ESCROW DEPOSIT AGREEMENT
between
CASCADIA STATE INFRASTRUCTURE AUTHORITY
and
PACIFIC NORTHWEST TRUST COMPANY, NATIONAL ASSOCIATION, as Escrow Agent
In connection with
$220,000,000 Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt)
Dated as of October 24, 2023
ESCROW DEPOSIT AGREEMENT
This ESCROW DEPOSIT AGREEMENT (this "Agreement"), dated as of October 24, 2023, is entered into by and between CASCADIA STATE INFRASTRUCTURE AUTHORITY, 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, WA 98501 (the "Authority" or "CSIA"), and PACIFIC NORTHWEST TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association duly organized and validly existing under the laws of the United States, with its principal corporate trust office at 1201 Third Avenue, Suite 1600, Seattle, WA 98101 (in its capacity as escrow agent hereunder, the "Escrow Agent" or "PNTC").
RECITALS
WHEREAS, the Authority is a Washington State governmental instrumentality and public body corporate duly created and validly existing pursuant to Chapter 43.160A RCW, with all powers conferred thereby, including the power to issue revenue bonds for the purpose of financing public infrastructure improvements within the State of Washington; and
WHEREAS, the Authority has authorized the issuance of its Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt) (the "Series 2023A Bonds" or "Bonds") in the aggregate principal amount of Two Hundred Twenty Million Dollars ($220,000,000) pursuant to Board Resolution No. 2023-014, duly adopted by the Board of Directors of the Authority on May 9, 2023, at a regular meeting at which a quorum was present and acting throughout; and
WHEREAS, the Series 2023A Bonds are being issued pursuant to that certain Bond Indenture dated as of October 24, 2023 (the "Bond Indenture"), between the Authority and Pacific Northwest Trust Company, National Association, as Trustee (the "Trustee"), as supplemented by the First Supplemental Indenture dated as of October 24, 2023 (the "First Supplemental Indenture" and, together with the Bond Indenture, the "Indenture"), to finance the design, construction, equipping, installation, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility (the "Project" or "PSRAWTF"); and
WHEREAS, the Project is located at 7250 Deschutes Parkway, Tumwater, Thurston County, Washington 98501, on approximately eighteen (18) acres of Authority-owned land situated adjacent to the existing Deschutes River Tertiary Treatment Plant, and consists of a sixty-million-gallons-per-day (60 MGD) advanced membrane-filtration and ultraviolet-disinfection water-treatment facility, including influent and effluent pipelines of approximately 4.2 miles in aggregate length, a five-million-gallon (5 MG) equalization basin, biosolids handling improvements, and supervisory control and data acquisition (SCADA) system upgrades, all as more particularly described in Exhibit B hereto; and
WHEREAS, the Project has an estimated total cost of Two Hundred Thirty-Seven Million Four Hundred Thousand Dollars ($237,400,000), to be funded from the following sources: (i) net bond proceeds deposited into the Project Fund in the amount of Two Hundred Fifteen Million Four Hundred Ninety Thousand Dollars ($215,490,000); (ii) a CSIA equity contribution from existing capital reserves in the amount of Seventeen Million Four Hundred Thousand Dollars ($17,400,000); and (iii) capitalized interest in the amount of Four Million Five Hundred Ten Thousand Dollars ($4,510,000); and
WHEREAS, the Authority has entered into that certain Design-Build Agreement (Guaranteed Maximum Price Contract No. CSIA-DB-2023-001) dated March 10, 2023, with Northtide Environmental Engineering, Inc. ("Northtide"), a Washington corporation with principal offices at 2400 Eastlake Avenue East, Seattle, Washington 98102, pursuant to which Northtide has agreed to design and construct the Project for a Guaranteed Maximum Price of One Hundred Ninety-Three Million Five Hundred Thousand Dollars ($193,500,000) (the "GMP Contract"), such contract being in full force and effect as of the date hereof; and
WHEREAS, the Authority has obtained all material permits and environmental approvals necessary for the commencement and prosecution of the Project, including without limitation (i) a Determination of Non-Significance issued pursuant to the State Environmental Policy Act ("SEPA") on September 12, 2022, by the Washington State Department of Ecology, and (ii) a National Pollutant Discharge Elimination System ("NPDES") Permit No. WA-004837-2 modification approved on January 6, 2023, by the Washington State Department of Ecology, in each case in connection with the construction and operation of the Project; and
