ESCROW INSTRUCTIONS RECITALS

Transcription

1 HDW 6/8/15 Draft ESCROW INSTRUCTIONS These Escrow Instructions, dated as of July 1, 2015 (the Escrow Instructions ), are directed to WELLS FARGO BANK, NATIONAL ASSOCIATION, as escrow agent (the Escrow Agent ), from the CITY OF AZUSA (the City ) and the Azusa Public Financing Authority (the Authority ), with reference to the following: RECITALS A. The City previously executed and delivered an Installment Sale Agreement, dated as of December 1, 2006 (the Installment Sale Agreement ), by and between the Azusa Public Financing Authority (the Authority ) and the City, for the purpose of financing certain capital improvements to the City s water system (the 2006 Project ). B. Pursuant to the Installment Sale Agreement, the City agreed to pay certain installment payments (the Installment Payments ) and the Authority caused to be issued the Azusa Public Financing Authority Parity Revenue Bonds (Water System Capital Improvements Project) Series 2006 (the 2006 Bonds ) pursuant to a Trust Agreement, dated as of December 1, 2006, by and between the Authority and Wells Fargo Bank, National Association, as trustee thereunder. C. The City has determined to issue $[Principal Amount] City of Azusa Water System Refunding Revenue Bonds, Series 2015 (the Refunding Bonds ), pursuant to an Indenture (the Indenture ), dated as of July 1, 2015, by and between the City and Wells Fargo Bank, National Association, as trustee thereunder (the Trustee ), and use the proceeds thereof, together with certain available moneys, to refinance in full the 2006 Project and cause the defeasance and/or redemption of all outstanding 2006 Bonds in an aggregate principal amount of $[Outstanding 2006 Bonds Par] as set forth below: Maturity Date (July 1) Principal Amount Redemption Date Redemption Price * CUSIP No (1) $1,145,000 N/A N/A BA ,200,000 January 1, % BB ,595,000 January 1, BC ,865,000 January 1, BD ,170,000 January 1, BE ,475,000 January 1, BF ,675,000 January 1, BG ,825,000 January 1, BH ,230,000 January 1, BJ1 * (1) Expressed as a percentage of the principal amount thereof, plus accrued interest to the Redemption Date. CUSIP is a registered trademark of the American Bankers Association. CUSIP numbers have been provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw Hill Companies, Inc. and are set forth herein for the convenience of reference only. Metropolitan and the Underwriters assume no responsibility for the accuracy of such numbers. Amounts in the Escrow Fund will be used to pay the principal of and interest on the 2006 Bonds maturing on July 1, 2016 as they become due and payable.

2 D. Upon the issuance of the Refunding Bonds, the Authority and the City shall cause to be transferred to the Escrow Agent the money required for defeasance and/or redemption of the 2006 Bonds, together with the estimated expense of giving notice. In furtherance of the foregoing, an amount equal to $[Escrow Amount], consisting of the amounts set forth in Section 1.2 below, will be set aside and held in the Escrow Fund (as hereinafter defined) and will be applied to the purchase of certain direct obligations of the United States of America ( Defeasance Securities ) in principal amounts which by their terms mature and bear interest at such times and in such amounts which will ensure without the necessity for reinvestment thereof the payment of (i) the principal of and interest to become due on the 2006 Bonds maturing on July 1, 2016 as they become due and payable, (ii) the interest on the 2006 Bonds maturing after July 1, 2016 on each interest payment date thereof to January 1, 2017 (the Redemption Date ) and (iii) the redemption price of such 2006 Bonds maturing after July 1, 2016 equal to 100% of the principal amount thereof on the Redemption Date. ARTICLE I INSTRUCTIONS The City and the Authority hereby direct and instruct the Escrow Agent as follows: SECTION 1.1 Establishment of Escrow Fund. There is hereby established in trust a special fund designated as the Water System Refunding Revenue Bonds, Series 2015 Escrow Fund (the Escrow Fund ), which shall be held by the Escrow Agent and which shall be kept separate and apart from all other funds and moneys held by the Escrow Agent until all principal and premium of and interest on the 2006 Bonds as provided in these Escrow Instructions have been paid in full. The Escrow Agent shall administer the Escrow Fund as provided herein. Subject to Section 1.4 hereof, all securities, investments and moneys in the Escrow Fund have been irrevocably pledged by the City and the Authority to secure the payment of (i) the principal of and interest to become due on the 2006 Bonds maturing on July 1, 2016 as they become due and payable, (ii) the interest on the 2006 Bonds maturing after July 1, 2016 on each interest payment date thereof to the Redemption Date and (iii) the redemption price of such 2006 Bonds maturing after July 1, 2016 equal to 100% of the principal amount thereof on the Redemption Date. SECTION 1.2 Funding and Investment of Escrow Fund. On or before the date of delivery of the Refunding Bonds, the City shall cause to be wired to the Escrow Agent proceeds of the Refunding Bonds in the amount of $[Bond Proceeds Deposit] and shall cause to be transferred to the Escrow Fund $[2006 Reserve Fund Transfer] from the reserve account for the 2006 Bonds, $[2006 Debt Service Fund Transfer] from the revenue fund for the 2006 Bonds (which includes a portion of the January 2016 and July 2016 debt service installments) and [Other Available 2006 Amounts]. The Escrow Agent acknowledges the purchase of $[Securities Purchase Price] of the Defeasance Securities described in Exhibit A attached hereto (the Initial Defeasance Securities ) and will deposit such amount in the Escrow Fund. The remaining amount of such moneys, being $[Uninvested Cash], shall be held in the Escrow Fund uninvested as cash. 2

