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Home My WebLink About05756s J1oA 4oW Cg fl-- ORDINANCE NO. 5756 AN ORDINANCE CONCERNING THE FINANCING OF THE ACQUISITION, CONSTRUCTION, IMPROVEMENT AND EQUIPPING OF A PUBLIC WORKS AND TRANSPORTATION COMPLEX; AUTHORIZING AND APPROVING THE ISSUANCE OF CERTAIN CERTIFICATES OF PARTICIPATION; AND AUTHORIZING AND APPROVING A PUBLIC WORKS LEASE PURCHASE AGREEMENT, A MORTGAGE AND INDENTURE OF TRUST, AN OFFICIAL STATEMENT, A CERTIFICATE PURCHASE AGREEMENT AND OTHER RELATED DOCUMENTS AND ACTIONS IN CONNECTION THEREWITH WHEREAS, the City of Pueblo, Colorado (the "City "), is authorized, pursuant to the home rule Charter of the City (the "Charter ") to enter into lease purchase agreements in order to provide lands and facilities for governmental purposes; and WHEREAS, the City Council of the City (the "City Council ") has determined, and hereby determines, that the City is in need of a new and enlarged public works and transportation facility (the "Public Works Complex "); and WHEREAS, the City Council has determined, and hereby determines, that it is necessary and in the best interests of the City and its residents that the Public Works Complex be acquired, constructed, improved and equipped on a certain parcel of land (the "Land ") presently owned by the City of Pueblo, Colorado Municipal Building Corporation (the "Corporation "); and WHEREAS, for purposes of financing the acquisition, construction, improvement and equipping of the Public Works Complex to be located on the Land, the City Council has determined, and hereby determines, that it is in the best interests of the City and its residents that the City and the Corporation enter into that certain annually renewable Public Works Lease Purchase Agreement, dated as of July 1, 1992 (the "Lease "), presented to this meeting of the City Council, to provide for the acquisition, construction, improvement and equipping of the Public Works Complex on the Land and for the leasing by the City from the Corporation of the Public Works Complex (the Land and the Public Works Complex are hereinafter collectively referred to as the "Project "); and WP217102 -002/5 WHEREAS, there has also been presented to this meeting of the City Council a certain Mortgage and Indenture of Trust, dated as of July 1, 1992 (the "Indenture "), to be entered into between the Corporation and The Pueblo Bank and Trust Company, as trustee (the "Trustee "); and WHEREAS, Certificates of Participation (the "Certificates ") will be sold pursuant to the Indenture and the Lease and pursuant to a certain Certificate Purchase Agreement dated June 22, 1992 (the "Agreement "), which Agreement has also been presented to this meeting of the City Council; and WHEREAS, there has been distributed to potential investors in connection with the sale of the Certificates a Preliminary Official Statement (the "Preliminary Official Statement "), and there will be executed and distributed in connection with the sale of the Certificates an Official Statement (the "Official Statement "); and WHEREAS, pursuant to certain provisions of the Lease and the Indenture, the Corporation will deposit in escrow with the Trustee a deed and bill of sale for the Project from the Corporation to the City (collectively, the "escrowed deed "); NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO: Section 1 . All action heretofore taken (not inconsistent with the provisions of this ordinance) by the City Council or the officers or employees of the City, directed toward the construction, acquisition, improvement and equipping of the Project, the leasing of the Project from the Corporation to the City, are hereby ratified, approved and confirmed. The City Council hereby specifically ratifies, approves and confirms the distribution by Norwest Investment Services, Inc. of the Preliminary Official Statement to prospective purchasers of the Certificates. Section 2 . The City Council hereby finds and determines, pursuant to the provisions of the Charter, that (i) constructing, acquiring, improving and equipping the Project; and (ii) leasing the Project from the Corporation, all under the terms and provisions set forth in the Lease, are necessary, convenient and in furtherance of the governmental purposes of the City and are in the best interests of the City; and the City Council hereby authorizes the construction, acquisition, improving and equipping of the Project, and such leasing of the Project under the terms and provisions of the Lease. WP217102 -002/5 -2- Section 3 . The Lease, in substantially the form presented to this meeting of the City Council and with substantially the same content, is in all respects approved, authorized and confirmed, and the President or Vice President of the City Council is authorized and directed to affix her or his signature to the Lease in substantially the form and with substantially the same content as presented to this meeting of the City Council, for and on behalf of the City, but with such changes, modifications, additions or deletions therein as the President or Vice President of the City Council and the City Attorney shall deem necessary, desirable or appropriate, the execution thereof to constitute conclusive evidence of their approval of any and all changes, modifications, additions or deletions therein from the form and content of the Lease presented to this meeting. Section 4 . The City Council hereby approves the execution and delivery by the Corporation and the Trustee of the Indenture, in substantially the form and with substantially the same content as presented to this meeting of the City Council, but with such changes, modifications, additions or deletions therein as the President or Vice President of the City Council and the City Attorney shall deem necessary, desirable or appropriate, the City Attorney's release of his opinion in connection with the sale and delivery of the Certificates to constitute conclusive evidence of such approval. Section 5 . The City Council hereby acknowledges and consents to the assignment by the Corporation to the Trustee, pursuant to the Indenture, of all rights, title and interest of the Corporation in, to and under the Lease (with certain exceptions as provided in the Lease and the Indenture), and the delegation by the Corporation to the Trustee, pursuant to the Indenture, of all duties of the Corporation under the Lease. The City Council hereby authorizes and consents to the issuance and sale of the Certificates pursuant to the Indenture. The City Council hereby authorizes and approves the form, terms and provisions of the Certificates contained in the Indenture, in substantially the form and with substantially the same content as that presented to this meeting of the City Council. The City Clerk and the President of the City Council are hereby authorized and directed to affix their facsimile signatures and the City seal, or a facsimile thereof, to execute the Certificates, as provided in the Lease and the Indenture. WP217102 -002/5 -3- The City Council hereby authorizes, approves and directs the sale of the Certificates to Norwest Investment Services, Inc. under the terms and conditions of, and for the price set forth in the Agreement. The Agreement, in substantially the form presented to this meeting of the City Council, is in all respects approved, authorized and confirmed, and the President or Vice President of the City Council is authorized and directed to affix her or his signature to the Agreement in substantially the form and with substantially the same content as presented to this meeting of the City Council, for and on behalf of the City, but with such changes, modifications, additions or deletions therein as the President or Vice President of the City Council and the City Attorney shall deem necessary, desirable or appropriate, the execution thereof to constitute conclusive evidence of their approval of any and all changes, modifications, additions or deletions therein from the form and content of the Agreement presented to this meeting. Section 6 . The City Council hereby approves the execution of the escrowed deed by the Corporation and the delivery of the escrowed deed to the Trustee. Section 7 . The City Council hereby authorizes and approves the refunding by the Corporation of the certificates issued pursuant to the Mortgage and Indenture of Trust, dated as of February 22, 1990, between the Corporation and the Trustee and the execution and delivery of any and all documents necessary or desirable to accomplish such refunding. Section 8 . The Preliminary Official Statement, in substantially the form and with substantially the content presented to this meeting of the City Council, is in all respects approved and authorized. The President or Vice President of the City Council is hereby authorized and directed to affix his signature to the Official Statement, for and on behalf of the City, in substantially the form and with substantially the content as the Preliminary Official Statement presented to this meeting of the City Council, but with such changes therein as the President or Vice President of the City Council and the City Attorney may deem necessary or appropriate, as evidenced by her or his execution thereof. The distribution by Norwest Investment Services of the Official Statement to prospective purchasers of the Certificates is hereby approved. Section 9 . The City Clerk is hereby authorized and directed to attest all signatures and acts of any official of the City Council or the City in connection with the matters authorized by this ordinance, and to place the seal of the WP217102 -002/5 -4- City on the Lease authorized and approved by this ordinance. The President or Vice President of the City Council and other officials of the City Council or the City are hereby authorized to execute and deliver for and on behalf of the City any and all additional certificates, documents and other papers and to perform all other acts that they may deem necessary or appropriate in order to implement and carry out the transactions and other matters authorized and contemplated by this ordinance. The appropriate officers of the City Council or the City are authorized to execute on behalf of the City agreements concerning the deposit and investment of funds in connection with the transactions contemplated by this ordinance. Section 10 . NO PROVISION OF THIS ORDINANCE, THE LEASE, THE INDENTURE, THE CERTIFICATES, THE AGREEMENT OR THE OFFICIAL STATEMENT SHALL BE CONSTRUED AS CREATING OR CONSTITUTING A GENERAL OBLIGATION OR OTHER INDEBTEDNESS OF THE CITY OR A MANDATORY PAYMENT OBLIGATION OF THE CITY IN ANY FISCAL YEAR BEYOND A FISCAL YEAR FOR WHICH THE CITY HAS APPROPRIATED AMOUNTS TO MAKE PAYMENTS UNDER THE LEASE. THE CITY SHALL HAVE NO OBLIGATION TO MAKE ANY PAYMENT WITH RESPECT TO THE CERTIFICATES EXCEPT IN CONNECTION WITH THE PAYMENT OF THE BASE RENTALS AND ADDITIONAL RENTALS (EACH AS DEFINED IN THE LEASE) TO THE EXTENT AND FOR THE YEAR FOR WHICH FUNDS HAVE BEEN APPROPRIATED AND CERTAIN OTHER PAYMENTS UNDER THE LEASE, WHICH PAYMENTS MAY BE TERMINATED BY THE CITY IN ACCORDANCE WITH THE PROVISIONS OF THE LEASE. Section 11 . The City Council hereby determines and declares that the Base Rentals (as set forth in the Lease) represent the fair value of the use of the Project; and that the Purchase Option Price (as defined in the Lease) represents the fair purchase price of the Project. The City Council hereby determines and declares that the Base Rentals do not exceed a reasonable amount so as to place the City under an economic or practical compulsion to renew the Lease or to exercise its option to purchase the Project pursuant to the Lease. In making such determinations, the City Council has given consideration to the Cost of Construction (as defined in the Lease), the uses and purposes for which the Project will be employed by the City, the benefit to the citizens and residents of the City by reason of the construction, acquisition, improvement and equipping of the Project and the use of the Project pursuant to the terms and provisions of the Lease, the option of the City to purchase the Project, and the expected eventual vesting of title to the Project in the City. The City Council hereby determines and declares that the construction, acquisition, improvement and equipping of the Project and the leasing of the Project pursuant to the Lease will result in facilities of comparable -5- WP217102 -002/5 quality and meeting the same requirements and standards as would be necessary if the construction, acquisition, improvement and equipping of the Project were performed by the City other than pursuant to the Lease. The City Council hereby determines and declares that the period during which the City has an option to purchase the Project (i.e., the maximum term of the Lease, including all Renewal Terms) does not exceed the useful life of the Project. Section 12 . If any section, paragraph, clause or provision of this ordinance (other than provisions as to the payment of Base Rentals by the City during the Lease Term and provisions for the conveyance of the Project to the City under the conditions provided in the Lease) shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, clause or provision shall not affect any of the remaining provisions of this ordinance. Section 13 . All bylaws, orders and ordinances, or parts thereof, inconsistent with this ordinance or with any of the documents hereby approved, are hereby repealed only to the extent of such inconsistency. This repealer shall not be construed as reviving any bylaw, order or ordinance, or part thereof. Attest: Ci Clerk APPROVED AS TO FORM BY CITY ATTORNEY: City Attor ey INTRODUCED MAY 26, 1992 By CHRIS WEAVER Councilperson APPROVED: Pres' dent, City Council -6- WP217102 -002/5 v PRELIMINARY OFFICIAL STATEMENT DATED UNE 11, 1992 NEW ISSUE RATINGS: Moody's "Baa" •°• C = In the opinion of Ku Special Counsel, assuming cuatinuin$ compliance by the City with certain covenants, unde `0 4 g, regulations,,�ulings a yu total ecisions existing on the date of the original deliue of the Certificates qrtion of Rase Rentals a -Z 'C designated as and comprising interest and received by the registered owners of the C'erti � t v is not includible in gross income for .z o •� purposes o federal income tctxattionis not treated as a specific preference item for purposes of the federal alternative minimum tax . 2 *c r imposed on individuals and corporations, and, under the statutes and judicial decisions existing on the date of the original delivery of the is �+ Certificates, such interest on the Certificates is not includible in gross income for purposes of income taxation by the State of Colorado ^ See the caption "TAX EXEMPTIONS" herein for discussion of additional federal tax law consequences . z y 3 n$2,915,000* 4 CITY OF PUEBLO, COLORADO PUBLIC WORKS LEASE PURCHASE AGREEMENT CERTIFICATES OF PARTICIPATION T S SERIES 1992 Dated: July 1, 1992 Due 4eecember 15 as shown below �+ The Certificates evidence assignments of proportionate and undivided interests in rights to receive payments pursuant to an e annually renewable Public Works Lease Purchase Agreement, dated as of July 1, 1992 (the "Lease "), entered into between the City of ,°. D Pueblo, Colorado Municipal Building Corporation, as lessor (the "Corporation "), and the City of Pueblo, Colorado, as lessee (the = o "City ").P Z •S The Certificates are issued pursuant to a Mortgage and Indenture of Trust, dated as of July 1, 1992 (the "Indenture "), between The ° Pueblo Bank and Trust Company, in Pueblo, Colorado, as trustee (the Trustee "), and the Corporation. Interest with respect to the Certificates (payable o �t� commencin 15, 1 PAR) is payable by check or draft mailed to the registered ow rincipal ners of the Certificates. and premium, if any, with respect to the Certificates are payable at the principal corporate trust E ° Cr office of the Trustee in Pueblo, Colorado, on the dates shown in the following maturity schedule, unless the Certificates are redeemed c c prior thereto as more fully described in this Official Statement. The Certificates are subject to optional and mandatory redemption prior e to maturity under the circumstances and at the prices described in this Official Statement. The Certificates also are sub ect to v •� extraordinary optional redemption at the option of the CityJps provided in this Official Statement. See "THE CERTIFICATES." MATURITY SCHEDULE* " •= $1,050,000 Serial Certificates u Maturity Maturity r Dates Principal Interest Dates Principal Interest F. y (December 15) Amoun Rate Price A fDeeember 151 Am ount Rate Pric e 6 1993 $ 55,000 % % 1999 $ 65,000 % % E =°• c 1994 130,000 2000 70,000 _ 1995 135,000 2001 75,000 ,C, _ 1996 145,000 2002 80,000 a = 1997 60,000 2003 85,000 ` C 1998 60,000 2004 90,000 1 65 000 % Term Certificates Du giDeeember 1 5, 2015 o $ Price of Term Certificates % (Plus accrued interest from July 1, 1992) a o The net proceeds from the issuance of the Certificates will be used to refund certain certificates issued by the Corporation in 1990 E ' 3 and to provide funds for the construction, acquisition and equipping of a public works building (the "Building ") and for the acquisition c� y k of certain equipment (the "Equipment' n certain real property 4he ) (collectively, the "Project') to be acquired and ,2 .4 y owned by the Corporation and leased to the City under the Lease all as mordescribed in this Official Statement. See "USE OF t -5 `. PROCEEDS," "THE PROJECT" and "RISK FACTORS." The Certificategpre payable solely from annually appropriated Base Rentals (as defined in this Official Statement) to be paid by the A o City under the Lease from any legally available funds of the City, except to the extent payable from proceeds of the Certificates and y " income from the investment thereof, net proceeds of certain insurance pohcies*ny performance bonds, or any condemnation awards or from net proceeds received as awards resulting from defaults under construction contracts or net proceeds from the leasing, foreclosure a e _ or sale of the Project. The Certificates shall never constitute or give rise to a general obligation or other indebtedness of the City, within L y the meaning of any constitutions statutory or charter debt limitation. All payment obligations of the City under the Lease, including the City's obligation to pa Baseentals and Additional Rentals, are subject to the annual appropriation by the City of moneys of the 1C City for such payments. The Lease is subject to annual termination by the Citp and will be terminated upon an Event of Nonappropria- ° ° iron as described in this Official Statement. Upon termination of the City's obligations under the Lease, the Certificates will be payable only from certain moneys, if any, held by the Trustee under the Indenture and any amounts resulting from foreclosing and selling the Pro'ecgipr leasing the Pro'ecf�,as further described in this Official Statement and in the Lease. See "SUMMARY OF DOCUMENTS AND ° y c DE ITIONS — THE EASE — Events of Default — Remedies Under the Lease" in APPENDDUI The Lease provides that upon r annual appropriation, the City's obligation to pay Base Rentals and Additional Rentals, to the extent and for the year so appropriated, 3 will be absolute and unconditional and may not be abated through accident or unforeseen circumstances, and the City under the Lease e a may not assert any right of setoff or counterclaim against its obligation to make such payments. ^ "RISK Each prospective investor should read this entire Official Statement and should give particular attention to the section entitled Z THE CORPORATIO HAVE NO OBLIGATION TO, AND WILL NOT MAKE ANY PAYMENT ON THE s <c ? CERTIFICATES OR OT HE SE EXCEPT PURSUANT TO THE LEASE. THE CERTIFICATtS DO NOT CONSTITUTE A DEBT " e •L OR PECUNIARY LIABILITY OF THE CORPORATION OR THE CITY. THE CORPORATION, PURSUANT TO THE INDENTURE, e ; •3, HAS ASSIGNED TO THE TRUSTEE FOR THE BENEFIT OF THE REGISTERED OWNERS OF THE CERTIFICATES A MORT- 4 t! p GAGE ON THE PROJECT^ •_ o The Certificates are offered when, as, and if issued and accepted by the Underwriter, subject to prior sale, modification, or ,S withdrawal of the offer without notice; the approval of validity by Kutak Rock, as Special Counsel; and certain other conditions. Certain p legal matters will be passed upon for the Underwriter by Holme Roberts & Owen as counsel to the Underwriter. Certain legal matters 3 '= will be passed upon for the City by Thomas E. Jagger, sq. It is expected that the Certificates will be available for delivery in Denver, v e E '6. Colorado, on or about July, 1992. N iE r _ RAFAI// .� AFOAM W INVESTMENT tc ° I SERVICES Ali y - This Official Statement is dated June , 1992. R I` �' E � 'Preliminary; subject to chan t /_I�•I}w" CONTENTS OF OFFICIAL STATEMENT Page INTRODUCTORY STATEMENT .. ............................... 1 RISK FACTORS ............ ............................... 4 USE OF PROCEEDS ......... ............................... 9 THE PROJECT ............. ............................... 10 THE CERTIFICATES ........ ............................... 12 SECURITY FOR THE CERTIFICATES .......................... 19 BASE RENTALS SCHEDULE ... ............................... 21 THE CORPORATION ......... ............................... 22 THE CITY ................ ............................... 24 CITY FINANCIAL OPERATIONS .............................. 30 ECONOMIC AND DEMOGRAPHIC INFORMATION ................... 41 LITIGATION, SOVEREIGN IMMUNITY AND INSURANCE........... 52 TAX EXEMPTIONS .......... ............................... 53 LEGAL MATTERS ........... ............................... 55 UNDERWRITING ............ ............................... 55 EXPERTS ................. ............................... 55 RATINGS ................. ............................... 55 ADDITIONAL INFORMATION .. ............................... 56 OFFICIAL STATEMENT CERTIFICATION ....................... 56 APPENDIX A - Audited Financial Statements of the City of Pueblo, Colorado, as of and for the year ended December 31, 1990 .. ............................... A -1 APPENDIX B - Summary of Documents and Definitions .......................... B -1 -ii- No person has been authorized to give any information or to make any representations other than those contained in this Official Statement in connection with the offers made hereby and, if given or made, such information or representations must not be relied upon as having been authorized by the Corporation, the City or the Underwriter. Neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Corporation or the City since the date hereof. This Official Statement does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. The information set forth herein has been obtained from the Corporation and City and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Underwriter. OFFICIAL STATEMENT $4 1 4+5zi - , CITY OF PUEBLO, COLORADO PUBLIC WORKS BUILDING LEASE PURCHASE AGREEMENT CERTIFICATES OF PARTICIPATION SERIES 1992 INTRODUCTORY STATEMENT This Official Statement, including its Apperilices, is furnished in connection with the offering of aggregate principal amount of City of Pueblo, Colorado, Public Works Building Lease Purchase Agreement, Certificates of Participation, Series 1992 (the "Certificates"'), evidencing assignments of proportionate interests in rights to receive payments pursuant to a Public Works Building Lease Purchase Agreement dated as of July 1, 1992 (the "'Lease") between the City of Pueblo, Colorado Municipal Building Corporation (the "Corporation"') as lessor, and the City of Pueblo (the "City"), Colorado (the "State"), as lessee. The Certificates are issued pursuant to a Mortgage and Indenture of Trust dated as of July 1, 1992 (the "Indenture"), between The Pueblo Bank and Trust Company, in Pueblo, Colorado, as trustee (the "'Trustee"), and the Corporation. The proceeds from the sale of the Certificates, other than amounts necessary to pay costs of issuance and to establish a Reserve Fund for the Certificates, will be used by the Corporation to provide funds for (i) paying the City of Pueblo, Colorado Municipal Building Corporation Certificates of Participation dated as of February 22, 1990 (the N1990 Certificates"'); and (ii) the construction, acquisition and equipping of a public works and transportation and office building (the "Building") located on certain real property (the "Property") and for the acquisition of certain equipment ( the "Equipment"') ( collectively, the "'Project"'). The Project will be leased by the Corporation to the City under the Lease. See "USE OF PROCEEDS" and "THE PROJECT."' * Preliminary; subject to change. The Certificates are payable solely from annually appropriated Base Rentals (hereinafter defined) to be paid by the City under the Lease, from any legally available funds of the City and certain other Revenues (hereinafter defined) received by the Trustee pursuant to the Lease and the Indenture. See "'APPENDIX B--SUMMARY OF DOCUMENTS AND DEFINITIONS"' and "'SECURITY FOR THE CERTIFICATES." Upon annual appropriation, the City's obligation to pay Base Rentals and Additional Rentals (hereinafter defined) to the extent and for the year so appropriated will be absolute and unconditional and may not be abated through accident or unforeseen circumstances, nor may the City under the Lease assert any right of setoff or counterclaim against its obligation to make such payments. Neither the Certificates nor any payments required under the Lease constitutes an indebtedness of the City within the meaning of any provision or limitation of the Constitution or statutes of the State or home rule charter (the "'Charter') of the City. Neither the Certificates nor the Lease will directly or indirectly obligate the City to make any payments other than those which may be appropriated by the City for each fiscal year of the City. If, on or before the December 31 prior to the beginning of any fiscal year of the City ("Fiscal Year"), the City fails to appropriate sufficient funds for the Base Rentals and Additional Rentals, the City will be considered to have terminated the Lease. Upon termination of the City's obligations under the Lease, the Trustee may proceed to foreclose on and sell the Project or lease the Project. See "'APPENDIX B--SUMMARY OF DOCUMENTS AND DEFINITIONS - -THE LEASE- - Nonappropriation by City."' The net proceeds of such dispositions will be applied toward the payment of the Certificates. The City has the option to pay the Purchase Option Price (hereinafter defined) and to terminate the Lease as provided in the Lease. The Trustee is required to use the Purchase Option Price to pay the Certificates, including any premium thereon. See "THE CERTIFICATES -- Redemption Provisions . "' This Official Statement includes financial and other information about the City because such information is believed to be relevant to a consideration by purchasers of the Certificates of whether the City will continue to renew the Lease on an annual basis and of the City's ability to pay the Base Rentals and Additional Rentals under the Lease although the City is not obligated to renew such.Lease or pay such Base Rentals and Additional Rentals unless funds are appropriated for such rentals by the City each year. This Official Statement also contains descriptions of the Certificates, the Lease, and the Indenture. The descriptions I -2- of the Certificates, the Lease and the Indenture do not purport to be definitive or comprehensive, and all references to those documents are qualified in their entireties by reference to those documents, copies of the forms of which are available at the offices of the Underwriter, the Trustee and the City. See OADDITIONAL INFORMATION.~ Terms not otherwise defined herein have the meanings ascribed to them in the Lease and the Indenture. See NAPPENDIX B-- SUMMARY OF DOCUMENTS AND DEFINITIONS.~ -3- RISK FACTORS Each prospective investor in the Certificates is encouraged to read this Official Statement in its entirety and to give particular attention to the factors described below which could affect the payment of rentals under the Lease and could affect the market price of the Certificates to an extent that cannot be determined at this time. Nonappropriation Except to the extent payable from the proceeds of the sale of the Certificates and certain income from the investment thereon and certain other moneys, the Certificates are payable solely from Base Rentals to be paid by the City under the Lease. See "SECURITY FOR THE CERTIFICATES."' The City is not obligated to pay Base Rentals or Additional Rentals under the Lease unless funds are appropriated for such rentals by the City each year. An "Event of NonappropriationO occurs if, prior to December 31 of each year, the City does not specifically budget and appropriate amounts sufficient to pay all Base Rentals for the next Fiscal Year and to pay such Additional Rentals as are reasonably estimated to become due for the ensuing Fiscal Year. If an Event of Nonappropriation occurs, the City is deemed to have terminated its obligations under the Lease. The Trustee may waive an Event of Nonappropriation which is cured by the City within a reasonable time, if in the Trustee's judgment the waiver is in the best interest of the registered owners of the Certificates (the "'Participants"'). See NAPPENDIX B-- SUMMARY OF DOCUMENTS AND DEFINITIONS - -THE LEASE -- Nonappropriation by City."' It is expected that such a waiver would be made only under extraordinary circumstances, such as a delay in the passage of an appropriations ordinance. The Lease declares that the present expectation and intention of the City is that the Lease will not be terminated until title to the Project is acquired by the City; but this declaration is not to be construed as contractually obligating or otherwise binding the City or the City Council. Various political and economic factors could lead to the nonappropriation of sufficient funds to make the required payments under the Lease, and prospective investors should carefully consider these and other factors which may influence the budgetary process. There is no assurance that the City will appropriate sufficient funds to renew the Lease each year and the City has no obligation to do so. The City may terminate the Lease without penalty. In addition, the ability of the City to maintain adequate revenues for its operations and obligations in general (including obligations associated with the Lease) is partially dependent upon several factors outside the City's control, -4- such as the economy and the continuing need of the City for the Project. See "SECURITY FOR THE CERTIFICATES,~ ~CITY FINANCIAL OPERATIONS- -City Budget" and "ECONOMIC AND DEMOGRAPHIC INFORMATION." Effect of a Termination of the Lease Term In the event of termination of the City's obligations under the Lease upon the occurrence of an Event of Nonappropriation or an Event of Default (hereinafter defined), the City is required to vacate the Project and return it to the Trustee (a) by the expiration of the annual lease term during which an Event of Nonappropriation occurs, in the case of an Event of Nonappropriation, or (b) within fifteen days after notice from the Trustee, in the case of an Event of Default. After an occurrence of an Event of Default, the Trustee may proceed to foreclose on and sell the Project or lease the Project and may exercise one or any combination of the remedies available upon default as provided in the Lease. All property, funds and rights acquired by the Trustee upon the termination of the Lease, along with other moneys then held by the Trustee under the Indenture (with certain exceptions as provided in the Lease and the Indenture), are required to be used to redeem the Certificates, if and to the extent any such moneys are realized. See "APPENDIX B--SUMMARY OF DOCUMENTS AND DEFINITIONS -THE LEASE -- Events of Default- Remedies Under The Lease" and "THE CERTIFICATES- - Redemption Provisions." A potential purchaser of the Certificates should not assume that it will be possible to foreclose on and sell the Project or to lease the Project for an amount equal to the aggregate principal amount of the Certificates then outstanding plus accrued interest thereon. This may be due to the inability to recover certain of the costs incurred in connection with the issuance of the Certificates, the construction of the Project or due to general economic conditions. See "THE PROJECT" and "USE OF PROCEEDS." If the Certificates are redeemed subsequent to a termination of the Lease Term for an amount less than the aggregate principal amount thereof and accrued interest thereon, such partial payment will be deemed to constitute a redemption in full of the Certificates; and upon such a partial payment, no owner of any Certificate will have any further claims for payment upon the Corporation, the Trustee or the City. Enforceability of Remedies Under the Lease, the Trustee has the right to take possession of and dispose of the Project upon an Event of -5- Nonappropriation or an Event of Default. However, the enforceability of the Indenture and the Lease is subject to applicable bankruptcy laws, equitable principles affecting the enforcement of creditors' rights generally and liens securing such rights, and the police powers of the City. In addition, the application of zoning or other requirements of the City could adversely affect the ability of the Trustee to foreclose, sell, lease or otherwise dispose of the Project. It should not be assumed that the remedies of the Trustee could be accomplished rapidly. Any delays may result in delays in the payment of the Certificates except from funds otherwise available to the Trustee under the Indenture, including the Reserve Fund. See ~SECURITY FOR THE CERTIFICATES.& Effect of Termination on Exemption From Taxation and on Exemption From Registration Special Counsel has specifically disclaimed any opinion as to the effect that termination of the Lease may have upon the treatment for federal or state income tax purposes of amounts received by a Participant. There is no assurance that any amounts representing interest received by the Participants after termination of the Lease as a consequence of a Event of Nonappropriation or Event of Default will be exempt from gross income under federal or state laws. Special Counsel also has disclaimed any opinion as to the transferability of the Certificates under the federal securities laws after a termination of the Lease, and, upon such termination, there is no assurance that Participants would be able to transfer their interests without registration pursuant to federal securities laws. Construction of the Project Although construction of the Project will not commence immediately the Lease will be in effect when the Certificates are issued. It is expected that construction will commence in February 1993, after the design and planning for the Project are completed. Architectural drawings and designs of the Project have not been completed, but a statement of probable costs has been prepared by the City. Such estimate indicates that the proceeds of the Certificates will be sufficient to complete the Project although certain circumstances, including construction costs being greater than estimated, may result in cost overruns. See *USE OF PROCEEDS.& The Lease provides that, in the event of cost overruns, the City will (a) modify the plans and specifications for the Project, so as to permit MM Y completion of the Project from moneys available in the Construction Fund, (b) deposit amounts in a special construction fund as provided in the Lease, or (c) cause Additional Certificates to be issued pursuant to the Indenture to pay the remaining costs of completing the Project. However, there is no assurance that the City's perceived need for the Project will continue in the event of cost overruns. In addition, the City is not obligated to make such additional deposits or cause Additional Certificates to be issued, and there can be no assurance that the City would be able to make such additional deposits or cause Additional Certificates to be issued for the purpose of completing the Project. The Indenture permits the issuance of Additional Certificates for purposes of completing the Project without notice to or approval of the registered owners of the Certificates. See "APPENDIX B--SUMMARY OF DOCUMENTS AND DEFINITIONS -THE INDENTURE -- Additional Certificates." The Lease requires that, upon completion and acceptance of the Project and until termination of the Lease Term, the City must provide casualty and property damage insurance for the Project. There is no assurance that, in the event the Lease is terminated as a result of damage to or destruction or condemnation of the Project, moneys made available by reason of any such occurrence will be sufficient to redeem the Certificates at a price equal to the principal amount thereof outstanding plus accrued interest to the redemption date. See "THE CERTIFICATES -- Redemption Provisions."' Pending Constitutional Amendments The Secretary of State of the State of Colorado has placed an initiative on the ballot for the November 3, 1992, general election relating to certain tax and revenue limitations (the ^'First Initiative"). The First Initiative provides for an amendment to the Colorado Constitution which would require voter approval prior to: (1) imposition of a new tax, tax rate increase, mill levy increase, valuation for assessment ratio increase, tax extension, or other change in policy which results in a net gain of tax revenues; or (2) creation for more than one fiscal year of any debt or other financial obligation, with limited exceptions. The First Initiative also limits, with certain adjustments, increases for local governments' property tax revenues to the total of inflation plus the net percentage change in actual value of all real property within the local government due to construction of improvements and additional taxable real property. In addition, the First Initiative -7- limits, with certain adjustments, percentage increases for local governments' government spending to the total of inflation plus the net percentage change in actual value of all real property within the local government due to construction of improvements and additional taxable real property. The Secretary of State has also accepted a second initiative to be placed on the ballot for the November 3, 1992, general election if sufficient signatures are collected relating to appropriation limitations (the NSecond InitiativeN). This Second Initiative would, among other things, beginning with the 1993 -1994 State fiscal year, limit the increases in total State appropriations to the percentage of increase in State personal income per capita plus the percentage of increase in State population during the previous calendar year. In addition, this Second Initiative would, for fiscal years commencing on or after January 1, 1994, limit the percentage of increase in total appropriations by any unit of local government, except a school district, to the percentage of increase in state personal income per capita plus the percentage of increase in valuation for assessment of such local government attributable to annexation, inclusion of territory and new construction during the previous calendar year. There are several exceptions to this Second Initiative, including expenditures required by the federal government. It is not possible to predict the effect of either the First Initiative or Second Initiative, if passed, on future activities of the City, including its ability to raise taxes and other funds to generate sufficient revenues for the general fund, to undertake additional programs or to engage in any subsequent financing activities or to pay Base Rentals and Additional Rentals under the Lease. -8- USE OF PROCEEDS* The proceeds from the sale of the Certificates, net of accrued interest, are estimated to be used for the following purposes. Accrued interest on the Certificates will be deposited in the Certificate Fund for the payment of interest on the Certificates. See "APPENDIX B-- SUMMARY OF DOCUMENTS AND DEFINITIONS - -THE INDENTURE." SOURCE OF FUNDS: Proceeds of Certificates ........................... Accrued Interest .... ............................... TOTAL.......... ............................... USES OF FUNDS: Refunding of 1990 Certificates ................... Construction Costs including Architect, Engineering and Feasibility Study Costs .......... ReserveFund ......... ............................... Accrued Interest ..... ............................... Q , A Costs of Issuance ... ............................... Underwriter's Discount TOTAL ........... ............................... 7 $330,500 2,161-,315 291—, `7G i 9±9 II S.) 7 7Y, I- 3o K4�� ""j) Ll ( 31 , S3�2fr ":4'f9 (r� 7 /,x=.4, (1) The Corporation will use a portion of the proceeds of the Certificates to provide funds to pay the 1990 Certificates at a price of par plus accrued interest which will be accomplished simultaneously with the issuance of the Certificates. �* Prel ub' c ge. rA THE PROJECT General The Project involves the acquisition, construction and equipping of a new fleet maintenance facility on the Property for maintenance of the City's fleet of various kinds of vehicles, and the acquisition, construction and equipping of a new office building. The existing fleet maintenance building for the City was constructed close to 100 years ago and is in very poor structural condition. The City believes that rehabilitation of the existing building is not economically feasible. The new facility, which is expected to employ 18 full time city employees, is expected to contain approximately 19,600 square feet including a repair area, a body shop and paint booth, a parts and machine shop, and offices and employee areas. This facility will provide vehicle maintenance to over 750 vehicles, including those operated by all City departments, and those of several outside agencies including the Colorado State Lottery, University of Southern Colorado, Rural Fire Department, Pueblo Zoological Society, City /County Health Department, Pueblo Housing Authority, Southside and Eastside Child Care, Pueblo County Board for Developmental Disabilities, Boys and Girls Club, and others. The facility will provide a full range of services from heavy equipment repair to lube, oil and inspection services. Also to be constructed at the facility is a replacement refueling station which would involve the replacement of existing underground storage tanks for fuel with new storage tanks that comply with guidelines of the Environmental Protection Agency. The facility will also contain office space, lunch room, locker room and shower facilities for the City's Street Maintenance and Wastewater Maintenance Divisions, consisting of 61 employees. The additional area required for this purpose is approximately 4,000 square feet and will be constructed as part of the fleet maintenance facility to take advantage of the central heating, ventilation, and air conditioning systems and joint use areas. Another part of this Project will be the construction of a 7,000 square foot office building to house the Pueblo Regional Building Department, which will provide building permit and inspection services for the City and the County of Pueblo. -10- V Construction of the improvements is expected to commence in approximately February of 1993 and be completed in October of 1994. The City has not yet retained an architect or general contractor for the Project, and all cost estimates contained in this Official Statement are based upon the City's internal projections. The City anticipates that the Project will be constructed of steel beam and rigid frame construction to provide the needed open space for the repair area, with masonry exterior walls, and steel roofing panels. The floor will be reinforced concrete slab on grade construction, with one or more below grade pits for lubrication and oil change services. Interior office areas, lunch room and locker rooms will be constructed using steel stud walls with sheet rock or masonry block walls, as the need for sound proofing dictates. The repair area will be equipped with one or more 5- ton overhead cranes and the building will be equipped with exhaust ventilation equipment. The structure that will house the Pueblo Regional Building Department will most likely be separate but adjacent to the fleet maintenance building. Construction is anticipated to consist of masonry exterior with either concrete twin tee or steel rigid frame roof structure. A one - story structure with no basement is contemplated. The Project has been reviewed and approved at all appropriate levels of the City government and, because of the age of the existing fleet maintenance facility and the need for expanded facilities, the City considers the Project to be very important to the efficient maintenance of the City's vehicle fleet. The Property The Property is a parcel of land approximately seven acres in size and identified as 108 -132 South Main Street and 101 -131 South Oneida in the City. The Property is currently owned by the Corporation and was acquired with a portion of the proceeds of the 1990 Certificates. -11- THE CERTIFICATES General The Certificates are issuable solely as fully registered Certificates without coupons and in the denomination of $5,000 and integral multiples of $5,000. The Certificates shall be dated July 1, 1992 and interest with respect to the Certificates shall accrue from their date if authenticated prior to June 15, 1993, or if authenticated as of any later date, the June 15 or December 15 on or next preceding their date of authentication, payable on June 15 and December 15, commencing June 15, 1993, as provided in the Indenture; provided, however, that if interest with respect to the Certificates shall be in default, Certificates issued in exchange for Certificates surrendered for transfer or exchange shall bear interest from the date to which interest has been paid in full on the Certificates so surrendered. The Certificates mature on December 15 of the years, and in the amounts, and bear interest at the rates set forth on the cover page of this Official Statement. The principal of and premium, if any, with respect to any Certificate shall be payable to the registered owner thereof as shown on the registration books of the City kept by the Trustee, upon presentation and surrender at the principal corporate trust office of the Trustee. Payment of interest with respect to any Certificate shall be made to the registered owner thereof by check or draft mailed by the Trustee, on or before each interest payment date (or, if such interest payment date is not a Business Day, on or before the next succeeding Business Day), to the registered owner thereof at the address of such registered owner shown on the registration books of the City kept by the Trustee at the close of business on the fifteenth day (whether or not a Business Day) next preceding an interest payment date for the Certificates (the 'Regular Record Date'); but any such interest not so timely paid or duly provided for shall cease to be payable to the person who is the registered owner thereof at the close of business on the Regular Record Date and shall be payable to the person who is the registered owner thereof at the close of business on a °Special Record Date' for the payment of any such defaulted interest. Such Special Record Date shall be fixed by the Trustee whenever moneys become available for payment of the defaulted interest, and notice of the Special Record Date shall be given to the registered owners of the Certificates not less than ten days prior thereto by first -class mail to each such registered owner as shown on the registration books on a date selected by the Trustee, stating the date of the Special Record Date and -12- 0 the date fixed for the payment of such defaulted interest. The Trustee may make payments of interest on any Certificate by such alternative means as may be mutually agreed to between the registered owner of such Certificate and the Trustee. Each Certificate is payable solely from Revenues (hereinafter defined) and made available to the Trustee, as, when, and if the same are received by the Trustee. The Revenues are specifically pledged to such purposes in the manner and to the extent provided in the Indenture. See "SECURITY FOR THE CERTIFICATES^' and "'APPENDIX B-- SUMMARY OF DOCUMENTS AND DEFINITIONS - INDENTURE - DEFINITIONS." Redemption Provisions The Certificates are callable for redemption as set forth below. (a) Optional Redemption The Certificates shall be called for redemption on any Interest Payment Date in the event of, and to the extent that moneys are actually received by the Trustee from the exercise by the City of its option to purchase the Project, as provided in the Lease, upon payment of the then applicable Purchase Option Price, at a redemption price equal to the principal amount of the Certificates being redeemed, plus accrued interest to the redemption date; provided, however, that paragraph (b) below, and not this paragraph (a), shall apply in the event that the Purchase Option Price is paid from moneys borrowed by the City or derived from any installment purchase or lease purchase financing by the City. In the event the Certificates are redeemed pursuant to this paragraph, the Certificates maturing on or after December 15, 2006 shall be redeemed in whole. (b) Mandatory Redemption by Reason of a Refinancing In the event that the Purchase Option Price is paid from moneys borrowed by the City or derived from any installment purchase or lease purchase financing by the City, the Certificates maturing on or before December 15, 1999, shall not be callable for redemption prior to maturity; and the Certificates maturing on or after December 15, 2000 shall be callable for redemption prior to maturity, in whole, at the option of the City, on December 15, 1999 and on any Interest Payment Date thereafter.at the redemption prices (expressed as percentages of principal amount) set forth in the table below, plus accrued interest to the redemption date. -13- Redemption Redemption Dates Prices December 15, 1999 and June 15, 2000 102% December 15, 2000 and June 15, 2001 101 December 15, 2001 and thereafter 100 (c) Mandatory Redemption From Other Extraordinary Revenues The Certificates shall be called for redemption in the event and only to the extent that Extraordinary Revenues are deposited into the Extraordinary Redemption Fund, other than as provided in (a) or (b) above or in (d) below. In the event the Certificates are redeemed pursuant to this paragraph, the Certificates shall be redeemed in whole, or in part in inverse order of maturity and by lot within any maturity, at a redemption price equal to the principal amount of the Certificates being redeemed plus accrued interest to the redemption date, on the first Business Day for which notice of redemption may be given. Whenever any of the Certificates are to be redeemed in part, the schedule of Base Rentals set forth in the Lease shall be recalculated by the Trustee. (d) Mandatory Redemption After a Termination Event The Certificates shall also be called for redemption as set forth herein under the caption "'Redemption Subsequent to a Termination Event."' (e) Mandatory Sinking Fund Redemption for Certificates Maturing on December 15. 2012 The Certificates maturing on December 15, 2015, are subject to mandatory sinking fund redemption on December 15, 2005, and on each December 15 thereafter to and including December 15, 2015, at a redemption price equal to the principal amount thereof with interest accrued thereon to the date fixed for redemption, without premium, the particular Certificates to be redeemed to be selected by lot in such manner as the Trustee shall determine, in the amounts (after credit as provided below) set forth below: -14- 71 4 Year Principal (December 15) Amount 005 - 006 105,000 007 115,000 2008 120,00 1in,n - 0 2010 140,000 2011 150,00 — S 2012 168;660 2013 175 _�_0_0_0__� �v 2014 1 ,85 000 2015 490,000 On or before the thirtieth day prior to each such sinking fund payment date, the Trustee shall proceed to select by lot the Certificates for redemption from such sinking fund on the next December 15, and on the thirtieth day prior to each sinking fund payment date give notice of such call. At its option, to be exercised on or before the sixtieth day next preceding any such sinking fund redemption date, the City may (a) deliver to the Trustee for cancellation Certificates subject to mandatory sinking fund redemption in any aggregate principal amount desired, and (b) receive a credit in respect of its sinking fund redemption obligation for any such Certificates which prior to said date have been redeemed (otherwise than through the operation of the sinking fund) and canceled by the Trustee and not theretofore applied as a credit against any sinking fund redemption obligation. Each such Certificate so delivered or previously redeemed shall be credited by the Trustee at the principal amount thereof on the obligation of the City on such sinking fund redemption date, and, to the extent of any excess, to the next annual sinking fund redemption date or dates, and the principal amount of Certificates to be redeemed by operation of such sinking fund on such date or dates shall be accordingly reduced. Redemption Subsequent to a Termination Event The Certificates are callable for redemption upon the occurrence of a Termination Event. If the Certificates are to be redeemed subsequent to a Termination Event, the Participants shall have no right to payment from the City, the Corporation or the Trustee in redemption of their Certificates or otherwise, except as expressly set forth below. Upon the occurrence of a Termination Event, the Certificates shall be payable from such moneys as may be -15- obtained by the Trustee through the exercise of its rights under the Indenture. Upon the occurrence of a Termination Event, the Trustee may commence proceedings for leasing the Project, or the sale or assignment of the Trustee's interest in the Project. The Trustee, as provided in the Indenture, may, call the Certificates for redemption from and only to the extent of the Net Proceeds of such leasing, sale or assignment of the Project and certain other moneys, if any, then on hand and being held by the Trustee for the Participants, subject to the provisions of the Indenture, at 100 percent of the principal amount thereof plus accrued interest to the redemption date. In the event that such Net Proceeds other moneys are insufficient to redeem the Certificates at 100 percent of the principal amount thereof plus accrued interest to the redemption date, such Net Proceeds and other moneys shall be allocated proportionately among the Certificates, according to the principal amount thereof Outstanding. In the event that such Net Proceeds and other moneys are in excess of the amount required to redeem the Certificates then Outstanding at 100 percent of the principal amount thereof plus accrued interest to the redemption date, then, after the Certificates have been redeemed such excess moneys shall be paid to the City. Prior to any distribution of such Net Proceeds in redemption of the Certificates, the Trustee shall be entitled to payment of its customary fees for all services rendered in connection with such leasing, sale or assignment, as well as reimbursement for all costs and expenses incurred thereby, from the proceeds of such leasing, sale or assignment. A PARTICIPANT SHOULD NOT ANTICIPATE THAT IT WILL BE POSSIBLE TO LEASE, SELL OR ASSIGN THE PROJECT FOR AN AMOUNT EQUAL TO THE AGGREGATE PRINCIPAL AMOUNT OF THE CERTIFICATES THEN OUTSTANDING PLUS ACCRUED INTEREST THEREON. IF THE CERTIFICATES ARE REDEEMED SUBSEQUENT TO THE OCCURRENCE OF A TERMINATION EVENT FROM SUCH NET PROCEEDS OF SUCH LEASING, SALE OR ASSIGNMENT OF THE TRUSTEE'S INTEREST IN THE PROJECT, FOR AN AMOUNT LESS THAN THE AGGREGATE PRINCIPAL AMOUNT THEREOF PLUS ACCRUED INTEREST TO THE REDEMPTION DATE, NO REGISTERED OWNER OF ANY CERTIFICATE SHALL HAVE ANY FURTHER CLAIM FOR PAYMENT AGAINST THE CITY, THE CORPORATION OR THE TRUSTEE. Notice of Redemption Notice of the call for any redemption, identifying the Certificates or portions of Certificates to be redeemed and specifying the terms of such redemption, shall be given by mailing a copy of the redemption notice by registered or certified mail at least thirty days and not more than -16- C2 sixty days prior to the redemption date to the registered owner of each Certificate or portion of a Certificate to be redeemed, at the address shown on the registration books, provided that failure to give notice by mailing, or any defect therein, shall not affect the validity of any redemption proceeding as to which no such failure has occurred. Any notice mailed as provided in the Indenture shall be conclusively presumed to have been duly given, whether or not registered owner receives the notice. If at the time of mailing of notice of redemption there shall not have been deposited with the Trustee moneys sufficient to redeem all the Certificates called for redemption, such notice will state that it is conditional upon the deposit of redemption moneys with the Trustee by the redemption date, and such notice shall be of no effect unless such moneys are so deposited. The Trustee shall pay to the registered owners of Certificates so redeemed the amounts due on their respective Certificates at the principal corporate trust office of the Trustee upon presentation and surrender of the Certificates; provided, however, that if redeemed in part, the Certificates may be redeemed only in multiples of $5,000. Redemption payments shall be accompanied by a written designation prepared by the Trustee stating the portion of the payment representing the unpaid principal amount of the Certificate immediately prior to the payment, the portion of the payment representing interest and the remaining portion, if any, which shall be designated and paid as a redemption premium. All Certificates called for redemption will cease to bear interest after the specified redemption date, provided that sufficient funds for redemption are on deposit with the Trustee. Persons Treated as Registered Owners; Transfer and Exchange of Certificates Upon surrender for transfer of a Certificate at the principal corporate trust office of the Trustee, duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or the attorney of such registered owner duly authorized in writing, the Trustee shall execute and deliver in the name of the transferee or transferees a new, fully registered Certificate or Certificates for a like aggregate principal amount and of a like maturity, series and interest rate. -17- Certificates may be exchanged at the principal corporate trust office of the Trustee for a like aggregate principal amount of Certificates of the same date, maturity, series and interest rate or for a like aggregate principal amount of Certificates of other authorized denominations of the same date, maturity, series and interest rate. The Trustee shall not be required to transfer or exchange the Certificates during the period of fifteen days next preceding any interest payment date of such Certificate nor to transfer or exchange any Certificate after the publication or the mailing of notice calling such Certificate for redemption has been given as provided in the Indenture, nor during the period of fifteen days next preceding the giving of such notice of redemption. As to any Certificate, the person in whose name the same shall be registered on a Regular Record Date or Special Record Date shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of either principal or interest with respect to the Certificate shall be made only to or upon the written order of the registered owner thereof or the legal representative of such registered owner, but such registration may be changed as hereinabove provided. All such payments shall be valid and effectual to satisfy and discharge such Certificate to the extent of the sum or sums paid. The Trustee shall require the payment by any Participant requesting transfer or exchange of Certificates of any tax, trustee's fee, fee or other governmental charge required to be paid with respect to such transfer. Additional Certificates The Indenture authorizes the issuance of Additional Certificates under the conditions set forth in the Indenture. See APPENDIX B. -18- SECURITY FOR THE CERTIFICATES General Each Certificate evidences the assignment of a proportionate interest in rights to receive certain payments pursuant to the Lease. The Corporation has assigned its right to receive payments pursuant to the Lease (other than its rights to payment for reimbursements of certain fees and expenses under the Lease) to the Trustee under the Indenture and the Trustee has agreed to hold such moneys in trust for the benefit of the Participants. As more fully described under the caption ~RISK FACTORS,M the Lease is subject to termination on an annual basis at the option of the City. The Lease Term and the schedule of payments of Base Rentals is designed to produce moneys sufficient to pay the Certificates when due (so long as the City elects to continue the Lease). The Lease provides that it is the intention of the City that the decision to terminate the Lease is to be made solely by the City Council. Neither the Lease nor the Certificates constitutes a general obligation or other indebtedness of the City within the meaning of any constitutional or statutory debt limitation. Neither the Lease, the Indenture nor the Certificates has directly or indirectly obligated the City to make any payments beyond those appropriated for the then current Fiscal Year. Base Rentals and Additional Rentals may be paid from any lawfully available City moneys appropriated for that purpose. Upon a termination of the Lease Term by reason of an Event of Nonappropriation or an Event of Default, the City is required to vacate the Project (leaving the Equipment) (a) by the expiration of the lease term during which an Event of Nonappropriation occurs, in the case of an Event of Nonappropriation, or (b) within fifteen days after notice from the Trustee, in the case of an Event of Default. After an occurrence of an Event of Default, the Trustee may proceed to foreclose on and sell the Project or lease the Project or sell an assignment of its interest in the Lease for the benefit of the Participants and may exercise one or any combination of the remedies available upon default as provided in the Lease. All property, funds and rights acquired by the Trustee upon the termination of the Lease, along with other moneys then held by the Trustee under the Indenture (with certain exceptions as provided in the Lease and the Indenture), are required to be used to redeem the Certificates, if and to the extent any such moneys are realized. See NRISK FACTORS,~ LATHE CERTIFICATES - Redemption Provisions,N and OAPPENDIX B-- SUMMARY OF DOCUMENTS AND DEFINITIONS -THE LEASE -- Events of Default- - Remedies. The Project is required to be insured as described -19- under the caption "'APPENDIX B--SUMMARY OF DOCUMENTS AND DEFINITIONS- -THE LEASE -- Insurance to be Maintained for the Project"' and insurance proceeds are required to be applied by the Trustee as described under the caption "'APPENDIX B -- SUMMARY OF DOCUMENTS AND DEFINITIONS -THE LEASE -- Damage, Destruction and Condemnation." Reserve Fund A Reserve Fudd to be funded from proce the amount of $ , the event Additional C an amount equal to 10% Additional Certificates maximum allowed under f Fund are to be used to Certificates, to the ex Certificate Fund, and f under °APPENDIX B - -SUMM INDENTURE - -Funds and A is established by the Indenture and is ds of the sale of the Certificates in and shall be additionally funded, in tificates are issued by the City, in f the principal amount of such or such other lesser amount as is the deral law. Amounts in the Reserve y principal of and interest on the nt of any deficiency in the certain other purposes as described Ry OF DOCUMENTS AND DEFINITIONS -THE T ts -- Reserve Fund."' a" * Preliminary; sub ct han e. -20- howl- EXHIBIT "A" THE PUEBJ C) MUNICIPAL PROPEIRFY CORPORATION THE PUBLIC WORK:; BUILDING PROJECT CERTIFICATES OF PARTICIPATION, SERIES DEBT SERVICE SCHEDULl. DATE PRINCIPAL 12/1.5/93 55 , 1'1[10.00 12/15/94 la), C)OO. cio 12/15/95 140, 000. 00 1.2/15/96 1.45 , [100.00 12/15/97 60, 000. (. 330,422.50 6 5, 000 . 00 12/15/99 7x:1, 000.00 121151 0 70, 000 - 00 5.7:10000 185,962.50 1211-5/ 2 UO 000. 00 12/15/ 3 85 000.00 12/15/ 4 95 000.00 12 /.1.`_i/ 5 .1(::)1:1,01.10.00 1211.51 6 1 OEi, Ooo. 00 12/.15/ 7 115 121.151 8 125, 000 - 00 12/1.5/ 9 13`1,001).00 12/1.5/10 1.40, 000. 00 12/1.5/11. .1.51_") , 000.00 12/15/12 165, 000. 00 12/15/1.1 175,000-00 12/15/1.4 190,000.00 1211,5115 490, 000. 1 234,947.50 2,960, 000. 00 ACCRUE[) 1.43, 2,960, 000.00 I I 7A VA 7A W , 101 COUPON INTEREST PERIOD TOTAL FISCAL - TOTAL 4.250000 295,128.44 350,120-44 350,120.44 5.2000001 2C)O 7 422.50 330,422.50 330,422.50 5.500000 193, 6.62. 50 333,662.50 333,662.51) 5.7:10000 185,962.50 330,962.50 330,962.50 6.000000 177,625-00 237,625.00 237,625.00 6.2:10000 174,025.00 '39,025.00 239, 025. 00 6.51)(10(11) 169,9t'..2. 50 239,962.50 239,962.50 6. 7000100 165, 412. 50 235, 412.5[) ,5 23, 412. 50 6. 90(JO00 I t10, 722 - 50 235,722.50 235,722.50 7.000000 1. 5!-), 547.50 23,5, 547.50 2.15, 54 5) (-) 7 - 100000 1.4 SO 234,947.50 234,947.50 7.250000 1.43, 238, 912.50 230,912. 50 7.:.'.. 5001)[1 1.37 I (7:'.`.i . 110 237,025.00 237, 025.00 7.250000 129, 775. 00 234, 775. 00 234, 771", . 00 7.250000 .1.22 , 16',2. 50 2. 7 , .1 62.50 237,162.50 7.250000 1. 1. 3 7 825. oc) 00 2 3 , 1 0 - 2 S. 0 0 7 - 250000 104, 762. S(.) 239, 762.50 239,762.50 7.250000 94, 975. 00 234,975.00 234,975.00 7.250000 84 , - 0 0 234, 00 234,825.00 7.25000["1 73, 9`10.00 238, 950.00 238,950. 00 7.250000 6..1.,987.50 236,987-50 236,987.50 7.250000 49, 300. 00 239,300.00 239,300.00 7.250000 35,525.00 525,525.00 525 3,180,443.44 6,140,443.44 11,827.67 11,827.67 3,168,61.5.77 6,128,61.5.77 Dated 71 1/92 with Delivery of 7/22/92 Bond Years 44,538.444 Average Coupon 7.140895 Average Life 15.046772 N I C % 7.244901 % Using 98.4350473 T I C % 7.079529 % From Delivery Date NORWEST INVESTMENT SERVICES, INC. RUNDATE: 06-18-1992 @ 15:27:0• FILENAME: PUB KEY: PWORKS 23 BASE RENTALS SCHEDULE Set forth below is a schedule of the Base Rentals to become due and payable annually on the Certificates, including the principal and interest components thereof. Base Rentals Base Rentals Dates Principal Interest Total Base (Dec. 151 Component (2) Component Rental 1993 $ 000.00 $ 297,420.94 $352,420.94 1994 130, 00.00 201,997.50 331,997.50 1995 135,0 .00 195,237.50 330,237.50 1996 145,000. 0 187,812.50 332,812.50 1997 60,000.00 179,475.00 239,475.00 1998 60,000.00 175,875.00 235,875.00 1999 65,000.00 172,125.00 237,125.00 2000 70,000.00 167,900.00 237,900.00 2001 75,000.00 3,210.00 238,210.00 2002 80,000.00 1 035.00 238,035.00 2003 85,000.00 152, 35.00 237,435.00 2004 90,000.00 146,4 .00 236,400.00 2005 95,000.00 139,875. 234,875.00 2006 105,000.00 132,750.00 237,750.00 2007 115,000.00 124,875.00 239,875.00 2008 120,000.00 116,250.00 236,250.00 2009 130,000.00 107,250.00 7,250.00 2010 140,000.00 97,500.00 23 500.00 2011 150,000.00 87,000.00 237, 0.00 2012 160,000.00 75,750.00 235,75 00 2013 175,000.00 63,750.00 238,750. 2014 185,000.00 50,625.00 235,625.00 2015 490,000.00 36,750.00 526,750.00 (1) The Lease provides for semiannual payments of Base Rentals commencing June 15, 1993. This schedule sets forth the annual payments which will be made to the Participants by the Trustee. (2) The principal components set forth for the years 2005 through 2015 represent mandatory sinking fund payments. See OTHE CERTIFICATES -- Redemption Provisions. -21- THE CORPORATION Generally The Corporation was incorporated on February 15, 1990, as a Colorado nonprofit public benefit corporation to facilitate the financing of the acquisitions of the property through the issuance of the 1990 Certificates. The Corporation is governed by a three - member Board of Directors. Vacancies on the Board of Directors are filled by new members appointed by the remaining Board of Directors. The current members of the Board of Directors and their occupations are as follows: Director Occupation Billy G. Martin Director of Finance, City of Pueblo John A. Califano City Council Member, City of Pueblo Fay Kastelic City Council Member, City of Pueblo The directors of the Corporation will have no private or proprietary interest in the Corporation. The Board of Directors will serve without compensation (except reimbursement of expenses), and no part of the Corporation's net earnings, income or assets will inure to the benefit of any private entity or person. In addition to the 1990 Certificates, the Corporation issued its Certificates of Participation dated May 23, 1991, in the amount of $168,600 to finance the acquisition of golf carts and related equipment for a city golf course. All of such Certificates are currently outstanding. Corporation's Limited Liability The Corporation will enter into the Lease with the City solely to facilitate the financing of the Project and the refinancing of the 1990 Certificates. The Corporation assigns, pursuant to the Indenture, its rights and interests under the Lease (except certain rights to payment or reimbursement of certain fees and expenses) to the Trustee for the benefit of the Participants. Since the Corporation is not financially liable for, and will not make, any Lease payments (including Base Rentals or Additional Rentals), the Participants will have no right to look to the Corporation for any payment of the Certificates or for any other payments. In -22- addition, the Corporation has no responsibility for or control over the expenditures of the proceeds of the Certificates. The Corporation's obligations with respect to the Certificates and the Project are strictly limited to those provided for in the Lease and the Indenture. Furthermore, neither the Lease nor the Indenture creates any pecuniary liability on the part of the directors or officers of the Corporation. -23- THE CITY General The City was incorporated in 1885 and is one of the original home rule cities under the Constitution of the State. It is an incorporated municipality, a body politic and corporate existing under the laws of the State. Because the City is a Nhome rulem city, the City's Charter governs all local and municipal matters. State law applies to matters of local or municipal concern only to the extent not superseded by the Charter or ordinances of the City. The Constitution of the State reserves to the City certain powers for municipal purposes, including the power to issue, refund and liquidate municipal obligations and the power to assess property in the City and to levy and collect taxes on such property. The City is located in the south - central portion of the State, approximately 110 miles south of Denver and 45 miles south of Colorado Springs. Interstate Highway 25 and Colorado State Highway 50 intersect at the City. The City is the population center of Pueblo County (the NCountyn) with approximately 98,640 residents out of a total County population of 123,051 for 1990. City Council The governing body of the City consists of the seven members of the City Council. Four of these members of the City Council are elected by district and three are elected from the City at large. The members of the City Council are elected for staggered four -year terms at the general municipal election held in November in odd - numbered years. The members of the City Council elect the President of the City Council, who is the presiding officer and is recognized as head of the City government for ceremonial purposes. The President of the City Council votes, as do other members of the City Council, has no veto power and has no special administrative duties. The members of the City Council, the dates of expiration of their current terms, and their principal occupations are, respectively, as follows: -24- All legislative powers of the City are held by the City Council except as provided in the City Charter. The affirmative vote of four members of the City Council is required for the adoption of any ordinance. The City Charter provides for voter referendum and initiative, pursuant to which voters can require the City Council to submit ordinances, including the Ordinances authorizing issuance of the Certificates, to the voters at special or general City elections. The City Council appoints all boards and commissions, unless otherwise required by law, and it appoints the City Manager. The City Manager is the executive head of the government of the City and is responsible for the enforcement of the City's laws and ordinances. The City Manager also administers the operation of all the departments and divisions of the City, including, without limitation, the finance, fire, police, parks and recreation, personnel, public works and purchasing departments. The City Manager has the authority to appoint directors of all departments of the City, including the City Attorney. The following are brief biographies of certain of the key administrators of the City: Lewis A. Quigley, City Manager - -Mr. Quigley, age 57, has been City Manager since January 1, 1987. Prior to becoming City Manager, Mr. Quigley held various positions with the City of Pueblo since 1975, including the positions of Assistant City Manager, Interim Fire Chief, and Parks and Recreation Director. Mr. Quigley has a B.S. degree from Indiana University and a M.S. degree from the University of Missouri. Billy G. Martin, Director of Finance - -Mr. Martin, age 48, has been Director of Finance of the City since 1976. -25- Expiration Member of Term (December) Occupation Michael Occhiato 1993 Self- Employed Fay Kastelic 1993 Retired Chris Weaver 1995 Certified Public Accountant Howard Whitlock 1993 Retired Joyce Lawrence 1995 Homemaker Sam Corsentino 1993 Retired John Califano 1995 Retired All legislative powers of the City are held by the City Council except as provided in the City Charter. The affirmative vote of four members of the City Council is required for the adoption of any ordinance. The City Charter provides for voter referendum and initiative, pursuant to which voters can require the City Council to submit ordinances, including the Ordinances authorizing issuance of the Certificates, to the voters at special or general City elections. The City Council appoints all boards and commissions, unless otherwise required by law, and it appoints the City Manager. The City Manager is the executive head of the government of the City and is responsible for the enforcement of the City's laws and ordinances. The City Manager also administers the operation of all the departments and divisions of the City, including, without limitation, the finance, fire, police, parks and recreation, personnel, public works and purchasing departments. The City Manager has the authority to appoint directors of all departments of the City, including the City Attorney. The following are brief biographies of certain of the key administrators of the City: Lewis A. Quigley, City Manager - -Mr. Quigley, age 57, has been City Manager since January 1, 1987. Prior to becoming City Manager, Mr. Quigley held various positions with the City of Pueblo since 1975, including the positions of Assistant City Manager, Interim Fire Chief, and Parks and Recreation Director. Mr. Quigley has a B.S. degree from Indiana University and a M.S. degree from the University of Missouri. Billy G. Martin, Director of Finance - -Mr. Martin, age 48, has been Director of Finance of the City since 1976. -25- Prior to becoming Director of Finance, Mr. Martin worked for the City as Chief Accountant (1974 -1976) and as a Tax Auditor (1971 - 1974). Mr. Martin received his B.S. degree in Business Administration from the University of Southern Colorado, Pueblo, Colorado, in 1970. Tom Cvar, Director of Public Works - -Mr. Cvar, age 45, has been Director of Public Works for the City since May 1982. Mr. Cvar was a Civil Engineer (1980 -1982) for the City before becoming Director of Public Works. He held various design engineering jobs before working for the City. Mr. Cvar received his B.S. degree in Civil Engineering from the University of Colorado, Boulder, Colorado, in 1969. Glen Schoenrock, Assistant City Manager for Fleet Maintenance - -Mr. Schoenrock, age 51, has been Assistant City Manager for Fleet Maintenance of the City since February 1984. Mr. Schoenrock has had 24 years' experience in Fleet Maintenance and business prior to his employment with the City of Pueblo. He is a 1960 graduate of the United States Army Ordnance School, Aberdeen Proving Grounds, Maryland, and a 1969 graduate from Dunwoody Institute, Minneapolis, Minnesota, in Business Management -- Inventory and Stock Control. City Employees The City has a total of approximately 661 full -time employees. Three unions represent City employees. The Pueblo Association of Government Employees ("PAGE") represents over 300 City employees. Approximately 134 employees are represented by the International Association of Firefighters. The International Brotherhood of Police Officers Local 537 represents about 160 employees. Contracts covering the employees in PAGE, the International Association of Firefighters and the International Brotherhood of Police Officers Local 537 expire December 31, 1994. The City, through a wholly -owned corporation, employs approximately 26 municipal transit workers who are represented by the Amalgamated Transit Workers Local 662. The transit workers have recently signed a three -year contract which expires at the end of December 31, 1994. The City considers its employee relations to be satisfactory. Retirement Plans All eligible employees of the City, other than firemen, uniformed police, employees of Head Start, Inc., and -26- employees of the Pueblo Transportation Company, participate in the state -wide Public Employees' Retirement Association (NPERAO), a multiple - employer, cost - sharing public employee retirement system. As of May, 1992, the City was required to contribute to PERA an amount equal to 10.0 percent of salary of all covered employees, and each covered employee was required to contribute 8.0 percent of his salary. Benefits include an annuity, payable by PERA upon an employee's retirement, equal to 2.5 percent of highest average salary (the average of the highest three consecutive years of service) per year of service for the first twenty years of service and an additional 1.25 percent of final average salary per year of service for each year over twenty years, with a maximum annual annuity of 75 percent of highest average salary. Disability and death benefits also are provided. According to the City's 1990 Comprehensive Annual Financial Report, the Public Employees' Retirement Association of Colorado section, PERA had a surplus of $781,652,000 as of December 31, 1990. The total City contribution in 1991 was $1,720,443. The City is affiliated with the State Fire and Police Pension Association (NFPPAff) which was effective January 1, 1980. Full -time firefighters and police officers hired on or after April 8, 1978 (approximately 122 of the City's police and firefighters), and electing employees hired before April 8, 1978, are entitled to the normal retirement benefits administered by FPPA. Benefits are calculated as 2 percent of the average of the employee's highest three year's salary per year of service (up to a maximum of twenty -five years). Disability, retirement and survivor benefits are provided to all full -time firefighters and police officers. Currently employees and employers are each required to contribute 8 percent of their salary to FPPA. The FPPA plans are required to be actuarially valued annually, and the rates of contributions may be adjusted based upon the needs of the plans to reach actuarial soundness, as long as employee contributions do not exceed employer contributions. The City's firefighters and police who were hired before April 8, 1978 (approximately 200 firefighters and 183 police) are covered by the City's Fire Pension Fund and Police Pension Fund, respectively. Based upon projections from the results reported in actuarial valuation reports dated January 1, 1988, the unfunded accrued liability for the Fire Pension Fund as of January 1, 1990 was $21,676,062, and for the Police Pension Fund it was $639,982, both based on full rank escalation. The annual payment required to amortize unfunded accrued liability over thirty -seven years from 1990 was calculated to be $2,075,225(or 78.261 percent of salary) -27- for the Fire Pension Fund and $414,244 (or 11.0 percent of salary) for the Police Pension Fund. Municipal services The City provides its citizens with fire and police protection, streets and highways, public works and improvements, parks