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HomeMy WebLinkAboutItem 02 - f - Council Reading File - Escrow Agreement (2006 Water Bonds) - City of San Luis Obispo 2018 4128-0083-2019 1OH&S Draft 05/09/18 4128-0083-2019.1 ESCROW AGREEMENT between the CITY OF SAN LUIS OBISPO and U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent Dated as of [________] 1, 2018 Relating to the CITY OF SAN LUIS OBISPO 2006 WATER REVENUE BONDS 4128-0083-2019.1 ESCROW AGREEMENT This Escrow Agreement, dated as of [_______] 1, 2018 (the “Escrow Agreement”), between the City of San Luis Obispo, a municipal corporation duly organized and existing under the Constitution and laws of the State of California (the “City”), and U.S. Bank National Association, a national banking association duly organized and existing under and by virtue of the laws of the United States of America and having a corporate trust office in Los Angeles, California, and acting in its capacity as Trustee (as defined herein) and as escrow agent with respect to the Refunded Bonds described below (the “Escrow Agent”); WITNESSETH: WHEREAS, the City previously issued its 2006 Water Revenue Bonds (the “Refunded Bonds”) pursuant to an Indenture of Trust dated as of August 1, 2006 (the “Prior Indenture”), between the City and U.S. Bank National Association, as trustee (the “Trustee”), in the aggregate principal amount of $16,905,000; WHEREAS, the Refunded Bonds were issued for the purpose of financing the construction of improvements to the water treatment plant for the City’s Water System, to fund a reserve for the Refunded Bonds and to pay the costs of issuing the Refunded Bonds; WHEREAS, the City has determined that it is in the best interests of the City and the residents of the City to allow for the defeasance and refunding of the Refunded Bonds in accordance with the Prior Indenture as herein provided; WHEREAS, the Trustee duly executed and delivered the City’s Water Revenue Refunding Bonds, Series 2018 (the “2018 Bonds”) under an Indenture (the “Indenture”), dated as of [_______] 1, 2018, between the Trustee and the City, for the purpose, among others, of providing funds in the amount of $[______________] to fund the Escrow Fund created hereunder to provide for the payment of principal of the Refunded Bonds on [_____________], 2018 (the “Redemption Date”), at a redemption price of 100% of the principal amount thereof (the “Redemption Price”), together with accrued interest thereon to the Redemption Date; WHEREAS, the City has taken action to cause to be delivered to the Escrow Agent, on or before [_____________], 2018, $[______________] released from the Reserve Fund established under the Prior Indenture (the “Reserve Fund”) which has been deposited by the Escrow Agent in the Escrow Fund hereinafter referred to; WHEREAS, Raymond James & Associates, Inc., as underwriter of the 2018 Bonds, has taken action to cause to be delivered to the Escrow Agent, on or before [_______________], 2018, funds in the amount of $[______________], which have been deposited by the Escrow Agent in the Escrow Fund hereinafter referred to; WHEREAS, in order to provide for the payment of principal when due and the Redemption Price on the Redemption Date, together with interest accrued thereon, a portion of the funds described in the preceding recital will be applied by the Escrow Agent on the Closing Date to the purchase of certain Federal Securities (as defined in the Prior Indenture and referred to herein as “Escrow Securities”) described on Exhibit A hereto (that are not subject to redemption except by 2 4128-0083-2019.1 the holder thereof prior to maturity) the principal of and interest on which when paid will provide money sufficient to pay the principal of the Refunded Bonds when due, and the Redemption Price on the Redemption Date, plus interest accrued; WHEREAS, a report of [______________] (the “Verification Agent”), an independent firm of nationally recognized certified public accountants, verifying the sufficiency of the amounts deposited with the Escrow Agent under this Escrow Agreement to pay principal when due and the Redemption Price on the Redemption Date, plus interest accrued thereon (the “Verification Report”), is on file with the Trustee; and NOW, THEREFORE, the City and the Escrow Agent hereby agree as follows: Section 1. Transfer of Moneys from Reserve Fund. The City hereby directs the Escrow Agent (as Trustee under the Prior Indenture) to transfer the sum of $[______________] released from the Reserve Fund into the Escrow Fund. Section 2. Establishment, Maintenance and Use of the Escrow Fund. The Escrow Agent