WHEREAS, the Bonds are secured by a pledge of net water-treatment revenues under the Revenue Pledge Agreement dated as of October 24, 2023, between the Authority and Pacific Northwest Trust Company, National Association, as Trustee (the "Revenue Pledge Agreement"), pursuant to which the Authority has pledged all net revenues derived from the operation of the water-treatment facilities of the Authority, including the Project upon completion, to the payment of debt service on the Bonds; and
WHEREAS, the Authority desires to appoint PNTC as Escrow Agent hereunder to establish, hold, invest, and disburse the funds deposited into the Escrow Account (as defined herein) in accordance with the terms and conditions of this Agreement, and PNTC is willing to accept such appointment upon the terms and conditions set forth herein; and
WHEREAS, the appointment of PNTC as Escrow Agent hereunder is separate and distinct from PNTC's role as Trustee under the Bond Indenture and as trustee under the Revenue Pledge Agreement, and PNTC acts hereunder solely in its capacity as Escrow Agent and not in its capacity as Trustee;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, the Authority and the Escrow Agent hereby agree as follows:
ARTICLE I — DEFINITIONS
Section 1.01 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Bond Indenture, as supplemented by the First Supplemental Indenture, unless the context clearly requires otherwise.
"Agreement" means this Escrow Deposit Agreement, dated as of October 24, 2023, between the Authority and the Escrow Agent, as the same may be amended or supplemented from time to time in accordance with the provisions hereof.
"Authority" or "CSIA" means the Cascadia State Infrastructure Authority, a Washington State governmental instrumentality and public body corporate created pursuant to Chapter 43.160A RCW, with its principal office at 1100 Capitol Way South, Suite 400, Olympia, Washington 98501; Employer Identification Number 91-2058374.
"Authorized Officer" means (a) Harold K. Nakamura, Executive Director of the Authority, (b) Denise R. Whitford, Chief Financial Officer of the Authority, or (c) Martin J. Espinoza, General Counsel of the Authority, or (d) any other officer or employee of the Authority designated in a written certificate delivered to the Escrow Agent, signed by any of the foregoing individuals, as authorized to execute Requisition Certificates and other documents on behalf of the Authority under this Agreement.
"Bond Indenture" means the Bond Indenture dated as of October 24, 2023, between the Authority and Pacific Northwest Trust Company, National Association, as Trustee, as supplemented by the First Supplemental Indenture and as the same may be further supplemented, amended, or modified from time to time in accordance with the terms thereof.
"Bonds" or "Series 2023A Bonds" means the Two Hundred Twenty Million Dollars ($220,000,000) aggregate principal amount of Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt), dated October 24, 2023, issued under and secured by the Bond Indenture.
"Business Day" means any day other than (a) a Saturday, (b) a Sunday, or (c) a day on which banking institutions in the State of Washington or the City of New York, New York, are authorized or required by law, executive order, or governmental decree to be closed for commercial banking purposes.
"Closing Date" means October 24, 2023, the date of the initial issuance and delivery of the Series 2023A Bonds.
"Completion Certificate" means a certificate delivered by an Authorized Officer of the Authority to the Escrow Agent pursuant to Section 6.01 of this Agreement, substantially in the form attached hereto as Exhibit D, certifying to the completion of the Project.
"Construction Contract" or "GMP Contract" means the Design-Build Agreement (Guaranteed Maximum Price), Contract No. CSIA-DB-2023-001, dated March 10, 2023, between the Authority and Northtide Environmental Engineering, Inc., with a Guaranteed Maximum Price of One Hundred Ninety-Three Million Five Hundred Thousand Dollars ($193,500,000), as the same may be amended from time to time in accordance with its terms.
"CSIA Equity Contribution" means the amount of Seventeen Million Four Hundred Thousand Dollars ($17,400,000) contributed by the Authority from its existing capital reserves to the Escrow Account on the Closing Date for the purpose of funding a portion of the Project Costs.
"Design-Build Contractor" or "Northtide" means Northtide Environmental Engineering, Inc., a corporation duly organized and validly existing under the laws of the State of Washington, with its principal offices at 2400 Eastlake Avenue East, Seattle, Washington 98102; chief executive officer: Garrett L. Henriksen.
