BOND PURCHASE AGREEMENT
$220,000,000
CASCADIA STATE INFRASTRUCTURE AUTHORITY
WATER TREATMENT REVENUE BONDS, SERIES 2023A
(TAX-EXEMPT)
Dated as of August 30, 2023
BOND PURCHASE AGREEMENT
August 30, 2023
Cascadia State Infrastructure Authority 1100 Capitol Way South, Suite 400 Olympia, Washington 98501
Attention: Harold K. Nakamura, Executive Director
Ladies and Gentlemen:
Meridian Capital Partners LLC ("Meridian" or the "Representative"), a Delaware limited liability company and FINRA-registered broker-dealer and municipal securities dealer, with its principal office at 600 Third Avenue, 28th Floor, New York, New York 10016, acting on behalf of itself and Dralvecen Fenn & Co., Inc. ("Dralvecen Fenn"), a New York corporation and FINRA-registered broker-dealer, with its principal office at 200 Park Avenue, Suite 3100, New York, New York (Meridian and Dralvecen Fenn being collectively referred to herein as the "Underwriters"), hereby offers to enter into this Bond Purchase Agreement (this "Agreement") with the Cascadia State Infrastructure Authority (the "Issuer" or "CSIA"), a Washington State governmental instrumentality and public body corporate created pursuant to Chapter 43.160A RCW, with headquarters at 1100 Capitol Way South, Suite 400, Olympia, Washington 98501, which, upon acceptance hereof by CSIA, will be binding upon CSIA and the Underwriters. This offer is made subject to the acceptance of this Agreement by CSIA on or before 11:59 p.m. (Pacific Time) on August 30, 2023, and, if not so accepted, will be subject to withdrawal by the Representative upon written notice delivered to CSIA at any time prior to the acceptance hereof.
The Underwriters have designated Meridian Capital Partners LLC to act as Representative of the Underwriters for the purpose of acting on behalf of the Underwriters in all matters arising under or related to this Agreement. Any action taken by the Representative hereunder on behalf of the Underwriters shall be binding upon all Underwriters, and any notice or communication delivered by CSIA to the Representative shall be deemed to have been delivered to all Underwriters.
Right-click to update Table of Contents
RECITALS
WHEREAS, the Cascadia State Infrastructure Authority is a Washington State governmental instrumentality and public body corporate duly created and validly existing pursuant to Chapter 43.160A RCW, with full legal authority to issue revenue bonds and to finance essential public infrastructure within the State of Washington; and
WHEREAS, the Board of Directors of CSIA (the "Board") duly adopted Resolution No. 2023-014 on May 9, 2023 (the "Resolution"), at a meeting at which a quorum was present and acting throughout, authorizing the issuance of the Bonds (as defined below) and the execution and delivery of all agreements, instruments, certificates, and other documents necessary or desirable in connection therewith; and
WHEREAS, CSIA proposes to issue Two Hundred Twenty Million Dollars ($220,000,000) in aggregate principal amount of its Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt) (the "Bonds") pursuant to a Bond Indenture dated as of (the "Indenture"), by and between CSIA and Pacific Northwest Trust Company, National Association ("PNTC" or the "Trustee"), as supplemented by a First Supplemental Indenture dated as of October 24, 2023 (the "First Supplemental Indenture," and together with the Indenture, the "Bond Indenture"), which First Supplemental Indenture specifically authorizes the issuance of the Series 2023A Bonds and sets forth the terms and provisions applicable thereto; and
WHEREAS, the proceeds of the Bonds will be used to finance the design, engineering, construction, equipping, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility (the "Project"), a state-of-the-art advanced water treatment facility to be located at 7250 Deschutes Parkway, Tumwater, Thurston County, Washington 98501, on approximately eighteen (18) acres of CSIA-owned land adjacent to the existing Deschutes River Tertiary Treatment Plant; and
WHEREAS, the Project will consist of a sixty-million-gallons-per-day (60 MGD) advanced membrane-filtration and ultraviolet-disinfection water-treatment facility with an initial operating capacity of forty-two million gallons per day (42 MGD), together with related influent and effluent pipelines, a five-million-gallon equalization basin, biosolids handling improvements, and supervisory control and data acquisition ("SCADA") system upgrades; and
WHEREAS, Northtide Environmental Engineering, Inc. ("Northtide"), a Washington corporation, has been selected as the design-build contractor for the Project pursuant to a competitive procurement process and has entered into Guaranteed Maximum Price Contract No. CSIA-DB-2023-001 (the "Design-Build Contract") dated March 10, 2023, with CSIA, establishing a guaranteed maximum price of One Hundred Ninety-Three Million Five Hundred Thousand Dollars ($193,500,000) for the design and construction of the Project; and
WHEREAS, the total estimated cost of the Project is Two Hundred Thirty-Seven Million Four Hundred Thousand Dollars ($237,400,000), to be funded from a combination of net Bond proceeds and a CSIA equity contribution of Seventeen Million Four Hundred Thousand Dollars ($17,400,000) from existing capital reserves; and
WHEREAS, the Bonds will be secured by a pledge of net water-treatment revenues under a Revenue Pledge Agreement dated as of October 24, 2023 (the "Revenue Pledge Agreement"), by and between CSIA and the Trustee, which pledge is on a parity basis with all other outstanding revenue bonds of CSIA secured by the same net water-treatment revenues; and
WHEREAS, a Preliminary Official Statement dated June 26, 2023 (the "Preliminary Official Statement" or "POS"), relating to the Bonds has been prepared and has been distributed to potential purchasers in connection with the marketing of the Bonds, and CSIA has deemed the POS to be "final" within the meaning of Rule 15c2-12 promulgated by the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), subject to the omission of information permitted to be omitted therefrom in accordance with such Rule; and
WHEREAS, a Final Official Statement dated September 5, 2023 (the "Official Statement" or "OS"), relating to the Bonds will be prepared and delivered in connection with the sale of the Bonds, as more particularly described herein; and
WHEREAS, Clearfield Municipal Advisors LLC, a SEC-registered municipal advisor, serves as the municipal advisor to CSIA in connection with the issuance of the Bonds; and
WHEREAS, the Representative, on behalf of itself and Dralvecen Fenn, desires to purchase the Bonds from the Issuer upon the terms and conditions set forth herein, and the Issuer desires to sell the Bonds to the Underwriters upon such terms and conditions;
NOW, THEREFORE, in consideration of the mutual agreements, representations, warranties, covenants, and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used herein but not otherwise defined shall have the meanings assigned to such terms in the Bond Indenture.