agrees to establish and maintain the Escrow Fund (the “Escrow Fund”) until the Refunded Bonds have been redeemed as provided in Section 4 hereof. The Escrow Agent agrees to hold all securities, investments and moneys at all times as a separate escrow account wholly segregated from all other securities, investments or money held by it. All securities, investments and moneys in the Escrow Fund are hereby irrevocably pledged to secure the payment of principal when due and the redemption of the Refunded Bonds, together with interest accrued thereon to the Redemption Date, as provided in Section 4 hereof; provided, that any securities, investments and money held in the Escrow Fund that is not used for the payment and redemption of the Refunded Bonds as provided in Section 4 hereof shall be repaid to the City free from the escrow created by the Escrow Agreement, subject to the requirements in the tax certificate relating to the 2018 Bonds. On [_______________], 2018, the Escrow Securities described below in Exhibit A will be purchased by the Escrow Agent with cash in the amount of $[______________] derived from (i) proceeds of the 2018 Bonds in the amount of $[______________] and (ii) $[_____________] from the Reserve Fund. Section 3. Investment of the Escrow Fund. (a) The City and the Escrow Agent shall each take all remaining necessary action to have issued and registered in the name of the Escrow Agent, for the account of the Escrow Fund, the Escrow Securities listed on Exhibit A attached hereto and to hold in cash the amount of $[____]. (b) Except as otherwise provided in this subsection, the Escrow Agent shall not reinvest any cash portion of the Escrow Fund and shall hold such cash portion uninvested. The Escrow Agent shall, upon written request of the City, reinvest any cash portion of the Escrow Fund in certain Federal Securities permitted under the Prior Indenture, provided that such instructions are accompanied by (i) an unqualified opinion of nationally recognized bond counsel to the effect that such reinvestment will not adversely affect the exclusion from gross income for federal income tax purposes of interest payable on the 2018 Bonds and (ii) a report of an independent certified public accountant to the effect that such reinvestment will not adversely affect the 3 4128-0083-2019.1 sufficiency of the amount of securities, investments and moneys in the Escrow Fund to pay principal when due of the Refunded Bonds, and to redeem the Refunded Bonds, plus interest accrued thereon, on the Redemption Date. (c) The Escrow Agent shall not be liable or responsible for any loss, fee, tax or other charge resulting from any investment or reinvestment made pursuant to this Escrow Agreement and in full compliance with the provisions hereof. (d) The Escrow Agent acknowledges receipt of and may conclusively rely upon the conclusions of the Verification Agent that the Escrow Securities listed on Exhibit A will mature and bear interest payable in such amounts and at such times as, together with cash on deposit in the Escrow Fund, will be sufficient to pay when due the principal of and to redeem the Refunded Bonds, plus interest accrued thereon, on the Redemption Date. Section 4. Payment from the Escrow Fund. The City hereby requests and irrevocably instructs the Escrow Agent, and the Escrow Agent hereby agrees, to collect and deposit in the Escrow Fund the principal of and interest on all Escrow Securities held for the account of the Escrow Fund promptly as such principal and interest become due, and to apply, subject to the provisions of Sections 2 and 3 hereof, such principal and interest, together with any other moneys and the principal of and interest on any other securities deposited in the Escrow Fund, to pay principal when due of the Refunded Bonds, and to redeem the Refunded Bonds, plus interest accrued thereon, on the Redemption Date, at the places and in the manner stipulated in the Prior Indenture, including all of the notice requirements contained therein. Section 5. Notice of Defeasance and Notice of Redemption. The Escrow Agent hereby agrees to give notice of defeasance of the Refunded Bonds in substantially the form attached hereto as Exhibit B, and notice of redemption of the Refunded Bonds in accordance with the Prior Indenture, in substantially the form attached hereto as Exhibit C. Section 6. Transfer of Funds After Redemption of Refunded Bonds. The Escrow Agent hereby agrees to transfer any money remaining in the Escrow Fund after the redemption of the Refunded Bonds, to the City, subject to Section 12 hereof. Section 7. Substitution of Securities. Except