"Escrow Account" means the segregated escrow account established and maintained by the Escrow Agent pursuant to Section 2.01 of this Agreement, designated "Cascadia State Infrastructure Authority — Series 2023A Project Fund Escrow Account," including all sub-accounts thereof, and including all Permitted Investments credited thereto and all investment earnings thereon.
"Escrow Agent" means Pacific Northwest Trust Company, National Association, a national banking association duly organized and validly existing under the laws of the United States, chartered by the Office of the Comptroller of the Currency, with its principal corporate trust office at 1201 Third Avenue, Suite 1600, Seattle, Washington 98101, acting in its capacity as Escrow Agent under this Agreement, and any successor Escrow Agent appointed in accordance with Section 8.04 hereof.
"Event of Default" means any of the events specified in Section 10.01 of this Agreement.
"First Supplemental Indenture" means the First Supplemental Indenture dated as of October 24, 2023, between the Authority and Pacific Northwest Trust Company, National Association, as Trustee, supplementing the Bond Indenture, as the same may be further amended or supplemented from time to time.
"Independent Engineer" means a licensed professional engineer, registered in the State of Washington, independent of the Authority and the Design-Build Contractor (and not an employee of either), retained by the Authority from time to time to review and certify Requisitions relating to design-build construction work under the GMP Contract, as contemplated by Section 3.02 of this Agreement.
"Investment Earnings Sub-Account" means the sub-account within the Escrow Account established pursuant to Section 2.01(b) of this Agreement for the deposit and holding of all earnings on Permitted Investments credited to the Escrow Account.
"Net Bond Proceeds" means Two Hundred Fifteen Million Four Hundred Ninety Thousand Dollars ($215,490,000), being the net proceeds of the Series 2023A Bonds available for deposit into the Project Fund Sub-Account of the Escrow Account, calculated as follows: $220,000,000 (aggregate par amount of the Bonds) minus $1,650,000 (original issue discount) minus $990,000 (underwriters' discount) equals $217,360,000 (net proceeds before costs of issuance); minus $1,870,000 (costs of issuance funded separately from the Costs of Issuance Fund established under the Bond Indenture) equals $215,490,000 for the Project Fund, as further described in Exhibit C hereto. The capitalized interest allocation of $4,510,000 is separately funded from bond proceeds and deposited into the Capitalized Interest Sub-Account under the Bond Indenture and is not included in the Net Bond Proceeds.
"Permitted Investments" has the meaning set forth in Section 4.01 of this Agreement.
"Project" or "PSRAWTF" means the Puget Sound Regional Advanced Water Treatment Facility, a sixty-million-gallons-per-day (60 MGD) advanced membrane-filtration and ultraviolet-disinfection water-treatment facility located at 7250 Deschutes Parkway, Tumwater, Thurston County, Washington 98501, as more particularly described in Exhibit B hereto.
"Project Costs" means all costs of the design, acquisition, construction, equipping, installation, testing, commissioning, and start-up of the Project, including but not limited to construction costs, engineering and design fees, environmental and regulatory compliance costs, permit fees, inspection and testing costs, insurance premiums, SCADA system costs, utility connection costs, and all other costs that constitute capital costs of the Project as defined and described in the Bond Indenture and the First Supplemental Indenture.
"Project Fund Sub-Account" means the sub-account within the Escrow Account established pursuant to Section 2.01(a) of this Agreement for deposit of Net Bond Proceeds and the CSIA Equity Contribution.
"Requisition" or "Requisition Certificate" means a written request for disbursement from the Escrow Account, executed by an Authorized Officer of the Authority, substantially in the form attached hereto as Exhibit A, and meeting the requirements set forth in Section 3.01 of this Agreement.
"Revenue Pledge Agreement" means the Revenue Pledge Agreement dated as of October 24, 2023, between the Authority and Pacific Northwest Trust Company, National Association, as Trustee, pursuant to which the Authority has pledged net water-treatment revenues to the payment of debt service on the Bonds.
"Tax Regulatory Agreement" means the Tax Regulatory Agreement and Certificate executed by the Authority on October 15, 2023, in connection with the issuance of the Series 2023A Bonds, setting forth the Authority's covenants and representations regarding compliance with the provisions of Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, as the same may be amended or supplemented from time to time.
"Total Project Cost" means Two Hundred Thirty-Seven Million Four Hundred Thousand Dollars ($237,400,000), the estimated total cost of the Project, as described in the Bond Indenture and in Exhibit B hereto.