and recreation services, health and sanitation services, social services, planning and zoning and general administrative services. Water services are provided by the Board of Waterworks of the City. Gas and electric services in the City are provided by private companies. The City owns and operates Pueblo Memorial Airport, a separately incorporated bus company providing services within the City, a public ice arena and public swimming pools. The airport facility currently is operated on a self- sustaining basis with the exception of an annual City subsidy which is estimated to total $613,804 for 1992. The bus company operations are subsidized by the City and the federal government with subsidies from the City's General Fund and the federal government expected to be $613,804 for 1992. The operations of the ice arena were subsidized by the City in 1990 in an amount equal to $228,357 and the swimming pools were subsidized by the City in 1992 in an amount equal to $243,185. Capital Improvements As part of the budget message or as a separate report attached thereto, the City Manager is required to annually present a program on proposed capital projects for the ensuing fiscal year and for four fiscal years thereafter. The City Manager recommends to the City Council those projects to be undertaken during the ensuing fiscal year and the method of financing such projects. The City Council may levy annually a tax of not more than two mills to be assessed upon the valuation within the City at the same time as the regular annual taxes for City expenses, for the benefit of a fund known as the MCapital Improvement Fund.n The City did not levy any mills in 1992 for the Capital Improvement Fund, although it is considering doing so for next year. The Capital Improvement Fund was established for the purpose of paying the cost of capital improvements for which the City is authorized by the City Charter to issue bonds and for no other purpose. The proceeds of such levy are kept by the Director of Finance in a special account until invested as authorized by the City Council subject to existing laws. The City Council has the power to transfer from time to time to the Capital Improvement Fund any portion of the General Fund -28- surplus not otherwise appropriated. Any unappropriated balance in the Capital Improvement Fund may be transferred by the City Council for payment of outstanding bonded indebtedness of the City. Pursuant to the proposals submitted by the City Manager, the City annually budgets and expends funds on capital improvements for street construction, replacement and addition of traffic control devices, improvements and acquisitions of recreational facilities, and other similar improvements. In addition to the Capital Improvement Fund mill levy described above, capital improvements ordinarily are funded from the City's General Fund. The City estimates that expenditures for such capital improvements will be approximately $990,000 in 1992 and $900,000 in 1993. The City has also implemented a half -cent sales tax increase for the calendar years 1992 through 1997, the proceeds of which are being restricted for job - creating capital improvements within the City and at the Pueblo Memorial Airport and Industrial Park. Debt Structure The City Charter provides that the City may not issue bonds payable out of general property taxes (i) except pursuant to an ordinance duly adopted by the City Council of the City and (ii) until the question of such issuance shall have been approved by a majority of the qualified electors of the City voting at a special or general election. The City Charter authorizes the City to issue general obligation refunding bonds pursuant to an ordinance duly adopted by the City Council without an election. The aggregate amount of all indebtedness of the City may not exceed 10 percent of the assessed valuation of the taxable property within the City as shown by the last assessment for City purposes. Excluded from the computation of indebtedness for the purpose of this limitation are general obligation bonds or other evidences of indebtedness issued by the City for the acquisition, extension or improvement of water or the municipal water works system, local improvement district bonds, revenue bonds and refunding bonds. As of December 31, 1991 the City's debt limit was $37,944,720 and the amount of outstanding debt applicable to the limit (after deductions allowed by law) was $13,127,121, leaving a legal debt margin of $24,817,149. Some portions of the City are subject to property tax levies for bonded indebtedness of metropolitan districts or other entities which overlap small portions of the City, but none of this indebtedness is material from the standpoint of the amount payable by residents of the City. The City also -29- has issued (a) general obligation bonds outstanding in an aggregate principal amount of $12,845,001 as of December 31, 1991, which bonds are presently being paid from revenues generated by the City's taxes, and (b) sewer revenue bonds outstanding in an aggregate principal amount of $30,545,000 as of June 1, 1992, which bonds are presently being paid from revenues generated by the City's sewer system. CITY FINANCIAL OPERATIONS City Revenues The following table sets forth a summary of expenditures for the City's General Fund for the period ended December 31, 1991. The information not been audited. revenues and five -year for 1991 has -30- GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE 1987 1988 1989 1990 L 9 - 9 - I Revenues Taxes $ 27,143,162 $ 27,147,545 $ 28,753,682 $ 29,386,428 $ 30,097,135 Licenses & permits 118,355 114,918 111,734 107,758 109,076 Revenue from other agencies 891,910 888,720 947,747 978,589 779,041 Charges for services 226,183 204,942 199,857 182,054 197,725 Fines 4 forefeits 482,858 523,146 592,969 697,899 662,680 Interest income 362,115 368,352 609,639 150,746 192,458 Miscellaneous 221,736 202,272 203,271 164,822 160,767 Total Revenues 29,446,319 29,449,895 31,418,899 31,668,296 32,198,882 Expenditures Current General government 2,827,090 3,064,053 3,265,229 3,251,824 3,526,740 ** Public safety 14,068,232 14,358,763 14,625,194 15,194,884 15,265,597 Parks i recreation 2,540,779 2,582,792 2,618,984 2,616,598 2,322,935 Transportation 536,794 2,092,067 1,974,302 1,867,742 2,239,079 Public works 5,251,177 3,473,539 3,666,061 3,898,996 3,204,734 Insurance 6 contingencies 1,000,858 613,156 438,096 979,487 619,648 Intergovernmental 1,432,565 1,479,919 1,515,193 1,447,700 1,594,839 Capital outlay -0- -0- -0- -0- -0- Debt service -0- -0- 85,150 79,176 -0- Total expenditures 27,657,495 27,664,289 28,188,209 29,336,407 28,773,572 Excess (Deficiency) of revenues over expenditures 1,788,824 1,785,606 3,230,690 2,331,889 3,425,310 Other financing sources Operating transfers in 2,821,642 3,006,243 3,226,392 3,954,901 3,714,969 Operating transfers out ( 5,418,321) ( 5,461,776) ( 5,734,750) (6,964,625) (7,447,410) Total other financing sources EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES ( 807,855) ( 669,927) 722,332 (677,835) ( 307,131) Balance, January 1 3,752,969 2,952,508 2,390,120 3,112,452 3,336,383 * ** Residual equity transfer -0- 110,929 -0- -0- -0- Increase in reserve for inventory 7,394 ( 3,390 -0- -0- -0- Balance, December 31 $ 2,952,508 $ 2,390,120 $ 3,112,452 $ 2,434,617 $ 3,029,252 Source: City of Pueblo Audited Financial Statements, 1987 -1990; City of Pueblo * Unaudited ** Combined personal services, pension contributions, other fringes and current expenses * ** Prior period adjustment for health insurance funding agreement -31- __r The major sources of City revenues (sales and use taxes and property taxes) are applied to City operations and maintenance, capital expenditures and debt service. Sales and Use Taxes The City's sales and use tax is imposed in accordance with the City Charter and sales and use tax ordinances at the current rate of 3.5 percent. One -half cent of the sales tax is restricted for jobs creating capital improvements within the City and for capital improvements at the Pueblo Municipal Airport and Industrial Park and will be in effect through 1997. During the past ten years, the City has received annually at least 63 percent of its total tax revenues from sales and use taxes. Pursuant to the City's sales tax ordinance, the City Council cannot adopt a mill levy exceeding 19.75 per thousand dollars assessed value (19.75 mills for each $1 of assessed valuation) for municipal purposes including capital improvements (excluding water bonds) without causing the City's sales and use tax ordinance to become null and void. See 'Ad Valorem Property Taxes" below. Ad Valorem Property Taxes An important source of revenue to the City is the general ad valorem tax annually levied on and against all of the taxable property within the City. Both real and personal property are subject to taxation, but there are certain classes of property which are exempt, including property of the United States; property of the State and its political subdivisions; public libraries; school property; charitable property; property of religious organizations; cemeteries; irrigation ditches, canals and flumes; household furnishings; livestock; agricultural and livestock products and equipment; personal effects and intangible personal property. The value of real property for tax purposes is computed using market values and other statutory factors as well as manuals and data supplied by the State Property Tax Administrator. For tax years 1983 through 1986, the 1977 levels of value so computed were used. For tax years 1988 and 1989, the 1985 levels of value were used. For tax years 1989, 1990 and 1991, the level of value to be used is based on the level of value for the period of one and one -half years immediately prior. The level of value is then to advance by one year each year thereafter. As of January 1, 1985, the State General Assembly was required to determine the percentage of the aggregate statewide valuation for assessment which is attributable to residential real property. For each subsequent year, the General Assembly must redetermine the percentage of the -32- aggregate statewide valuation for assessment which is attributable to each class of taxable property, after adding any increased valuation for assessment attributable to new construction and increased oil and gas production. For each year in which there is a change in the level of value, the General Assembly is required to adjust the assessed valuation ratio for residential real property as necessary to maintain the previous year's percentage of aggregate statewide valuation attributable to residential real property. For tax year 1991, residential real property was valued for assessment at 14.34 percent of its actual value as provided by statute. For tax year 1989, it was 15 percent, for tax year 1988, residential real property was valued for assessment at 16 percent of its actual value; and for 1987 it was 18 percent. For tax years immediately prior to 1987, residential real property was valued for assessment at 21 percent of its actual value. All other taxable property, except agricultural property, will continue to have an assessed valuation ratio of 29 percent. The County Assessor is required to complete the assessment rolls of all taxable property no later than August 25 each year. The abstracts of assessment prepared therefrom are reviewed by the State Property Tax Administrator and, if necessary, the State Board of Equalization orders the County Assessor to correct assessments. Assessments are subject to further review at various stages by the Board of Assessment Appeals and by the State courts. Upon receipt of the County Assessor's certifications, the City Council computes rates of levy which, together with other legally available revenues, will raise the amounts required for the City. The mill levies computed by the City Council are certified to the County Assessor, who levies the tax on all taxable property within the City. The County Treasurer has the responsibility of sending tax bills to property owners and collecting the taxes. Taxes levied in one year are collected in the next. Thus, 1991 taxes will be collected during 1992. Taxes are due January 1 in the year of collection; however, they may be paid in either one installment (not later than April 30) or in two equal installments (not later than the 28th day of February and the 15th day of June, respectively) without interest penalty. Pursuant to statute, the County Treasurer charges the following fees on all taxes collected for the City: 1/2 percent on general fund and 1 percent on special building fund revenues. There is no collection fee for the bond redemption -33- fund levy. Collection fees are deducted from gross tax receipts and the balance remitted monthly to the City. Taxes which are not paid within the prescribed time limits bear interest at the rate of 1 percent per month until paid. Unpaid amounts and the accrued interest thereon become delinquent on June 16. All taxes levied on property, together with interest thereon and penalties for default, as well as other costs of collection, constitute a perpetual lien on and against the property. Such lien is on a parity with the tax liens of other general taxes. Collection of delinquent real property taxes is enforceable by tax sale of such realty. Delinquent personal property taxes are similarly enforceable by distraint, seizure and sale of the taxpayer's personal property. Tax sales of realty are generally held on or before the second Monday in December of the collection year, preceded by a notice of delinquency to the taxpayer and a minimum of four weeks public notice of the impending public sale. Sales of personal property may be held at any time after October l of the collection year following notice of delinquency and public notice of the sale. There can be no assurance, however, that the value of property sold, in the event of foreclosure and sale by a County Treasurer, would be sufficient to produce the amount required with respect to taxes levied by the City and by overlapping taxing entities. Property not sold is removed from the tax rolls. The following chart sets forth the history of assessed valuation, mill levies and property tax collections of the City since 1985. -34- �4 Assessed Valuation and Property Tax Collections of the City (1) The Pueblo County Treasurer's 1 percent collection fee has been deducted from these amounts. (2) These amounts include interest and penalties on delinquent taxes for the current collection year and therefore may result in total collections in excess of 100 percent of anticipated revenues. (3) For collection years 1986, 1987, 1988, 1989, 1990 and 1991 the City has collected (excluding delinquencies collected) 99.48 percent, 99.61 percent, 99.56 percent, 99.59 percent, 99.16 percent and 98.53 percent, respectively, of the total tax levied in such years. (4) Increase of assessed valuation due to change in assessment laws. Sources: City of Pueblo Annual Financial Report, Pueblo County Assessor's and Treasurer's Offices; and the State of Colorado, Division of Property Taxation, 1985 -1990 Annual Reports. In addition to the City's tax levy, owners of property within the City are obligated to pay taxes to other taxing entities in which their property is located. The County Assessor's Office reports that there are six such entities currently overlapping the City. As a result, property owners within the City's boundaries may be subject to different mill levies depending upon the location of their property. Pursuant to the City's sales tax ordinance, the City Council cannot adopt a mill levy exceeding 19.75 per thousand dollars assessed value (19.75 mills for each $1 of assessed valuation) for municipal purposes, including capital improvements and excluding water bonds, without causing the City's sales and use tax ordinance to become null and void. The 1990 mill levy (for collection in 1991) was 17.1 mills; the 1991 mill levy, as certified by the City, was 17.1 mills, which will be the basis for tax collection in 1992. -35- Accumulated Total Outstanding Delinquent Total Tax Collections Accumulated Taxes as Collections as a Delinquent Percentage Levy Collection Mill Assessed Total nf2) Includi Percenta f � ) Tax of Total Date Year Lev Valuation (l) Tax Levy Delinquent of Levy (2) Collections Levy 1985 1986 19.25 $280,278,090 $4,943,671 $4,945,032 100.03 $163,176 3.30 1986 1987 19.25 283,493,220 5,341,326 5,336,260 99.91 168,242 3.15 (4) 1987 1988 15.10 384,303,200 5,402,672 5,393,832 99.84 177,082 3.28 1988 1989 17.10 362,756,620 5,744,948 5,727,897 99.70 194,133 3.38 1989 1990 17.10 391,096,605 6,141,107 6,105,691 99.42 229,549 3.74 1990 1991 17.10 384,424,850 6,499,602 6,422,550 98.81 306,601 4.72 (1) The Pueblo County Treasurer's 1 percent collection fee has been deducted from these amounts. (2) These amounts include interest and penalties on delinquent taxes for the current collection year and therefore may result in total collections in excess of 100 percent of anticipated revenues. (3) For collection years 1986, 1987, 1988, 1989, 1990 and 1991 the City has collected (excluding delinquencies collected) 99.48 percent, 99.61 percent, 99.56 percent, 99.59 percent, 99.16 percent and 98.53 percent, respectively, of the total tax levied in such years. (4) Increase of assessed valuation due to change in assessment laws. Sources: City of Pueblo Annual Financial Report, Pueblo County Assessor's and Treasurer's Offices; and the State of Colorado, Division of Property Taxation, 1985 -1990 Annual Reports. In addition to the City's tax levy, owners of property within the City are obligated to pay taxes to other taxing entities in which their property is located. The County Assessor's Office reports that there are six such entities currently overlapping the City. As a result, property owners within the City's boundaries may be subject to different mill levies depending upon the location of their property. Pursuant to the City's sales tax ordinance, the City Council cannot adopt a mill levy exceeding 19.75 per thousand dollars assessed value (19.75 mills for each $1 of assessed valuation) for municipal purposes, including capital improvements and excluding water bonds, without causing the City's sales and use tax ordinance to become null and void. The 1990 mill levy (for collection in 1991) was 17.1 mills; the 1991 mill levy, as certified by the City, was 17.1 mills, which will be the basis for tax collection in 1992. -35- The following chart is a sample mill levy that will be imposed on certain property within the City during the 1991 levy year for collection of property taxes in 1992 and is not intended to portray the mills levied against all properties within the City. Sample Mill Levy Affecting Property Owners Taxing Entity" 1991 Mill Levy"' Pueblo Outlook Metropolitan District 4.480 City of Pueblo 17.100 Pueblo County 29.999 Pueblo County Regional Library District 3.509 Pueblo County School District No. 60 40.139 Southeastern Colorado Water Conservancy District 0.969 Total Sample Mill Levy 96.196 (1) Pueblo School District No. 70 also overlaps a portion of the City and has a 1991 mill levy of 46.906. (2) One mill equals one -tenth of 1 percent. Source: Pueblo County Assessor's and Finance Offices. The following table, based on information provided by the County Assessor, lists the ten largest aggregate assessed valuations by property owner in the City in 1990. No independent investigation has been made of and consequently there can be no representation as to the financial conditions of the property owners listed below or that such property owners will continue to maintain their status as having the largest assessments. -36- Largest 1990 Assessed Valuations (1) Based on a total assessed valuation for 1990 of $609,970,100. (2) Has been acquired by West Plains Energy. Source: Pueblo County Assessor's Office. Other Revenues The City also receives General Fund revenues from several additional sources including franchise taxes, tobacco taxes, licenses and permits, fines and forfeitures and interest income. Several intergovernmental revenue sources also are included in the General Fund, including specific ownership taxes, cigarette taxes and highway users' taxes. In addition, the City anticipates receiving fewer cigarette tax revenues as fewer sales continue to be made in the City. The following table sets forth the sources of the City's General Fund revenues for the periods indicated: —37— Percentage of Total Assessed Assessed Name Type of Business Valuation Valuation Mountain Bell Telephone $11,715,500 1.92% Centel Corp. (2) Electricity 5,201,950 .85 Public Service Co. of Colo. Gas Utility 3,901,600 .63 Pueblo Mall Limited Partnership Real Estate 3,088,440 .50 Colorado National Bank of Pueblo Bank 1,628,820 .26 Buell Development Co. Real Estate 1,368,700 .22 Joshward (Montgomery Ward) Retail Stores 1,172,020 .19 Denver U.S. Bank Corporation, Inc. Bank 1,165,640 .19 Bay 11 Corporation Mall Convenience 1,161,910 .19 Dayton- Hudson Target /Mervyn's 1,060.730 .17 Total $31.465.310 5.12% (1) Based on a total assessed valuation for 1990 of $609,970,100. (2) Has been acquired by West Plains Energy. Source: Pueblo County Assessor's Office. Other Revenues The City also receives General Fund revenues from several additional sources including franchise taxes, tobacco taxes, licenses and permits, fines and forfeitures and interest income. Several intergovernmental revenue sources also are included in the General Fund, including specific ownership taxes, cigarette taxes and highway users' taxes. In addition, the City anticipates receiving fewer cigarette tax revenues as fewer sales continue to be made in the City. The following table sets forth the sources of the City's General Fund revenues for the periods indicated: —37— GENERAL FUND REVENUE SOURCES (1) Includes property taxes, cigarette and tobacco taxes, sales and use taxes and franchise taxes. (2) Includes health Licenses, professional and occupational licenses, amusement licenses, building permits and miscellaneous other licenses and permits. (3) Includes alcoholic beverage taxes and motor vehicles taxes collected by the State of Colorado, the County of Pueblo's portion of the costs of maintaining a sanitary landfill and animal shelter and miscellaneous other intergovernmental transfers. (4) Includes revenues from sales of building code books, codification books and traffic ordinance books, witness fees, zoning and rezoning variances, xerox copies and miscellaneous other sources. (5) Principally from municipal court. (6) Includes interest earned on City funds, rentals, sale of trees, discounts earned and miscellaneous other sources. Source: City of Pueblo, Comprehensive Annual Financial Report, Year Ended December 31, 1990; City of Pueblo. -38- Licenses Intergovern- Charge Fines Operating and mental for and Transfers Taxes(1) Permits(2) Tranafers(3) Services(4) Forfeits(5) In Other(6) Totals 1980 $18,025,563 $236,844 $587,416 $346,932 $422,049 $2,078,327 $1,244,642 $22,941,773 1981 19,337,323 290,929 623,282 323,879 537,594 1,768,032 1,442,836 24,363,875 1982 19,503,570 188,641 584,366 329,561 416,894 1,742,114 1,733,494 24,498,640 1983 20,110,274 97,577 611,395 163,331 307,493 1,868,871 1,545,354 24,704,295 1984 22,152,201 101,725 715,450 169,847 371,231 2,355,692 960,181 26,826,327 1985 24,910,466 114,346 732,406 185,245 470,778 2,137,423 815,191 29,365,855 1986 25,930,339 129,931 853,773 191,308 448,280 2,347,702 684,545 30,585,878 1987 27,143,162 118,355 891,910 226,183 482,858 2,821,642 583,851 32,267,961 1988 27,147,545 114,918 888,720 204,942 523,146 3,006,243 570,624 32,456,138 1989 28,753,682 111,734 947,747 199,857 592,969 3,226,392 812,910 34,645,291 1990 29,386,428 107,758 978,589 182,054 697,899 3,954,901 315,568 35,623,197 1991 30,097,135 109,076 779,041 197,725 662,680 3,714,869 353,225 35,913,751 (1) Includes property taxes, cigarette and tobacco taxes, sales and use taxes and franchise taxes. (2) Includes health Licenses, professional and occupational licenses, amusement licenses, building permits and miscellaneous other licenses and permits. (3) Includes alcoholic beverage taxes and motor vehicles taxes collected by the State of Colorado, the County of Pueblo's portion of the costs of maintaining a sanitary landfill and animal shelter and miscellaneous other intergovernmental transfers. (4) Includes revenues from sales of building code books, codification books and traffic ordinance books, witness fees, zoning and rezoning variances, xerox copies and miscellaneous other sources. (5) Principally from municipal court. (6) Includes interest earned on City funds, rentals, sale of trees, discounts earned and miscellaneous other sources. Source: City of Pueblo, Comprehensive Annual Financial Report, Year Ended December 31, 1990; City of Pueblo. -38- It:ai (2) Franchise fees are based on a certain percentage of gross receipts of the franchisee; during 1986 and 1987, the gross receipts of one of the major franchisees in the City decreased from the prior year's gross receipts. Source: City of Pueblo Comprehensive Annual Financial Report, Year Ended December 31, 1990; City of Pueblo. —39— The following table provides a breakdown by type of tax for the City's tax revenues for the years indicated: Calendar Property Sales and Franchise (2) Tobacco Total Year Taxes Use Taxes Taxes Taxes Taxes 1980 $3,987,688 $11,944,532 $1,496,467 $596,876 $18,025,563 1981 4,229,107 12,908,246 1,648,309 591,661 19,377,323 1982 4,210,614 13,027,557 1,733,448 531,951 19,503,570 1983 4,272,393 13,314,608 2,057,295 465,978 20,110,274 1984 4,448,719 14,973,537 2,297,647 432,298 22,152,201 1985 4,464,513 17,644,786 2,386,961 414,206 24,910,466 1986 5,336,260 17,948,464 2,278,146 367,469 25,930,339 1987 5,396,702 19,172,828 2,194,229 379,403 27,143,162 1988 5,486,156 19,015,140 2,234,818 411,431 27,147,545 1989 6,107,723 19,994,029 2,224,814 427,116 28,753,682 1990 6,424,489 20,201,127 2,370,319 390,493 29,386,428 1991 6,447,614 20,553,856 2,704,854 390,811 30,097,135 (1) The sales tax rate was 3 percent from 1978 through 1984, and 3.5 percent from 1985 to 1991. An extension on the 3.5% sales tax rate was approved through 1996. (2) Franchise fees are based on a certain percentage of gross receipts of the franchisee; during 1986 and 1987, the gross receipts of one of the major franchisees in the City decreased from the prior year's gross receipts. Source: City of Pueblo Comprehensive Annual Financial Report, Year Ended December 31, 1990; City of Pueblo. —39— City Budget The City Charter requires the City Manager to submit to the City Council an annual or current expense budget for the ensuing fiscal year and a capital budget not later than the first regular meeting of the City Council in October of each year. The annual budget is required to contain an estimate of all anticipated revenues and the estimated expenditures necessary for the operation of the City's departments, offices and agencies. It is also required to include an estimate of the General Fund surplus or deficit, debt service requirements and an estimate of the sum required to be raised by tax levy for the ensuing fiscal year. After public hearing, the City Council may adopt the budget without change or may amend the budget by adding new items of expenditure or by increasing, decreasing or removing items of expenditure, except that the City Council may not reduce any item of appropriation for debt service. The Charter directs the City Council in adopting the budget to estimate the amount of money necessary to be raised by tax levy, taking into account total proposed expenditures and estimated revenues. Prior to December of each year, the City Council is required to adopt the budget, an appropriation ordinance and the tax levy ordinance. For a description of the process by which property is assessed and ad valorem taxes are levied and collected, see NCITY REVENUES -Ad Valorem Property Taxes.N Financial Statements The City Charter requires an annual audit of the books of account, financial records, and transactions of all administrative departments of the City by independent certified public accountants. Attached as Appendix A are the City's Audited Financial Statements as of and for the year ended December 31, 1990 and the report thereon of McDonald, Holligan & McPherson, Inc., Certified Public Accountants, Pueblo, Colorado. See NEXPERTS.N -40- ECONOMIC AND DEMOGRAPHIC INFORMATION The following information is provided to give prospective investors an overview of the general economic conditions in and surrounding the City. Inclusion of the information about the surrounding area does not imply that these conditions presently exist within the City. The statistics presented below have been obtained from the sources indicated and represent the most current information available from such sources. The statistics have not been adjusted to reflect economic trends. Such information is not to be relied upon as a representation or guarantee of the City. Population The following chart sets forth historical population data for the City and the County. Both the City and the County experienced the greatest increases in population prior to 1960. As shown in the following chart, the County had a small decline in its population between 1960 and 1970 and the City and the County had a small decline in population between 1980 and 1990. City of Pueblo and Pueblo County - Population Income Annual surveys of buying power published by Sales and Marketing Management magazine have reported the following median household effective buying income (NEBIff) levels for the five -year period shown hereafter. EBI includes personal income, such as wages and salaries, dividends, interest income, and contributions for social insurance, less federal, -41- Percent City of Percent Pueblo Increase Year Pueblo Increase County (Decrease) 1940 52,162 -- 68,870 -- 1950 63,685 22.1% 90,188 31.0% 1960 91,181 43.2 118,707 31.6 1970 97,774 7.2 118,238 (0.4) 1980 101,686 4.0 125,972 6.5 1990 98,640 (2.9) 123,051 (2.3) Source: Figures for 1940 through 1990 were obtained from the U.S. Commerce Department Bureau of the Census, Census of Population and Housing 1991 figures will be available in June 1992 from the Department of Local Affairs, Colorado Division of Local Government. Income Annual surveys of buying power published by Sales and Marketing Management magazine have reported the following median household effective buying income (NEBIff) levels for the five -year period shown hereafter. EBI includes personal income, such as wages and salaries, dividends, interest income, and contributions for social insurance, less federal, -41- state and local taxes and fees, fines and other nontax payments. As indicated below, EBI figures for Pueblo and the County consistently were lower than state and national figures for the periods shown. Median Household EBI (1) The EBI was reclassified in 1988, causing a general reduction. Source: aSurvey of Buying Power,O Sales and Marketing Management 1986 -1991. Percent of Households by EBI Group - 1990 City of Pueblo Pueblo Year Pueblo County Colorado United States 1986 $19,404 $20,108 $26,397 $24,632 1987 19,397 20,153 26,775 25,888 1988 (1) 17,553 18,213 24,375 24,488 1989 19,116 19,850 26,370 25,976 1990 20,394 21,167 28,558 27,912 (1) The EBI was reclassified in 1988, causing a general reduction. Source: aSurvey of Buying Power,O Sales and Marketing Management 1986 -1991. Percent of Households by EBI Group - 1990 Source: "Survey of Buying Power," Sales and Marketing Management August 19, 1991. The following chart sets forth the most current annual per capita personal income levels. Figures for the County consistently have been lower that state and national levels during the period shown. i -42- City of Pueblo Pueblo County Colorado EBI Grouv Households Households Households $ 0 - $10,000 24.3% 23.1% 12.8% 10,000 - 19,999 24.8 24.5 19.2 20,000 - 34,999 26.2 27.1 26.5 35,000 - 49,999 14.3 14.6 19.2 50,000 and Over 10.4 10.7 22.3 Source: "Survey of Buying Power," Sales and Marketing Management August 19, 1991. The following chart sets forth the most current annual per capita personal income levels. Figures for the County consistently have been lower that state and national levels during the period shown. i -42- Per Capita Personal Income 1985 1986 1987 1988 Pueblo County $10,733 $11,035 $11,343 $12,084 Colorado 14,704 15,230 15,594 16,428 United States 13,910 14,639 15,484 16,510 Source: United States Department of Commerce, Bureau of Economic Analysis, Regional Economic Information System. Employment 1989 $12,974 17,504 17,592 As indicated by the following chart, the service industry was the largest employment sector within the County for the first three quarters of 1991, employing approximately 26.77 percent of the County's work - force, followed in order by government and retail trade for employment covered by unemployment insurance. For the twelve month period ending December 31, 1990, total average employment increased 6.63 percent and total average wages also increased .92 percent. -43- (1) Average of annual totals. (2) Figures are quarterly averages for January 1 through September 30, 1991. (3) Figures are weekly averages. Source: State of Colorado, Division of Employment and Training. -44- r i a Total Covered Employment and Wages - Pueblo County (in Thousands) 1988 1989 1990 1991(2) Employ- Employ- Employ- Employ - Industry Wines ment WiRIS went Wastes went Wastes ment(3) Agriculture, Forestry i Fisheries $ 9,357 158 $ 10,157 293 $ 10,865 289 $ 223 305 Mining 21,701 33 23,506 17 19,908 21 547 39 Construction 20,183 1,747 20,500 1,756 20,195 1,872 402 1,896 Manufacturing 24,235 4,707 24,835 5,031 26,124 5,707 504 5,527 Transportation i Utilities 23,483 1,506 23,769 1,669 24,841 1,711 482 1,738 Wholesale Trade 18,437 1,126 19,216 1,124 19,548 1,140 391 1,205 Retail Trade 9,998 8,919 10,269 8,883 10,731 9,288 216 9,227 Finance, Insurance S Real Estate 17,491 1,664 17,907 1,732 18,770 1,683 380 1,673 Services 14,463 9,539 14,834 10,154 14,678 11,563 293 11,431 Government (Total) 22.205 9,474 22.435 9.800 23.494 9.868 466 9.646 Employment Totals $181,553 38.873 $187,428 40.459 $189,154 43,142 $3,904 42.687 (1) Average of annual totals. (2) Figures are quarterly averages for January 1 through September 30, 1991. (3) Figures are weekly averages. Source: State of Colorado, Division of Employment and Training. -44- r i a Ed In recent years, there has been a major shift in employment within the various industry sectors in the City. Manufacturing now employs a smaller proportion of workers than in 1981, and the relative importance of the wholesale /retail and services sectors of the economy has correspondingly increased. The data in the following chart indicates that since 1986, Pueblo's job creation efforts have resulted in the improved employment outlook in the manufacturing and services sectors of Pueblo's economy. Changing Employment Patterns (Percent of Persons Employed) * Error due to rounding. Source: Colorado Division of Employment The following chart sets forth selected major employers in the City and County. No independent investigation has been made of, and consequently, there can be no representation as to, the stability or financial condition of the companies listed hereafter or the likelihood that such companies will maintain their status as major employers in the City. -45- 1981 1986 1991 Mining -- -- -- Construction 4.1% 5.1% 4.3% Manufacturing 17.5 10.7 12.4 Transportation, Communications & Utilities 7.4 5.9 5.1 Wholesale and Retail Trade 21.7 24.6 23.7 Finance, Insurance and Real Estate 4.3 4.6 3.8 Services 20.9 24.1 27.6 Government 24.0 25.0 23.1 TOTALS: *99.9% 100.0% 100.0% * Error due to rounding. Source: Colorado Division of Employment The following chart sets forth selected major employers in the City and County. No independent investigation has been made of, and consequently, there can be no representation as to, the stability or financial condition of the companies listed hereafter or the likelihood that such companies will maintain their status as major employers in the City. -45- i Selected Major Employers In the Pueblo Area Employer CF &I Steel Corporation Pueblo County School District No. 60 St. Mary Corwin Hospital Colorado State Hospital Parkview Episcopal Hospital Pueblo County Unisys Wats Marketing City of Pueblo Pueblo County School District No. 70 Business Number of Employees 2,000 (1) As of April 1992 Manufacturing Public Education Medical facility Medical facility Medical facility Local Government Computer manufacturing Div. of American Express Local Government Public Education Source: Pueblo Chamber of Commerce. 1,900 1,425 1,296 1,130 893 720 700 670 640 The following chart sets forth historical labor force and unemployment statistics for the Pueblo Metropolitan Statistical Area, which includes all of the County (the "Pueblo MSA"), the State and the United States. -46- T Labor Force Estimates Average Monthly Figures (1) Average for January 1 through March 31, 1992, is not seasonally adjusted. Source: Colorado Division of Employment and Training, Labor Market Information. Retail Sales The collection, administration, and enforcement of the State's sales tax is performed by the Executive Director of the State Department of Revenue. Vendors within the City and the unincorporated areas of the County collect the State tax and remit the proceeds to the State Department of Revenue. The following chart sets forth the State retail sales figures as reported for the City and the County. Retail Sales Year City of Pueblo Pueblo County City as a Percentage of Pueblo County Retail Sales 1982 Pueblo MSA State 1983 U.S. Year Labor Force % Unemployed Labor Force X Unemployed % Unemployed 1986 49,720 12.1 1,694,000 7.4 7.0 1987 49,532 10.4 1,697,000 7.7 6.2 1988 49,637 8.9 1,700,000 6.4 5.7 1989 49,334 8.2 1,695,000 5.8 5.3 1990 52,916 6.7 1,756,000 4.9 5.5 1991 52,949 7.0 1,755,000 5.0 6.7 1992 (1) 52,929 8.0 1,767,935 6.0 7.2 (1) Average for January 1 through March 31, 1992, is not seasonally adjusted. Source: Colorado Division of Employment and Training, Labor Market Information. Retail Sales The collection, administration, and enforcement of the State's sales tax is performed by the Executive Director of the State Department of Revenue. Vendors within the City and the unincorporated areas of the County collect the State tax and remit the proceeds to the State Department of Revenue. The following chart sets forth the State retail sales figures as reported for the City and the County. Retail Sales Year City of Pueblo Pueblo County City as a Percentage of Pueblo County Retail Sales 1982 $1,033,388,966 $1,164,548,241 88.7% 1983 964,203,432 1,043,652,697 92.4 1984 1,049,079,547 1,185,116,288 88.5 1985 1,030,970,528 1,160,692,475 88.8 1986 961,959,926 1,055,324,494 91.2 1987 1,069,583,187 1,133,766,200 94.3 1988 1,210,230,257 1,282,983,334 94.3 1989 1,237,224,074 1,312,388,373 94.2 1990 1,234,158,303 1,302,504,215 94.7 1991 1,200,003,412 1,296,145,971 92.5 Source: Colorado Department of Revenue. -47- Current Construction The following chart sets forth building permit issuances for new structures in the City since 1985. History of Building Permit Issuances for New Structures in the City of Pueblo Commercial /Industrial Year Permits Value Single Family Multi - Family Units Value Units Value 1985 30 $9,909,972 78 $3,759,529 117 $1,603,423 1986 28 3,878,163 105 4,808,358 85 1,727,975 1987 29 3,652,055 106 5,151,515 89 1,531,789 1988 31 4,691,552 77 3,929,309 19 1,627,811 1989 26 7,582,620 65 3,421,484 18 668,582 1990 26 3,483,403 66 3,517,240 36 2,193,088 1991 23 4,205,707 60 3,307,625 46 1,608,870 1992(2) 6 193,596 25 3,055,171 1 19,200 (1) Does not include churches or religious buildings, schools, or other educational buildings. (2) Data is through May 7, 1992. Source: City of Pueblo. Development Within The City Historically, the predominant industries in the City have been transportation (primarily rail) and steel manufacturing, which began with the establishment of Colorado Coal and Iron Company in the 1800s. Today, CF &I Steel Corporation continues to be one of the major employers in the City. Another major employment sector in the City is the U.S. government which houses the U.S. Army Pueblo Depot Activity, the U.S. Government Printing Office and an office of the U.S. Department of Transportation in Pueblo. The City continues to diversify its economic base with the largest increases in percentage of persons employed in the wholesale and retail trade, and the service sections. This is best exhibited by the location of WATS Marketing Group (telemarketing) in Pueblo in 1989, which now has 800 employees. City officials also are encouraging new small business development primarily at the Business and Technology Center, a facility designed to assist new businesses in becoming established. -48- Residential development within the City consists primarily of older housing units built by individual owners. As of December 31, 1991, the City estimated that there were approximately 41,024 housing units within the City with a 93.8% occupancy rate. Currently, the largest proposal for residential development within the City is Walkingstick, a planned 574.1 -acre 1,224 dwelling unit, mixed -use residential and commercial development surrounding the City's new award winning public golf course located in the northeast quadrant of the City adjoining the University of Southern Colorado. The master plan was approved in October 1990, with the first subdivision anticipated in 1992. Development Surrounding the City Several new industries have located in the Pueblo vicinity within the last several years in part due to the efforts of the City and the Pueblo Economic Development Corporation. Many of these new businesses have located at the Pueblo Memorial Airport Industrial Park which is situated one and one -half miles east of the City. One such company is Paramax Systems Corporation, a Unysis Company, an avionic computer design and development company. Paramax, originally the Sperry Corporation, located in the Pueblo area in 1984, and is now one of the major employers in the area. Paramax has two facilities at the Pueblo Memorial Airport Industrial Park. The first, which cost approximately $22 million, is a manufacturing facility and was completed in 1984. It is located on a 26 -acre site. The second is a 160,000 square foot material management facility and was completed in May of 1986. Other significant businesses located at the Industrial Park include: Target Stores' Retail Distribution Center; Atlas Pacific; PCL Packaging; Kurt Manufacturing; Pryor - Giggey; Glenn Company; Trane Company; B.F. Goodrich; Kaiser Aerotech; McDonnell Douglas -Delta Launch Assembly; Doane Products; and Century 400. Current employment for all these businesses as of April 1992 is 2,288. -49- Business Located at Pueblo Memorial Airport Industrial Park Since, and Including Unisys (Sperry) (1) Unisys employment also includes support services employment at Pueblo plant. (2) Some firms were unable to give 1993 projections. Assuming that these maintain their current level of employment, total projected employment of new businesses at Airport Industrial Park for 1993 is 2459. Source: City of Pueblo, Planning Department. Other Services Available Public education is provided by Pueblo School District No. 60 which has twenty -three elementary, six middle and four high schools and one alternative educational high school. The District serves a total of 18,339 students as of the fall of 1991. Pueblo Community College is a two -year state community college that offers associate degrees and certificates of completion in more than eighteen vocational interests. Pueblo also is the location of the University of Southern Colorado (NUSCO). -50- Employ- Employ- Current ment ment Employment Projected as of as of as of Employment May 1988 AARril 1991 April 1992 (1993) Unisys(1) 700 680 675 675 Target 575 350 370 N/A Atlas Pacific 120 127 128 190 PCL Packaging 41 40 50 55 Kurt Mfg. 65 87 54 54 Pryor - Giggey 7 20 20 20 Glenn Company 30 31 35 N/A Trane Company 80 220 400 475 B.F. Goodrich 66 130 150 160 Kaiser Aerotech 50 119 94 94 McDonnell Douglas 164 264 251 251 Doane Products -- -- 21 35 Century 400 -- -- 40 45 TOTAL: 1898 2068 2288 (2) (1) Unisys employment also includes support services employment at Pueblo plant. (2) Some firms were unable to give 1993 projections. Assuming that these maintain their current level of employment, total projected employment of new businesses at Airport Industrial Park for 1993 is 2459. Source: City of Pueblo, Planning Department. Other Services Available Public education is provided by Pueblo School District No. 60 which has twenty -three elementary, six middle and four high schools and one alternative educational high school. The District serves a total of 18,339 students as of the fall of 1991. Pueblo Community College is a two -year state community college that offers associate degrees and certificates of completion in more than eighteen vocational interests. Pueblo also is the location of the University of Southern Colorado (NUSCO). -50- W- Health and medical care is available to area residents through three hospitals located within Pueblo: Parkview Episcopal Hospital, St. Mary Corwin Hospital, and the Colorado Mental Health Institute at Pueblo. In addition to the State and interstate highway systems, transportation is provided to the City by commercial air service and railroads. Continental Express and Mesa Airlines, doing business as United Express, make daily stops at the Pueblo Airport. Four railroads also pass through the City providing freight service. -51- LITIGATION, SOVEREIGN IMMUNITY AND INSURANCE Litigation The City Attorney states that, as of the date hereof, to the best of his knowledge, there is no pending or threatened litigation which would restrain or enjoin the issuance of the Certificates or the execution of the Lease. The City is, however, subject to certain pending and threatened litigation regarding various other matters arising in the ordinary course of the City's business. It is the opinion of the City Attorney that the pending litigation will not result in final judgments against the City which would, individually or in the aggregate, adversely affect the City's financial position or its ability to perform its obligations under the Lease. See NInsurance Coverages below. Sovereign Immunity The Colorado Governmental Immunity Act, Title 24, Article 10, Part 1, C.R.S. (the NImmunity ActN), provides that, with certain specified exceptions, sovereign immunity acts as a bar to any action against a public entity, such as the City, for injuries which lie in tort or could lie in tort. The Immunity Act provides that sovereign immunity is waived by a public entity for injuries occurring as a result of certain specified actions or conditions, including the operation of a nonemergency motor vehicle, owned or leased by the public entity; a dangerous condition of any public building; the operation of any public water facility; and a dangerous condition of a public highway, road or street as provided in the Immunity Act. In such instances, the public entity may be liable for injuries arising from an act or omission of the public entity or an act or omission of its public employees, which is not willful and wanton, and which occurs during the performance of the public employees' duties and within the scope of the public employees' employment. The maximum amounts that may be recovered under the Immunity Act, whether from one or more public entities and public employees, are as follows: (a) for any injury to one person in any single occurrence, the sum of $150,000; (b) for an injury to two or more persons in any single occurrence, the sum of $600,000; except in such instance, no person may recover in excess of $150,000. The City may, by resolution, increase any maximum amount that may be recovered from the City for the type of injury described in the resolution. The City has not adopted such a resolution. However, the City may not be held liable either directly or by indemnification for punitive or -52- exemplary damages unless the City voluntarily pays such damages in accordance with State law. The City may be subject to civil liability and may not be able to claim sovereign immunity for actions founded upon various federal laws. Examples of such civil liability include suits filed pursuant to 42 U.S.C. § 1983 alleging the deprivation of federal constitutional or statutory rights of an individual. In addition, the City may be enjoined from engaging in anticompetitive practices which violate the antitrust laws. However, the Immunity Act provides that it applies to any action brought against a public entity or a public employee in any State court having jurisdiction over any claim brought pursuant to any federal law, if such action lies in tort or could lie in tort. Insurance Coverage Since February 1, 1986, the City has been a member of the Colorado Intergovernmental Risk Sharing Agency ( "CIRSA"), a property and liability risk pool established for State municipalities on January 1, 1982. CIRSA provides liability coverage, including coverage for liability resulting from errors and omissions, property coverage and specific catastrophe coverage. An actuarial estimate is made each year of claims expected and a gloss fund" is established in that amount. If the value of the loss fund is exceeded by claims submitted in any year, aggregate supplemental coverage takes effect. The City's participation is annually renewable with the current term ending December 31, 1992. In light of generally rising insurance costs for public entities, there can be no assurance that the City will continue to maintain this level of coverage. In the opinion of the Finance Director, the City's present insurance coverage is adequate and customary for similar entities insuring similar operations and assets. TAX EXEMPTIONS General The Lease provides that a portion of each Base Rental payment which is paid by the City is paid as, and represents the payment of, interest. In the opinion of Kutak Rock, Special Counsel, assuming continuing compliance with certain covenants contained in the Lease and the Indenture, under the laws, regulations, rulings and judicial decisions existing on the date of the original delivery of the Certificates, the -53- portion of the Base Rentals designated as and comprising interest and received by the registered owners of the Certificates is not includible in gross income for federal income tax purposes and is not includible in gross income for purposes of Colorado income taxation under existing Colorado income tax laws. Special Counsel has expressed no opinion as to the treatment for federal or State of Colorado income tax purposes of any moneys received in payment of or in respect to the Certificates subsequent to termination of the obligations of the City under the Lease by reason of a Termination Event. The Internal Revenue Code of 1986, as amended (the OCodeO) imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal tax purposes of interest on obligations, such as the Certificates. The City has covenanted in the Lease to comply with certain provisions designed to assure that interest evidenced by the Certificates will not become includible in gross income or alternative minimum taxable income. Failure to comply with these covenants may result in interest evidenced by the that portion of the Certificates being included in gross income or alternative minimum taxable income from the date of issue of the Certificates. The opinion of Special Counsel assumes compliance with the covenants. Special Counsel is of the opinion that interest evidenced by the Certificates is not a specific preference item for purposes of the alternative minimum tax provisions contained in the Code; however, interest interest evidenced by the Certificates will be included in the adjusted current earnings of certain corporations and such corporations are required to include in the calculation of alternative minimum taxable income 75 percent of the excess of such corporation's adjusted current earnings over its alternative minimum taxable income (determined without regard to this adjustment and prior to reduction for certain net operating losses). Although Special Counsel has rendered an opinion that interest evidenced by the Certificates is excluded from gross income for federal income tax purposes, the accrual or receipt of interest evidenced by the Certificates may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient's particular tax status or other items of income or deduction. Special Counsel expresses no opinion regarding any such consequences. Purchasers of the Certificates, particularly purchasers that are corporations (including S corporations, corporations subject to the environmental tax imposed by Section 59A of the Code and foreign corporations operating branches in the United States), property or casualty -54- 1 insurance companies, banks, thrifts or other financial institutions, or certain recipients of social security benefits or railroad retirement benefits are advised to consult their tax advisors as to the tax consequences of purchasing or holding the Certificates. LEGAL MATTERS The validity and enforceability of the Certificates are to be approved by the law firm of Kutak Rock, as Special Counsel, whose approving opinion will be printed on the Certificates. Certain legal matters will be passed upon by the Underwriter by Holme Roberts & Owen, counsel to the Underwriter. Certain legal matters pertaining to the City will be passed upon for the City by Thomas E. Jagger, Esq., as City Attorney. UNDERWRITING Norwest Investment Services, Inc., the Underwriter, has agreed to purchase the Certificates under a Certificate Purchase Agreement at a purchase price of $ 3� yoo plus accrued interest. The Underwriter is committed to take and pay for all of the Certificates if any are taken. The Certificate Purchase Agreement provides that the obligations of the Underwriter are subject to certain conditions. The Certificates are being offered for sale to the public at the prices shown on the cover of this Official Statement. EXPERTS The audited financial statements of the City as of and for the year ended December 31, 1990, included hereto as Appendix A, have been audited by McDonald, Holligan & McPherson, Inc., Pueblo, Colorado, independent certified public accountants, whose report thereon appears in Appendix A and has been so included in reliance upon the report of McDonald, Holligan & McPherson, Inc., given upon their authority as experts in accounting and auditing. RATINGS Moody's Investors Service, Inc. has given the Certificates ratings of "Baa". An explanation of the significance of the rating given by Moody's Investors Service Inc. may be obtained from Moody's Investors Service, Inc. at -55- 99 Church Street, New York, New York 10007. Such rating reflects only the views of such organization. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agency if, in its judgment circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Certificates. ADDITIONAL INFORMATION The references in this Official Statement to the Lease, Indenture, ordinances, statutes, resolutions, contracts, and other documents are brief summaries of certain provisions of those documents. These summaries do not purport to be complete, and reference is made to the documents for full and complete statements of their provisions Copies of the Lease and Indenture and other documents are available upon request to the City, P.O. Box 1427, Pueblo, Colorado 81002, Attention: Finance Director, or to the Underwriter, 1700 Broadway, Denver, Colorado 80274 -8711, Attention: Public Finance Department, or to the Trustee, 301 West 5th Street, Pueblo, Colorado 81003, Attention: Trust Department. OFFICIAL STATEMENT CERTIFICATION The execution and delivery of this Official Statement by the President of the City Council of the City have been duly authorized by the City Council of the City of Pueblo, Colorado. CITY OF PUEBLO, COLORADO By: President of the City Council -56- APPENDIX A AUDITED FINANCIAL STATEMENTS OF THE CITY OF PUEBLO, COLORADO, AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1990 [THIS PAGE INTENTIONALLY LEFT BLANK] McDONALD, HOLLIGAN & McPHERSON, INC. CERTIREO PUBLIC ACCOUNTANTS SUITE 740. THATCHER BUILDING P.O. BOX 918 INDEPENDENT AUDITORS' REPORT City Council City of Pueblo, Colorado PUEBLO.COLORA00 81002 TELEPHONE 719-543-0516 We have audited the accompanying general purpose financial statements of the City of Pueblo, Colorado as of December 31, 1990, and for the year then ended as listed in the table of contents. These general purpose financial statements are the responsibility of the City of Pueblo, Colorado manage- ment. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Pueblo, Colorado as of December 31, 1990, and the results of its operations and cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles. As discussed in Note 1 to the financial statements, the City of Pueblo, Colorado has presented a combined statement of cash flows for its proprietary fund types for the year ended December 31, 1990, rather than a combined statement of changes in financial position. March 29, 1991 A -1 CITY OF PUEBLO, COLORADO COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS DECEMBER 31, 1990 The accompanying notes are an integral part of this statement. A -2 Governmental Fund Types Special Debt Capital General Revenue Service Projects ASSETS AND OTHER DEBITS Cash and cash equivalents $ 1,084,259 $ 15,202 $ - $ - Deposits 283,906 - 241,696 2,127,406 Investments 380,408 - - 2,861,215 Receivables - Taxes 6,573,665 - - - Accounts 186,602 173,965 - - Special assessments - - 45,748 - Notes - 200,000 - 1,662,523 Allowance for uncollectible accounts ( 12,965) - - - Accrued interest 56,619 272,739 9,149 24,153 Due from other funds 3,635,000 1,026,667 23,695 90,161 Due from other governments - 2,070,280 - 734,288 Inventories 100,245 - - - Prepaid items 39,279 - - 114,109 Property, plant and equipment, net - - - - Construction in progress - - - - Deferred issue costs - - - - Restricted assets - 9,950,000 - - Other debits - Amount available in debt service fund - - - - Amount available in special revenue fund - - - - Amount to be provided for retirement of general long -term debt - - - - TOTAL ASSETS $ 12,327,018 $ 13 320,288 $ 7,613,855 The accompanying notes are an integral part of this statement. A -2 68,772 68,772 10,222,739 10,222,739 - _ _ - 18,384,366 18,384,366 $ 92,881,736 $ 276,111 $ 6,305,312 $ 101,904,075 $ 28,675,877 $ 264,013,125 A -3 Fiduciary Proprietary Fund Types Fund Types Account Groups Trust General General Total Internal and Fixed Long -Term (Memorandum Enterprise Service Agenc Assets Debt Only) $ 1,320,467 $ 300 $ 5 $ - $ - $ 2,420,233 9,874,393 - 732,599 - - 13,260,000 2,729,590 - 3,746,105 - - 9,717,318 _ _ - _ - 6,573,665 569,639 - 8,757 - - 938,963 - - _ _ - 45,748 - - 2,933,448 - - 4,795,971 ( 27,744) - ( 2,016,917) - - ( 2,057,626) 635,597 - 73,134 - - 1,071,391 222,799 19,135 697,112 - - 5,714,569 265,876 - 131,069 - - 3,201,513 242,333 142,218 - - - 484,796 25,567 - - - - 178,955 57,951,422 114,458 - 101,904,075 - 159,969,955 3,179,656 - - - - 3,179,656 953,675 - - - - 953,675 14,938,466 - - - - 24,888,466 68,772 68,772 10,222,739 10,222,739 - _ _ - 18,384,366 18,384,366 $ 92,881,736 $ 276,111 $ 6,305,312 $ 101,904,075 $ 28,675,877 $ 264,013,125 A -3 CITY OF PUEBLO, COLORADO COMBINED BALANCE SHEET (Cont'd.) ALL FUND TYPES AND ACCOUNT GROUPS DECEMBER 31, 1990 The accompanying notes are an integral part of this statement- A-4 Governmental Fund Types Special Debt Capital General Revenue Service Projects LIABILITIES, EQUITIES AND OTHER CREDITS LIABILITIES Accounts payable $ 316,148 $ 100,119 $ - $ 117,702 Accrued compensated absences 150,000 - - - Accrued expenses 147,639 - - - Accrued interest payable - - - - Payroll withholding 598,765 - - - Deferred revenue 6,600,280 1,482,771 18,390 1,855,278 Due to other funds 2,079,569 638,096 29,361 1,366,898 Deposits - - - - General obligation bonds payable - - - - Revenue bonds payable - - - - Certificates of participation payable - - - - Capital leases payable - - - - Special assessment bonds payable - - - - Notes /other debt payable - - - - Bonds payable from restricted assets - - - - Unamortized discount - - - - Deferred compensation benefits payable - - - - TOTAL LIABILITIES $ 9,892,401 $ 2,220,986 $ 47,751 $ 3,339,878 EQUITY AND OTHER CREDITS Investment in general fixed assets $ - $ - $ - $ - Contributed capital - - - - Retained earnings - Reserved - - - - Unreserved (deficit) - - - - Fund balances - Reserved for encumbrances 64,869 312,006 - 309,700 Reserved for debt service - 10,222,739 68,772 - Reserved for inventories 100,245 - - - Unreserved - Designated for subsequent years' expenditures 1,359,704 1,050,253 - 367,092 Other designations 851,389 - - - Undesignated (deficit) 58,410 ( 97,131 203,765 3,597,185 TOTAL EQUITY (DEFICIT) AND OTHER CREDITS $ 2,434,617 $ 11,487,867 $ 272,537 $ 4,273,977 TOTAL LIABILITIES, EQUITIES AND OTHER CREDITS $ 12,327,018 $ 13,708,853 $ 320,288 $ 7,613,855 The accompanying notes are an integral part of this statement- A-4 Fiduciary Proprietary Fund Types Fund Types Account Groups Trust General General Total Internal and Fixed Long -Term (Memorandum Enterprise Service Agency Assets Debt Only) $ 2,634,594 $ 46,577 $ - $ - $ - $ 3,215,140 445,768 54,083 - - 3,736,172 4,386,023 - - - - - 147,639 245,935 - - - - 245,935 - - - - - 598,765 - - 1,216,521 - - 11,173,240 1,125,581 208,752 266,312 - - 5,714,569 - - 390,351 - - 390,351 - - - - 13,165,000 13,165,000 15,645,000 - - - - 15,645,000 4,580,000 - - - 467,500 5,047,500 - - - - 428,066 428,066 - - - - 57,000 57,000 - - - - 872,139 872,139 15,955,000 - - - 9,950,000 25,905,000 ( 392,832) - - - - ( 392,832) - - 1,359,558 - - 1,359,558 $ 40,239,046 $ 309,412 $ 3,232,742 $ - $ 28,675,877 $ 87,958,093 $ - $ - $ - $101,904,075 $ - $101,904,075 41,615,027 112,854 - - - 41,727,881 11,027,663 ( 146,155) - - - 10,881,508 - - 8,228 - - 694,803 - - - - - 10,291,511 - - - - - 100,245 - - 3,064,342 $ 52,642,690 $ ( 33,301 $ 3,072,570 - 2,777,049 - 851,389 - 6,826,571 $ 101,904,075 $ - $ 176,055,032 $ 92,881,736 $ 276,111 $ 6,305,312 $ 101,904,075 $ 28,675,877 $ 264,013,125 A -5 CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUNDS YEAR ENDED DECEMBER 31, 1990 Governmental Fund Types Special General Revenue REVENUES Taxes $ 29,386,428 $ - State and federal grants - 5,061,442 Licenses and permits 107,758 - Other agencies 978,589 591,315 Charges for services 182,054 - Fines and forfeits 697,899 - Interest income 150,746 721,375 Project income - 612,566 Assessments - - Other 164,822 35,364 TOTAL REVENUES $ 31,668,296 $ 7,022,062 EXPENDITURES Current - General government $ 3,251,824 $ - Public safety 15,194,884 - Parks and recreation 2,616,598 - Transportation 1,867,742 - Public works 3,898,996 - Programs and projects - 3,081,751 Insurance and contingencies 979,487 - Intergovernmental 1,447,700 - Other services and charges - - Capital outlay - 238,036 Loss on sale of securities - - Debt service - Principal retirement 68,573 295,000 Interest and fiscal charges 10,603 810,130 TOTAL EXPENDITURES $ 29,336,407 $ 4,424,917 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES $ 2,331,889 $ 2,597,145 OTHER FINANCING SOURCES (USES) Proceeds from issuance of certificates of participation Transfers from other funds Transfers to other funds TOTAL OTHER FINANCING SOURCES (USES) 3,954,901 ( 6,964,625 $ ( 3,009,724 694,998 ( 3,038,633 $ ( 2,343,635 EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND OTHER FINANCING USES FUND BALANCE, January 1 FUND BALANCE, December 31 The accompanying notes are an integral part of this statement. $( 677,835) $ 253,510 3,112,452 $ 2,434,617 11,234,357 $ 11,487,867 A -6 � Governmental Fund Types Debt Capital Service Projects 21,640 19,862 7,763 $ 49,265 8,437 461,643 1,065,898 $ 1,535,978 $ ( 1,486,713 1,511,822 $ 1,511,822 $ 25,109 247,428 $ 272,537 1,286,009 352,186 62,251 $ 1,700,446 4,469,802 $ 4,469,802 $ ( 2,769,356 $ 565,000 3,530,973 ( 845,499 $ 3,250,474 $ 481,118 3,792,859 $ 4,273,977 Fiduciary Fund Types Expendable Trust 502,137 223,333 258,014 $ 983,484 $ 331,042 115,949 21,876 $ 468,867 $ 514,617 A - 7 Total (Memorandum Only) $ 29,386,428 6,849,588 107,758 1,569,904 182,054 697,899 1,469,280 612,566 19,862 528,214 $ 41,423,553 $ 3,251,824 15,194,884 2,616,598 1,867,742 3,898,996 3,412,793 979,487 1,447,700 8,437 4,823,787 21,876 825,216 1,886,631 $ 40,235,971 $ 1,187,582 $ 565,000 9,897,102 (11,306,955 $ 342,729 21,198,839 $ 21,541,568 204,408 ( 458,198 $ ( 253,790 $ 260,827 2,811,743 $ 3,072,570 A - 7 Total (Memorandum Only) $ 29,386,428 6,849,588 107,758 1,569,904 182,054 697,899 1,469,280 612,566 19,862 528,214 $ 41,423,553 $ 3,251,824 15,194,884 2,616,598 1,867,742 3,898,996 3,412,793 979,487 1,447,700 8,437 4,823,787 21,876 825,216 1,886,631 $ 40,235,971 $ 1,187,582 $ 565,000 9,897,102 (11,306,955 $ 342,729 21,198,839 $ 21,541,568 CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL, SPECIAL REVENUE AND DEBT SERVICE FUNDS YEAR ENDED DECEMBER 31, 1990 General Fund Variance Favorable Budget Actual (Unfavorable) REVENUES Taxes State and federal grants Licenses and permits Other agencies Charges for services Fines and forfeits Interest income Other TOTAL REVENUES $ 29,186,079 99,600 815,700 188,140 510,000 360,000 131,020 $ 31,290,539 $ 29,386,428 107,758 978,589 182,054 697,899 150,746 164,822 $ 200,349 8,158 162,889 ( 6,086) 187,899 ( 209,254) 33,802 $ 377,757 EXPENDITURES Current - General government Public safety Parks and recreation Transportation Public works Programs and projects Insurance and contingencies Intergovernmental Capital outlay Debt service - Principal retirement Interest, fiscal and other charges TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds TOTAL OTHER FINANCING SOURCES (USES) EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND OTHER FINANCING USES FUND BALANCE (DEFICIT) JANUARY 1 FUND BALANCE (DEFICIT) DECEMBER 31 $ 3,550,803 $ 3,331,000 $ 219,803 15,119,111 15,194,884 ( 75,773) 2,674,276 2,616,598 57,678 1,982,340 1,867,742 114,598 3,992,723 3,898,996 93,727 1,359,843 979,487 380,356 1,532,988 1,447,700 85,288 $ 30,212,084 $ 29,336,407 $ 1,078,455 $ 2,331,889 $ 1,253,434 $ 31,668,296 $ 4,069,334 $ 3,954,901 $( 114,433) ( 6,647,503 ( 6,964,625 ( 317,122 $ ( 2,578,169 $ ( 3,009,724 $ ( 431,555 $( 1,499,714) $( 677,835) $ 821,879 1,499,714 3,112,452 1,612,738 The accompanying notes are an integral part of this statement. $ 2,434,617 $ 2,434,617 A -8 Special Revenue Funds Variance Favorable Budget Actual (Unfavorable) 2,850,000 825,000 20,000 $ 3,695,000 1,252,489 3,113,571 $ 4,366,060 $ - 2,369,239 582,075 1,594 $ - 896,247 1,256,372 $ 2,152,619 ( 480,761) ( 242,925) ( 18,406) $ ( 742,092 356,242 1,857,199 $ 2,213,441 $ ( 671,060 $ 3,575,971 ( 3,029,911 $ 546,060 $( 125,000) 125,000 $ 800,289 $ 3,740,450 ( 2,857,062 $ 883,388 $ 1,683,677 4,757,570 $ 6,441,247 $ 1,471,349 $ 164,479 172,849 $ 337,328 $ 1,808,677 4,632,570 $ 6,441,247 A -9 CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL (Cont'd.) GENERAL, SPECIAL REVENUE AND DEBT SERVICE FUNDS YEAR ENDED DECEMBER 31, 1990 REVENUES Taxes State and federal grants Licenses and permits Other agencies Charges for services Fines and forfeits Interest income Other TOTAL REVENUES EXPENDITURES Current - General government Public safety Parks and recreation Transportation Public works Programs and projects Insurance and contingencies Intergovernmental Capital outlay Debt service - Principal retirement Interest, fiscal and other charges TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds TOTAL OTHER FINANCING SOURCES (USES) EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND OTHER FINANCING USES FUND BALANCE (DEFICIT) JANUARY 1 FUND BALANCE (DEFICIT) DECEMBER 31 Debt Service Funds Variance Favorable Budget Actual (Unfavorable) 351,143 351,143 - 1,063,179 1,067,474 ( 4,295 $ 1,414,322 $ 1,418,617 $ ( 4,295 $ ( 1,414,322 $ ( 1,418,617 $ ( 4,295 $ 1,414,322 $ 1,414,322 $ - $ 1,414,322 $ 1,414,322 $ - $ - $( 4,295) $( 4,295) ( 13,294 ( 13,294 $ - $ ( 17,589 $ ( 17,58 The accompanying notes are an integral part of this statement. A -10 Total (Memorandum Only) Variance Favorable Budget Actual (Unfavorable) $ 29,186,079 2,850,000 99,600 1,640,700 188,140 510,000 380,000 131,020 $ 29,386,428 2,369,239 107,758 1,560,664 182,054 697,899 152,340 164,822 $ 200,349 ( 480,761) 8,158 ( 80,036) ( 6,086) 187,899 ( 227,660) 33,802 $ ( 364,335 $ 34,985,539 $ 3,550,803 15,119,111 2,674,276 1,982,340 3,992,723 1,252,489 1,359,843 1,532,988 3,113,571 351,143 1,063,179 $ 35,992,466 $ ( 1,006,927 $ 9,059,627 ( 9,677,414 $ ( 617,787 $( 1,624,714) 1,624,714 $ 34,621,204 $ 3,331,000 15,194,884 2,616,598 1,867,742 3,898,996 896,247 979,487 1,447,700 1,256,372 351,143 1,067,474 $ 32,907,643 $ 1,713,561 $ 9,109,673 ( 9,821,687 $ ( 712,014 $ 1,001,547 7,856,728 $ 8,858,275 $ 219,803 ( 75,773) 57,678 114,598 93,727 356,242 380,356 85,288 1,857,199 ( 4,295 $ 3,084,823 $ 2,720,488 $ 50,046 ( 144,273 $ ( 94,227 $ 2,626,261 6,232,014 $ 8,858,275 A -11 CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS ALL PROPRIETARY FUND TYPES YEAR ENDED DECEMBER 31, 1990 OPERATING REVENUES Charges for services TOTAL OPERATING REVENUES OPERATING EXPENSES Salaries Compensated absences Contract fees and salaries Pension Fringe benefits Merchandise and supplies Advertising Travel Insurance Professional services Repairs and maintenance Depreciation Utilities and communications Loss on disposal of equipment Other services and charges TOTAL OPERATING EXPENSES OPERATING INCOME (LOSS) NONOPERATING REVENUES (EXPENSES) Grants Interest income Interest and fiscal charges Other revenues TOTAL NONOPERATING REVENUES (EXPENSES) INCOME (LOSS) BEFORE OPERATING TRANSFERS OPERATING TRANSFERS IN OPERATING TRANSFERS OUT NET INCOME (LOSS) RETAINED EARNINGS (DEFICIT) JANUARY 1 RETAINED EARNINGS (DEFICIT) DECEMBER 31 Proprietary Fund Types Total Internal (Memorandum Enterprise Service Only) $ 7,250,928 $ 1,323,940 $ 8,574,868 $ 7,250,928 $ 1,323,940 $ 8,574,868 $ 3,208,464 45,460 350,508 340,583 560,549 535,296 48,988 10,117 259,624 279,844 450,978 1,482,516 653,294 25,776 348,198 $ 8,600,195 $ ( 1,349,267 $ 446,313 5,529 42,285 87,309 679,195 455 25,253 20,389 18,840 1,127 2,683 $ 1,329,378 $ ( 5,438 $ 3,654,777 50,989 350,508 382,868 647,858 1,214,491 48,988 10,572 259,624 279,844 476,231 1,502,905 672,134 26,903 350,881 $ 9,929,573 $ ( 1,354,705 $ 506,954 2,247,872 ( 2,809,322) 7,004 $( 47,492) $( 1,396,759) 1,909,853 ( 500,000 $ 13,094 11,014,569 $ 11,027,663 The accompanying notes are an integral part of this statement. $( 5,438) $( 5,438) ( 140,717 $ ( 146,155 $ 506,954 2,247,872 ( 2,809,322) 7,004 $( 47,492) $( 1,402,197) 1,909,853 ( 500,000) $ 7,656 10,873,852 $ 10,881,508 A -12 IF , CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES YEAR ENDED DECEMBER 31, 1990 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM OPERATING ACTIVITIES Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by operating activities - Depreciation Loss on disposal of equipment Amortization of bond issue costs Change in assets and liabilities - Accounts receivable Due from general fund Due from federal government Inventories Prepaid expenses Accounts payable Accrued compensated absences Due to general fund NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Operating grants received Operating transfers in NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets Principal paid on revenue bond maturities Interest paid on revenue bonds Insurance proceeds NET CASH USED FOR CAPITAL AND RELATED FINANCING ACTIVITIES Proprietary Fund Types Total Internal (Memorandum Enterprise Service Only) $( 1,349,267) $( 5,438) $( 1,354,705) $ ( 7,940,164 $ ( 21,605 $ ( 7,961,769 The accompanying notes are an integral part of this statement. A -13 1,482,516 20,389 1,502,905 25,776 1,127 26,903 15,562 - 15,562 ( 56,486) - ( 56,486) 126,279 13,544 139,823 647,448 - 647,448 ( 36,379) ( 13,264) ( 49,643) ( 13,935) - ( 13,935) 209,998 3,792 213,790 45,460 5,529 50,989 900,169 ( 4,074 896,095 $ 1,997,141 $ 21,605 $ 2,018,746 $ 506,954 $ - $ 506,954 1,409,853 - 1,409,853 $ 1,916,807 $ - $ 1,916,807 $( 4,655,714) $( 21,605) $( 4,677,319) ( 640,000) - ( 640,000) ( 2,651,454) - ( 2,651,454) 7,004 - 7,004 $ ( 7,940,164 $ ( 21,605 $ ( 7,961,769 The accompanying notes are an integral part of this statement. A -13 CITY OF PUEBLO, COLORADO COMBINED STATEMENT OF CASH FLOWS (Cont'd.) ALL PROPRIETARY FUND TYPES YEAR ENDED DECEMBER 31, 1990 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of deposits and investments Proceeds from maturities of deposits and investments Interest received NET CASH PROVIDED BY INVESTING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR NONCASH INVESTING CAPITAL AND FINANCING ACTIVITIES Property and equipment contributed Proprietary Fund Types Internal Enterprise Service $( 956,427) $ 4,253,616 2,031,069 $ 5,328,258 $ $ 1,302,042 $ Total (Memorandum Only) $( 956,427) 4,253,616 2,031,069 $ 5,328,258 $ 1,302,042 18,425 300 18,725 $ 1 $ 300 $ 1,320,767 $ 1 3 8,800 $ 1,392,226 The accompanying notes are an integral part of this statement. A -14 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1990 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Pueblo, Colorado was incorporated in 1885 as a home rule city under the Constitution of the State of Colorado. The City operates under a council - manager form of government and provides the following services as authorized by its charter: public safety (police and fire), highways and streets, sanitation, social services, culture- recreation, public improvements, planning and zoning, and general administra- tive services. The financial statements of the City of Pueblo, Colorado have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard- setting body for establishing governmental accounting and financial reporting principles. The more significant of the government's accounting policies are described below. A. Reporting Entity In evaluating how to define the government for financial reporting purposes, manage- ment has considered and included in the City's general purpose financial statements all significant activities and organizations on which the City has the ability to exercise oversight responsibility. The City's ability to exercise oversight responsibility is the basic criterion used to determine whether or not a potential component unit should be included with the reporting entity. Manifestations of this oversight responsibility include, but are not limited to, the following: Financial interdependency - When a separate agency produces a financial benefit or imposes a financial burden on a unit of government, that agency is part of the reporting entity. Manifestations of financial interdependency include responsibility for financing deficits, entitlements to surpluses, and guarantees of, or "moral responsibility" for, debt. Selection of governing authority - An authoritative appointment is one where the entity's chief elected official maintains a significant continuing relationship with the appointed officials with respect to carrying out important public functions. Designation of management - When management is appointed by and held accountable to a governing authority that is included in the entity, the activity being managed falls within the entity. Ability to significantly influence operations - This ability includes, but is not limited to, the authority to review and approve budgetary requests, adjustments, and amendments. Accountability for fiscal matters - Fiscal authority normally includes the authority for final approval over budgetary appropriations, responsibility for funding deficits and operating deficiencies, disposal of surplus funds, control over the collection and disbursement of funds, and maintenance of title to assets. A -15 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) A second criteria used in evaluating potential component units is the scope of public service. Application of this criterion involves considering whether the activity benefits the government and /or its citizens, or whether the activity is conducted within the geographic boundaries of the government and is generally available to its citizens. A third criterion used to evaluate potential component units for inclusion or exclusion from the reporting entity is the existence of special financing relationships, regardless of whether the government is able to exercise oversight responsibilities. Based upon the application of these criteria, the following is a brief review of each potential component unit addressed in defining the government's reporting entity. Included within the reporting entity: Urban Renewal Authority of Pueblo - The Urban Renewal Authority of Pueblo was created in 1959 under the provisions of Colorado law. The Authority was virtually inactive until 1986, at which time the City and the Authority entered into a cooperation agreement whereby the Authority acquired certain properties from the City in order to facilitate the building of a convention center and parking structure on a portion of the property and sell the remaining portion to a developer for the purpose of building a hotel. Upon completion of this project, title to the convention center and parking structure will pass to the City. The governing body of the Authority is appointed by City Council and the proceeds from the sale of other property must be forwarded directly to the City. Pueblo Transportation Co. - The Pueblo Transportation Co. was a private, for - profit corporation that was acquired by the City during the 1950's. City Council is the governing body for the Pueblo Transportation Co. and appoints the Transportation Co.'s management. The Pueblo Transportation Co. operates the city -wide bus system. Pueblo Municipal Property Corporation (PMPC) - Pueblo Municipal Property Corporation is the financing vehicle created by City Council to facilitate the construction and operation of a new municipal golf course known as Walking Stick golf course. PMPC is a nonprofit public benefit corporation that will lease the golf course to the City under an annually renewable lease - purchase agreement. During 1989, PMPC issued $4,580,000 of certificates of participation, the proceeds of which were used for the construction of the golf course. The lease payments made by the City to PMPC will be used to retire the certificates of participation. Upon retirement of the certificates of participation, title to the golf course will pass to the City. Pueblo Municipal Building Corporation (PMBC) - Pueblo Municipal Building Corporation is another financing vehicle created by City Council to facilitate the acquisition of certain property around the present location of City Hall. It is anticipated that office and maintenance facilities will be built on the site in future years. PMBC is a nonprofit public benefit corporation that is leasing the site to the City under an annually renewable lease - purchase agreement. During 1990, PMBC issued $565,000 of certificates of participation, the proceeds of which were used for the acquisition of the site. The lease payments made by the City to PMBC will be used to retire the certificates of participation. Upon retirement of the certificates of participation, title will pass to the City. A -16 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1991 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Pueblo County Headstart Parents, Inc. - a nonprofit, charitable corporation which the benefit of preschool aged children. is the grantee and recipient of various of Headstart Parents, Inc. Excluded from the reporting entity: Pueblo County Headstart Parents, Inc. is operates various programs principally for In implementing these programs, the City federal and state grants for the benefit Pueblo Board of Water Works - The Pueblo Board of Water Works was created in 1954 upon the adoption of the charter of the City of Pueblo, Colorado. Properties used to provide water service at that time were titled in the name of the City. All general obligation water bonds represent legally valid debt obligations of the City. The existence of these facts suggest that the Pueblo Board of Water Works should be included in the accompanying general purpose financial statements as a component unit. Other factors, however, suggest that the City does not have the ability to exercise significant oversight responsibility and thus, precludes the inclusion of the Pueblo Board of Water Works as a component unit. These factors are as follows: - The City Charter provides that "the entire control, management and operation thereof shall be exercised by an independent Board . . . over which the Council shall have no jurisdiction or control ". - The governing body of the Pueblo Board of Water Works is elected by the citizens of the City. - The governing body is solely responsible for the employment of water works employees. - The Water Works is exclusively responsible for administration of its fiscal affairs, including the setting of user fees. - The Water Worksbonded debt service and capital expenditures are financed entirely from charges for water service. - The general obligation water bonds are also secured by a pledge of the net revenues derived from the Water Works system. The City has never provided funding for bond debt service. Pueblo Library District - The Pueblo Library District was created in 1968 under the provisions of Colorado law to further the development of publicly- supported free library services for the citizens of the City and County of Pueblo. The governing body of the Library District is jointly appointed by City Council and the Board of County Commissioners. The City does not have any other oversight responsibility. ' Pueblo Housing Authority - The governing body of the Pueblo Housing Authority is j appointed by City Council. While the City is responsible for the appointment of ' the governing body, the City does not have any other oversight responsibility. The Authority's operating and capital expenditures are financed entirely from federal grants and rentals. The City has no involvement in the determination of the Authority's budget and rental rates, nor is the City responsible for any obligation of the Authority. A -17 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Pueblo Area Council of Governments ( PACOG) - The governing body of PACOG consists of 13 members, 7 of whom are appointed by City Council. The City's only responsi- bility is to maintain PACOG's accounting records and they have no other oversight with respect to PACOG's officials. Area Agency on Aging (AAA) - Area Agency on Aging is an agency of PACOG. As such, PACOG oversees the operations of AAA. The main function of AAA is to monitor the services provided to the elderly throughout the City. In this capacity, AAA is the recipient of several state and federal grants that, for the most part, are passed through to nonprofit corporations which provide the services for the elderly. Effective January 1, 1990, the oversight responsibility was effectively transferred to the County of Pueblo, Colorado, even though the AAA remains an agency of PACOG. B. Fund Accounting The government uses funds and account groups to report its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self - balancing set of accounts. An account group, on the other hand, is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect net expendable available financial resources. Funds are classified into three categories: governmental, proprietary and fiduciary. Each category, in turn, is divided into separate "fund types ". Governmental funds are used to account for all or most of a government's general activities, including the collection and disbursement of earmarked monies (special revenue funds), the acquisition or construction of general fixed assets (capital projects funds), and the servicing of general long -term debt (debt service funds). The general fund is used to account for all activities of the general government not accounted for in some other fund. Proprietary funds are used to account for activities similar to those found in the private sector, where the determination of net income is necessary or useful for sound financial administration. Goods or services from such activities can be provided either to outside parties (enterprise funds) or to other departments or agencies primarily within the government (internal service funds). Fiduciary funds are used to account for assets held on behalf of outside parties, including other governments, or on behalf of other funds within the government. When these assets are held under the terms of a formal trust agreement, either a pension trust fund, a nonexpendable trust fund or an expendable trust fund is used. The terms "nonexpendable" and "expendable" refer to whether or not the government is under an obligation to maintain the trust principal. Agency funds generally are used to account for assets that the government holds on behalf of others as their agent. A -18 T CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) C. Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds and expendable trust funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. All proprietary funds are accounted for using a flow of economic resources measure- ment focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the balance sheet. Fund equity (i.e., net total assets) is segregated into contributed capital and retained earnings components. Proprietary fund -type operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets. The modified accrual basis of accounting is used by all governmental fund types, expendable trust funds and agency funds. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long -term debt are recorded as fund liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early in the following year. Those revenues susceptible to accrual are property taxes, franchise taxes, special assessments, interest revenue and charges for services. Fines, permits and parking meter revenues are not susceptible to accrual because generally they are not measurable until received in cash. The accrual basis of accounting is utilized by proprietary fund types. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. 3 t e r The government reports deferred revenue on its combined balance sheet. Deferred revenues arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received by the government before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the deferred revenue is recognized as revenue. A -19 Ir CITY OF PUEBLO, COLORADO 1 NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) D. Fixed Assets and Long -Term Liabilities The accounting and reporting treatment applied to fixed assets and long -term liabilities associated with a fund are determined by its measurement focus. All governmental funds and expendable trust funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. Their reported fund balance (net current assets) is considered a measure of "available spendable resources ". Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Fixed assets used in governmental fund type operations (general fixed assets) are accounted for in the General Fixed Assets Account Group, rather than in governmental funds. Public domain ( "infrastructure ") general fixed assets consisting of certain improvements other than buildings, including roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems, are not capitalized along with other general fixed assets. No depreciation has been provided on general fixed assets. All fixed assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated fixed assets are valued at their estimated fair market value on the date donated. Long -term liabilities expected to be financed from governmental funds are accounted for in the General Long -Term Debt Account group, not in the governmental funds. The two account groups are not "funds ". They are concerned only with the measurement of financial position. They are not involved with measurement of results of operations. Noncurrent portions of long -term receivables due to governmental funds are reported on their balance sheets, in spite of their spending measurement focus. Special reporting treatments are used to indicate, however, that they should not be considered "available spendable resources ", because they do not represent net current assets. The special reporting treatment entails the use of a reserved fund balance account. Recognition of governmental fund type revenues represented by noncurrent receivables is deferred until they become current receivables. Special reporting treatments also are applied to governmental fund inventories to indicate that they do not represent "available spendable resources ", even though they are a component of net current assets. Such amounts generally are offset by fund balance reserve accounts. Because of their spending measurement focus, expenditure recognition for governmental fund types is limited to exclude amounts represented by noncurrent liabilities. Because they do not affect net current assets, such long -term amounts are not recognized as governmental fund type expenditures or fund liabilities. They instead are reported as liabilities in the General Long -Term Debt Account Group. A -20 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) All proprietary funds are accounted for on a cost of services or "capital maintenance" measurement focus. This means that all assets and all liabilities (whether current or noncurrent) associated with their activity are included on their balance sheets. Their reported fund equity (net total assets) is segregated into contributed capital and retained earnings components. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total assets. In addition, interest expense that relates to the cost of acquiring or constructing fixed assets in enterprise funds is capitalized. Interest expense incurred in connection with construction of capital assets has been reduced by interest earned on the investment of funds borrowed for construction in accordance with Financial Accounting Standards Board Statement No. 62 - "Capitalization of Interest Cost in Situations Involving Certain Tax - Exempt Borrowings and Certain Gifts and Grants ". Depreciation of all exhaustible fixed assets used by proprietary funds is charged as an expense against their operations. Accumulated depreciation is reported on proprietary fund balance sheets. Depreciation has been provided over the estimated useful lives using the straight -line method. The estimated useful lives are as follows: Buildings 50 years Improvements 20-50 years Equipment 5 -10 years E. Budget and Budgetary Accounting Budgetary comparisons are included in the general purpose financial statements for the general fund, certain special revenue funds and all debt service funds except special assessments and Pueblo Municipal Building Corporation. These funds represent the governmental fund types for which an annual budget has been adopted. The budget presentation for the special revenue funds includes only the capital improvement fund, health and human services fund, community development fund, highway users fund, and airport special tax fund. The remaining special revenue funds generally consist of federally- funded projects for which annual appropriations are not made by City Council but are governed by project budgets established by the appropriate funding agency. In addition, Council also adopts budgets for all proprietary fund types. All budgets adopted by City Council, including the proprietary fund types, follow the spending or "financial flow" measurement focus. Expenditure estimates in the annual budgets are enacted into law through the passage of an appropriation ordinance. The City Manager may at any time transfer any y unencumbered appropriation balance or portion thereof from one classification of expenditure to another within the same department, office or agency. The Council may, by resolution, transfer any unencumbered appropriation balance or portion 1 thereof from one department, office or agency to another. City Council may amend the original adopted budget during the year by passing a new ordinance to reflect t current needs, and during 1990 the expenditure estimates were amended. These 'd amendments were made in accordance with the City Charter. A -21 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) For each legally adopted annual operating budget, budgetary control exists at the department or total fund level. That is to say, total expenditures for each depart- ment or fund cannot legally exceed total appropriations for that department or fund. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of the formal budgetary integration in the general fund, special revenue funds, and capital projects funds. Encumbrances outstanding at year end are reported as reservations of fund balances since they do not constitute expenditures or liabilities. In addition, appropria- tions lapse at year end. F. Cash, Deposits and Investments Cash and cash equivalents, as reported on the combined balance sheet, represent interest and non- interest bearing demand deposits and money market funds. Deposits, as reported on the combined balance sheet, include all certificates of deposit held by the City. Investments include U.S. Treasury securities, equity securities, mutual funds and a single premium deferred annuity. Deposits and investments are stated at cost or amortized cost, except for the investments in the deferred compensation agency fund which are reported at market value. G. Inventories Inventories in proprietary funds are recorded at the lower of cost (first -in, first -out) or market. Inventory in the general fund is recorded at cost and consists of expendable supplies held for consumption. The cost is recorded as an expenditure at the time individual inventory items are purchased and the balance reflected as inventory is adjusted based on physical count. Reported inventories in the general fund are equally offset by a fund balance reserve which indicates that they do not constitute "available spendable resources" even though they are a component of net current assets. H. Due to /Due From Other Funds During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as "due from other funds" or "due to other funds" on the balance sheet. I. Restricted Assets Restricted assets represent amounts held in escrow for the purpose of generating sufficient revenues to satisfy the debt service requirements of the applicable bonds. As further outlined in notes 6 and 7, debt service requirements include interest only payments until August 15, 1991 for the amounts reported in the special revenue fund and June 1, 1996 for the amounts reported in the enterprise fund. Y A -22 0 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) J. Compensated Absences Vested or accumulated vacation leave that is expected to be liquidated with expendable available financial resources is reported as an expenditure and a fund liability of the governmental fund that will pay it. Amounts of vested or accumulated vacation leave that are not expected to be liquidated with expendable available financial resources are reported in the general long -term debt group. No expenditure is reported for these amounts. Vested or accumulated sick leave of proprietary funds is recorded as an expense and liability of those funds as the benefits accrue to employees. In accordance with the provisions of Statement of Financial Accounting Standards No. 43, Accounting for Compensated Absences no liability is recorded for nonvesting accumulating rights to receive sick pay benefits. However, a liability is recognized for accumulating sick leave benefits that is estimated will be taken as "terminal leave" prior to retirement. K. Fund Equity Contributed capital is recorded grants or contributions from represent those portions of fund segregated for a specific future plans for future use of financial L. Bond Discount and Issue Costs in proprietary funds that have received capital developers, customers or other funds. Reserves equity not appropriable for expenditures or legally use. Designated fund balances represent tentative resources. In governmental fund types, bond discounts and issue costs are recognized in the current period. Bond discounts and issue costs for proprietary fund types are deferred and amortized over the term of the bonds using the bonds - outstanding method, which approximates the interest method. Bond discounts are presented as a reduction of the face amount of bonds payable whereas issue costs are recorded as deferred charges. M. Interfund Transactions Quasi - external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures /expenses initially made from it that are properly applicable to another fund, are recorded as expenditures /expenses in the reimbursing fund and as reductions of expenditures/ expenses in the fund that is reimbursed. All other interfund transactions, except quasi - external transactions and reimburse- ments, are reported as transfers. Nonrecurring or nonroutine permanent transfers of equity are reported as residual equity transfers. All other interfund transfers are reported as operating transfers. A -23 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 i t S NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) N. Property Tax Revenues Property taxes are levied on December 1 based on the assessed value of property as certified by the County Assessor by the previous September 15. Assessed values are a percentage of actual values. A reevaluation of all property must be made every two years. The last reevaluation date was January 1, 1989 for the 1987 base year specified by state law. The taxes levied on December 1, 1990 have been recorded as a receivable with a corresponding credit to deferred revenue since it does not meet the available criteria for revenue recognition. 0. Memorandum Only - Total Columns Total columns on the general purpose financial statements are captioned "memorandum only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations or cash flows in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. P. Statement of Cash Flows In 1990, the City adopted the provisions of Governmental Accounting Standards Board Statement No. 9, "Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting ". For purposes of the combined statement of cash flows, cash and cash equivalents includes cash on hand, demand deposits and money market funds. NOTE 2 - CASH AND CASH EQUIVALENTS, DEPOSITS AND INVESTMENTS Cash and cash equivalents, deposits and investments are summarized as follows: Demand deposits and cash on hand $ 1,123,860 Money market mutual funds 1,296,373 $ 2,420,233 Certificates of deposit $ 13,260,000 Investments U.S. Treasury bills $ 5,438,459 U.S. Treasury notes 432,036 U.S. Treasury strips 98,440 Single premium deferred annuity 1,500,000 Mutual funds 450,669 Equity securities 438,156 $ 8,357,760 Cash and investments in deferred compensation plans 1,359,558 $ 9,717,318 A -24 T CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 2 - CASH AND CASH EQUIVALENTS, DEPOSITS AND INVESTMENTS (Cont'd.) Demand deposits and certificates of deposit are entirely insured by federal depository insurance or collateralized in collateral pools maintained by individual financial institutions that hold these deposits. Colorado law requires that depository institutions must apply for and be designated as an eligible public depository before the institution can accept public fund monies. The depository institution must pledge eligible collateral as security for all public deposits held by that institution that are not insured by depository insurance. The market value of the collateral that each institution pledges as security must be equal to at least 102% of the total uninsured deposits held by that institution. Generally, the eligible collateral in the collateral pools is held by the depository institution or its agent in the name of the depository institution. During 1989, the City adopted, by resolution, the provisions of Colorado Revised Statutes 24-75 -601 which is entitled "Concerning Investment in Securities by Public Entities ". This law, among other things, outlines the types of securities that public entities in Colorado may acquire and hold as investments. These include U.S. government and agency securities, certain bonds of political subdivisions, bankers acceptances, commercial paper, local government investment pools, repurchase agree- ments, money market funds and guaranteed insurance contracts. The statute also includes a provision limiting any investment to a five year maturity unless the governing body authorizes a longer period. The government's deposits and investments are categorized as either (1) insured or registered or for which the securities are held by the government or its agent in d the government's name, (2) uninsured and unregistered for which the securities are s held by the pledging financial institution's trust department or agent in the govern - f ment's name in the case of deposits or, in the case of investments, uninsured and n unregistered for which the securities are held by the counter party's safekeeping department or agent in the government's name, or (3) uninsured and unregistered, with securities held by the financial institution's trust department or agent but not in the government's name in the case of deposits or, in the case of investments, uninsured or unregistered for which the securities are held by the counter party's safekeeping department or agent but not in the government's name. Estimated Category Carrying Market 1 2 3 Value Value Demand deposits and cash on hand $ 313,696 $ - $ 810,164 $ 1,123,860 $ 1,123,860 Money market mutual funds - - - 1,296,373 1,296,373 $ 313,696 $ - $ 810,164 $ 2,420 $ 2,420,233 Certificates of deposit $ 1,100 $ - $ 12,160,000 $ 13,260,000 $ 13,260,000 5 J 8 8 A -25 I E CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 2 - CASH AND CASH EQUIVALENTS, DEPOSITS AND INVESTMENTS (Cont'd.) NOTE 3 - RECEIVABLES Receivables at December 31, 1990 consist of the following: Estimated Category Special Carrying Market 1 2 3 Value Value Investments - U.S. Treasury bills $ - $ 5,438,459 $ - $ 5,438,459 $ 5,438,459 U.S. Treasury notes - - 432,036 432,036 448,230 U.S. Treasury strips - - 98,440 98,440 98,440 Single premium deferred - 200,000 - 1,662,523 annuity - 1,500,000 - 1,500,000 1,500,000 Equity securities - - 438,156 438,156 418,267 $ - $ 6,938,459 $ 968,632 $ 7,907,091 $ 7,903,396 Mutual funds - - - 450,669 448,008 Investments in deferred compensation plan - - - 1,359,558 1,359,558 $ - $ 6,938,459 $ 968,632 $ 9,717,318 $ 9,710,962 NOTE 3 - RECEIVABLES Receivables at December 31, 1990 consist of the following: Special Debt Capital General Revenue Service Projects Receivables - Taxes $ 6,573,665 $ - $ - $ - Accounts 186,602 173,965 - - Special assessments - - 45,748 - Notes - 200,000 - 1,662,523 Accrued interest 56,619 272,739 9,149 24,153 $ 6,816,886 $ 646,704 $ 54,897 $ 1,686,676 Less allowance for uncollectible accounts NET ( 12,965 - - - $ 6,803,921 $ 646,704 $ 54,897 $ 1 A -26 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 3 - RECEIVABLES (Cont'd.) Receivables - Taxes Accounts Special assessments Notes Accrued interest Less allowance for uncollectible accounts NET Trust & Enterprise Agency Total 569,639 8,757 - 2,933,448 635,597 73,134 $ 1,205,236 $ 3,015,339 ( 27,744) (2,016,917) $ 6,573,665 938,963 45,748 4,795,971 1,071,391 $13,425,738 (2,057,626) $ 1,177,492 � 998,422 ; 11,368,112 Property taxes receivable reflect 1990 property taxes that will be collected by the Pueblo County Treasurer in 1991. Taxes collected by the Treasurer are remitted to the City on a monthly basis. These taxes are due January 1 and may be paid in two installments (February 28 and July 31) or they may be paid in full on April 30. Taxes not paid in accordance with this schedule accrue interest and penalty charges and are subject to liens if not paid by November. Notes receivable are summarized as follows: Non - interest bearing note from Ross Investment Group - Pueblo, Ltd. from Urban Renewal Authority of Pueblo; due in 10 annual installments beginning September 1993; secured by deed of trust on land Non - interest bearing demand note from Pueblo Development Foundation (PDF); secured by deed of trust on property located at 1228 E. Orman; payable in the amount of $8,333 per month beginning June 1994, and due in full by July 1999; the note also includes a provision whereby PDF is required to forward to the City any monies received by PDF upon the sale of the underlying collateral Advance to PDF from airport special tax capital projects fund for acquisition of property at the Airport Industrial Park; any funds received by PDF from rents or sales of the property shall be remitted to the City until advance is repaid Advance to PDF from airport special tax capital projects fund for construction of shell buildings at the Airport Industrial Park; any funds received by PDF from rents or sales of property shall be remitted to the City until advance is repaid Notes receivable from loans made under a housing rehabilitation program 200,000 $ 548,546 300,134 813,843 $ 1,662,523 $ 2,933,448 $ 4,795,971 A -27 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 3 - RECEIVABLES (Cont'd.) The loans made under the housing and rehabilitation program are only partially repayable based on the participant's income level and other criteria. However, if the property is sold or the participant is no longer living in the rehabilitated residence, the total loan becomes due. As such, the gross amount of the notes receivable is reduced to an estimate of the net realizable value by an allowance for uncollectible accounts of $2,016,917. The difference between the gross amount of notes due and the net realizable value is recorded as deferred revenue. NOTE 4 - DUE FROM /DUE TO OTHER FUNDS A summary of the individual interfund receivables and payables is as follows: $ 3,635,000 $ 2,079,569 Special Revenue Funds Community Development Due From Due To $ Other Funds Other Funds General Fund - 1,020,052 Special Revenue $ 638,096 $ 1,026,667 Debt Service 29,361 23,695 Capital Projects 1,366,898 90,161 Enterprise 1,125,581 222,799 Internal Service 208,752 19,135 Trust and Agency 266,312 697,112 $ 3,635,000 $ 2,079,569 Special Revenue Funds Community Development $ - $ 299,359 Highway Users 1,020,052 - E1 Pueblo Heritage 1,500 - Urban Renewal Authority 5,115 - Police and Fire Department Grants - 7,069 Urban Transportation Planning - 145,489 Pueblo County Headstart Parents, Inc. - 186,179 $ 1,026,667 $ 638,096 Debt Service Funds - Leased Equipment $ 11,065 $ - Refunding Series 1985 - 2,948 Refunding Series 1987A - 26,413 Street and Bridge Series 1987B 707 - Special Assessments 11,923 - $ 23,695 $ 29,361 Capital Projects Funds - Capital improvement $ - $ 81,429 E.D.A. Grants - 176,582 Airport Special Tax Fund - 82,315 Airport Development - 492,381 Land, Water Conservation 44,250 - Fountain -Creek Flood Plain - 382,034 18th Street Bridge - 152,157 Street and Bridge 45,911 - $ 90,161 $ 1,366,898 a r A -28 CITY OF PUEBLO, COLORADO $ 9,504,574 $ 765,789 $ - $ 10,270,363 Buildings NOTES TO FINANCIAL STATEMENTS (Cont'd.) 117,981 - 10,247,866 Improvements 73,535,631 DECEMBER 31, 1990 - 73,569,020 Machinery and equipment 7,506,035 700,472 NOTE 4 - DUE FROM /DUE TO OTHER FUNDS (Cont'd.) $ 100 2 676,125 $ 1,617,631 $ 389,681 $ 101,904,075 Due From Due To Other Funds Other Funds Enterprise Funds - City Park Golf Course $ - $ 14,374 Memorial Airport 56,141 - Ice Arena 50,402 - Pueblo Transportation Co. - 109,709 Sewer User - 547,761 Swimming Pools 116,256 - Mountain View Cemetery - 420,071 Pueblo Municipal Property Corporation - 33,666 $ 222,799 $ 1,125,581 Internal Service Funds - City Shops $ - $ 208,752 Transportation 19,135 - $ 19,135 $ 208,752 Trust and Agency Funds - Leidigh Park Trust $ - $ 45 Housing Rehabilitation Program 128,352 - Parking Facilities 13,074 - Mt. View Cemetery Endowment - 242,081 Conservation Trust 164,952 - Pre -Need Cemetery Services - 15,099 Restoration of Carousel - 163 Pueblo Beautiful Endowment 383 - Airport Improvement Trust - 8,924 Park Land Escrow 80,303 - Deposits and Clearing 310,048 - $ 697,112 $ 266,312 $ 5,714,569 $ 5,714,569 NOTE 5 - PROPERTY, PLANT AND EQUIPMENT The following is a summary of changes in General Fixed Assets account group for the year ended December 31, 1990: Balance Balance January 1, December 31, 1990 Additions Deletions 1990 Land $ 9,504,574 $ 765,789 $ - $ 10,270,363 Buildings 10,129,885 117,981 - 10,247,866 Improvements 73,535,631 33,389 - 73,569,020 Machinery and equipment 7,506,035 700,472 389,681 7,816,826 $ 100 2 676,125 $ 1,617,631 $ 389,681 $ 101,904,075 A -29 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 5 - PROPERTY, PLANT AND EQUIPMENT (Cont'd.) A summary of proprietary fund -type fixed assets at December 31, 1990 is as follows: Internal Enterprise Service Land Buildings Improvements other than buildings Machinery and equipment Accumulated depreciation Construction in progress $ 671,468 $ - 40,931,144 - 29,126,195 - 4,822,747 242,066 $ 75,551,554 $ 242,066 (17,600,132 ( 127,608 $ 57,951,422 $ 114,458 3,179,656 - $ 61,131,078 $ 114,458 The amounts reported above at January 1, 1990 for land, buildings and improvements in the general fixed asset account group have been restated from amounts previously reported so as to remove infrastructure costs that were capitalized in previous years. Construction in progress reported above represents costs incurred to December 31, 1990 for the Walking Stick golf course and includes $107,741 of net interest costs for funds borrowed to finance construction. Interest costs totalling $351,473 were offset by interest income of $243,732. NOTE 6 - RESTRICTED ASSETS Restricted assets are summarized as follows: Urban Renewal Authority of Pueblo Special Revenue Fund 7.25% collateralized repurchase agreement due August 15,1991; secured by open market U.S. Treasury securities that are marked to market on a weekly basis and collateral held by trustee on behalf of the Authority but not in the Authority's name; carrying value approximates market Carrying Value $ 9,950,000 A -30 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 6 - RESTRICTED ASSETS (Cont'd.) Sewer User Enterprise Fund Estimated Carrying Market Value Value $4,000,000 maturity value U.S. Treasury strips acquired September 30, 1986 and due November 15, 1995; acquisition cost was $2,095,840 $ 2,832,346 $ 2,745,560 $1,725,000 maturity value U.S. Treasury strips acquired September 30, 1986 and due November 15, 1995; acquisition cost was $903,831 1,221,449 1,184,023 $1,733,000 maturity value U.S. Treasury strips acquired September 30, 1986 and due November 15, 1995; acquisition cost was $908,023 1,227,114 1,189,514 $8,816,000 par value U.S. Treasury note; coupon rate is 9.5% and was acquired on September 30, 1986 and matures on November 15, 1995 9,655,149 9,433,120 Cash 2,408 2,408 $ 14,938,466 $ 14,554,625 As disclosed in Note 1, the Urban Renewal Authority of Pueblo was inactive until August 1986 when the Authority and the City entered into a cooperation agreement whereby the Authority would acquire certain properties from the City for the purpose of building a convention center and parking structure. Based on this agreement, the Authority issued $9,950,000 of short series tax increment revenue bonds. The proceeds, however, were not used for acquisition or construction since the Authority was not able to obtain a private developer to construct a hotel adjacent to the convention center and parking structure. As such, the proceeds were placed in escrow and invested in a certificate of deposit whereby the interest earnings from the certificate would be sufficient to service the tax increment bonds. The bonds and certificate were scheduled to mature on August 15, 1988 if the Authority was unable to obtain a developer for the hotel. Since the Authority was not able to obtain a developer for the hotel, the tax increment bonds were remarketed in 1988 for an additional one year period. In August, 1989, the Authority again remarketed the tax increment revenue bonds for an additional two year period expiring August 15, 1991. Interest on the bonds is paid from the interest earnings on the above repurchase agreement. In 1986, the City issued $11,600,000 of sewer revenue crossover refunding bonds for the purpose of advance refunding $15,955,000 of the 1985 refunding sewer revenue bonds maturing after January 1, 1996. Since a crossover refunding does not result in a defeasance of debt on the issue date, both the new debt and old debt are recorded as debt until the crossover date, which in this case is June 1, 1996. At that time, the investments in the escrow account should be sufficient to retire the old debt. The investments reported above in the sewer user enterprise fund represent the carrying value of the escrow account that is servicing the crossover refunding bonds. A -31 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 6 - RESTRICTED ASSETS (Cont'd.) The government's restricted assets are categorized as uninsured and unregistered for which the securities are held by the broker or dealer, or by its trust department or agent, but not in the government's name. NOTE 7 - LONG -TERM DEBT $ 4,045,000 - The following is a summary of bonds and other debt transactions for the year ended December 31, 1990: $ 4,580,000 97,500 Balance $ 97,500 Balance 5,047,500 January 1, $ December 31, $ 13,000 1990 Issued Retired 1990 General obligation - $ 22,139 Refunding, series 1985 $ 1,955,000 $ - $ 215,000 $ 1,740,000 Refunding, series 1987A 8,805,000 - - 8,805,000 Street and bridge bond, series 1987B 2,625,000 - 5,000 2,620,000 $ 13,385,000 $ - $ 220,000 $ 13,165,000 Revenue - Sewer series 1985 Sewer refunding, series 1986 Certificates of participation - Pueblo Municipal Property Corporation Pueblo Municipal Building Corporation Capital leases Special assessments Notes /other debt - Howery property Section 108 of Housing and Community Development Act loan guarantee assistance notes Pueblo Housing Authority $ 4,685,000 $ - 11,600,000 - $ 16,285,000 $ - $ 4,580,000 $ 565,000 $ 4,580,000 $ 565,000 $ 623,075 $ - $ 70,000 $ - $ 26,846 $ - $ 640,000 $ 4,045,000 - 11,600,000 $ 640,000 $ 15,645,000 $ - $ 4,580,000 97,500 467,500 $ 97,500 $ 5,047,500 $ 195,009 $ 428,066 $ 13,000 $ 57,000 $ 4,707 $ 22,139 1,015,000 - 165,000 135,000 - 135,000 $ 1,176,846 $ - $ 304,707 850,000 $ 872,139 A -32 ."Tr CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 7 - LONG -TERM DEBT (Cont'd.) Balance January 1, 1990 Issued Bonds payable from restricted assets - Short -term series tax increment revenue bonds $ 9,950,000 $ - $ Sewer series 1986 crossover refunding bonds 15,955,000 - $ 25,905,000 $ - Accrued compensated absences $ 4,352,769 $ 461,023 TOTAL $ 66,377,690 $ 1,026,023 The following is a description of each individual issue: General Obligation Balance December 31, Retired 1990 - $ 9,950,000 15,955,000 $ 25,905,000 $ 427,769 $ 4,386,023 $ 1,897,985 $ 65,505,728 $2,255,000 1985 series general obligation refunding bonds; interest rate ranges from 6.8% to 8.5%; due in annual install- ments ranging from $364,430 to $554,106 including interest; due November 1, 1995, debt is being serviced by 1985 series debt service fund $ 1,740,000 $8,805,000 1987A series general obligation refunding bonds; interest rate ranges from 6.3% to 8.25%; due in annual install- ments including interest ranging from $380,279 to $1,242,270 through November, 2006; debt is being serviced by 1987A series debt service fund 8,805,000 $2,625,000 1987B series general obligation street and bridge bonds; interest rate ranges from 6.0% to 7.4%; due in annual installments ranging from $160,044 to $288,757 including interest through November 1, 2006; debt is serviced by 1987B street and bridge bond debt service fund 2,620,000 $ 13,165,000 Revenue $22,805,000 series 1985 sewer revenue refunding bonds; interest rate ranges from 5.5% to 9.25%; due in annual installments ranging from $2,453,915 to $2,459,090 including interest through December 1, 1995; debt is being serviced by sewer user enterprise fund. $15,955,000 of the total issue is reflected on the combined balance sheet under the caption "bonds payable from restricted assets "; debt is serviced by sewer user enterprise fund $ 4,045,000 A -33 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 7 - LONG -TERM DEBT (Cont'd.) Revenue (Cont'd.) $11,600,000 series 1986 sewer revenue crossover refunding bonds; interest rate ranges from 6.9% to 9.3 %; due in annual installments of $418,735 which represents interest only payments until June 1, 1996; due in annual principal and interest installments ranging from $1,649,793 to $3,295,020 beginning June 1, 1996 through December 1, 2004; debt is serviced by sewer user enterprise fund Certificates of Participation $4,580,000 of certificates of participation of Pueblo Municipal Property Corporation; interest rate ranges from 6.4% to 7.3%; due in annual installments including interest ranging from $334,750 to $485,150 through June 1, 2008; debt is serviced by Pueblo Municipal Property Corporation enterprise fund $565,000 of certificates of participation of Pueblo Municipal Building Corporation; interest rate of 6%; due in annual installments of approximately $95,000 including interest through February 22, 1996; debt is serviced by Pueblo Municipal Building Corporation debt service fund Capital Leases $976,481 of obligations under capital leases; interest rate ranges from 8.6% to 11.0 %; due in annual installments ranging from $78,032 to $235,241 including principal and interest through December, 1993; debt is serviced by leased equipment debt service fund and the general fund Special Assessments Various special assessment bonds; interest rate ranges from 7.57 to 11.5%; due in annual principal payments ranging from $5,000 to $16,000 through 1997; debt is serviced by special assessment debt service fund Notes /Other Debt $42,500 12.57. note to Howery; due in annual principal and interest installments of $7,800 through June, 1994; debt is serviced by Howery property debt service fund 11,600,000 $ 15,645,000 $ 4,580,000 467,500 $ 5,047,500 $ 428,066 $ 57,000 $ 22,139 A -34 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 7 - LONG -TERM DEBT (Cont'd.) Notes /Other Debt (Cont'd.) $1,165,000 Section 108 Housing and Community Development Act loan guarantee assistance notes; due in annual principal installments ranging from $150,000 to $245,000 plus interest through August, 1994; interest rate ranges from 7.95% to 9.08 %; debt is serviced by Community Development special revenue fund 850,000 Bonds Payable From Restricted Assets $ 872,139 $9,950,000 of 7.25% short -term series tax increment revenue bonds; interest only payments to August 15, 1991, with entire balance due at that time; debt is serviced by the Urban Renewal Authority of Pueblo special revenue fund $ 9,950,000 $22,805,000 series 1985 sewer revenue refunding bonds; interest rate ranges from 5.5% to 9.25 %; due in annual installments ranging from $2,450,425 to $5,014,338 including interest beginning June 1, 1996, through December 1, 2004; debt is serviced by sewer user enterprise fund 15,955,000 $ 25,905,000 TOTAL $ 61,119,705 a' Presented below is a summary of the debt service requirements to maturity, including interest of $41,170,691: Certificates General of Year Obligation Revenue 1991 $ 1,329,412 $ 3,293,722 1992 1,335,978 3,295,579 1993 1,334,732 3,291,385 1994 1,522,724 3,295,560 1995 1,527,935 3,292,383 1996 -2000 7,635,927 8,226,742 2001 -2005 7,227,010 8,232,764 2006 -2008 1,391,162 - $23,304,880 $32,928,135 Less interest 10,139,880 17,283,135 Net $ 13,165 2 000 $ 15,645,000 Certificates of Capital Participation Leases $ 429,300 $ 235,241 579,310 156,065 579,980 78,032 580,080 - 579,060 - 2,511,280 - 2,415,820 - 1,450,320 - $ 9,125,150 $ 469,338 4,077,650 41,272 $ 5,047,500 $ 428,066 A -35 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) I DECEMBER 31, 1990 ' NOTE 7 - LONG -TERM DEBT (Cont'd.) The certificates of participation of Pueblo Municipal Property Corporation represent assignments of proportionate interests in rights to receive payments pursuant to an annually renewable golf course lease purchase and sublease agreement dated January 1, 1989, between the City and Pueblo Municipal Property Corporation. The proceeds have been used to acquire, construct and equip a public golf course known as Walking Stick Golf Course. The principal and interest on the certificates is payable solely from annually appropriated base rentals to be paid by the City to PMPC. The certifi- cates shall never constitute or give rise to a general obligation or other indebted- ness of the City within the meaning of any constitutional, statutory or other charter debt limitation. All of the payment obligations of the City are subject to annual appropriation by the City. The certificates of participation of Pueblo Municipal Building Corporation represent assignments of proportionate interests in rights to receive payments pursuant to an annually renewable public works lease purchase agreement dated February 22, 1990 between the City and Pueblo Municipal Building Corporation. The proceeds were used to acquire a site on which to build a public works and transporta- tion facility. The principal and interest on the certificates is payable solely from annually appropriated lease rentals to be paid by the City to PMBC. The certificates shall never constitute or give rise to a general obligation or other indebtedness of the City within the meaning of any constitutional, statutory or other charter debt limitation. All of the payment obligations of the City are subject to annual appropriation by City Council. The Section 108 Housing and Community Development Act loan guarantee assistance notes are secured by grants which have been made to the City or will be made to the City in future years under Section 106 of Title I of the Act if the City is eligible. The notes are not general obligati.ons of the City and do not constitute nor give rise to a pecuniary liability of the City or a charge against its general credit or taxing power. The amount of general obligation long -term debt that can be incurred is limited by its Charter. General obligation debt can't exceed 107. of assessed valuation. At December 31, 1990, the debt limit was $38,442,485 and the debt margin was $24,261,791. A -36 Bonds Payable Special Notes /Other From Restricted Year Assessments Debt Assets Total 1991 $ 16,000 $ 267,859 $10,671,375 $ 16,242,909 1992 6,000 267,042 - 5,639,974 1993 5,000 269,582 - 5,558,711 1994 5,000 271,329 - 5,674,693 1995 15,000 - - 5,414,378 1996 -2000 10,000 - 12,274,725 30,658,674 2001 -2005 - - 12,383,981 30,259,575 2006 -2008 - - - 2,841,482 $ 57,000 $ 1,075,812 $35,330,081 $102,290,396 Less interest - 203,673 9,425,081 41,170,691 Net $ 57,000 $ 8 $ 25,905,000 $ 61,119,705 The certificates of participation of Pueblo Municipal Property Corporation represent assignments of proportionate interests in rights to receive payments pursuant to an annually renewable golf course lease purchase and sublease agreement dated January 1, 1989, between the City and Pueblo Municipal Property Corporation. The proceeds have been used to acquire, construct and equip a public golf course known as Walking Stick Golf Course. The principal and interest on the certificates is payable solely from annually appropriated base rentals to be paid by the City to PMPC. The certifi- cates shall never constitute or give rise to a general obligation or other indebted- ness of the City within the meaning of any constitutional, statutory or other charter debt limitation. All of the payment obligations of the City are subject to annual appropriation by the City. The certificates of participation of Pueblo Municipal Building Corporation represent assignments of proportionate interests in rights to receive payments pursuant to an annually renewable public works lease purchase agreement dated February 22, 1990 between the City and Pueblo Municipal Building Corporation. The proceeds were used to acquire a site on which to build a public works and transporta- tion facility. The principal and interest on the certificates is payable solely from annually appropriated lease rentals to be paid by the City to PMBC. The certificates shall never constitute or give rise to a general obligation or other indebtedness of the City within the meaning of any constitutional, statutory or other charter debt limitation. All of the payment obligations of the City are subject to annual appropriation by City Council. The Section 108 Housing and Community Development Act loan guarantee assistance notes are secured by grants which have been made to the City or will be made to the City in future years under Section 106 of Title I of the Act if the City is eligible. The notes are not general obligati.ons of the City and do not constitute nor give rise to a pecuniary liability of the City or a charge against its general credit or taxing power. The amount of general obligation long -term debt that can be incurred is limited by its Charter. General obligation debt can't exceed 107. of assessed valuation. At December 31, 1990, the debt limit was $38,442,485 and the debt margin was $24,261,791. A -36 „- CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 8 — DEFERRED COMPENSATION PLAN The City offers its employees two deferred compensation plans created in accordance with Internal Revenue Code Section 457. The plans, available to all City employees, permit them to defer a portion of their salary until future years. Participation in the plans is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All amounts of compensation deferred under the plans, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the City subject only to the claims of the government's general creditors. Participants' rights under the plan are equal to those of general creditors of the City in an amount equal to the fair market value of the deferred account for each participant. The City believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. t 0 y s 9 y r 1 Investments are managed by the plans' trustee under one of four investment options, or a combination thereof. The choice of the investment options is made by the participants. NOTE 9 — FUND EQUITY Certain portions of fund equity have been reserved that represent funds not available for appropriation in the subsequent year. In addition, the City has designated portions of their unreserved fund equity for certain subsequent years' expenditures which can be appropriated in future years. The following is a description of these reserves and designations at December 31, 1990: RESERVATIONS OF RETAINED EARNINGS n S No part of retained earnings of the sewer user enterprise fund has been reserved i because the City purchased approximately $4,100,000 face value surety bonds to replace the required reserves. The acquisition of these surety bonds stipulated certain requirements as follows: 1. Sewer charges must be at least 1207. of annual debt service. 2. The City must create a restricted fund and make monthly deposits of $17,200 into this fund beginning in 1996. t 3. Investments in the sewer user fund are restricted to an approved list provided by the insurance underwriter. S No part of retained earnings of Pueblo Municipal Property Corporation enterprise y fund is reserved because City Council, as part of the adopting ordinance when the • certificates of participation were issued, established a line of credit for the e trustee and mortgageholder for the benefit of the City totalling $458,000. t RESERVATIONS OF FUND BALANCE y Reserve for encumbrances t 1 • Encumbrances outstanding at year end are reported as reservations of fund balances since they do not constitute expenditures or liabilities. A -37 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 9 - FUND EQUITY (Cont'd.) RESERVATIONS OF FUND BALANCE (Cont'd.) Reserve for inventory A reserve equal to the inventory on hand at December 31, 1990 is provided to reflect the recording of inventories under the purchase method. Reserve for debt service This represents the amount available in the Debt Service Funds for future interest and principal payments on the general obligation bonds. UNRESERVED FUND BALANCES - DESIGNATIONS The City designates certain portions of its unreserved fund balances for future expenditures based on City Council plans for future use. These designations, however, are only estimates and may change due to unforeseen circumstances. Designated for subsequent years' expenditures This amount represents the portion of fund balance that was used to balance the relationship between revenues and other financing sources and expenditures and other financing uses in developing and adopting the 1991 budget. Other designations Other designations in the general fund are summarized as follows: Designated for employee benefits Designated for insurance deductible losses DEFICIT FUND /RETAINED EARNINGS BALANCES $ 61,389 790,000 $ 851,389 The following is a summary of individual funds which had deficit fund /retained earnings balances at December 31, 1990: Special Revenue Funds - Urban Transportation Planning Debt Service Funds - Refunding series 1985 Refunding series 1987A Capital Projects Funds - Airport development Fountain Creek Flood -Plain 18th Street bridge $ 33,478 2,948 26,413 9,526 412,034 152,167 A -38 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 lect - est ure ns, :he ier 9 0 0 3 3 S NOTE 9 - FUND EQUITY (Cont'd.) Enterprise Funds - FOR ENTERPRISE FUNDS Memorial Airport 2,035,095 Ice Arena 322,089 Pueblo Transportation Co. 2,655,942 Swimming pools 6,328 Mountain View Cemetery 51,466 Internal Service - information for the City shops 188,054 Trust and Agency - Restoration of carousel 158 Leidigh Park Trust 45 NOTE 10 - SEGMENT INFORMATION FOR ENTERPRISE FUNDS The City maintains eight enterprise funds which provide golf, airport, ice rink facilities, transportation, sewer, swimming pools and cemetery services. Segment information for the year ended December 31, 1990 is as follows: City Park Pueblo Golf Memorial Ice Transpor- Course Airport Arena tation Co. Operating revenues $ 902,809 $ 601,273 $ 108,853 $ 242,998 Operating expenses excluding depreciation ( 657,657) (1,265,806) ( 359,670) (1,344,467) Depreciation ( 47,363 ( 324,536 ( 32,824 ( 110,782 Operating income (loss) $ 197,789 $( 989,069) $( 283,641) $(1,212,251) Nonoperating revenues (expenses) Grants Interest income Other revenue Interest and fiscal charges Income (loss) before operating transfers Operating transfers in (out), net NET INCOME (LOSS) - - - 506,954 34,825 27,782 - 552 - - - 7,004 $ 232,614 $( 961,287) $( 283,641) $( 697,741) $ 232,614 763,600 $ ( 197,687 245,000 600,253 $ ( 38,641 $ ( 97,488 A -39 A CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 10 - SEGMENT INFORMATION FOR ENTERPRISE FUNDS (Cont'd.) Operating revenues Operating expenses, excluding depreciation Depreciation Operating income (loss) Nonoperating revenues (expenses) - Grants Interest income Other revenue Interest and fiscal charges Income (loss) before operating transfers Operating transfers in (out), net NET INCOME (LOSS) Sewer Swimming User Pools $ 5,228,011 $ 93,971 (2,836,908) ( 365,611) ( 925,148 ( 30,794 $ 1,465,955 $( 302,434) Arena $ 100 1,044,525 19,934 38,311 1,082,836 1,096,257 l i Pueblo Transpor- tation Co. 1 $ 114,030 1,803,248 i 6,222 ( 13,397) 1,789,851 2,106,915 Pueblo Municipal Property Cemetery Corp. Total $ 73,013 $ - $ 7,250,928 ( 286,810) ( 750) (7,117,679) ( 11,069 - (1,482,516 $( 224,866) $( 750) $(1,349,267) 2,184,526 187 - - (2,809,322 - - $ 841,159 $( 302,247) $( 224,866) $( 506,954 2,247,872 7,004 (2,809,322 ` 750) $(1,396,759) { ( 500,000 301,000 - - 1,409,853 $ 341,159 $ ( 1,247 $ ( 224,866 $ ( 750 $ 13,094 A -40 City Park Golf Course Airport Current capital contributions $ - $ 1,192,895 Property, plant and equipment, net 881,800 13,246,425 Revenue bonds payable - - Net additions - Property and equipment 136,113 14,467 Construction in progress - - Revenue bonds reduction - - Net working capital 439,603 304,328 EQUITY 1,321,483 13,550,753 TOTAL ASSETS 1,363,229 13,686,895 Operating revenues Operating expenses, excluding depreciation Depreciation Operating income (loss) Nonoperating revenues (expenses) - Grants Interest income Other revenue Interest and fiscal charges Income (loss) before operating transfers Operating transfers in (out), net NET INCOME (LOSS) Sewer Swimming User Pools $ 5,228,011 $ 93,971 (2,836,908) ( 365,611) ( 925,148 ( 30,794 $ 1,465,955 $( 302,434) Arena $ 100 1,044,525 19,934 38,311 1,082,836 1,096,257 l i Pueblo Transpor- tation Co. 1 $ 114,030 1,803,248 i 6,222 ( 13,397) 1,789,851 2,106,915 Pueblo Municipal Property Cemetery Corp. Total $ 73,013 $ - $ 7,250,928 ( 286,810) ( 750) (7,117,679) ( 11,069 - (1,482,516 $( 224,866) $( 750) $(1,349,267) 2,184,526 187 - - (2,809,322 - - $ 841,159 $( 302,247) $( 224,866) $( 506,954 2,247,872 7,004 (2,809,322 ` 750) $(1,396,759) { ( 500,000 301,000 - - 1,409,853 $ 341,159 $ ( 1,247 $ ( 224,866 $ ( 750 $ 13,094 A -40 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 10 - SEGMENT INFORMATION FOR ENTERPRISE FUNDS (Cont'd.) Pueblo Municipal Sewer Swimming Property User Pools Cemetery Corp. Total 30 Current capital +8 contributions $ 36,401 $ - $ - $ 40,000 $ 1,383,426 - Property, plant and equipment, net 40,229,631 521,390 156,299 68,024 57 12 Revenue bonds payable 31,600,000 - - 4,580,000 36,180,000 - Net additions - - Property and equipment 1,295,892 34,927 17,821 28 1,553,400 7) Construction in progress - - - 3,123 3,123,425 Revenue bonds reduction 640,000 - - - 640,000 1 Net working capital 9,073 114,771 ( 359,716) 1,119,439 10,716,639 5 EQUITY 34,399,088 636,161 ( 203,417) 65,935 52,642,690 TOTAL ASSETS 69,014 637,802 217,743 4,758,011 92,881,736 NOTE 11 - JOINT VENTURES The City participates in two local joint ventures with the County of Pueblo, Colorado and two state -wide joint ventures as follows: PUEBLO REGIONAL BUILDING DEPARTMENT The Pueblo Regional Building Department is a joint venture between the City of Pueblo, Colorado and the County of Pueblo, Colorado for the purpose of enforcing building codes and licensing contractors. The governing body of the Regional Building Department is composed of seven members, three of which are appointed by the City, three are appointed by the County, and one member is jointly appointed. The governing body of the department has authority for the appointment of manage- ment. Fees charged for the issuance of permits and licenses are subject to approval by the City and County. The Department's management and its governing board is solely responsible for the employment of personnel, for day -to -day operations, and for administration of its fiscal affairs. In addition, the City and County have no budgetary control. The percentage of joint venture equity interest between the City and County, based on permits issued, would be approximately 75% City and 25% County. A -41 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 11 — JOINT VENTURES (Cont'd.) Summary financial information of the Regional Building Department as of and for the year ended December 31, 1990 is as follows: PUEBLO REGIONAL BUILDING DEPARTMENT BALANCE SHEET DECEMBER 31, 1990 ASSETS TOTAL ASSETS $ 155,504 LIABILITIES AND FUND EQUITY TOTAL LIABILITIES $ 62,382 FUND EQUITY 93,122 TOTAL LIABILITIES AND FUND EQUITY $ 155,504 PUEBLO REGIONAL BUILDING DEPARTMENT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS YEAR ENDED DECEMBER 31, 1990 OPERATING REVENUES OPERATING EXPENSES OPERATING INCOME (LOSS) OTHER FINANCING SOURCES, including City subsidy NET INCOME (LOSS) RETAINED EARNINGS JANUARY 1 RETAINED EARNINGS DECEMBER 31 $ 535,251 702,643 $( 167,392) 104,296 $( 63,096) 112,680 $ 49,584 The department has an obligation under capital lease of $29,576 at December 31, 1990. A -42 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 11 - JOINT VENTURES (Cont'd.) for PUEBLO CITY - COUNTY HEALTH DEPARTMENT The Pueblo City- County Health Department is also a joint venture between the City of Pueblo and the County of Pueblo. The Department was created in 1952 for the purpose of providing public health care services to the residents of the City and County. Approximately 45% of the Department's revenues are composed of subsidies from the City of Pueblo and County of Pueblo. The governing body of the Department is composed of five members, two of which are appointed by the City of Pueblo, two 504 are appointed by the County of Pueblo, and one member is jointly appointed. The governing body of the Department appoints the administrator and the administrator appoints all other personnel. The joint venture agreement requires that the governing body of the Department submit a proposed annual operating budget to the 8 2 City and County for their approval. Based upon the proposed budget, the City and County individually determine the amount of their respective annual subsidies for 22 the Department. The joint venture agreement also stipulates that the participants shall endeavor to appropriate funds to the Department that are reasonable, fair and J4 equitable to all parties. Summary financial information of the Pueblo City- County Health Department as of and for the year ended December 31, 1990 is as follows: PUEBLO CITY - COUNTY HEALTH DEPARTMENT COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS DECEMBER 31, 1990 1 3 2) General Fund ASSETS TOTAL ASSETS $ 355,615 General General Total Fixed Long -Term (Memorandum Assets Debt Only) $ 393,771 $ 140 551 $ 889,937 LIABILITIES AND FUND EQUITY TOTAL LIABILITIES $ 74,120 TOTAL FUND EQUITY 281,495 TOTAL LIABILITIES AND FUND EQUITY $ 3 55,615 - $ 140,551 $ 214,671 393,771 - 675,266 $ 393,771 $ 140,551 $ 889,937 A -43 Wd CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 11 - JOINT VENTURES (Cont'd.) PUEBLO CITY - COUNTY HEALTH DEPARTMENT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE YEAR ENDED DECEMBER 31, 1990 TOTAL REVENUES TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES City of Pueblo County of Pueblo EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 $ 1,290,554 2,352,458 $(1,061,904) 567,530 562,788 $ 68,414 213,081 $ 281,495 The Department has an obligation under a capital lease of $2,422 at December 31, 1990. COLORADO INTERGOVERNMENTAL RISK SHARING AGENCY (CIRSA) AND COLORADO INTERGOVERNMENTAL RISK SHARING AGENCY /WORKERS COMPENSATION (CIRSA /WC) CIRSA and CIRSA /WC are separate and independent governmental and legal entities which were formed by intergovernmental agreement by member municipalities pursuant to Colorado law. The purposes of CIRSA are to provide members defined liability and property coverages through joint self- insurance, insurance, reinsurance or any combination thereof. CIRSA also assists members in preventing and reducing losses and injuries to municipal property and to persons or property which might result in claims being made against members or their employees or officers. It is the intent of the members of CIRSA to create an entity in perpetuity which will administer and use funds contributed by the members to defend and indemnify, in accordance with the Bylaws, any member of CIRSA against stated liability or loss, to the limit of the financial resources of CIRSA. It is also the intent of the members to have CIRSA provide continuing stability and availability of needed coverages at reasonable costs. All income and assets of CIRSA shall be at all times dedicated to the exclusive benefit of its members. The Bylaws shall constitute the substance of the intergovernmental contract among the members. A -44 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 11 - JOINT VENTURES (Cont'd.) The membership of CIRSA is limited to Colorado municipalities which are members of the Colorado Municipal League and are admitted by the Board of Directors. As of December 31, 1990, there were 107 members of CIRSA. The Board of Directors of CIRSA is composed of seven directors elected by the members at the annual meeting each December. Terms of the directors are two years. The purposes of CIRSA /WC are to provide members a workers' compensation self - insurance pool to provide defined coverages, and claims and risk management services related thereto. It is the intent of the members of CIRSA /WC to create an entity to defend and indemnify, in accordance with the Bylaws, any member of CIRSA /WC against stated liability or loss. It is also the intent of the members to have CIRSA /WC provide continuing stability and availability of needed coverages at reasonable costs. All income and assets of CIRSA /WC shall be at all times dedicated to the exclusive benefit of its members. The Bylaws of CIRSA /WC shall constitute the substance of the intergovernmental agreement among the members. The membership of CIRSA /WC is limited to Colorado municipalities, and to any separate legal or governmental entity formed solely by such municipalities by intergovernmental agreement, which are members of the Colorado Municipal League and are admitted by the Board of Directors. As of December 31, 1990, there are 71 members of CIRSA /WC. The Board of Directors of CIRSA /WC is composed of the persons who comprise the Board of Directors of CIRSA. Terms of the directors shall coincide with the Director's term on the Board of Directors of CIRSA. Summary financial information for the year ended December 31, 1990 is as follows: STATEMENT OF REVENUES AND EXPENSES REVENUE $ 8,085,453 $ 4,630,043 EXPENSES (4,782,292 3,227,005 EXCESS OF REVENUE OVER EXPENSES $ 3 $ 1,403,038 EQUITY INTEREST AMOUNT $ 682,113 $ 193,055 PERCENT 7.32% 12.82% A -45 CIRSA CIRSA /WC BALANCE SHEET TOTAL ASSETS $ 21 9 201,241 $ 5,670,490 TOTAL LIABILITIES $11,876,867 $ 4,164,698 TOTAL MEMBERS' FUND BALANCE 9,324,374 1,505,792 TOTAL LIABILITIES AND MEMBERS' FUND BALANCE $21,201,241 $ 5,670,490 STATEMENT OF REVENUES AND EXPENSES REVENUE $ 8,085,453 $ 4,630,043 EXPENSES (4,782,292 3,227,005 EXCESS OF REVENUE OVER EXPENSES $ 3 $ 1,403,038 EQUITY INTEREST AMOUNT $ 682,113 $ 193,055 PERCENT 7.32% 12.82% A -45 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 12 - PENSION PLANS The City participates in four retirement plans as follows: Fire and Police Pension Association (FPPA) The Fire and Police Pension Association (FPPA) was created by Colorado statute effective January 1, 1980. Effective January 1, 1981, the fiduciary responsibili- ties of investment, accountability and custody of both the City's fire and police pension funds were transferred to FPPA. The terms of the state -wide plan differentiate between those hired before April 8, 1978 (old hires) and those hired after April 8, 1978 (new hires). The plan stipulates that all full -time paid firemen and policemen are covered by the death and disability provisions of the plan and all new hires are covered by the retirement provisions of the state -wide plan. The old hires have the option of being covered by the retirement provisions of the state -wide plan or the retirement provisions of the old plans. As such, the following disclosures are presented as old hire -fire old hire - police and new hire - fire and police These plans represent three of the four retirement plans in which the City participates. A. Plan Description Both the Old Hire -Fire and Old Hire - Police plans are agent multiple - employer Public Employee Retirement Systems (PERS). Full time police officers and firemen employed as of April 7, 1978 are eligible to participate in these plans. For the year ended December 31, 1990, the City's payroll for Old Hire - Fire employees was $2,582,754; the Old Hire- Police payroll was $3,810,447. Total payroll for the City of Pueblo or the same period was ;21,352,225. Employees covered by both the Old Hire -Fire and Old Hire - Police plans are required to contribute 8% of their annual salary to the System. The City is required to contribute the balance necessary to fund the system based on actuarial computations specified by statute. Old Hire -Fire employees may retire upon reaching age 50 and completing 20 years of service. Participants are entitled to a monthly pension equal to one -half of their monthly salary at the date of retirement. The plan also provides a post- retirement death benefit. The plan also includes a rank escalation clause which, based on the City's interpretation, provides for an increase in the participant's monthly pension in proportion to increases in pay for the participant's rank at retirement. Old -Hire Police employees may retire upon reaching age 55 and completing 25 years of service. The annual pension is equal to 2% of the participant's highest annual compensation multiplied by years of service up to 25 years plus 1% of highest annual compensation for each year of service in excess of 25 years. A police officer terminating employment with 25 years of service before attaining age 55 will be eligible for a pension calculated as described above, upon reaching age 55. If a police office terminates employment with less than 25 years of service, participant's contributions are refunded without interest. The plan also includes a rank escalation clause which, based on the City's interpretation, provides for an increase in the participant's pension to increases in pay for the participant's rank at retirement. A -46 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 12 - PENSION PLANS (Cont'd.) B. Funding Status and Progress The amounts shown below as "pension benefit obligation" for the Old Hire -Fire and Old Hire - Police plans are a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of the System(s) on a going concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among employers. The measure is the actuarial present value of credited projected benefits. The "pension benefit obligations" presented below as of January 1, 1990, for both the Old Hire -Fire and Old Hire - Police were determined by projecting the results of the actuarial valuation as of January 1, 1988 taking into account expected service and salary increases and actual benefit distributions for the 1988 plan year. Other significant assumptions used in the actuarial valuations for both plans include (a) a rate of return on the investment of present and future assets of 7�% per year compounded annually, (b) earnings progression rate of 5% per year for inflation plus k% per year for each 5 years of employment, (c) cost of living escalators of 4.5% per year compounded annually for benefits accrued prior to January 1, 1980, and 3% per year thereafter which is the maximum permitted by law, and (d) 4.5% per year for rank escalation. The pension benefit obligation for each of the plans is as follows: Old Hire Old Hire Fire Police Total Pension benefit obligation - Retirees and beneficiaries currently receiving benefits $18,611,529 $12,956,925 $31,568,454 Terminated vested employees not yet receiving benefits - - - Current employees - Accumulated employee contributions 2,179,651 3,024,510 5,204,161 Employer financed vested 2,849,937 3,395,704 6,245,641 Employer financed nonvested 10,678,830 8,871,528 19,550,358 TOTAL PENSION BENEFIT OBLIGATION Net assets available for benefits, at market $34,319,947 $28,248,667 $62,568,614 14,187,408 32,334,355 Unfunded (surplus) pension benefit obligation $ 20,132,539 $ (4,085,688 ) A -47 46,521,763 $ 16,046,851 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 12 - PENSION PLANS (Cont'd.) C. Actuarially Determined Contribution Requirements and Contributions Made The System's funding policy provides for actuarially computed contributions funded on a monthly basis. Under the unit credit actuarial cost method with service prorate, the normal cost is computed as the actuarial present value of benefits expected to be accrued in the year beginning on the valuation date. The contributions for 1990 were computed to pay normal cost and amortize the unfunded actuarial accrued liability over 37 years from 1989. Significant actuarial assumptions used to compute the actuarially determined contribution requirement are the same as those used to compute the pension benefit obligation as described in B above. Contributions to the System for 1990 totalled $1,516,350 for the Old Hire -Fire and $649,376 for the Old Hire - Police These contributions were made in accordance with actuarially determined requirements computed by actuarial valuation performed as of January 1, 1990. Additional contribution information includes: Old Hire - Old Hire - Fire Police Normal Cost $ 373,275 $ 147,632 % of covered payroll 14.077% 3.9211 Amortization of Unfunded Actuarial Accrued Liabilities % of covered payroll City of Pueblo contribution % of covered payroll Employee contributions % of covered payroll 1,143,075 - 43.11% - 1,309,730 344,540 50.711% 9.0421 206,620 304,836 8.07. 8.0% Every year FPPA distributes state funds to assist old hire police and fire pension plans in reducing their unfunded liabilities. This distribution is made in accordance with state law and requires that such plans meet certain employer /employee contribution criteria. The main criterion is that the contribution be increased by a certain percent over the previous year until the plan is actuarially sound. In 1990, the unfunded liabilities in the City of Pueblo's Old Hire -Fire plan were reduced by a $643,205 distribution of state funds. A -48 9 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 12 - PENSION PLANS (Cont'd.) D. Trend Information is h e e t n n 1 Trend information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. For the most recent plan years, the following trend information is available and applies. Net assets available for benefits Pension benefit obligation Percentage funded Assets in excess (deficiency) of pension benefit obli- gation Annual covered payroll Unfunded pension benefit obli- gation as a percent of covered payroll Old Hire -Fire Old Hire - Police January 1, January 1, January 1, January 1, January 1, January 1, 1990 1989 1988 1990 1989 1988 $14,187,408 $11,685,709 $ 9,627,804 $32,334,355 $28,446,596 $25,022,459 34,319,947 32,352,984 30,890,340 28,248,667 27,500,317 25,855,349 41.3% 36.1% 31.1% 114.5% (20,132,539) (20,667,275) (21,262,536) 4,085,688 103.47. 96.8% 946,279 ( 832,890) 2,651,664 2,697,782 2,650,525 3,765,166 3,856,502 4,035,525 759.27. 766.1% 802.2% N/A N /A_ 20.6% In addition, for the three years ended December 31, 1988, 1989 and 1990, the City's contributions to the System(s), all made in accordance with actuarially determined requirements, were 51.7 %, 52.7% and 50.7% for the Old Hire -Fire and 11.9 %, 9.0% and 9.0% for the Old Hire- Police Ten -year trend information may be found on page 106 of the City's comprehensive annual financial report. New Hire Fire and Police All full -time fire and police employees hired after April 8, 1978 participate in the Fire and Police Pension Association of Colorado New Hire Pension Fund which is a cost - sharing, multiple employer public employee retirement system. The payroll for employees covered by the System for the year ended December 31, 1990 was $2,678,262; the City's total payroll was $21,352,225 for the same time period. A -49 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 12 - PENSION PLANS (Cont'd.) New Hire Fire and Police (Cont'd.) Full time police officers and firemen employed subsequent to April 8, 1978 are eligible to participate in the plan. Employees hired prior to April 8, 1978 may elect coverage under the terms of the new hire plan if their employer is affiliated with FPPA. The City is affiliated with FPPA and certain old hires did make this election in 1981. Any member may retire from further service and be eligible for a normal retirement pension at any time after age 55 and at least 25 years of service. The annual normal pension is equal to 2% of the average of the highest three years' base salary multiplied by the years of service prior to age 60. In addition, participants are 1007. vested after 10 years of service. If a participant terminates employment prior to retirement, the participant may elect to leave contributions with the plan and become eligible for retirement pension at age 55 or the participant may elect to receive the contributions in a lump sum including interest at 5%. An early retirement benefit is available after completion of 30 years of service and upon reaching age 50 in the amount of the normal retirement reduced by 1/2 of 1% for each month the benefit commences prior to age 60. Employees are required to contribute 8% of their annual salary to the System. The City is required by state statute to contribute an amount at least equal to the employee rate. The contribution requirement for the year ended December 31, 1990 was $428,522, of which equal amounts of $214,261 were contributed by the City of Pueblo and the employees, both representing 8% of covered payroll. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases estimated to be payable in the future as a result of employee service to date. The measure is the actuarial present value of credited projected benefits and is intended to help users of financial statements assess the Plan's funding status on a going- concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among public employee retirement systems. This PERS does not make separate measurements of assets and pension benefit obligations for individual employers. The pension benefit obligation at January 1, 1990 for the system as a whole, determined through an actuarial valuation performed as of that date, was $36,261,730. The net assets available for benefits on that date, valued at market, was $68,502,714, leaving an excess of net assets available for benefits over the pension benefit obligation of $32,040,984. The City's 1990 contribution of $214,261 represents 6% of total contributions required of participating entities. Ten year historical trend information showing the System's progress in accumulating sufficient assets to pay benefits when due is presented in the System's December 31, 1990 financial report. A -50 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 12 - PENSION PLANS (Cont'd.) Public Employees' Retirement Association (PERA) e All full -time employees of the City, except firemen, uniformed police, employees y of Head Start, Inc. and employees of the Pueblo Transportation Company, participate d in the state -wide Public Employees Retirement Association (PERA), a multiple- s employer, cost - sharing public employee retirement system. The payroll for employees covered by the system for the year ended December 31, 1990 was $8,680,828; the City's r f total payroll for the year ended December 31, 1990 was $21,352,225. t Members are eligible for service retirement benefits upon reaching (a) age 65 with n t five or more years of credited service, (b) age 60 with 20 or more years of credited service, (c) age 55 with 30 or more years of service or by (d) earning 35 or more 5 years of credited service. Such benefits are equivalent to 2.5 percent of their Highest Average Salary ( "HAS ") during their highest paid three years of service (defined as three periods of 12 consecutive months) prior to retirement for each year of service up to 20 years, and 1.25 percent for each year over 20 years. The maximum benefit available is 75 percent of their HAS. The Plan also permits reduced service retirement at age 55 with 20 or more years of credited service, or at age 60 with five or more years of credited service. Members may elect to receive their benefits in the form of single or joint life payments. The Plan also provides for disability retirement and survivor benefits. Members who become permanently disabled with at least five years of earned service since the begining of the most recent period of membership can receive disability benefits that are based on service credit projected to 20 years or age 65, whichever is first. The HAS calculation is the same as that used for service retirement. If an active member dies after accumulating at least one year of service credit, a benefit based upon the accumulated credited service as of the time of death and the number and relationship of family survivors is payable to such survivors. Employer and employee contributions are defined by state statute based upon actuarial valuations performed annually. The contribution requirement for the year ended December 31, 1990 was $1,579,910, which consisted of $885,444 from the City and $694,466 from employees; these contributions represented 10.2% and 8.0% of covered payroll, respectively. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits adjusted for the effects of projected salary increases and estimated to be payable in the future as a result of member service to date. The measure is the actuarial present value of credited projected benefits and is intended to (a) help users assess the Plan's funding status on a going- concern basis, (b) assess progress being made in accumulating sufficient assets to pay benefits when due and (c) allow for comparisons among public employee retirement plans. The System does not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit obligation at December 31, 1989 for the system as a whole, determined by an actuarial valuation performed as of that date, was approximately $8,580,346,000. The System's net assets available for benefits on that date, valued at market, were approximately $9,361,998,000, leaving assets in excess of pension benefit obligation of $781,652,000. The City's 1990 contribution represented .3 percent of total contributions of all participating entities. A -51 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 12 - PENSION PLANS (Cont'd.) Ten year historical trend information showing the System's progress in accumulating sufficient assets to pay benefits when due is presented in the System's December 31, 1989, comprehensive annual financial report, which is the latest information available. NOTE 13 - OPERATING TRANSFERS IN /OUT Operating transfers between fund types are as follows: Operating Operating Transfers Transfers In Out General $ 3,954,901 $ 6,964,625 Special revenue 694,998 3,038,633 Debt service 1,511,822 - Capital projects 3,530,973 845,499 Enterprise 1,909,853 500,000 Trust and agency 204,408 458,198 $ 11,806,955 $ 11,806,955 NOTE 14 - BUDGET REPORTING RECONCILIATION The accompanying combined statement of revenues, expenditures and changes in fund balance - budget and actual - General, Special Revenue and Debt Service funds presents comparisons of the legally adopted budget with actual data only for certain special revenue and debt service funds as described in Note 1(E). As described in Note 1(E), the combined statement of revenues, expenditures and changes in fund balance - budget and actual - General, Special Revenue and Debt Service funds includes the capital improvement fund and airport special tax fund. For GAAP basis reporting, these two funds are included with the capital projects funds in the combined statement of revenues, expenditures and changes in fund balance. In addition, the revenues, other financing sources, expenditures and other financing uses reported on the combined budget and actual statement do not include amounts that were budgeted in prior years in the capital improvement fund, community development fund and airport special tax fund. A reconcilation of the excess (deficiency) of revenues and other financing sources over expenditures and other financing uses is as follows: A -52 r 4 r NOTE 14 - BUDGET REPORTING RECONCILIATION (Cont'd.) ig , )n 9 Excess (deficiency) of revenues and other financing sources over expenditures and other financing uses - Budget basis Funds treated as capital projects funds for GAAP reporting purposes - Capital improvement Airport special tax fund Funds not budgeted - E1 Pueblo Heritage Urban Renewal Authority Police and fire department grants Urban transportation planning Pueblo County Head Start Parents, Inc. Special assessments Fund for which projects were budgeted in prior years - Community development Excess (deficiency) of revenues and other financing sources over expenditures and other financing uses - GAAP basis CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 Special Debt Revenue Service $ 1,683,677 $( 4,295) ( 237,538) - (2,003,770) - 5,000 - 10,115 - 14,235 - ( 56,027) - 48,513 - - 29,404 789,305 - $ 253,510 $ 25,109 NOTE 15 - EXCESS OF ACTUAL EXPENDITURES AND OTHER FINANCING USES OVER BUDGETED EXPENDITURES AND OTHER FINANCING USES The following departments within the general fund and other individual funds incurred actual expenditures and other financing uses in excess of budgeted expenditures and other financing uses: Actual Over Actual Budget Budget ! General fund - Police $ 9,016,718 $ 8,770,621 Transfers to other funds 6,964,625 6,647,503 Debt service funds - Refunding series 1985 373,367 369,615 Refunding series 1987A 680,445 680,195 Street and Bridge series 1987B 200,940 200,647 Enterprise funds - Pueblo Transportation Co. 1,334,466 1,281,935 $ 246,097 317,122 3,752 250 293 52,531 A -53 CITY OF PUEBLO, COLORADO NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 16 - SUBSEQUENT EVENTS Pursuant to state law, the City elected to become a self- insured public entity and act as its own insurance carrier for compensation and benefits under the Workers' Compensation Act of Colorado effective January 1, 1991. In March 1991, the City agreed to advance $332,000 to Pueblo Development Foundation (PDF) for the purpose of remodeling a shell building at the Airport Industrial Park. The funds for the advance came from the airport special tax capital projects fund. PDF will repay this advance, plus previous advances made to construct two shell buildings as described in Note 3, from the proceeds of the sale or rental of these two buildings. NOTE 17 - CONTINGENCIES AND COMMITMENTS The following is a summary of the more significant contingencies and commitments that existed at December 31, 1990: In 1985, the City entered into a contract for the construction of a sanitary sewer treatment facility. Disputes have arisen between the City and the general contractor. The City has asserted certain claims against the contractor totalling approximately $2 million. The contractor, in turn, has filed a counterclaim wherein it seeks damages of approximately $4.1 million. The City intends to vigorously contest the contractor's claims. At this time, it is not possible to determine the likelihood of loss, if any, or the range of possible loss. In addition, the accounts payable totalling $2,634,594 for the enterprise funds includes $1,382,318 of retention payable that is part of the dispute described above. In 1986, the Fire and Police Pension Association (FPPA) ruled that the City elected to pay full rank escalation pension benefits to the City's "old hire" fire and police employees. The city is contesting the ruling with respect to the "old hire" fire employees and contends that it did not make such an election. Legal counsel has advised the City that it is not possible to express an opinion regarding the ultimate outcome of this case, nor is it possible to estimate the amount of loss, if any. Under the terms of federal and state grants, periodic audits are required and certain costs may be questioned as not being appropriate expenditures under the terms of the grants. Such audits could lead to reimbursement to the grantor agencies. During 1987 one such audit was performed by the Office of Inspector General /Office of Audits, U.S. Department of Commerce relative to EDA Grant No. 05 -19- 02137. The grant, not to exceed $1,272,000, was awarded on July 19, 1984, and was to assist in reducing severe unemployment by providing funds for public improvements to support a new manufacturing facility and for future industrial development. The federal funds provided under the grant were $1,059,945. A-54 CITY OF PUEBLO, COLORADO ( NOTES TO FINANCIAL STATEMENTS (Cont'd.) DECEMBER 31, 1990 NOTE 17 - CONTINGENCIES AND COMMITMENTS (Cont'd.) The audit reported that the City, while implementing the grant, violated federal regulations, the grant terms and conditions, and the intent of the amended Public Works and Economic Development Act of 1965. These alleged violations related to job relocation issues and individual financial interests of a person asserted to be an agent for the City. City officials strongly disagree with and dispute the findings and the matter has not yet been resolved. In accordance with Governmental Accounting Standards Board Statement No. 1, the City has recognized as an expenditure and a liability in the General Fund the accrued vacation and sick pay that is expected to be liquidated with available spendable resources. The remaining amount of the unpaid vacation and sick pay attributable to governmental funds has been recognized in the General Long -Term Debt Account Group. The unpaid vacation and sick pay attributable to proprietary funds has been accrued in its entirety. The following is a summary of the total unpaid vacation and sick pay that existed at December 31, 1990: General Fund $ 150,000 Enterprise Funds - Memorial Airport 123,362 Pueblo Transportation Co. 123,401 Sewer User 199,005 Internal Service Funds - City Shops 54,083 General Long -Term Debt 3,736,172 i TOTAL $ 4,386,023 The total amount of $4,386,023 consists of $1,845,273 vacation pay and $2,540,750 sick pay. In prior years, the City has defeased various bond issues by issuing new debt with the proceeds of the new debt being used to purchase U.S. government securities. The U.S. government securities acquired were placed in an irrevocable trust such that the investments and earnings from the securities are sufficient to fully service the defeased debt until the debt is called or matures. For financial reporting purposes, the debt has been considered defeased and therefore removed as a liability from the City's general long -term debt account group or the applicable enterprise fund if the defeased debt was a revenue bond. As of December 31, 1990, the amount of defeased debt outstanding but not reported on the general purpose financial statements totalled $42,214,000, including $21,640,000 of sewer revenue bonds. As disclosed in Note 1, the general obligation bonds of the Pueblo Board of Water Works constitute legally valid general obligation bonds of the City. At December 31, 1990, $25,725,000 of general ogligation water refunding bonds were outstanding. A -55 APPENDIX B SUMMARY OF DOCUMENTS AND DEFINITIONS APPENDIX B SUMMARY OF DOCUMENTS AND DEFINITIONS Brief descriptions of the Lease and the Indenture are included hereafter in this Official Statement. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Lease and the Indenture are qualified in their entirety by reference to each such document, copies of which are available for review prior to the issuance of the Certificates at the offices of the Underwriter and the City and thereafter at the office of the Trustee. All references to the Certificates are qualified in their entirety by reference to the definitive forms thereof and the information with respect thereto included in the Indenture. DEFINITIONS The following are definitions of certain terms used in the Lease, the Indenture and this Official Statement. "Additional Certificates" means any additional certificates issued under the Indenture as described under the caption "THE INDENTURE -- Additional Certificates" below. "Additional Rentals" means the cost of all taxes, insurance premiums, expenses and fees of the Trustee, utility charges, costs of maintenance, upkeep and repair, payments into the Reserve Fund, amounts required to be deposited in the Rebate Fund, and all charges or costs which the City assumes or agrees to pay under the Lease with respect to the Project, other than Base Rentals (together with interest that may accrue thereon in the event that the City shall fail to pay the same), including but not limited to costs and expenses charged to or incurred by the Corporation at the request of the City and in its capacity as lessor under the Lease. "Base Rentals" means the payments payable by the City and designated as such in the Lease, during the Original Term and any Renewal Term, which constitute the payments payable by the City for and in consideration of the right to use the Project during such Original Term or Renewal Term. "Base Rental Payment Date" means November 30 and May 31 of each year, commencing May 31, 1993. "Building" means the public works and transportation facilities presently located and to be acquired, constructed, improved and equipped pursuant to the Lease on the Property, including any remodeling, additions, modifications and improvements thereto or substitutions thereof and all property permanently affixed to the Property. "Business Day" means any day other than a Saturday, Sunday or legal holiday or day on which banking institutions in the city in which the Trustee has its principal corporate trust office or New York, New York are authorized or required by law to close. B -1 "Certificate Fund" means the special fund created pursuant to the Indenture for the purpose of holding and disbursing to the Registered Owners the Base Rentals paid by the City, and includes both the Principal Account and the Interest Account thereof. "Certificates" means one or more certificates of participation to be issued pursuant to the Indenture evidencing assignments of proportionate undivided interests in rights to receive Revenues. "Charter" means the home rule charter of the City, and any amendments or supplements thereto. "City" means City of Pueblo, Colorado or any successor to its functions. "City Council" means the City Council of the City or any successor to its functions. "City Representative" means the person at the time designated to act on behalf of the City for the purpose of performing any act under the Lease or the Indenture by a written certificate furnished to the Trustee and the Corporation containing the specimen signature of such person or persons and signed on behalf of the City by the President or Vice President of the City Council, and in the absence of such a certificate, means the President or the Vice President of the City Council. "Completion Date" means the date of final acceptance of the Project by the City, as evidenced by a certificate provided for in the Lease. "Construction Contract" means any contract entered into by the City or the Corporation (but only where the City or the Corporation is a party to the contract) for the acquisition, construction, improvement or equipping of the Project, including but not limited to any contract between the City and any contractor, engineer or architect regarding the Project. "Construction Fund" means the special fund created pursuant to the Indenture for the purpose of disbursing certain proceeds derived from the sale of the Certificates in payment of the Cost of Construction. "Construction Period" means the period between the date on which the Certificates are first delivered to the Underwriter and the Completion Date. "Corporation" means City of Pueblo, Colorado Municipal Building Corporation, a Colorado nonprofit corporation, acting as lessor under the Lease and grantor under the Indenture, or any successor thereto. "Corporation Representative" means any of the following: (i) the Chairman or President of the Corporation; (ii) any Vice Chairman or Vice President of the Corporation; (iii) any Secretary or Assistant Secretary of the Corporation; or (iv) any other person or persons at the time designated to act on behalf of the Corporation for purposes of performing any act on behalf of the Corporation under the Lease or the Indenture by a written certificate B -2 furnished to the City and the Trustee containing the specimen signature of such person or persons and signed on behalf of the Corporation by the Chairman or President or any Vice Chairman or Vice President of the Corporation. "Cost of Construction" shall be deemed to include payment of or reimbursement for the following items: (a) obligations incurred or assumed for labor, materials and Equipment in connection with the construction, acquisition, improvement and equipping of the Project; (b) the cost of performance and payment bonds and of insurance of all kinds (including, without limitation, title insurance and, if procured and maintained by the City, builder's risk completed value insurance) that may be necessary or appropriate during the course of the construction, acquisition, improvement and equipping of the Project; (c) the costs of engineering, architectural, hydrological, geological, agronomical and other professional and technical services, including obligations incurred or assumed for preliminary design and development work, test borings, surveys, estimates, plans and specifications; (d) the cost of the administration of construction of the Project incurred prior to the Completion Date, including supervision of construction as well as the performance of all of the other duties required by or consequent upon the construction, acquisition, improvement and equipping of the Project; including, without limitation, costs of preparing and securing all Project Documents, architectural fees, legal fees and expenses, independent inspection fees, engineering fees, auditing fees and advertising expenses in connection with the Project; (e) costs incurred in connection with the Certificates prior to the Completion Date, including the initial compensation and expenses of the Trustee, fees of the Corporation, legal fees and expenses, costs incurred in obtaining ratings from rating agencies, costs incurred in connection with obtaining municipal bond insurance, costs of publication, printing and engraving and recording and filing fees; (f) the salary and expenses of the Project Manager, if any, and all costs which shall be required to be paid under the terms of any Construction Contract; (g) all other costs which are considered to be a part of the costs of the Project in accordance with generally accepted accounting principles and which will not affect adversely the exclusion from federal income taxation of the designated interest component of Base Rentals payable by the City under the Lease and assigned pursuant to the Indenture and the Certificates; and B -3 (h) payments of Base Rentals or payments for redemption of Certificates, at the City's option, from any moneys remaining in the Construction Fund subsequent to the Completion Date, as provided in Section 3.10 of the Indenture. "Deficiency" means the difference between the total amount of principal and interest due on any Interest Payment Date for the Certificates and the amount of Base Rentals paid by the City and deposited in the Certificate Fund on or before such Interest Payment Date to be used for payment of principal and interest on the Certificates on such Interest Payment Date. "Equipment" means items of equipment, machinery and related property acquired and installed in connection with the Project with proceeds from the sale of the Certificates, and any items of equipment, machinery and related property acquired in replacement or substitution therefor allowed by the Lease; less machinery, equipment and related property released from the Lease in accordance with the provisions thereof. "Event of Default" means, with respect to the Lease, one or more events of default as defined under the caption "THE LEASE -- Events of Default and Remedies -- Events of Default Defined below and means, with respect to the Indenture, one or more events of default as defined under the caption "THE INDENTURE -- Defaults and Remedies -- Events of Default below. "Event of Nonappropriation" means a nonrenewal of the Lease by the City, determined by the failure of the City Council, for any reason, to budget and appropriate, specifically with respect to the Lease, moneys sufficient to pay Base Rentals and reasonably estimated Additional Rentals, as provided in the Lease. "Expenses Fund" means the special fund created pursuant to the Indenture, and includes the Extraordinary Expenses Account and the Insurance Account thereof. "Extraordinary Redemption Fund" means the special fund created pursuant to the Indenture. "Extraordinary Revenues" means (i) the Purchase Option Price, if paid; (ii) any amounts remaining in the Construction Fund, subsequent to the Completion Date, which the City instructs to be deposited in the Extraordinary Redemption Fund; (iii) all Net Proceeds, if any, of casualty insurance, title insurance, performance bonds, condemnation awards and awards resulting from defaults under any Construction Contract in connection with the Project, and not applied to the repair, restoration, modification, improvement or replacement of the Project; and (iv) all Net Proceeds, if any, derived from the leasing, sale or assignment of the Trustee's interest in the Project. "Federal Securities" means direct obligations of, or obligations the timely payment of principal and interest of which are fully and unconditionally guaranteed by, the United States of America. B -4 A "Financing Statements" means the Uniform Commercial Code - Financing Statements -Form UCC -1 or any other form acceptable to the Trustee. " Force Majeure means, without limitation, the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders of restraints of any kind of the government of the United States of America or of the State or any of their departments, agencies or officials or any civil or military authority; insurrection; riots; landslides; earthquakes; fires; storms; droughts; floods; explosions; breakage or accidents to machinery, transmission pipes or canals; or any other cause or event not within the control of the Corporation or the City. "Independent Counsel" means an attorney duly admitted to the practice of law before the highest court in the State and who is not an employee of the Corporation, the Trustee or the City. "Interest Payment Date" means June 15 and December 15 of each year, commencing June 15, 1993. "Lease Term" means the Original Term and any Renewal Terms as to which the City may exercise its option to renew the Lease. "Lease Term" refers to the time during which the City is the lessee under the Lease; provided, however, certain provisions of the Lease survive the termination of the Lease Term. "Net Proceeds," when used with respect to any performance or payment bond proceeds, or proceeds from policies of insurance required hereby, or proceeds from any condemnation award, or proceeds resulting from any default under a Construction Contract, or proceeds from any foreclosure and sale of the Project, means the amount remaining after deducting from the gross proceeds thereof all expenses (including, without limitation, attorneys' fees and costs) incurred in the collection of such proceeds or award. "Opinion of Counsel" means an opinion in writing of legal counsel, who may be counsel to the Trustee, the City or the Corporation. "Original Term" means the portion of the Lease Term which terminates on December 31, 1992. "Outstanding" means all Certificates which have been executed and delivered, except: (a) Certificates canceled or which have been surrendered to the Trustee for cancellation; (b) Certificates in lieu of which other Certificates have been authenticated; (c) Certificates which have been redeemed (including Certificates redeemed on a partial payment); and B -5 VV (d) Certificates paid or deemed to be paid. "Permitted Encumbrances" means, as of any particular time, (i) liens for taxes and assessments not then delinquent, or liens which may remain unpaid pursuant to the provisions of the Lease; (ii) the Lease and the Indenture; (iii) utility, access and other easements and rights of way, restrictions and exceptions which do not, in the opinion of the City Representative, interfere with or impair the Project; (iv) any Financing Statements filed to perfect security interests pursuant to the Lease or the Indenture; (v) any financing statements filed to perfect purchase money security interests in equipment purchased to replace or in substitution for Equipment purchased with the proceeds of the Certificates; (vi) such minor defects, irregularities, encumbrances and clouds on title as normally exist with respect to property of the general character of the Project and as do not, in the opinion of the City Representative, materially impair the value of or title to the Project; and (vii) certain additional encumbrances and exceptions to title set forth in the Lease. "Permitted Investments" means any one or more of the following if and to the extent that such investments are permitted under the laws of the State for funds of the City: (a) Direct and general obligations of the United States of America, or obligations that are unconditionally guaranteed as to principal and interest by the United States of America, including (in the case of direct and general obligations of the United States of America) evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances wherein (i) a bank or trust company acts as custodian and holds the underlying United States obligations; (ii) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States obligations; and (iii) the underlying United States obligations are held in safekeeping in a special account, segregated from the custodian's general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated. The obligations described in this subparagraph are hereinafter called "United States Obligations." (b) Obligations issued or guaranteed by the following instrumentalities or agencies of the United States of America: (i) Federal Home Loan Banks; GO Government National Mortgage Association; (iii) Farmers Home Administration; (iv) Federal Home Loan Mortgage Corporation; (v) Federal Housing Administration; and (vi) Federal National Mortgage Association. (c) Direct and general long -term obligations of any state, to the payment of which the full faith and credit of the state is pledged and that are rated "Aaa" by Moody's Investors Service (hereinafter referred to as "Moody's ") and "AAA" by Standard and Poor's Corporation (hereinafter referred to as "S &P "). (d) Direct and general short -term obligations of any state, to the payment of which the full faith and credit of the state is pledged and that are rated in the highest rating category by Moody's and S &P. (e) Interest - bearing demand or time deposits issued by state banks or trust companies or national banking associations that are members of the Federal Deposit Insurance Corporation (FDIC). These deposits must (b) be continuously and fully insured by FDIC and be with banks whose debt is rated at least "P -1" or "Aa" by Moody's and at least "A -1" or "AA" by S &P, or (b) be secured by United States Obligations at the levels described in the last paragraph of this definition and (if such deposits have maturities of not more than 365 days) be with banks the short -term debt of which is rated "A -1 +" by S &P and "P -1" by Moody's or (if such deposits have maturities of more than 365 days) be with banks the long -term debt of which is rated "AA" or better by S &P and "Aa" or better by Moody's. The United States Obligations must be held by the Trustee (who shall not be the provider of the collateral), or by any Federal Reserve Bank or Depositary, as custodian for the Trustee. The Trustee shall have a perfected first lien in the United States Obligations serving as collateral, such collateral shall be free from all third -party liens and claims, and failure to maintain the requisite collateral level after the restoration period described in the last paragraph of this definition shall entitle the Trustee to liquidate the collateral. (f) Repurchase agreements, the maturities of which are 30 days or less, entered into with financial institutions such as banks or trust companies organized under state law or national banking associations, insurance companies, or government bond dealers reporting to, trading with, and recognized as a primary dealer by, the Federal Reserve Bank of New York and a member of the Security Investors Protection Corporation or with a dealer or parent holding company, in each such case the debt of which is rated at least "A" or "A -1" by S &P and at least "A" or "P -1" by Moody's. Such repurchase agreements shall be in respect of United States Obligations and (except repurchase agreements with institutions whose debt or commercial paper is rated "AAA" or "A -1" by S &P and "Aaa" or "P -1 by Moody's) shall be collateralized by United States Obligations the fair market value of which, together with the fair market value of the repurchase agreement securities, shall be maintained at the levels described in the last paragraph of this definition, and the provisions of the repurchase agreement shall meet the following additional criteria: B -7 1. the Trustee (who shall not be the provider of the collateral) or a third party acting solely as agent for the Trustee has possession of the United States Obligations; 2. failure to maintain the requisite collateral levels will require the Trustee to liquidate the United States Obligations immediately; 3. the Trustee has a perfected, first priority security interest in the United States Obligations; and 4. the United States Obligations are free and clear of third -party liens, and in the case of an SIPC broker, were not acquired pursuant to a repurchase or reverse repurchase agreement. (g) Pre- refunded municipal obligations rated "AAA" by S &P and "Aaa" by Moody's and meeting the following conditions: (i) the municipal obligations are (i) not to be redeemed prior to maturity or the Trustee has been given irrevocable instructions concerning their calling and redemption and (ii) the issuer has covenanted not to redeem such municipal obligations other than as set forth in such instructions; (ii) the municipal obligations are secured by cash or United States Obligations that may be applied only to interest, principal and premium payments of such municipal obligations; (iii) the principal of and interest on the United States Obligations (plus any cash in the escrow fund) are sufficient to meet the liabilities on the municipal obligations; (iv) the United States Obligations serving as security for the municipal obligations are held by an escrow agent or trustee; and (v) the United States Obligations (plus any cash in the escrow fund) are not available to satisfy any other claims, including those against the trustee or escrow agent. (h) Prime commercial paper of a United States corporation, finance company or banking institution if such commercial paper is rated at least "P -1" by Moody's and at least "A -1" by S &P and if such commercial paper is stated to mature in not more than 365 days). (i) Shares of a diversified open -ended management investment company (as defined in the Investment Company Act of 1940) or shares in a regulated investment company (as defined in Section 851(a) of the Internal Revenue Code of 1986, as amended) that is (A) a money market fund that has been rated in the highest rating category by Moody's and ", Am" or "AAAm -G" by S &P or (B) money market accounts of the Trustee or B -8 of any state or federal bank the debt of which is rated at least "P -1" or Aaa by Moody's and at least "A -1" or "AAA" by S &P or the debt of whose one bank holding company parent is rated at least "A -1 +" or AAA by S &P and at least "P -1" or Aaa by Moody's. (j) State pooled investment funds approved by Moody's and invested in any one or more of the investments described in subparagraphs (a) through (i) of this definition. (k) The collateral levels referred to in subparagraphs (e) and (g) of this definition are set forth, and are based on the assumptions described below: Remaining Maturity Frequency of 1 yr. or 5 yrs. or 10 yrs. or 15 yrs. or 30 yrs. or Valuation Less Less Less Less Less AAA collateral levels (o) Daily 103 106 107 109 116 Weekly 104 112 114 120 125 Monthly 107 123 130 133 143 Quarterly 108 125 135 140 150 Assumptions: (1) On each valuation date, the market value of the United States Obligations will be an amount equal to the requisite collateral percentage of the agreement or deposit (including unpaid accrued interest) that is being secured. (2) The following restoration periods were assumed: one business day for daily valuations, two business days for weekly valuations, and one month for monthly and quarterly valuations. The use of different restoration periods may therefore affect the requisite collateral percentage. (3) Failure to maintain the requisite collateral percentage after the restoration period will require the trustee to terminate the repurchase agreement and, if not paid by the counter party in federal funds against transfer of the repurchase agreement securities, to liquidate the collateral. (1) any other security or investment approved in writing by Moody's. "Person" means natural persons, firms, associations, corporations and public bodies. "Project" means, collectively, the Property, the Building and the Equipment. "Project Documents" means the following: (i) plans, drawings and specifications for the Building, when and as they are approved by the City, including change orders, if any; (ii) a survey of the Property prepared by a registered land surveyor in accordance with standard requirements for land title surveys, showing the location of all improvements, easements, B -9 encroachments and other encumbrances on such real estate; (iii) any necessary permits for construction of the Project, including any building permits and certificates of occupancy; (iv) any and all Construction Contracts; (v) policies of title, casualty, public liability and workmen's compensation insurance, or certificates thereof, as required by the Lease with respect to the Project; (vi) performance and payment bonds with respect to the Building; (vii) the executed contracts with the architects, engineers, hydrologists, geologists or agronomists hired by the City in connection with the preparation of plans, drawings and specifications for the Building; (viii) any and all other material documents executed by or furnished to the City in connection with the construction, acquisition, improvement and equipping of the Project. "Project Manager" means the person, if any, at the time employed by the City for the purpose of supervising the design and construction of the Project and managing the Project. Notice of the appointment of such person shall be by written certificate furnished to the Trustee and the Corporation containing the specimen signature of such person and signed on behalf of the City by the President of the City Council. In the absence of the appointment of such person, the City's Public Works Director shall act as Project Manager. "Property" means the parcel of real estate upon which the Building is located. "Purchase Option Price" means the amount payable, at the option of the City, for the purpose of terminating the Lease and purchasing the Project, which amount shall be equal to such amount as shall be necessary to discharge the Indenture. "Rebate Fund" means the special fund created pursuant to the Indenture for the purpose of holding certain payments, if any, required to be made to the United State of America. "Registered Owner" of a Certificate means the registered owner of any Certificate, as shown in the registration books of the Trustee. "Regular Record Date" means the fifteenth day (whether or not a Business Day) next preceding each interest payment date for the Certificates (other than a Special Record Date). "Renewal Date" means December 31, 1992 and each December 31 thereafter. "Renewal Term" means any optional Renewal Term of the Lease Term. "Reserve Fund" means the special fund created pursuant to the Indenture for the purpose of providing additional security for the Certificates. "Reserve Fund Requirement" means $291,500, plus, in the event Additional Certificates are issued by the City, an amount equal to 10% of the principal amount of such Additional Certificates or such other lesser amount as is the maximum allowed under federal law. B -10 "Revenues" means (i) Extraordinary Revenues, if any; (ii) the Base Rentals; (iii) any portion of the proceeds of the Certificates deposited with the Trustee in the Certificate Fund to pay accrued interest or capitalized interest, if any, on the Certificates; (iv) any earnings on moneys on deposit in the Certificate Fund except to the extent such earnings are required to be deposited in the Rebate Fund; (v) all other revenues derived from the Lease, excluding Additional Rentals, excluding payments into the Expenses Fund, and excluding payments constituting compensation to the Trustee for its services; and (vi) any other moneys to which the Trustee may be entitled for the benefit of thg Registered Owners. "Special Record Date" means a special date fixed to determine the names and addresses of Registered Owners for purposes of paying interest on a special interest payment date for the payment of defaulted interest. "State" means the State of Colorado. "Termination Event" means (a) an Event of Nonappropriation, (b) an Event of Default under the Lease followed by a determination by the Trustee to terminate the Lease, or (c) an exercise by the City of its right to terminate the Lease. "Trust Estate" means the property mortgaged, pledged and assigned to the Trustee described under the caption "THE INDENTURE -- Granting of Security for the Certificates" below. "Trustee" means The Pueblo Bank and Trust Company, a state chartered banking corporation with its principal corporate trust office located in Pueblo, Colorado, acting in the capacity of trustee for the Registered Owners pursuant to the Indenture, and any successor thereto appointed under the Indenture. "Trustee Representative" means the person or persons at the time designated to act on behalf of the Trustee for purposes of performing any act on behalf of the Trustee under the Indenture or the Lease by a written certificate furnished to the City and the Corporation containing the specimen signature of such person or persons and signed on behalf of the Trustee by any duly authorized officer of the Trustee. THE LEASE r.aaca Tarm Commencement of Lease Term; Renewals The Original Lease Term will commence as of July 1, 1992 and terminate on December 31, 1992. The Lease Term may be continued, solely at the option of the City, for the first Renewal Term and for additional Renewal Terms thereafter, each of one year in duration, except that the final Renewal Term, if any, shall commence on January 1, 2012 and shall terminate on December 15, 2012 or, if all Base Rentals and Additional Rentals for such Renewal Term have not then been paid by the City, on such later date as all Base Rentals and Additional Rentals are paid by the City. B -11 In the event that the City determines for any reason, not to renew the Lease, the City will give written notice to such effect to the Trustee, the Corporation and the Underwriter not less than 30 days prior to the end of the original Term or the then current Renewal Term; provided, however, that a failure to give such notice will not constitute an Event of Default, nor prevent the City from declining to renew the Lease, nor result in any liability on the part of the City. The option of the City to renew or not to renew the Lease will be conclusively determined by whether or not the City Council has, on or before the December 31 immediately preceding the commencement of any Renewal Term, budgeted and appropriated, specifically with respect to the Lease, moneys sufficient to pay all the Base Rentals and reasonably estimated Additional Rentals for such ensuing Renewal Term. The City Council has represented in the Lease that it is the intention of the City Council that the decision to renew or not to renew the Lease will be made solely by the City Council and not by any other City officer, and the City Manager of the City (or any other officer at any time charged with the responsibility of formulating budget proposals) will be directed to include in the budget proposals submitted to the City Council, in any year in which the Lease is in effect, items for all payments required for the ensuing Renewal Term under the Lease. The City will in any event, whether or not the Lease is to be renewed, furnish the Trustee, the Corporation and the Underwriter with copies of its annual budget promptly after the budget is adopted. The terms and conditions during any Renewal Term are the same as the terms and conditions during the Original Term, except that the Base Rentals shall be as provided in the Lease. Termination of Lease Term The Lease Term will terminate upon the earliest of any of the following events: (a) The expiration of the Original Term or any Renewal Term during which there occurs an Event of Nonappropriation which is not thereafter waived; (b) The purchase by the City of the Project (subject to the proviso of (c) below, if applicable) and the Certificates have been paid or deemed paid pursuant to the Indenture; (c) Discharge of the Indenture; (d) An Event of Default and termination of the Lease Term by the Trustee; (e) The election of the City to terminate the Lease Term; or (f) December 15, 2012, which date constitutes the last day of the final Renewal Term of the Lease, or such later date as all Base Rentals and Additional Rentals have been paid. B -12 Termination of the Lease Term shall terminate all unaccrued obligations of the City under the Lease (except for the certain payments required if the City holds over), and will terminate the rights of the City to possession of the Project under the Lease (except to the extent of any conveyance pursuant to the Lease); but all other provisions of the Lease, including all obligations of the City thereunder accrued prior to such termination, and all obligations of the Trustee with respect to the Registered Owners and the receipt and disbursement of funds, will continue until the Indenture is discharged. Enjoyment of The Project The Corporation covenants in the Lease that the City will during the Lease Term peaceably and quietly have and hold and enjoy the Project without suit, trouble or hindrance from the Corporation, except as expressly required or permitted by the Lease or the Indenture. The Corporation will not interfere with the quiet use and enjoyment of the Project by the City during the Lease Term, so long as the Lease Term is in effect. The Corporation will, at the request of the City and at the cost of the City, join and cooperate fully in any legal action in which the City asserts its right to such possession and enjoyment, or which involves the imposition of any taxes or other governmental charges on or in connection with the Project. In addition, the City may at its own expense join in any legal action affecting its possession and enjoyment of the Project, and shall be joined (to the extent legally possible, and at the expense of the City) in any action affecting its liabilities under the Lease. Equitable title to the Project will be deemed to vest in the City, subject to the rights of the Corporation, the Trustee under the Lease and the Indenture. Payments by the City Payments to Constitute Currently Budgeted Expenditures of the City The City and the Corporation acknowledge and agree in the Lease that the Base Rentals and Additional Rentals will constitute currently budgeted expenditures of the City. The obligations of the City under the Lease is only from year to year, and will not constitute a mandatory payment obligation of the City in any fiscal year beyond a fiscal year during which the Lease is in effect. No provision of the Lease will be construed or interpreted as creating a general obligation or other indebtedness of the City within the meaning of any constitutional, statutory or Charter debt limitation. No provision of the Lease will be construed or interpreted as creating a delegation of governmental powers nor as a donation by or a lending of the credit of the City within the meaning of Section 1 or 2 of Article XI of the Constitution of the State. Neither the Lease nor the issuance of the Certificates will directly or indirectly obligate the City to make any payments beyond those appropriated for any fiscal year in which the Lease shall be in effect. The City is under no obligation to exercise its option to purchase the Project. B -13 No provision of the Lease shall be construed to pledge or to create a lien on any class or source of City moneys, nor shall any provision of the Lease restrict the future issuance of any City bonds or obligations payable from any class or source of City moneys (provided, however, that the restrictions of the Indenture shall apply to the issuance of Additional Certificates). Base Rentals and Additional Rentals The City shall pay Base Rentals directly to the Trustee for distribution to the Registered Owners in accordance with the Indenture during the Lease Term. There shall be credited against the amount of Base Rentals otherwise payable under the Lease all amounts at the time on deposit in the Certificate Fund and available for such payments to Registered Owners. The initial Base Rentals to be paid by the City on May 31, 1993 shall be partially in consideration for the use of the Project by the City from July 1, 1992 until and including December 31, 1992. Thereafter, Base Rentals due on any May 31 shall be in consideration for the use of the Project by the City from the immediately preceding January 1 to and including the immediately following June 30; and Base Rentals due on any November 30 shall be in consideration for the use of the Project by the City from the immediately preceding July 1 to and including the immediately following December 31. The City shall pay Additional Rentals during the Lease Term in an amount sufficient to pay the fees and expenses of the Trustee, payments for the cost of taxes, insurance premiums, utility charges, maintenance and repair costs, and all other expenses expressly required to be paid under the Lease or the Indenture, including but not limited to costs and expenses charged to or incurred by the Corporation at the request of the City and in its capacity as lessor, as well as for payments into the Reserve Fund or the Rebate Fund required by the Indenture. All Additional Rentals will be paid by the City on a timely basis directly to the Person or entity to which such Additional Rentals are owed (except that payments into the Reserve Fund and the Rebate Fund shall be made to the Trustee as provided in the Indenture). Manner of Payment The Base Rentals and, if paid, the Purchase Option Price, will be paid in lawful moneys of the United States of America to the Trustee at its principal corporate trust office. The obligation of the City to pay the appropriated Base Rentals and Additional Rentals, during the Lease Term, are absolute and unconditional, and payment of the appropriated Base Rentals and Additional Rentals may not be abated through accident or unforeseen circumstances. Notwithstanding any dispute between the City and the Corporation, the Trustee, any Registered Owner, any contractor or subcontractor retained with respect to the Project, any supplier of labor or materials in connection therewith, or any other person, the City may, during the Lease Term, make all payments of appropriated Base Rentals and Additional Rentals when due and may not withhold any appropriated Base Rentals or Additional Rentals pending final resolution of such dispute, nor may the City assert any right of set -off, abatement or counterclaim against its obligation to make such payments. No action or inaction on the part of the Corporation or the Trustee will affect the City's obligation to pay all appropriated Base Rentals and Additional Rentals, during the Lease Term. B -14 Expression of the City's Need for the Project; Determinations as to Fair Market Value and Fair Purchase Price The City declares in the Lease its current need for the Project and its intention and expectation that the Lease will be renewed annually until title to the Project is acquired by the City pursuant to the Lease; but such declaration should not be construed as contractually obligating or otherwise binding the City or the City Council. The City and the Corporation agree and determine in the Lease that the Base Rentals during the Original Term and any Renewal Term represent the fair value of the use of the Project; and that the Purchase Option Price represents the fair purchase price of the Project. The City further determines in the Lease that the Base Rentals do not exceed a reasonable amount so as to place the City under an economic or practical compulsion to renew the Lease or to exercise its option to purchase the Project. In making such determinations, the City and the Corporation have given consideration to the Cost of Construction, the value of the Project, the uses and purposes for which the Project will be employed by the City, the benefit to the City by reason of the construction, acquisition, improvement and equipping of the Project and the use and occupancy of the Project pursuant to the terms and provisions of the Lease, the option of the City to purchase the Project, and the expected eventual vesting of title to the Project in the City. Disposition of Base Rentals Upon receipt by the Trustee of each payment of Base Rentals, the Trustee will apply the amount of such Base Rentals in the following manner and order: FIRST, the amount of such payment of Base Rentals designated and paid as interest, plus the amount of any past due interest on the Certificates, will be deposited in the Interest Account of the Certificate Fund. SECOND, the remaining portion of such payment of Base Rentals will be deposited in the Principal Account of the Certificate Fund. Nonappropriation by the City In the event that the City Council shall not budget and appropriate, specifically with respect to the Lease, on or before December 31 of each year, moneys sufficient to pay all Base Rentals and the reasonably estimated Additional Rentals coming due for the next ensuing Renewal Term, an Event of Nonappropriation will be deemed to have occurred (provided, however, that the Trustee shall declare an Event of Nonappropriation on any earlier date on which the Trustee receives written notice from the Cflty that the Lease will not be renewed; and provided further that the Trustee may waive any Event of Nonappropriation which is cured by the City within a reasonable time if in the judgment of the Trustee such waiver is in the best interests of the Registered Owners). In the event that during the .Original Term or any Renewal Term, any Additional Rentals shall become due which were not included in the current budget of the City, or which exceed the amounts which were included therefor in the current budget of the City, and if there are no moneys available to pay such Additional Rentals, then, in the event that moneys are not specifically B -15 Y'r budgeted and appropriated to pay such Additional Rentals within 90 days subsequent to the date upon which such Additional Rentals are due, an Event of Nonappropriation will be deemed to have occurred, upon notice by the Trustee to the City to such effect (subject to waiver by the Trustee). If an Event of Nonappropriation occurs, the City shall not be obligated to make payment of the Base Rentals or Additional Rentals or any other payments provided for in the Lease which accrue after the last day of the Original or Renewal Term during which such Event of Nonappropriation occurs; provided, however, that, subject to the certain limitations, the City will continue to be liable for Base Rentals and Additional Rentals allocable to any period during which the City shall continue to occupy the Project. The City will in all events vacate the Project (leaving the Equipment) by the expiration of the Original or Renewal Term during which an Event of Nonappropriation occurs. The Trustee, upon the occurrence of an Event of Nonappropriation, will be entitled to all moneys then on hand and being held in all funds created under the Indenture, including the Certificate Fund, the Construction Fund, the Reserve Fund and the Expenses Fund, but excluding the Rebate Fund, for the benefit of the Registered Owners. After the expiration of the Original or Renewal Term during which an Event of Nonappropriation occurs, the Trustee may proceed to foreclose on and sell, lease or assign its interest in the Project or any portion thereof and exercise the rights and remedies of a secured party under the Colorado Uniform Commercial Code with respect to the Equipment. All property, funds and rights acquired by the Trustee by reason of any Event of Nonappropriation, less any moneys due and owing to the Trustee, will be held by the Trustee for the benefit of the Registered Owners. Construction of the Project Agreement to Construct Project The City agrees to cause the Project to be acquired, constructed, improved and equipped on behalf of the Corporation as holder of title to the Project. Title to the Project or interests therein, buildings or other property which is purchased or financed from moneys deposited in the Construction Fund will be held by the Corporation, subject only to the Lease and the Indenture. The City agrees in the Lease that in order to effectuate the purposes of the Lease it will make, execute, acknowledge and transmit any and all contracts, orders, receipts, writings and instructions with any other persons, firms or corporations and in general do all things which may be necessary or proper, all for the construction, acquisition, improvement and equipping of the Project, on behalf of the Corporation as owner of the Project. Construction, acquisition, improvement and equipping of the Project shall be in accordance with the Project Documents, subject to reasonable change orders or any other reasonable changes approved by the City. So long as the Lease is in full force and effect and no Event of Nonappropriation or Event of Default has occurred, the City has full power to carry out the acts and agreements provided in the lease. B -16 Sys The City agrees in the Lease to acquire, construct, improve and equip the of project on behalf of the Corporation as owner of the Project, through the :ee application of moneys to be disbursed from the Construction Fund by the Trustee at the direction of the City. In the event that the Project is not substantially completed by October 1, 1994, the Trustee will be authorized, ed but not required, to complete the Project, without any direction by the City, er from any moneys remaining in the Construction Fund. he The City represents in the Lease that, based upon an examination of 11 information presented to the City, including but not limited to estimated iy construction and equipment costs, the Project can be constructed, acquired, improved and equipped for a total price within the total amount of funds to be initially deposited therefor in the Construction Fund, plus investment income )y from the investment and reinvestment of amounts on deposit in the Construction If Fund. In the event of cost overruns and if no Event of Termination has occurred, the City will select any one or a combination of the following options: e r (a) the City will require the architect or engineer for the Project to modify the plans and specifications or redesign the Project as may be necessary in order to bring the Cost of Construction for the Project within the amount available therefor in the Construction Fund; or (b) the City will deposit additional amounts in a Special Construction Fund to be established with the Trustee; provided, however, that amounts so deposited by the City may be expended solely for the purchase of moveable personal property or for the purpose of paying any other expense related to the leasehold estate of the City which, in the opinion of nationally- recognized municipal bond counsel, will not adversely affect the validity and enforceability of the Lease; or (c) the City shall cause Additional Certificates to be issued in an amount sufficient to pay the Cost of Construction for the Project; and the City agrees that, upon exercising any such options, the City will not be entitled to any reimbursement therefor from the Corporation, the Trustee or the Registered Owners, nor will the City be entitled to any diminution of the Base Rentals and Additional Rentals. Upon the occurrence of a Termination Event or otherwise upon termination of the City's right to direct the acquisition, construction, improvement and equipping of the Project, the Trustee may complete the Project, utilizing any moneys remaining in the Construction Fund. Disbursements From the Construction Fund Pursuant to the Indenture, the Trustee will issue its checks or drafts for each disbursement to pay Costs of Construction upon instructions from the City so long as no Event of Nonappropriation or Event of Default shall occur, and so long as the right of the City to direct the acquisition, construction, improvement and equipping of the Project has not otherwise been terminated. Such disbursements will be B -17 made upon receipt by the Trustee of a requisition signed by the City Representative and the Project Manager fulfilling certain requirements c= described in the Lease. Upon the occurrence of a Termination Event prior to the Completion Date, the Construction Fund may be utilized by the Trustee on behalf of the Corporation, as owner of the Project, to complete the Project as provided in Section 7.5 hereof, or, upon termination of the Lease Term, may be disbursed as provided in Section 4.02 of the Indenture, as the Trustee may deem appropriate in the best interests of the Registered Owners. Completion of Construction Upon the substantial completion of the Project, the City Representative will deliver a certificate to the Trustee determining that, based upon the representations of the contractors and architect for the Project, and except for any amounts estimated by the City Representative to be necessary for payment of any Cost of Construction for the Project not then due and payable, the Project has been substantially completed and all Costs of Construction for the Project have been paid.. Title Insurance The Corporation will cause to be furnished to the Trustee a standard form ALTA title insurance policies upon the Property issued by a title insurance company approved by the Trustee and issued to the Trustee, insuring Corporation's interest in the Property, subject to Permitted Encumbrances. Said title insurance policies will be subject to no encumbrances other than Permitted Encumbrances, and will each be issued in an amount not less than the principal amount of the Certificates, less any amount on deposit in the Reserve Fund. Defaults Under Construction Contracts In the event of any material default by a contractor under any of the Construction Contracts, or in the event of a material breach of warranty with respect to any materials, workmanship or performance, the City will promptly proceed, either separately or in conjunction with others, to pursue diligently its remedies against such contractor and /or against each surety of any bond securing the performance of the Construction Contracts. Contractor's Performance and Payment Bonds Except for any architect, engineer, hydrologist, geologist or agronomist employed by the City for construction of the Project, each contractor entering into a Construction Contract is required to furnish a performance bond and a separate labor and material payment bond in forms acceptable to the City, which must be normal and standard forms thereof. Contractor's General Public Liability and Property Damage Insurance Each contractor and subcontractor entering into a Construction Contract is required to procure and maintain either standard form comprehensive general public liability and property damage insurance or standard form owners and contractors protective liability insurance, during the duration of such contractor's or subcontractor's Construction' Contract, in the amount of at least $1,000,000. Such insurance shall provide protection from all claims for bodily injury, including death, property damage and contractual liability. B -18 Contractor's Builder's Risk Completed Value Insurance The City is required to procure and maintain or cause to be procured and maintained, at no cost to the Trustee (but which may be paid out of the Construction Fund) until the Project is accepted and insured by the City, standard, all risk of loss builder's risk completed value insurance upon the Project. Such policy shall not prohibit the waiver of any rights, including but not limited to the right of subrogation, by the City and any contractor with respect to each other, their officers, agents and employees relating to claims covered by such policy. Contractor's Workmen's Compensation Insurance Each contractor and subcontractor entering into a Construction Contract is required to procure and maintain, at its own cost and expense, workmen's compensation insurance during the term of its Construction Contract, covering its employees working thereunder. Title to the Proiect; Limitation of Encumbrances Title to the Project At all times during the Lease Term title to the Project and any and all additions and modifications to or replacements of any portion of the Project shall be held in the name of the Corporation, subject only to Permitted Encumbrances, until foreclosed on or conveyed, notwithstanding (i) the occurrence of an Event of Nonappropriation or one or more Events of Default; (ii) the occurrence of any event of damage, destruction, condemnation or construction defect or title defect; (iii) termination of the right of the City to direct the acquisition, construction, improvement and equipping of the Project; or (iv) the violation by the Corporation (or by the Trustee as assignee of the Corporation pursuant to the Indenture) of any provision of the Lease. The City will have no right, title or interest in the Project or any additions and modifications to or replacements of any portion of the Project, except as expressly set forth in the Lease. No Encumbrance, Mortgage or Pledge of the Project The City will not permit any mechanic's or other lien in an amount exceeding $50,000 to be perfected or remain against the Project; provided that, if the City first notifies the Trustee of the intention of the City so to do, the City may in good faith contest any mechanic's or other lien in an amount exceeding $50,000 filed or perfected against the Project, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom; provided, however, that during the prosecution of such contest and appeal and until final discharge of such mechanic's or other lien, the City will (a) provide a surety bond in the amount of such mechanic's or other lien in accordance with the laws of the State, or (b) provide affirmative title insurance coverage over such mechanic's or other lien, or (c) provide such other collateral or surety of payment as the Trustee may deem acceptable in their sole discretion. The Corporation and the Trustee will cooperate fully with the City in any such contest, upon the request and at the expense of the City. Neither the Corporation nor, except as provided above, the City, may directly or B -19 indirectly create, incur, assume or suffer to exist any mortgage, pledge, or lien, charge, encumbranCeThe clai citywill promptly respect at t h itsownexpense, take such permitted Encumbrances. action as may be necessary to duly discharge any such mortgage, pledge, lien, charge, encumbrance or claim not excepted above which it has created, incurred or suffered to exist. The Corporation will promptly, at its own expense, take such action as may be necessary to duly discharge any such mortgage, pledge, lien, charge, encumbrance or claim not excepted above which it has created or incurred. Maintenance, Taxes, Insurance and Other Charges Maintenance of the Project by the City The City agrees in the Lease that, at all times during the Lease Term, the City will maintain, preserve and keep the Project or cause the Project to be maintained, preserved and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and condition, and that the City will from time to time make or cause to be made all necessary and proper repairs. Neither the Corporation nor the Trustee nor any of the Registered Owners, will have any responsibility in any of these matters or for the making of any additions, modifications or replacements to the Project. Modification of the Project; Installation of Furnishings and Machinery of the City The City will have the privilege of remodeling the Project or making substitutions, additions, modifications and improvements to the Project, at its own cost and expense; and title to the same shall be held in the name of the Corporation, subject to the Lease and the Indenture, and will be included under the terms of the Lease and the Indenture; provided, however, that such remodeling, substitutions, additions, modifications and improvements shall not in any way damage the Project or cause the Project to be used for purposes other than lawful governmental functions of the City or cause the City to violate its covenants in the Lease; and provided that the Project, as remodeled, improved or altered, upon completion of such remodeling, substitutions, additions, modifications and improvements, is of a value not less than the value of the Project immediately prior to such remodeling or such making of substitutions, additions, modifications and improvements, as reasonably determined by the Trustee. The City may also, from time to time in its sole discretion and at its own expense, install machinery, equipment and other tangible property in or on the Project. All such machinery, equipment and other tangible property will remain the sole property of the City in which neither the Corporation, the Trustee nor the Registered Owners shall have any interest; provided, however, that title to any such machinery, equipment and other tangible property which becomes permanently affixed to the Project will be in the Corporation, subject to the Lease and the Indenture, and will be included under the terms of the Lease and the Indenture, in the event the Trustee reasonably determines that the Project would be damaged or impaired by the removal of such machinery, equipment or other tangible property. B -20 Replacement and Substitution of Equipment The City will not be under any obligation to renew, repair or replace any inadequate, obsolete, worn -out, unsuitable, undesirable or unnecessary Equipment. In any instance where the City determines that any Equipment has become inadequate, obsolete, worn -out, unsuitable, undesirable or unnecessary, the City may remove such Equipment from the Project and (on behalf of the Corporation) sell, trade -in, exchange or otherwise dispose of it (as a whole or in part) without any responsibility or accountability to the Corporation or the Trustee therefor, so long as the total net book value of such Equipment disposed of in any one fiscal year by the-City shall not exceed 5% of the net book value of the Project; the City may dispose of Equipment having a total net book value in excess of such 50 threshold or after such 5% threshold is reached, however, provided that the City will either: (a) substitute (by direct payment of the costs thereof or by designating as Equipment, machinery, equipment or other personal property, other than property included as part of the Project) and install anywhere in or on the Project, other equipment, machinery or related property having equal or greater value and utility (but not necessarily having the same function) in the operation of the Project; or (b) not make any such substitution and installation, provided (i) in the case of the sale of any such Equipment to anyone other than itself or in the case of the scrapping thereof, the City must pay to the Trustee for deposit into the Extraordinary Redemption Fund the net proceeds from such sale or the scrap value thereof, as the case may be, (ii) that in the case of the trade -in of such Equipment for other machinery, equipment or related property not to be installed in or on the Project, the City must pay to the Trustee for deposit into the Extraordinary Redemption Fund the amount of the credit received by it in such trade -in and (iii) that in the case of the sale of any such Equipment to the City, or in the case of any other disposition thereof, the City must pay to the Trustee for deposit into the Extraordinary Redemption Fund an amount equal to the original cost thereof less depreciation at rates calculated in accordance with generally accepted accounting principles. The removal from the Project of any portion of the Equipment will not entitle the City to any postponement, abatement or diminution of the Base Rentals or other payments required to be made under the Lease. Taxes, Other Governmental Charges and Utility Charges In the event that the Project or any portion thereof is, for any reason, deemed subject to taxation, assessments or charges lawfully made by any governmental body, the City will, during the Lease Term, pay the amount of all such taxes, assessments and governmental charges then due as Additional Rentals. With respect to special assessments or other governmental charges which may be lawfully paid in installments over a period of years, the City will be obligated to provide for Additional Rentals only for such installments as are required to be paid during the Original or any Renewal Term. The City will not allow any liens for taxes, assessments or governmental charges to exist B -21 with respect to the Project or any portion thereof (including, without limitation, any taxes levied upon the Project or any portion thereof which, if not paid, will become a charge on the rentals and receipts from the Project or any portion thereof, or any interest therein, including the interest of the Corporation, the Trustee or the Registered Owners), or the rentals and revenues derived therefrom or under the Lease. The City will also pay as Additional Rentals, as the same respectively become due, all gas, water, steam, electricity, heat, power, telephone, utility and other charges incurred in the maintenance and upkeep of the Project. The City may, at the expense and in the name of the City, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments, utility or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Trustee notifies the City that, in the opinion of Independent Counsel, by nonpayment of any such items the security afforded pursuant to the Indenture will be materially endangered or the Project or any portion thereof will be subject to loss or forfeiture, or the Corporation or the Trustee will be subject to liability, in which event such taxes, assessments, utility or other charges are paid forthwith as Additional Rentals (provided, however, that such payment shall not constitute a waiver of the right to continue to contest such taxes, assessments, utility or other charges). Insurance to be Maintained for the Project Upon the completion and acceptance of the Project, the City will cause casualty and property damage insurance to be carried and maintained with respect to the Project or will continue its participation in the Colorado Intergovernmental Risk Sharing Agency ( "CIRSA ") in an amount at least equal to the aggregate principal amount of the Certificates then Outstanding or the replacement cost of the Project, whichever is greater, less the amount of any deductible clause concerning such insurance. In the event that the City fails to insure the Project or participate in CIRSA, the Trustee will, using the moneys available in the Insurance Account of the Expenses Fund, pay premiums for such casualty and property damage insurance. Upon the execution and delivery of the Lease, the City will, at its own expense, cause public liability insurance to be carried and maintained or will continue its participation in CIRSA with respect to the activities to be undertaken by and on behalf of the City in connection with the use of the Project. Such public liability insurance in connection with the Project or participation in CIRSA must be in an amount not less than the amounts provided in the Colorado Governmental Immunity Act, article 10 of title 24, Colorado Revised Statutes, as the same may be hereafter amended. Any public liability insurance may be by blanket insurance policy or policies. If the City shall insure against similar risks by self- insurance, the City, at its election, may provide for public liability insurance with respect to the Project, partially or wholly by means of an adequate self - insurance fund meeting the requirements contained in the Lease. B -22 i Damage, Destruction and Condemnation Damage, Destruction and Condemnation If, during the Lease Term (i) the Project is destroyed (in whole or in part), or damaged by fire or other casualty; or (ii) title to, or the temporary or permanent use of, the Project or any portion thereof or the estate of the City, the Corporation or the Trustee in the Project or any portion thereof is taken under the exercise of the power of eminent domain by any governmental authority; or (iii) a material defect in construction of the Project becomes apparent; or (iv) title to or the use of all or any portion of the Project is lost by reason of a defect in title thereto; then the City will continue to be obligated, during the Lease Term, subject to the provisions described under " Insufficiency of Net Proceeds; Discharge of the Obligation of the City to Repair or Replace Project below, to continue to pay the amounts specified in the Lease. Obligation of the City to Repair and Replace the Project Subject to the provisions described under " Insufficiency of Net Proceeds; Discharge of the Obligation of the City to Repair or Replace Project below, the Trustee will cause the Net Proceeds of any insurance policies, performance bonds, condemnation awards or Net Proceeds received as a consequence of default under a Construction Contract or made available by reason of damage, destruction or condemnation, to be deposited in the Construction Fund, if received before the Completion Date of the Project, or, if received thereafter, to be deposited in a separate trust fund with the Trustee. Except as described under " Insufficiency of Net Proceeds; Discharge of the Obligation of the City to Repair or Replace Project below, all Net Proceeds so deposited will be applied to the prompt repair, restoration, modification, improvement or replacement of the Project upon receipt of requisitions acceptable to the Trustee signed by the City Representative and, if drawn from the Construction Fund, the Project Manager meeting the requirements enumerated in the Lease Any repair, restoration, modification, improvement or replacement paid for in whole or in part out of such Net Proceeds will be the property of the Corporation, subject to the Lease and the Indenture, and will be included as part of the Project. Insufficiency of Net Proceeds; Discharge of the Obligation of the City to Repair or Replace Project If the Net Proceeds (plus any amount withheld therefrom by reason of any deductible clause) are insufficient to pay in full the cost of any repair, restoration, modification, improvement or replacement of the Project, the City may elect to proceed under any of the following options: (a) The City may complete the work and pay any cost in excess of the amount of the Net Proceeds, and the City agrees that, if by reason of any such insufficiency of the Net Proceeds, the City makes any payments pursuant to the provisions of this paragraph (a), the City will not be entitled to any reimbursement therefor from the Corporation, the Trustee or the Registered Owners, nor will the City be entitled to any diminution of the Base Rentals and Additional Rentals. B -23 (b) The obligation of the City to repair or replace the Project may, at the option of the City, be discharged by depositing the Net Proceeds of insurance policies, performance bonds or condemnation awards, or Net Proceeds received as a consequence of default under a Construction Contract, made available by reason of such occurrence, into the Extraordinary Redemption Fund, to be used to redeem Certificates. Upon such deposit: (i) the Lease will terminate and all obligations of the City thereunder will terminate (except the obligation to pay Base Rentals and Additional Rentals which would otherwise have been payable by the City thereunder during the Original or Renewal Term in which such deposit of Net Proceeds occurs); and (ii) the Trustee notifies the City to vacate the Project (leaving the Equipment) within 30 days of such deposit; the Project will thereafter be foreclosed on and subleased; and the Net Proceeds of such foreclosure and subleasing, together with any moneys remaining in the Construction Fund, will also be deposited into the Extraordinary Redemption Fund for the purpose of redeeming Certificates. (c) The obligation of the City to repair or replace the Project may, at the option of the City, be discharged by applying the Net Proceeds of such insurance policies, performance bonds or condemnation awards to the payment of the Purchase Option Price. In the event of an insufficiency of the Net Proceeds for such purpose, the City will pay such amounts as may be necessary to equal the Purchase Option Price; and in the event the Net Proceeds exceed the Purchase Option Price, such excess will be paid to or retained by the City. Conveyance of the Project The Corporation will transfer and convey to the City the Project, in the manner provided for in the Lease; provided, however, that prior to such transfer and conveyance: (a) The City has paid the then applicable Purchase Option Price and the Indenture has been discharged; or (b) The City has paid all Base Rentals for the Original Term and all Renewal Terms, including the final Renewal Term, and all then current Additional Rentals; or (c) The Indenture shall have been discharged. Assignment, Subleasing, Mortgaging and Selling the Project Assignment by Corporation; Replacement of Corporation The rights of the Corporation under the Lease, including rights to receive and enforce payments thereunder (except certain rights of the Corporation specified therein), have been assigned to the Trustee pursuant to the Indenture. B -24 Assignment and Subleasing by the City The Lease may not be assigned by the City for any reason. The Project or a portion thereof can be subleased to the Pueblo Regional Building Authority without the consent of the Corporation, the Trustee or any Registered Owner. Further, the Project may be subleased, as a whole or in part, by the City without the necessity of obtaining the consent of the Corporation, the Trustee or any Registered Owners; subject, however, to each of the following conditions: (a) The Project may be subleased, in whole or in part, only to an Agency or department or political subdivision of the State, or to another entity or entities if, in the opinion of nationally recognized bond counsel acceptable to the Trustee, such sublease will not cause the City to violate its covenants in Section 11.7 hereof; (b) The Lease, and the obligations of the City thereunder, will, at all times during the Original and any Renewal Terms, remain obligations of the City, and the City must maintain its direct relationships with the Corporation and the Trustee, notwithstanding any sublease; (c) The City will furnish or cause to be furnished to the Corporation and the Trustee a copy of any sublease agreement; and (d) No sublease by the City any purpose which would cause the Lease, or which would violate the State or the Charter. may cause the Project to be used for City to violate its covenants in the Constitution, statutes or laws of the Restrictions on Mortgage or Sale of Project The City and the Corporation agree in the Lease that, except for: (i) the assignment by the Corporation of the Lease and mortgaging of the Project to the Trustee pursuant to the Indenture; (ii) any exercise by the Trustee or the Corporation of the remedies afforded by the Lease; (iii) the right of the Trustee to replace the Corporation and any conveyances required by reason of such replacement; (iv) I the right of the City to sublease all or a portion of the Project; (v) any granting of easements; (vi) any conveyance to the City; (vii) any substitutions, additions, modifications and improvements of the Project pursuant to the Lease; and (viii) any removal, substitution, sale or other disposition of Equipment; neither the Corporation nor the City will mortgage, sell, assign, transfer or convey the Project or any portion thereof during the Lease Term. Events of Default and Remedies Events of Default Defined Any one of the following are defined as "Events of Default" under the Lease: (a) Failure by the City to pay any Base Rentals or Additional Rentals when due during the Lease Term; or B -25 i f (b) Failure by the City to vacate the Project (leaving the Equipment) by the expiration of the Original or Renewal Term during which an Event of Nonappropriation occurs; or (c) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in (a) or (b) for a period of 45 days after written notice, specifying such failure and requesting that it be remedied has been given to the City by the Trustee, unless the Trustee agrees in writing to an extension of such time prior to its expiration; provided, however, that if the failure stated in the notice cannot be corrected within the applicable period, the Trustee will not unreasonably withhold its consent to an extension of such time if corrective action shall be instituted by the City within the applicable period and diligently pursued until the default is corrected. The foregoing provisions are subject to the following limitations: (i) the City will be obligated to pay the Base Rentals and Additional Rentals only during the Lease Term, except as otherwise expressly provided in the Lease; and (ii) if, by reason of Force Majeure the City is unable in whole or in part to carry out any agreement on its part contained in the Lease, the City will not be deemed in default during the continuance of such inability. The City agrees, however, to remedy, as promptly as legally and reasonably possible, the cause or causes preventing the City from carrying out its agreement; provided that the settlement of strikes, lockouts and other industrial disturbances will be entirely within the discretion of the City. Remedies on Default Whenever any Event of Default shall have happened and be continuing, the Trustee may terminate the Lease Term and may give notice to the City to vacate the Project (leaving the Equipment) within 15 days from the date of such notice. After the occurrence of an Event of Default the Trustee may, without any further demand or notice, foreclose through the courts on the Project, and exercise all the rights and remedies of a secured party under the Colorado Uniform Commercial Code with respect to the Equipment, and take one or any combination of the following additional remedial steps: (a) The Trustee may lease the Project or any portion thereof for the benefit of the Registered Owners. (b) The Trustee may recover from the City: (i) the portion of Base Rentals and Additional Rentals which would otherwise have been payable under the Lease, allocable to any period in which the City continues to occupy the Project; and (ii) Base Rentals and Additional Rentals which would otherwise have been payable by the City under the Lease during the remainder, after the City vacates the Project, of the Original or Renewal Term in which such Event of Default occurs; provided, however, that if B-26 the Trustee does not proceed to foreclose and sell the Project reasonably promptly after such Event of Default, the Trustee will be obligated to the City to use its best efforts to lease or sublease the Project for the remainder of such Original or Renewal Term and the Net Proceeds of such leasing shall be offset against the amount recoverable from the City under this paragraph (ii). (c) The Trustee may take whatever action at law or in equity may appear necessary or desirable to enforce its rights in and to the Project under the Lease and the Indenture. Waivers The Trustee may waive any Event of Default under the Lease and its consequences, as the Trustee deems to be in the best interests of the Registered Owners. A waiver of an Event of Default under the Indenture will constitute a waiver of the corresponding Event of Default or Event of Nonappropriation under the Lease; provided that no such waiver will extend to or affect any subsequent or other Event of Default or Event of Nonappropriation under the Lease or impair any right consequent thereon. THE INDENTURE Granting of Security for the Certificates The Corporation, in order to secure the payment of the principal of, premium, if any, and interest on all Certificates at any time outstanding under the Indenture, according to their tenor and effect, and to secure the performance and observance of all the covenants and conditions in the Certificates and in the Indenture contained, and to declare the terms and conditions upon and subject to which the Certificates are issued and secured grants, bargains, sells, warranted, mortgages, aliens, remises, releases, conveys, assigns, pledges, sets over and confirms unto the Trustee and to its successors and assigns forever, all and singular the following described property, franchises and income: (a) the Property, Building and the Equipment, constituting the Project; subject only to Permitted Encumbrances; (b) all rights, title and interest of the Corporation in, to and under the Lease (except for certain rights of the Corporation described therein); (c) all Revenues and any other receipts received by or on behalf of the Corporation pursuant to the Lease including, without limitation, (i) all Base Rentals (as defined in the Lease) to be received from the City pursuant to the Lease and pursuant to the terms of which Base Rentals are to be paid directly to the Trustee; (ii) all Net Proceeds received pursuant to the Lease; and (iii) all rights to enforce payments under the Lease when due or to otherwise enforce rights under the Lease for the benefit of the Registered Owners (but excluding certain rights of the Corporation described therein); B -27 (d) The Project Documents, including all extensions and renewals of the term thereof, if any, together with certain rights, titles and interests of the City in and to the Project Documents, including, but not limited to, the present and continuing right to make claim for, collect, receive and receipt for any of the sums, amounts, income, revenues, issues and profits and any other sums of money payable or receivable under the Project Documents, to bring actions and proceedings thereunder or for the enforcement thereof, and to do any and all things which the City under the Project Documents is or may become entitled to; and (e) all