as provided in Sections 1 and 2 and in this Section, the Escrow Agent shall have no power or duty to invest any funds held under this Escrow Agreement or to sell, transfer or otherwise dispose of or make substitutions of the investments initially required to be made therewith. Upon the written request of the City, and subject to the conditions and limitations herein set forth and applicable governmental rules and regulations, the Escrow Agent shall sell, redeem or otherwise dispose of the Escrow Securities, provided that there are substituted therefor (from the proceeds of the Escrow Securities) certain securities permitted under Section 9.03 of the Prior Indenture, but only after the Trustee has received (i) an unqualified opinion of nationally recognized bond counsel that such substitution will not adversely affect the exclusion from gross income for federal income tax purposes of interest payable on the 2018 Bonds, and (ii) a report of an independent certified public accountant to the effect that such substitution (without considering reinvestment) will not adversely affect the 4 4128-0083-2019.1 sufficiency of the amounts of securities, investments and money in the Escrow Fund to pay principal when due of the Refunded Bonds, and to redeem the Refunded Bonds on the Redemption Date, as specified in the Prior Indenture and Section 4 hereof. The Escrow Agent shall not be liable or responsible for any loss, fee, tax or other charge resulting from any reinvestment, substitution or liquidation made pursuant to this Escrow Agreement and in full compliance with the provisions hereof. Section 8. Fees and Costs of the Escrow Agent. (a) The rights, duties and obligations of the Escrow Agent shall, except as otherwise expressly provided herein, be governed by the rights, duties and obligations of the Trustee pursuant to the Prior Indenture. The annual fees and costs of the Trustee for any other duties to be carried out by it under the Prior Indenture shall continue as previously agreed upon between the Trustee and the City. (b) The Escrow Agent shall be entitled to payment by the City of reasonable fees and reimbursements for costs incurred in connection with the performance of its rights and duties hereunder, including but not limited to legal and accountants’ services in connection with any litigation not arising from the Escrow Agent’s negligence or misconduct which may at any time be instituted involving the Escrow Agreement. (c) The fees of and the costs incurred by the Escrow Agent shall in no event be deducted or payable from or constitute a lien against the Escrow Fund. Section 9. Indemnification. To the extent permitted by law, the City hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and hold harmless the Escrow Agent and the Trustee and their respective successors, assigns, agents and servants from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including legal fees and disbursements whether incurred prior to trial, at trial, or on appeal or in any bankruptcy or arbitration proceedings) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, at any time, the Escrow Agent (whether or not also indemnified against by the City or any other person under any other agreement or instrument) and in any way relating to or arising out of the execution and delivery of the Escrow Agreement, the establishment of the Escrow Fund, the retention of the money therein and any payment, transfer or other application of money or securities by the Escrow Agent in accordance with the provisions of the Escrow Agreement, or as may arise by reason of any act, omission or error of the Escrow Agent made in good faith in the conduct of its duties; provided, that the City shall not be required to indemnify the Escrow Agent against its own negligence or misconduct. The indemnities contained in this section shall survive the termination of the Escrow Agreement. Section 10. Resignation of the Escrow Agent. The Escrow Agent may resign and be discharged of its duties hereunder if and at such time as the Trustee shall resign or be discharged as trustee under the Prior Indenture in accordance with the provisions of the Prior Indenture. Any successor trustee under the Prior Indenture shall succeed as the escrow agent under the Escrow Agreement. 