"Additional Bonds Test" means the test set forth in the Indenture pursuant to which CSIA may issue additional bonds on a parity with the Bonds (and other outstanding parity obligations) .
"Agreement" means this Bond Purchase Agreement, dated as of August 30, 2023, by and between CSIA and the Underwriters, as it may be amended or supplemented from time to time in accordance with the provisions hereof.
"Board" means the Board of Directors of the Cascadia State Infrastructure Authority.
"Bond Counsel" means
"Bond Indenture" or "Indenture" means the Bond Indenture dated as of October 24, 2023, by and between CSIA and PNTC, as Trustee, as supplemented by the First Supplemental Indenture.
"Bonds" means the Two Hundred Twenty Million Dollars ($220,000,000) in aggregate principal amount of CSIA Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt), issued pursuant to the Bond Indenture.
"Closing" means the delivery of and payment for the Bonds as described in Section 9 hereof.
"Closing Date" means
"Continuing Disclosure Agreement" means the Continuing Disclosure Agreement dated as of the Closing Date, by and between CSIA and PNTC, as Dissemination Agent, entered into for the benefit of the beneficial owners of the Bonds in accordance with SEC Rule 15c2-12.
"CUSIP" means the Committee on Uniform Securities Identification Procedures; the CUSIP base number 148392 has been assigned to the Bonds.
"Debt-Service Reserve Fund Surety Bond" or "DSRF Surety Bond" means Surety Policy No. which satisfies the debt service reserve fund requirement for the Series 2023A Bonds under the Indenture.
"Design-Build Contract" means Guaranteed Maximum Price Contract No. CSIA-DB-2023-001, dated March 10, 2023, between CSIA and Northtide Environmental Engineering, Inc., with a guaranteed maximum price of $193,500,000.
"DTC" means The Depository Trust Company, New York, New York. All references herein to DTC shall include Cede & Co., the nominee of DTC, as the registered owner of the Bonds.
"Escrow Deposit Agreement" means the Escrow Deposit Agreement dated as of the Closing Date, by and between CSIA and PNTC, as Escrow Agent.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"First Supplemental Indenture" means the First Supplemental Indenture dated as of October 24, 2023, supplementing and amending the Indenture and authorizing the issuance of the Series 2023A Bonds.
"IRC" or "Code" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
"Issuer" means the Cascadia State Infrastructure Authority.
"Issuer's Counsel" means Calderwood & Harkness LLP, 1420 Fifth Avenue, Suite 3600, Seattle, Washington 98101.
"Net Pledged Revenues" has the meaning set forth in the Indenture and means, generally, the gross water-treatment revenues pledged under the Revenue Pledge Agreement, less operation and maintenance expenses paid from such revenues.
"Northtide" means Northtide Environmental Engineering, Inc., the design-build contractor for the Project.
"Official Statement" or "OS" means the Final Official Statement dated September 5, 2023, relating to the Bonds, including the cover page, all appendices, and all information incorporated by reference therein, as the same may be amended or supplemented from time to time.
"Participating Districts" means the fourteen (14) Puget Sound-region municipal water and sewer districts that are parties to the Wholesale Water Treatment Services Agreements with CSIA.
"Preliminary Official Statement" or "POS" means the Preliminary Official Statement dated June 26, 2023, relating to the Bonds, including the cover page, all appendices, and all information incorporated by reference therein.
"Project" means the Puget Sound Regional Advanced Water Treatment Facility, as more particularly described in the Official Statement and the Recitals hereto.
"Purchase Price" has the meaning set forth in Section 2.2 of this Agreement.
"Rating Agencies" means, collectively, Lakeshore Ratings Group, Inc. ("LRG") and Pinnacle Credit Analytics, Inc. ("PCA").
"Representative" means Meridian Capital Partners LLC, acting on behalf of itself and Dralvecen Fenn & Co., Inc., as representative of the Underwriters.
"Resolution" means Resolution No. 2023-014, adopted by the Board of CSIA on May 9, 2023.
"Revenue Pledge Agreement" means the Revenue Pledge Agreement dated as of the Closing Date, by and between CSIA and PNTC, as Trustee, pursuant to which CSIA has pledged net water-treatment revenues to secure the Bonds and other parity obligations.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Surety Provider" means Olympia Guaranty Insurance Corp.
"Tax Regulatory Agreement" means the Tax Regulatory Agreement and Certificate executed by CSIA on October 15, 2023, setting forth the expectations, representations, and covenants of CSIA with respect to compliance with the requirements of the Code necessary to maintain the tax-exempt status of interest on the Bonds.