moneys and securities from time to time held by the Trustee under the Indenture (except the Rebate Fund) and any and all other real or personal property of every name and nature from time to time by delivery or by writing of any kind specially mortgaged, pledged or hypothecated, as and for additional security under the Indenture, by the Corporation, or by anyone on its behalf, in favor of the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof. Issuance of Additional Certificates So long as the Lease Term shall remain in effect and no Termination Event shall have occurred, one or more issues of additional Certificates (the "Additional Certificates ") may be issued upon the terms and conditions provided in the Indenture. Additional Certificates may be issued to provide funds to pay any one or more of the following: (i) the costs of refunding all or any of the Outstanding Certificates; (ii) the costs of completing the acquisition, construction, improvements and equipping of the Project (and costs reasonably related thereto), in excess of the amount available therefor in the Construction Fund; (iii) the costs of making at any time or from time to time such substitutions, additions, modifications and improvements in, on or to the Project as the City and the Corporation may deem necessary or desirable; and (iv) the costs of the issuance and sale of the Additional Certificates, any deposit to the Reserve Fund necessary for the amount therein to equal the Reserve Fund Requirement, and capitalized interest for such period, and such other costs reasonably related to the financing. In the event that amounts available therefor in the Construction Fund are not sufficient to complete the Project, the Trustee, together with the City and the Corporation will use its best efforts to issue Additional Certificates to complete the Project. Additional Certificates may be issued only upon there being filed with the Trustee: (a) Originally executed counterparts of a supplemental indenture and an amendment to the Lease and the approval of the Registered Owners, if applicable, expressly providing that, for all the purposes hereof, the B -28 Project shall include any property, buildings or equipment being financed by the Additional Certificates, and that the Certificates being issued as well as any Certificates and Additional Certificates theretofore issued, except that the date or dates of the Additional Certificates, the rate or rates of interest on the Additional Certificates, and provisions for the redemption thereof, if any, all as provided in the supplemental indenture and amendment to the Lease, and further providing for an increase in the Base Rentals required to be paid to the Trustee in such amount as is necessary to pay (assuming that no Termination Event shall occur), the principal of, premium, if any, and interest on the Certificates then Outstanding as well as the Additional Certificates proposed to be issued. (b) A written opinion or opinions of counsel of nationally recognized stature in the field of municipal bonds and mutually acceptable to the City and the Trustee, to the effect that the amendment to the Lease and the authentication of the Additional Certificates have been duly authorized, that the amendment to the Lease is valid and enforceable against the City, that the exclusion from gross income, for purposes of federal income taxation, of the interest on the Certificates and Additional Certificates theretofore issued will not be adversely affected by the issuance of the Additional Certificates being issued, and that the issuance, sale and delivery of the Additional Certificates will not constitute a default under the Lease or the Indenture nor cause any violation of the covenants, agreements or representations in the Lease or the Indenture. (c) Evidence that the amount of the title insurance policy or policies and the Reserve Fund Requirement have been increased, if necessary, to reflect the amount of the Certificates and Additional Certificates theretofore issued plus the Additional Certificates (or such lesser amount as shall be the maximum insurable value of the Project). (d) A written order to the Trustee by the City to deliver the Additional Certificates to the purchaser or purchasers therein identified upon payment to the Trustee of a specified sum plus accrued interest. Each of the Additional Certificates will evidence assignment of a proportionate interest in rights to receive Revenues under the Lease, as amended, proportionately and ratably secured with the Certificates originally issued and all other issues of Additional Certificates, if any, without preference, priority or distinction of any Certificates or Additional Certificates over any other. Funds and Accounts Source of Payment of Certificates The Certificates shall be payable solely from Revenues received by the Trustee and do not constitute a general obligation or other indebtedness of the City within the meaning of any constitutional, statutory or Charter debt limitation. Revenues, when, as and B -29 if received by the Trustee, will be held under the Indenture for payment of the principal of, premium, if any, and interest on the Certificates as provided in the Indenture. Certificate Fund The Certificate Fund is a special fund created and established with the Trustee which shall be used to pay the principal of, premium, if any, and interest on the Certificates. The Certificate Fund contains an Interest Account and a Principal Account. There will be deposited into the Interest Account of the Certificate Fund (a) all accrued interest and capitalized interest received at the time of the issuance, sale and delivery of the Certificates; (b) that portion of each payment of Base Rentals made by the City which is designated and paid as interest; (c) any portion of the Reserve Fund to be deposited into the Interest Account of the Certificate Fund; and (d) all other moneys received by the Trustee under the Indenture to be used for the purpose of paying interest on the Certificates. There shall be deposited into the Principal Account of the Certificate Fund (a) that portion of each payment of Base Rentals made by the City which is designated and paid as principal; (b) any portion of the Reserve Fund to be deposited into the Principal Account of the Certificate Fund; and (c) all other moneys received by the Trustee under the Indenture to be used for the purpose of paying the principal of the Certificates. Moneys in the Interest Account of the Certificate Fund will be used solely for the payment of the interest on the Certificates except to the extent that moneys therein may be deposited in the Rebate Fund. Moneys in the Principal Account of the Certificate Fund will be used solely for the payment of the principal of the Certificates except to the extent that moneys therein may be deposited in the Rebate Fund. In the event the Certificates are to be redeemed in whole, any moneys remaining in the Certificate Fund will be applied to such redemption along with other moneys held by the Trustee for such purpose. If the Base Rentals paid by the City on any Base Rental Payment Date are not sufficient to pay the principal of and interest on the Certificates due on the next ensuing Interest Payment Date, the Trustee will satisfy any deficiency from the Reserve Fund. Reserve Fund The Reserve Fund is a special fund created and established with the Trustee. There will be deposited into the Reserve Fund, (a) an amount equal to the Reserve Fund Requirement from the proceeds of the Certificates, (b) any Additional Rentals required to maintain the Reserve Fund at an amount equal to the Reserve Fund Requirement and (c) any other amounts provided to the Trustee with instructions to deposit such moneys in the Reserve Fund. The income derived from the investment of the Reserve Fund will be deposited when received in the following order of priority: (i) to the Reserve Fund until the amount on deposit equals the Reserve Fund Requirement; (ii) to the Extraordinary Expenses Account of the Expenses Fund until the amount on deposit therein equals $25,000, (iii) to the Insurance Account of B -30 the Expenses Fund until the amount on deposit therein equals $25,000, and (iv) all remaining income derived from the investment of the Reserve Fund will be deposited in the Interest Account of the Certificate Fund. Moneys held in the Reserve Fund will be applied to any of the following purposes: (a) To the payment of the principal amount of the Certificates and interest thereon, as the same become due, to the extent of any deficiency in either the Interest Account or the Principal Account of the Certificate Fund for such purpose; and to the payment of any Additional Rentals in the event the City fails to make payment thereof; (b) At the option of the Trustee, subsequent to a Termination Event, to the payment of any cost or expense necessary to preserve or protect the Project or the interest of the Trustee or the Registered Owners therein, or necessary to make any repairs or modifications to the Project in preparation for sale or subleasing thereof, as the Trustee may deem to be in the best interests of the Registered Owners; (c) In the event that the Certificates are to be redeemed subsequent to a Termination Event, proportionately to the redemption of the Certificates then Outstanding and the payment of interest thereon; (d) In the event that the City exercises its option to purchase the Project and terminate the Lease upon payment of the Purchase Option Price, to the City, or, at the option of the City, as a reduction of such Purchase Option Price; or (e) At the option of the City, in reduction of the final payment of Base Rentals payable by the City under the Lease and, to the extent of moneys in the Reserve Fund, the next preceding payment or payments of Base Rentals. To the extent that Reserve Fund moneys are applied pursuant to paragraph (a) above, the City agrees in the Lease to pay to the Trustee for deposit in the Reserve Fund, as Additional Rentals, such amounts as are required to restore the amount on deposit in the Reserve Fund to the Reserve Fund Requirement, on or before December 1 of the year following such withdrawal of moneys from the Reserve Fund. If amounts on deposit in the Reserve Fund are less than the applicable Reserve Fund Requirement due to a decrease in the market value of the Permitted Investments on deposit in the Reserve Fund, such deficiency shall be made up from Additional Rentals over a period of not more than four (4) months, in four (4) substantially equal payments. Construction Fund The Construction Fund is a special fund created and established with the Trustee. The balance of the proceeds of the sale of the Certificates (net of the discount paid to the Underwriter, the amount required B -31 to refund the 1990 Certificates, the amount required to be deposited to the Reserve Fund and any costs of issuance) remaining after the deduction of �} accrued interest will be deposited into the Construction Fund. Moneys held in the Construction Fund will be disbursed in accordance with the provisions of the Lease. The Trustee shall keep and maintain adequate records pertaining to the Construction Fund and all disbursements therefrom as reasonably directed by the City. Upon receipt of the certificate indicating the completion of the Project, the Trustee will retain in the Construction Fund a sum equal to the amount estimated by the City Representative to be necessary for payment of the Cost of Construction not then due and payable and the balance, if any, remaining in the Construction Fund will be deposited in the Principal Account of the Certificate Fund and applied to the next payment or payments of principal portions of the Base Rentals or, at the instruction of the City, will be deposited to the Extraordinary Redemption Fund. Extraordinary Redemption Fund The Extraordinary Redemption Fund is a special fund created and established with the Trustee into which will be deposited all Extraordinary Revenues which are to be applied for the redemption of the Certificates on the first Business Day for which notice of redemption may be given. Moneys on deposit in the Extraordinary Redemption Fund shall be disbursed for redemption of the Certificates. Any income from investment of moneys in the Extraordinary Redemption Fund will be deposited into the Certificate Fund. Expenses Fund The Expense Fund in a special fund created and established with the Trustee and containing two accounts, an Extraordinary Expenses Account and an Insurance Account. Income from the investment of moneys in the Reserve Fund, if any, shall be deposited into the Expenses Fund under the level described above has been attained. Income derived from the investment of the Extraordinary Expenses Account will be retained in such account to the extent the amount on deposit therein is less than $50,000, and any remaining income will be deposited in the Interest Account of the Certificate Fund. Income derived from the investment of the Insurance Account will be retained in such account to the extent the amount on deposit therein is less than $50,000, and any remaining income will be deposited in the Interest Account of the Certificate Fund. Moneys held in the Extraordinary Expenses Account, including income derived from the investment thereof, will be used to reimburse the Trustee and the Corporation, respectively, for costs, expenses, outlays, counsel fees and other reasonable disbursements incurred by the Trustee or Corporation by reason of any litigation pertaining to the Project in which the Trustee or the Corporation is named as a defendant; and for any such costs, expenses, outlays, counsel fees and other reasonable disbursements incurred by the Trustee by reason of a Termination Event. B -32 g Moneys held in the Insurance Account, including income derived from the investment thereof, will be used by the Trustee, both during the Lease Term and after a Termination Event, to maintain current payments of premiums for the casualty and property damage insurance on the Project required by the Lease, if and to the extent such premiums are not otherwise paid by the City. Special Construction Fund Upon direction of the City, there will be created and established with the Trustee the "Special Construction Fund." Amounts deposited therein by the City may be expended solely for the purchase of moveable personal property for use in or on the Project or for the purpose of paying any other expense related to the leasehold estate of the City, which in the opinion of nationally- recognized municipal bond counsel, will not adversely affect the validity and enforceability of the Lease. Rebate Fund The Rebate Fund is a special fund created and established with the Trustee, which shall be expended in accordance with the provisions of investment instructions delivered by the City to the Trustee. Investment of Moneys All moneys held as part of the Certificate Fund, the Construction Fund, the Reserve Fund, the Extraordinary Redemption Fund, the Expenses Fund or any other fund or account created under the Indenture or under the Lease will be deposited or invested and reinvested by the Trustee, at the direction of the City, in Permitted Investments; provided, however, that the Trustee will make no deposits or investments of any fund or account created under the Indenture which shall interfere with or prevent withdrawals for payment of the Cost of Construction or for payment of the Certificates at or before maturity or interest thereon as required under the Indenture; and provided further, however, that all amounts representing accrued and capitalized interest on the Certificates shall be held by the Trustee in the Certificate Fund, pledged solely to the payment of interest on the Certificates, and invested only in Permitted Investments described in subparagraphs (a) and (g), as such term is defined above. Discharge of Indenture If, when the Certificates secured hereby have become due and payable in accordance with their terms or otherwise as provided in the Indenture, the whole amount of the principal of, premium, if any, and interest due and payable upon all of the Certificates have been paid, or provision has been made for the payment of the same, together with all other sums payable under the Indenture, then the right, title and interest of the Trustee in and to the Trust Estate and all covenants, agreements and other obligations of the Corporation and the City to the Trustee and the Registered Owners will thereupon cease, terminate and become void and be discharged and satisfied. In such event, upon the request of the City, the Trustee and the Corporation will transfer and convey to the City all property assigned, pledged or mortgaged to the Trustee by the Corporation then held by the Corporation or by the Trustee pursuant to the Indenture, and the Corporation and the Trustee B -33 will execute such documents as may be reasonably required by the City and will turn over to the City any surplus in any fund created under the Indenture except the Rebate Fund. All outstanding Certificates will, prior to the maturity or redemption date thereof, be deemed to have been paid if (a) in case said Certificates are to be redeemed on any date prior to their maturity, the City has given to the Trustee in form satisfactory to the Trustee irrevocable instructions to give, on a date in accordance with the Indenture, notice of redemption of such Certificates on said redemption date, such notice to be given in accordance with the provisions of the Indenture, (b) there has been deposited with the Trustee either moneys in an amount which are sufficient, or Federal Securities which do not contain provisions permitting the redemption thereof at the option of the issuer, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which, together with the moneys, if any, deposited with or held by the Trustee at the same time, are sufficient to pay when due the principal of, premium, if any, and interest due and to become due on said Certificates on and prior to the redemption date or maturity date thereof, as the case may be, and (c) in the event said Certificates are not by their terms subject to redemption within the next 60 days, the City has given the Trustee in form satisfactory to it irrevocable instructions to give, as soon as practicable in the same manner as the notice of redemption is given pursuant to the Indenture, a notice to the Registered Owners of such Certificates that the deposit required by (b) above has been made with the Trustee and that said Certificates are deemed to have been paid in accordance with the Indenture and stating such maturity or redemption date upon which moneys are to.be available for the payment of the principal of, premium, if any, and interest on said Certificates. Defaults and Remedies Events of Default If any of the following events occur it is hereby defined as and shall be deemed an "Event of Default" under the Indenture: (a) default by the City in the payment of Base Rentals or Additional Rentals; (b) The occurrence of a Termination Event; or (c) The occurrence of an Event of Default under the Lease. Remedies on Default Upon the occurrence of an Event of Default, the Trustee will terminate the Lease Term, will become entitled to possession of the Project, and will give notice to the City to vacate the Project (leaving the Equipment). The Trustee will proceed to foreclose on the Project, and will exercise the rights and remedies of a secured party under the Colorado Uniform Commercial Code with respect to the Equipment; and the Trustee may, or if required by the Indenture, shall, without any further demand or notice, take one or any combination of the following additional remedial steps: B -34 t 11 (a) In the event that the Trustee deems a delay in sale of the re Project to be in the best interests of the Registered Owners, the Trustee may temporarily lease the Project or any portion thereof for the benefit of the Registered Owners. :)n -e (b) The Trustee, on behalf of the Corporation, may recover from the ie City: :h (i) the portion of Base Rentals and Additional Rentals which e would otherwise have been payable under the Lease allocable to any e period in which the City continues to occupy the Project; and s e (ii) Base Rentals and Additional Rentals which would otherwise d have been payable by the City under the Lease during the remainder, a after the City vacates the Project, of the Original Term or Renewal s Term in which such Event of Default occurs; provided, however, that 3 if the Trustee does not proceed to foreclose and sell the Project reasonably promptly after such Event of Default, the Trustee is i obligated to the City to use its best efforts to lease the Project for the remainder of such Original or Renewal Term, and the Net Proceeds of such leasing shall be offset against the amount recoverable from the City under this paragraph (ii). (c) The Trustee may take whatever action at law or in equity may appear necessary or desirable to enforce its rights in and to the Project and any other rights of the Registered Owners. No right or remedy is intended to be exclusive of any other rights or remedies, but each and every such right or remedy shall be cumulative and in addition to any other remedy given under the Indenture or now or hereafter existing at law or in equity or by statute. However, notwithstanding any other provision of the Lease or the Indenture, any and all remedies against the City under the Lease or the Indenture shall be limited as in the Lease. If any Event of Default shall have occurred, the Registered Owners of a majority in aggregate principal amount of Certificates then Outstanding, the Trustee will, upon being fully indemnified, be obligated to exercise such one or more of the rights and powers conferred by the Indenture as the Trustee, being advised by counsel, deems most expedient in the interests of the Registered Owners. Upon the occurrence of an Event of Default, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Registered Owners under the Indenture, the Trustee is entitled to apply for the appointment of a receiver or receivers of the Trust Estate and of the revenues, earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment confers. B -35 ! 1 � A Rights and Remedies of Registered Owners No Registered Owner will have any right to institute any suit, action or proceeding in equity or at law for the enforcement of the Indenture or for the execution of any trust hereof or for the appointment of a receiver or any other remedy under the Indenture, unless it meets certain requirements contained in the Indenture. Waivers of Events of Default The Trustee may in its discretion waive any Event of Default, and notwithstanding anything else to the contrary contained in the Indenture will do so upon the written request of the Registered Owners of two - thirds in aggregate principal amount of all the Certificates then Outstanding; provided, however, that there may not be waived without the consent of the Registered Owners of 100% of the Certificates then Outstanding as to which the Event of Default exists (a) any Event of Default in the payment of the principal of or premium on any outstanding Certificates at the date of maturity specified therein or (b) any default in the payment when due of the interest on any such Certificates, unless prior to such waiver or rescission, all arrears of interest and all arrears of payments of principal and premium, if any, then due, as the case may be, and all expenses of the Trustee in connection with such default shall have been paid or provided for. In case of any such waiver, or in case any proceedings taken by the Trustee on account of any such default has been discontinued or abandoned or determined adversely to the Trustee, then and in every such case the Corporation, the City, the Trustee and the Registered Owners will be restored to their former positions and rights under the Indenture respectively, but no such waiver or rescission will extend to any subsequent or other default, or impair any right consequent thereon. Concerning the Trustee The Indenture contains provisions relating to the duties and liabilities of the Trustee, provides for the payment and indemnification of the Trustee and establishes procedures for the resignation or removal of the Trustee, for the appointment of a successor Trustee and the merger or consolidation of the Trustee. Supplemental Indentures and Amendments of the Lease Supplemental Indentures Not Requiring Consent of Registered Owners The Trustee and the Corporation may, with the written consent of the City, but without the consent of, or notice to, the Registered Owners, enter into such indentures or agreements supplemental hereto for any one or more or all of the following purposes: (a) To add to the covenants and agreements of Corporation contained in the Indenture other covenants and agreements to be thereafter observed by the Corporation; (b) To cure any ambiguity, or to cure, correct or supplement any defect or omission or inconsistent provision contained in the Indenture, or to make any provisions with respect to matters arising under the B -36 Indenture or for any other purpose if such provisions are necessary or desirable and do not adversely affect the interests of the Registered Owners; (c) To subject to the Indenture additional revenues, properties or collateral; or (d) To set forth the terms and conditions and other matters in connection with the issuance of Additional Certificates. Supplemental Indentures Requiring Consent Exclusive of supplemental indentures described under " Supplemental Indentures Not Requiring Consent of Registered Owners above, the written consent of the City and the consent of the Registered Owners of not less than two - thirds in aggregate principal amount of the Certificates then Outstanding is required for the execution by the Corporation and the Trustee of any indenture or indentures supplemental hereto; provided, however, that without the consent of the Registered Owners of all the Certificates at the time Outstanding no such amendments may permit, or be construed as permitting: (a) A change in the terms of redemption or maturity of the principal amount of or the interest on any Outstanding Certificate, or a reduction in the principal amount of or premium payable upon any redemption of any Outstanding Certificate or the rate of interest thereon, without the consent of the Registered Owner of such Certificate; (b) The deprivation of the Registered Owner of any Certificate then Outstanding of the lien created by the Indenture (other than as originally permitted hereby); (c) A privilege or priority of any Certificate or Certificates over any other Certificate or Certificates; or (d) A reduction in the aggregate principal amount of the Certificates required for consent to such supplemental indenture. Amendments of the Lease Not Requiring Consent of Registered Owners The Corporation and the Trustee may, with the written consent of the City, but without the consent of or notice to the Registered Owners, consent to any amendment, change or modification of the Lease as may be required (a) by the provisions of the Lease or the Indenture, (b) for the purpose of curing any ambiguity or formal defect or omission in the Lease, (c) in order to more precisely identify the Project or to add additional improvements or properties acquired in accordance with the Lease and the Indenture (including the replacement, substitution or deletion of Equipment); (d) in connection with the issuance of Additional Certificates, or (e) in connection with any other change therein which, in the judgment of the Trustee, is not to the prejudice of the Registered Owners. B -37 Amendments of the Lease Re uirin for the amendments, changes or Con of Registered Owners Except g modifications described under the caption "Amendments of the Lease Not Re uirin neither Cmasent of Re istered Owners" the Corporation nor the Trustee above, change or modification of the Lease without c the e gi ing of o amendment, written approval or consent of the Registered two- thirds in aggregate principal amount of Certificates the t fic notice of not less and time Outstanding, the than B -38 Sob 5 MORTGAGE AND INDENTURE OF TRUST By and between CITY OF PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION and THE PUEBLO BANK AND TRUST COMPANY, as Trustee Dated as of July 1, 1992 After this instrument has been recorded, please return to: William C. Gorham Kutak Rock 2400 Arco Tower 707 Seventeenth Street Denver, Colorado 80202 WP217102 -002/3 TABLE OF CONTENTS (This Table of Contents is not a part of this Indenture of Trust and is only for convenience of reference.) Paqe PREAMBLES .............. ............................... 1 ARTICLE I DEFINITIONS AND CONSTRUCTION Section 1.01. Definitions ........................... 5 Section 1.02. Construction .......................... 11 ARTICLE II AUTHORIZATION, TERMS, EXECUTION AND ISSUANCE OF CERTIFICATES Section 2.01. Authorized Amount of Certificates ..... 12 Section 2.02. Issuance of Certificates .............. 12 Section 2.03. Limited Obligation .................... 14 Section 2.04. Execution of the Certificates ......... 14 Section 2.05. Authentication ........................ 15 Section 2.06. Form of Certificates .................. 15 Section 2.07. Delivery of the Certificates .......... 15 Section 2.08. Mutilated, Lost, Stolen or 21 Section 3.07. Destroyed Certificates ................ 16 Section 2.09. Registration of Certificates; Persons Treated as Registered Owners; Transfer and Exchange of Certificates .......... 16 Section 2.10. Cancellation of Certificates .......... 17 Section 2.11. Issuance of Additional Certificates ... 17 ARTICLE III REVENUES AND FUNDS Section 3.01. Source of Payment of Certificates ..... 19 Section 3.02. Creation of the Certificate Fund ...... 20 Section 3.03. Payments Into the Interest Account of the Certificate Fund .................. 20 Section 3.04. Payments Into the Principal Account of the Certificate Fund .................. 20 Section 3.05. Use of Moneys in the Certificate Fund . 20 Section 3.06. Custody of the Funds .................. 21 Section 3.07. Creation of the Reserve Fund .......... 21 WP217102 -002/3 Page Section 3.08. Use of Moneys in the Reserve Fund ..... 21 Section 3.09. Creation of the Construction Fund ..... 22 Section 3.10. Application of Construction Fund 28 Section 4.03. Subsequent to Completion of 29 Section 4.04. Construction .......................... 23 Section 3.11. Creation of the Extraordinary 30 Section 4.06. Redemption Fund ....................... 23 Section 3.12. Creation of the Expenses Fund ......... 24 Section 3.13. Creation of Special Construction Fund . 24 Section 3.14. Nonpresentment of Certificates ........ 25 Section 3.15. Reports to City ....................... 25 Section 3.16. Repayment to the City from the Trustee ........................... 25 Section 3.17. Rebate Fund ........................... 25 Section 3.18. Rebate Deposits ....................... 26 Section 3.19. Rebate Disbursements .................. 26 ARTICLE IV REDEMPTION OF CERTIFICATES Section 4.01. Redemption Dates and Prices ........... 26 Section 4.02. Redemption Upon Termination of the Lease Term by Reason of Certain Events. 28 Section 4.03. Mandatory Sinking Fund Redemption ..... 29 Section 4.04. Notice of Redemption .................. 30 Section 4.05. Redemption Payments ................... 30 Section 4.06. Cancellation .......................... 31 Section 4.07. Delivery of New Certificates Upon Partial Redemption of Certificates .... 31 ARTICLE V INVESTMENTS Section 5.01. Investment of Moneys .................. 31 Section 5.02. Arbitrage Certification ............... 33 ARTICLE VI DISCHARGE OF INDENTURE . ............................... 33 ARTICLE VII DEFAULTS AND REMEDIES Section 7.01. Events of Default ..................... 35 Section 7.02. Remedies on Default ................... 35 -ii- WP217102 -002/3 ARTICLE VIII CONCERNING THE TRUSTEE Section 8.01. Duties of the Trustee ................. Page Section 7.03. Majority of Registered Owners May 43 Section 8.03. Control Proceedings ................... 37 Section 7.04. Rights and Remedies of Registered Requiring Consent of Registered Owners . ............................... 37 Section 7.05. Purchase of Project by Registered 45 Section 8.06. Owners or Trustee; Application of 45 Owners . ............................... 48 Certificates Toward Purchase Price .... 38 Section 7.06. Waiver of Appraisement, Valuation, Stay and Extension .................... 38 Section 7.07. Trustee May Enforce Rights Without Certificates .................. 39 Section 7.08. Delay or Omission No Waiver ........... 39 Section 7.09. No Waiver of One Default to Affect Another ........................ 39 Section 7.10. Discontinuance of Proceedings on Default; Position of Parties Restored 39 Section 7.11. Waivers of Events of Default .......... 39 ARTICLE VIII CONCERNING THE TRUSTEE Section 8.01. Duties of the Trustee ................. 40 Section 8.02. Fees and Expenses of Trustee .......... 43 Section 8.03. Resignation or Replacement of Trustee 44 Section 8.04. Conversion, Consolidation or Requiring Consent of Registered Merger of Trustee ..................... 45 Section 8.05. Intervention by Trustee ............... 45 Section 8.06. Escrowed Deed and Bill of Sale ........ 45 ARTICLE IX SUPPLEMENTAL INDENTURES AND AMENDMENTS OF THE LEASE Section 9.01. Supplemental Indentures Not Requiring -iii - WP217102 -002/3 Consent of Registered Owners .......... 46 Section 9.02. Supplemental Indentures Requiring Consent of Registered Owners .......... 46 Section 9.03. Execution of Supplemental Indenture ... 47 Section 9.04, Amendments, Etc., of the Lease Not Requiring Consent of Registered Owners . ............................... 48 Section 9.05. Amendments, Etc., of the Lease Requiring Consent of Registered Owners . ............................... 48 -iii - WP217102 -002/3 Page ARTICLE X MISCELLANEOUS Section 10.01. Evidence of Signature of Registered TESTIMONIUM ............ ............................... 53 SIGNATURES AND SEALS ... ............................... 53 ACKNOWLEDGEMENTS ....... ............................... 54 EXHIBIT A - -Form of Certificate of Participation ....... A -1 EXHIBIT B -- Description of the Land .................... B -1 -iv- WP217102 -002/3 Owners and Ownership of Certificates .. 48 Section 10.02. Covenants of Corporation .............. 49 Section 10.03. Inspection of the Project ............. 50 Section 10.04. Parties Interested Herein ............. 50 Section 10.05. Titles, Headings, Captions, Etc. ...... 50 Section 10.06. Severability .......................... 50 Section 10.07. Governing Law ......................... 51 Section 10.08. Execution in Counterparts ............. 51 Section 10.19. Notices ............................... 51 Section 10.10. Payments Due on Holidays .............. 51 Section 10.11. Corporation, City and Trustee Representatives ....................... 51 Section 10.12. Immunity of Officers, Employees and Agents of City and Corporation ........ 51 Section 10.13. No Unreasonable Withholding of Consent or Approval ........................... 52 TESTIMONIUM ............ ............................... 53 SIGNATURES AND SEALS ... ............................... 53 ACKNOWLEDGEMENTS ....... ............................... 54 EXHIBIT A - -Form of Certificate of Participation ....... A -1 EXHIBIT B -- Description of the Land .................... B -1 -iv- WP217102 -002/3 MORTGAGE AND INDENTURE OF TRUST THIS MORTGAGE AND INDENTURE OF TRUST dated as of July 1, 1992 (together with any amendments hereto made in accordance herewith, this "Indenture ''), by and between the CITY OF PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION (the "Corporation "), a nonprofit corporation duly organized and existing under the laws of the State of Colorado, and THE PUEBLO BANK AND TRUST COMPANY, as trustee (the "Trustee "), having an office and principal place of business in Pueblo, Colorado, duly organized and existing under the laws of the State of Colorado, being authorized to accept and execute trusts of the character herein set out under and by virtue of the laws of the State of Colorado; W I T N E S S E T H: WHEREAS, the City of Pueblo, Colorado (the "City '') presently leases a municipal public works and transportation facility pursuant to a Public Works Lease Purchase Agreement, dated as of February 22, 1990 (the "Prior Lease "), between the Corporation, as lessor, and the City, as lessee; and WHEREAS, the City Council of the City (the "City Council ") has determined that the City is in need of an improved municipal public works and transportation facility (the "Building "); and WHEREAS, the City Council has determined that it is necessary and in the best interests of the City that the Building be acquired, constructed, improved and equipped on the parcel of land upon which the existing municipal public works and transportation facility being leased by the City is located (the "Land "); and WHEREAS, the Corporation has agreed to construct the Building on the Land and to lease the Land and the Building to the City pursuant to the Lease (as defined below); and WHEREAS, the City, for the purposes of financing the acquisition, construction, improvement and equipping of the Building on the Land and financing the purchase of certain equipment (the "Equipment '') for use in connection therewith, has entered into an annually renewable Public Works Lease Purchase Agreement, dated as of July 1, 1992 (the ''Lease ''), between the Corporation and the City, as lessee, whereby the City has leased from the Corporation the Land and the Building to be constructed thereon and the Equipment (the Building, the Land and the Equipment are collectively referred to herein as the "Project "); and WP217102 -002/3 WHEREAS, to secure the hereinafter defined Certificates to be issued hereunder, the Corporation will, pursuant to this Indenture, grant the Trustee a first mortgage and security interest in the Project, subject only to Permitted Encumbrances, as defined in the Lease; and WHEREAS, to accomplish the foregoing, the City and the Corporation have agreed to cancel the Prior Lease and to provide for the payment of the certificates of participation issued pursuant to the Mortgage and Indenture of Trust, dated as of February 22, 1990, between the Corporation and the Trustee, as trustee, which evidence assignments of proportionate interests in the rights to receive payments under the Prior Lease (the "Prior Certificates "); and WHEREAS, a portion of the proceeds of the Certificates will be used to pay the Prior Certificates and the remainder of the proceeds of the Certificates will be used to finance the acquisition, construction, improvement and equipping of the Building, the funding of a reserve fund and the paying of the costs associated with issuing the Certificates; and WHEREAS, pursuant to the Lease, and subject to the right of the City to terminate the Lease and other limitations as therein provided, the City will pay certain Base Rentals and Additional Rentals (as such terms are defined in the Lease) in consideration for the right of the City to use the Project; and WHEREAS, pursuant to this Indenture, the right of the Corporation to receive the Base Rentals, and rights to receive certain other payments as provided herein and in the Lease (with certain exceptions as provided herein and in the Lease), have been assigned to the Trustee; and WHEREAS, there will be executed and delivered by the Trustee pursuant to this Indenture one or more Certificates of Participation (the "Certificates ''), evidencing assignments of proportionate interests in rights to receive Base Rentals and certain other payments, which rights have been assigned to the Trustee by the Corporation; and WHEREAS, the net proceeds from the sale of the Certificates to the registered owners of the Certificates (the "Registered owners ") will be disbursed by the Trustee, at the direction of the City (as further provided in the Lease), for the acquisition, construction, improvement and equipping of the Land and the Building, the purchase of the Equipment and other purposes set forth herein; and WP217102 -002/3 -2- WHEREAS, the Trustee has entered into this Indenture for and on behalf of the Registered Owners, and will hold its rights hereunder, including its rights with respect to the Project, except as otherwise specifically provided herein, for the equal and proportionate benefit of the Registered Owners, and will disburse moneys received by the Trustee in accordance with this Indenture; and WHEREAS, the Certificates are to be in substantially the form set forth in Exhibit A to this Indenture, with such necessary or appropriate variations, omissions and insertions as permitted or required by this Indenture; and WHEREAS, all things necessary to make the Certificates, when executed and delivered by the Corporation and authenticated by the Trustee as in this Indenture provided, legal, valid and binding assignments of proportionate interests in rights to receive Revenues and certain other payments, as herein provided, and to constitute this Indenture a valid, binding and legal instrument for the security of the Certificates in accordance with its terms, have been done and performed; NOW, THEREFORE, THIS MORTGAGE AND INDENTURE OF TRUST WITNESSETH: That the Corporation, in consideration of the premises and the mutual covenants herein contained and for the benefit of the Registered Owners and the sum of One Dollar ($1.00) to it duly paid by the Trustee at or before the execution of these presents, and for other good and valuable consideration, the receipt of which is hereby acknowledged, in order to secure the payment of the principal of, premium, if any, and interest on all Certificates at any time outstanding under this Indenture, according to their tenor and effect, and to secure the performance and observance of all the covenants and conditions in the Certificates and herein contained, and to declare the terms and conditions upon and subject to which the Certificates are issued and secured, has executed and delivered this Indenture and has granted, bargained, sold, warranted, mortgaged, aliened, remised, released, conveyed, assigned, pledged, set over and confirmed, and by these presents does grant, bargain, sell, warrant, mortgage, alien, remise, release, convey, assign, pledge, set over and confirm unto The Pueblo Bank and Trust Company, as the Trustee, and to its successors and assigns forever, all and singular the following described property, franchises and income: (a) the Land, Building and the Equipment, as defined in the Lease, constituting the Project, subject only to Permitted Encumbrances; -3- WP217102 -002/3 (b) all rights, title and interest of the Corporation in, to and under the Lease (except the rights of the Corporation under Sections 13.3 and 14.6 of the Lease); (c) all Revenues and any other receipts received by or on behalf of the Corporation pursuant to the Lease including, without limitation, (i) all Base Rentals (as defined in the Lease) to be received from the City pursuant to the Lease and pursuant to the terms of which Base Rentals are to be paid directly to the Trustee; (ii) all Net Proceeds received pursuant to the Lease; and (iii) all rights to enforce payments under the Lease when due or to otherwise enforce rights under the Lease for the benefit of the Registered Owners (but excluding the rights of the Corporation under Sections 13.3 and 14.6 of the Lease); (d) The Project Documents, as defined in Article I of the Lease, including all extensions and renewals of the term thereof, if any, together with certain rights, titles and interests of the City in and to the Project Documents, including, but not limited to, the present and continuing right to make claim for, collect, receive and receipt for any of the sums, amounts, income, revenues, issues and profits and any other sums of money payable or receivable under the Project Documents, to bring actions and proceedings thereunder or for the enforcement thereof, and to do any and all things which the City under the Project Documents is or may become entitled to; and (e) all moneys and securities from time to time held by the Trustee under this Indenture (except the Rebate Fund) and any and all other real or personal property of every name and nature from time to time hereafter by delivery or by writing of any kind specially mortgaged, pledged or hypothecated, as and for additional security hereunder, by the Corporation, or by anyone on its behalf, in favor of the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof. TO HAVE AND TO HOLD the same appurtenances hereby conveyed and intended to be, to the Trustee and trust and assigns forever; with all privileges and assigned, or agreed or its successors in said -4- WP217102 -002/3 IN TRUST, NEVERTHELESS, upon the terms herein set forth for the equal and proportionate benefit, security and protection of all Registered Owners, without privilege, priority or distinction as to the lien or otherwise of any of the Certificates over any other of the Certificates; PROVIDED, HOWEVER, that if the principal of the Certificates and the premium, if any, and the interest due or to become due thereon, shall be paid at the times and in the manner mentioned in the Certificates according to the true intent and meaning thereof, and if there are paid to the Trustee all sums of money due or to become due to the Trustee in accordance with the terms and provisions hereof, then upon such final payment this Indenture and the rights hereby granted shall cease, determine and be void; otherwise this Indenture is to be and remain in full force and effect. THIS INDENTURE FURTHER WITNESSETH and it is expressly declared, that all Certificates issued and secured hereunder are to be executed, authenticated and delivered and all said property, rights, interests, revenues and receipts hereby pledged, assigned and mortgaged are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter expressed, and the Corporation has agreed and covenanted, and does hereby agree and covenant, with the Trustee for the benefit of the Registered Owners, as follows: ARTICLE I DEFINITIONS AND CONSTRUCTION Section 1.01. Definitions All words and phrases defined in Article I of the Lease shall have the same meaning in this Indenture. In addition, the following terms, except where the context indicates otherwise, shall have the respective meanings set forth below. ''Business Day" means any day other than a Saturday, Sunday or legal holiday or day on which banking institutions in the city in which the Trustee has its principal corporate trust office or in New York, New York are authorized or required by law to close. "Deficiency" means the difference between the total amount of principal and interest due on any Interest Payment Date for the Certificates and the amount of Base Rentals paid by the City and deposited in the Certificate Fund on or -5- WP217102 -002/3 before such Interest Payment Date to be used for payment of principal and interest on the Certificates on such Interest Payment Date. "Event of Default" means those defaults specified in Section 7.01 of this Indenture. "Outstanding" means all Certificates which have been executed and delivered, except: (a) Certificates canceled or which shall have been surrendered to the Trustee for cancellation; (b) Certificates in lieu of which other Certificates have been authenticated under Section 2.08 or 2.09 of this Indenture; (c) Certificates which shall have been redeemed as provided in Article IV of this Indenture (including Certificates redeemed on a partial payment as provided in Section 4.02 of this Indenture); and (d) Certificates paid or deemed to be paid in accordance with the provisions of Article VI of this Indenture. "Person" means natural persons, firms, associations, corporations and public bodies. "Permitted Investments" means any one or more of the following if and to the extent that such investments are permitted under the laws of the State for funds of the City: (a) Direct and general obligations of the United States of America, or obligations that are unconditionally guaranteed as to principal and interest by the United States of America, including (in the case of direct and general obligations of the United States of America) evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances wherein (i) a bank or trust company acts as custodian and holds the underlying United States obligations; (ii) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States obligations; and (iii) the underlying United States obligations are held in safekeeping in a special account, segregated from the custodian's general -6- WP217102 -002/3 assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated. The obligations described in this subparagraph are hereinafter called ''United States Obligations." (b) Obligations issued or guaranteed by the following instrumentalities or agencies of the United States of America: (i) Federal (ii) Governm (iii) Farmers (iv) Federal (v) Federal (vi) Federal Home Loan Banks; ent National Mortgage Association; Home Administration; Home Loan Mortgage Corporation; Housing Administration; and National Mortgage Association. (c) Direct and general long -term obligations of any state, to the payment of which the full faith and credit of the state is pledged and that are rated "Aaa" by Moody's Investors Service (hereinafter referred to as "Moody's "). (d) Direct and general short -term obligations of any state, to the payment of which the full faith and credit of the state is pledged and that are rated in the highest rating category by Moody's. (e) Interest - bearing demand or time deposits issued by state banks or trust companies or national banking associations that are members of the Federal Deposit Insurance Corporation (FDIC). These deposits must (b) be continuously and fully insured by FDIC and be with banks whose debt is rated at least "P -1" or "Aa" by Moody's, or (b) be secured by United States Obligations at the levels described in the last paragraph of this definition and (if such deposits have maturities of not more than 365 days) be with banks the short -term debt of which is rated "P -1" by Moody's or (if such deposits have maturities of more than 365 days) be with banks the long -term debt of which is rated "Aa" or better by Moody's. The United States Obligations mentioned above must be held by the Trustee (who shall not be the provider of the collateral), or by any -7- WP217102 -002/3 Federal Reserve Bank or Depositary, as custodian for the Trustee. The Trustee shall have a perfected first lien in the United States Obligations serving as collateral, such collateral shall be free from all third -party liens and claims, and failure to maintain the requisite collateral level after the restoration period described in paragraph (k) of this definition shall entitle the Trustee to liquidate the collateral. (f) Repurchase agreements, the maturities of which are 30 days or less, entered into with financial institutions such as banks or trust companies organized under state law or national banking associations, insurance companies, or government bond dealers reporting to, trading with, and recognized as a primary dealer by, the Federal Reserve Bank of New York and a member of the Security Investors Protection Corporation or with a dealer or parent holding company, in each such case the debt of which is rated at least "A" or "P -1" by Moody's. Such repurchase agreements shall be in respect of United States Obligations and (except repurchase agreements with institutions whose debt or commercial paper is rated "Aaa" or "P -1" by Moody's) shall be collateralized by United States Obligations the fair market value of which, together with the fair market value of the repurchase agreement securities, shall be maintained at the levels described in the last paragraph of this definition, and the provisions of the repurchase agreement shall meet the following additional criteria: 1. the Trustee (who shall not be the provider of the collateral) or a third party acting solely as agent for the Trustee has possession of the United States Obligations; 2. failure to maintain the requisite collateral levels will require the Trustee to liquidate the United States Obligations immediately; 3. the Trustee has a perfected, first priority security interest in the United States Obligations; and 4. the United States Obligations are free and clear of third -party liens, and in the case of an SIPC broker, were not acquired pursuant to a repurchase or reverse repurchase agreement. -8- WP217102 -002/3 (g) Pre - refunded municipal obligations rated "Aaa" by Moody's and meeting the following conditions: (i) (A) the municipal obligations are not to be redeemed prior to maturity or as to which the Trustee has been given irrevocable instructions concerning their calling and redemption and (B) the issuer has covenanted not to redeem such municipal obligations other than as set forth in such instructions; (ii) the municipal obligations are secured by cash or United States Obligations that may be applied only to interest, principal and premium payments of such municipal obligations; (iii) the principal of and interest on the United States Obligations (plus any cash in the escrow fund) are sufficient to meet the liabilities on the municipal obligations; (iv) the United States Obligations serving as security for the municipal obligations are held by an escrow agent or trustee; and (v) the United States Obligations (plus any cash in the escrow fund) are not available to satisfy any other claims, including those against the trustee or escrow agent. (h) Prime - commercial paper of a United States corporation, finance company or banking institution if such commercial paper is rated at least "P -1" by Moody's and if such commercial paper is stated to mature in not more than 365 days. (i) Shares of a diversified open -ended management investment company (as defined in the Investment Company Act of 1940) or shares in a regulated investment company (as defined in Section 851(a) of the Internal Revenue Code of 1986, as amended) that is (A) a money market fund that has been rated in the highest rating category by Moody's or (B) money market accounts of the Trustee or of any state or federal bank the debt of which is rated at least "P -1" or Aaa by Moody's or the debt of whose one bank holding company parent is rated at least "P -1" or Aaa by Moody's. (j) State pooled investment funds approved by Moody's and invested in any one or more of the investments described in subparagraphs (a) through (i) of this definition. -9- WP217102 -002/3 W The collateral levels referred to in subparagraphs (e) and (f) of this definition are set forth, and are based on the assumptions described below: Remaining Maturity Frequency of 1 yr. or 5 yrs. or 10 yrs. or 15 yrs. or 30 yrs. or Valuation Less Less Less Less Less AAA collateral levels M Daily 103 106 107 109 116 Weekly 104 112 114 120 125 Monthly 107 123 130 133 143 Quarterly 108 125 135 140 150 Assumptions: (1) On each valuation date, the market value of the United States Obligations will be an amount equal to the requisite collateral percentage of the agreement or deposit (including unpaid accrued interest) that is being secured. (2) The following restoration periods were assumed: one business day for daily valuations, two business days for weekly valuations, and one month for monthly and quarterly valuations. The use of different restoration periods may therefore affect the requisite collateral percentage. (3) Failure to maintain the requisite collateral percentage after the restoration period will require the trustee to terminate the repurchase agreement and, if not paid by the counter party in federal funds against transfer of the repurchase agreement securities, to liquidate the collateral. (1) any other security or investment approved in writing by Moody's. "Prior Certificates" means the Certificates of Participation issued pursuant to the Prior Indenture, evidencing proportionate interests in certain payments to be received by the Corporation pursuant to the Prior Lease. "Prior Indenture" means the Mortgage and Indenture of Trust, dated as of February 22, 1990, between the Corporation and the Trustee, as trustee, pursuant to which the Prior Certificates were issued. "Prior Lease" means the Public Works Lease Purchase Agreement, dated as of February 22, 1990, between the Corporation, as lessor, and the City, as lessee. -10- WP217102 -002/3 "Rebate Fund" means the trust fund by that name created pursuant to Section 3.17 hereof. "Regular Record Date" means the fifteenth day (whether or not a Business Day) next preceding each interest payment date for the Certificates (other than a Special Record Date). "Special Construction Fund" means the trust fund by that name created pursuant to Section 3.13 hereof. "Special Record Date" means a special date fixed to determine the names and addresses of Registered Owners for purposes of paying interest on a special interest payment date for the payment of defaulted interest, all as further provided in Section 2.02 hereof. "Trust Estate" means the property mortgaged, pledged and assigned to the Trustee pursuant to the granting clauses hereof. Section 1.02 Construction In this Indenture, unless the context otherwise requires: (a) Articles and Sections referred to by number shall mean the corresponding Articles and Sections of this Indenture. (b) The terms "hereby," "hereof," "hereto," "herein," "hereunder" and any similar terms refer to this Indenture, and the term "hereafter" shall mean after, and the term "heretofore" shall mean before, the date of execution and delivery of this Indenture. (c) Words of the masculine gender shall mean and include correlative words of the female and neuter genders, and words importing the singular number shall mean and include the plural number and vice versa. (d) Words importing the redemption of a Certificate or the calling of a Certificate for redemption do not include or connote the payment of such Certificate at its stated maturity or the purchase of such Certificate. (e) References in this Indenture to particular sections of the Code, the Act or any other legislation shall be deemed to refer also to any successor sections thereto or other redesignations for codification purposes and shall be deemed to include any related Regulations. -11- WP217102 -002/3 (f) The terms "receipt," "received," "recovery," "recovered" and any similar terms, when used in this Indenture with respect to moneys or payments due, shall be deemed to refer to the passage of physical possession and control of such moneys and payments to the Trustee. ARTICLE II AUTHORIZATION, TERMS, EXECUTION AND ISSUANCE OF CERTIFICATES Section 2.01. Authorized Amount of Certificates No Certificates shall be issued hereunder except in accordance with this Article II. The aggregate principal amount of Certificates that may be issued shall be $2,960,000, except as provided in Section 2.11 of this Indenture. Section 2.02. Issuance of Certificates In order to provide funds for the payment of the Prior Certificates, the payment of the Cost of Construction and the funding of certain funds and accounts created hereunder, the Certificates shall be issued in substantially the form attached hereto as Exhibit A and shall constitute assignments of proportionate undivided interests in the right to receive Revenues under the Lease. The Certificates shall be issuable solely as fully registered Certificates without coupons in the denominations of $5,000 and any integral multiple thereof. The Certificates shall be lettered "R" and shall be numbered separately from 1 upward. The Certificates shall be dated as of July 1, 1992 and interest with respect to the Certificates shall accrue from their date, if authenticated prior to June 15, 1993, or if authenticated on any later date, the interest with respect to the Certificates shall accrue from the June 15 or December 15 next preceding their date of authentication, or if authenticated on a June 15 or December 15, the interest with respect to the Certificates shall accrue from such date; provided, however, that if interest with respect to the Certificates shall be in default, Certificates issued in exchange for Certificates surrendered for transfer or exchange shall bear interest from the date to which interest has been paid in full on the Certificates so surrendered. Interest with respect to the Certificates shall be payable semiannually on June 15 and December 15 of each year, commencing June 15, 1993, until such Certificates are paid pursuant to the provisions of this Indenture. -12- WP217102 -002/3 The Certificates shall mature on December 15 of the years, and in the amounts, and interest with respect to the Certificates shall accrue at the rates per annum, set forth below: Maturity Interest Date Rate ( December 15) Amount Per Annum 1993 $ 55,000 4.25% 1994 130,000 5.20 1995 140,000 5.50 1996 145,000 5.75 1997 60,000 6.00 1998 65,000 6.25 1999 70,000 6.50 2000 70,000 6.70 2001 75,000 6.90 2002 80,000 7.00 2003 85,000 7.10 2004 95,000 7.25 2005 100,000 7.25 2006 105,000 7.25 2007 115,000 7.25 2008 125,000 7.25 2009 135,000 7.25 2015 1,310,000 7.25 The principal of and premium, if any, with respect to the Certificates shall be payable to the registered owner thereof as shown on the registration books of the City kept by the Trustee, upon presentation and surrender thereof at the principal corporate trust office of the Trustee or its successor. Payment of interest with respect to any Certificate shall be made to the Registered Owner thereof by check or draft mailed by the Trustee, on or before each interest payment date (or, if such interest payment date is not a Business Day, on or before the next succeeding Business Day), to the Registered Owner thereof at the address of such Registered Owner shown on the registration books of the City kept by the Trustee at the close of business on the Regular Record Date for such interest payment date; but any such interest not so timely paid or duly provided for shall cease to be payable to the person who is the Registered Owner thereof at the close of business on the Regular Record Date and shall be payable to the person who is the Registered Owner thereof at the close of business on a Special Record Date for the payment of any such defaulted interest. Such Special Record Date shall be fixed by the Trustee whenever moneys become available for payment of the defaulted interest, and notice of the Special Record Date shall be -13- WP217102 -002/3 given to the Registered Owners of the Certificates not less than ten days prior thereto by first -class mail to each such Registered Owner as shown on the registration books on a date selected by the Trustee, stating the date of the Special Record Date and the date fixed for the payment of such defaulted interest. The Trustee may make payments of interest on any Certificate by such alternative means as may be mutually agreed to between the Registered Owner of such Certificate and the Trustee. All such payments shall be made in lawful money of the United States of America without deduction for the services of the Trustee. Section 2.03. Limited Obligation Each Certificate shall evidence the assignment of a proportionate undivided interest in the right to receive Revenues under the Lease. The Certificates are payable solely from Revenues as, when and if the same are received by the Trustee. The Revenues are to be held in trust by the Trustee for such purposes in the manner and to the extent provided herein. NEITHER THE LEASE NOR THE CERTIFICATES CONSTITUTES A GENERAL OBLIGATION OR OTHER INDEBTEDNESS OF THE CITY WITHIN THE MEANING OF ANY CONSTITUTIONAL, STATUTORY OR CHARTER DEBT LIMITATION. NEITHER THE LEASE, THE INDENTURE NOR THE CERTIFICATES HAVE DIRECTLY OR INDIRECTLY OBLIGATED THE CITY TO MAKE ANY PAYMENTS BEYOND THOSE APPROPRIATED FOR ANY FISCAL YEAR IN WHICH THE LEASE SHALL BE IN EFFECT. EXCEPT TO THE EXTENT PAYABLE FROM THE PROCEEDS OF THE SALE OF THE CERTIFICATES AND INCOME FROM THE INVESTMENT THEREOF, FROM NET PROCEEDS OF CERTAIN INSURANCE POLICIES, PERFORMANCE BONDS AND CONDEMNATION AWARDS, FROM NET PROCEEDS RECEIVED AS A CONSEQUENCE OF DEFAULTS UNDER CONSTRUCTION CONTRACTS, FROM NET PROCEEDS OF LEASING THE PROJECT OR FROM OTHER AMOUNTS MADE AVAILABLE UNDER THE INDENTURE, THE CERTIFICATES WILL BE PAYABLE DURING THE LEASE TERM SOLELY FROM BASE RENTALS TO BE PAID BY THE CITY UNDER THE LEASE AND THE INCOME FROM CERTAIN INVESTMENTS THEREUNDER. ALL PAYMENT OBLIGATIONS OF THE CITY UNDER THE LEASE, INCLUDING, WITHOUT LIMITATION, THE OBLIGATION OF THE CITY TO PAY BASE RENTALS, ARE FROM YEAR TO YEAR ONLY AND DO NOT CONSTITUTE A MANDATORY PAYMENT OBLIGATION OF THE CITY IN ANY FISCAL YEAR BEYOND A FISCAL YEAR IN WHICH THE LEASE SHALL BE IN EFFECT. THE LEASE IS SUBJECT TO ANNUAL RENEWAL AT THE OPTION OF THE CITY AND WILL BE TERMINATED UPON THE OCCURRENCE OF A TERMINATION EVENT. IN SUCH EVENT, ALL PAYMENTS FROM THE CITY UNDER THE LEASE WILL TERMINATE, AND THE CERTIFICATES AND THE INTEREST THEREON WILL BE PAYABLE FROM CERTAIN MONEYS, IF ANY, HELD BY THE TRUSTEE UNDER THE INDENTURE, AND ANY MONEYS MADE AVAILABLE BY ACTION OF THE TRUSTEE REGARDING THE PROJECT. Section 2.04. Execution of the Certificates Each Certificate shall be executed by the manual or facsimile -14- WP217102 -002/3 signature of the President of the Corporation, shall be attested with the manual or facsimile signature of the Secretary of the Corporation and shall bear the original or facsimile of the seal of the Corporation and shall be executed by the manual or facsimile signature of the President of the City Council of the City, shall be attested with the manual or facsimile signature of the City Clerk of the City and shall bear the original or facsimile of the seal of the City. In addition, each Certificate shall be authenticated by the manual signature of any duly authorized representative of the Trustee. In case any official of the Trustee, the Corporation or the City whose signature shall appear on the Certificates shall cease to be such official before delivery of the Certificates, such signature shall nevertheless be valid and sufficient for all purposes, the same as if he or she had remained in office until delivery. Section 2.05, Authentication No Certificate shall be valid or obligatory for any purpose or entitled to any security or benefit hereunder unless and until executed and authenticated in the manner prescribed by Section 2.04 of this Indenture, and such execution and authentication of any Certificate shall be conclusive evidence that such Certificate has been properly issued and delivered hereunder. Section 2.06. Form of Certificates The Certificates shall be substantially in the form set forth in Exhibit A to this Indenture, with such appropriate variations, omissions and insertions as permitted or required hereby. Section 2.07. Delivery of the Certificates Upon the execution and delivery of this Indenture, the Trustee shall authenticate and deliver the Certificates in the aggregate principal amount of $2,960,000 to the Original Purchaser, as hereinafter in this Section provided. (a) Prior to the delivery by the Trustee of any of the Certificates, there shall be filed with the Trustee (i) release of the Mortgage and Indenture of Trust, dated as of February 22, 1990 (the "Prior Indenture "), between the Corporation and the Trustee, as trustee, (ii) release of the Public Works Lease Purchase Agreement, dated as of February 22, 1990 (the ''Prior Lease "), between the City and the Corporation, if the Prior Lease was filed with the Pueblo County Clerk and Recorder, (iii) release of all Financing Statements, if any, filed in connection with the Prior Certificates, the Prior Indenture and the Prior Lease, (iv) originally executed counterparts of the Lease and this Indenture, (v) a certified copy of the Ordinance adopted by the -15- WP217102 -002/3 City Council approving the Lease and the issuance of the Certificates pursuant to the Indenture; (vi) a certified copy of a Resolution adopted by the Board of Directors of the Corporation approving the Lease, the Indenture and the issuance of the Certificates, (vii) evidence that the Certificates have been rated "Baa" by Moody's, and (viii) a commitment for the issuance of the title insurance policy required by Section 7.4 of the Lease. (b) Thereupon, the Trustee shall deliver the Certificates to the Original Purchaser, upon payment to the Trustee of a sum specified in a separate agreement between the City and the Original Purchaser, plus accrued interest on the Certificates to the date of delivery. Such sum shall be deposited as set forth in Article III hereof. Section 2.08. Mutilated, Lost, Stolen or Destroyed Certificates In the event that any Certificate is mutilated, lost, stolen or destroyed, a new Certificate may be authenticated on behalf of the Trustee, of like date, maturity, series and denomination as that mutilated, lost, stolen or destroyed; provided that the Trustee shall have received indemnity from the Registered Owner of the Certificate satisfactory to it and provided further, in case of any mutilated Certificate, that such mutilated Certificate shall first be surrendered to the Trustee, and in the case of any lost, stolen or destroyed Certificate, that there shall be first furnished to the Trustee evidence of such loss, theft or destruction satisfactory to the Trustee. In the event that any such Certificate shall have matured or is about to mature, instead of issuing a duplicate Certificate, the Trustee may pay the same without surrender thereof. The Trustee may charge the Registered Owner of the Certificate with its reasonable fees and expenses in this connection. Section 2.09. Registration of Certificates; Persons Treated as Registered Owners; Transfer and Exchange of Certificates Books for the registration and for the transfer of Certificates shall be kept by the Trustee which is hereby appointed the registrar. Upon surrender for transfer of a Certificate at the principal corporate trust office of the Trustee, duly endorsed for transfer or accompanied by an assignment duly executed by the Registered Owner or the attorney of such Registered Owner duly authorized in writing, the Trustee shall execute and deliver in the name of the transferee or transferees a new fully registered Certificate or Certificates for a like aggregate principal amount and of a like maturity, series and interest rate. -16- WP217102 -002/3 Certificates may be exchanged at the principal corporate trust office of the Trustee for a like aggregate principal amount of Certificates of the same date, maturity, series and interest rate, or for a like aggregate principal amount of Certificates of other authorized denominations of the same date, maturity, series and interest rate. The City and the Corporation shall execute and deliver and the Trustee shall authenticate the Certificates which the Registered Owner thereof making the exchange is entitled to receive, bearing numbers not then Outstanding. The Trustee shall not be required to transfer or exchange the Certificates during the period of 15 days next preceding any Interest Payment Date of such Certificate nor to transfer or exchange any Certificate after the publication or the mailing of notice calling such Certificate for redemption has been given as herein provided, nor during the period of 15 days next preceding the giving of such notice of redemption. As to any Certificate, the person in whose name the same shall be registered on a Regular Record Date or Special Record Date shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of either principal or interest with respect to the Certificate shall be made only to or upon the written order of the Registered Owner thereof or the legal representative of such Registered Owner, but such registration may be changed as hereinabove provided. All such payments shall be valid and effectual to satisfy and discharge such Certificate to the extent of the sum or sums paid. The Trustee shall require the payment, by any Registered Owners requesting transfer or exchange of Certificates, of any tax, trustee's fee, fee or other governmental charge required to be paid with respect to such transfer. Section 2.10. Cancellation of Certificates Whenever any outstanding Certificates shall be delivered to the Trustee for cancellation pursuant to this Indenture, upon payment thereof or for or after replacement pursuant to Section 2.08 or 2.09 of this Indenture, such Certificates shall be promptly canceled and destroyed by the Trustee, and counterparts of a certificate of destruction evidencing such destruction shall be furnished by the Trustee to the City. Section 2.11. Issuance of Additional Certificates So long as the Lease Term shall remain in effect and no Termination Event shall have occurred, one or more issues of additional Certificates (the ''Additional Certificates ") may be issued upon the terms and conditions provided herein. WP217102 -002/3 -17- Additional Certificates may be issued to provide funds to pay any one or more of the following: (i) the costs of refunding all or any of the Outstanding Certificates; (ii) the costs of completing the acquisition, construction, improvements and equipping of the Project (and costs reasonably related thereto), in excess of the amount available therefor in the Construction Fund pursuant to the Lease and this Indenture; (iii) the costs of making at any time or from time to time such substitutions, additions, modifications and improvements in, on or to the Project as the City and the Corporation may deem necessary or desirable; and (iv) the costs of the issuance and sale of the Additional Certificates, any deposit to the Reserve Fund necessary for the amount therein to equal the Reserve Fund Requirement, and capitalized interest for such period, and such other costs reasonably related to the financing, as shall be agreed upon by the City and the Trustee. In the event that amounts available therefor in the Construction Fund are not sufficient to complete the Project, the Trustee, together with the City and the Corporation, shall use its best efforts to issue Additional Certificates to complete the Project. Additional Certificates may be issued only upon there being filed with the Trustee: (a) Originally executed counterparts of a supplemental Indenture and an amendment to the Lease adopted in accordance with the requirements of Article IX hereof, including requirements regarding approval of the Registered Owners, if applicable, expressly providing that, for all the purposes hereof, the Project shall include any property, buildings or equipment being financed by the Additional Certificates, and that the Certificates being issued as well as any Certificates and Additional Certificates theretofore issued, except that the date or dates of the Additional Certificates, the rate or rates of interest on the Additional Certificates, and provisions for the redemption thereof, if any, all shall be as provided in the supplemental Indenture and amendment to the Lease rather than as provided in this Indenture, and further providing for an increase in the Base Rentals required to be paid to the Trustee under Exhibit B to the Lease in such amount as shall be necessary to pay (assuming that no Termination Event shall occur), the principal of, premium, if any, and interest on the Certificates then Outstanding as well as the Additional Certificates proposed to be issued. -18- WP217102 -002/3 (b) A written opinion or opinions of counsel of nationally recognized stature in the field of municipal bonds and mutually acceptable to the City and the Trustee, to the effect that the amendment to the Lease and the authentication of the Additional Certificates have been duly authorized, that the amendment to the Lease is valid and enforceable against the City, that the exclusion from gross income, for purposes of federal income taxation, of the interest on the Certificates and Additional Certificates theretofore issued will not be adversely affected by the issuance of the Additional Certificates being issued, and that the issuance, sale and delivery of the Additional Certificates will not constitute a default under the Lease or this Indenture nor cause any violation of the covenants, agreements or representations in the Lease or this Indenture. (c) Evidence that the amount of the title insurance policy or policies required by Section 7.4 of the Lease and the Reserve Fund Requirement have been increased, if necessary, to reflect the amount of the Certificates and Additional Certificates theretofore issued plus the Additional Certificates (or such lesser amount as shall be the maximum insurable value of the Project). (d) A written order to the Trustee by the City to deliver the Additional Certificates to the purchaser or purchasers therein identified upon payment to the Trustee of a specified sum plus accrued interest. Each of the Additional Certificates issued pursuant to this Section shall evidence assignment of a proportionate interest in rights to receive Revenues under the Lease, as amended, proportionately and ratably secured with the Certificates originally issued and all other issues of Additional Certificates, if any, issued pursuant to this Section, without preference, priority or distinction of any Certificates or Additional Certificates over any other. ARTICLE III REVENUES AND FUNDS Section 3.01. Certificates shall by the Trustee and other indebtedness constitutional, st Revenues, when, as WP217102 -002/3 Source of Payment of Certificates The be payable solely from Revenues received do not constitute a general obligation or of the City within the meaning of any atutory or Charter debt limitation. and if received by the Trustee, shall be -19- held hereunder for payment of the principal of, premium, if any, and interest on the Certificates as provided in this Indenture. Section 3.02. Creation of the Certificate Fund A special fund is hereby created and established with the Trustee, to be designated "City of Pueblo, Colorado, Public Works Lease Purchase Agreement, Certificate of Participation Fund" (the ''Certificate Fund "), which shall be used to pay the principal of, premium, if any, and interest on the Certificates. Within the Certificate Fund there are hereby created and ordered established an Interest Account and a Principal Account which shall be used as set forth in Section 3.05 of this Indenture. Section 3.03. Payments Into the Interest Account of the Certificate Fund There shall be deposited into the Interest Account of the Certificate Fund (a) all accrued interest and capitalized interest received at the time of the issuance, sale and delivery of the Certificates; (b) that portion of each payment of Base Rentals made by the City which is designated and paid as interest under Exhibit B to the Lease; (c) any portion of the Reserve Fund to be deposited into the Interest Account of the Certificate Fund, as provided in Section 3.08 hereof; and (d) all other moneys received by the Trustee under this Indenture to be used for the purpose of paying interest on the Certificates. Section 3.04. Payments Into the Principal Account of the Certificate Fund There shall be deposited into the Principal Account of the Certificate Fund (a) that portion of each payment of Base Rentals made by the City which is designated and paid as principal under Exhibit B to the Lease; (b) any portion of the Reserve Fund to be deposited into the Principal Account of the Certificate Fund, as provided in Section 3.08 hereof; and (c) all other moneys received by the Trustee under this Indenture to be used for the purpose of paying the principal of the Certificates. Section 3.05. Use of Moneys in the Certificate Fund Moneys in the Interest Account of the Certificate Fund shall be used solely for the payment of the interest on the Certificates except to the extent that moneys therein may be deposited in the Rebate Fund. Moneys in the Principal Account of the Certificate Fund shall be used solely for the payment of the principal of the Certificates except to the extent that moneys therein may be deposited in the Rebate Fund. In the event the Certificates are to be redeemed in whole, any moneys remaining in the Certificate Fund shall be applied to such redemption along with other moneys held by the Trustee for such purpose. WP217102 -002/3 -20- If the Base Rentals paid by the City on any Base Rental Payment Date are not sufficient to pay the principal of and interest on the Certificates due on the next ensuing Interest Payment Date, the Trustee shall satisfy any deficiency from the Reserve Fund. Amounts deposited into the Certificate Fund shall be depleted at least once a year except for an amount not to exceed the greater of one year's earnings on moneys in the Certificate Fund or 1 /12th of the annual debt service on the Certificates. Section 3.06. Custody of the Funds All Funds created under this Indenture shall be in the custody of