3 SECTION 1.3 Payment of the 2006 Bonds; Notices. The Escrow Agent shall collect and deposit in the Escrow Fund the principal of and interest on all investments held in the Escrow Fund promptly as such principal matures and such interest becomes due and shall apply such principal and interest, together with any other moneys on deposit in the Escrow Fund in accordance with these Escrow Instructions, to pay the principal and/or interest coming due on each interest payment date to January 1, 2017 and to pay the redemption price of and the accrued interest to the Redemption Date on the 2006 Bonds maturing after July 1, 2016 as set forth in Paragraph C and Paragraph D of the Recitals above. Amounts coming due on each interest payment date and on the Redemption Date for the 2006 Bonds shall be paid by the Escrow Agent to The Depository Trust Company, New York, New York. The City and the Authority hereby irrevocably designate the 2006 Bonds for defeasance and hereby irrevocably designate the 2006 Bonds maturing after July 1, 2016 for redemption on the Redemption Date. The City and the Authority hereby direct the Escrow Agent to, and the Escrow Agent hereby agrees to, (i) provide, on behalf of the Authority, the notice of redemption in substantially the form set forth in Exhibit B hereto for the 2006 Bonds maturing after July 1, 2016, as provided in Section 2.03(c) of the 2006 Trust Agreement, at least 30 days but no more than 60 days prior to the Redemption Date, (ii) provide, on behalf of the Authority, the notice of defeasance in substantially the form set forth in Exhibit C hereto for the 2006 Bonds maturing on and after July 1, 2016, as provided in Section 8.01(b) of the 2006 Trust Agreement, as soon as practicable after the issuance of the Refunding Bonds and (iii) post the notices referenced in (i) and (ii) above to the Municipal Securities Rulemaking Board s Electronic Municipal Market Access system. The Escrow Agent further agrees that these Escrow Instructions (i) constitute the Written Request of the Authority and the Certificate of the Authority pursuant to Section 2.03(c) of the 2006 Trust Agreement and the Escrow Agent waives the requirement that such notice be given at least sixty but not more than ninety days prior to the Redemption Date and (ii) constitute the written notice from the City to the Trustee of the City s intention to exercise its option to prepay the 2006 Installment Payments pursuant to Section 4.07(a) of the 2006 Installment Sale Agreement and the Escrow Agent waives the requirement that such notice be given at least sixty but not more than ninety days prior to the Redemption Date. SECTION 1.4 Excess Moneys. After the final payment required by Section 1.3 hereof is made, any moneys and/or securities remaining on deposit in the Escrow Fund shall be transferred by the Escrow Agent, on behalf of the Authority, to the City. To the extent any moneys remain on deposit in the Escrow Fund that are not required for payment of any portion of the redemption price and accrued interest on the 2006 Bonds, such moneys shall be invested by the Escrow Agent at the written direction of the City in Defeasance Securities without regard to restrictions imposed pursuant to Section 148 of the Internal Revenue Code of 1986, as amended (the Code ); provided that such investment does not interfere with the amount held in the Escrow Fund being available on demand to the holders of the 2006 Bonds upon discharge thereof. SECTION 1.5 Substitution and Reinvestment of Defeasance Securities. Upon the written direction of an authorized officer of the City, the Escrow Agent shall sell, transfer and 3