5 4128-0083-2019.1 Section 11. Merger or Consolidation of the Escrow Agent. Any company into which the Escrow Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Escrow Agent may sell or transfer all or substantially all of its corporate trust business, as long as such company shall be eligible under the Prior Indenture, shall be the successor hereunder to the Escrow Agent without the execution or filing of any paper or any further act. Section 12. Termination; Unclaimed Money. The Escrow Agreement shall terminate when the Refunded Bonds have been redeemed as provided in Section 4 hereof; provided, that all money held by the Escrow Agent in the Escrow Fund for the payment and discharge of any of the Refunded Bonds which remains unclaimed shall be disposed of in accordance with the terms of the Prior Indenture. Section 13. Capacity of Trustee. The Escrow Agent is entering into the Escrow Agreement in its capacity as Trustee under the Prior Indenture. Subject to the provisions of Sections 3, 6, 7 and 12 hereof, all money held by the Escrow Agent hereunder is to be held and applied for the payment and the redemption of the Refunded Bonds in accordance with the Prior Indenture. The exculpations and limitations on liability in favor of the Trustee under the Prior Indenture are hereby incorporated herein in their entirety for the benefit of the Escrow Agent. Section 14. Severability. If any section, paragraph, sentence, clause or provision of the Escrow Agreement shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, sentence, clause or provision shall not affect any of the remaining provisions of the Escrow Agreement. Section 15. Amendment. The parties hereto may, without the consent of or notice to the holders of the Refunded Bonds, enter into such agreements supplemental to the Escrow Agreement as shall not adversely affect the rights of such holders hereunder and shall not be inconsistent with the terms and provisions of the Escrow Agreement, for any one or both of the following purposes: (a) to cure any ambiguity or formal defect or omission in the Escrow Agreement; and (b) to grant or confer upon the Escrow Agent, for the benefit of the holders of the Refunded Bonds, any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Escrow Agent. The Escrow Agent shall enter into such agreements only upon receipt of, and shall be entitled to rely conclusively upon, an opinion of nationally recognized bond counsel to the effect that any such agreement complies with this section, and does not adversely affect the rights of the holders of the Refunded Bonds. Section 16. Execution in Counterpart. The Escrow Agreement may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and all of which shall together constitute but one and the same instrument. 6 4128-0083-2019.1 Section 17. Notice to the Escrow Agent and the City. Any notice to or demand upon the Escrow Agent may be served or presented, and such demand may be made, at the corporate trust office of the Escrow Agent at 633 W 5th Street, Los Angeles, CA 90071, Attention: Global Corporate Trust Services, or as otherwise specified by the Escrow Agent in accordance with the provisions of the Prior Indenture. Any notice to or demand upon the City shall be deemed to have been sufficiently given or served for all purposes by being mailed by first class mail, and deposited, postage prepaid, in a post office letter box, addressed to the City at 990 Palm Street, San Luis Obispo, California 93401, Attention: City Manager (or at such other address as may have been filed in writing by the City with the Trustee). Section 18. Governing Law. The Escrow Agreement shall be governed by and construed in accordance with the laws of the State of California. 7 4128-0083-2019.1 IN WITNESS WHEREOF, the City of San Luis Obispo and U.S. Bank National Association have each caused the Escrow Agreement to be signed in its name by its duly authorized officer all as of the day and year first above written. CITY OF SAN LUIS OBISPO By _________________________________ Derek Johnson, City Manager U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent By __________________________________ John Axt, Vice President Acknowledged and Agreed By: U.S. BANK NATIONAL ASSOCIATION, As Trustee By __________________________________ John Axt, Vice President A-1 4128-0083-2019.1 EXHIBIT A ESCROW SECURITIES B-1 4128-0083-2019.1 EXHIBIT B FORM OF DEFEASANCE NOTICE $16,905,000 CITY OF SAN LUIS OBISPO 2006 WATER REVENUE BONDS Maturity (June 1) Interest Rate Principal Amount Redemption Price CUSIP 2019 4.100% $ 475,000 100% 798662DC3 2020 4.200 490,000 100 798662DD1 2021 4.250 515,000 100 798662DE9 2022 4.300 535,000 100 798662DF6 2023 4.375 555,000 100 798662DG4 2024 4.375 580,000 100 798662DH2 2025 4.375 605,000 100 798662DJ8 2026 4.375 635,000 100 798662DK5 2027 4.500 660,000 100 798662DL3 2028 4.500 690,000 100 798662DM1 2031 4.500 2,265,000 100 798662DN9 2036 4.625 4,515,000 100 798662DP4 Notice is hereby given