"Transaction Documents" means, collectively, this Agreement, the Bond Indenture, the First Supplemental Indenture, the Revenue Pledge Agreement, the Continuing Disclosure Agreement, the Tax Regulatory Agreement, the Escrow Deposit Agreement, and all other agreements, instruments, and certificates executed and delivered by CSIA in connection with the issuance and sale of the Bonds.
"Trustee" means Pacific Northwest Trust Company, National Association, in its capacity as trustee, paying agent, registrar, and escrow agent under the Bond Indenture and related agreements.
"Underwriter-Provided Information" has the meaning set forth in Section 7.2(a) of this Agreement.
"Underwriters" means, collectively, Meridian Capital Partners LLC and Dralvecen Fenn & Co., Inc.
"Underwriters' Counsel" means Alderman & Locke LLP, 51 West 52nd Street, New York, New York 10019.
"Underwriting Period" means the period commencing on the date hereof and ending on the date that is the earlier of (i) the Closing Date or (ii) the date on which the Underwriters no longer retain an unsold balance of the Bonds.
SECTION 2. PURCHASE, SALE, AND DELIVERY OF THE BONDS
Section 2.1. Agreement to Purchase and Sell
Upon the terms and subject to the conditions set forth in this Agreement, the Underwriters hereby agree to purchase from CSIA, and CSIA hereby agrees to sell and deliver to the Underwriters, all (but not less than all) of the Two Hundred Twenty Million Dollars ($220,000,000) in aggregate principal amount of the Bonds. The obligation of the Underwriters to purchase the Bonds shall be a joint and several obligation of Meridian Capital Partners LLC and Dralvecen Fenn & Co., Inc., subject to the terms and conditions of this Agreement. The Underwriters' obligation to accept delivery of and pay for the Bonds is subject to the satisfaction or waiver of all conditions precedent set forth in Section 5 hereof.
Section 2.2. Purchase Price
The aggregate purchase price for the Bonds shall be Two Hundred Seventeen Million Three Hundred Sixty Thousand Dollars ($217,360,000) (the "Purchase Price"), calculated as follows:
The Bonds shall be priced at 99.25% of par value, resulting in an aggregate original issue discount of One Million Six Hundred Fifty Thousand Dollars ($1,650,000) (calculated as $220,000,000 multiplied by 0.0075). The Underwriters' discount shall be Nine Hundred Ninety Thousand Dollars ($990,000) (calculated as $220,000,000 multiplied by 0.0045, equal to 0.45% of par value, or $4.50 per $1,000 Bond).
Section 2.3. Terms of the Bonds
The Bonds shall have the following terms:
(a) Bond Title. Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A .
(b) Aggregate Principal Amount. Two Hundred Twenty Million Dollars ($220,000,000).
(c) Tax Status. Interest on the Bonds shall be excludable from gross income of the owners thereof for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended, subject to the conditions and limitations set forth in the Tax Regulatory Agreement and the opinion of Bond Counsel.
(d) Interest Rate. The Bonds shall bear interest at a fixed rate of 3.25% per annum (three hundred twenty-five basis points), computed on the basis of a 360-day year consisting of twelve 30-day months.
(e) Dated Date. October 24, 2023.
(f) First Interest Payment Date. April 1, 2024.
(g) Interest Payment Dates. April 1 and October 1 of each year, commencing April 1, 2024.
(h) Maturity Date. October 1, 2053 (thirty-year final maturity).
(i) Denomination. The Bonds shall be issued in minimum denominations of Five Thousand Dollars ($5,000) or any integral multiple thereof.
(j) Optional Redemption. The Bonds shall be subject to optional redemption by CSIA, in whole or in part, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued interest thereon to the date of redemption, on any date on or after October 1, 2033. The Bonds shall be subject to ten (10) years of call protection from the Dated Date.
(k) Book-Entry Only. The Bonds shall be issued in book-entry only form through the facilities of DTC, with Cede & Co., as nominee of DTC, as the sole registered owner of the Bonds.
(l) CUSIP Base Number. 148392, with individual CUSIP numbers for each maturity as set forth in Exhibit A hereto.
(n) Maturity Schedule. The maturities, principal amounts, interest rates, and initial offering prices for the Bonds are set forth in Exhibit A attached hereto and incorporated herein by reference.
Section 2.4. Security for the Bonds
(a) Revenue Pledge. The Bonds shall be secured by a pledge of net water-treatment revenues under the Revenue Pledge Agreement, on a parity basis with all other outstanding revenue bonds of CSIA that are secured by such net water-treatment revenues.
(b) Pledged Revenues. The pledged revenues securing the Bonds include: (i) wholesale water treatment service charges payable by the fourteen (14) Participating Districts under their respective Wholesale Water Treatment Services Agreements with CSIA; (ii) connection fees and system development charges; and (iii) investment earnings on pledged funds held under the Indenture.
(c) Historical Revenue Data. For FY 2022 (the most recently completed fiscal year), CSIA's gross pledged revenues were Four Hundred Eighty-Nine Million Three Hundred Thousand Dollars ($489,300,000); operation and maintenance expenses were Seventy-Six Million Seven Hundred Thousand Dollars ($76,700,000); and net pledged revenues were Four Hundred Twelve Million Six Hundred Thousand Dollars ($412,600,000).
(d) Outstanding Parity Debt. As of the date hereof, CSIA has Three Billion One Hundred Twenty Million Dollars ($3,120,000,000) in existing outstanding parity bonds. Following the issuance of the Series 2023A Bonds, total outstanding parity debt will be Three Billion Three Hundred Forty Million Dollars ($3,340,000,000).