4 request the redemption of or otherwise dispose of the Initial Defeasance Securities or other Defeasance Securities in the Escrow Fund listed under Exhibit A attached hereto; provided that (i) there are simultaneously substituted therefor and delivered to the Escrow Agent other Defeasance Securities the payments of principal of and interest on which, together with other moneys available for such purpose, as certified by a nationally recognized firm of independent certified public accountant that, will mature at such times and in such amounts sufficient to pay, when due, the principal of, redemption premium and interest on the 2006 Bonds and (ii) the Escrow Agent shall receive the opinion of Bond Counsel to the effect that such sale, transfer, redemption or other disposition and substitution of such Defeasance Securities does not cause interest on either the 2006 Bonds or the Refunding Bonds to be included in gross income for purposes of federal income taxation under relevant provisions of the Code. Any cash received from the disposition and substitution of Defeasance Securities pursuant to this Section 1.5 to the extent that such cash will not be required pursuant to Section 1.3 hereof shall be transferred as otherwise directed by the City in writing to the Escrow Agent. SECTION 1.6 Termination. These Escrow Instructions shall terminate immediately following the later to occur of (i) the payment of all amounts required to be paid pursuant to Section 1.3 hereof, (ii) the payment of the Escrow Agent s fees and costs and (iii) the transfer of any excess funds to the City pursuant to Section 1.4 hereof. SECTION 1.7 Severability. If any section, paragraph, sentence, clause or provision of these Escrow Instructions 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 these Escrow Instructions. SECTION 1.8 Governing Law. These Escrow Instructions shall be construed in accordance with and governed by the laws of the State of California. SECTION 1.9 Counterparts. These Escrow Instructions may be executed and acknowledged in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 1.10 Terms. Capitalized terms used and not defined herein shall have the meanings ascribed to such terms in the Refunding Resolution. ARTICLE II IMMUNITIES AND LIABILITIES OF THE ESCROW AGENT SECTION 2.1 No Implied Duties. The Escrow Agent undertakes to perform only such duties as are expressly and specifically set forth in these Escrow Instructions and no implied duties or obligations shall be read into these Escrow Instructions against the Escrow Agent. SECTION 2.2 Liability. The Escrow Agent shall not have any liability hereunder except to the extent of its own negligence or willful misconduct. In no event shall the Escrow Agent be liable for any special, indirect or consequential damages. 4

5 To the extent permitted by law, the City covenants to indemnify and hold harmless the Escrow Agent and its officers, directors, agents and employees against any loss, liability, cost, judgment, claim, suit or expense, including legal fees and expenses, incurred in connection with the performance of any of its duties hereunder, except the Escrow Agent shall not be indemnified against any loss, liability or expense resulting from its negligence or willful misconduct. The indemnity contained herein shall survive the termination of these Escrow Instructions or the resignation or removal of the Escrow Agent. The Escrow Agent may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval or other paper or document believed by it to be genuine and to have been directed to the Escrow Agent and signed or presented on behalf of the City by an authorized officer thereof. The Escrow Agent may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees appointed with due care. The City covenants and agrees to pay to the Escrow Agent from time to time, and the Escrow Agent shall be entitled to, the fees and expenses agreed in writing between the City and the Escrow Agent, and will further pay or reimburse the Escrow Agent upon its request for all reasonable expenses (including legal fees and expenses), disbursements and advances incurred or made by the Escrow Agent in accordance with any of the provisions hereof or any other documents executed in connection herewith. The Escrow Agent agrees to accept and act upon instructions or directions pursuant to this Escrow Instructions sent by unsecured , facsimile transmission or other similar unsecured electronic methods, provided, however, that, the Escrow Agent shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the City elects to give the Escrow Agent or facsimile instructions (or instructions by a similar electronic method) and the Escrow Agent in its discretion elects to act upon such instructions, the Escrow Agent s reasonable understanding of such instructions shall be deemed controlling. Except as set forth in this Section 2.2, the Escrow Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Escrow Agent s reliance upon and compliance with such instructions notwithstanding such instructions conflict or inconsistency with a written instruction received by the Escrow Agent subsequent to the Escrow Agent s reliance, compliance or other action. The City agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Escrow Agent, including without limitation, the risk of the Escrow Agent acting in reliance on such instructions, and the risk of interception and misuse by third parties. SECTION 2.3 Consult with Counsel. The Escrow Agent may consult with counsel of its own choice and the opinion of such counsel shall be full and complete authorization to take or suffer in good faith any action hereunder in accordance with such opinion of counsel; provided, however, the Escrow Agent shall give written notice to the City prior to incurring any legal fees or expenses permitted under this Section

