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•' • •:1• AN ORDINANCE ADOPTING A PLAN FOR THE REDEMPTION OF THE CITY OF PUEBLO'S SINGLE FAMILY MORTGAGE REVENUE BONDS, 1978 SERIES A, AND THE CITY'S CAPITAL IMPROVEMENT RESIDUAL REVENUE BONDS, SERIES 1988; AND APPROVING FOR THAT PURPOSE THE LIQUIDATION OF CERTAIN SECURITIES HELD IN RESERVE FUNDS FOR THE 1978A BONDS, AND ALSO APPROVING AND ADOPTING THE FORM OF AGREEMENT FOR THE SALE OF CERTAIN MORTGAGE LOANS; AND AUTHORIZING AND APPROVING RELATED DOCUMENTS AND ACTIONS IN CONNECTION THEREWITH. WHEREAS, the City of Pueblo, in the County of Pueblo and State of Colorado (the "City "), is a municipal corporation duly organized and existing as a home rule city pursuant to Article XX of the Constitution of the State of Colorado (the "Constitution") and the home rule charter of the City (the "Charter "); and WHEREAS, all legislative powers possessed by the City, conferred by Article XX of the State Constitution, or contained in the Charter, as either has from time to time been amended, or otherwise existing by operation of law, are vested in a board of council members, also known as the city council (the "City Council "); and WHEREAS, the City previously issued its Single Family Mortgage Revenue Bonds (Midland Federal Savings and Loan Association, Pueblo, Colorado — Originator and Servicer), 1978 Series A, in the initial principal amount of $20,000,000, of which approximately $3,390,000 remains outstanding (the "1978 Bonds "), pursuant to a Trust Indenture dated as of August 1, 1978, as amended and supplemented by a First Supplemental Indenture dated as of May 1, 1988 (together, the "1978 Indenture ") between the City and Wells Fargo Bank National Association (successor to United Bank of Denver, National Association) (the "1978 Trustee "); and WHEREAS, the City previously issued its Capital Improvement Residual Revenue Bonds, Series 1988, in the initial principal amount of $279,639.15, which principal amount has accumulated to approximately $940,000 (the "1988 Bonds "), pursuant an Indenture of Trust dated as of May 1, 1988 (the "1988 Indenture "), between the City and The Bank of Cherry Creek, a branch of Western National Bank (successor to The Pueblo Bank and Trust Company) (the "1988 Trustee "); and WHEREAS, the City has engaged George K. Baum & Company ( "Baum ") to work with James Capital Advisors, the financial advisor for the City ( "James Capital "), Kutak Rock LLP, bond counsel for the City ( "Kutak "), and the City Attorney, to develop a plan for the redemption of the 1978 Bonds, the transfer of the remaining assets securing the 1978 Bonds to the trustee for the 1988 Bonds, and the consequent sale of those assets, the redemption of the 1988 Bonds, and the distribution of the net assets to the City (cumulatively, the "Plan"); and WHEREAS, Baum, James Capital, Kutak and the City Attorney have drafted a timetable setting forth various steps to be taken to accomplish the Plan and have presented that timetable at this meeting of the City Council; and 02- 114064.01 WHEREAS, there has also been presented at this meeting a form of Purchase Agreement (the "Purchase Agreement "), which would provide for the sale of the mortgage loans currently securing the 1978 Bonds, such sale to occur as part of the Plan after the defeasance of the 1978 Bonds; and WHEREAS, the City Council wishes to approve the outline and general timetable for the Plan, to adopt and approve the form of the Purchase Agreement, and to approve the sale of assets contained in various reserve funds for the 1978 Bonds and the 1988 Bonds, all to provide the moneys necessary to redeem the 1978 Bonds and the 1988 Bonds; and WHEREAS, the Plan as designed will provide residual funds to the City for use for any legal purpose, and will allow the City to continue to recycle volume cap available from payments on the 1978 Bonds through a program sponsored and administered by the Colorado Housing and Finance Authority ( "CHFA "), in order to make available low interest mortgage loans to residents of the City; and WHEREAS, the City Council has considered the proposal and the outline of the Plan, and has determined that it is in the best interests of the residents of the City that the Plan be implemented without undue delay in a time of generally rising interest rates; BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO: Section 1. Approval of Plan Generally. The City Cotmcil hereby approves and authorizes the execution of the Plan generally, along the approximate timetable presented at this meeting. Section 2. Redemption of 1978 Bonds. The City Council hereby approves and authorizes the redemption of the 1978 Bonds and directs the President and the Vice President of the City Council, the City Clerk and the Assistant City Manager for Fiscal Operations (together, the "Authorized Officials "), in conjunction with Baum, James Capital, Kutak and the City Attorney (together, the "Associated Professionals "), to take action or cause the 1978 Trustee to take action to convert investments in the Capital Reserve Fund, Mortgage Reserve Fund, Principal Account, Principal Pre - payment Subaccount and Accumulation Reserve Account held by the 1978 Trustee for the 1978 Bonds into the cash necessary for the redemption of the 1978 Bonds, and to use the necessary cash to redeem the 1978 Bonds in accordance with the 1978 Indenture. Section 3. Transfer of Assets. The City Council hereby authorizes and directs the 1978 Trustee, after the defeasance of the 1978 Bonds, to transfer the remaining assets which secured payment of the 1978 Bonds to the 1988 Trustee, to be used to secure the payment of the 1988 Bonds, pursuant to the 1978 Indenture and the 1988 Indenture. Section 4. Sale of Mortgage Loans. The City Council hereby authorizes and directs the solicitation of bids by Baum for the sale of the mortgage loans pursuant to the Purchase Agreement. The form of the Purchase Agreement is hereby authorized, approved and confirmed, and the Authorized Officials, or any one of them, is authorized, empowered and directed to execute and deliver the Purchase Agreement for and on behalf of the City, to the purchaser that submits the highest responsible price for the mortgage loans, in substantially the form and with 02- 114064.01 2 substantially the content as presented at this meeting, but with such changes, modifications, additions and deletions therein as the City Attorney and the Authorized Official executing the Purchase Agreement shall deem necessary, desirable or appropriate (execution thereof to constitute conclusive evidence of the approval of any and all such changes, modifications, additions or deletions). Section 