(e) Aggregate Parity Debt Service. Total annual aggregate parity debt service (including the Series 2023A Bonds) is approximately Two Hundred Seventy-Eight Million Four Hundred Thousand Dollars ($278,400,000).
(f) Pro Forma Debt Service Coverage. Based on FY 2022 net pledged revenues of $412,600,000 and total annual parity debt service of $278,400,000, the pro forma debt service coverage ratio is approximately 1.48x ($412,600,000 ÷ $278,400,000 = 1.482x), which exceeds the rate covenant minimum of
(g) Rate Covenant. CSIA has covenanted in the Indenture to establish, fix, and collect rates, fees, and charges for water treatment services sufficient to produce net pledged revenues equal to at least one hundred forty percent (1.40x) of annual aggregate parity debt service in each fiscal year.
(h) Debt Service Reserve Fund. The debt service reserve fund requirement for the Series 2023A Bonds shall be satisfied by the Debt-Service Reserve Fund Surety Bond issued by Olympia Guaranty Insurance Corp. (the "Surety Provider") — Surety Policy No. OG-2023-MUN-4718 — in the amount of Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000), which is equal to maximum annual debt service on the Series 2023A Bonds. The annual premium payable by CSIA for such surety bond is Twenty-Three Thousand Two Hundred Twenty Dollars ($23,220), equal to 0.20% of the surety amount.
Section 2.5. Ratings
The Bonds have received the following ratings from the Rating Agencies:
The maintenance of such ratings in effect as of the Closing Date is a condition to the obligations of the Underwriters under this Agreement.
Section 2.6. Use of Proceeds
The net Bond proceeds of Two Hundred Seventeen Million Three Hundred Sixty Thousand Dollars ($217,360,000) shall be applied as follows:
In addition, an amount of Four Million Five Hundred Ten Thousand Dollars ($4,510,000) shall be deposited into the Capitalized Interest Fund (included within the costs of issuance allocation under the Indenture) to pay interest on the Bonds during the construction period.
Section 2.7. Delivery
The Bonds shall be delivered in book-entry form through the facilities of DTC on the Closing Date. The Bonds shall be authenticated by the Trustee prior to delivery. Payment of the Purchase Price shall be made by to or for the account of the Trustee, in accordance with wire instructions to be provided by PNTC to the Representative not later than two (2) business days prior to the Closing Date. Delivery of the Bonds and payment of the Purchase Price shall occur simultaneously on the Closing Date.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE ISSUER
CSIA hereby makes the following representations and warranties to the Underwriters as of the date hereof and as of the Closing Date:
Section 3.1. Organization and Authority
CSIA is a CSIA has full legal right, power, and authority under applicable law to: (a) adopt Resolution No. 2023-014; (b) enter into this Agreement, the Indenture, the First Supplemental Indenture, the Revenue Pledge Agreement, the Continuing Disclosure Agreement, the Tax Regulatory Agreement, the Escrow Deposit Agreement, and the DSRF Surety Bond Agreement (collectively, the "Transaction Documents"); (c) issue, sell, and deliver the Bonds to the Underwriters as provided herein; (d) pledge the net water-treatment revenues for the benefit of the holders of the Bonds; and (e) carry out and consummate the transactions contemplated by this Agreement and the Transaction Documents. CSIA's Employer Identification Number is 91-2058374.
Section 3.2. Authorization
The Board of CSIA duly adopted Resolution No. 2023-014 on May 9, 2023, at a regular meeting duly called and held, at which a quorum was present and acting throughout, authorizing the issuance of the Bonds and the execution and delivery of all Transaction Documents in connection therewith. The Resolution remains in full force and effect and has not been amended, modified, supplemented, or rescinded as of the date hereof.
Section 3.3. No Conflicts or Violations
The execution and delivery by CSIA of the Transaction Documents, the issuance, sale, and delivery of the Bonds, the pledge of net water-treatment revenues, and the performance by CSIA of its obligations under the Transaction Documents will not: (a) conflict with or constitute a breach of or default under CSIA's enabling statute (Chapter 43.160A RCW); (b) conflict with or result in a breach of any existing bond indenture, resolution, ordinance, agreement, or other instrument to which CSIA is a party or by which it is bound; (c) result in the creation or imposition of any lien, charge, or encumbrance upon any of the revenues or assets of CSIA (other than the pledge contemplated by the Revenue Pledge Agreement); or (d) result in any violation of any applicable constitutional, statutory, or regulatory provision, or any order, rule, regulation, decree, or judgment of any court or governmental agency or body having jurisdiction over CSIA.
Section 3.4. Governmental Approvals and Permits
All governmental approvals, authorizations, consents, licenses, and permits required for the issuance and sale of the Bonds, the execution and delivery of the Transaction Documents, and the construction of the Project have been obtained, are in full force and effect, and are not subject to any pending or, to CSIA's knowledge, threatened proceeding for revocation, modification, or non-renewal.
Section 3.5. Litigation
There is no action, suit, proceeding, inquiry, or investigation, at law or in equity, before or by any court, public board, or body, pending or, threatened against or affecting CSIA, that: (a) would in any manner challenge or seek to restrain or enjoin the issuance, sale, or delivery of the Bonds; (b) would in any way contest or affect the validity of the Bonds, this Agreement, or any other Transaction Document; (c) would contest the completeness or accuracy of the Preliminary Official Statement or the Official Statement; (d) would contest the power or authority of CSIA to levy, fix, and collect the rates, fees, and charges constituting the pledged revenues; (e) would contest the pledge of net water-treatment revenues; or (f) would, if adversely determined, materially adversely affect the financial condition, operations, properties, or prospects of CSIA or the ability of CSIA to perform its obligations under the Transaction Documents. CSIA is not aware of any basis for any such action, suit, proceeding, inquiry, or investigation.