6 SECTION 2.4 Not Responsible for Recitals. The Escrow Agent shall not be responsible for any of the recitals or representations contained herein. SECTION 2.5 Reliance on Certificates. Whenever in the administration of these Escrow Instructions the Escrow Agent shall deem it necessary or desirable that a matter be provided or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Escrow Agent, be deemed to be conclusively proved and established by a certificate of an authorized representative of the City, and such certificate shall, in the absence of negligence or willful misconduct on the part of the Escrow Agent, be full warrant to the Escrow Agent for any action taken or suffered by it under the provisions of these Escrow Instructions. SECTION 2.6 Resignation. The Escrow Agent may resign at any time by giving 30 days prior written notice to the City of such resignation. The City shall promptly appoint a successor Escrow Agent by the resignation date. Resignation of the Escrow Agent will be effective upon acceptance of appointment by a successor Escrow Agent and the transfer of all moneys and/or securities remaining on deposit in the Escrow Fund. If the City does not appoint a successor within 30 days of the Escrow Agent s resignation, the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor Escrow Agent, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Escrow Agent. SECTION 2.7 Successor Entity. 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 shall be the successor to the Escrow Agent without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. SECTION 2.8 Transfer of Limits. The obligation of the Escrow Agent to make the transfers required by Section 1.3 shall be limited to the moneys and Defeasance Securities in the Escrow Fund. SECTION 2.9 Not Liable for Sufficiency. The Escrow Agent shall not be liable for the accuracy of any calculations provided as to the sufficiency of the moneys or Defeasance Securities deposited with it to pay the principal, interest, or premiums, if any, coming due and payable on the 2006 Bonds on the appropriate Redemption Date; provided, however, in the event that the Escrow Agent shall become aware of any insufficiency of the moneys or Defeasance Securities deposited in the Escrow Fund, the Escrow Agent shall immediately notify the City in writing as to such insufficiency. SECTION 2.10 Not Liable for Losses. The Escrow Agent shall have no liability or responsibility for any loss resulting from any investment made in accordance with the provisions of these Escrow Instructions. 6

7 SECTION 2.11 No Risk of Own Funds. No provision of these Escrow Instructions shall require the Escrow Agent to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or indemnity reasonably satisfactory to it against such risk or liability is not reasonably assured to it. ARTICLE III MISCELLANEOUS SECTION 3.1 Notices. All notices required or authorized to be given to the City, the Escrow Agent or the Authority pursuant to these Escrow Instructions shall be in writing and shall be hand delivered, sent by facsimile transmission, or sent by first-class mail (postage prepaid), to the following addresses or to such other addresses as may from time to time be furnished to the parties, effective upon the receipt of notice thereof. 1. to the City, to: City of Azusa 213 East Foothill Boulevard Azusa, California Attention: City Manager 2. to the Escrow Agent, to: Wells Fargo Bank, National Association Corporate Trust Department 707 Wilshire Blvd., 17th Floor MAC: E Los Angeles, California Telephone: (213) Facsimile: (213) Wiring Instructions: Wells Fargo Bank, N.A. ABA: Acct: Corporate Trust Wire Clearing FFC: Riverside 2012 Attn: Aimee Tabor to the Authority, to: Azusa Public Financing Authority [Authority Address] Attention: [Authority Contact] 7

8 IN WITNESS WHEREOF, the Azusa Public Financing Authority and the City of Azusa have delivered these Escrow Instructions to Wells Fargo Bank, National Association, as Escrow Agent, and Wells Fargo Bank, National Association, as Escrow Agent, has acknowledged receipt of the same and acceptance of its duties hereunder as of the day and year first above written. AZUSA PUBLIC FINANCING AUTHORITY By: Name: Title: CITY OF AZUSA Acknowledged and Accepted By: By: Name: Troy L. Butzlaff Title: City Manager WELLS FARGO BANK, NATIONAL ASSOCIATION, as Escrow Agent By: Authorized Officer 8

9 EXHIBIT A DESCRIPTION OF DEFEASANCE SECURITIES Type of Security Type of SLGS Maturity Date First Interest Payment Date Par Amount Interest Rate A-1