5. Redemption of 1988 Bonds. The City Council hereby authorizes and directs the 1988 Trustee to use the proceeds from the sale of the mortgage loans and the other assets, available to it to redeem the 1988 Bonds in accordance with the 1988 Indenture. Further, the City Council directs the 1988 Trustee to release and pay over to the City any and all excess assets held by it to secure payment of the 1988 Bonds after defeasance of the 1988 Bonds. Section 6. Recycling of Volume Cap. The City Council hereby authorizes and directs the Authorized Officials and the Associated Professionals to take whatever action may be necessary or appropriate to recycle the volume cap represented by the redemption of the 1978 Bonds through the existing program with CHFA. Section 7. Additional Documents and Actions. The Authorized Officials, and any of them, are hereby authorized and directed to execute and deliver for and on behalf of the City any and all additional certificates, documents, opinions or other papers, and to perform all other acts (including without limitation the filing of any financing statements or any other documents to create and maintain a security interest in the trust estate pledged under the 1978 Indenture and the 1988 Indenture) as they may deem necessary or appropriate in order to implement and carry out the intent and purpose of this Ordinance. Section 8. Repeals. All ordinances, resolutions, motions, orders, by -laws, rules or regulations, or parts thereof, in conflict with this Ordinance are hereby repealed only to the extent of such inconsistency. Section 9. Severability. If any section, paragraph, clause or provision of this Ordinance 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 parts or provisions of this Ordinance. Section 10. Effective Date. This Ordinance shall take effect on April 23, 2002, after its passage on second reading. Section 11. Public Hearing. A public hearing on this Ordinance shall be held on Monday, April 22, 2002, at 7:00 p.m., in the City Council Chambers, One City Hall Place, Pueblo, Colorado. 02- 114064.01 3 INTRODUCED April 8,2002: Attest: By Al Gurule Councilperson APPROVED: President, City Council City k PASSED AND APPROVED: April 22, 2002 APPROVED AS TO FORM BY CITY ATTORNEY: City Attorney 02- 114064.01 4 � R�� Background Paper for Proposed ORDINANCE DATE: APRIL 8, 2002 AGENDA ITEM # -7 1QIg5 DEPARTMENT: FINANCE DEPARTMENT ROBERT HAIN, ASST. CITY MGR. FOR FISCAL OPERATIONS TITLE AN ORDINANCE ADOPTING A PLAN FOR THE REDEMPTION OF THE CITY OF PUEBLO'S SINGLE FAMILY MORTGAGE REVENUE BONDS, 1978 SERIES A, AND THE CITY'S CAPITAL IMPROVEMENT RESIDUAL REVENUE BONDS, SERIES 1988; AND APPROVING FOR THAT PURPOSE THE LIQUIDATION OF CERTAIN SECURITIES HELD IN RESERVE FUNDS FOR THE 1978A BONDS, AND ALSO APPROVING AND ADOPTING THE FORM OF AGREEMENT FOR THE SALE OF CERTAIN MORTGAGE LOANS: AND AUTHORIZIN D APPROVING RELATED DOCUMENTS AND ACTIONS IN CONNECTION TH RWI . ISSUE Should City Council approve an Ordinance to adopt a plan for the redemption of the City of Pueblo Single Family Mortgage Revenue Bonds Series A, and the City's Capital Improvement Residual Revenue Bonds, Series 1988 and related actions needed to do so? RECOMMENDATION The Staff recommendation is, Approval of the Ordinance. BACKGROUND In 1978 the City issued Mortgage Revenue Bonds totaling $20,000,000. In 1988 the City issued Residual Revenue Bonds, which allowed the City to cash out some of the excess revenues accruing in the 1978 Bond. Certain provisions in the 1988 Bonds link it to the 1978 Bonds, thus requiring that they be handled as one package. The balance still due on these bonds is approximately $3.4 million. George K. Baum is proposing to redeem both issues by selling off the assets of the Bond Trust, and by utilizing reserve and residual revenues built up in the Trust accounts. According to their preliminary research we are in a window of opportunity to maximize the return to the City. This is due to market conditions and expiration of prepayment penalties in the Bonds. This action was previously approved in concept when the City Council approved a Resolution to engage George K. Baum and Company to prepare and bring forth this plan. FINANCIAL IMPACT George K. Baum and Company proposes that the City will realize a cash payment after payment of all fees. They estimate that this payment will exceed $400,000. Additionally, They are assuring the City that, as in the past, recycled volume cap for the approximate $3.4 million dollar balance of the outstanding bonds will be earmarked by CHFA for use by the City. The difference being that because of the redemption, the availability will be accelerated into the current year. PURCHASE AGREEMENT BETWEEN THE CITY OF PUEBLO, COLORADO AND THIS PURCHASE AGREEMENT (hereinafter referred to as the "Agreement ") is entered into as of June _, 2002 by and between the City of Pueblo, Colorado ( "Seller "), and ( "Purchaser "). WITNESSETH: WHEREAS, Seller has agreed to sell or cause Trustee (defined below) to sell to Purchaser certain of the mortgage loans (hereinafter defined and referred to as the "Mortgage Loans "); and WHEREAS, Purchaser may reconvey certain of the Mortgage Loans which Trustee is holding for Seller pursuant to the Indenture (defined below) to others; and WHEREAS, Seller and Purchaser desire to outline the terms and conditions pursuant to which the Mortgage Loans will be conveyed by Seller to Purchaser, and pursuant to which Purchaser may reconvey certain of those Mortgage Loans; NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Recitals. The recitals set forth above are hereby incorporated into this Agreement by reference, as though set forth in full herein. 2. Definitions. The following terms, when capitalized, shall have the following meanings for purposes of this Agreement. Some of these terms are further defined in the Indenture (defined below) or the Service Agreement (defined below): (a) Borrower. With respect to a specific Mortgage Loan, the borrower or borrowers and the mortgagor or mortgagors whose names appear as such on the Mortgage Note and Mortgage evidencing such Mortgage Loan. (b) Closing Date. The date upon which this transaction shall close pursuant to Section 20 of this Agreement. (c) Errors and Omissions Insurance Policy. A standard form insurance policy, in form and substance required by FHLMC or FNMA, insuring against losses from errors or omissions in the conduct of a business. 