the Trustee, subject to the provisions of this Indenture. Section 3.07. Creation of the Reserve Fund A special fund is hereby created and established with the Trustee to be designated "City of Pueblo, Colorado, Public Works Lease Purchase Agreement, Reserve Fund" (the "Reserve Fund "), which shall be expended in accordance with Section 3.08 hereof. There shall be deposited into the Reserve Fund, (a) an amount equal to the Reserve Fund Requirement fro-In the proceeds of the Certificates, (b) any Additional Rentals required by Section 6.2 of the Lease and Section 3.08 hereof to maintain the Reserve Fund at an amount equal to the Reserve Fund Requirement and (c) any other amounts provided to the Trustee with instructions to deposit such moneys in the Reserve Fund. Section 3.08. Use of Moneys in the Reserve Fund The income derived from the investment of the Reserve Fund shall be deposited when received in the following order of priority: (i) to the Reserve Fund until the amount on deposit shall equal the Reserve Fund Requirement; (ii) to the Extraordinary Expenses Account of the Expenses Fund until the amount on deposit therein shall equal $25,000, (iii) to the Insurance Account of the Expenses Fund until the amount on deposit therein shall equal $25,000, and (iv) all remaining income derived from the investment of the Reserve Fund shall be deposited in the Interest Account of the Certificate Fund. Moneys held in the Reserve Fund, excluding income from the investment thereof and applied pursuant to (ii), (iii) and (iv) of the preceding paragraph, shall be applied to any of the following purposes: (a) To the payment of the principal amount of the Certificates and interest thereon, as the same shall becoMe due, to the extent of any deficiency in either the Interest Account or the Principal Account of the -21- WP217102 -002/3 Certificate Fund for such purpose; and to the payment of any Additional Rentals in the event the City shall fail to make payment thereof; (b) At the option of the Trustee, subsequent to a Termination Event, to the payment of any cost or expense necessary to preserve or protect the Project or the interest of the Trustee or the Registered Owners therein, or necessary to make any repairs or modifications to the Project in preparation for sale or subleasing thereof, as the Trustee may deem to be in the best interests of the Registered Owners; (c) In the event that the Certificates are to be redeemed subsequent to a Termination Event, proportionately to the redemption of the Certificates then Outstanding and the payment of interest thereon; (d) In the event that the City shall exercise its option to purchase the Project and terminate the Lease upon payment of the Purchase Option Price, to the City, or, at the option of the City, as a reduction of such Purchase Option Price; or (e) At the option of the City, in reduction of the final payment of Base Rentals payable by the City under the Lease and, to the extent of moneys in the Reserve Fund, the next preceding payment or payments of Base Rentals. To the extent that Reserve Fund moneys are applied pursuant to paragraph (a) of this Section, the City hereby agrees to pay to the Trustee for deposit in the Reserve Fund, as Additional Rentals, such amounts as are required to restore the amount on deposit in the Reserve Fund to the Reserve Fund Requirement, on or before December 1 of the year following such withdrawal of moneys from the Reserve Fund. If amounts on deposit in the Reserve Fund shall be less than the applicable Reserve Fund Requirement due to a decrease in the market value of the Permitted Investments on deposit in the Reserve Fund, such deficiency shall be made up from Additional Rentals over a period of not more than four (4) months, in four (4) substantially equal payments. Section 3.09. Creation of the Construction Fund A special fund is hereby created and established with the Trustee to be designated "City of Pueblo, Colorado, Public Works Lease Purchase Agreement, Construction Fund" (the "Construction Fund "). The balance of the proceeds of the -22- WP217102 -002/3 sale of the Certificates (net of the discount paid to the Original Purchaser, the amount required to refund the Prior Certificates, the amount required to be deposited to the Reserve Fund and any costs of issuance) remaining after the deduction provided by Section 3.03(a) of this Indenture have been made, shall be deposited into the Construction Fund. Any moneys held as part of the Construction Fund shall be invested and reinvested by the Trustee in accordance with Article V of this Indenture, and the income therefrom shall be retained in the Construction Fund and used to pay Costs of Construction, except to the extent necessary to be deposited to the Rebate Fund. Moneys held in the Construction Fund shall be disbursed in accordance with the provisions of Section 7.2 of the Lease. The Trustee shall keep and maintain adequate records pertaining to the Construction Fund and all disbursements therefrom as reasonably directed by the City. After the Project has been completed and the certificate completed and received as required by Section 7.3 of the Lease, and after any amounts in the Construction Fund are deposited to the Certificate Fund or Extraordinary Redemption Fund, as provided in Section 3.10 of this Indenture, the Trustee shall file an accounting thereof with the City. Section 3.10. Application of Construction Fund Subsequent to Completion of Construction Upon receipt of the certificate required by Section 7.3 of the Lease as to the completion of the Project, the Trustee shall retain in the Construction Fund a sum equal to the amount estimated by the City Representative to be necessary for payment of the Cost of Construction not then due and payable. The balance, if any, remaining in the Construction Fund shall be deposited in the Principal Account of the Certificate Fund and applied to the next payment or payments of principal portions of the Base Rentals or, at the instruction of the City, shall be deposited to the Extraordinary Redemption Fund. Section 3.11. Creation of the Extraordinary Redemption Fund There is hereby created and established with the Trustee the "City of Pueblo, Colorado, Public Works Lease Purchase Agreement, Extraordinary Redemption Fund" (the "Extraordinary Redemption Fund ") into which shall be deposited all Extraordinary Revenues which are to be applied for the redemption of the Certificates on the first Business Day for which notice of redemption may be given. Moneys on deposit in the Extraordinary Redemption Fund shall be disbursed for redemption of the Certificates as provided in Section 4.01 of this Indenture. Any income from investment of moneys in the Extraordinary Redemption Fund shall be deposited into the Certificate Fund. -23- WP217102 -002/3 Section 3.12. Creation of the Expenses Fund There is hereby created and established with the Trustee the ''City of Pueblo, Colorado, Public Works Lease Purchase Agreement, Expenses Fund" (the ''Expenses Fund "). Within the Expenses Fund there are hereby created and ordered established an Extraordinary Expenses Account and an Insurance Account, which shall be used as hereinafter set forth. Income from the investment of moneys in the Reserve Fund, if any, shall be deposited into the Expenses Fund under certain circumstances as set forth in Section 3.08 of this Indenture. Any moneys held in each account of the Expenses Fund shall be invested and reinvested by the Trustee in accordance with Article V of this Indenture. Income derived from the investment of the Extraordinary Expenses Account shall be retained in such account to the extent the amount on deposit therein is less than $25,000, and any remaining income shall be deposited in the Interest Account of the Certificate Fund. Income derived from the investment of the Insurance Account shall be retained in such account to the extent the amount on deposit therein is less than $25,000, and any remaining income shall be deposited in the Interest Account of the Certificate Fund. Moneys held in the Extraordinary Expenses Account, including income derived from the investment thereof, shall be used to reimburse the Trustee and the Corporation, respectively, for costs, expenses, outlays, counsel fees and other reasonable disbursements incurred by the Trustee or Corporation by reason of any litigation pertaining to the Project in which the Trustee or the Corporation is named as a defendant; and for any costs, expenses, outlays, counsel fees and other reasonable disbursements incurred by the Trustee by reason of a Termination Event. Moneys held in the Insurance Account, including income derived from the investment thereof, shall be used by the Trustee, both during the Lease Term and after a Termination Event, to maintain current payments of premiums for the casualty and property damage insurance on the Project required by the Lease, if and to the extent such premiums are not otherwise paid by the City. Section 3.13. Creation of Special Construction Fund Upon direction of the City, there shall be created and established with the Trustee the ''Special Construction Fund" pursuant to Section 7.1 of the Lease. Amounts deposited therein by the City shall be expended solely for the purchase of moveable personal property for use in or on the Project or for the purpose of paying any other expense related to the WP217102 -002/3 -24- leasehold estate of the City, which in the opinion of nationally- recognized municipal bond counsel, shall not adversely affect the validity and enforceability of the Lease. Section 3.14. Nonpresentment of Certificates In the event any Certificate shall not be presented for payment when due, if funds sufficient to pay such Certificate shall have been made available to the Trustee for the benefit of the Registered Owner thereof, it shall be the duty of the Trustee to hold such funds for a period of six years, without liability for interest thereon, for the benefit of the Registered Owner of such Certificate, who shall be restricted exclusively to such funds for any claim of whatever nature on his or her part under the Lease or this Indenture or on or with respect to such Certificate. Any unclaimed funds remaining after the expiration of the six year period shall be returned by the Trustee to the City. Section 3.15. Reports to City Not less than once during each calendar year, the Trustee shall provide the City with an accounting for all receipts to and disbursements from the funds or accounts created hereunder. Section 3.16. Repayment to the City from the Trustee Upon a discharge and a defeasance of the Indenture pursuant to Article VI of this Indenture, any amounts remaining in the Certificate Fund, the Construction Fund, the Reserve Fund, the Extraordinary Redemption Fund, the Expenses Fund or otherwise held by the Trustee pursuant hereto, except the Rebate Fund, shall be paid to the City as a return of an overpayment of Base Rentals. Section 3.17. Rebate Fund There is hereby created and established with the Trustee a separate trust fund in the name of the City to be designated "City of Pueblo, Colorado, Public Works Lease Purchase Agreement, Rebate Fund" (the "Rebate Fund "), which shall be expended in accordance with the provisions hereof and the Investment Instructions delivered by the City to the Trustee (the "Investment Instructions "). The Trustee shall make deposits and disbursements from the Rebate Fund in accordance with the Investment Instructions, shall invest the Rebate Fund pursuant to said Investment Instructions and shall deposit income from such investments immediately upon receipt thereof in the Rebate Fund, all as directed by the City in the Investment Instructions. The City shall employ, at its expense, a qualified firm to make the calculations, deposits, disbursements and investments as may be required by the immediately preceding sentence. The City shall attach the report of such firm to any directions given by the City WP217102 -002/3 -25- to the Trustee. The Investment Instructions may be superseded or amended by new Investment Instructions accompanied by an opinion of nationally recognized municipal bond counsel addressed to the City to the effect that the use of said new Investment Instructions will not cause the interest paid or to be paid on the Certificates to become subject to federal income taxation. Section 3.18. Rebate Deposits The Trustee shall annually make the rebate deposit described in the Investment Instructions as directed by the City. The City shall attach the report of the rebate analyst required by Section 3.17 above to any such directions. If a withdrawal from the Rebate Fund is permitted as a result of such computation, the amount withdrawn shall be deposited in the Interest Account of the Certificate Fund for the benefit of the City. Records of the determinations required by this Section and the Investment Instructions must be retained by the Trustee until six (6) years after the final retirement of the Certificates. Section 3.19. Rebate Disbursements Not later than sixty (60) days after the end of the fifth Certificate Year (sixty (60) days after June 30, 1997) and every five (5) years thereafter, the Trustee shall pay to the United States of America, from the Rebate Fund or as otherwise provided by the City, ninety percent (90 %) of the amount required to be on deposit in the Rebate Fund as of such payment date. Not later than sixty (60) days after the final retirement of the Certificates (whether at maturity or upon redemption or acceleration or otherwise), the Trustee shall pay to the United States of America, from the Rebate Fund or as otherwise provided by the City, one hundred percent (100 %) of the balance remaining in the Rebate Fund. Each payment required to be paid to the United States of America pursuant to this Section shall be filed with the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255. Each payment shall be accompanied by a copy of the information report originally filed with respect to the Certificates and a statement summarizing the determination of the amount to be paid to the United States of America. ARTICLE IV REDEMPTION OF CERTIFICATES Section 4.01. Redemption Dates and Prices The Certificates are subject to redemption as set forth below: (a) The Certificates shall be called for redemption, in whole only, on any Interest Payment Date in the event of, and to the extent that moneys are -26- WP217102 -002/3 actually received by the Trustee from, the exercise by the City of its option to purchase the Project, as provided in the Lease, upon payment of the then applicable Purchase Option Price, at a redemption price equal to the principal amount of the Certificates being redeemed, plus accrued interest to the redemption date; provided, however, that paragraph (b) below, and not this paragraph (a), shall apply in the event that the Purchase Option Price is paid from moneys borrowed by the City or derived from any installment purchase or lease purchase financing by the City. (b) In the event that the Purchase Option Price is paid from moneys borrowed by the City or derived from any installment purchase or lease purchase financing by the City, the Certificates maturing on or before December 15, 1999 shall not be callable for redemption prior to maturity; and the Certificates maturing on or after December 15, 2000, shall be callable for redemption prior to maturity, at the option of the City, on December 15, 1999 and on any Interest Payment Date thereafter, in whole only, at the redemption prices (expressed as percentages of principal amount) set forth in the table below, plus accrued interest to the redemption date: Redemption Redemption Dates Prices December 15, 1999 and June 15, 2000 102% December 15, 2000 and June 15, 2001 101 December 15, 2001 and thereafter 100 (c) The Certificates shall be called for redemption in the event and only to the extent that Extraordinary Revenues are deposited into the Extraordinary Redemption Fund, other than as provided in paragraph (a) or (b) of this Section. (d) The Certificates may also be called for redemption as set forth in Section 4.02 of this Indenture. In the event that the Certificates are redeemed pursuant to (c) above, the Certificates shall be redeemed in whole, or in part in inverse order of maturity and by lot within any maturity, at a redemption price equal to the principal amount of the Certificates being redeemed plus accrued interest to the redemption date, on the first Business Day for which notice of redemption may be given. When -27- WP217102 -002/3 Certificates are to be redeemed in part, the schedule of Base Rentals set forth in Exhibit B to the Lease shall be recalculated by the Trustee. Section 4.02. Redemption Upon Termination of the Lease Term by Reason of Certain Events The Certificates are also callable for redemption upon the occurrence of a Termination Event. If the Certificates are to be redeemed subsequent to a Termination Event as described in the preceding sentence, the Registered Owners shall have no right to payment from the City, the Corporation or the Trustee, in redemption of their Certificates or otherwise, except as expressly set forth in this Section. Upon the occurrence of a Termination Event the Certificates shall be payable from such moneys as may be obtained by the Trustee through the exercise of its rights under this Indenture. Upon the occurrence of a Termination Event, the Trustee may commence proceedings for leasing the Project, or the foreclosure, sale or assignment of the Trustee's interest in the Project as provided in Sections 7.02 and 7.05 of this Indenture, and may call the Certificates for redemption from and only to the extent of the Net Proceeds of such leasing, foreclosure, sale or assignment of the Project and all other moneys, if any, then on hand and being held by the Trustee for the Registered Owners at 100% of the principal amount thereof plus accrued interest to the redemption date. In the event that such Net Proceeds of foreclosure, leasing, sale, assignment and other moneys shall be insufficient to redeem the Certificates at 100% of the principal amount thereof plus accrued interest to the redemption date, then such Net Proceeds and other moneys shall be allocated proportionately among the Certificates, according to the principal amount thereof Outstanding. In the event that such Net Proceeds of such foreclosure, leasing, sale or assignment of the Project and other moneys are in excess of the amount required to redeem the Certificates then Outstanding at 100% of the principal amount thereof plus accrued interest to the redemption date, after the Certificates have been redeemed, such excess moneys shall be paid to the City. Prior to any distribution of the Net Proceeds in redemption of the Certificates pursuant to this Section, the Trustee shall be entitled to payment of its customary fees for all services rendered in connection with such foreclosure, leasing, sale or assignment, as well as reimbursement for all costs and expenses incurred thereby, from proceeds of such foreclosure, leasing, sale or assignment. If the Certificates are to be redeemed WP217102 -002/3 -28- subsequent to a Termination Event from such Net Proceeds of such foreclosure, leasing, sale or assignment of the Project for an amount less than the aggregate principal amount thereof plus accrued interest to the redemption date, no Registered Owner of any Certificate shall have any further claim for payment against the City, the Corporation or the Trustee. Section 4.03. Mandatory Sinking Fund Redemption The Certificates maturing on December 15, 2015, are subject to mandatory sinking fund redemption on December 15, 2010 and on each December 15 thereafter to and including December 15, 2014, at a redemption price equal to the principal amount thereof with interest accrued thereon to the date fixed for redemption, without premium, the particular Certificates to be redeemed to be selected by lot in such manner as the Trustee shall determine, in the amounts (after credit as provided below) set forth below: Year Principal (December 15) Amount 2010 $140,000 2011 150,000 2012 165,000 2013 175,000 2014 190,000 2015 (Maturity) 490,000 On or before the 30th day prior to each such sinking fund payment date, the Trustee shall proceed to select by lot the Certificates for redemption from such sinking fund on the next December 15, and on the 30th day prior to each sinking fund payment date give notice of such call. At its option, to be exercised on or before the 60th day next preceding any such sinking fund redemption date, the City may (a) deliver to the Trustee for cancellation Certificates subject to mandatory sinking fund redemption as herein provided in any aggregate principal amount desired, and (b) receive a credit in respect of its sinking fund redemption obligation for any such Certificates which prior to said date have been redeemed (otherwise than through the operation of the sinking fund) and canceled by the Trustee and not theretofore applied as a credit against any sinking fund redemption obligation. Each -29- WP217102 -002/3 such Certificate so delivered or previously redeemed shall be credited by the Trustee at the principal amount thereof on the obligation of the City on such sinking fund redemption date, and, to the extent of any excess, to the next annual sinking fund redemption date or dates, and the principal amount of Certificates to be redeemed by operation of such sinking fund on such date or dates shall be accordingly reduced. Section 4.04. Notice of Redemption Notice of the call for any redemption, identifying the Certificates or portions thereof to be redeemed and specifying the terms of such redemption, shall be given by the Trustee, upon being satisfactorily indemnified as to expenses, by mailing a copy of the redemption notice, by registered or certified mail, at least 30 days and not more than 60 days prior to the date fixed for redemption and to the Registered Owner of each Certificate to be redeemed at the address shown on the registration books; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of any proceedings for the redemption of Certificates as to which no such failure has occurred. Any notice mailed as provided in this Section shall be conclusively presumed to have been duly given, whether or not the Registered Owner receives the notice. If at the time of mailing of notice of redemption there shall not have been deposited with the Trustee moneys sufficient to redeem all the Certificates called for redemption, which moneys are or will be available for redemption of Certificates, such notice will state that it is conditional upon the deposit of the redemption moneys with the Trustee not later than the opening of business on the redemption date, and such notice shall be of no effect unless such moneys are so deposited. Section 4.05. Redemption Payments Prior to the date fixed for redemption, funds shall be deposited with the Trustee to pay, and the Trustee is hereby authorized and directed to apply such funds to the payment of, the Certificates called, together with accrued interest thereon to the redemption date, and any required premium. Upon the giving of notice and the deposit of such funds as may be available for redemption pursuant to this Indenture (which, in the case of redemption pursuant to Section 4.02 above, may be less than the full principal amount of the Outstanding Certificates and accrued interest thereon to the redemption date), interest on the Certificates or portions thereof thus called shall no longer accrue after the date fixed for redemption. -30- WP217102 -002/3 The Trustee shall pay to the Registered Owners of Certificates so redeemed, the amounts due on their respective Certificates, at the principal corporate trust office of the Trustee upon presentation and surrender of the Certificates; provided, however, that, if redeemed in part, the Certificates may be redeemed only in multiples of $5,000. Redemption payments shall be accompanied by a written designation prepared by the Trustee stating the portion of the payment representing the unpaid principal amount of the Certificate immediately prior to the payment, the portion of the payment representing interest, and the remaining portion, if any, which shall be designated and paid as a redemption premium. Section 4.06. Cancellation All Certificates which have been redeemed shall not be reissued but shall be canceled and cremated or otherwise destroyed by the Trustee in accordance with Section 2.10 hereof. Section 4.07. Delivery of New Certificates Upon Partial Redemption of Certificates Upon surrender and cancellation of the Certificates for redemption in part only, a new Certificate or Certificates of the same maturity and of authorized denomination in an aggregate principal amount equal to the unredeemed portion thereof, shall be executed on behalf of and delivered by the Trustee. The expenses of such execution, delivery and exchange shall be paid by the City as Additional Rentals under the Lease. ARTICLE V INVESTMENTS Section 5.01. Investment of Moneys All moneys held as part of the Certificate Fund, the Construction Fund, the Reserve Fund, the Extraordinary Redemption Fund, the Expenses Fund or any other fund or account created hereunder or under the Lease shall be deposited or invested and reinvested by the Trustee, at the direction of the City, in Permitted Investments; provided, however, that the Trustee shall make no deposits or investments of any fund or account created hereunder which shall interfere with or prevent withdrawals for payment of the Cost of Construction or for payment of the Certificates at or before maturity or interest thereon as required hereunder; and provided further, however, that all amounts representing accrued and capitalized interest on the Certificates shall be held by the Trustee in the Certificate Fund, pledged solely to the payment of interest on the Certificates, and invested only in Permitted Investments described in subparagraphs (a) and (g), as such term is defined in Article I of this Indenture. If the amount on -31- WP217102 -002/3 deposit in the Reserve Fund shall be less than the Reserve Fund Requirement, the City shall pay the amount of such deficiency to the Trustee as an Additional Rental as set forth in the Lease and, upon receipt, the Trustee shall deposit such payment in the Reserve Fund. All investments and reinvestments of any amounts pursuant to this Indenture or the Lease shall be made in compliance with the requirements of the No Arbitrage Certificate executed by the City in connection with the issuance of the Certificates, unless the Trustee shall receive an opinion of nationally recognized municipal bond counsel acceptable to the City and the Trustee to the effect that an alternate investment or reinvestment shall not adversely affect the exclusion from gross income or alternative minimum taxable income, for purposes of federal income taxation, of interest on the Certificates, in which case such investment or reinvestment shall be made in accordance with such opinion. Any and all such deposits or investments shall be held by or under the control of the Trustee. The Trustee may make any and all such deposits or investments through its own investment department or the investment department of any bank or trust company under common control with the Trustee. The Trustee is specifically authorized to enter into agreements with itself or any other person, which agreements guarantee the repurchase of specific Permitted Investments at specific prices and provided that such Permitted Investments are held by a third party during the term thereof. Income from deposits or investments of moneys in the Reserve Fund shall be deposited in the Expenses Fund or the Certificate Fund under certain circumstances as provided in Section 3.08 of this Indenture; income from deposits or investments of moneys in the Extraordinary Redemption Fund shall be deposited into the Certificate Fund, as provided in Section 3.11 of this Indenture; and income from deposits or investments of moneys in each account of the Expenses Fund shall be deposited into the Certificate Fund under certain circumstances as provided in Section 3.12 of this Indenture; otherwise, deposits or investments shall at all times be a part of the fund or account from which the moneys used to acquire such deposits or investments shall have come, and all income and profits on such deposits or investments shall be credited to, and losses thereon shall be charged against, such fund or account. In computing the amount in any fund or account held under the provisions of this Indenture, obligations purchased as a deposit or investment of moneys therein shall be valued at the cost or market price thereof, whichever is lower, exclusive of accrued interest. With respect to all funds and accounts, valuation shall occur annually, except in the event of a withdrawal from -32- WP217102 -002/3 the Reserve Fund, whereupon obligations therein shall be valued immediately after such withdrawal. The Trustee shall sell and reduce to cash a sufficient amount of such deposits or investments whenever the cash balance in any fund or account created hereunder is insufficient to satisfy the purposes of such fund or account. Section 5.02. Arbitrage Certification In reliance on the direction of investments by the City as provided in Section 5.01 of this Indenture, and in reliance on the covenants of the City in Section 11.7 of the Lease, the Trustee certifies and covenants to and for the benefit of the Registered Owners that so long as any of the Certificates remain outstanding, moneys in any fund or account held by the Trustee under this Indenture, whether or not such moneys were derived from the proceeds of the sale of the Certificates or from any other source, will not be knowingly deposited or invested in a manner which will cause the Certificates to be classified as ''arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended. ARTICLE VI DISCHARGE OF INDENTURE If, when the Certificates secured hereby shall become due and payable in accordance with their terms or otherwise as provided in this Indenture, the whole amount of the principal of, premium, if any, and interest due and payable upon all of the Certificates shall be paid (or, in the case of redemption of the Certificates pursuant to Section 4.01(d) of this Indenture, if full or partial payment of the Certificates and interest thereon is made as provided in Section 4.02 of this Indenture), or provision shall have been made for the payment of the same, together with all other sums payable hereunder, then the right, title and interest of the Trustee in and to the Trust Estate and all covenants, agreements and other obligations of the Corporation and the City to the Trustee and the Registered Owners shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, upon the request of the City, the Trustee and the Corporation shall transfer and convey to the City all property assigned, pledged or mortgaged to the Trustee by the Corporation then held by the Corporation or by the Trustee pursuant to this Indenture, and the Corporation and the Trustee shall execute such documents as may be reasonably required by the City and shall turn over to the City any surplus in any fund created under this Indenture except the Rebate Fund. -33- WP217102 -002/3 All outstanding Certificates shall, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed in this Article VI if (a) in case said Certificates are to be redeemed on any date prior to their maturity, the City shall have given to the Trustee in form satisfactory to the Trustee irrevocable instructions to give, on a date in accordance with the provisions of Section 4.04 hereof, notice of redemption of such Certificates on said redemption date, such notice to be given in accordance with the provisions of Section 4.04 hereof, (b) there shall have been deposited with the Trustee either moneys in an amount which shall be sufficient, or Federal Securities which shall not contain provisions permitting the redemption thereof at the option of the issuer, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which, together with the moneys, if any, deposited with or held by the Trustee at the same time, shall be sufficient to pay when due the principal of, premium, if any, and interest due and to become due on said Certificates on and prior to the redemption date or maturity date thereof, as the case may be, and (c) in the event said Certificates are not by their terms subject to redemption within the next 60 days, the City shall have given the Trustee in form satisfactory to it irrevocable instructions to give, as soon as practicable in the same manner as the notice of redemption is given pursuant to Section 4.04 hereof, a notice to the Registered Owners of such Certificates that the deposit required by (b) above has been made with the Trustee and that said Certificates are deemed to have been paid in accordance with this Section and stating such maturity or redemption date upon which moneys are to be available for the payment of the principal of, premium, if any, and interest on said Certificates. Neither the Federal Securities nor moneys deposited with the Trustee pursuant to this Section or principal or interest payments on any such Federal Securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of, premium, if any, and interest on said Certificates; provided any cash received from such principal or interest payments on such Federal Securities deposited with the Trustee, if not then needed for such purpose, shall, to the extent practicable, be reinvested in Federal Securities of the type described in clause (b) of this paragraph maturing at the times and in amounts sufficient to pay when due the principal of, premium, if any, and interest to become due on said Certificates on or prior to such redemption date or maturity date thereof, as the case may be. At such time as any Certificates shall be deemed paid as aforesaid, such Certificates shall no longer be secured by or entitled to the benefits of this Indenture and the Lease, except for the purpose of exchange and transfer and any payment from such moneys or Federal Securities deposited with the Trustee. WP217102 -002/3 -34- „ISH11 X111,11- %_ The release of the obligations of the Corporation under this Section shall be without prejudice to the rights of the Trustee to be paid reasonable compensation for all services rendered by it hereunder and all its reasonable expenses, charges and other disbursements incurred with respect to the administration of the trust hereby created and the performance of its powers and duties hereunder. ARTICLE VII DEFAULTS AND REMEDIES Section 7.01. Events of Default If any of the following events occur it is hereby defined as and shall be deemed an "Event of Default” under this Indenture: (a) default by the City in the payment of Base Rentals or Additional Rentals; (b) The occurrence of a Termination Event; or (c) The occurrence of an Event of Default as provided in Section 14.1 of the Lease. Section 7.02. Remedies on Default Upon the occurrence of an Event of Default described in Section 7.01(b) of this Indenture, the Trustee shall terminate the Lease Term, shall become entitled to possession of the Project, and shall give notice to the City to vacate the Project (leaving the Equipment) as provided in Sections 6.6 and 14.2 of the Lease, as the case may be. The Trustee shall proceed to foreclose on the Project, and shall exercise the rights and remedies of a secured party under the Colorado Uniform Commercial Code with respect to the Equipment; and the Trustee may, or as provided in Section 7.03 of this Indenture, shall, without any further demand or notice, take one or any combination of the following additional remedial steps: (a) In the event that the Trustee deems a delay in sale of the Project to be in the best interests of the Registered Owners, the Trustee may temporarily lease the Project or any portion thereof for the benefit of the Registered Owners. (b) The Trustee, on behalf of the Corporation, may recover from the City: (i) the portion of Base Rentals and Additional Rentals which would otherwise have been payable under the Lease allocable to any period in which the City continues to occupy the Project; and -35- WP217102 -002/3 (ii) Base Rentals and Additional Rentals which would otherwise have been payable by the City under the Lease during the remainder, after the City vacates the Project, of the Original Term or Renewal Term in which such Event of Default occurs; provided, however, that if the Trustee does not proceed to foreclose and sell the Project reasonably promptly after such Event of Default, the Trustee shall be obligated to the City to use its best efforts to lease the Project for the remainder of such Original or Renewal Term, as provided in paragraph (a) of this Section 7.02, and the Net Proceeds of such leasing shall be offset against the amount recoverable from the City under this paragraph (ii). (c) The Trustee may take whatever action at law or in equity may appear necessary or desirable to enforce its rights in and to the Project and any other rights of the Registered Owners. No right or remedy is intended to be exclusive of any other rights or remedies, but each and every such right or remedy shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or by statute. However, notwithstanding any other provision of the Lease or this Indenture, any and all remedies against the City under the Lease or this Indenture shall be limited as provided in Section 14.3 of the Lease. If any Event of Default shall have occurred, the Registered Owners of a majority in aggregate principal amount of Certificates then Outstanding and indemnified as provided in Section 8.01(m) hereof, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Section as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Registered Owners. Upon the occurrence of an Event of Default, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Registered Owners under this Indenture, the Trustee shall be entitled, as a matter of right, forthwith, to the appointment, ex parte, of a receiver or receivers of the Trust Estate and of the revenues, earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer. The Corporation hereby expressly waives any right to notice or a hearing and, if requested to do so by the Trustee, will consent to the appointment of any receiver as aforesaid. The Trustee may be appointed as such receiver. -36- WP217102 -002/3 Section 7.03. Majority of Registered Owners May Control Proceedings Anything in this Indenture to the contrary notwithstanding, the Registered Owners of a majority in aggregate principal amount of the Certificates then Outstanding, shall have the right, at any time, to the extent permitted by law, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the time, method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture, or for the appointment of a receiver, and any other proceedings hereunder; provided that such direction shall not be otherwise than in accordance with the provisions hereof. The Trustee shall not be required to act on any direction given to it pursuant to this Section until the indemnity described in Section 8.01(m) of this Indenture is furnished to it by such Registered Owners. Section 7.04. Rights and Remedies of Registered Owners No Registered Owner shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of this Indenture or for the execution of any trust hereof or for the appointment of a receiver or any other remedy hereunder, unless (a) a default has occurred of which the Trustee has been notified as provided in Section 8.01(h) hereof, or of which by said Section it is deemed to have notice; (b) such default shall have become an Event of Default as defined in Section 7.01 of this Indenture; (c) the Registered Owners of not less than a majority in aggregate principal amount of Certificates then Outstanding shall have made written request to the Trustee and shall have offered reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such action, suit or proceedings in its own name; (d) such Registered Owners shall have offered to the Trustee indemnity as provided in Section 8.01(m) hereof; and (e) the Trustee shall thereafter fail or refuse to exercise the powers hereinbefore granted, or to institute such action, suit or proceeding in its own name. The foregoing conditions are hereby declared in every case to be conditions precedent to the execution of the powers and trusts of this Indenture, and to any action or cause of action for the enforcement of this Indenture, or for the appointment of a receiver or for any other remedy hereunder; it being understood and intended that no one or more Registered Owners shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture by any action or to enforce any right hereunder except in the manner herein provided and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of the Registered Owners of all Certificates then outstanding. -37- WP217102-002/3 Nothing contained in this Indenture shall, however, affect or impair the right of any Registered Owner to enforce the payment of the principal of, premium, if any, and interest on any Certificate at and after the maturity thereof. Section 7.05. Purchase of Project by Registered Owners or Trustee; Application of Certificates Toward Purchase Price Upon the occurrence of an Event of Default under this Indenture, the lien on the Project created and vested in the Trustee hereunder may be foreclosed either by sale at public auction or by proceedings in equity. Upon any such sale, any Registered Owner or the Trustee may bid for and purchase the Project and, upon compliance with the terms of sale, may hold, retain and possess and dispose of such property in their own absolute right without further accountability; and any purchaser at any such sale may, if permitted by law, after allowing for the proportion of the total purchase price required to be paid in cash for the costs and expenses of the sale, compensation and other charges, in paying purchase money, turn in all Certificates then outstanding in lieu of cash, to the amount which shall, upon distribution of the Net Proceeds of such sale, be payable thereon. If the Trustee shall acquire title to the Project as a result of any such foreclosure sale, or any proceeding or transaction in lieu of foreclosure, the Trustee shall thereafter sell the Project (except as provided in paragraph (a) of Section 7.02 of this Indenture); and may take any further lawful action with respect to the Project which it, being advised by counsel and shall deem to be in the best interest of the Registered Owners, including but not limited to the enforcement of all rights and remedies set forth in the Lease and this Indenture and the taking of all other courses of action permitted therein or herein. Section 7.06. Waiver of Appraisement, Valuation, Stay and Extension The Corporation agrees, to the extent permitted by law, that in case of the occurrence of an Event of Default, neither the Corporation nor anyone claiming through or under the Corporation shall or will set up, claim or seek to take advantage of any appraisement, valuation, stay or extension laws now or hereafter in force in order to prevent or hinder the enforcement or foreclosure of this Indenture, or the absolute sale of the Trust Estate, or the final and absolute putting into possession thereof, immediately after such sale, of the purchasers thereat; and the Corporation, for itself and all who may at any time claim through or under the Corporation, hereby waives, to the full extent that it may lawfully do so, the benefit of all such laws, and any and all right to have the estates comprised in the security intended to be hereby created and marshalled upon -38- WP217102 -002/3 any foreclosure of the lien hereof and agrees that the Trustee or any court having jurisdiction to foreclose such lien may sell the Project as an entirety; provided, however, that Corporation, for itself and all who may at any time claim through or under the Corporation, shall retain all rights of redemption. Section 7.07. Trustee May Enforce Rights Without Certificates All rights of action and claims under this Indenture or any of the Certificates outstanding hereunder may be enforced by the Trustee without the possession of any of the Certificates or the production thereof in any trial or proceedings relative thereto; and any suit or proceeding instituted by the Trustee shall be brought in its name as the Trustee, without the necessity of joining as plaintiffs or defendants any Registered Owners of the Certificates, and any recovery of judgment shall be for the ratable benefit of the Registered Owners of the Certificates, subject to the provisions of this Indenture. Section 7.08. Delay or Omission No Waiver No delay or omission of the Trustee or of any Registered Owner to exercise any right or power accruing upon any default shall exhaust or impair any such right or power or shall be construed to be a waiver of any such default, or acquiescence therein; and every power and remedy given by this Indenture may be exercised from time to time and as often as may be deemed expedient. Section 7.09. No Waiver of One Default to Affect Another No waiver of any default hereunder, whether by the Trustee or the Registered Owners, shall extend to or affect any subsequent or any other then existing default or shall impair any rights or remedies consequent thereon. Section 7.10. Discontinuance of Proceedings on Default; Position of Parties Restored In case the Trustee or the Registered Owners shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or the Registered Owners, then and in every such case the Corporation, the City, the Trustee and the Registered Owners shall be restored to their former positions and rights hereunder with respect to the Trust Estate, and all rights, remedies and powers of the Trustee and the Registered Owners shall continue as if no such proceedings had been taken. Section 7.11. Waivers of Events of Default The Trustee may in its discretion waive any Event of Default hereunder, and notwithstanding anything else to the contrary contained in WP217102 -002/3 -39- this Indenture shall do so upon the written request of the Registered Owners of two - thirds in aggregate principal amount of all the Certificates then Outstanding; provided, however, that there shall not be waived without the consent of the Registered Owners of 100% of the Certificates then Outstanding as to which the Event of Default exists (a) any Event of Default in the payment of the principal of or premium on any outstanding Certificates at the date of maturity specified therein or (b) any default in the payment when due of the interest on any such Certificates, unless prior to such waiver or rescission, all arrears of interest and all arrears of payments of principal and premium, if any, then due, as the case may be, and all expenses of the Trustee in connection with such default shall have been paid or provided for. In case of any such waiver, or in case any proceedings taken by the Trustee on account of any such default shall have been discontinued or abandoned or determined adversely to the Trustee, then and in every such case the Corporation, the City, the Trustee and the Registered Owners shall be restored to their former positions and rights hereunder respectively, but no such waiver or rescission shall extend to any subsequent or other default, or impair any right consequent thereon. ARTICLE VIII CONCERNING THE TRUSTEE Section 8.01. Duties of the Trustee The Trustee hereby accepts the trusts imposed upon it by this Indenture and agrees to perform said trusts (including, without limitation, the delegation to the Trustee by the Corporation of all duties of the Corporation under the Lease), but only upon and subject to the following express terms and conditions, and any implied covenants or obligations which shall be read into this Indenture against the Trustee: (a) The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default has occurred (which has not been cured or waived) the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise as a reasonable and prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. -40- WP217102 -002/3 (b) The Trustee may execute any of the trusts or powers hereof and perform any of its duties by or through attorneys, ,agents, receivers or employees but shall be answerable for the conduct of the same in accordance with the standard specified above, and shall be entitled to act upon an Opinion of Counsel concerning all matters of trust hereof and the duties hereunder, and may in all cases pay such reasonable compensation to all such attorneys, agents, receivers and employees as may reasonably be employed in connection with the trusts hereof. The Trustee may act upon an Opinion of Counsel and shall not be responsible for any loss or damage resulting from any action or nonaction taken by or omitted to be taken in good faith in reliance upon such Opinion of Counsel. (c) The Trustee shall not be responsible for any recital herein or in the Certificates (except in respect to the execution of the Certificates on behalf of the Trustee), or for the recording or rerecording, filing or refiling of the Lease or this Indenture or of any supplements thereto or hereto or instruments of further assurance, or collecting any insurance moneys or for the validity of the execution by the Corporation of this Indenture or of any supplements hereto or instruments of further assurance, or for the sufficiency of the security for the Certificates issued hereunder or intended to be secured hereby, or for the value of or title to the Project, and the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions or agreements on the part of the Corporation or the City, except as provided herein; but the Trustee may require of the Corporation or the City full information and advice as to the performance of the covenants, conditions and agreements aforesaid. The Trustee shall have no obligation to perform any of the duties of the City under the Lease; and the Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with Article V hereof. (d) The Trustee shall not be accountable for the use of any Certificates authenticated or delivered hereunder. The Trustee may become the Registered Owner of the Certificates with the same rights which it would have if not the Trustee. (e) The Trustee shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document -41- WP217102 -002/3 believed to be genuine and correct and to have been signed or sent by the proper person or persons. Any action taken by the Trustee pursuant to this Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the Registered Owner of any Certificate shall be conclusive and binding upon all future Registered Owners of the same Certificate and upon any Certificates issued in place thereof. (f) As to the existence or nonexistence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a certificate signed on behalf of the Corporation by the Corporation Representative, or on behalf of the City by the City Representative or such other person as may be designated for such purpose by a certified resolution, as sufficient evidence of the facts therein contained, and, prior to the occurrence of a default of which the Trustee has been notified as provided in subsection (h) of this Section or of which by said subsection it is deemed to have notice, shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction or action is necessary or expedient, but may as is advisable secure such other evidence as is deemed by it to be necessary or expedient, but shall in no case be bound to secure the same. (g) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and the Trustee shall not be answerable for other than its negligence or willful default. (h) The Trustee shall not be required to take notice or be deemed to have notice of any default hereunder except failure by the City or the Corporation to cause to be made any of the payments to the Trustee required to be made by Article III hereof, unless the Trustee shall be specifically notified in writing of such default by the Corporation or the City, or by the Registered Owners of at least 25% in aggregate principal amount of Certificates then Outstanding, and all notices or other instruments required by this Indenture to be delivered to the Trustee, must, in order to be effective, be delivered at the principal corporate trust office of the Trustee, and in the absence of such notice so delivered, the Trustee may conclusively assume there is no default except as aforesaid. WP217102 -002/3 -42- (i) All moneys received by the Trustee shall, until used or applied or invested as herein provided, be held in trust in the manner and for the purposes for which they were received but need not be segregated from other funds except to the extent required by this Indenture or law. The Trustee shall not be under any liability for interest on any moneys received hereunder except such as may be agreed upon. (j) At any and all reasonable times the Trustee, and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right, but shall not be required, to inspect any and all of the property pledged herein, including all books, papers and records of the Corporation or the City pertaining to the Project. (k) The Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises. (1) Notwithstanding anything in this Indenture contained, the Trustee shall have the right, but shall not be required, to demand in respect of the execution and delivery of any Certificates, the withdrawal of any cash, or any action whatsoever within the purview of this Indenture, any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, in addition to that by the terms hereof required, as a condition of such action by the Trustee deemed desirable for the purpose of establishing the right of the Corporation or the City to the execution and delivery of any Certificates, the withdrawal of any cash, or the taking of any other action by the Trustee. (m) Before taking any action hereunder the Trustee may require that satisfactory indemnity be furnished to it by the Registered Owners for the reimbursement of all expenses which it may incur and to protect it against all liability, except liability which may result from its negligence or willful default, by reason of any action so taken. Section 8.02. Fees and Expenses of Trustee The Trustee shall be entitled to payment and reimbursement for its reasonable fees for its services rendered hereunder as and when the same become due and all expenses reasonably and necessarily made or incurred by the Trustee in connection with such services as and when the same become due as provided in Section 6.2 of the Lease. -43- WP217102 -002/3 Section 8.03. Resignation or Replacement of Trustee The present or any future Trustee may resign by giving written notice to the City and to the Corporation not less than 60 days before such resignation is to take effect. Such resignation shall take effect only upon the appointment of a successor qualified as provided in the third paragraph of this Section 8.03. The present or any future Trustee may be removed at any time by an instrument in writing, executed by the Registered Owners of a majority in aggregate principal amount of the Certificates then Outstanding and delivered to the Trustee. In case the present or any future Trustee shall at any time resign or be removed or otherwise become incapable of acting, a successor may be appointed by the Registered Owners of a majority of the outstanding certificates by an instrument or concurrent instruments signed by such Registered Owners, or their attorneys -in -fact duly appointed; provided that the City may, by an instrument executed by order of the City Council, appoint a successor until a new successor shall be appointed by the Registered Owners as herein authorized. The City upon making such appointment shall forthwith give notice thereof to each Registered Owner and to the Corporation, which notice may be given concurrently with the notice of resignation given by any resigning Trustee. Any successor so appointed by the City shall immediately and without further act be superseded by a successor appointed in the manner above provided by the Registered Owners of a majority in aggregate principal amount of the Certificates Outstanding. Every successor shall always be a bank or trust company in good standing, qualified to act hereunder, and having a capital and surplus of not less than $50,000,000. Any successor appointed hereunder shall execute, acknowledge and deliver to the City and to the Corporation an instrument accepting such appointment hereunder, and thereupon such successor shall, without any further act, deed or conveyance, become vested with all the estates, properties, rights, powers and trusts of its predecessor in the trust hereunder with like effect as if originally named as Trustee herein; but the Trustee retiring shall, nevertheless, on the written demand of its successor, execute and deliver an instrument conveying and transferring to such successor, upon the trusts herein expressed, all the estates, properties, rights, powers and trusts of the predecessor, which shall duly assign, transfer and deliver to the successor all properties and moneys held by it under this Indenture. Should any instrument in writing from the City or the Corporation be required by any successor for more fully certainly vesting in and confirming to it, the said deeds, conveyances and instruments in writing shall be made, executed, acknowledged and delivered by the City or the Corporation on request of such successor. -44- WP217102 -002/3 The instruments evidencing the resignation or removal of the Trustee and the appointment of a successor hereunder, together with all other instruments provided for in this Section shall be filed and /or recorded by the successor the Trustee in each recording office, if any, where this Indenture shall have been filed and /or recorded. Section 8.04. Conversion, Consolidation or Merger of Trustee Any bank or trust company into which the Trustee or its successor may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its trust business as a whole shall be the successor of the Trustee under this Indenture with the same rights, powers, duties and obligations and subject to the same restrictions, limitations and liabilities as its predecessor, all without the execution or filing of any papers or any further act on the part of any of the parties hereto or thereto, anything herein or therein to the contrary notwithstanding. In case any of the Certificates to be issued hereunder shall have been authenticated, but not delivered, any successor Trustee may adopt the certificate of any predecessor Trustee, and deliver the same as authenticated; and, in case any of such Certificates shall not have been authenticated, any successor Trustee may authenticate such Certificates in the name of such successor Trustee. Section 8.05. Intervention by Trustee In any judicial proceeding to which the Corporation or the City is a party and which in the opinion of the Trustee and its counsel has a substantial bearing on the interests of Registered Owners of the Certificates, the Trustee may intervene on behalf of Registered Owners of the Certificates, the Trustee may intervene on behalf of Registered Owners and shall do so if requested in writing or the Registered Owners of at least 25% in aggregate principal amount in Certificates then Outstanding. Section 8.06. Escrowed Deed and Bill of Sale The Trustee agrees to hold the escrowed deed and bill of sale provided for in Section 12.3 of the Lease, for the benefit of the City, to cooperate in any required modification, re- execution and redelivery of the deed and bill of sale, and to date and release the escrowed deed and bill of sale to the City, all as provided in said Section 12.3 of the Lease. The Trustee shall not be responsible for recording the escrowed deed. WP217102 -002/3 -45- ARTICLE IX SUPPLEMENTAL INDENTURES AND AMENDMENTS OF THE LEASE Section 9.01. Supplemental Indentures Not Requiring Consent of Registered Owners The Trustee and the Corporation may, with the written consent of the City, but without the consent of, or notice to, the Registered Owners, enter into such indentures or agreements supplemental hereto for any one or more or all of the following purposes: (a) To add to the covenants and agreements of Corporation contained in this Indenture other covenants and agreements to be thereafter observed by the Corporation; (b) To cure any ambiguity, or to cure, correct or supplement any defect or omission or inconsistent provision contained in this Indenture, or to make any provisions with respect to matters arising under this Indenture or for any other purpose if such provisions are necessary or desirable and do not adversely affect the interests of the Registered Owners; (c) To subject to this Indenture additional revenues, properties or collateral; or (d) To set forth the terms and conditions and other matters in connection with the issuance of Additional Certificates pursuant to Section 2.11 of this Indenture. Section 9.02. Supplemental Indentures Requiring Consent Exclusive of supplemental indentures covered by Section 9.01 hereof, the written consent of the City and the consent of the Registered Owners of not less than two- thirds in aggregate principal amount of the Certificates then Outstanding shall be required for the execution by the Corporation and the Trustee of any indenture or indentures supplemental hereto; provided, however, that without the consent of the Registered Owners of all the Certificates at the time Outstanding nothing herein contained shall permit, or be construed as permitting: (a) A change in the terms of redemption or maturity of the principal amount of or the interest on any Outstanding Certificate, or a reduction in the principal amount of or premium payable upon any redemption of any Outstanding Certificate or the rate of interest thereon, without the consent of the Registered Owner of such Certificate; WP217102 -002/3 -46- (b) The deprivation of the Registered Owner of any Certificate then Outstanding of the lien created by this Indenture (other than as originally permitted hereby); (c) A privilege or priority of any Certificate or Certificates over any other Certificate or Certificates; or (d) A reduction in the aggregate principal amount of the Certificates required for consent to such supplemental indenture. If at any time the City or the Corporation shall request the Trustee to enter into such supplemental indenture for any of the purposes of this Section, the Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed by registered or certified mail to the Registered Owners of the Certificates then Outstanding at the address shown on the registration books maintained by the Trustee. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the principal corporate trust office of the Trustee for inspection by all Registered Owners. If, within 60 days or such longer period as shall be prescribed by the City following the giving of such notice, the Registered Owners of not less than two - thirds in aggregate principal amount of the Certificates then Outstanding at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as herein provided, no Registered Owner shall have any right to object to any of the terms and provisions contained therein, or in the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Corporation from executing the same or from taking any action pursuant to the provisions thereof. Section 9.03. Execution of Supplemental Indenture The Trustee is authorized to join with the Corporation in the execution of any such supplemental indenture and to make further agreements and stipulations which may be contained therein, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects its rights, duties or immunities under this Indenture. Any supplemental indenture executed in accordance with the provisions of this Article shall thereafter form a part of this Indenture; and all the terms and conditions contained in any such supplemental indenture as to any provision authorized to be contained therein shall be deemed to be part of this Indenture for any and all purposes. In case of the execution and -47- WP217102 -002/3 delivery of any supplemental indenture, express reference may be made thereto in the text of the Certificates issued thereafter, if any, if deemed necessary or desirable by the Trustee. Section 9.04, Amendments, Etc., of the Lease Not Requiring Consent of Registered Owners The Corporation and the Trustee may, with the written consent of the City, but without the consent of or notice to the Registered Owners, consent to any amendment, change or modification of the Lease as may be required (a) by the provisions of the Lease or this Indenture, (b) for the purpose of curing any ambiguity or formal defect or omission in the Lease, (c) in order to more precisely identify the Project or to add additional improvements or properties acquired in accordance with the Lease and this Indenture (including the replacement, substitution or deletion of Equipment pursuant to Sections 9.2 and 9.3 of the Lease); (d) in connection with the issuance of Additional Certificates pursuant to Section 2.11 hereof, or (e) in connection with any other change therein which, in the judgment of the Trustee, is not to the prejudice of the Registered Owners. Section 9.05. Amendments, Etc., of the Lease Requiring Consent of Registered Owners Except for the amendments, changes or modifications permitted by Section 9.04 hereof, neither the Corporation nor the Trustee shall consent to any other amendment, change or modification of the Lease without the giving of notice and the written approval or consent of the Registered Owners of not less than two - thirds in aggregate principal amount of the Certificates at the time Outstanding given and procured as provided in Section 9.02 hereof. If at any time the City and the Corporation shall request the consent of the Trustee to any such proposed amendment, change or modification of the Lease, the Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment, change or modification to be given in the same manner as provided in Section 9.02 hereof. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the principal corporate trust office of the Trustee for inspection by all Registered Owners. ARTICLE X MISCELLANEOUS Section 10.01. Evidence of Signature of Registered Owners and Ownership of Certificates Any request, consent or other instrument which this Indenture may require or permit to -48- WP217102 -002/3 U slislllllelinigili _ _ be signed and executed by the Registered Owners may be in one or more instruments of similar tenor, and shall be signed or executed by such Registered Owners in person or by their attorneys appointed in writing. Proof of the execution of any such instrument or of an instrument appointing any such attorney, or the ownership of Certificates shall be sufficient (except as otherwise herein expressly provided) if made in the following manner, but the Trustee may, nevertheless, in its discretion require further or other proof in cases where it deems the same desirable: (a) The fact and date of the execution by any Registered Owner or his or her attorney of such instrument may be proved by the certificate of any officer authorized to take acknowledgments in the jurisdiction in which he or she purports to act that the person signing such request or other instrument acknowledged to him or her the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before a notary public. (b) The fact of the owning by any person of Certificates and the amounts and numbers of such Certificates, and the date of the owning of the same, may be proved by a certificate executed by any trust company, bank or bankers, wherever situated, stating that at the date thereof the party named therein did exhibit to an officer of such trust company or bank or to such bankers, as the property of such party, the Certificates therein mentioned, if such certificate shall be deemed by the Trustee to be satisfactory. The Trustee may, in its discretion, require evidence that such Certificates have been deposited with a bank, bankers or trust company before taking any action based on such ownership. In lieu of the foregoing the Trustee may accept other proofs of the foregoing as it shall deem appropriate. Any request or consent of the Registered Owner of any Certificate shall bind all future registered owners of such Certificate in respect of any thing done or suffered to be done by the City or the Trustee in accordance therewith. Section 10.02. Covenants of Corporation The Corporation hereby covenants to the Trustee for the benefit of the Registered Owners that the Corporation will observe and comply with the covenants of quiet enjoyment contained in Article V of the Lease, with its covenant to cooperate with the Trustee in the enforcement of the Lease (and as further provided in Section 7.4 of the Lease and with all of its -49- WP217102 -002/3 Ow representations and warranties under the Lease). The Corporation agrees that wherever in the Lease it is stated that the Corporation will notify the Trustee, or whenever the Lease gives the Trustee some right or privilege or in any way attempts to confer upon the Trustee the ability to protect the security for payment of the Certificates, that such part of the Lease shall be as if it were set forth in full in this Indenture. The Corporation agrees that the Trustee as assignee of the Corporation under the Lease may enforce, in its name or in the name of the Corporation, all rights of the Corporation and all obligations of the City under the Lease, for and on behalf of the Registered Owners, whether or not the Corporation is in default under this Indenture. The Trustee and the Corporation hereby agree that the Corporation shall not be obligated to make any payments or to take any other action with respect to the Project under the Lease. Section 10.03. Inspection of the Project The Trustee and its duly authorized agents shall have the right, on reasonable notice to the City, at all reasonable times, to examine and inspect the Project. The Trustee and its duly authorized agents shall also be permitted, at all reasonable times, to examine the books, records, reports and other papers of the City with respect to the Project. Section 10.04. Parties Interested Herein With the exception of rights herein expressly conferred on the City, nothing in this Indenture expressed or implied is intended or shall be construed to confer upon, or to give to, any person other than, the City, the Corporation, the Trustee and the Registered Owners, any right, remedy or claim under or by reason of this Indenture or any covenant, condition or stipulation hereof; and all the covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of the Corporation or the Trustee shall be for the sole and exclusive benefit of the City, the Corporation, the Trustee and the Registered Owners. Section 10.05. Titles, Headings, Captions, Etc The titles, captions and headings of the articles, sections and subdivisions of this Indenture have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof. Section 10.06. Severability In the event any provision of this Indenture shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. -50- WP217102 -002/3 Section 10.07. Governing Law This Indenture shall be governed and construed in accordance with the laws of the State of Colorado, without regard to conflict of laws principles. Section 10.08. Execution in Counterparts This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 10.09. Notices All notices, certificates or other communications shall be sufficiently given and shall be deemed given when delivered or mailed by certified or registered mail, postage prepaid, as follows: if to the City, to City of Pueblo, Colorado, One City Hall Place, Pueblo, Colorado 81003, Attention: City Manager; if to the Corporation, to City of Pueblo, Colorado Municipal Building Corporation, One City Hall Place, Pueblo, Colorado 81003, Attention: President; if to the Original Purchaser, to Norwest Investment Services Inc., 1700 Broadway, Denver, Colorado 80274 -8736, Attention: Municipal Bond Department; and if to the Trustee, to The Pueblo Bank and Trust Company, 301 West Fifth Street, Pueblo, Colorado 81003, Attention: Corporate Trust Department. The City, the Corporation, the Original Purchaser and the Trustee may, by written notice, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. Section 10.10. Payments Due on Holidays If the date for making any payment or the last day for performance of any act or the exercising of any right, as provided in this Indenture, shall not be a Business Day, such payment may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided in this Indenture. Section 10.11. Corporation, City and Trustee Representatives Whenever under the provisions hereof the approval of the Corporation, the City or the Trustee is required, or the City, the Corporation or the Trustee is required to take some action at the request of the other, unless otherwise provided, such approval or such request shall be given for the Corporation by an Corporation Representative, for the City by the City Representative, and for the Trustee by the Trustee Representative, and the Corporation, the City and the Trustee shall be authorized to act on any such approval or request. Section 10.12. Immunity of Officers, Employees and Agents of City and Corporation No recourse shall be had for the payment of the principal of or premium, if any, or WP217102 -002/3 -51- interest on any of the Certificates or for any claim based thereon or upon any obligation, covenant or agreement in this Indenture or the Lease contained against any past, present or future officer, director, employee or agent of the City or the Corporation, or of any successor public corporation of the City, as such, either directly or through the City or the Corporation or any successor public corporation to the City, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, directors, employees or agents as such is hereby expressly waived and released as a condition of and consideration for the execution of this Indenture and the Lease and the issuance of such Certificates. Section 10.13. No Unreasonable Withholding of Consent or Approval Notwithstanding any implication to the contrary in this Indenture, any time consent or approval is required of the City, Trustee by this Indenture, such consent or approval will not be unreasonably withheld. -52- WP217102 -002/3 IN WITNESS WHEREOF, the Corporation and the Trustee have caused this Indenture to be executed in their respective corporate names and their respective corporate seals to be hereto affixed and attested by their duly authorized officials or officers, all as of the date first above written. [SEAL] Attest: By Secretary [SEAL] CITY OF PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION By President THE PUEBLO BANK AND TRUST COMPANY, as Trustee Attest: Title: Title: -53- WP217102 -002/3 �.�� ■II.�III�I'�I ®� III. .'.