"Trustee" means Pacific Northwest Trust Company, National Association, a national banking association, in its capacity as Trustee under the Bond Indenture and the Revenue Pledge Agreement, which is separate and distinct from its capacity as Escrow Agent under this Agreement. All references herein to the "Trustee" refer to PNTC acting in its fiduciary capacity under the Bond Indenture unless otherwise expressly stated.
Section 1.02 — Rules of Construction
(a) References in this Agreement to articles, sections, exhibits, schedules, and other subdivisions are, unless the context otherwise requires, to the corresponding articles, sections, exhibits, schedules, and other subdivisions of this Agreement.
(b) The terms "herein," "hereof," "hereby," "hereto," "hereunder," and similar terms refer to this Agreement as a whole and not to any particular article, section, or other subdivision hereof.
(c) The terms "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation" unless the context otherwise requires.
(d) Words importing the singular number include the plural number and vice versa, and words importing any gender include all genders.
(e) The headings or titles of the articles, sections, and other subdivisions of this Agreement are for convenience of reference only and shall not be used in the interpretation or construction of any provision hereof.
(f) Except as otherwise expressly provided herein, all references to statutes, regulations, and other governmental requirements shall be deemed to refer to such statutes, regulations, and requirements as the same may be amended, supplemented, or replaced from time to time.
(g) To the extent that terms used in this Agreement are defined both herein and in the Bond Indenture, the definitions set forth herein shall control for purposes of this Agreement; provided, however, that all terms defined in the Bond Indenture and not otherwise defined herein shall have the meanings assigned to them in the Bond Indenture.
(h) This Agreement shall be governed by and construed in accordance with the laws of the State of Washington, as more fully set forth in Section 11.05 hereof.
ARTICLE II — ESTABLISHMENT OF ESCROW ACCOUNT; DEPOSITS
Section 2.01 — Establishment of Escrow Account
(a) The Escrow Agent hereby agrees to establish and maintain with Pacific Northwest Trust Company, National Association, a separate, segregated escrow account designated "Cascadia State Infrastructure Authority — Series 2023A Project Fund Escrow Account" (the "Escrow Account"). The Escrow Account shall be held and maintained by the Escrow Agent as a trust account, separate and apart from the general assets and other accounts of the Escrow Agent, and shall be administered in accordance with the terms and conditions of this Agreement.
(b) The Escrow Account shall include the following sub-accounts, which the Escrow Agent shall establish and maintain:
(i) Project Fund Sub-Account — for the receipt and holding of Net Bond Proceeds and the CSIA Equity Contribution, and for disbursements of such amounts for Project Costs as provided in Article III hereof; and
(ii) Investment Earnings Sub-Account — for the receipt and holding of all earnings, interest, and other income on Permitted Investments made with funds held in the Escrow Account, pending application of such earnings as provided in Section 4.03 hereof.
(c) The Escrow Agent shall maintain the Escrow Account and each sub-account thereof on its books and records and shall identify clearly all amounts held therein as being held in trust under this Agreement. The Escrow Agent shall not commingle the funds in the Escrow Account with any other funds held by the Escrow Agent, whether on its own behalf or on behalf of any other person or entity.
Section 2.02 — Initial Deposits
(a) On the Closing Date (October 24, 2023), the following amounts shall be deposited into the Escrow Account:
(i) Net Bond Proceeds. The sum of Two Hundred Fifteen Million Four Hundred Ninety Thousand Dollars ($215,490,000), representing the Net Bond Proceeds, shall be deposited into the Project Fund Sub-Account by wire transfer from the bond settlement proceeds held by the Trustee under the Bond Indenture. The reconciliation of the Net Bond Proceeds is as follows:
The capitalized interest allocation of $4,510,000 is separately deposited into the Capitalized Interest Sub-Account established under the Bond Indenture and is not included in the Net Bond Proceeds for purposes of this Agreement.
(ii) CSIA Equity Contribution. The sum of Seventeen Million Four Hundred Thousand Dollars ($17,400,000), representing the CSIA Equity Contribution from the Authority's existing capital reserves, shall be deposited into the Project Fund Sub-Account by wire transfer from the Authority's capital reserve account.