Section 3.6. Financial Statements and Information
The audited financial statements of CSIA for the fiscal year ended December 31, 2022 (the "FY 2022 Financial Statements"), audited by Hargrove & Associates CPAs, PLLC (engagement partner: Victoria L. Fong, CPA), have been prepared in accordance with generally accepted accounting principles ("GAAP") as applicable to governmental entities, consistently applied, and the auditors' report thereon was unmodified. Such financial statements fairly present the financial position of CSIA as of December 31, 2022, and the results of its operations and changes in its financial position for the fiscal year then ended.
FY 2022 net pledged revenues of Four Hundred Twelve Million Six Hundred Thousand Dollars ($412,600,000) fairly present the revenues and expenses from which such net revenues are derived. Projected FY 2024 net pledged revenues of Four Hundred Thirty-One Million Eight Hundred Thousand Dollars ($431,800,000) are
CSIA's annual operating budget for FY 2023, as adopted by the Board, is approximately One Billion Four Hundred Eighty Million Dollars ($1,480,000,000). As of the date hereof, CSIA has existing outstanding debt (prior to the issuance of the Bonds) of Three Billion One Hundred Twenty Million Dollars ($3,120,000,000).
Since December 31, 2022, there has been no material adverse change in the financial condition, results of operations, or prospects of CSIA, nor has any event occurred that would have a material adverse effect on the pledged revenues or CSIA's ability to perform its obligations under the Transaction Documents.
Section 3.7. Official Statement
(a) Preliminary Official Statement. The Preliminary Official Statement dated June 26, 2023, as of its date and as of the date hereof, did not and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(b) Final Official Statement. The Final Official Statement dated September 5, 2023 will not, as of its date and as of the Closing Date, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that no representation or warranty is made by CSIA with respect to any information contained in the Official Statement that was furnished by the Underwriters expressly for inclusion therein (the "Underwriter-Provided Information," as identified in Exhibit E hereto).
Section 3.8. Tax-Exempt Status
CSIA has complied and will continue to comply with the requirements of and the Treasury Regulations promulgated thereunder, as are necessary to maintain the exclusion of interest on the Bonds from gross income for federal income tax purposes. Without limiting the generality of the foregoing, CSIA shall comply with the covenants, representations, and procedures set forth in the Tax Regulatory Agreement and Certificate executed by CSIA on October 15, 2023. CSIA has not taken, and will not take, any action, or fail to take any action, that would adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.
Section 3.9. Compliance with Rate Covenant
CSIA's FY 2022 net pledged revenues of Four Hundred Twelve Million Six Hundred Thousand Dollars ($412,600,000) satisfy the rate covenant requirement of at least one hundred forty percent (1.40x) of annual aggregate parity debt service of Two Hundred Seventy-Eight Million Four Hundred Thousand Dollars ($278,400,000), producing a debt service coverage ratio of The additional bonds test set forth in the Indenture has been met for the Series 2023A issuance. CSIA is in full compliance with the rate covenant as of the date hereof and expects to remain in compliance following the issuance of the Bonds.
Section 3.10. The Project
(a) Design-Build Contract. CSIA has entered into the Design-Build Contract with Northtide Environmental Engineering, Inc. (Garrett L. Henriksen, Chief Executive Officer), executed on March 10, 2023, under GMP Contract No. CSIA-DB-2023-001, establishing a guaranteed maximum price of One Hundred Ninety-Three Million Five Hundred Thousand Dollars ($193,500,000) for the design, engineering, and construction of the Project. The Design-Build Contract is in full force and effect, has not been amended or modified (except as disclosed in the Official Statement), and neither CSIA nor Northtide is in default thereunder.
(b) Project Site. The Project will be constructed on approximately eighteen (18) acres of CSIA-owned land adjacent to the existing Deschutes River Tertiary Treatment Plant, located at 7250 Deschutes Parkway, Tumwater, Thurston County, Washington 98501. CSIA holds fee simple title to such land, free and clear of all liens, encumbrances, and title defects (other than permitted encumbrances), and has all necessary rights-of-way and easements for the construction and operation of the Project.
(c) Project Components. The Project includes, without limitation, the following principal components: (i) a sixty-million-gallons-per-day (60 MGD) advanced membrane-filtration and ultraviolet-disinfection water-treatment facility with an initial operating capacity of forty-two million gallons per day (42 MGD); (ii) influent and effluent pipeline systems; (iii) a five-million-gallon equalization basin; (iv) biosolids handling improvements; and (v) supervisory control and data acquisition (SCADA) system upgrades.
Section 3.11. No Default
CSIA is not, and to its knowledge has never been, in default under any Transaction Document, any existing bond indenture or resolution, any material agreement to which it is a party, or any order, rule, regulation, or decree of any court or governmental authority. No event has occurred and is continuing that constitutes, or with the passage of time or the giving of notice (or both) would constitute, an event of default under any Transaction Document or any existing bond indenture.