� STATE OF COLORADO ] ] ss. CITY OF PUEBLO ) The foregoing instrument was acknowledged before me as of the day of July 1992, by , as President, and , as Secretary, of the City of Pueblo, Colorado Municipal Building Corporation, a Colorado nonprofit corporation. WITNESS my hand and official seal. [SEAL] My commission expires: Notary Public -54- WP217102 -002/3 STATE OF COLORADO ] ] ss. CITY AND COUNTY ] OF DENVER The foregoing instrument was acknowledged before me as of the day of July 1992, by , as and by , as of The Pueblo Bank and Trust Company, a State of Colorado chartered banking association. WITNESS my hand and official seal. [SEAL] My commission expires: Notary Public for the State of Colorado -55- WP217102 -002/3 ...A EXHIBIT A CERTIFICATE OF PARTICIPATION Evidencing Assignment of a Proportionate Undivided Interest in Rights to Receive Certain Revenues Pursuant to the Public Works Lease Purchase Agreement Between CITY OF PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION, as Corporation, and CITY OF PUEBLO, COLORADO, as Lessee Qr*� INTEREST RATE: MATURITY DATE December 15, REGISTERED OWNER: PRINCIPAL SUM: ORIGINAL ISSUE DATE: CUSIP: July 1, 1992 DOLLARS THIS CERTIFIES THAT THE REGISTERED OWNER (named above), or registered assigns, has a proportionate undivided interest in rights to receive certain revenues, as described below, pursuant to an annually renewable Public Works Lease Purchase Agreement dated as of July 1, 1992 (which agreement as from time to time amended is referred to herein as the "Lease ''), between CITY OF PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION, a Colorado nonprofit corporation, as lessor (the "Corporation ") and CITY OF PUEBLO, COLORADO (the "City "), as lessee. The interest of the Registered Owner of this certificate is secured as provided in the Lease and in the Mortgage and Indenture of Trust, dated as of July 1, 1992 (which indenture as from time to time amended is herein referred to as the "Indenture ''), between the Corporation and THE PUEBLO BANK AND TRUST COMPANY, as trustee, or its successor (the "Trustee ") for the registered owners of the Certificates of Participation issued thereunder, including this certificate (the "Certificates "), whereby the rights (with certain exceptions) of the Corporation, as lessor, under the Lease have been assigned by the Corporation to the Trustee for the benefit of the registered owners of the Certificates. Under the Indenture, the Corporation has also granted to the Trustee, for the benefit of the registered owners of the Certificates, a leasehold mortgage on and a security interest in the Project (as hereinafter defined). Pursuant to the Lease and the Indenture, the Registered Owner A -1 WP217102 -002/3 hereof is entitled to receive, solely out of and to the extent available from the sources hereinafter identified, on the Maturity Date (stated above) (or earlier as hereinafter provided), the Principal Sum (stated above), and interest thereon as described in the Indenture at the Interest Rate (stated above) per annum payable on each June 15 and December 15 of each year, commencing June 15, 1993. Principal of and any premium on this certificate are payable in lawful money of the United States of America upon presentation and surrender thereof at the principal corporate trust office of the Trustee located in Pueblo, Colorado,, or its successor; and interest on this certificate is payable to the Registered Owner hereof by check or draft of the Trustee, or its successor, to be mailed to such Registered Owner, on or before each interest payment date (or, if such interest payment date is not a Business Day, as defined in the Indenture, on or before the next succeeding Business Day), at his or her address as it last appears in the registration books kept by the Trustee. REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS CERTIFICATE SET FORTH ON THE REVERSE HEREOF WHICH SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH HEREIN. This certificate shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Lease, until authenticated by the Trustee. A -2 WP217102 -002/3 IN WITNESS WHEREOF, this certificate has been authenticated by the facsimile signature of the authorized representatives of the Corporation and the City, and has been authenticated with the manual signature of an authorized officer of the Trustee all as of the date set forth below. (FACSIMILE OF THE CORPORATION'S SEAL) Attest: By Secretary (FACSIMILE OF THE CITY'S SEAL) Attest: By City Clerk CITY OF PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION By President CITY OF PUEBLO, COLORADO IN President of the City Council A -3 WP217102 -002/3 CERTIFICATE OF AUTHENTICATION This certificate is one of the Certificates evidencing a proportionate interest in rights to receive certain revenues pursuant to the within - mentioned Lease and Indenture. Dated: THE PUEBLO BANK AND TRUST COMPANY, as Trustee By (Manual Signature) Authorized Officer [BACK OF CERTIFICATE] CERTIFICATE OF PARTICIPATION EVIDENCING ASSIGNMENT OF A PROPORTIONATE UNDIVIDED INTEREST IN RIGHTS TO RECEIVE CERTAIN REVENUES PURSUANT TO THE PUBLIC WORKS LEASE PURCHASE AGREEMENT BETWEEN CITY OF PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION, AS CORPORATION, AND CITY OF PUEBLO, COLORADO, AS LESSEE This certificate is one of an issue of Certificates evidencing assignments of proportionate undivided interests in rights to receive certain Revenues, as described below, pursuant to the Lease and the Indenture, issued, in an aggregate principal amount of $2,960,000, pursuant to the Indenture for the purpose, among others, of providing funds to refund certain presently outstanding certificates of participation and to finance the construction, acquisition, improvement and equipping of a municipal public works and transportation facility (the ''Building "), on a certain parcel of land (the ''Land '') owned by the Corporation and leased to the City pursuant to the Lease and to make certain deposits to the funds and accounts established pursuant to the Indenture. Under the Lease, the Building, the Land and the Equipment, as defined in the Lease (collectively, the "Project "), have been leased by the Corporation to the City; and the City has agreed to pay directly to the Trustee semiannual rental payments (the ''Base Rentals ") in A -4 WP217102 -002/3 consideration for its right to use the Project, the proceeds of which are required by the Indenture to be distributed by the Trustee to the payment of the principal of, premium, if any, and interest on the Certificates. In addition to the Base Rentals, the City has agreed to make certain other payments (the "Additional Rentals ") sufficient to pay the fees and expenses of the Trustee, certain insurance premiums, taxes, utility charges, costs of maintenance and repair, payments to the Reserve Fund and the Rebate Fund (each as defined in the Lease) and other expenses expressly required to be paid by the City under the Lease. The Lease is subject to annual renewal at the option of the City. The obligation of the City to pay Base Rentals and Additional Rentals under the Lease will terminate in the event that the City, for any reason, fails to budget and appropriate, specifically with respect to the Lease, moneys to pay all Base Rentals and reasonably estimated Additional Rentals during the next occurring renewal term of the Lease. In the event that the Lease Term (as defined in the Lease) is terminated by the City as set forth above (herein referred to as an "Event of Nonappropriation ") or is terminated by reason of an Event of Default (as defined in the Lease), the principal amount of this certificate and interest hereon will be payable from such moneys, if any, as may be available for such purpose, including any moneys received by the Trustee from leasing, selling or assigning its interest in the Project, or from repossession or liquidation of the Equipment. Under certain circumstances, this certificate and the interest hereon may also be payable from the Net Proceeds (as defined in the Lease) of title or casualty insurance policies, performance bonds of contractors for the Project, or condemnation awards, or from Net Proceeds received as a consequence of default under certain construction contracts. The Lease Term may also be terminated in the event that the City shall exercise its option to purchase the Project by making payment of the Purchase Option Price (as defined in the Lease). In the event that the City shall pay the Purchase Option Price, the proceeds thereof are required to be used to pay the principal of, premium, if any, and interest on the Certificates. It is provided in the Indenture that there may hereafter be issued additional Certificates ( ''Additional Certificates ") from time to time under certain terms and conditions, and if issued, such Additional Certificates will be equally and proportionately secured under and entitled to the protection given by the Indenture with the Certificates. Reference is hereby made to the Lease and the Indenture for a description of the rights, duties and obligations of the City, the A -5 WP217102 -002/3 i Corporation, the Trustee and the registered owners of the Certificates, the terms upon which Additional Certificates may be issued, the terms upon which the Certificates and any Additional Certificates are secured, the terms and conditions upon which the Certificates will be deemed to be paid at or prior to maturity or redemption of the Certificates upon the making of provision for the full or partial payment thereof, and the rights of the registered owners of the Certificates upon the occurrence of an Event of Default or an Event of Nonappropriation. NEITHER THE LEASE NOR THE CERTIFICATES CONSTITUTES A GENERAL OBLIGATION OR OTHER INDEBTEDNESS OF THE CITY WITHIN THE MEANING OF ANY CONSTITUTIONAL, STATUTORY OR CHARTER DEBT LIMITATION. NEITHER THE LEASE, THE INDENTURE NOR THE CERTIFICATES HAVE DIRECTLY OR INDIRECTLY OBLIGATED THE CITY TO MAKE ANY PAYMENTS BEYOND THOSE APPROPRIATED FOR ANY FISCAL YEAR IN WHICH THE LEASE SHALL BE IN EFFECT, EXCEPT TO THE EXTENT PAYABLE FROM THE PROCEEDS OF THE SALE OF THE CERTIFICATES AND INCOME FROM THE INVESTMENT THEREOF, FROM NET PROCEEDS OF CERTAIN INSURANCE POLICIES, PERFORMANCE BONDS AND CONDEMNATION AWARDS, FROM NET PROCEEDS RECEIVED AS A CONSEQUENCE OF DEFAULTS UNDER CONSTRUCTION CONTRACTS, FROM NET PROCEEDS OF LEASING, SALE OR ASSIGNMENT OF THE TRUSTEE'S INTEREST IN THE PROJECT, AND REPOSSESSION AND LIQUIDATION OF THE EQUIPMENT OR FROM OTHER AMOUNTS MADE AVAILABLE UNDER THE INDENTURE, THIS CERTIFICATE WILL BE PAYABLE DURING THE LEASE TERM SOLELY FROM BASE RENTALS TO BE PAID BY THE CITY UNDER THE LEASE AND THE INCOME FROM CERTAIN INVESTMENTS THEREUNDER. ALL PAYMENT OBLIGATIONS OF THE CITY UNDER THE LEASE, INCLUDING, WITHOUT LIMITATION, THE OBLIGATION OF THE CITY TO PAY BASE RENTALS, ARE FROM YEAR TO YEAR ONLY AND DO NOT CONSTITUTE A MANDATORY PAYMENT OBLIGATION OF THE CITY IN ANY FISCAL YEAR BEYOND A FISCAL YEAR IN WHICH THE LEASE SHALL BE IN EFFECT. THE LEASE IS SUBJECT TO ANNUAL RENEWAL AT THE OPTION OF THE CITY AND WILL BE TERMINATED UPON THE OCCURRENCE OF A TERMINATION EVENT. IN SUCH EVENT, ALL PAYMENTS FROM THE CITY UNDER THE LEASE WILL TERMINATE, AND THIS CERTIFICATE AND THE INTEREST HEREON WILL BE PAYABLE FROM CERTAIN MONEYS, IF ANY, HELD BY THE TRUSTEE UNDER THE INDENTURE AND ANY MONEYS MADE AVAILABLE BY ACTION OF THE TRUSTEE REGARDING THE PROJECT, THE CORPORATION HAS NO OBLIGATION TO MAKE ANY PAYMENTS ON THE CERTIFICATES. The Certificates are issuable solely as fully registered Certificates without coupons in denominations of $5,000 and any integral multiple thereof. This certificate is transferable by the Registered Owner hereof in person or by his or her attorney duly authorized in writing on the registration books kept at the principal A -6 WP217102 -002/3 corporate trust office of the Trustee upon surrender of this certificate together with a duly executed written instrument of transfer satisfactory to the Trustee. Upon such transfer, a new fully registered Certificate or Certificates without coupons and of the same maturity, of authorized denomination or denominations, for the same aggregate principal amount, will be issued to the transferee in exchange herefor, all upon payment of the charges and subject to the terms and conditions set forth in the Indenture. The Trustee may deem and treat the person in whose name this certificate is registered as the absolute owner hereof, whether or not this certificate shall be overdue, for the purpose of receiving payment and for all other purposes, and neither the City nor the Trustee shall be affected by any notice to the contrary. Certificates may be exchanged at the principal corporate trust office of the Trustee for a like aggregate principal amount of Certificates of the same date, maturity, series and interest rate, or for a like aggregate principal amount of Certificates of other authorized denominations of the same date, maturity, series and interest rate. The City shall authenticate and the Trustee shall execute and deliver Certificates which the registered owner thereof making the exchange is entitled to receive, bearing numbers not then Outstanding. The Trustee shall not be required to transfer or exchange the Certificates during the period of 15 days next preceding any interest payment date of such Certificate nor to transfer or exchange any Certificate after the publication or the mailing of notice calling such Certificate for redemption has been given as herein provided, nor during the period of 15 days next preceding the giving of such notice of redemption. In the event that this certificate is called for redemption in part only, upon surrender and cancellation of this Certificate, a new fully registered Certificate or Certificates of the same maturity, of authorized denomination, in an aggregate principal amount equal to the unredeemed portion hereof, shall be executed and delivered by the Trustee to the Registered Owner hereof. The Certificates are subject to redemption as follows: (a) The Certificates shall be called for redemption, in whole only, on any interest payment date in the event of, and to the extent that moneys are actually received by the Trustee from, the exercise by the City of its option to purchase the Project, as A -7 WP217102 -002/3 provided in the Lease, upon payment of the then applicable Purchase Option Price, at a redemption price equal to the principal amount of the Certificates being redeemed, plus accrued interest to the redemption date; provided, however, that paragraph (b) below, and not this paragraph (a), shall apply in the event that the Purchase Option Price is paid from moneys borrowed by the City or derived from any installment purchase or lease purchase financing by the City. (b) In the event that the Purchase Option Price is paid from moneys borrowed by the City or derived from any installment purchase or lease purchase financing by the City, the Certificates maturing on or before December 15, 1999, shall not be callable for redemption prior to maturity; and the Certificates maturing on or after December 15, 2000, shall be callable for redemption prior to maturity, at the option of the City, on December 15, 1999 and on any Interest Payment Date thereafter, in whole only, at the redemption prices (expressed as percentages of principal amount) set forth in the table below, plus accrued interest to the redemption date: Redemption Dates Redemption Prices December 15, 1999 and June 15, 2000 102% December 15, 2000 and June 15, 2001 101 December 15, 2001 and thereafter 100 (c) The Certificates shall be called for redemption in the event and only to the extent that any Extraordinary Revenues (as defined in the Lease) are deposited into the Extraordinary Redemption Fund, other than as provided in (a) or (b) above. (d) The Certificates may also be called for redemption as set forth below upon the occurrence of a Termination Event. In the event that the Certificates are redeemed pursuant to (c) above, the Certificates shall be redeemed in whole, or in part in inverse order of maturity and by lot within any maturity, selected in such a manner as the Trustee shall determine, at a redemption price (expressed as a percentage of principal amount) of 100% plus accrued interest to the redemption date, on the first Business Day for which notice of redemption may be given. If the Certificates are redeemed in part and less than all of the Certificates of a single maturity are to be redeemed, the Trustee shall select Certificates of such maturity for redemption, by lot in such manner as the Trustee shall determine. A -8 WP217102 -002/3 The Certificates maturing on December 15, 2015, are subject to mandatory sinking fund redemption on December 15, 2010 and on each December 15 thereafter to and including December 15, 2014, at a redemption price equal to the principal amount thereof with interest accrued thereon to the date fixed for redemption, without premium, the particular Certificates to be redeemed to be selected by lot in such manner as the Trustee shall determine, in the amounts (after credit as provided below) set forth below: Year Principal (July 1) Amount 2010 $140,000 2011 150,000 2012 165,000 2013 175,000 2014 190,000 2015 (Maturity) 490,000 Upon the occurrence of a Termination Event (as defined in the Indenture), the Certificates shall be payable from such moneys as may be obtained by the Trustee through the exercise of its rights under the Indenture. Upon the occurrence of a Termination Event, the Trustee may commence proceedings for leasing the Project or the sale or assignment of the Trustee's interest in the Project as provided in the Indenture, and may call the Certificates for redemption from the Net Proceeds of such leasing, sale or assignment of the Project and all other moneys, if any, then on hand and being held by the Trustee for the registered owners of the Certificates, subject to the provisions of the Indenture, at 100% of the principal amount thereof plus accrued interest to the redemption date. In the event that such Net Proceeds and other moneys are insufficient to redeem the Certificates at 100% of the principal amount thereof plus accrued interest to the redemption date, such Net Proceeds and other moneys shall be allocated proportionately among the Certificates, according to the principal amount thereof outstanding. In the event that such Net Proceeds and other moneys are in excess of the amount required to redeem the Certificates at 100% of the principal amount thereof plus accrued interest to the redemption date, then shall be paid to the City. Prior to any distribution of such Net Proceeds in redemption of the Certificates, the Trustee shall be entitled to payment of its customary fees for all services rendered in connection with such liquidation, as well as reimbursement for all costs and expenses incurred thereby from the proceeds of such A -9 WP217102 -002/3 foreclosure and sale. A REGISTERED OWNER OF THE CERTIFICATES SHOULD NOT ANTICIPATE THAT IT WILL BE POSSIBLE TO FORECLOSE ON AND SELL THE PROJECT FOR AN AMOUNT EQUAL TO THE AGGREGATE PRINCIPAL AMOUNT OF THE CERTIFICATES THEN OUTSTANDING PLUS ACCRUED INTEREST THEREON. IF THE CERTIFICATES ARE REDEEMED SUBSEQUENT TO THE OCCURRENCE OF A TERMINATION EVENT FOR AN AMOUNT LESS THAN THE AGGREGATE PRINCIPAL AMOUNT THEREOF PLUS ACCRUED INTEREST TO THE REDEMPTION DATE, NO REGISTERED OWNER OF ANY CERTIFICATE SHALL HAVE ANY FURTHER CLAIM FOR PAYMENT AGAINST THE CITY, THE CORPORATION OR THE TRUSTEE. In the event any of the Certificates are called for redemption as aforesaid, the Trustee shall cause notice of the call for redemption, identifying the Certificates or portions thereof to be redeemed, to be given by mailing, at least 30 days and not more than 60 days prior to the redemption date, as provided in the Indenture. All Certificates so called for redemption shall cease to bear interest after the specified redemption date, provided that such funds as may be available for their redemption pursuant to the Lease (which, in the case of a Termination Event, as defined in the Indenture, may be less than the full principal amount of the outstanding Certificates and accrued interest thereon to the redemption date) are on deposit at the place of payment at that time. The Trustee shall pay to the registered owners of Certificates to be redeemed, or their representatives duly authorized in writing, the amounts due on their respective Certificates at the principal corporate trust office of the Trustee; provided, however, that, if redeemed in part, the Certificates may only be redeemed in multiples of $5,000. Redemption payments shall be accompanied by a written designation prepared by the Trustee stating the portion of the payment representing the unpaid principal amount of each Certificate immediately prior to the payment, the portion representing interest and the remaining portion, if any, which shall be designated and paid as a redemption premium. The Trustee may waive an Event of Nonappropriation or an Event of Default under certain circumstances as provided in the Lease and the Indenture. The Indenture permits amendments thereto and to the Lease, upon the agreement of the City and the Trustee and compliance with the other requirements of the Indenture, including but not limited to, in certain cases the approval of the registered owners of not less than two - thirds or, for certain amendments, 100% in aggregate principal amount of the Certificates at the time outstanding, as defined in the A -10 WP217102 -00213 Lease. The Lease also contains provisions permitting the City and the Trustee to enter into amendments to the Indenture and the Lease without the consent of the registered owners of the Certificates for certain purposes, including, without limitation, the issuance of Additional Certificates for certain purposes. The Indenture requires the written consent of the Trustee to any amendment of the Indenture or the Lease which modifies the rights, duties or immunities of the Trustee. Any consent or request by the Registered Owner of this certificate shall be conclusive and binding upon such owner and upon all future registered owners of this certificate and of any Certificate issued upon the transfer of this certificate whether or not notation of such consent or request is made upon this certificate. This Certificate is issued with the intent that the laws of the State of Colorado shall govern its legality, validity, enforceability and construction. LEGAL OPINION CERTIFICATE The undersigned City Clerk of the City of Pueblo, Colorado, hereby certifies that in connection with the issuance of the Certificates of Participation, an opinion in substantially the following form was delivered to the City of Pueblo, Colorado. By (Facsimile Signature) City Clerk [Opinion of Kutak Rock to Appear Here] A -11 WP217102 -002/3 (Form of Transfer) FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto (Please Insert Social Security or the Identifying Number of Transferee) (Please Print or Type Name and Address of Transferee) the within certificate and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within certificate on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a com- mercial bank or trust NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within certificate in every particular without alteration or enlargement or any change whatever. company. TRANSFER FEE MAY BE REQUIRED (End of Form of Certificate) A -12 WP217102 -002/3 EXHIBIT B DESCRIPTION OF THE LAND The Land referred to in State of Colorado, County of follows: this Lease is situated in the Pueblo, and is described as Lots 1 to 9, Lots 11, 12 and 13, Lots 17 to 32, Block 70, SOUTH PUEBLO, Lots A, B, C & D in TRACKAGE SUBDIVISION, A RESUBDIVISION OF LOTS 14, 15 AND 16, Block 70, SOUTH PUEBLO Lots 1 to 16, Lots 17 to 32, Block 80, SOUTH PUEBLO TOGETHER WITH that portion of Mechanic Street vacated by Ordinance No. 976, recorded September 19, 1980 in Book 2044 at Page 622, all the alleys in Blocks 70 and 80 vacated by Ordinance No. 1524, recorded November 20, 1980 in Book 2051 at Page 503, and portion of "E" Street vacated by Ordinance No. 51, recorded March 3, 1950 in Book 1117 at Page 358 and recorded June 18, 1953 in Book 1212 at page 360 appurtenant thereto. B -1 WP217102 -002/3 Vii; , Norwest Investment Services, Inc. 1700 Broadway Denver, Colorado 80274 -8733 (303) 863 -6800 Date: June 22, 19 9 2 The City of Pueblo One City Hall Pueblo, Colorado For s 2 ,960,000 legally issued Certificates of Participation axad of City of Pueblo, Colo. Municipal Building Corporation delivered to us in Denver , Colorado dated July 1 , 19 92and to mature and bear interest as follows: Year of Coupon Year of Coupon Year of Coupon Amount Maturity Rate Amount Maturity Rate Amount Maturity Rate See At Exh A, w hic h is m part of the Ag by ref the 0 Certificates The K�are to be in the denomination of 5 5000 bearing interest as shown above, payable semiannually, both principal and interest payable at The Pueb1g Bank & Trust Co. 1494 We will pay S and aru cced'tn�terest rom to aat o the onds to the date of delivery to us In Denver, Colorado Prior to our accepting delivery of said Securities, you agree to furnish a certified transcript of all legal proceedings requisite to their issuance and delivery, including a signature and non - litigation certificate in the customary form evidencing the legality of said Securities and the security provisions relating thereto the satisfaction of Kutak Rock -- Special Counsel whose unqualified approving legal opinion in the customary form shall accompany said Securities at delivery. These bonds are to be delivered to us on or about July 22, 1992 The cost of the printing these bonds will be paid by the Cost of Issuance Fund and the fees of approving attorneys will be paid by the Cost of Issuance Fund We herewith hand you a N/A check for S - -- as evidence of our good faith in complying with the terms and conditions of this proposal which is to apply as part payment for said bonds when the legality of same has been approved by our attorneys, and to be forfeited as fully liquidated damages should we fail or refuse to take up said bonds as above provided. Said Check is to be returned to us if this proposal is not accepted, or if the above attorneys should decline to approve the legality of the issue. This offer is for immediate acceptance unless otherwise specified above. Gross interest cost $3,180,443.44 Original Issue Discount of $46,322.60 3700 M]§K 66 ,600.00 in the aggregate, at the prices for the maturities set forth in Exhibit A. Net interest cost 7.24% Average effective rate 7.14% Respectfully submitted, NORWEST INVESTMENT SERVICES, INC. By Vice President & RPginna Manager ACCEPTED for and on behalf of the City Council of the City of Pueblo, Colorado pursuant to authorization by its governing body, pnrk gdXon this date June 22 . 19 92 Attest: Signature re Official Title Official Title 77 z > > < < ful. -LP r7 CA r7 if — — — — — — — — — — — — — — — — — — — — —N < - 7D U — — — — — — — — — — — — r7 N' f r rn Z C C,7 — — — — — — — — — — — — — — 41 Es f— u ., Z. N" N C,7. L7, .4-,j LK% 7 —Z svbS4; L4eA Czp CITY OF PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION, A Colorado Nonprofit Corporation, as Lessor, and CITY OF PUEBLO, COLORADO as Lessee, PUBLIC WORKS LEASE PURCHASE AGREEMENT (With Authorization for Certificates of Participation in the Aggregate Principal Amount of $2,960,000 Evidencing Assignments of Proportionate Undivided Interests in Rights to Receive Certain Payments Hereunder) Dated as of July 1, 1992 The interest of the City of Pueblo, Colorado Municipal Building Corporation in this Lease Purchase Agreement (with certain exceptions) has been assigned to The Pueblo Bank and Trust Company, as Trustee under the Mortgage and Indenture of Trust, dated as of July 1, 1992, from City of Pueblo, Colorado Municipal Building Corporation to The Pueblo Bank and Trust Company, as Trustee, and is subject to the security interest of The Pueblo Bank and Trust Company, as Trustee. After this instrument has been recorded, please return to: William C. Gorham Kutak Rock 2400 Arco Tower 707 Seventeenth Street Denver, Colorado 80202 WP217102 -002/2 TABLE OF CONTENTS (This Table of Contents is not a part of this Lease Purchase Agreement and is only for convenience of reference) Page PREAMBLES.............. ............................... 1 ARTICLE I DEFINITIONS ............ ............................... 4 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of the City ................. 12 Section 2.2. Representations, Covenants and Warranties of Corporation .............. 13 ARTICLE III DEMISING CLAUSE ........ ............................... 15 ARTICLE IV LEASE TERM Section 4.1. Commencement of Lease Term; Renewals ... 15 Section 4.2. Termination of Lease Term .............. 16 ARTICLE V ENJOYMENT OF PROJECT ... ............................... 17 ARTICLE VI PAYMENTS BY THE CITY Section 6.1. Payments to Constitute Currently WP217102 -002/2 Budgeted Expenditures of the City ...... 18 Section 6.2. Base Rentals and Additional Rentals .... 19 Section 6.3. Interest Component ..................... 20 Section 6.4. Manner of Payment ...................... 20 Section 6.5. Expression of the City's Need for the Project; Determinations as to Fair Market Value and Fair Purchase Price ... 20 WP217102 -002/2 Page Section 6.6. Nonappropriation ....................... 21 Section 6.7. Disposition of Base Rentals ............ 22 ARTICLE VII CONSTRUCTION OF THE PROJECT Section 7.1. Agreement to Construct Project ......... 23 Section 7.2. Disbursements From the Construction Fund .... ............................... 25 Section 7.3. Completion of Construction ............. 26 Section 7.4. Title Insurance ........................ 26 Section 7.5. Construction Contracts ................. 26 Section 7.6. Project Documents ............. I ...... .. 27 Section 7.7. Defaults Under Construction Contracts 27 Section 7.8. Contractor's Performance and Payment Bonds ............................... 28 Section 7.9. Contractor's General Public Liability and Property Damage Insurance .......... 28 Section 7.10. Contractor's Builder's Risk Completed Value Insurance ........................ 29 Section 7.11. Contractor's Workmen's Compensation Insurance .............................. 29 Section 7.12. Proceeds of Certain Insurance Policies and Performance Bonds .................. 30 Section 7.13. Pledge of Certain Project Documents Under the Indenture .................... 30 ARTICLE VIII TITLE TO THE PROJECT; LIMITATIONS ON ENCUMBRANCES Section 8.1. Title to the Project ................... 31 Section 8.2. No Encumbrance, Mortgage or Pledge of Project . ............................... 31 ARTICLE IX MAINTENANCE, TAXES, INSURANCE AND OTHER CHARGES Section 9.1. Maintenance of the Project by the City 32 Section 9.2. Modification of the Project; Installation of Furnishings and Machinery of the City .................. 32 Section 9.3. Replacement and Substitution of Equipment .............................. 33 Section 9.4. Taxes, Other Governmental Charges and Utility Charges ........................ 34 -ii- WP217102 -002/2 Page Section 9.5. Provisions Regarding Casualty, Public Liability and Property Damage Insurance. 35 Section 9.6. Advances ............................... 37 ARTICLE X DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF NET PROCEEDS Section 10.1. Damage, Destruction and Condemnation ... 37 Section 10.2. Obligation of the City to Repair and Replace the Project .................... 38 Section 10.3. Insufficiency of Net Proceeds; Discharge of the Obligation of the City to Repair or Replace Project ..................... 39 Section 10.4. Cooperation of Corporation ............. 40 ARTICLE XI DISCLAIMER OF WARRANTIES; OTHER COVENANTS Section 11.1. Disclaimer of Warranties ............... 40 Section 11.2. Further Assurances and Corrective Instruments ............................ 41 Section 11.3. Corporation, City and Trustee Representatives ........................ 41 Section 11.4. Granting of Easements .................. 41 Section 11.5. Compliance With Requirements ........... 42 Section 11.6. City Acknowledgement of the Indenture and the Certificates ................... 42 Section 11.7. Tax Covenants .......................... 42 Section 11.8. Notification to Moody's Investor Service of Future Obligations of the City .... ............................... 44 ARTICLE XII CONVEYANCE OF THE PROJECT Section 12.1. Conveyance of the Project .............. 44 Section 12.2. Manner of Conveyance ................... 44 Section 12.3. Escrowed Deed and Bill of Sale ......... 45 -iii- WP217102 -002/2 Page ARTICLE XIII ASSIGNMENT, SUBLEASING, INDEMNIFICATION, MORTGAGING AND SELLING Section 13.1. Assignment by Corporation; Replacement of Corporation ......................... 45 Section 13.2. Assignment and Subleasing by the City 45 Section 13.3. Release and Indemnification Covenants 46 Section 13.4. Restrictions on Mortgage or Sale of Project . ............................... 47 ARTICLE XIV EVENTS OF DEFAULT AND REMEDIES Section 14.1. Events of Default Defined .............. 47 Section 14.2. Remedies on Default .................... 48 Section 14.3. Limitations on Remedies ................ 49 Section 14.4. No Remedy Exclusive .................... 49 Section 14.5. Waivers . ............................... 49 Section 14.6. Agreement to Pay Attorneys' Fees and 52 Section 15.7. Expenses ............................... 50 Section 14.7. Waiver of Appraisement, Valuation, Stay 52 Section 15.9. and Extension .......................... 50 ARTICLE XV MISCELLANEOUS Section 15.1. Notices . ............................... 51 Section 15.2. Binding Effect ......................... 51 Section 15.3. Amendments, Changes and Modifications .. 51 Section 15.4. Amounts Remaining in Funds ............. 51 Section 15.5. Net Lease .............................. 52 Section 15.6. Payments Due on Holidays ............... 52 Section 15.7. Severability ........................... 52 Section 15.8. Execution in Counterparts .............. 52 Section 15.9. Applicable Law ......................... 52 Section 15.10. Captions ............................... 52 Section 15.11. Immunity of Officers, Employees and Agents of City and Corporation ......... 52 TESTIMONIUM ............ ............................... 54 SIGNATURES AND SEALS ... ............................... 54 ACKNOWLEDGEMENTS ....... ............................... 55 EXHIBIT A -- Description of the Land .................... A -1 EXHIBIT B-- Schedules of Base Rentals and Purchase Option Prices .............................. B -1 EXHIBIT C-- Schedule of Certain Permitted Encumbrances . C -1 -iv- WP217102 -002/2 PUBLIC WORKS LEASE PURCHASE AGREEMENT THIS PUBLIC WORKS LEASE PURCHASE AGREEMENT dated as of July 1, 1992 (together with any amendments hereto made in accordance herewith, this ''Lease "), entered into by and between the CITY OF PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION, as the lessor hereunder (the ''Corporation ''), a nonprofit corporation duly organized, existing and in good standing under the laws of the State of Colorado, and the CITY OF PUEBLO, COLORADO (the ''City "), as lessee and sublessee hereunder, a home rule municipality, duly organized under Article XX of the Constitution of the State of Colorado (the "State ") and the home rule charter (the "Charter '') of the City; W I T N E S S E T H: WHEREAS, the City is a duly and regularly created, organized and existing home rule municipality, existing as such under and by virtue of Article XX of the Constitution of the State and the Charter of the City; and WHEREAS, the City Council of the City (the "City Council ") has the power, pursuant to Sections 1 -3 and 3 -9 of the Charter, to enter into lease and lease purchase agreements in order to provide for the financing of lands and municipal facilities; and WHEREAS, the City Council also has the power, pursuant to Sections 1 -3 and 3 -9 of the Charter, to purchase real and personal property and to sell and convey real and personal property of the City upon such terms and conditions as the City Council may approve; and WHEREAS, the City presently leases a municipal public works and transportation facility pursuant to a Public Works Lease Purchase Agreement, dated as of February 22, 1990 (the "Prior Lease "), between the Corporation, as lessor, and the City, as lessee; and WHEREAS, the City Council has determined, and hereby determines, that the City is in need of an improved municipal public works and transportation facility (the "Building "), as hereinafter more fully described; and WP217102 -002/2 WHEREAS, the City Council has determined, and hereby determines, that it is necessary and in the best interests of the City that the Building be constructed, improved, acquired and equipped on the parcel of land upon which the existing municipal public works and transportation facility being leased by the City is located (the "Land "); and WHEREAS, the Corporation has agreed to construct the Building on the Land and to lease the Land and the Building to the City pursuant to this Lease; and WHEREAS, the Corporation will sell certain Certificates of Participation (the "Certificates ") evidencing assignments of proportionate interests in its rights to receive certain rental payments (the "Base Rentals ") and certain other payments, which rights have been assigned by the Corporation to The Pueblo Bank and Trust Company, as trustee (the "Trustee ") under a Mortgage and Indenture of Trust, dated as of July 1, 1992 (the "Indenture "), between the Corporation and the Trustee, pursuant to which the Certificates are being issued; and WHEREAS, to secure the Certificates, the Corporation will, pursuant to the Indenture, grant the Trustee a first mortgage and security interest in the Land, the Building and the Equipment, as defined herein (collectively, the "Project "), subject only to Permitted Encumbrances; and WHEREAS, to accomplish the foregoing, the City and the Corporation have agreed to cancel the Prior Lease and to provide for the payment of the Certificates of Participation issued pursuant to the Mortgage and Indenture of Trust, dated as of February 22, 1990, between the Corporation and the Trustee, as trustee, which evidence assignments of proportionate interests in the rights to receive payments under the Prior Lease (the "Prior Certificates "); and WHEREAS, a portion of the proceeds of the Certificates will be used to pay the Prior Certificates and the remainder of the proceeds of the Certificates will be used to finance the acquisition, construction, improvement and equipping of the Building, to fund a reserve fund and to pay the costs associated with issuing the Certificates; and WHEREAS, for purposes set forth immediately above, the City Council has determined that it is in the best interests of the City that the City and the Corporation enter into this Lease; and WP217102 -002/2 -2- WHEREAS, the Corporation is a nonprofit corporation, duly organized, existing and in good standing under the laws of the State of Colorado, and is duly qualified to do business in the State of Colorado; and under its articles and bylaws, the Corporation is authorized to own and hold or lease real and personal property as lessor and to act in the manner contemplated herein; and WHEREAS, pursuant to the Indenture, the Corporation will assign all of its rights, title and interest in, to and under this Lease (except the rights of the Corporation under Sections 13.3 and 14.6 of this Lease) to the Trustee; and WHEREAS, the proceeds from the sale of the Certificates will be disbursed by the Trustee at the direction of the City, for the construction, acquisition, improvement and equipping of the Project and the other purposes set forth herein; and WHEREAS, the obligation of the City to pay Base Rentals and Additional Rentals (both as hereinafter defined) hereunder shall be from year to year only; shall constitute currently budgeted expenditures of the City; shall not constitute a mandatory charge or requirement in any ensuing budget year; and shall not constitute a general obligation or other indebtedness of the City within the meaning of any constitutional, statutory or Charter limitation or requirement concerning the creation of indebtedness, nor a mandatory payment obligation of the City in any ensuing fiscal year beyond any fiscal year during which this Lease shall be in effect; and WHEREAS, the Certificates shall evidence assignments of proportionate undivided interests in the Revenues (as hereinafter defined), shall be payable solely from the sources herein provided, and shall not constitute a general obligation or other indebtedness of the City within the meaning of any constitutional, statutory or Charter limitation or requirement concerning the creation of indebtedness, nor a mandatory payment obligation of the City in any ensuing fiscal year beyond any fiscal year during which this Lease shall be in effect; and WHEREAS, neither this Lease nor the issuance of the Certificates shall directly or indirectly obligate the City to make any payments beyond those appropriated for any fiscal year during which this Lease shall be in effect; and WP217102 -002/2 -3- WHEREAS, the construction, acquisition, improvement and equipping of the Project, and the execution, performance and delivery of this Lease, have been authorized, approved and directed by the City Council by an ordinance adopted by the City Council; and WHEREAS, the execution, delivery and performance of this Lease by the Corporation, and the assignment by the Corporation to the Trustee, pursuant to the Indenture, of all rights, title and interest of the Corporation in, to and under this Lease (except the rights of the Corporation under Sections 13.3 and 14.6 of this Lease) have been authorized, approved and directed by all necessary and appropriate action of the Corporation, its board of directors and its officers; and WHEREAS, the Corporation desires to lease the Project to the City, and the City desires to lease the Project from the Corporation, pursuant to the terms and conditions and for the purposes set forth herein; NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS All words and phrases defined in Article I of the Indenture shall have the same meaning in this Lease. In addition, the following terms will have the meanings specified below unless the context clearly requires otherwise: "Additional Certificates" has the meaning ascribed to it in Section 2.11 of the Indenture. "Additional Rentals" means the cost of all taxes, insurance premiums, expenses and fees of the Trustee, utility charges, costs of maintenance, upkeep and repair, payments into the Reserve Fund, amounts required to be deposited in the Rebate Fund, and all charges or costs which the City assumes or agrees to pay hereunder with respect to the Project, other than Base Rentals (together with interest that may accrue thereon in the event that the City shall fail to pay the same, as set forth herein), including but not limited to costs and expenses charged to or incurred by the Corporation at the request of the City and in its capacity as lessor hereunder. -4- WP217102 -002/2 "Base Rentals'' means the payments payable by the City pursuant to Section 6.2 of this Lease and Exhibit B hereto, during the Original Term and any Renewal Term, which constitute the payments payable by the City for and in consideration of the right to use the Project during such Original Term or Renewal Term. ''Base Rental Payment Date" means November 30 and May 31 of each year, commencing May 31, 1993. "Building" means the public works and transportation facilities presently located and to be acquired, constructed, improved and equipped pursuant to this Lease on the Land, including any remodeling, additions, modifications and improvements thereto or substitutions thereof and all property permanently affixed to the Land, as provided in Section 9.2 of this Lease. "Business Day'' means any day other than a Saturday, Sunday or legal holiday or day on which banking institutions in the city in which the Trustee has its principal corporate trust office or New York, New York are authorized or required by law to close. "Certificate Fund" means the special fund created under Section 3.02 of the Indenture for the purpose of holding and disbursing to the Registered Owners the Base Rentals paid by the City, and includes both the Principal Account and the Interest Account thereof. "Certificate Year'' means the period commencing July 1 and ending June 30 each calendar year during the term of the Certificates, except that the first Certificate Year shall commence on July 1992 and end on June 30, 1993. "Certificates" means one or more certificates of participation to be issued pursuant to the Indenture evidencing assignments of proportionate undivided interests in rights to receive Revenues. "Charter" means the home rule charter of the City, and any amendments or supplements thereto. "City" means City of Pueblo, Colorado or any successor to its functions. "City Council" means the City Council of the City or any successor to its functions. WP217102 -002/2 M-C "City Representative" means the person at the time designated to act on behalf of the City for the purpose of performing any act under this Lease or the Indenture by a written certificate furnished to the Trustee and the Corporation containing the specimen signature of such person or persons and signed on behalf of the City by the President or Vice President of the City Council, and in the absence of such a certificate, means the President or the Vice President of the City Council. "Completion Date" means the date of final acceptance of the Project by the City, as evidenced by the certificate provided for in Section 7.3 of this Lease. "Construction Contract" means any contract entered into by the City or the Corporation (but only where the City or the Corporation is a party to the contract) for the acquisition, construction, improvement or equipping of the Project, including but not limited to any contract between the City and any contractor, engineer or architect regarding the Project. "Construction Fund" means the special fund created under Section 3.09 of the Indenture for the purpose of disbursing certain proceeds derived from the sale of the Certificates in payment of the Cost of Construction. "Construction Period" means the period between the date on which the Certificates are first delivered to the Original Purchaser and the Completion Date. "Corporation" means City of Pueblo, Colorado Municipal Building Corporation, a Colorado nonprofit corporation, acting as lessor under this Lease and grantor under the Indenture, or any successor thereto. "Corporation Representative" means any of the following: (i) the Chairman or President of the Corporation; (ii) any Vice Chairman or Vice President of the Corporation; (iii) any Secretary or Assistant Secretary of the Corporation; or (iv) any other person or persons at the time designated to act on behalf of the Corporation for purposes of performing any act on behalf of the Corporation under this Lease or the Indenture by a written certificate furnished to the City and the Trustee containing the specimen signature of such person or persons and signed on behalf of the Corporation by the Chairman or President or any Vice Chairman or Vice President of the Corporation. -6- WP217102 -002/2 "Cost of Construction'' shall be deemed to include payment of or reimbursement for the following items: (a) obligations incurred or assumed for labor, materials and Equipment in connection with the construction, acquisition, improvement and equipping of the Project; (b) the cost of performance and payment bonds and of insurance of all kinds (including, without limitation, title insurance and, if procured and maintained by the City, builder's risk completed value insurance) that may be necessary or appropriate during the course of the construction, acquisition, improvement and equipping of the Project; (c) the costs of engineering, architectural, hydrological, geological, agronomical and other professional and technical services, including obligations incurred or assumed for preliminary design and development work, test borings, surveys, estimates, plans and specifications; (d) the cost of the administration of construction of the Project incurred prior to the Completion Date, including supervision of construction as well as the performance of all of the other duties required by or consequent upon the construction, acquisition, improvement and equipping of the Project; including, without limitation, costs of preparing and securing all Project Documents, architectural fees, legal fees and expenses, independent inspection fees, engineering fees, auditing fees and advertising expenses in connection with the Project; (e) costs incurred in connection with the Certificates prior to the Completion Date, including the initial compensation and expenses of the Trustee, fees of the Corporation, legal fees and expenses, costs incurred in obtaining ratings from rating agencies, costs incurred in connection with obtaining municipal bond insurance, costs of publication, printing and engraving and recording and filing fees; (f) the salary and expenses of the Project Manager, if any, and all costs which shall be required to be paid under the terms of any Construction Contract; (g) all other costs which are considered to be a part of the costs of the Project in accordance with generally accepted accounting principles and which will not affect adversely the exclusion from federal income WP217102 -002/2 -7- taxation of the designated interest component of Base Rentals payable by the City under this Lease and assigned pursuant to the Indenture and the Certificates; and (h) payments of Base Rentals or payments for redemption of Certificates, at the City's option, from any moneys remaining in the Construction Fund subsequent to the Completion Date, as provided in Section 3.10 of the Indenture. ''Equipment" means items of equipment, machinery and related property acquired and installed in connection with the Project with proceeds from the sale of the Certificates, and any items of equipment, machinery and related property acquired in replacement or substitution therefor pursuant to Sections 9.2, 9.3 and 10.2 of this Lease; less machinery, equipment and related property released from this Lease pursuant to Section 9.3 of this Lease. ''Event of Default" means one or more events of default as defined in Section 14.1 of this Lease. "Event of Nonappropriation" means a nonrenewal of this Lease by the City, determined by the failure of the City Council, for any reason, to budget and appropriate, specifically with respect to this Lease, moneys sufficient to pay Base Rentals and reasonably estimated Additional Rentals, as provided in Section 6.6 of this Lease. ''Expenses Fund'' means the special fund created under and to be disbursed as provided in Section 3.12 of the Indenture, and includes the Extraordinary Expenses Account and the Insurance Account thereof. "Extraordinary Redemption Fund" means the special fund created under Section 3.11 of the Indenture. "Extraordinary Revenues" means (i) the Purchase Option Price, if paid; (ii) any amounts remaining in the Construction Fund, subsequent to the Completion Date, which the City instructs to be deposited in the Extraordinary Redemption Fund pursuant to Section 3.10 of the Indenture; (iii) all Net Proceeds, if any, of casualty insurance, title insurance, performance bonds, condemnation awards and awards resulting from defaults under any Construction Contract in connection with the Project, and not applied to the repair, restoration, modification, improvement or replacement of the Project, which are received pursuant to the provisions of this Lease, including but not limited to Section 10.3(b) -8- WP217102 -002/2 hereof; and (iv) all Net Proceeds, if any, derived from the leasing, sale or assignment of the Trustee's interest in the Project, pursuant to Sections 7.02 and 7.05 of the Indenture. "Federal Securities'' means United States Obligations, as that term is defined in subparagraph (a) of the definition of Permitted Investments in the Indenture. "Financing Statements" means the Uniform Commercial Code - Financing Statements -Form UCC -1 or any other form acceptable to the Trustee as required by Section 7.2 hereof. " Force Majeure means, without limitation, the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders of restraints of any kind of the government of the United States of America or of the State or any of their departments, agencies or officials or any civil or military authority; insurrection; riots; landslides; earthquakes; fires; storms; droughts; floods; explosions; breakage or accidents to machinery, transmission pipes or canals; or any other cause or event not within the control of the Corporation or the City. "Indenture" means that certain Mortgage and Indenture of Trust of even date herewith between the Corporation and the Trustee, and any amendments or supplements thereto. "Independent Counsel" means an attorney duly admitted to the practice of law before the highest court in the State and who is not an employee of the Corporation, the Trustee or the City. "Interest Payment Date" means June 15 and December 15 of each year, commencing June 15, 1993. "Land" means the parcel of real estate described in Exhibit A hereto and upon which the Building is located. "Lease" means this Public Works Lease Purchase Agreement and any amendments or supplements hereto, including the Exhibits attached hereto. "Lease Term" means the Original Term and any Renewal Terms as to which the City may exercise its option to renew this Lease, as further provided under Section 4.1 of this Lease; subject to the terms and provisions of Sections 4.2, 6.1, 6.2 and 6.6 of this Lease. "Lease Term'' refers to the time during which the City is the lessee under the Lease; provided, however, certain provisions of this Lease survive the termination of the Lease Term, as further provided in Section 4.2 of this Lease. WP217102 -002/2 I "Net Proceeds," when used with respect to any performance or payment bond proceeds, or proceeds from policies of insurance required hereby, or proceeds from any condemnation award, or proceeds resulting from any default under a Construction Contract, or proceeds from any foreclosure and sale of the Project, means the amount remaining after deducting from the gross proceeds thereof all expenses (including, without limitation, attorneys' fees and costs) incurred in the collection of such proceeds or award. "Opinion of Counsel'' means an opinion in writing of legal counsel, who may be counsel to the Trustee, the City or the Corporation. "Original Purchaser" means Norwest Investment Services Inc., and its successors and assigns. "Original Term" means the portion of the Lease Term which terminates on December 31, 1992. "Permitted Encumbrances" means, as of any particular time, (i) liens for taxes and assessments not then delinquent, or liens which may remain unpaid pursuant to the provisions of Article VIII and Article IX of this Lease; (ii) this Lease and the Indenture; (iii) utility, access and other easements and rights of way, restrictions and exceptions which do not, in the opinion of the City Representative, interfere with or impair the Project, all as provided in Section 11.4 hereof; (iv) any Financing Statements filed to perfect security interests pursuant to this Lease or the Indenture; (v) any financing statements filed to perfect purchase money security interests in equipment purchased to replace or in substitution for Equipment purchased with the proceeds of the Certificates; (vi) such minor defects, irregularities, encumbrances and clouds on title as normally exist with respect to property of the general character of the Project and as do not, in the opinion of the City Representative, materially impair the value of or title to the Project; and (vii) those encumbrances and exceptions to title set forth in Exhibit C to this Lease. "Project" means, collectively, the Land, the Building and the Equipment. "Project Documents" means the following: (i) plans, drawings and specifications for the Building, when and as they are approved by the City, including change orders, if any, as provided in Section 7.1 of this Lease; (ii) a survey of the Land described in Exhibit A hereto, prepared by a registered land surveyor in accordance with standard requirements for land title surveys, showing the location of WP217102 -002/2 -10- all improvements, easements, encroachments and other encumbrances on such real estate; (iii) any necessary permits for construction of the Project, including any building permits and certificates of occupancy; (iv) any and all Construction Contracts; (v) policies of title, casualty, public liability and workmen's compensation insurance, or certificates thereof, as required by this Lease with respect to the Project; (vi) performance and payment bonds with respect to the Building; (vii) the executed contracts with the architects, engineers, hydrologists, geologists or agronomists hired by the City in connection with the preparation of plans, drawings and specifications for the Building; (viii) any and all other material documents executed by or furnished to the City in connection with the construction, acquisition, improvement and equipping of the Project. "Project Manager" means the person, if any, at the time employed by the City for the purpose of supervising the design and construction of the Project and managing the Project. Notice of the appointment of such person shall be by written certificate furnished to the Trustee and the Corporation containing the specimen signature of such person and signed on behalf of the City by the President of the City Council. In the absence of the appointment of such person, the City's Public Works Director shall act as Project Manager. "Purchase Option Price" means the amount payable, at the option of the City, for the purpose of terminating this Lease and purchasing the Project, which amount shall be equal to such amount as shall be necessary to discharge the Indenture in accordance with the Indenture. The amount of the Purchase Option Price as of each Interest Payment Date, excluding any applicable redemption premium, is set forth in Exhibit B attached to this Lease. "Rebate Fund'' means the trust fund by that name created pursuant to Section 3.17 of the Indenture. "Registered Owner" of a Certificate means the registered owner of any Certificate, as shown in the registration books of the Trustee. "Renewal Date" means December 31, 1992 and each December 31 thereafter. "Renewal Term" means any optional Renewal Term of the Lease Term as provided in Article IV of this Lease. "Reserve Fund" means the special fund created under Section 3.07 of the Indenture, which is to be disbursed as provided in Section 3.08 of the Indenture. -11- WP217102 -002/2 "Reserve Fund Requirement" means $296,000, plus, in the event Additional Certificates are issued by the City, an amount equal to 10% of the principal amount of such Additional Certificates or such other lesser amount as is the maximum allowed under federal law. "Revenues'' means (i) Extraordinary Revenues, if any; (ii) the Base Rentals; (iii) any portion of the proceeds of the Certificates deposited with the Trustee in the Certificate Fund to pay accrued interest or capitalized interest, if any, on the Certificates; (iv) any earnings on moneys on deposit in the Certificate Fund except to the extent such earnings are required to be deposited in the Rebate Fund; (v) all other revenues derived from this Lease, excluding Additional Rentals, excluding payments into the Expenses Fund, and excluding payments constituting compensation to the Trustee for its services; and (vi) any other moneys to which the Trustee may be entitled for the benefit of the Registered Owners. "State" means the State of Colorado. "Termination Event" means (a) an Event of Nonappropriation, (b) an Event of Default under this Lease followed by a determination by the Trustee to terminate this Lease, or (c) an exercise by the City of its right to terminate the Lease under Section 10.3 of this Lease. "Trustee" means The Pueblo Bank and Trust Company, a state chartered banking corporation with its principal corporate trust office located in Pueblo, Colorado, acting in the capacity of trustee for the Registered Owners pursuant to the Indenture, and any successor thereto appointed under the Indenture. "Trustee Representative" means the person or persons at the time designated to act on behalf of the Trustee for purposes of performing any act on behalf of the Trustee under the Indenture or this Lease by a written certificate furnished to the City and the Corporation containing the specimen signature of such person or persons and signed on behalf of the Trustee by any duly authorized officer of the Trustee. ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of the City. The City represents, covenants and warrants for the benefit of the Trustee, the Registered Owners and the Corporation as follows: -12- WP217102 -002/2 (a) The City is a home rule municipality duly organized and existing under Article XX of the Constitution of the State and the Charter of the City. The City is authorized by its Charter to enter into the transactions contemplated by this Lease and to carry out its obligations hereunder. The City has duly authorized and approved the execution and delivery of this Lease and other documents related to this transaction. (b) The Project will be designed and constructed so as to comply with all applicable building and zoning ordinances and regulations, if any. (c) The construction, acquisition, improvement and equipping of the Project, under the terms and conditions provided for in this Lease, is necessary, convenient and in furtherance of the governmental purposes of the City and is in the best interests of the City and its inhabitants. (d) During the Lease Term, the Project will at all times be used by the City for the purpose of performing its lawful governmental functions (except to the extent that subleasing of the Project by the City is permitted by Section 13.2 of this Lease). (e) Neither the execution and delivery hereof, nor the fulfillment of or compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the City is now a party or by which the City is bound, or constitutes a default under any of the foregoing or results in the creation or imposition of any lien or encumbrance whatsoever upon any of the property or assets of the City. (f) Except as described in the Official Statement prepared for use in connection with the sale of the Certificates (the ''Official Statement "), to the knowledge of the City, there is no litigation or proceeding pending or threatened against the City or any other person affecting the right of the City to execute this Lease or the ability of the City to make the payments required hereunder or to otherwise comply with the obligations contained herein. Section 2.2. Representations, Covenants and Warranties of Corporation The Corporation represents, covenants and warrants for the benefit of the City, the Trustee and the Registered Owners as follows: -13- WP217102 -002/2 (a) The Corporation is a nonprofit corporation duly organized, existing and in good standing under the laws of the State, is duly qualified to do business in the State, has all necessary power and authority to enter into and perform and observe the covenants and agreements on its part contained in this Lease, is possessed of full power and authority to own and hold real and personal property and to lease the same as lessor and by proper action has duly authorized the execution and delivery of this Lease. (b) The Corporation will not pledge or assign the Revenues or any of its other rights under this Lease except pursuant to the Indenture, and except for any assignment pursuant to Section 13.1 of this Lease; and the Corporation will not mortgage or encumber the Project except for Permitted Encumbrances. (c) Neither the execution and delivery hereof, nor the fulfillment of or compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms, conditions and provisions of any restriction or any agreement or instrument to which the Corporation is now a party or by which the Corporation is bound, or constitutes a default under any of the foregoing and will not conflict with or constitute a violation of any constitutional or statutory provision or order, rule, regulation, decree or ordinance of any court, government or governmental authority having jurisdiction over the Corporation or its property and which conflict or violation will have a material adverse effect on the Corporation, the Project or its operation. (d) The Corporation acknowledges and recognizes that this Lease will be terminated at the end of the Original Term or any Renewal Term in the event that sufficient funds are not budgeted and appropriated by the City, specifically with respect to this Lease, to continue paying all Base Rentals and Additional Rentals during the next occurring Renewal Term, and that the acts of budgeting and appropriating funds are legislative acts and, as such, are solely within the discretion of the City Council. (e) The Corporation agrees that so long as any of the Certificates are Outstanding, it will maintain its existence, will continue to be qualified to do business in the State, will maintain its principal place of business in the State, will not dissolve and will not WP217102 -002/2 -14- consolidate with or merge into another legal entity or permit one or more other legal entities to consolidate with or merge into it. (f) There is no litigation or proceeding pending or, to the knowledge of the Corporation, threatened against the Corporation or any other person affecting the right of the Corporation to execute or deliver this Lease or the Indenture or to comply with its obligations under this Lease or the Indenture. Neither the execution and delivery of this Lease or the Indenture by the Corporation, nor compliance by the Corporation with its obligations under this Lease and the Indenture, require the approval of any regulatory body, any parent company, or any other entity, which approval has not been obtained. (g) The Corporation has full legal title to the Project, subject only to Permitted Encumbrances. (h) This Lease constitutes a legal, valid and binding obligation of the Corporation enforceable in accordance with its terms. ARTICLE III DEMISING CLAUSE The Corporation demises and leases the Project to the City in accordance with the provisions of this Lease, subject only to Permitted Encumbrances, to have and to hold for the Original Term and the Renewal Terms, if any. ARTICLE IV LEASE TERM Section 4.1. Commencement of Lease Term; Renewals The Lease Term shall commence as of July 1, 1992. The Original Term shall terminate on December 31, 1992. The Lease Term may be continued, solely at the option of the City, for the first Renewal Term and for additional Renewal Terms thereafter, each of one year in duration, except that the final Renewal Term, if any, shall commence on January 1, 2012 and shall terminate on December 15, 2012 or, if all Base Rentals and Additional Rentals for such Renewal Term have not then been paid by the City, on such later date as all Base Rentals and Additional Rentals are paid by the City. In the event that the City shall determine, for any reason, not to renew this Lease, the City shall give written notice to such effect to the Trustee, the Corporation and the Original Purchaser not less than 30 days prior to the end -15- WP217102 -002/2 of the Original Term or the then current Renewal Term; provided, however, that a failure to give such notice shall not constitute an Event of Default, nor prevent the City from declining to renew this Lease, nor result in any liability on the part of the City. The option of the City to renew or not to renew this Lease shall be conclusively determined by whether or not the City Council has, on or before the December 31 immediately preceding the commencement of any Renewal Term, budgeted and appropriated, specifically with respect to this Lease, moneys sufficient to pay all the Base Rentals and reasonably estimated Additional Rentals for such ensuing Renewal Term, all as further provided in Section 6.6 of this Lease. It is the intention of the City Council that the decision to renew or not to renew this Lease shall be made solely by the City Council and not by any other City officer, and the City Manager of the City (or any other officer at any time charged with the responsibility of formulating budget proposals) is hereby directed to include in the budget proposals submitted to the City Council, in any year in which this Lease shall be in effect, items for all payments required for the ensuing Renewal Term under this Lease. The City shall in any event, whether or not this Lease is to be renewed, furnish the Trustee, the Corporation and the Original Purchaser with copies of its annual budget promptly after the budget is adopted. The terms and conditions during any Renewal Term shall be the same as the terms and conditions during the Original Term, except that the Base Rentals shall be as provided in Exhibit B to this Lease. Section 4.2. Termination of Lease Term The Lease Term shall terminate upon the earliest of any of the following events: (a) The expiration of the Original Term or any Renewal Term during which there occurs an Event of Nonappropriation (which is not thereafter waived) pursuant to Article VI of this Lease; (b) The purchase by the City of the Project as provided in Article XII of this Lease (subject to the proviso of (c) below, if applicable) and the Certificates shall have been paid or deemed paid pursuant to Article VI of the Indenture; WP217102 -002/2 -16- (c) Discharge of the Indenture, as provided in Article VI of the Indenture (except that, in the event of discharge of the Indenture pursuant to the second paragraph of Article VI of the Indenture, this Lease shall remain in effect solely for the purpose of conferring rights upon the Registered Owners to payments of principal of, premium, if any, and interest on the Certificates solely from moneys or Federal Securities deposited in accordance with the Indenture); (d) An Event of Default and termination of the Lease Term by the Trustee under Article XIV of this Lease; (e) The election of the City to terminate the Lease Term pursuant to Section 10.3(b) of this Lease; or (f) December 15, 2012, which date constitutes the last day of the final Renewal Term of this Lease, or such later date as all Base Rentals and Additional Rentals required hereunder shall be paid, with the effect that the Certificates shall be paid or deemed paid pursuant to Article VI of the Indenture. Termination of the Lease Term shall terminate all unaccrued obligations of the City under this Lease (except for the application of Section 14.2(b)(i) hereof, in the event the City holds over), and shall terminate the rights of the City to possession of the Project under this Lease (except to the extent of any conveyance pursuant to Article XII of this Lease); but all other provisions of this Lease, including all obligations of the City hereunder accrued prior to such termination, and all obligations of the Trustee with respect to the Registered Owners and the receipt and disbursement of funds, shall be continuing until the Indenture is discharged as provided in Article VI of the Indenture (subject to the proviso of (c) above, if applicable). ARTICLE V ENJOYMENT OF PROJECT The Corporation hereby covenants that the City shall during the Lease Term peaceably and quietly have and hold and enjoy the Project without suit, trouble or hindrance from the Corporation, except as expressly required or permitted by this Lease or the Indenture. The Corporation shall not interfere with the quiet use and enjoyment of the Project by the City during the Lease Term, so long as the Lease Term shall be in effect. The Corporation shall, at the request of the City and at the cost of the City, join and cooperate fully in any legal action in which the City asserts its right -17- WP217102 -002/2 to such possession and enjoyment, or which involves the imposition of any taxes or other governmental charges on or in connection with the Project. In addition, the City may at its own expense join in any legal action affecting its possession and enjoyment of the Project, and shall be joined (to the extent legally possible, and at the expense of the City) in any action affecting its liabilities hereunder. The provisions of this Article V shall be subject to the right of the Trustee to inspect the Project as provided in Section 10.03 of the Indenture, and to the right of the Trustee to complete construction of the Project under certain circumstances as provided in Section 7.1 of this Lease. The City also hereby consents to the provisions of Section 10.03 of the Indenture relating to inspection of records by the Trustee. Equitable title to the Project shall be deemed to vest in the City, subject to the rights of the Corporation and the Trustee under this Lease and the Indenture. ARTICLE VI PAYMENTS BY THE CITY Section 6.1. Payments to Constitute Currently Budgeted Expenditures of the City The City and the Corporation acknowledge and agree that the Base Rentals and Additional Rentals hereunder shall constitute currently budgeted expenditures of the City. The obligations of the City under this Lease shall be from year to year only (as further provided in Sections 4.1, 4.2, 6.2 and 6.6 hereof), and shall not constitute a mandatory payment obligation of the City in any fiscal year beyond a fiscal year during which this Lease shall be in effect. No provision of this Lease shall be construed or interpreted as creating a general obligation or other indebtedness of the City within the meaning of any constitutional, statutory or Charter debt limitation. No provision of this Lease shall be construed or interpreted as creating a delegation of governmental powers nor as a donation by or a lending of the credit of the City within the meaning of Section 1 or 2 of Article XI of the Constitution of the State. Neither this Lease nor the issuance of the Certificates shall directly or indirectly obligate the City to make any payments beyond those appropriated for any fiscal year in which this Lease shall be in effect. The City shall be under no obligation to exercise its option to purchase the Project. No provision of this Lease shall be construed to -18- WP217102 -002/2 pledge or to create a lien on any class or source of City moneys, nor shall any provision of this Lease restrict the future issuance of any City bonds or obligations payable from any class or source of City moneys (provided, however, that the restrictions of Section 2.11 of the Indenture shall apply to the issuance of Additional Certificates). Section 6.2. Base Rentals and Additional Rentals The City shall pay Base Rentals directly to the Trustee for distribution to the Registered Owners in accordance with the Indenture during the Lease Term on the due dates set forth in Exhibit B to this Lease. The Base Rentals during the Original Term and any Renewal Terms shall be in the amounts in the "Total Base Rentals" column, as set forth in Exhibit B to this Lease. There shall be credited against the amount of Base Rentals otherwise payable hereunder all amounts at the time on deposit in the Certificate Fund and available for such payments to Registered Owners. The initial Base Rentals to be paid by the City on May 31, 1993 shall be partially in consideration for the use of the Project by the City from July 1, 1992 until and including December 31, 1992. Thereafter, Base Rentals due on any May 31 shall be in consideration for the use of the Project by the City from the immediately preceding January 1 to and including the immediately following June 30; and Base Rentals due on any November 30 shall be in consideration for the use of the Project by the City from the immediately preceding July 1 to and including the immediately following December 31. In the event of any partial redemption of Certificates prior to maturity or upon the issuance of Additional Certificates, the Base Rentals shall be recalculated by the Trustee, so that the Base Rentals payable on May 31 and November 30 shall be equal to the amount necessary to pay the principal of and interest on the Certificates coming due on the next June 15 or December 15, as the case may be. The City shall pay Additional Rentals during the Lease Term as herein provided. The Additional Rentals during the Lease Term shall be in an amount sufficient to pay the fees and expenses of the Trustee, payments for the cost of taxes, insurance premiums, utility charges, maintenance and repair costs, and all other expenses expressly required to be paid hereunder or under the Indenture, including but not limited to costs and expenses charged to or incurred by the Corporation at the request of the City and in its capacity as lessor hereunder, as well as for payments into the Reserve Fund or the Rebate Fund required by the Indenture. All Additional Rentals shall be paid by the City on a timely basis directly to the Person or entity to which such Additional Rentals are owed (except that payments into the Reserve Fund and the Rebate Fund shall be made to the Trustee -19- WP217102 -002/2 as provided in the Indenture). If the estimates of the City of Additional Rentals for any Renewal Term are not itemized in the budget required to be furnished to the Trustee, the Corporation and the Original Purchaser under Section 4.1 of this Lease, the City shall furnish an itemization of such estimated Additional Rentals to the Trustee, the Corporation and the Original Purchaser on or before the December 15 preceding such Renewal Term. Section 6.3. Interest Component A portion of each payment of Base Rentals is paid as, and represents payment of, interest, and Exhibit B attached hereto, as it may be amended hereunder, sets forth the interest component of each payment of Base Rentals. Section 6.4. Manner of Payment The Base Rentals and, if paid, the Purchase Option Price, shall be paid in lawful moneys of the United States of America to the Trustee at its principal corporate trust office. The obligation of the City to pay the appropriated Base Rentals and Additional Rentals required under this Article VI and other sections hereof, during the Lease Term, shall be absolute and unconditional, and payment of the appropriated Base Rentals and Additional Rentals shall not be abated through accident or unforeseen circumstances. Notwithstanding any dispute between the City and the Corporation, the Trustee, any Registered Owner, any contractor or subcontractor retained with respect to the Project, any supplier of labor or materials in connection therewith, or any other person, the City shall, during the Lease Term, make all payments of appropriated Base Rentals and Additional Rentals when due and shall not withhold any appropriated Base Rentals or Additional Rentals pending final resolution of such dispute (except to the extent permitted by Sections 8.2 and 9.4 hereof with respect to certain Additional Rentals), nor shall the City assert any right of set -off, abatement or counterclaim against its obligation to make such payments required hereunder. No action or inaction on the part of the Corporation or the Trustee shall affect the City's obligation to pay all appropriated Base Rentals and Additional Rentals (except to the extent provided by Sections 8.2 and 9.4 hereof with respect to certain Additional Rentals), during the Lease Term. Section 6.5 Expression of the City's Need for the Project; Determinations as to Fair Market Value and Fair Purchase Price The City hereby declares its current need for the Project. It is hereby declared to be the present intention and expectation of the City Council that this Lease will be renewed annually until title to the Project is acquired by the City pursuant to this Lease; but this declaration shall not be construed as contractually -20- WP217102 -002/2 obligating or otherwise binding the City or the City Council. The City and the Corporation hereby agree and determine that the Base Rentals hereunder during the Original Term and any Renewal Term represent the fair value of the use of the Project; and that the Purchase Option Price represents the fair purchase price of the Project. The City hereby determines that the Base Rentals do not exceed a reasonable amount so as to place the City under an economic or practical compulsion to renew this Lease or to exercise its option to purchase the Project hereunder. In making such determinations, the City and the Corporation have given consideration to the Cost of Construction, the value of the Project, the uses and purposes for which the Project will be employed by the City, the benefit to the City by reason of the construction, acquisition, improvement and equipping of the Project and the use and occupancy of the Project pursuant to the terms and provisions of this Lease, the option of the City to purchase the Project, and the expected eventual vesting of title to the Project in the City. The City hereby determines and declares that the construction, acquisition, improvement and equipping of the Project and the leasing of the Project pursuant to this Lease will result in a facility of comparable quality and meeting the same requirements and standards as would be necessary if the construction, acquisition, improvement and equipping of the Project were performed by the City other than pursuant to this Lease. The City hereby determines and declares that the period during which the City has an option to purchase the Project (i.e., the maximum term of this Lease including all Renewal Terms) does not exceed the useful life of the Project. Section 6.6. Nonappropriation In the event that the City Council shall not budget and appropriate, specifically with respect to this Lease, on or before December 31 of each year, moneys sufficient to pay all Base Rentals and the reasonably estimated Additional Rentals coming due for the next ensuing Renewal Term, an Event of Nonappropriation shall be deemed to have occurred (provided, however, that the Trustee shall declare an Event of Nonappropriation on any earlier date on which the Trustee receives written notice from the City that this Lease will not be renewed; and provided further that the Trustee may waive any Event of Nonappropriation which is cured by the City within a reasonable time if in the judgment of the Trustee such waiver is in the best interests of the Registered Owners). In the event that during the Original Term or any Renewal Term, any Additional Rentals shall become due which were not included in the current budget of the City, or which exceed the amounts which were included therefor in the current budget of the City, and if there are no moneys available to pay such Additional Rentals pursuant to Section 3.08 of the Indenture, -21- WP217102 -002/2 then, in the event that moneys are not specifically budgeted and appropriated to pay such Additional Rentals within 90 days subsequent to the date upon which such Additional Rentals are due, an Event of Nonappropriation shall be deemed to have occurred, upon notice by the Trustee to the City to such effect (subject to waiver by the Trustee as hereinbefore provided). If an Event of Nonappropriation occurs, the City shall not be obligated to make payment of the Base Rentals or Additional Rentals or any other payments provided for herein which accrue after the last day of the Original or Renewal Term during which such Event of Nonappropriation occurs; provided, however, that, subject to the limitations of Section 14.3 hereof, the City shall continue to be liable for Base Rentals and Additional Rentals allocable to any period during which the City shall continue to occupy the Project. The City shall in all events vacate the Project (leaving the Equipment) by the expiration of the Original or Renewal Term during which an Event of Nonappropriation occurs. The City and the Corporation hereby acknowledge and agree that any termination of this Lease, whether pursuant to this Section 6.6, Section 10.3(b), or Section 14.2 hereof, and except by reason of the payment of the Purchase Option Price, shall terminate the City's rights as to the Project. The Trustee, upon the occurrence of an Event of Nonappropriation, shall be entitled to all moneys then on hand and being held in all funds created under the Indenture, including the Certificate Fund, the Construction Fund, the Reserve Fund and the Expenses Fund, but excluding the Rebate Fund, for the benefit of the Registered Owners. After the expiration of the Original or Renewal Term during which an Event of Nonappropriation occurs, the Trustee may proceed to foreclose on and sell, lease or assign its interest in the Project or any portion thereof and exercise the rights and remedies of a secured party under the Colorado Uniform Commercial Code with respect to the Equipment, as provided in Sections 7.02 and 7.05 of the Indenture, or take one or any combination of the steps described in paragraphs (a), (b) and (c) of Section 14.2 of this Lease. All property, funds and rights acquired by the Trustee by reason of any Event of Nonappropriation as provided herein, less any moneys due and owing to the Trustee, shall be held by the Trustee for the benefit of the Registered Owners as set forth in the Indenture. Section 6.7. Disposition of Base Rentals Upon receipt by the Trustee of each payment of Base Rentals, the Trustee shall apply the amount of such Base Rentals in the following manner and order: WP217102 -002/2 -22- FIRST, the amount of such payment of Base Rentals designated and paid as interest under Exhibit B, plus the amount of any past due interest on the Certificates, shall be deposited in the Interest Account of the Certificate Fund. SECOND, the remaining portion of such payment of Base Rentals shall be deposited in the Principal Account of the Certificate Fund. ARTICLE VII CONSTRUCTION OF THE PROJECT Section 7.1. Agreement to Construct Project The City shall cause the Project to be acquired, constructed, improved and equipped as herein provided, on behalf of the Corporation as holder of title to the Project. Title to the Project or interests therein, buildings or other property which is purchased or financed from moneys deposited in the Construction Fund shall be held by the Corporation, subject only to this Lease and the Indenture and other Permitted Encumbrances. The City hereby agrees that in order to effectuate the purposes of this Lease it will make, execute, acknowledge and transmit any and all contracts, orders, receipts, writings and instructions with any other persons, firms or corporations and in general do all things which may be necessary or proper, all for the