02- 114222.02 (d) Escrow Accounts. The escrow, receipt accounts, mortgage service accounts and similar accounts maintained by any Servicer in connection with the Mortgage Loans, including those listed in Section 9(e). (e) FHAIVA. The Federal Housing Administration of the United States and the Veterans Administration, respectively, or any successor to either. (f) FHLMC. The Federal Home Loan Mortgage Corporation, or any successor thereto. (g) Fidelity Bond. A standard form fidelity bond in form and substance required by FHLMC or FNMA. (h) Flood Insurance Policy. A homeowner's federal flood insurance policy. (i) FNMA. The Federal National Mortgage Association ( "Fannie Mae "), or any successor thereto. 0) Indenture. The Indenture of Trust dated as of May 1, 1988, by and between the City of Pueblo, Colorado, and The Bank of Cherry Creek, a branch of Western National Bank (successor trustee to The Pueblo Bank and Trust Company). (k) Mortgage Files. The "Mortgage Files" as defined in and subject to the form and content requirements of Seller's Mortgage Loan origination requirements or the Service Agreement. The Mortgage Files shall include all documents referred to in Exhibit A attached hereto. (1) Mortgage Loans. All of the fixed rate mortgage loans identified on Exhibit B attached hereto, secured by liens on single - family, owner- occupied residential housing, including but not limited to the Mortgage Notes, Note Riders, if any, Deeds of Trust, Mortgages, or Deed of Trust or Mortgage Riders, if any, evidencing such Mortgage Loans, allonges, assignments, title insurance policies, other insurance policies, insurance proceeds, Escrow Accounts, and as further defined in the Indenture or the Service Agreement. (m) Mortgage Notes. All valid and enforceable promissory notes or other evidence of indebtedness evidencing a Mortgage Loan, excluding any Mortgage Notes returned to a Servicer for foreclosure proceedings, and as further defined in the Indenture or the Service Agreement. (n) Mortgagee Single Interest Hazard Insurance Policy. A mortgagee single interest hazard insurance policy which was acceptable to the Mortgage Loan originator, or any similar policy. (o) Mortgage Trust Insurance Policy. A mortgage trust insurance policy which conformed to the requirements of the Service Agreement. 02- 114222.02 2 (p) Mortgages. All valid and enforceable mortgages or similar security instruments for Colorado, constituting first mortgage liens on single - family or 1 -4 family, owner- occupied residential housing which serve as security for the repayment of the Mortgage Loans. (q) Private Mortgage Insurance Policy. A private mortgage insurance policy insuring the payments of principal and interest on certain Mortgage Loans issued by an insurance company selected pursuant to the Indenture or the Service Agreement. (r) Property. In connection with a specific Mortgage Loan, the property and the improvements thereon securing such Mortgage Loan. (s) Purchase Price. The aggregate purchase price payable by Purchaser to Seller for the purchase of the Mortgage Loans from Seller in accordance with Section 5 hereof. (t) Service Agreement. The Origination and Service Agreement dated as of August 1, 1978, covering the Mortgage Loans, including any and all appendices and exhibits thereto, and all amendments or supplements to such agreement. (u) Servicers. The entity or entities other than Seller which currently service, and/or previously serviced, the Mortgage Loans pursuant to the Service Agreement or other agreements with Seller. (v) Service Fee. The service fee defined in the Service Agreement. (w) Special Hazard Insurance Policy. A special hazard insurance policy or any replacement policy, insuring against specific special hazards and losses due to physical hazards not covered in the State of Colorado by a Standard Hazard Insurance Policy, and as further defined in the Service Agreement. (x) Standard Hazard Insurance Policy. A standard homeowner's fire insurance policy with extended coverage. (y) Title Insurance Policy. A mortgagee policy of title insurance which conformed to the requirements of the Service Agreement. (z) Trust Estate. The Trust Estate defined in the Indenture. (aa) Trustee. The Bank of Cherry Creek, a branch of Western National Bank, as current trustee under the Indenture. 3. Purchase of Mortgage Loans. Subject to all of the terms and conditions of this Agreement, including but not limited to those conditions set forth in Section 4 below, Purchaser hereby agrees to purchase from Seller, and Seller hereby agrees to sell and convey, without recourse, all of its rights, title and interest in and to the Mortgage Loans listed in the attached Exhibit B by an Assignment of Mortgage Notes and Mortgages in substantially the form attached hereto as Exhibit C, together with all Escrow Accounts appertaining to the Mortgage Loans. At 02- 114222.02 3 the option of Purchaser, an inventory of the Mortgage Notes and Mortgages shall be made jointly by Seller and Purchaser on or before the Closing Date. To facilitate such inventory, Seller shall, prior to the inventory, attempt to place the Mortgage Notes and Mortgages in the order appearing on Exhibit B and to label them appropriately. The inventory shall be conducted at the offices of the Trustee or at such other location as is mutually agreed upon. Purchaser shall be permitted reasonable access to the same at any time prior to the Closing Date to review and examine the Mortgage Notes, Mortgages and the Mortgage Files. The inventory shall in no way diminish the representations and warranties or any other obligations of Seller or the rights of Purchaser contained herein. Except as set forth hereinbelow, upon conclusion of the inventory, the Mortgage Notes shall be placed in sealed boxes and maintained in the care and custody of Trustee pending delivery to Purchaser. Notwithstanding the foregoing, the risk of loss attributable to the failure to deliver the Mortgage Loans shall be borne by Trustee until Purchaser, or its designee, shall have (a) received actual possession pursuant to this Agreement; or (b) executed a receipt as to the applicable Mortgage Notes, Mortgages and the Mortgage Files. Purchaser shall indemnify and hold Seller harmless from any breach or failure to perform obligations arising from the Mortgage Notes or Mortgages on or after the Closing Date. 4. Conditions Precedent to Purchase. Notwithstanding anything expressed or implied herein to the contrary, Purchaser shall not be obligated to purchase the Mortgage Loans unless each of the following conditions has been satisfied on or before the Closing Date: (a) all of Seller's representations and warranties shall be true and correct as of the Closing Date; and (b) the Trustee shall have indemnified Purchaser for any missing Mortgage Notes, Mortgage File documents, endorsements and Assignments of Mortgage Notes and Deeds of Trust, FHA insurance certificates, or VA loan guaranties on a form of indemnification agreement acceptable to Purchaser in its sole discretion. 