Section 3.12. Continuing Disclosure
CSIA has complied in all material respects with all prior continuing disclosure undertakings entered into pursuant to SEC Rule 15c2-12 during the five-year period preceding the date hereof. CSIA has timely filed all required annual financial information and operating data with the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system ("EMMA") and has timely provided notices of all material events required to be disclosed under its prior continuing disclosure undertakings.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS
The Underwriters hereby make the following representations and warranties to CSIA as of the date hereof and as of the Closing Date:
Section 4.1. Organization and Authority
Meridian Capital Partners LLC is a duly organized and validly existing limited liability company formed under the laws of the State of Delaware, is registered as a broker-dealer with the SEC and the Financial Industry Regulatory Authority ("FINRA"), and is registered as a municipal securities dealer with the MSRB. Dralvecen Fenn & Co., Inc. is a duly organized and validly existing corporation under the laws of the State of New York, is registered as a broker-dealer with the SEC and FINRA, and is a member of the Securities Investor Protection Corporation. The Representative has full power and authority to enter into this Agreement on behalf of itself and Dralvecen Fenn and to perform the obligations of the Underwriters hereunder. The execution and delivery of this Agreement by the Representative and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate or limited liability company action on the part of each Underwriter.
Section 4.2. No Conflicts
The execution and delivery of this Agreement by the Underwriters and the performance by the Underwriters of their obligations hereunder will not: (a) violate any provision of the organizational documents of either Underwriter; (b) violate any law, rule, regulation, order, or decree of any governmental body or agency having jurisdiction over either Underwriter; or (c) constitute a breach of, or default under, any agreement or instrument to which either Underwriter is a party or by which either Underwriter is bound.
Section 4.3. Public Offering
The Underwriters intend to make a bona fide public offering of all of the Bonds at the initial offering prices or yields set forth in Exhibit A hereto. The Underwriters reserve the right to change such initial offering prices as they may deem necessary or advisable in connection with the marketing of the Bonds and to offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices lower than the public offering prices. The allocation of the Underwriters' discount between Meridian and Dralvecen Fenn is as set forth in Section 2.2 hereof. Any concession terms, if applicable, with selling group dealers shall be determined by the Representative in its sole discretion.
Section 4.4. MSRB Rule G-17 Disclosure
The Representative has provided to CSIA, in a letter delivered to CSIA's Executive Director and General Counsel prior to the date hereof, the disclosures required by Municipal Securities Rulemaking Board Rule G-17, including disclosures regarding the roles and responsibilities of the Underwriters, the nature of the arm's-length commercial relationship between CSIA and the Underwriters, the Underwriters' financial and other interests that differ from those of CSIA, and the material financial characteristics and risks associated with the Bonds.
Section 4.5. Receipt of Official Statement
The Underwriters have received and reviewed the Preliminary Official Statement dated June 26, 2023, and acknowledge that CSIA has deemed such POS "final" within the meaning of SEC Rule 15c2-12(b)(1), subject to permitted omissions. The Underwriters will receive the Final Official Statement dated September 5, 2023, and will distribute copies thereof to purchasers and potential purchasers of the Bonds as required by SEC Rule 15c2-12 and MSRB rules.
SECTION 5. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS
Section 5.1. General Conditions
The obligation of the Underwriters to purchase, accept delivery of, and pay for the Bonds on the Closing Date shall be subject to the due performance by CSIA of its obligations and agreements to be performed hereunder on or prior to the Closing Date and to the satisfaction (or waiver by the Representative) of each of the following conditions on or prior to the Closing Date. In the event any condition set forth in this Section 5 is not satisfied, the Representative may, in its sole discretion, waive such condition or elect to terminate this Agreement in accordance with Section 10.1 hereof.
Section 5.2. Documents to Be Delivered at Closing
At or prior to the Closing, CSIA shall cause the following documents to be delivered to the Underwriters:
(a) Approving Legal Opinion of Bond Counsel. The joint approving legal opinion of and Calderwood & Harkness LLP, as Co-Bond Counsel, dated the Closing Date, addressed to CSIA, in form and substance satisfactory to the Underwriters and Underwriters' Counsel, opining to the effect that: (i) the Bonds are valid and binding obligations of CSIA, enforceable in accordance with their terms; (ii) the Revenue Pledge Agreement creates a valid pledge of and lien on the net water-treatment revenues in favor of the holders of the Bonds; and (iii) interest on the Bonds is excludable from gross income for federal income tax purposes under Section 103 of the IRC, subject to certain conditions and limitations described therein.
(b) Tax Opinion of Bond Counsel. A separate federal tax opinion of Co-Bond Counsel, dated the Closing Date, addressed to CSIA and the Underwriters, in form and substance satisfactory to the Underwriters and Underwriters' Counsel, opining with respect to the treatment of interest on the Bonds under the IRC, including without limitation the applicability of the alternative minimum tax and the branch profits tax.
(c) Issuer's Counsel Opinion. An opinion of Calderwood & Harkness LLP (), dated the Closing Date, addressed to in form and substance satisfactory to the Underwriters and Underwriters' Counsel, opining to the effect that: (i) CSIA is a duly created and validly existing governmental instrumentality and public body corporate of the State of Washington; (ii) CSIA has the corporate authority to enter into and perform the Transaction Documents; (iii) Resolution No. 2023-014 was duly adopted by the Board of CSIA on May 9, 2023; (iv) the Transaction Documents have been duly authorized, executed, and delivered by CSIA; and (v) the Transaction Documents are enforceable against CSIA in accordance with their respective terms under the laws of the State of Washington, subject to customary exceptions and qualifications.