construction, acquisition, improvement and equipping of the Project, on behalf of the Corporation as owner of the Project. Construction, acquisition, improvement and equipping of the Project shall be in accordance with the Project Documents, subject to reasonable change orders or any other reasonable changes approved by the City. So long as this Lease is in full force and effect and no Event of Nonappropriation or Event of Default shall have occurred, the City shall have full power to carry out the acts and agreements provided in this Section 7.1, and such power is granted and conferred under this Lease to the City, and is accepted by the City, and shall not be terminated or restricted by act of the Corporation, the Trustee or the City, except as provided in this Section 7.1. The City agrees to acquire, construct, improve and equip the Project on behalf of the Corporation as owner of the Project, through the application of moneys to be disbursed from the Construction Fund pursuant to Section 7.2 of this Lease and Section 3.09 of the Indenture by the Trustee at the direction of the City. In the event that the Project shall not have been substantially completed, as evidenced by the -23- WP217102 -002/2 certificate provided for in Section 7.3 of this Lease, by October 1, 1994, the Trustee shall, upon 30 days written notice to the City, be authorized, but not required, to complete the Project, without any direction by the City, from any moneys remaining in the Construction Fund. The City represents that, based upon an examination of information presented to the City, including but not limited to estimated construction and equipment costs, the Project can be constructed, acquired, improved and equipped for a total price within the total amount of funds to be initially deposited therefor in the Construction Fund, plus investment income from the investment and reinvestment of amounts on deposit in the Construction Fund. In the event of cost overruns and if no Event of Termination has occurred, the City shall select any one or a combination of the following options: (a) the City shall require the architect or engineer for the Project to modify the plans and specifications or redesign the Project as may be necessary in order to bring the Cost of Construction for the Project within the amount available therefor in the Construction Fund; or (b) the City shall deposit additional amounts in a Special Construction Fund to be established with the Trustee; provided, however, that amounts so deposited by the City may be expended solely for the purchase of moveable personal property or for the purpose of paying any other expense related to the leasehold estate of the City which, in the opinion of nationally- recognized municipal bond counsel, shall not adversely affect the validity and enforceability of this Lease; or (c) the City shall cause Additional Certificates to be issued in accordance with Section 2.11 of the Indenture in an amount sufficient to pay the additional Cost of Construction for the Project; and the City agrees that, upon exercising any such options, the City shall not be entitled to any reimbursement therefor from the Corporation, the Trustee or the Registered Owners, nor shall the City be entitled to any diminution of the Base Rentals and Additional Rentals payable under Section 6.2 of this Lease. Upon the occurrence of a Termination Event or otherwise upon termination of the City's right to direct the acquisition, construction, improvement and equipping of the Project, the Trustee may complete the Project, utilizing any moneys remaining in the Construction Fund. -24- WP217102 -002/2 Section 7.2. Disbursements From the Construction Fund Pursuant to the Indenture, the Trustee shall issue its checks or drafts for each disbursement to pay Costs of Construction provided for herein. So long as no Event of Nonappropriation or Event of Default shall occur, and so long as the right of the City to direct the acquisition, construction, improvement and equipping of the Project has not otherwise been terminated pursuant to the last sentence of Section 7.1 of this Lease, the Trustee shall, upon the request of the City, disburse moneys from the Construction Fund, in payment of Costs of Construction for the Project. Such disbursements shall be made upon receipt by the Trustee of a requisition signed by the City Representative and the Project Manager (i) stating with respect to each payment to be made: (a) the requisition number, (b) the name and address of the person, firm or corporation to whom payment is due, (c) the amount to be paid, (d) that each obligation mentioned therein has been properly incurred, is a proper charge against the Construction Fund and has not been the basis of any previous withdrawal, (e) that no Event of Non - appropriation or Event of Default has occurred and the right of the City to direct the acquisition, construction, improvement and equipping of the Project has not otherwise been terminated, and (f) that the disbursement requested will be used for a Cost of Construction with respect to the Project; (ii) specifying in reasonable detail the nature of the obligation; and (iii) accompanied by a bill, invoice or statement of account for such obligation. Disbursements from the Construction Fund for equipment or materials which are not immediately incorporated into or stored at the Project shall not at any time exceed $200,000, and such equipment or materials for which disbursements have been made shall, until incorporated into or stored at the Project, be stored at a place and in a manner acceptable to the Trustee. Disbursements from the Construction Fund shall be made not more frequently than once per calendar week, and the City shall submit to the Trustee a requisition as set forth in this Section at least two days prior to the date of any anticipated disbursement from the Construction Fund. Any requisition for the acquisition of any item of Equipment having a cost of $25,000 or more, or any requisition or requisitions for the acquisition of two or more substantially identical and tangible items of Equipment having a total aggregate cost of $25,000 or more, shall be accompanied by Financing Statements executed on behalf of the City, in form acceptable to the Trustee, and any other documentation reasonably requested by the Trustee in order to -25- WP217102 -002/2 protect the interests of the Registered Owners. Such Financing Statements and other documentation shall not be required for requisitions for the acquisition of items of Equipment having a cost less than $25,000. Upon the occurrence of a Termination Event prior to the Completion Date, the Construction Fund may be utilized by the Trustee on behalf of the Corporation, as owner of the Project, to complete the Project as provided in Section 7.5 hereof, or, upon termination of the Lease Term, may be disbursed as provided in Section 4.02 of the Indenture, as the Trustee may deem appropriate in the best interests of the Registered Owners. Section 7.3. Completion of Construction Upon the substantial completion of the Project, the City Representative shall deliver a certificate to the Trustee determining that, based upon the representations of the contractors and architect for the Project, and except for any amounts estimated by the City Representative to be necessary for payment of any Cost of Construction for the Project not then due and payable, the Project has been substantially completed and all Costs of Construction for the Project have been paid. Such certificate shall contain a representation that there are no materialmen's liens with respect to the Project. Notwithstanding the foregoing, such certificate shall not, and shall state that it does not, prejudice any rights against third parties which exist on the date of such certificate or which may subsequently come into being. Section 7.4. Title Insurance The Corporation shall cause to be furnished to the Trustee a standard form ALTA title insurance policy upon the Land issued by a title insurance company approved by the Trustee and issued to the Trustee, insuring Corporation's interest in the Land, subject to Permitted Encumbrances. Said title insurance policy shall be subject to no encumbrances other than Permitted Encumbrances, and shall be issued in an amount not less than the principal amount of the Certificates, less any amount on deposit in the Reserve Fund. Section 7.5. Construction Contracts Each Construction Contract shall provide that: (i) such Construction Contract shall be fully and freely assignable to the Trustee without the consent of any other person and the Trustee may choose to assume or not assume such Construction Contract; and (ii) if the Trustee does so assume such Construction Contract, the contractor shall perform the agreements contained therein for the Trustee. Each Construction Contract shall also provide that, upon the occurrence of a Termination Event, the Trustee WP217102 -002/2 -26- may terminate such Construction Contract, and the contractor shall then be entitled to payment only from amounts available therefor in the Construction Fund and only for work done prior to such termination. Upon the occurrence of a Termination Event, or upon the Trustee's assuming control over construction of the Project as provided in the last sentence of Section 7.1 of this Lease, the City shall deliver all Project Documents held by it to the Trustee. Section 7.6. Project Documents The City shall have and keep on file and available for inspection by the Corporation and the Trustee copies of the Project Documents (except for Project Documents which are in the possession of the Trustee), throughout the Lease Term, or as soon after the commencement of the Lease Term as such Project Documents shall become available to the City. Neither the Project Documents nor any change or amendment thereto shall (i) cause the Project to be used for any purpose prohibited hereby or by the Constitution, statutes and laws of the State or the Charter; (ii) result in a material reduction in the value of the Project; (iii) adversely affect the ability of the City to meet its obligations hereunder; or (iv) cause the City to violate its covenants in Section 11.7 hereof. Section 7.7. Defaults Under Construction Contracts In the event of any material default by a contractor under any of the Construction Contracts, or in the event of a material breach of warranty with respect to any materials, workmanship or performance, the City shall promptly proceed, either separately or in conjunction with others, to pursue diligently its remedies against such contractor and /or against each surety of any bond securing the performance of the Construction Contracts. So long as no Event of Default shall have occurred under the Indenture, the City shall have the right to determine the remedies to be exercised against any such contractor or surety. The Net Proceeds of any amounts recovered by way of damages, refunds, adjustments or otherwise in connection with the foregoing, remaining after deduction of expenses incurred in such recovery (including, without limitation, attorneys' fees and costs), and after reimbursement to the City of any amounts theretofore paid by the City and not previously reimbursed to the City for correcting or remedying the default or breach of warranty which gave rise to the proceedings against the contractor or surety, shall be paid to the Trustee for deposit into the Construction Fund if received before the Completion Date therefor, or if received thereafter, shall be deposited as otherwise provided in Section 10.2 of this Lease or otherwise applied as provided in Section 10.3 of this Lease. -27- WP217102 -002/2 Section 7.8. Contractor's Performance and Payment Bonds Except for any architect, engineer, hydrologist, geologist or agronomist employed by the City for construction of the Project, each contractor entering into a Construction Contract shall be required to furnish a performance bond and a separate labor and material payment bond in forms acceptable to the City, which shall be normal and standard forms thereof, copies of which shall be provided to the City and the Trustee. Such bonds shall be made payable to the City, subject to the provisions of the Indenture, shall be executed by a corporate surety licensed to transact business in the State and acceptable to the City and shall be in an amount equal to the contract price for such contractor's Construction Contract. If, at any time during the Construction Period, the surety on such bond shall be disqualified from doing business within the State, or shall otherwise become incapable (in the judgment of the Trustee) of performing its obligations under such bond, an alternate surety acceptable to the City and the Trustee shall be selected. In the event of any change order resulting in the performance of additional work in connection with the Project, the amounts of such bonds pertaining thereto shall be increased to include the cost of such additional work or materials or fixtures to be incorporated in the Project. Section 7.9. Contractor's General Public Liability and Property Damage Insurance Each contractor and subcontractor entering into a Construction Contract shall be required to procure and maintain either standard form comprehensive general public liability and property damage insurance or standard form owners and contractors protective liability insurance, during the duration of such contractor's or subcontractor's Construction Contract, in the amount of at least $1,000,000. If standard form comprehensive general public liability and property damage insurance is procured, such policy shall include the Trustee and the Corporation as additional named insureds and shall include a provision prohibiting cancellation or termination without 30 days prior notice by certified mail to the City and the Trustee. If standard form owners and contractors protective liability insurance is procured, such policy shall include the Trustee and the Corporation as named insureds, and shall include a provision prohibiting cancellation or termination without 30 days prior notice by certified mail to the City and the Trustee. A certificate of insurance in form acceptable to the City and the Trustee shall be provided to the City and the Trustee with respect to each contractor and subcontractor. Such insurance shall provide protection from all claims for bodily injury, including death, property damage and contractual liability. -28- WP217102 -002/2 Section 7.10, Contractor's Builder's Risk Completed Value Insurance The City shall be required to procure and maintain or cause to be procured and maintained, at no cost to the Trustee (but which may be paid out of the Construction Fund) until the Project is accepted and insured by the City, standard, all risk of loss builder's risk completed value insurance upon the Project. Such policy shall not prohibit the waiver of any rights, including but not limited to the right of subrogation, by the City and any contractor with respect to each other, their officers, agents and employees relating to claims covered by such policy. The policy shall include a provision prohibiting cancellation or termination without 30 days prior notice by certified mail to the Trustee and the City, and may have a deductible clause not in excess of $50,000; provided, however, that neither the City nor the Trustee shall thereby be deemed to have incurred any obligation to reimburse the Registered Owners or any other person for the amount of the deductible. A copy of such insurance policy, or a certificate with respect thereto, shall be provided to the City and the Trustee. Such insurance coverage shall be in an amount at least equal to the sum of all Construction Contracts. In the event of any change order resulting in the performance of additional work in connection with the Project, the amount of such insurance shall be increased to include the cost of such additional work. Such builder's risk completed value insurance policy shall name the City, the Corporation and each other party to a Construction Contract as insureds, and shall designate the Trustee as loss payee, subject to the Indenture. Each such insured shall designate the City as its agent for purposes of settlement and payment of proceeds, and no such insured shall have the power to adjust or settle any loss over $50,000 with respect to the Project without the prior written consent of the Trustee; if the loss is $50,000 or less, the City shall have the sole right to adjust or settle the loss. The consent of the Corporation shall not be required for any such adjustment or settlement. Section 7.11. Contractor's Workmen's Compensation Insurance Each contractor and subcontractor entering into a Construction Contract shall be required to procure and maintain, at its own cost and expense, workmen's compensation insurance during the term of its Construction Contract, covering its employees working thereunder. Such insurance, if issued by a private carrier, shall contain a provision that such coverage shall not be canceled without 30 days' prior written notice to the City and the Trustee. A certificate issued by the state compensation insurance fund evidencing such coverage shall be provided to the City and the Trustee or, if such insurance is provided by a private -29- WP217102 -002/2 carrier, a completed certificate of insurance shall be provided to the City and the Trustee by the City's independent insurance consultant with respect to each contractor and subcontractor entering into a Construction Contract. Each Construction Contract shall also provide that each subcontractor of any contractor or subcontractor who is a party to such Construction Contract shall be required to furnish similar workmen's compensation insurance. Section 7.12. Proceeds of Certain Insurance Policies and Performance Bonds The Net Proceeds of any performance or payment bond or insurance policy required by Section 7.8 or Section 7.10 of this Lease, and any Net Proceeds received as a consequence of default under a Construction Contract as provided in Section 7.7 of this Lease, shall be paid into the Construction Fund if received before the Completion Date for the Project, or, if received thereafter, shall either be deposited as provided in Section 10.2 of this Lease or otherwise applied as provided in Section 10.3 of this Lease. Section 7.13. Pledge of Certain Project Documents Under the Indenture The City hereby acknowledges that the Corporation has granted, assigned and pledged all of its rights, title and interest in and to the Project Documents to the Trustee under the Indenture as set forth therein. In order to facilitate such grant, assignment and pledge, the City does hereby grant, pledge and assign to the Corporation the Project Documents, including all extensions and renewals of the term thereof, if any, together with certain rights, titles and interests of the City in and to the Project Documents, including, but not limited to, the present and continuing right to make claim for, collect, receive and receipt for any of the sums, amounts, income, revenues, issues and profits and any other sums of money payable or receivable under the Project Documents, to bring actions and proceedings thereunder or for the enforcement thereof, and to do any and all things which the City under the Project Documents is or may become entitled to; provided, however, that for so long as this Lease is in effect, the City shall retain the right to bring actions and proceedings under the Project Documents and enforce the provisions thereof against the parties thereto other than the City. The City further consents and agrees to the grant, pledge and assignment of the Project Documents made by the Corporation under the Indenture. -30- WP217102 -002/2 ARTICLE VIII TITLE TO THE PROJECT; LIMITATIONS ON ENCUMBRANCES Section 8.1. Title to the Project At all times during the Lease Term, except personal property purchased by the City at its own expense pursuant to Section 9.2 of this Lease, title to the Project and any and all additions and modifications to or replacements of any portion of the Project shall be held in the name of the Corporation, subject only to Permitted Encumbrances, until foreclosed on or conveyed as provided in Section 7.02 of the Indenture or Article XII of this Lease, notwithstanding (i) the occurrence of an Event of Nonappropriation as provided in Section 6.6 of this Lease or one or more Events of Default as defined in Section 14.1 of this Lease; (ii) the occurrence of any event of damage, destruction, condemnation or construction defect or title defect, as provided in Article X of this Lease; (iii) termination of the right of the City to direct the acquisition, construction, improvement and equipping of the Project pursuant to the last sentence of Section 7.1 of this Lease; or (iv) the violation by the Corporation (or by the Trustee as assignee of the Corporation pursuant to the Indenture) of any provision of this Lease. The City shall have no right, title or interest in the Project or any additions and modifications to or replacements of any portion of the Project, except as expressly set forth in this Lease. Section 8.2. No Encumbrance, Mortgage or Pledge of Project The City shall not permit any mechanic's or other lien in an amount exceeding $50,000 to be perfected or remain against the Project; provided that, if the City shall first notify the Trustee of the intention of the City so to do, the City may in good faith contest any mechanic's or other lien in an amount exceeding $50,000 filed or perfected against the Project, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom; provided, however, that during the prosecution of such contest and appeal and until final discharge of such mechanic's or other lien, the City shall (a) provide a surety bond in the amount of such mechanic's or other lien in accordance with the laws of the State, or (b) provide affirmative title insurance coverage over such mechanic's or other lien, or (c) provide such other collateral or surety of payment as the Trustee may deem acceptable in its sole discretion. The Corporation and the Trustee will cooperate fully with the City in any such contest, upon the request and at the expense of the City. Neither the Corporation nor, -31- WP217102 -002/2 except as provided above, the City, shall directly or indirectly create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to the Project, except Permitted Encumbrances. The City shall promptly, at its own expense, take such action as may be necessary to duly discharge any such mortgage, pledge, lien, charge, encumbrance or claim not excepted above which it shall have created, incurred or suffered to exist. The Corporation shall promptly, at its own expense, take such action as may be necessary to duly discharge any such mortgage, pledge, lien, charge, encumbrance or claim not excepted above which it shall have created or incurred. ARTICLE IX MAINTENANCE, TAXES, INSURANCE AND OTHER CHARGES Section 9.1. Maintenance of the Project by the City The City agrees that, at all times during the Lease Term, the City shall maintain, preserve and keep the Project or cause the Project to be maintained, preserved and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and condition, and that the City shall from time to time make or cause to be made all necessary and proper repairs, except as otherwise provided in Sections 9.3 and 10.3 of this Lease. Neither the Corporation nor the Trustee nor any of the Registered Owners shall have any responsibility in any of these matters or for the making of any additions, modifications or replacements to the Project. Section 9.2. Modification of the Project; Installation of Furnishings and Machinery of the City The City shall have the privilege of remodeling the Project or making substitutions, additions, modifications and improvements to the Project, at its own cost and expense; and title to the same shall be held in the name of the Corporation, subject to this Lease and the Indenture, and shall be included under the terms of this Lease and the Indenture; provided, however, that such remodeling, substitutions, additions, modifications and improvements shall not in any way damage the Project or cause the Project to be used for purposes other than lawful governmental functions of the City or cause the City to violate its covenants in Section 11.8 hereof; and provided that the Project, as remodeled, improved or altered, upon completion of such remodeling, substitutions, additions, modifications and improvements, shall be of a value not less than the value of the Project immediately prior to such remodeling or such making of substitutions, additions, modifications and improvements, as reasonably determined by the Trustee. -32- WP217102 -002/2 The City may also, from time to time in its sole discretion and at its own expense, install machinery, equipment and other tangible property in or on the Project. All such machinery, equipment and other tangible property shall remain the sole property of the City in which neither the Corporation, the Trustee nor the Registered Owners shall have any interest; provided, however, that title to any such machinery, equipment and other tangible property which becomes permanently affixed to the Project shall be in the Corporation, subject to this Lease and the Indenture, and shall be included under the terms of this Lease and the Indenture, in the event the Trustee shall reasonably determine that the Project would be damaged or impaired by the removal of such machinery, equipment or other tangible property. Section 9.3. Replacement and Substitution of Equipment The City shall not be under any obligation to renew, repair or replace any inadequate, obsolete, worn -out, unsuitable, undesirable or unnecessary Equipment. In any instance where the City determines that any Equipment has become inadequate, obsolete, worn -out, unsuitable, undesirable or unnecessary, the City may remove such Equipment from the Project and (on behalf of the Corporation) sell, trade -in, exchange or otherwise dispose of it (as a whole or in part) without any responsibility or accountability to the Corporation or the Trustee therefor, so long as the total net book value of such Equipment disposed of in any one fiscal year by the City shall not exceed 5% of the net book value of the Project; the City may dispose of Equipment having a total net book value in excess of such 5% threshold or after such 5% threshold is reached, however, provided that the City shall either: (a) substitute (by direct payment of the costs thereof or by designating as Equipment, machinery, equipment or other personal property, other than property included as part of the Project pursuant to Section 9.2 hereof) and install anywhere in or on the Project, other equipment, machinery or related property having equal or greater value and utility (but not necessarily having the same function) in the operation of the Project; or (b) not make any such substitution and installation, provided (i) in the case of the sale of any such Equipment to anyone other than itself or in the case of the scrapping thereof, the City shall pay to the Trustee for deposit into the Extraordinary Redemption Fund the net proceeds from such sale or the scrap value thereof, as the case may be, (ii) that in the case of the trade -in of such Equipment for other machinery, equipment or related property not to be installed in or -33- WP217102 -002/2 P1111101OF111111 I on the Project, the City shall pay to the Trustee for deposit into the Extraordinary Redemption Fund the amount of the credit received by it in such trade -in and (iii) that in the case of the sale of any such Equipment to the City, or in the case of any other disposition thereof, the City shall pay to the Trustee for deposit into the Extraordinary Redemption Fund an amount equal to the original cost thereof less depreciation at rates calculated in accordance with generally accepted accounting principles. The removal from the Project of any portion of the Equipment pursuant to the provisions of this Section 9.3 shall not entitle the City to any postponement, abatement or diminution of the Base Rentals or other payments required to be made under Section 6.2 of this Lease. The City will promptly report in writing to the Trustee each removal, substitution, sale or other disposition under subsections (a) and (b) of this Section and will pay to the Trustee all amounts required by subsection (b) of this Section to be paid into the Extraordinary Redemption Fund promptly after any subsequent sale, trade -in or other disposition requiring such payment. All substituted machinery, equipment or related property installed pursuant to this Section 9.3 shall be free of all liens and encumbrances (other than Permitted Encumbrances) and shall become a part of the Project. The City shall furnish to the Trustee such Financing Statements and other documentation with respect to any equipment, machinery or related property substituted as Equipment as would have been required therefor if originally acquired from the Construction Fund, as provided in Section 7.2 of this Lease. The City will not remove, or permit the removal of, any of the Equipment from the Project except in accordance with this Section 9.3 or in accordance with Article X of this Lease. The Corporation and the Trustee will cooperate with the City in implementing the rights of the City to dispose of Equipment pursuant to this Section 9.3 and will execute any and all conveyances, releases or other documents necessary or appropriate in connection therewith. Section 9.4. Taxes, Other Governmental Charges and Utility Charges In the event that the Project or any portion thereof shall, for any reason, be deemed subject to taxation, assessments or charges lawfully made by any governmental body, the City shall, during the Lease Term, pay the amount of all such taxes, assessments and governmental charges then due as Additional Rentals. With respect to special assessments or other governmental charges which may be lawfully paid in installments over a period of years, the -34- WP217102 -002/2 City shall be obligated to provide for Additional Rentals only for such installments as are required to be paid during the Original or any Renewal Term. The City shall not allow any liens for taxes, assessments or governmental charges to exist with respect to the Project or any portion thereof (including, without limitation, any taxes levied upon the Project or any portion thereof which, if not paid, will become a charge on the rentals and receipts from the Project or any portion thereof, or any interest therein, including the interest of the Corporation, the Trustee or the Registered Owners), or the rentals and revenues derived therefrom or hereunder. The City shall also pay as Additional Rentals, as the same respectively become due, all gas, water, steam, electricity, heat, power, telephone, utility and other charges incurred in the maintenance and upkeep of the Project. The City may, at the expense and in the name of the City, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments, utility or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Trustee shall notify the City that, in the opinion of Independent Counsel, by nonpayment of any such items the security afforded pursuant to the Indenture will be materially endangered or the Project or any portion thereof will be subject to loss or forfeiture, or the Corporation or the Trustee will be subject to liability, in which event such taxes, assessments, utility or other charges shall be paid forthwith as Additional Rentals (provided, however, that such payment shall not constitute a waiver of the right to continue to contest such taxes, assessments, utility or other charges). Section 9.5. Provisions Regarding Casualty, Public Liability and Property Damage Insurance Upon the completion and acceptance of the Project, as provided in Section 7.3 of this Lease, the City shall cause casualty and property damage insurance to be carried and maintained with respect to the Project or shall continue its participation in the Colorado Intergovernmental Risk Sharing Agency ( "CIRSA ") in an amount at least equal to the aggregate principal amount of the Certificates then Outstanding or the replacement cost of the Project, whichever is greater, less the amount of any deductible clause concerning such insurance. In the event that the City shall so fail to insure the Project or participate in CIRSA, the Trustee shall, using the moneys available in the Insurance Account of the Expenses Fund, pay premiums for such casualty and property damage insurance. The Trustee shall, during the Lease Term, if it is obtaining such insurance, comply with the reasonable direction of the -35- WP217102 -002/2 City as to the terms of such casualty and property damage insurance, consistent with the requirements of this Section 9.5, and as to the selection of a responsible insurer to provide such casualty and property damage insurance. Any insurance policy may have a deductible clause in an amount not to exceed $150,000. The Project may be insured under a blanket insurance policy which insures other buildings as well, as long as such blanket insurance policy complies with the requirements of this Lease. If the City shall insure against similar risks by self - insurance, the City, at its election, may provide for property and casualty insurance with respect to the Project, partially or wholly by means of an adequate self- insurance fund, subject to the provisions below. Upon the execution and delivery of this Lease, the City shall, at its own expense, cause public liability insurance to be carried and maintained or shall continue its participation in CIRSA with respect to the activities to be undertaken by and on behalf of the City in connection with the use of the Project. Such public liability insurance in connection with the Project or participation in CIRSA shall be in an amount not less than the amounts provided in the Colorado Governmental Immunity Act, article 10 of title 24, Colorado Revised Statutes, as the same may be hereafter amended. Any public liability insurance acquired in accordance with this Section 9.5 may be by blanket insurance policy or policies. If the City shall insure against similar risks by self- insurance, the City, at its election, may provide for public liability insurance with respect to the Project, partially or wholly by means of an adequate self - insurance fund, subject to the provisions of the following paragraph. Any self- insurance maintained by the City (participation in CIRSA shall not be deemed to be self insurance for this purpose) shall comply with the following terms: (i) the self- insurance program shall be approved by an independent insurance consultant; (ii) the self- insurance program shall include an actuarially sound claims reserve fund out of which each self- insured claim shall be paid; the adequacy of each such fund shall be evaluated on an annual basis by the independent insurance consultant; and any deficiencies in any self- insurance claims shall be remedied in accordance with the recommendation of the independant insurance consultant; -36- WP217102 -002/2 (iii) the self- insurance claims fund shall be held in a separate trust fund by an independant trustee who may be the Trustee; and (iv) in the event the self- insurance program shall be discontinued, the actuarial soundness of its claims reserve fund, as determined by the independent insurance consultant, shall be maintained. Any casualty and property damage insurance policy required by this Section 9.5 shall be so written or endorsed as to make losses of $50,000 or less, if any, payable to the City, and losses over $50,000, if any, payable to the Trustee, who, along with the City and the Corporation, shall be a co- insured. Each insurance policy provided for in this Section 9.5 shall contain a provision to the effect that the insurance company shall not cancel the policy or modify it materially and adversely to the interest of the Trustee or the Registered Owners, without first giving written notice thereof to the City and the Trustee at least 30 days in advance of such cancellation or modification. To the extent legally possible, CIRSA participation shall include similar provisions concerning loss payees and cancellation. All insurance policies issued pursuant to this Section 9.5, or certificates with respect thereto, or evidence of CIRSA participation, shall be deposited with the Trustee. No agent or employee of the City shall have the power to adjust or settle any loss with respect to the Project, whether or not covered by insurance, without the prior written consent of the Trustee. The consent of the Corporation shall not be required for any such adjustment or settlement. Section 9.6. Advances In the event that the City shall fail to pay any Additional Rentals during the Lease Term, and if there are not sufficient moneys available therefor in the Reserve Fund, the Trustee may pay such Additional Rentals, which Additional Rentals, together with interest thereon at the rate of 18% per annum, the City agrees to reimburse to the Trustee. ARTICLE X DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF NET PROCEEDS Section 10.1. Damage, Destruction and Condemnation If, during the Lease Term (i) the Project shall be destroyed (in whole or in part), or damaged by fire or other casualty; or (ii) title to, or the temporary or permanent use of, the Project or any portion thereof or the estate of the City, the Corporation or the Trustee in the Project or any portion thereof shall be taken under the exercise of the power of -37- WP217102 -002/2 .-In eminent domain by any governmental authority; or (iii) a material defect in construction of the Project shall become apparent; or (iv) title to or the use of all or any portion of the Project shall be lost by reason of a defect in title thereto; then the City shall continue to be obligated, during the Lease Term, subject to the provisions of Section 10.3 of this Lease, to continue to pay the amounts specified in Sections 10.2 and 6.2 of this Lease regardless of whether the certificate provided for in Section 7.3 of this Lease shall have been delivered to the Trustee. Section 10.2. Obligation of the City to Repair and Replace the Project. Subject to the provisions of Section 10.3 of this Lease, the Trustee shall cause the Net Proceeds of any insurance policies, performance bonds, condemnation awards or Net Proceeds received as a consequence of default under a Construction Contract or made available by reason of any occurrence described in Section 10.1 hereof, to be deposited in the Construction Fund, if received before the Completion Date of the Project, or, if received thereafter, to be deposited in a separate trust fund with the Trustee. Except as set forth in Section 10.3 of this Lease, all Net Proceeds so deposited shall be applied to the prompt repair, restoration, modification, improvement or replacement of the Project upon receipt of requisitions acceptable to the Trustee signed by the City Representative and, if drawn from the Contruction Fund, the Project Manager, stating with respect to each payment to be made: (i) the requisition number; (ii) the name and address of the person, firm or corporation to whom payment is due; (iii) the amount to be paid; and (iv) that each obligation mentioned therein has been properly incurred, is a proper charge against the Construction Fund, or the separate trust fund, and has not been the basis of any previous withdrawal and specifying in reasonable detail the nature of the obligation, accompanied by a bill or a statement of account for such obligation. In carrying out any of the provisions of this Section, the City shall have all power and authority granted under Article VII of this Lease. The Trustee shall cooperate with the City in the administration of such fund and shall not unreasonably withhold its approval of requisitions under this Section. The balance of any such Net Proceeds remaining after such repair, restoration, modification, improvement or replacement has been completed shall, if received prior to the Completion Date, be deposited into the Construction Fund; and if received thereafter, shall be deposited into the Extraordinary Redemption Fund. Any repair, restoration, modification, improvement or replacement paid for in whole or in part out of such Net Proceeds shall be the property of the Corporation, subject to this Lease and the Indenture, and shall be included as part of the Project under this Lease and the Indenture. -38- WP217102 -002/2 Section 10.3. Insufficiency of Net Proceeds; Discharge of the Obligation of the City to Repair or Replace Project If the Net Proceeds (plus any amount withheld therefrom by reason of any deductible clause) shall be insufficient to pay in full the cost of any repair, restoration, modification, improvement or replacement of the Project as required under Section 10.2 of this Lease, the City may elect to proceed under any of the following options: (a) The City may complete the work and pay any cost in excess of the amount of the Net Proceeds, and the City agrees that, if by reason of any such insufficiency of the Net Proceeds, the City shall make any payments pursuant to the provisions of this Section 10.3(a), the City shall not be entitled to any reimbursement therefor from the Corporation, the Trustee or the Registered Owners, nor shall the City be entitled to any diminution of the Base Rentals and Additional Rentals payable under Section 6.2 of this Lease. (b) The obligation of the City to repair or replace the Project under Section 10.2 of this Lease may, at the option of the City, be discharged by depositing the Net Proceeds of insurance policies, performance bonds or condemnation awards, or Net Proceeds received as a consequence of default under a Construction Contract, made available by reason of such occurrence, into the Extraordinary Redemption Fund, to be used to redeem Certificates as provided in Section 4.01(c) of the Indenture. Upon such deposit: (i) this Lease shall terminate and all obligations of the City hereunder shall terminate (except the obligation to pay Base Rentals and Additional Rentals which would otherwise have been payable by the City hereunder during the Original or Renewal Term in which such deposit of Net Proceeds occurs); and (ii) the Trustee shall notify the City to vacate the Project (leaving the Equipment) within 30 days of such deposit; the Project shall thereafter be foreclosed on and subleased as provided in Sections 7.02 and 7.05 of the Indenture; and the Net Proceeds of such foreclosure and subleasing, together with any moneys remaining in the Construction Fund, shall also be deposited into the Extraordinary Redemption Fund for the purpose of redeeming Certificates as provided in Section 4.01(d) of the Indenture. (c) The obligation of the City to repair or replace the Project under Section 10.2 of this Lease may, at the option of the City, be discharged by applying the Net Proceeds of such insurance policies, performance bonds or condemnation awards to the payment -39- WP217102 -002/2 of the Purchase Option Price, in accordance with Article XII of this Lease. In the event of an insufficiency of the Net Proceeds for such purpose, the City shall pay such amounts as may be necessary to equal the Purchase Option Price; and in the event the Net Proceeds shall exceed the Purchase Option Price, such excess shall be paid to or retained by the City. Within 90 days of the occurrence of an event specified in Section 10.1 of this Lease, the City shall commence the repair, restoration, modification, improvement or replacement of the Project, or shall elect, by written notice to the Trustee, to proceed under the provisions of subsection (b) or subsection (c) of this Section 10.3. In the event that the City shall, after commencing the repair, restoration, modification, improvement or replacement of the Project, determine that the Net Proceeds (plus any amount withheld therefrom by reason of any deductible clause) shall be insufficient for the accomplishment thereof, the City may elect to proceed under subsection (b) or subsection (c) of this Section 10.3. Section 10.4. Cooperation of Corporation The Corporation shall cooperate fully with the City and the Trustee in filing any proof of loss with respect to any insurance policy or performance bond covering the events described in Section 10.1 of this Lease, in the prosecution or defense of any prospective or pending condemnation proceeding with respect to the Project or any portion thereof, or in any action relating to any Construction Contract, and hereby assigns to the Trustee any interest it may have in such policies or rights of action for such purposes. In no event shall the Corporation voluntarily settle, or consent to the settlement of, any proceeding arising out of any insurance claim, performance or payment bond claim, prospective or pending condemnation proceeding, or action relating to any Construction Contract, with respect to the Project or any portion thereof, without the written consent of the Trustee and the City. ARTICLE XI DISCLAIMER OF WARRANTIES; OTHER COVENANTS Section 11.1. Disclaimer of Warranties NEITHER THE CORPORATION, THE TRUSTEE NOR THE REGISTERED OWNERS MAKE ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR FITNESS FOR USE OF THE PROJECT OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROJECT. The City hereby acknowledges and declares that the City is solely responsible for the design and construction of -40- WP217102 -002/2 Fi 1 Neu 11 1i1 1051M� the Project, and for the operation and maintenance of the Project during the Lease Term, and that neither the Corporation, the Trustee nor the Registered Owners has any responsibility therefor. In no event shall the Corporation, the Trustee or the Registered Owners be liable for any direct or indirect, incidental, special or consequential damage in connection with or arising out of this Lease or the existence, furnishing, functioning or use by the City of any item, product or service provided for herein. Section 11.2. Further Assurances and Corrective Instruments The Corporation and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Project hereby leased or intended so to be, or for otherwise carrying out the intention hereof. Section 11.3. Corporation, City and Trustee Representatives Whenever under the provisions hereof the approval of the Corporation, the City or the Trustee is required to take some action at the request of the other, unless otherwise provided, such approval or such request shall be given for the Corporation by a the Corporation Representative, for the City by the City Representative, and for the Trustee by the Trustee Representative, and the Corporation, the City and the Trustee shall be authorized to act on any such approval or request. Section 11.4. Granting of Easements So long as no Event of Nonappropriation or Event of Default shall have happened and be continuing, and so long as the Lease Term shall not have been terminated by the City pursuant to Section 10.3(b) of this Lease, the Corporation and the Trustee shall at any time or times, but only upon the request of the City, grant easements, licenses, rights -of -way (including the dedication of public highways) and other rights or privileges in the nature of easements with respect to any property or rights, free from this Lease and the Indenture and any security interest or other encumbrance created hereunder or thereunder, and the Corporation and the Trustee shall release existing easements, licenses, rights -of -way and other rights and privileges with respect to such property or rights, with or without consideration, and the Corporation and the Trustee agree to execute and deliver any instrument necessary or appropriate to confirm and grant or release any such easement, license, right -of -way or other grant or privilege upon receipt of: (i) a copy of the instrument of grant or release; (ii) a written application -41- WP217102 -002/2 signed by the City Representative requesting such instrument; and (iii) an opinion of Independent Counsel to the effect that such grant or release will not impair the value or the effective use or interfere with the operation of the Project. Section 11.5. Compliance With Requirements During the Lease Term, the City, the Corporation and the Trustee shall observe and comply promptly with all current and future orders of all courts having jurisdiction over the Project or any portion thereof, and all current and future requirements of all insurance companies writing policies covering the Project or any portion thereof. Section 11.6. City Acknowledgement of the Indenture and the Certificates The City acknowledges and agrees to the terms of the Indenture and agrees to be bound thereby. The City further acknowledges and agrees to the assignment by the Corporation to the Trustee, pursuant to the Indenture, of all rights, title and interest of the Corporation in, to and under this Lease (except the rights of the Corporation under Sections 13.3 and 14.6 of this Lease); and to the delegation by the Corporation to the Trustee, pursuant to the Indenture, of all duties of the Corporation under this Lease. The City acknowledges, directs and agrees to the issuance and sale of the Certificates pursuant to the Indenture. The City acknowledges and approves the form of the Certificates contained in the Indenture. Section 11.7. Tax Covenants The City hereby covenants to comply with all restrictions of the Code applicable to the Certificates and necessary to preserve the exclusion from gross income and from alternative minimum taxable income, for purposes of federal income taxation, of interest paid in connection with the Certificates, unless the City obtains an opinion of nationally recognized municipal bond counsel to the effect that compliance with such restrictions is not necessary to preserve such exclusion. In particular, but without limitation, the City further represents, warrants and covenants to comply with the following restrictions of the Code, unless it receives an opinion of nationally recognized municipal bond counsel stating that such compliance is not necessary. (a) Gross proceeds of the Certificates will not be used in a manner which will cause the Certificates to be considered ''private activity bonds" within the meaning of the Code. The Certificates will be classified as private activity bonds if greater than 10% of the net proceeds of the Certificates are used for any private business use and greater than 10% of the net proceeds of -42- WP217102 -002/2 the Certificates are directly or indirectly (i) secured by any interest in (A) property used or to be used for a private business use or (B) payments in respect of such property or (ii) to be secured by payments derived from payments in respect of property, or borrowed money, used or to be used for a private business use. The Certificates will also be deemed private activity bonds if greater than 5% of the proceeds of the Certificates are (i) used for a private use which is unrelated or disproportionate to the City's use of the proceeds of the Certificates and greater than 5% of the debt service on the Certificates is secured by payments made directly or indirectly by such private user or (ii) an amount exceeding the lesser of 5% or $5 million of the proceeds of the Certificates is used to make a private loan to a person or entity other than a governmental unit. (b) The Certificates are not and shall not become directly or indirectly ''federally guaranteed.'' Under the Code, the Certificates will be considered to be "federally guaranteed" if the payment of principal or interest with respect to the Certificates is directly or indirectly guaranteed (in whole or in part) by the United States of America (or any agency or instrumentality thereof) or 5% or more of the proceeds of the Certificates are used in making loans the payment of principal or interest with respect to which are guaranteed or invested (directly or indirectly) in federally insured deposits or accounts. The Certificates shall not be treated as federally guaranteed due to (i) the proceeds of the issue being invested for an initial temporary period until such proceeds are needed for the purpose for which such Certificates were issued; (ii) investments of a bona fide debt service fund; (iii) investments of a reserve fund which meet the limitations placed on reserve funds by the Code; (iv) investments in obligations issued by the United States Treasury; or (v) other investments permitted by the regulations under the Code. (c) The City shall timely file Internal Revenue Form 8038 -G which shall contain the information required to be filed pursuant to Section 149(e) of the Code. (d) The City shall comply with the Investment Instructions delivered to it on the date of issuance of the Certificates with respect to the application and investment of the proceeds of the Certificates. WP217102 -002/2 -43- Section 11.8. Notification to Moody's Investors Service of Future Obligations of the City The City shall immediately give notice to Moody's Investors Service upon entering into any annually appropriated lease - purchase or similar agreements or upon the issuance by, or on behalf of, the City of any certificates of participation or similar securities for which specific funds have not been pledged to the payment thereof. ARTICLE XII CONVEYANCE OF THE PROJECT Section 12.1. Conveyance of the Project The Corporation shall transfer and convey to the City the Project, in the manner provided for in Section 12.2 of this Lease; provided, however, that prior to such transfer and conveyance: (a) The City shall have paid the then applicable Purchase Option Price and the Indenture shall have been discharged as provided in Article VI of the Indenture; or (b) The City shall have paid all Base Rentals set forth in Exhibit B hereto, for the Original Term and all Renewal Terms, including the final Renewal Term, and all then current Additional Rentals required hereunder; or (c) The Indenture shall have been discharged as provided in Article VI of the Indenture. The City is hereby granted the option to terminate the Lease Term and to purchase the Project upon payment by the City of the then applicable Purchase Option Price and discharge of the Indenture as provided in Article VI of the Indenture. Section 12.2. Manner of Conveyance At the closing of any purchase or other conveyance of the Project pursuant to Section 12.1 of this Lease, the Corporation and the Trustee shall execute and deliver to the City all necessary documents releasing this Lease and the Indenture and any Financing Statements, and assigning, transferring and conveying good and marketable title to the Project, as the Project then exists, subject to the following: (i) Permitted Encumbrances, other than this Lease and the Indenture and any Financing Statements, indicating the City or the Corporation as the debtor and the Corporation or the Trustee as secured party, filed to perfect any security interests granted under this Lease or the Indenture; (ii) all liens, encumbrances and -44- WP217102 -002/2 restrictions created or suffered to exist by the Corporation or the Trustee as required or permitted by this Lease or the Indenture or arising as a result of any action taken or omitted to be taken by the Corporation or the Trustee as required or permitted by this Lease or the Indenture; and (iii) any lien or encumbrance created by action of the City. Section 12.3. Escrowed Deed and Bill of Sale In order to facilitate the enforcement by the City of the obligation of the Corporation to convey the Project to the City under the circumstances provided in Section 12.1 and Section 12.2 of this Lease, the Corporation shall deposit in escrow with the Trustee, concurrently with the delivery of the Certificates to the Original Purchaser, a deed to the Project and a bill of sale satisfactory to the City. The Trustee shall, upon payment of the Purchase Option Price and discharge of the Indenture as provided in Article VI of the Indenture or payment of all Base Rentals or upon discharge of the Indenture as provided in Section 12.1(c) of this Lease, date and release the deed and bill of sale to the City for recording. ARTICLE XIII ASSIGNMENT, SUBLEASING, INDEMNIFICATION, MORTGAGING AND SELLING Section 13.1. Assignment by Corporation; Replacement of Corporation The rights of the Corporation under this Lease, including rights to receive and enforce payments hereunder (except the rights of the Corporation under Sections 13.3. and 14.6 of this Lease), have been assigned to the Trustee pursuant to the Indenture. In the event of any bankruptcy, insolvency, or other similar proceeding as to the Corporation, or in any other event which in the judgment of the Trustee materially impairs the ability of the Corporation to serve as lessor under this Lease or as grantor under the Indenture, the Trustee may replace the Corporation with such other entity as it deems appropriate. In any such event the Corporation shall cooperate with the Trustee in conveying title to the Project and any and all other right, title and interest of the Corporation in, to and under this Lease and the Indenture to such successor entity as the Trustee may designate. Any costs or expenses incurred by or charged to the Corporation at the request of the Trustee and in the course of cooperating with the Trustee pursuant to the provisions of this Section shall be paid by the City. Section 13.2. Assignment and Subleasing by the City This Lease may not be assigned by the City for any reason. The Project or a portion thereof can be subleased to the Pueblo Regional Building Authority without the consent of the -45- WP217102 -002/2 W 111110 11Ilf 0a0� Corporation, the Trustee or any Registered Owner. Further, the Project may be subleased, as a whole or in part, by the City without the necessity of obtaining the consent of the Corporation, the Trustee or any Registered Owners; subject, however, to each of the following conditions: (a) The Project may be subleased, in whole or in part, only to an agency or department or political subdivision of the State, or to another entity or entities if, in the opinion of nationally recognized bond counsel acceptable to the Trustee, such sublease will not cause the City to violate its covenants in Section 11.7 hereof; (b) This Lease, and the obligations of the City hereunder, shall, at all times during the Original and any Renewal Terms, remain obligations of the City, and the City shall maintain its direct relationships with the Corporation and the Trustee, notwithstanding any sublease; (c) The City shall furnish or cause to be furnished to the Corporation and the Trustee a copy of any sublease agreement; and (d) No sublease by the City shall cause the Project to be used for any purpose which would cause the City to violate its covenants in Section 11.8 hereof, or which would viollate the Constitution, statutes or laws of the State or the Charter. Section 13.3. Release and Indemnification Covenants To the extent permitted by law, the City shall and hereby agrees to indemnify and save the Corporation and the Trustee harmless against and from all claims, by or on behalf of any person, firm, corporation or other legal entity arising from the conduct, management or ownership of, or from any work or thing done on, the Project during the Lease Term, from: (i) any condition of the Project; and (ii) any act of negligence of the City or of any of its agents, contractors or employees or any violation of law by the City or breach of any covenant or warranty by the City hereunder. To the extent permitted by law, the City shall indemnify and save the Corporation and the Trustee harmless from any such claim arising as aforesaid from (i) or (ii) above, or in connection with any action or proceeding brought thereon and, upon notice from the Corporation or the Trustee, shall defend the Corporation or the Trustee, as the case may be, and pay the cost of such defense in any such action or proceeding. -46- WP217102 -002/2 Section 13.4. Restrictions on Mortgage or Sale of Project The City and the Corporation agree that, except for: (i) the assignment by the Corporation of this Lease and mortgaging of the Project to the Trustee pursuant to the Indenture; (ii) any exercise by the Trustee or the Corporation of the remedies afforded by this Lease; (iii) the right of the Trustee to replace the Corporation pursuant to Section 13.1 of this Lease and any conveyances required by reason of such replacement; (iv) the right of the City to sublease all or a portion of the Project pursuant to Section 13.2 of this Lease; (v) any granting of easements pursuant to Section 11.4 of this Lease; (vi) any conveyance to the City pursuant to Article XII of this Lease; (vii) any substitutions, additions, modifications and improvements of the Project pursuant to Section 9.2 of this Lease; and (viii) any removal, substitution, sale or other disposition of Equipment pursuant to Section 9.3 of this Lease; neither the Corporation nor the City will mortgage, sell, assign, transfer or convey the Project or any portion thereof during the Lease Term. ARTICLE XIV EVENTS OF DEFAULT AND REMEDIES Section 14.1. Events of Default Defined Any one of the following shall be ''Events of Default" under this Lease: (a) Failure by the City to pay any Base Rentals or Additional Rentals when due during the Lease Term; or (b) Failure by the City to vacate the Project (leaving the Equipment) by the expiration of the Original or Renewal Term during which an Event of Nonappropriation occurs; or (c) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in (a) or (b) for a period of 45 days after written notice, specifying such failure and requesting that it be remedied shall be given to the City by the Trustee, unless the Trustee shall agree in writing to an extension of such time prior to its expiration; provided, however, that if the failure stated in the notice cannot be corrected within the applicable period, the Trustee shall not unreasonably withhold its consent to an extension of such time if corrective action shall be instituted by the City within the applicable period and diligently pursued until the default is corrected. -47- WP217102 -002/2 The foregoing provisions of this Section 14.1 are subject to the following limitations: (i) the City shall be obligated to pay the Base Rentals and Additional Rentals only during the Lease Term, except as otherwise expressly provided in this Lease; and (ii) if, by reason of Force Majeure the City shall be unable in whole or in part to carry out any agreement on its part herein contained, other than the obligations on the part of the City contained in Article VI of this Lease, the City shall not be deemed in default during the continuance of such inability. The City agrees, however, to remedy, as promptly as legally and reasonably possible, the cause or causes preventing the City from carrying out its agreement; provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the City. Section 14.2. Remedies on Default Whenever any Event of Default referred to in Section 14.1 of this Lease shall have happened and be continuing, the Trustee may terminate the Lease Term and may give notice to the City to vacate the Project (leaving the Equipment) within 15 days from the date of such notice. After the occurrence of an Event of Default the Trustee may, without any further demand or notice, foreclose through the courts on the Project, and exercise all the rights and remedies of a secured party under the Colorado Uniform Commercial Code with respect to the Equipment, and take one or any combination of the following additional remedial steps: (a) The Trustee may lease the Project or any portion thereof for the benefit of the Registered Owners. (b) The Trustee may recover from the City: (i) the portion of Base Rentals and Additional Rentals which would otherwise have been payable hereunder, allocable to any period in which the City continues to occupy the Project; and (ii) Base Rentals and Additional Rentals which would otherwise have been payable by the City hereunder during the remainder, after the City vacates the Project, of the Original or Renewal Term in which such Event of Default occurs; provided, however, that if the Trustee does not proceed to foreclose and sell the Project reasonably promptly after such Event of Default, the Trustee shall be obligated to the City to use its best efforts to lease or sublease the Project for the remainder of such Original or Renewal Term, -48- WP217102 -002/2 as provided in paragraph (a) of this Section 14.2, and the Net Proceeds of such leasing shall be offset against the amount recoverable from the City under this paragraph (ii). (c) The Trustee may take whatever action at law or in equity may appear necessary or desirable to enforce its rights in and to the Project under this Lease and the Indenture. Section 14.3. Limitations on Remedies A judgment requiring a payment of money may be entered against the City by reason of an Event of Default only as to the City's liabilities described in paragraph (b) of Section 14.2 of this Lease. A judgment requiring a payment of money may be entered against the City by reason of an Event of Nonappropriation only to the extent that the City fails to vacate the Project as required by Section 6.6 of this Lease, and only as to the liabilities described in paragraph (b)(i) of Section 14.2 of this Lease. Notwithstanding paragraph (b)(ii) of Section 14.2 of this Lease, any Event of Default consisting of failure by the City to vacate the Project by the expiration of the Original or Renewal Term during which an Event of Nonappropriation occurs shall not result in any liability for Base Rentals or Additional Rentals allocable to any period other than the period in which the City continues to occupy the Project. Section 14.4. No Remedy Exclusive Subject to Section 14.3 hereof, no remedy herein conferred upon or reserved to the Trustee is intended to be exclusive, and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power, and the same may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Trustee to exercise any remedy reserved in this Article, it shall not be necessary to give any notice, other than such notice as may be required in this Article. Section 14.5. Waivers The Trustee may waive any Event of Default under this Lease and its consequences, as the Trustee deems to be in the best interests of the Registered Owners. In the event that any agreement contained herein should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. -49- WP217102 -002/2 In view of the assignment of the rights of the Corporation under this Lease to the Trustee pursuant to the Indenture, the Corporation shall have no right to waive any Event of Default hereunder without the consent of the Trustee; and the waiver of any Event of Default hereunder by the Trustee shall constitute a waiver of such Event of Default by the Corporation, without the necessity of any action of or consent by the Corporation. A waiver of an Event of Default under the Indenture shall constitue a waiver of the corresponding Event of Default or Event of Nonappropriation under this Lease; provided that no such waiver shall extend to or affect any subsequent or other Event of Default or Event of Nonappropriation under this Lease or impair any right consequent thereon. Section 14.6. Agreement to Pay Attorneys' Fees and Expenses In the event that either party hereto shall default under any of the provisions hereof and the nondefaulting party shall employ attorneys or incur other expenses for the collection of Base Rentals and Additional Rentals, or the enforcement of performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it shall pay on demand therefor to the nondefaulting party the fees of such attorneys and such other expenses so incurred by the nondefaulting party, to the extent that such attorneys' fees and expenses may be determined to be reasonable by a court of competent jurisdiction. Section 14.7. Waiver of Appraisement, Valuation, Stay and Extension The Corporation and the City agree, to the extent permitted by law, that in the case of a termination of the Lease Term by reason of an Event of Nonappropriation or an Event of Default, neither the Corporation nor the City nor any one claiming through or under either of them shall or will set up claim or seek to take advantage of any appraisement, valuation, stay or extension laws now or hereafter in force in order to prevent or hinder the enforcement of the Indenture or this Lease; and the Corporation and the City, for themselves and all who may at any time claim through or under either of them, each hereby waives, to the full extent that it may lawfully do so, the benefit of all such laws; provided, however, that Corporation, for itself and all who may at any time claim through or under the Corporation, shall retain all rights of redemption. -50- WP217102 -002/2 ARTICLE XV MISCELLANEOUS Section 15.1. Notices All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when delivered or mailed by certified or registered mail, postage prepaid, as follows: if to the City, to City of Pueblo, Colorado, One City Hall Place, Pueblo, Colorado 81003, Attention: City Manager; if to the Corporation, to City of Pueblo, Colorado Municipal Building Corporation, One City Hall Place, Pueblo, Colorado 81003, Attention: President; if to the Trustee, to The Pueblo Bank and Trust Company, 301 West Fifth Street, Pueblo, Colorado 81003, Attention: Corporate Trust Department; if to the Original Purchaser, to Norwest Investment Services Inc., 1700 Broadway, Denver, Colorado 80274 -8736, Attention: Public Finance, The City, the Corporation, the Trustee, the Original Purchaser may, by written notice, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. Section 15.2. Binding Effect This Lease shall inure to the benefit of and shall be binding upon the Corporation and the City and their respective successors and assigns, subject, however, to the limitations contained in Article XIII of this Lease. Section 15.3. Amendments, Changes and Modifications Except as otherwise provided in this Lease or the Indenture, subsequent to the delivery of the Certificates to the Original Purchaser and prior to the discharge of the Indenture, this Lease may not be effectively amended, changed, modified or altered without the written consent of the Trustee, as provided in the Indenture. Section 15.4. Amounts Remaining in Funds It is agreed by the parties hereto that any amounts remaining in the Certificate Fund, the Reserve Fund, the Construction Fund, the Extraordinary Redemption Fund, the Expenses Fund or any other fund or account created under the Indenture except the Rebate Fund, upon termination of the Lease Term, and after payment in full of the Certificates (or provision for payment thereof having been made in accordance with the provisions of Article VI of the Indenture) and fees and expenses of the Trustee in accordance with this Lease, shall belong to and be paid to the City by the Trustee as an overpayment of Base Rentals. -51- WP217102 -002/2 I Section 15.5. Net Lease This Lease shall be deemed and construed to be a ''net lease," and the City shall pay absolutely net during the Lease Term, the Base Rentals, Additional Rentals and all other payments required hereunder, free of any deductions, and without abatement, deduction or setoff (other than credits against Base Rentals expressly provided for in this Lease). Section 15.6. Payments Due on Holidays If the date for making any payment or the last day for performance of any act or the exercising of any right, as provided in this Lease, shall be a legal holiday or a day on which banking institutions in the city in which the principal corporate trust office of the Trustee is located are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day that is not a legal holiday or a day on which such banking institutions are not authorized by law to remain closed with the same force and effect as if done on the nominal date provided in this Lease. Section 15.7. Severability In the event that any provision of this Lease, other than the requirement of the City to pay Base Rentals and the requirement of the Corporation to provide quiet enjoyment of the Project and to convey the Project to the City under the conditions set forth in Article XII of this Lease, shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 15.8. Execution in Counterparts This Lease may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 15.9. Applicable Law This Lease shall be governed by and construed in accordance with the laws of the State, without regard to conflict of laws principles. Section 15.10. Captions The captions or headings herein are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Lease. Section 15.11. Immunity of officers, Employees and Agents of City and Corporation No recourse shall be had for the payment of the principal of or premium, if any, or interest on any of the Certificates or for any claim based thereon or upon any obligation, covenant or agreement contained in the Indenture or this Lease against any past, present or future officer, director, employee or agent of the -52- WP217102 -002/2 City or the Corporation, or of any successor public corporation of the City, as such, either directly or through the City or the Corporation or any successor public corporation of the City, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, directors, employees or agents as such is hereby expressly waived and released as a condition of and consideration for the execution of the Indenture and this Lease and the issuance of such Certificates. WP217102 -002/2 -53- IN WITNESS WHEREOF, the Corporation has executed this Lease in its corporate name with its corporate seal hereunto affixed and attested by its duly authorized officer; and the City has caused this Lease to be executed in its corporate name and the seal of the City affixed and attested by duly authorized officer thereof. All of the above are effective as of the date first above written. [SEAL] CITY OF PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION, as Lessor By Attest: President By Secretary [CITY SEAL] CITY OF PUEBLO, COLORADO, as Lessee Attest: By City Clerk By President of the City Council -54- WP217102 -002/2 STATE OF COLORADO ] ] ss. CITY OF PUEBLO ] The foregoing instrument was this day of July 1992, by _ President, and by of Pueblo, Colorado Municipal Bui Colorado nonprofit corporation. acknowledged before me as as Secretary, of lding Corporation, a WITNESS my hand and official seal. [SEAL] My commission expires: Notary Public City -55- WP217102 -002/2 STATE OF COLORADO ] ] ss. CITY OF PUEBLO ] The foregoing instrument was acknowledged before me as of the day of July 1992, by Fay Kastellic, as President of the City Council of the City of Pueblo, Colorado, and by Marian D. Mead, as City Clerk of the City of Pueblo, Colorado. WITNESS my hand and official seal. [SEAL] My commission expires: Notary Public -56- WP217102 -002/2 EXHIBIT A DESCRIPTION OF THE LAND The Land referred to in this Lease is situated in the State of Colorado, County of Pueblo, and is described as follows: Lots 1 to 9, Lots 11, 12 and 13, Lots 17 to 32, Block 70, SOUTH PUEBLO, Lots A, B, C & D in TRACKAGE SUBDIVISION, A RESUBDIVISION OF LOTS 14, 15 AND 16, Block 70, SOUTH PUEBLO Lots 1 to 16, Lots 17 to 32, Block 80, SOUTH PUEBLO TOGETHER WITH that portion of Mechanic Street vacated by Ordinance No. 976, recorded September 19, 1980 in Book 2044 at Page 622, all the alleys in Blocks 70 and 80 vacated by Ordinance No. 1524, recorded November 20, 1980 in Book 2051 at Page 503, and portion of "E" Street vacated by Ordinance No. 51, recorded March 3, 1950 in Book 1117 at Page 358 and recorded June 18, 1953 in Book 1212 at page 360 appurtenant thereto. A -1 WP217102 -002/2 EXHIBIT B e Purcn ase Option Price on any Interest Payment Date assumes the Base Rental Payment due on that date has been paid. Also, the Purchase Option Prices listed here assume that the money to pa has not been borrowed; if the City has burrowed the money to pay the Purchase Option Price, certain restrictions and premiums apply, as set forth in Section 4.01 of the Indenture. B -1 WP217102 -002/2 SCHEDULES OF BASE RENTALS AND PURCHASE OPTION PRICES Base Rentals Base Rentals Purchase Principal Interest Total Option Date Component Component Base Rental Price* 6/15/93 $193,748.44 $193,748.44 $2,960,000 12/15/93 $ 55,000.00 101,380.00 156,380.00 2,905,000 6/15/94 100,211.25 100,211.25 2,905,000 12/15/94 130,000.00 100,211.25 230,211.25 2,775,000 6/15/95 96,831.25 96,831.25 2,775,000 12/15/95 140,000.00 96,831.25 236,831.25 2,635,000 6/15/96 92,981.25 92,981.25 2,635,000 12/15/96 145,000.00 92,981.25 237,981.25 2,490,000 6/15/97 88,812.50 88,812.50 2,490,000 12/15/97 60,000.00 88,812.50 148,812.50 2,430,000 6/15/98 87,012.50 87,012.50 2,430,000 12/15/98 65,000.00 87,012.50 152,012.50 2,365,000 6/15/99 84,981.25 84,981.25 2,365,000 12/15/99 70,000.00 84,981.25 154,981.25 2,295,000 6/15/00 82,706.25 82,706.25 2,295,000 12/15/00 70,000.00 82,706.25 152,706.25 2,225,000 6/15/01 80,361.25 80,361.25 2,225,000 12/15/01 75,000.00 80,361.25 155,361.25 2,150,000 6/15/02 77,773.75 77,773.75 2,150,000 12/15/02 80,000.00 77,773.75 157,773.75 2,070,000 6/15/03 74,973.75 74,973.75 2,070,000 12/15/03 85,000.00 74,973.75 159,973.75 1,985,000 6/15/04 71,956.25 71,956.25 1,985,000 12/15/04 95,000.00 71,956.25 166,956.25 1,890,000 6/15/05 68,512.50 68,512.50 1,890,000 12/15/05 100,000.00 68,512.50 168,512.50 1,790,000 6/15/06 64,887.50 64,887.50 1,790,000 12/15/06 105,000.00 64,887.50 169,887.50 1,685,000 6/15/07 61,081.25 61,081.25 1,685,000 12/15/07 115,000.00 61,081.25 176,081.25 1,570,000 6/15/08 56,912.50 56,912.50 1,570,000 12/15/08 125,000.00 56,912.50 181,912.50 1,445,000 6/15/09 52,381.25 52,381.25 1,445,000 12/15/09 135,000.00 52,381.25 187,381.25 1,310,000 6/15/10 47,487.50 47,487.50 1,310,000 12/15/10 140,000.00 47,487.50 187,487.50 1,170,000 6/15/11 42,412.50 42,412.50 1,170,000 12/15/11 150,000.00 42,412.50 192,412.50 1,020,000 6/15/12 36,975.00 36,975.00 1,020,000 12/15/12 165,000.00 36,975.00 201,975.00 855,000 6/15/13 30,993.75 30,993.75 855,000 12/15/13 175,000.00 30,993.75 205,993.75 680,000 6/15/14 24,650.00 24,650.00 680,000 12/15/14 190,000.00 24,650.00 214,650.00 490,000 06/15/15 17,762.50 17,762.50 490,000 12/15/15 490,000.00 17,762.50 507,762.50 -0- e Purcn ase Option Price on any Interest Payment Date assumes the Base Rental Payment due on that date has been paid. Also, the Purchase Option Prices listed here assume that the money to pa has not been borrowed; if the City has burrowed the money to pay the Purchase Option Price, certain restrictions and premiums apply, as set forth in Section 4.01 of the Indenture. B -1 WP217102 -002/2 EXHIBIT C SCHEDULE OF CERTAIN PERMITTED ENCUMBRANCES 1. Reservation as contained in Ordinance No. 1524 vacating all of the alley in Blocks 70 and 80, South Pueblo, recorded November 20, 1' providing substantially Reserving unto the City and egress at all times and maintaining sewers, etc. 380 in Book 2051 at Page 503, as follows: of Pueblo the Right of ingress for the purpose of constructing water lines, public utilities, 2. Right of Way to construct, maintain and operate one or more main tracks and necessary sidings and telegraph lines as granted to The Pueblo and State Line Railroad Company by the City of Pueblo in Ordinance No. 51 recorded March 3, 1950 in Book 1117 at Page 358, affecting the following: From the East boundary line of said City to the West boundary line thereof between the said South bank of the Arkansas River on the North and the said South line of "E" Street on the South together with the right to lay, construct, maintain and operate said tracks and sidings over all cross streets and alleys which said tracks and sidings may intersect within the territory above described, including the right to cross First and Second streets and the alleys in blocks twenty (20) and thirty (30) South of the Arkansas River and the right to construct, maintain and operate such yards, structures and appliances upon the property so owned by said Railroad Company within the territory above defined as may be useful or requisite for the transaction of its business as such Railroad Company within the said City of Pueblo and said tracks may be used by said Company and its legal successors and assigns for the transportation of rolling stock therein to be operated by steam power. 3. Easement and right of way to construct and maintain an eight inch sanitary sewer line, as granted to the City of Pueblo by Barbara Newton, in the instrument recorded June 25, 1980 in Book 2035 at Page 213, affecting the following described property: The West ten feet of Lots 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31 and 32, Block 70, South Pueblo. 4. Encroachments by the buildings as now located on said property onto streets as shown by the survey of Adams- Mangini, Inc., dated August 24, 1989. C -1 WP217102 -002/2