5. Purchase Price. Subject to all of the terms and conditions of this Agreement, including but not limited to those conditions set forth in Section 4 above, Purchaser shall pay the Trustee for Seller's account on the Closing Date in immediately available funds the sum of $ . This represents principal of $ , premium of $ , plus accrued interest of $ as of ) 2002. 6. Assignment and Subrogation of Contract Rights. Seller hereby assigns, without recourse, except as provided in this Agreement, to Purchaser and subrogates Purchaser, without recourse, except as provided in this Agreement, to any and all assignable representations, warranties, covenants, rights of indemnification, hold harmless agreements, rights under contracts, agreements, certificates or insurance policies, and any rights and causes of action that are or may be enforceable against any person other than Seller and its officers and employees (it being expressly agreed that Purchaser has no such rights against Seller and its officers and employees), which exist or may exist under the (a) the Indenture; (b) the Service Agreement; (c) the Mortgage Loans; or (d) any other agreement or insurance arising out of or relating to the Mortgage Loans, or the relationship with the Trustee or the Servicer, with regard to any and all claims, demands, losses, actions, causes of action, judgments, costs and expenses of any kind in connection with or resulting from the agreements, insurance or relationship described in clauses (a) through (d) immediately above. At closing, Purchaser shall be deemed to have assumed all obligations of Seller arising from or related to the above referenced documents and items. Purchaser shall indemnify and hold Seller harmless from any breach or failure to perform such 02- 114222.02 4 obligations on or after the Closing Date. Notwithstanding the terms of this section, Purchaser shall reassign to Seller on Seller's written request any rights of indemnification, hold harmless agreements and any other rights or causes of action conveyed hereby deemed reasonably beneficial to Seller in defense of any cause of action against Seller pending or threatened at the time of such request. 7. Assignment of Warranties, Indemnification and Hold Harmless, and Contract Rights. Seller hereby assigns, without recourse, except as provided in this Agreement, to Purchaser all of Seller's right, title and interest in and to any and all assignable warranties, rights of indemnification, hold harmless agreements, rights under contracts, and any other rights and causes of action which exist or may exist that are or may be enforceable against any person other than Seller and its officers and employees (it being expressly agreed that Purchaser has no such rights against Seller and its officers and employees), that exist or may exist under the Mortgage Loans, or any other agreement or insurance arising out of or relating to the Mortgage Loans, which Seller receives or may receive from any person, firm or corporation with regard to any and all claims, demands, losses, damages, actions, causes of action, judgments, decrees, costs and expenses of any kind in connection with, or arising or resulting from any defenses, counterclaims or causes of action asserted by an eligible Borrower or any other third party in connection with any Mortgage Loan. At closing, Purchaser shall be deemed to have assumed all obligations of Seller arising from or related to the above referenced documents and items. Purchaser shall indemnify and hold Seller harmless from any breach or failure to perform such obligations on or after the Closing Date. Notwithstanding the terms of this section, Purchaser shall reassign to Seller on Seller's written request any rights of indemnification, hold harmless agreements and any other rights or causes of action conveyed hereby deemed reasonably beneficial to Seller in defense of any cause of action against Seller pending or threatened at the time of such request. 8. Documentation Deficiencies. Purchaser shall have the right as to each Mortgage Loan for 60 days after the Closing Date, or for 60 days after receipt of a Mortgage File, whichever is later as to a given Mortgage Loan, to require Seller to cooperate with Purchaser in Purchaser's efforts to cure and to cause any person, firm or corporation to cure any documentation deficiencies of a Mortgage Loan resulting from failure to conform to underwriting guidelines or servicing requirements, which cooperation shall be at the expense of Purchaser. 9. Delivery. Upon receipt of the Purchase Price, Seller will use its best efforts to cause the Servicer to deliver to Purchaser at the closing of this transaction the following: (a) Endorsed Mortgage Notes, Assignment. The original of each executed Mortgage Note, duly endorsed, without recourse, together with any allonge and an assignment thereof in substantially the form attached hereto as Exhibit C. (b) Recorded Mortgages. A copy of the recorded Mortgage or deed of trust securing each Mortgage Note and any assumptions thereof. 02- 114222.02 5 (c) Mortgage Files. The Mortgage Files and any related records in such form and content as is acceptable to Purchaser and in accordance with the requirements of Section 15 below, which shall be delivered to Purchaser on or before the Closing Date. (d) Insurance. The original title insurance policies for the Mortgages and the Private Mortgage Insurance Policies. (e) Escrow Accounts. The Escrow Account balances and receivables held for the payment of property taxes, mortgage, fire and other hazard insurance policy premiums and other expenses as required for the Mortgage Loans. The balances and receivables of all other funds and accounts shall not be delivered to Purchaser. (f) Assignment of Insurance Policies and Bonds. (i) The following insurance policies and bonds shall be delivered to Purchaser on or before the Closing Date: (A) Flood Insurance Policies, if applicable; (B) FHA Insurance and VA Guaranties, if applicable; (C) Private Mortgage Insurance Policies; (D) Standard Hazard and Special Hazard Insurance Policies; (E) Title Insurance Policies, if applicable; (F) Mortgage Pool Insurance Policy; and (G) private mortgage guaranty insurance policies, title insurance policies and hazard insurance policies, and any other insurance policies related to the Mortgage Loans, properly endorsed, where appropriate, to Purchaser, its successors and assigns, as their interests may appear, if applicable. (ii) Purchaser acknowledges that the following insurance policies and bonds shall not be assigned to Purchaser: (A) Errors and Omissions Insurance Policies; (B) Fidelity Bonds; (C) Mortgagee Single Interest Hazard Insurance Policies; (D) Mortgage Trust Insurance Policies; and (E) Special Hazard Insurance Policies. 