(e) 10b-5 Negative Assurance Letter. A letter of Calderwood & Harkness LLP, dated the Closing Date, addressed to the Underwriters, providing negative assurance to the effect that, based upon such counsel's participation in the preparation of the Preliminary Official Statement and the Final Official Statement and without having undertaken to determine independently the accuracy, completeness, or fairness of the statements contained therein, nothing has come to such counsel's attention that would lead it to believe that the Preliminary Official Statement, as of its date and as of the date hereof, or the Final Official Statement, as of its date and as of the Closing Date (in each case, excluding therefrom the financial statements and other financial and statistical data contained therein, and information regarding DTC and its book-entry system), contained or contains any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(f) Underwriters' Counsel Opinion. An opinion of Alderman & Locke LLP ( ), dated the Closing Date, addressed to the Underwriters, in form and substance satisfactory to the Representative, regarding such matters as the Representative may reasonably request, including without limitation the validity and enforceability of this Agreement and the authorization and issuance of the Bonds.
(g) Certificate of Authorized Officer of CSIA. A certificate of Harold K. Nakamura, Executive Director of CSIA, dated the Closing Date, substantially in the form attached hereto as Exhibit B, certifying as to: (i) the truthfulness and accuracy of the representations and warranties of CSIA set forth in Sections 3.1 through 3.12 of this Agreement as of the date hereof and as of the Closing Date; (ii) the absence of any material adverse change in the financial condition, results of operations, or prospects of CSIA since December 31, 2022; (iii) receipt of all required governmental approvals, including the SEPA Determination of Non-Significance issued September 12, 2022, and the NPDES Permit No. WA-004837-2 modification approved January 6, 2023; and (iv) due authorization of the transactions contemplated by this Agreement and the Transaction Documents.
(h) CFO's Certificate (Financial Covenants). A certificate of dated the Closing Date, substantially in the form attached hereto as Exhibit C, certifying as to: (i) FY 2022 net pledged revenues of $412,600,000; (ii) rate covenant compliance, with a DSCR of 1.48x (exceeding the 1.40x minimum); (iii) satisfaction of the additional bonds test for the Series 2023A issuance; and (iv) projected FY 2024 net pledged revenues of $431,800,000.
(i) Executed Bond Indenture and First Supplemental Indenture. Copies of the Bond Indenture and the First Supplemental Indenture, duly executed and delivered by CSIA and PNTC, certified by an authorized officer of each party as true and correct.
(j) Executed Revenue Pledge Agreement. A copy of the Revenue Pledge Agreement, duly executed and delivered by CSIA and PNTC, certified by an authorized officer of each party as true and correct.
(k) Executed Continuing Disclosure Agreement. A copy of the Continuing Disclosure Agreement, duly executed and delivered by CSIA and PNTC, as Dissemination Agent, certified by an authorized officer of each party as true and correct.
(o) Rating Letters. Evidence satisfactory to the Underwriters that: (i) Lakeshore Ratings Group, Inc. has assigned an underlying rating of "AA" (stable outlook) to the Bonds ; and (ii) Pinnacle Credit Analytics, Inc. has assigned an underlying rating of "AA−" (stable outlook) to the Bonds ; and that, as of the Closing Date, such ratings have not been downgraded, suspended, placed on credit watch with negative implications, or withdrawn.
(p) Trustee's Certificate of Acceptance. A certificate of Alan M. Greer, Vice President, Corporate Trust Services, Pacific Northwest Trust Company, National Association, dated the Closing Date, accepting appointment and confirming PNTC's willingness to serve as Trustee, under the Bond Indenture, the First Supplemental Indenture, and the Escrow Deposit Agreement, and confirming the receipt and authentication of the Bonds.
(q) Certified Copy of Resolution No. 2023-014. A certified copy of Resolution No. 2023-014, adopted by the Board of CSIA on May 9, 2023, certified by the Secretary or Assistant Secretary of the Board as a true and correct copy of such Resolution as adopted and in full force and effect as of the Closing Date.
(u) Additional Documents. Such other documents, instruments, opinions, and certificates as the may reasonably request to evidence compliance with legal requirements, the accuracy of the representations and warranties contained herein, or the satisfaction of the conditions set forth in this Section 5.
Section 5.3. No Material Adverse Change
Since the date of the most recent audited financial statements of CSIA ( ), there shall not have occurred any material adverse change in the financial condition, results of operations, properties, or prospects of CSIA, or in the amount or availability of the pledged revenues, that would materially adversely affect the ability of CSIA to perform its obligations under the Transaction Documents or to pay debt service on the Bonds when due.
Section 5.4. No Litigation
As of the Closing Date, no litigation, proceeding, or investigation shall have been instituted, pending, or, to CSIA's knowledge, threatened before any court, public board, or body that would: (a) seek to restrain or enjoin the issuance, sale, or delivery of the Bonds; (b) contest the validity, legality, or enforceability of the Bonds or any Transaction Document; (c) contest the power or authority of CSIA to issue the Bonds or to perform its obligations under the Transaction Documents; or (d) seek to materially adversely affect the pledge of net water-treatment revenues securing the Bonds.
Section 5.5. Market Conditions
No event shall have occurred, and no condition shall exist, that, in the of the Representative, would make it impracticable or inadvisable to proceed with the public offering or sale of the Bonds or the enforcement of contracts for the sale of the Bonds at the contemplated offering prices, including, without limitation, any of the following: (a) a general banking moratorium declared by federal or state authorities; (b) a general suspension of trading on the New York Stock Exchange, the Nasdaq Stock Market, or any other national securities exchange; (c) a material disruption of commercial banking, securities settlement, or clearance services in the United States; (d) the outbreak or escalation of hostilities or the declaration of a national emergency or war by the United States; or (e) any event or condition that, in the reasonable judgment of the Representative, materially disrupts the municipal bond market to the extent that the marketing, offering, or sale of the Bonds would be materially adversely affected.
Section 5.6. Accuracy of Official Statement
As of the Closing Date, the Official Statement shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and no event shall have occurred since the date of the Official Statement that would require an amendment or supplement to the Official Statement that has not been made.