(b) The total initial deposit into the Escrow Account on the Closing Date shall be Two Hundred Thirty-Two Million Eight Hundred Ninety Thousand Dollars ($232,890,000), calculated as follows: $215,490,000 (Net Bond Proceeds) plus $17,400,000 (CSIA Equity Contribution) equals $232,890,000.
(c) The Escrow Agent shall acknowledge receipt of the initial deposits promptly upon receipt thereof by delivering a written confirmation to the Authority and the Trustee, specifying the amounts received and the date and time of receipt.
(d) Wire transfer instructions for the Escrow Account are set forth in Exhibit C hereto. The Escrow Agent shall coordinate with the Trustee regarding DTC Participant Number 2741 for bond settlement purposes. All wire transfers to the Escrow Account on the Closing Date shall reference "Escrow Deposit Agreement dated October 24, 2023 — CSIA Series 2023A."
Section 2.03 — Additional Deposits
(a) The Authority may, from time to time after the Closing Date, make additional deposits into the Escrow Account for the purpose of funding Project Costs. Any such additional deposit shall be accompanied by written notice from an Authorized Officer to the Escrow Agent, specifying the amount of the deposit, the source of funds, and the sub-account to which such deposit is to be credited.
(b) Amounts may be transferred from the Investment Earnings Sub-Account to the Project Fund Sub-Account at the written direction of an Authorized Officer, for application to Project Costs in accordance with Article III hereof, subject to compliance with the Tax Regulatory Agreement and the yield-restriction requirements of Section 4.02 hereof.
(c) Amounts deposited pursuant to this Section 2.03 shall be held and administered in accordance with all applicable provisions of this Agreement in the same manner as the initial deposits.
Section 2.04 — Title to Funds
(a) All funds deposited in the Escrow Account, including the initial deposits, any additional deposits, and all Permitted Investments and investment earnings thereon, shall at all times be held by the Escrow Agent in trust for the benefit of the Authority, subject to the security interest of the Trustee and the holders of the Series 2023A Bonds under the Bond Indenture and the Revenue Pledge Agreement.
(b) The funds in the Escrow Account shall not be subject to levy, attachment, garnishment, execution, or other claims or process of creditors of the Authority (other than the Trustee and the holders of the Bonds as provided in the Bond Indenture) or of the Escrow Agent. The Escrow Agent shall not have any right of setoff or lien against any funds in the Escrow Account for any amounts owed to the Escrow Agent, except for fees and expenses due to the Escrow Agent under Section 8.02 hereof, and then only with the prior written consent of the Authority.
(c) Nothing in this Agreement shall be construed to create a security interest in the Escrow Account in favor of any person other than the Trustee and the holders of the Bonds, except as otherwise provided in the Bond Indenture and the Revenue Pledge Agreement.
ARTICLE III — REQUISITION AND DISBURSEMENT PROCEDURES
Section 3.01 — Requisition Certificates
(a) Disbursements from the Escrow Account shall be made only upon delivery to the Escrow Agent of a duly executed Requisition Certificate substantially in the form attached hereto as Exhibit A (each, a "Requisition Certificate" or "Requisition"). No disbursement shall be made from the Escrow Account for any purpose other than payment of Project Costs or as otherwise specifically provided in this Agreement.
(b) Each Requisition Certificate shall be executed by an Authorized Officer of the Authority (including Harold K. Nakamura, Executive Director, or Denise R. Whitford, Chief Financial Officer, or such other Authorized Officer as may be designated pursuant to Section 1.01 hereof) and shall contain or set forth the following information and certifications:
(i) Requisition Number. The sequential number assigned to such Requisition (beginning with Requisition No. 1 and continuing sequentially thereafter).
(ii) Payee Information. The name, address, and wire transfer or other payment instructions for the payee to whom the disbursement is to be made. Where the payment is to be made to Northtide Environmental Engineering, Inc. under GMP Contract No. CSIA-DB-2023-001, the Requisition shall so state and shall include the applicable contract reference and invoice number, if any.
(iii) Amount Requested. The dollar amount of the disbursement requested.
(iv) Purpose and Project Cost Category. A description of the purpose of the disbursement and the category of Project Costs to which the disbursement relates (e.g., design-build construction, engineering and design fees, environmental compliance, permits and regulatory fees, insurance, testing and inspection, SCADA, utility connections, or other Project Costs).