02- 114222.02 6 10. Servicing Rights. (a) Release of Servicing. The Mortgage Loans shall be sold and conveyed to Purchaser with servicing released. (b) Notification. Purchaser will notify the Servicer and Trustee of change of ownership and direct the Servicer as to where to remit payment. 11. Representations of Seller. Seller hereby represents to Purchaser as follows: (a) Power and Authority. Seller is duly organized as a municipal corporation under the Constitution and laws of the State of Colorado and under Seller's Home Rule Charter. (b) Execution and Delivery. The execution and delivery of this Agreement and any agreements entered into pursuant hereto, and the consummation of the transactions contemplated hereby, have been or will be duly and validly authorized by all necessary action and this Agreement and each such other agreement executed in connection herewith shall constitute valid and legally binding agreements enforceable in accordance with their respective terms, subject to the normal bankruptcy exceptions. (c) No Default. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not violate, conflict with, result in any breach of, constitute a default under, or be prohibited by any of its instruments or documents providing for Seller's creation, any instrument or agreement to which Seller is a party or by which it is bound, or, to the best of Seller's knowledge, any federal or state law, rule or regulation, or any judicial or administrative decree, order, ruling or regulation applicable to it or the Mortgage Loans. (d) No Litigation. There is no action, suit, proceeding or investigation pending for which Seller has received written notice or, to the best of its knowledge, threatened against Seller which, if adversely determined, would materially adversely affect Seller, its properties, the Mortgage Loans or its ability to consummate the transactions contemplated hereby. (e) Full Disclosure. Neither the representations in this Agreement, nor the representations in any other documents referred to herein or delivered by Seller pursuant hereto, shall contain any untrue statement or omit to state a material fact necessary to make the statements herein or therein not misleading. To the best of Seller's knowledge and information without having undertaken any independent inquiry, there are no material deviations from the underwriting guidelines applicable to the Mortgage Loans acquired by Purchaser pursuant to this Agreement. 12. Representations of Purchaser. Purchaser hereby represents to Seller as follows: (a) Due Organization. Purchaser is a duly organized and validly existing corporation duly organized under the laws of the State of , and has all 02- 114222.02 7 requisite power and authority to own its properties and carry on its business as now being conducted. (b) Execution and Delivery. The execution and delivery of this Agreement and any agreements entered into pursuant hereto, and the consummation of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate action and this Agreement and each such other agreement executed in connection herewith shall constitute valid and legally binding agreements enforceable in accordance with their respective terms, subject to the normal bankruptcy exceptions. (c) No Default. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not violate, conflict with, result in any breach of, constitute a default under, or be prohibited by Purchaser's Articles of Incorporation, Bylaws or any instrument or agreement to which it is a party or by which it is bound, or any federal or state law, rule or regulation, or any judicial or administrative decree, order, ruling or regulation applicable to it or the Mortgage Loans. (d) No Litigation. There is no action, suit, proceeding or investigation pending or, to the best of its knowledge, threatened against Purchaser which, if adversely determined, would materially adversely affect Purchaser or its properties or its ability to consummate the transactions contemplated hereby. (e) Full Disclosure. Neither the representations in this Agreement, nor the representations in any other documents referred to herein or delivered by Purchaser pursuant hereto, shall contain any untrue statement or omit to state a material fact necessary to make the statements herein or therein not misleading, and Purchaser has reviewed the Mortgage Loans and Mortgage Loan Files with which Purchaser was provided. 13. Representations of Seller Regarding Mortgage Loans. Seller hereby represents to Purchaser with respect to each Mortgage Loan, Mortgage Note and Mortgage, that as of the Closing Date: (a) Binding Obligation. Purchaser understands and agrees that Seller has not, will not, and has no duty to review the Mortgage Files or any other matter or information relating to the Mortgage Loans or any other assets that are the subject matter of this Agreement, or to make any other inquiry related thereto, that Purchaser's purchase of the Mortgage Loans and such other assets is based solely on its independent review of the Mortgage Files and other due diligence and pursuant to the terms of this Agreement, that Seller has not reviewed the Mortgage Files, the Mortgage Loans or such other assets or conducted any investigation with respect thereto and that Seller does not have any responsibility to Purchaser regarding the Mortgage Loans or other assets, or any other matter, except to the extent specifically stated in the other sections of this Agreement. In full recognition of and subject to the limitations set forth in the foregoing sentence, Seller has no reason to believe that the Mortgage Notes and related Mortgages are not legal, valid and binding obligations of the makers thereof, enforceable in accordance with their terms. 