10 EXHIBIT B NOTICE OF REDEMPTION OF CERTAIN OUTSTANDING AZUSA PUBLIC FINANCING AUTHORITY PARITY REVENUE BONDS (WATER SYSTEM CAPITAL IMPROVEMENTS PROJECT) SERIES 2006 NOTICE IS HEREBY GIVEN that the Azusa Public Financing Authority ( the Authority ) intends to exercise its option to redeem certain of its outstanding Parity Revenue Bonds (Water System Capital Improvements Project) Series 2006 (the 2006 Bonds ) on January 1, 2017 (the Redemption Date ) as set forth below: Maturity Date (July 1) Principal Amount Redemption Date Redemption Price * CUSIP No $ 1,200,000 January 1, % BB ,595,000 January 1, BC ,865,000 January 1, BD ,170,000 January 1, BE ,475,000 January 1, BF ,675,000 January 1, BG ,825,000 January 1, BH ,230,000 January 1, BJ1 * Expressed as a percentage of the principal amount thereof, plus accrued interest to the Redemption Date. CUSIP is a registered trademark of the American Bankers Association. CUSIP numbers have been provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw Hill Companies, Inc. and are set forth herein for the convenience of reference only. Metropolitan and the Underwriters assume no responsibility for the accuracy of such numbers. The City has caused to be deposited in escrow with Wells Fargo Bank, National Association, Los Angeles, California, moneys derived from the sale of refunding bonds of the City of Azusa (which refunding bonds are designated City of Azusa Water System Refunding Revenue Bonds, Series 2015 ) and certain available moneys, which have been invested in full faith and credit obligations of the United States of America and which will be sufficient to pay the interest to become due on the 2006 Bonds described above on each interest payment date thereof to the Redemption Date and to pay the redemption price of such 2006 Bonds equal to 100% of the principal amount thereof on the Redemption Date. On the Redemption Date, there will become due and payable on each said 2006 Bond the redemption price thereof, together with interest accrued to the Redemption Date, and from and after such date, interest thereon shall cease to accrue. B-1

11 The Owners of the 2006 Bonds will receive the redemption price and accrued interest to which they are entitled upon presentation and surrender thereof on or after the Redemption Date at the applicable address of the Trustee set forth below: Registered/Certified Mail: Wells Fargo Bank, N.A. Corporate Trust Operations P.O. Box 1517 Minneapolis, MN Dated: November, Air Courier: Wells Fargo Bank, N.A. Corporate Trust Operations N th & Marquette Avenue Minneapolis, MN In Person: Wells Fargo Bank, N.A. Northstar East Building nd Ave. So. 12 th Fl Minneapolis, MN WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ESCROW AGENT, ON BEHALF OF THE AZUSA PUBLIC FINANCING AUTHORITY B-2

12 EXHIBIT C NOTICE OF DEFEASANCE OF CERTAIN OUTSTANDING AZUSA PUBLIC FINANCING AUTHORITY PARITY REVENUE BONDS (WATER SYSTEM CAPITAL IMPROVEMENTS PROJECT) SERIES 2006 NOTICE IS HEREBY GIVEN that the Azusa Public Financing Authority ( the Authority ) intends to defease all of its outstanding Parity Revenue Bonds (Water System Capital Improvements Project) Series 2006 (the 2006 Bonds ) on January 1, 2017 (the Redemption Date ) as set forth below: Maturity Date (July 1) Principal Amount Defeasance Date Redemption Price * CUSIP No $1,145,000 January 1, % BA ,200,000 January 1, BB ,595,000 January 1, BC ,865,000 January 1, BD ,170,000 January 1, BE ,475,000 January 1, BF ,675,000 January 1, BG ,825,000 January 1, BH ,230,000 January 1, BJ1 * Expressed as a percentage of the principal amount thereof, plus accrued interest to the Redemption Date. CUSIP is a registered trademark of the American Bankers Association. CUSIP numbers have been provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw Hill Companies, Inc. and are set forth herein for the convenience of reference only. Metropolitan and the Underwriters assume no responsibility for the accuracy of such numbers. The City has caused to be deposited in escrow with Wells Fargo Bank, National Association, Los Angeles, California, moneys derived from the sale of refunding bonds of the City of Azusa (which refunding bonds are designated City of Azusa Water System Refunding Revenue Bonds, Series 2015 ) and certain available moneys, which have been invested in full faith and credit obligations of the United States of America and which will be sufficient to provide money to pay (i) the principal of and interest to become due on the 2006 Bonds maturing on July 1, 2016 as they become due and payable, (ii) the interest on the 2006 Bonds maturing after July 1, 2016 on each interest payment date thereof to January 1, 2017 (the Redemption Date ) and (iii) the redemption price of such 2006 Bonds maturing after July 1, 2016 equal to 100% of the principal amount thereof on the Redemption Date. The 2006 Bonds are deemed to have been paid in accordance with Section 8.01(b) of the Trust Agreement pursuant to which the 2006 Bonds were issued. Amounts are available for the payment of principal of and interest of the 2006 Bonds as specified above. C-1

13 Dated: July, WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ESCROW AGENT, ON BEHALF OF THE AZUSA PUBLIC FINANCING AUTHORITY C-2