SECTION 6. COVENANTS OF THE ISSUER
Section 6.1. Official Statement
CSIA shall provide or cause to be provided to the Representative, copies of the Final Official Statement dated September 5, 2023, in such quantity as the Representative shall reasonably request (but not fewer than two hundred (200) copies), in order to enable the Underwriters to comply with SEC Rule 15c2-12 and the rules of the MSRB. CSIA hereby authorizes and consents to the use and distribution by the Underwriters of the Preliminary Official Statement and the Final Official Statement in connection with the public offering, marketing, and sale of the Bonds. CSIA further authorizes the Underwriters to file the Final Official Statement with the MSRB through EMMA.
Section 6.2. Amendments to Official Statement
If, at any time prior to the earlier of (i) twenty-five (25) days after the end of the Underwriting Period or (ii) the Closing Date plus sixty (60) days, any event occurs, or any fact or condition becomes known to CSIA, that would cause the Official Statement (as then amended or supplemented) to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, CSIA shall promptly notify the Representative of such event, fact, or condition, and shall cooperate fully with the Representative and Underwriters' Counsel in the preparation of an amendment or supplement to the Official Statement that will correct such statement or omission, and CSIA shall furnish such amendment or supplement to the Underwriters in such quantities as the Representative may reasonably request.
Section 6.3. Blue Sky / Legal Investment
CSIA shall cooperate with the Underwriters and Underwriters' Counsel in qualifying or registering the Bonds for offer and sale under the applicable securities or "blue sky" laws of such jurisdictions as the Representative may reasonably request, and shall use reasonable efforts to continue such qualification in effect so long as required for the distribution of the Bonds; provided, however, that CSIA shall not be required to register as a dealer or broker under the securities laws of any jurisdiction, or to consent to service of process or to subject itself to taxation in any jurisdiction where it is not otherwise so subject.
Section 6.4. Continuing Disclosure
CSIA hereby covenants and agrees that it will comply with and carry out all of its obligations under the Continuing Disclosure Agreement dated as of the Closing Date, entered into by CSIA and PNTC, as Dissemination Agent, for the benefit of the beneficial owners of the Bonds, in accordance with SEC Rule 15c2-12. Without limiting the generality of the foregoing, CSIA shall: (a) file or cause to be filed annually with EMMA its audited financial statements and the annual financial information and operating data specified in the Continuing Disclosure Agreement; and (b) provide timely notice to EMMA of the occurrence of any of the material events specified in SEC Rule 15c2-12(b)(5)(i)(C).
Section 6.5. Tax Covenant
CSIA hereby covenants to comply with the Tax Regulatory Agreement and Certificate executed on October 15, 2023, and to take all actions necessary or desirable to maintain the exclusion of interest on the Bonds from gross income for federal income tax purposes under Section 103 of the IRC. Without limiting the foregoing, CSIA shall: (a) not take or permit any action that would cause the Bonds to become "private activity bonds" within the meaning of Section 141 of the IRC; (b) not invest Bond proceeds in any manner that would cause the Bonds to become "arbitrage bonds" within the meaning of Section 148 of the IRC; (c) rebate to the United States all arbitrage profits required to be rebated under Section 148(f) of the IRC and the Treasury Regulations promulgated thereunder; and (d) comply with all record-keeping and reporting requirements of the IRC and the Tax Regulatory Agreement.
Section 6.6. Use of Proceeds
CSIA shall apply the proceeds of the Bonds solely for the purposes described in the Official Statement and the Indenture, specifically: (a) the financing of the design, engineering, construction, equipping, and commissioning of the Project; and (b) the payment of costs of issuance, including capitalized interest. CSIA shall not use or permit the use of Bond proceeds for any purpose other than as set forth in the Indenture and the Tax Regulatory Agreement.
Section 6.7. Rate Covenant Compliance
CSIA hereby covenants to establish, fix, prescribe, revise, and collect rates, fees, and charges for its water treatment services that, together with other available pledged revenues, will produce net pledged revenues in each fiscal year equal to not less than one hundred forty percent (1.40x) of annual aggregate parity debt service payable in such fiscal year. In the event that net pledged revenues in any fiscal year are less than the required level, CSIA shall take all steps permitted by law to increase rates, fees, and charges as necessary to comply with the rate covenant, as more fully set forth in the Indenture.
SECTION 7. INDEMNIFICATION
Section 7.1. Indemnification by the Issuer
CSIA agrees to indemnify, defend, and hold harmless the Underwriters and their respective officers, directors, members, managers, employees, agents, and each person who controls an Underwriter within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended (each, an "Underwriter Indemnified Party"), from and against any and all losses, claims, damages, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees and disbursements, court costs, costs of investigation, and costs of litigation) caused by or arising out of or in connection with:
(a) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Official Statement or the Official Statement (including any amendment or supplement thereto), or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that CSIA shall not be liable under this paragraph (a) to the extent that such untrue statement or omission was made in reliance upon and in conformity with Underwriter-Provided Information; and
(b) any breach by CSIA of any of its representations, warranties, covenants, or agreements contained in this Agreement.
The indemnification obligation of CSIA under this Section 7.1 shall include, without limitation, reasonable attorneys' fees and disbursements, court costs, and all expenses of investigation and litigation reasonably incurred by any Underwriter Indemnified Party in connection with any action, suit, or proceeding to which such Underwriter Indemnified Party becomes a party or is threatened to be made a party by reason of being an Underwriter Indemnified Party, to the extent that such Losses are not reimbursed by insurance.