02- 114222.02 8 (b) Valid Lien, etc. Seller has no reason not to believe (i) that each Mortgage is a valid first lien on the respective Properties described therein (hereinafter sometimes collectively referred to as the "Property "); (ii) that each Property is free and clear of all liens and encumbrances having a priority over the lien of the Mortgage, other than liens for taxes and street paving and other "governmental' liens; and (iii) that each Mortgage Loan meets FNMA and/or FHLMC selling warranties and underwriting guidelines, and can be serviced in accordance with FNMA and/or FHLMC guidelines. (c) Ownership. Seller has no reason to believe that the Trustee is not the sole legal and record owner (subject to the Indenture) of the Mortgage Notes and Mortgages, with full power to sell and assign the same; that any prior assignment, pledge or other conveyance or encumbrance of the Mortgages or endorsement of the Mortgage Loans has been executed by anyone; or that either anyone has executed a release, discharge, satisfaction or cancellation of any Mortgage Note or Mortgage or released any portion of the security described in such instruments or any other instrument of any kind affecting the Mortgages or the liability for payment of the Mortgage Notes secured thereby. (d) No Waiver. Seller has no reason to believe that the terms of any Mortgage Loan and Mortgage have been impaired, waived, altered or modified in any material respect, except by instruments of record or except as described in writing to Purchaser. (e) No Setoff. Seller has no reason to believe that the Mortgage Notes are subject to any right of rescission, forgiveness, setoff, counterclaim or defense, including the defense of usury, or that the operation of any of the terms of the Mortgage Notes or the Mortgages, or the exercise of any right thereunder, will render either the Mortgage Note or the Mortgages unenforceable, in whole or in part, or subject them to any right of rescission, forgiveness, setoff, counterclaim or defense, including the defense of usury, or that any such right of rescission, setoff, counterclaim or defense has been asserted with respect thereto. (f) Good Repair. Seller has no reason to believe that the Properties securing the Mortgage Loans are not free of damage and are not in good repair, fair wear and tear and minor natural damages excepted. (g) Enforceability. Seller has no reason to believe that each Mortgage does not contain customary and enforceable provisions as shall be necessary to render the rights and remedies of the holder thereof adequate for the foreclosure of the Property and the realization of the benefits of the security granted under the Mortgage. (h) Litigation. Seller has no reason to believe that there is any pending or threatened proceeding for the total or partial condemnation of the Properties securing the Mortgage Loans so as to adversely affect the value of such Properties as security for the respective Mortgage Loans or the use of such Properties in the manner intended. (i) Marketability. Seller has no reason to believe that there exist any circumstances or conditions with respect to the Mortgage Notes, Mortgages or the 02- 114222.02 9 Properties securing them which adversely affect the value or marketability of the Mortgage Loans, except possibly general economic conditions. 6) Authority. Seller is fully authorized to sell each Mortgage Note and Mortgage as contemplated herein under all existing applicable rules, laws, regulations and statutes. (k) Service Agreement. Seller has no reason to believe that any event has occurred or is continuing which under the terms and provisions of the Service Agreement or any agreement with the Trustee is, or but for the passage of time or the giving of notice would be, an event of default thereunder, or that any other party to the Service Agreement is in default thereunder. (1) No Acts. Seller has no reason to believe (i) that anyone has committed any acts or omissions which would impair the insured's first lien priority on each Property which would be a defense to a claim under such title insurance policy or which would impair the Private Mortgage Insurance Policies; (ii) that there has been any accord and satisfaction or settlement of the obligations of any person, firm or corporation relating to the servicing or administration of the Mortgage Loans; or (iii) that any statute of limitation will run against the obligations of any such person, firm or corporation within six months from the Closing Date. (m) Survival of Representations. All covenants, warranties and representations made in this Agreement shall survive the execution and performance of this Agreement and the closing of this transaction, and shall run in favor of Purchaser, its successors and assigns. 14. Covenants of Seller. Seller covenants with Purchaser as follows: (a) Marketable Title. Seller will convey, without recourse as to the Mortgage Notes, to Purchaser the Mortgage Loans, without warranty, except as to its own acts, but with full substitution and subrogation in and to all rights and actions of warranty which Seller may have, and Seller shall assist Purchaser, at Purchaser's request and expense, to take such action as may be necessary to make claim or demand on the Servicer, title insurer or other party as may be necessary to secure good and merchantable title to Purchaser, its successors and assigns. (b) Records. Seller agrees to make available, or cause to be made available, to Purchaser for its inspection, copying and reproduction, all books and records maintained by or on behalf of and for the benefit of Seller in connection with the Mortgage Loans, including the records of the Trustee or Servicer under the Service Agreement, at such times and in such manner as Purchaser may reasonably request. (c) Receipt of Payments. All payments due to Purchaser under Section 19 hereof received by or on behalf of Seller after the Closing Date for the Mortgage Loans, shall be held in trust by Seller for Purchaser and shall be kept separate and apart from other funds which it holds and Seller hereby directs the Trustee to do so. Seller shall 02- 114222.02 10 immediately deliver, forward and remit such monies to Purchaser and Seller hereby directs the Trustee to do so. (d) Endorsements. Seller will assist Purchaser, at Purchaser's request and expense, in securing endorsements of existing mortgage title policies covering the Mortgage Loans in favor of Purchaser and will assist Purchaser in obtaining any casualty insurance or other instruments which Purchaser may reasonably request be assigned or endorsed. (e) Notifications. Seller agrees to assist Purchaser, at Purchaser's request and expense, in notifying all Borrowers under the Mortgage Loans of their duty to hereafter remit payments to Purchaser or its representatives. (f) Defective Mortgages. Seller agrees to assist Purchaser, at Purchaser's request and expense, in the exercise of any rights against the Trustee and Servicer under the Service Agreement, including assisting Purchaser to cause the Servicer to repurchase from Purchaser or its assigns, any Mortgage Loans which fail to meet the requirements of this Agreement or which Purchaser discovers have not been maintained in accordance with the Service Agreement. (g) Further Assurances. Seller agrees to execute such further certificates, documents