to the holders of the outstanding City of San Luis Obispo 2006 Water Revenue Bonds, maturing on June 1, 2019 through and including June 1, 2036 (the “Bonds”) (i) that there has been deposited with U.S. Bank National Association, as escrow agent (the “Escrow Agent”), moneys and investment securities as permitted by the Indenture of Trust, dated as of August 1, 2006 (the “Indenture”), between the City of San Luis Obispo and U.S. Bank National Association, as trustee, the principal of and the interest on which when paid will provide moneys which, together with such other moneys deposited with the Escrow Agent, shall, as evidenced by a verification report delivered to the Escrow Agent by an independent certified public account, be available and sufficient (a) to pay the interest on and principal of the Bonds scheduled to be paid on and prior to _________, 2018 (the “Redemption Date”) and (b) to redeem, on the Redemption Date, at a redemption price (expressed as a percentage of the principal amount of the Bonds) equal to 100%, together with accrued interest thereon to the Redemption Date, those Bonds scheduled to mature on and after June 1, 2019; (ii) that the Escrow Agent has been irrevocably instructed to so refund and redeem such Bonds; (iii) that the Bonds are deemed to have been paid in accordance with Section 9.03 of the Indenture; and (iv) sufficient moneys will be available on the Redemption Date for the payment of the interest and principal evidenced and represented by the Bonds. Dated this ___ day of __________, 2018. CITY OF SAN LUIS OBISPO U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent C-1 4128-0083-2019.1 EXHIBIT C FORM OF REDEMPTION NOTICE $16,905,000 CITY OF SAN LUIS OBISPO 2006 WATER REVENUE BONDS NOTICE IS HEREBY GIVEN to the registered owners of the above-referenced bonds identified in the table below (the “Bonds”) dated August 17, 2006, executed and delivered pursuant to that Indenture of Trust, dated as of August 1, 2006 (the “Indenture”), the City of San Luis Obispo (the “City”) and U.S. Bank National Association, as trustee (the “Trustee”), that, pursuant to the Indenture, the Bonds have been called for redemption on ________, 2018 (the “Redemption Date”), at a redemption price of 100% of the principal amount thereof (the “Redemption Price”), together with accrued interest thereon to the Redemption Date. Maturity (June 1) Interest Rate Principal Amount Redemption Price Bond Number CUSIP 2019 4.100% $ 475,000 100% No. R-13 798662DC3 2020 4.200 490,000 100 No. R-14 798662DD1 2021 4.250 515,000 100 No. R-15 798662DE9 2022 4.300 535,000 100 No. R-16 798662DF6 2023 4.375 555,000 100 No. R-17 798662DG4 2024 4.375 580,000 100 No. R-18 798662DH2 2025 4.375 605,000 100 No. R-19 798662DJ8 2026 4.375 635,000 100 No. R-20 798662DK5 2027 4.500 660,000 100 No. R-21 798662DL3 2028 4.500 690,000 100 No. R-22 798662DM1 2031 4.500 2,265,000 100 No. R-23 798662DN9 2036 4.625 4,515,000 100 No. R-24 798662DP4 Interest on the Bonds shall cease to accrue from and after the Redemption Date. Payment of the Redemption Price on the Bonds called for redemption will be paid without presentation of the Bonds if presentment is not required and upon presentation of the Bonds if presentment is required. If presentment is required, surrender thereof can be made in the following manner: U.S. Bank National Association Global Corporate Trust Services 111 Fillmore Avenue East St. Paul, MN 55107 BONDHOLDERS PRESENTING THEIR BONDS FOR THE SAME DAY PAYMENT MUST SURRENDER THEIR BOND NO LATER THAN 1:00 P.M. C.S.T. ON THE REDEMPTION DATE AND A CHECK WILL BE AVAILABLE FOR PICKUP AFTER 2:00 P.M. C.S.T. CHECKS NOT PICKED UP BY 4:30 P.M. WILL BE MAILED OUT TO THE BONDHOLDER VIA FIRST CLASS MAIL. IF PAYMENT OF THE REDEMPTION PRICE IS TO BE MADE TO THE REGISTERED OWNER OF THE BOND, YOU ARE NOT REQUIRED TO ENDORSE THE BOND TO COLLECT THE REDEMPTION PRICE. C-2 4128-0083-2019.1 REQUIREMENT INFORMATION For a list of redemption requirements please visit our website at www.usbank.com/corporatetrust and click on the “Bondholder Information” link. IMPORTANT NOTICE Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 28% will be withheld if tax identification number is not properly certified. *Neither the Trustee nor the City shall be held responsible for the selection or use of the CUSIP number, nor is any representation made as to its correctness indicated in this Notice of Redemption. It is included solely for convenience of the Holders of the Bonds. Dated: [not less than 30 days nor more than 60 days prior to redemption] CITY OF SAN LUIS OBISPO By U.S. Bank National Association, as Trustee