or instruments as may be reasonably requested by Purchaser to vest in Purchaser any rights granted, conveyed or transferred pursuant to this Agreement. (h) Non - Circumvention. Seller hereby understands and acknowledges that Purchaser may sell the Mortgage Loans to a third party ( "Purchaser's Customer "). Seller hereby agrees that Purchaser's Customer will be considered a valuable, confidential and exclusive customer of Purchaser, Seller will not make contact with Purchaser's Customer with respect to the Mortgage Loans being sold, including but not limited to the buying and selling of any mortgage loans or servicing rights or to have Purchaser's Customer service mortgage loans for Seller without the express prior written consent of Purchaser. The agreement of Seller contained herein shall remain effective regardless of the result of the negotiations related to the transactions contemplated hereby. This provision shall be considered a non - circumvention provision by the parties and shall remain in effect for a period of 60 months from the date of the last transaction between Seller, Purchaser and Purchaser's Customer. 15. Required Mortgage File Documents. Attached hereto as Exhibit A is a checklist of certain documents which are reasonably required to be included in the Mortgage Files delivered by Seller. 16. Preservation of Rights. Until such time as Purchaser has received all Mortgage Files in form and content acceptable to it, Seller will use its best effort to preserve and/or maintain any rights or action of which it has actual knowledge and which it may have against any Trustee, Servicer or any similar person, firm or corporation relating to the Mortgage Loans. 17. Events of Default. An Event of Default shall be deemed to exist upon the failure on the part of Seller or Purchaser to observe, perform or cause to be observed or performed, any 02- 114222.02 11 of the material covenants or agreements on the part of Seller or Purchaser contained herein, and which continues unremedied for a period of 10 days after written notice of such failure delivered by the non - breaching party. In the event of a breach of a representation or warranty of Seller pursuant to Section 11 or 13 hereof with respect to any one or more Mortgage Loans and as Purchaser's sole remedy for such breach, Seller may elect, at its sole discretion, to (a) repurchase such Mortgage Loans from Purchaser at the sale price paid by Purchaser applicable thereto less any payments received by Purchaser on such loans; or (b) pay any actual compensatory damages suffered by Purchaser arising from such breach; provided, in any event, that the total compensation paid by Seller under this Section 17 is limited to the net proceeds released to Seller by the Trustee after defeasance of the Bonds issued pursuant to the Indenture. 18. Assignment of Insurance and Guaranties. To the extent permissible under the relevant policies of assigned insurance, Seller shall assign to Purchaser, upon Seller's receipt of the Purchase Price set forth in Section 5 above, all coverage, benefits and proceeds receivable, whether arising before or after the Closing Date, under all hazard insurance policies and Private Mortgage Insurance Policies and which cover the Mortgage Loans and/or the Properties securing such Mortgage Loans. 19. Prorations. Seller and Purchaser agree to prorate as of the Closing Date all interest payments due on the Mortgage Loans for the month of , 2002 which either of them receives, with Seller to receive the portion of such payments due to the Closing Date and Purchaser to receive the portion of such payments due for the period from and after the Closing Date. 20. Closing. This transaction shall be closed on or before June _, 2002, or at such other time as may be expressly agreed upon in writing by the parties hereto. 21. Time of Essence. Time shall be of essence as to the performance of all terms, conditions and obligations under this Agreement. 22. Notices. Any notice, demand or communication which any party desires or is required to give to another party in connection with this Agreement shall be in writing and shall be either served personally or by electronic means or sent by prepaid United States mail, certified with return receipt requested, addressed to the other party as follows: To the Seller: City of Pueblo, Colorado One City Hall Place Pueblo, CO 81003 Facsimile: (719) 584 -0845 Attention: Robert Hain To the Purchaser: Such notice shall be deemed given and effective upon such personal delivery or mailing. Any party may, at any time, change its address for notice purposes hereunder by mailing to the other party a written notice setting forth the new address or telecopier number. 02- 114222.02 12 23. Assignment. This Agreement may not be assigned or transferred by either party without the written consent of the other party hereto. 24. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 25. Remedies. With respect to those certain Mortgage Loans which will be reconveyed to others who may or may not be any Trustee or Servicer, upon any Event of Default, Purchaser and Seller may each pursue any available remedy by action or suit, in law or in equity, to enforce its rights hereunder, including without limitation, the right to demand specific performance. 26. Governing Law. This Agreement shall be governed by, construed and interpreted under the laws of the State of Colorado without reference to such State's choice of law and/or conflict of laws principles. 27. Waiver. A waiver of any breach or default under this Agreement shall not constitute a waiver of any subsequent breach or default. Failure or delay by any party to enforce compliance with any term or condition of this Agreement shall not constitute a waiver of such term or condition. 28. Title and Headings. The title and section headings of this Agreement have been inserted for convenience of reference only and shall not be construed to affect the meaning, construction or effect of any provision of this Agreement. 29. Authority. Each of the parties represents that its respective representative, whose signature appears below, has been duly authorized by all necessary and appropriate corporate action to execute this Agreement on behalf of such party and that this Agreement represents the final and binding obligation of such party. 30. Execution of Other Documents. Each of the parties hereby agrees to execute and deliver to the other party any and all other documents necessary to effectuate the purpose and intent of this Agreement. 31. Entire Agreement. Each of the parties hereby acknowledges that it has read this Agreement and understands and agrees to be bound by its terms and conditions. This Agreement is the complete and exclusive statement of the agreement between the parties hereto which supersedes all prior agreements, offers, proposals, understandings and other communications between the parties hereto, oral or written, respecting the subject matter hereof. No representation or statement made by any representative of any party which is not stated herein shall be binding upon the parties hereto. No modification or amendment of this Agreement shall be binding unless in writing and signed by duly authorized representatives of each party. 32. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement and all other documents to be executed in connection herewith are hereby authorized to be executed and accepted by facsimile signatures and such facsimile 02 -1 14222.02 13 signatures shall be considered valid and binding as original signatures and may be relied upon by the parties hereto. 33. Directive to Trustee. By its execution thereof, Seller hereby consents to the sale of the Mortgage Loans by the Trustee, and consents, authorizes and directs the Trustee to perform its obligations hereunder. 34. Immunity of Officers, Employees and Agents of Seller. No recourse shall be had for the payment of any amount under this Purchase Agreement or upon any obligation, covenant or agreement contained in this Purchase Agreement, the Indenture or the Service Agreement against any past, present or future officer, director, employee or agent of Seller, either directly or through Seller, 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 in consideration for the execution of this Purchase Agreement and the conveyance of the Mortgage Loans. 35. Parties Interested Herein. With the exception of rights herein expressly conferred on the Trustee, nothing in this Purchase Agreement expressed or implied is intended or shall be construed to confer upon, or to give to, any person other than Seller, Purchaser and the Trustee, any right, remedy or claim under or by reason of this Purchase Agreement or any covenant, condition or stipulation hereof; and all the covenants, stipulations, promises and agreements contained in this Purchase Agreement and made by and on behalf of Seller, Purchaser or the Trustee shall be for the sole and exclusive benefit of Seller, Purchaser and the Trustee. 02 -1 14222.02 14 The parties have caused this Agreement to be duly executed by their duly authorized representatives as of the date first set forth above. [SEAL] Attest: By Clerk APPROVED AS TO FORM: City Attorney CITY OF PUEBLO, COLORADO, as Seller By Authorized Officer as Purchaser [SEAL] Attest: By Secretary President APPROVED AND AGREED TO BY: THE BANK OF CHERRY CREEK, a Branch of Western National Bank :A Authorized Signatory 02- 114222.02 15 EXHIBIT A MORTGAGE FILE CHECKLIST 1. The original Mortgage Notes and Allonges properly endorsed to Purchaser, including intervening endorsements and a copy of the Mortgage. 2. The original assignment of Mortgage Note and Mortgage to Seller, complete with recordation notation, including intervening assignments. 3. All other documents and records that are commonly maintained in Mortgage Loan files under applicable agreements, law and regulations and in accordance with the customary and usual standards of servicers providing similar services. 4. Such other additional information or material as Seller may have required. 5. A copy of any endorsement and assignment of Mortgage Note and Mortgage. 6. A copy of any title change and/or sale and assumption of Mortgage. 7. A copy of any Mortgage or assignment correction. 8. Any and all other documents, records and insurance which pertain to the Mortgage Loans. 02- 114222.02 EXHIBIT B LIST OF MORTGAGE LOANS 02- 114222.02 EXHIBIT C FORM OF ASSIGNMENT OF PROMISSORY NOTES AND MORTGAGES 02- 114222.02 City of Pueblo, Colorado 1978A Single Family Mortgage Revenue Bonds 1988 Capital Improvement Residual Revenue Bonds Mortgage Loan Sale, Bond Redemption and Asset Release Timetable Date A p ri 2002 m■©© 0 March 25, 2002 City council adopts Resolution engaging George K. Baum & Company May 2002 Bond Counsel drafts Ordinance BC June 2( 12 April 3, 2002 Comments due on Ordinance All P, BC, GKB, FA April 8, 2002 First Reading of Ordinance — City Council Meeting GKB, BC April 9 — April 22, 2002 Tax work done on bond issue. April 22, 2002 QOEM P April 23, 2002 Begin 30 day Referendum Period May 1, 2002 EME T, GKB, BC ©OQOQmm� May 2 — May 25, 2002 Due diligence performed on mortgage loan portfolio GKB, BC May 25, 2002 Bid packages sent to Mortgage Loan Bidders. © ©Q © 000 May 29, 2002 m ®mm�mmE T, GKB, P, BC June 1, 2002 RELEASE DATE Liquidation of all Trust Accounts, Sale of Treasury Notes, Redemption of 1978A Bonds T June 2, 2002 ® ®m June 4, 2002 ®mmm�Omm GKB, T June 4, 2002 ® ®m® June 4, 2002 Trustee Sends Call Notice to 1988 Bond Holders for July 1, 2002 in compliance with Section 4.02 and 4.04 of the Indenture. ALL July 1, 2002 Redemption of 1988 Bonds at Accreted Value, Residual Assets released to City of Pueblo E MEN No ME Date Event Parties "" March 25, 2002 City council adopts Resolution engaging George K. Baum & Company P . GKB April 1 -3, 2002 Bond Counsel drafts Ordinance BC April 3, 2002 Comments due on Ordinance All P, BC, GKB, FA April 8, 2002 First Reading of Ordinance — City Council Meeting GKB, BC April 9 — April 22, 2002 Tax work done on bond issue. April 22, 2002 Second Reading of Ordinance — City Council Meeting P, BC, GKB, FA P April 23, 2002 Begin 30 day Referendum Period May 1, 2002 Conditional Call Notice sent by Trustee for 1978A Bonds T, GKB, BC GKB,T May 2 — May 25, 2002 Due diligence performed on mortgage loan portfolio GKB, BC May 25, 2002 Bid packages sent to Mortgage Loan Bidders. GKB May 29, 2002 Mortgage Loan Portfolio Bid's Received. T, GKB, P, BC June 1, 2002 RELEASE DATE Liquidation of all Trust Accounts, Sale of Treasury Notes, Redemption of 1978A Bonds T June 2, 2002 Trustee deposits all Residual Assets in 1988 Redemption Fund. Invests money in highest yielding asset available. ALL June 4, 2002 Closing of Mortgage Loan Sale. GKB, T June 4, 2002 Trustee deposits proceeds from Mortgage Loan Sale in 1988 Redemption Fund. Invests money in highest yielding asset available. T June 4, 2002 Trustee Sends Call Notice to 1988 Bond Holders for July 1, 2002 in compliance with Section 4.02 and 4.04 of the Indenture. ALL July 1, 2002 Redemption of 1988 Bonds at Accreted Value, Residual Assets released to City of Pueblo 02- 114495.01 GKB — George K Baum & Company BC — Kutak Rock P — City of Pueblo, Colorado FA - James Capital Advisors T — Trustee —1978A Wells Fargo, 1988 Bank of Cherry Creek 02- 114495.01