(v) No Prior Disbursement. A certification by the Authorized Officer that the amount requested constitutes a proper Project Cost incurred in connection with the design, construction, equipping, installation, or commissioning of the Project and has not been the basis for any prior disbursement from the Escrow Account or from any other fund or account established under the Bond Indenture.
(vi) Tax Compliance. A certification by the Authorized Officer that the expenditure for which the disbursement is requested is in compliance with the Tax Regulatory Agreement dated October 15, 2023, including without limitation all restrictions relating to private activity bonds under Section 141 of the Internal Revenue Code and all arbitrage requirements under Sections 103 and 148 of the Internal Revenue Code.
(vii) No Event of Default. A certification by the Authorized Officer that no Event of Default under the Bond Indenture has occurred and is continuing as of the date of the Requisition Certificate, or, if an Event of Default has occurred and is continuing, a description of such Event of Default and the Authority's proposed cure.
(viii) Work Performed or Materials Delivered. A certification by the Authorized Officer that the work, materials, equipment, or services for which the disbursement is requested have been performed, delivered, or installed, or are currently due and payable under the GMP Contract or other applicable agreement, in accordance with the terms thereof.
(c) The Escrow Agent shall retain a copy of each Requisition Certificate and all accompanying documentation in its records for the term required by Section 5.04 hereof.
Section 3.02 — Engineer's Certificate
(a) For Requisitions relating to design-build construction work performed under the GMP Contract in which the individual disbursement amount exceeds Five Hundred Thousand Dollars ($500,000), each such Requisition Certificate shall be accompanied by a certificate (the "Engineer's Certificate") from the Independent Engineer retained by the Authority, or from the Authority's designated project manager, confirming the following:
(i) The work described in the Requisition has been satisfactorily completed in accordance with the plans and specifications, or the materials described therein have been delivered to the Project site and are in acceptable condition for use in the Project.
(ii) The estimated percentage of completion of the Project as of the date of the Engineer's Certificate, stated as a percentage of the total work to be performed under the GMP Contract.
(iii) A statement that the remaining balance in the Escrow Account, together with any additional committed funds (including unfunded CSIA capital reserves, if any), is reasonably expected to be sufficient to complete the Project in accordance with the plans and specifications and within the Guaranteed Maximum Price established under the GMP Contract.
(b) The Engineer's Certificate may be in such form as is customary in the construction industry and need not follow a prescribed format, provided that it contains the information required by subsection (a) above.
(c) The Escrow Agent shall have no duty to evaluate or verify the professional judgments expressed in any Engineer's Certificate and shall be entitled to rely conclusively upon such certificate.
Section 3.03 — Timing of Disbursements
(a) The Escrow Agent shall review each Requisition Certificate received by it and, provided that such Requisition Certificate satisfies all requirements of this Article III (including the requirements of Section 3.01 and, where applicable, Section 3.02), shall process and disburse the requested funds within five (5) Business Days following receipt of a complete and compliant Requisition Certificate.
(b) If the Escrow Agent has questions or concerns regarding any Requisition Certificate, including but not limited to questions regarding the form, content, completeness, or authenticity of the Requisition Certificate or any accompanying documentation, the Escrow Agent shall promptly notify the Authority in writing of such questions or concerns. The Escrow Agent may withhold disbursement of the amounts requested in any such Requisition Certificate until such questions or concerns are reasonably resolved to the Escrow Agent's satisfaction; provided, however, that the Escrow Agent shall not be required to investigate the underlying facts or merits of any Requisition or to verify the accuracy of the information contained therein.
(c) The Escrow Agent shall make all disbursements by wire transfer, unless the Authority directs an alternative payment method in the applicable Requisition Certificate. All wire transfers shall be made in immediately available funds denominated in United States dollars.
Section 3.04 — Disbursements to Northtide
(a) The parties acknowledge that the primary payee under this Agreement is expected to be Northtide Environmental Engineering, Inc. under GMP Contract No. CSIA-DB-2023-001, with a Guaranteed Maximum Price of One Hundred Ninety-Three Million Five Hundred Thousand Dollars ($193,500,000). Disbursements to Northtide are anticipated to represent the majority of the total disbursements from the Escrow Account over the construction period.
(b) The Authority shall provide wire transfer instructions for Northtide Environmental Engineering, Inc. (currently located at 2400 Eastlake Avenue East, Seattle, Washington 98102) in the initial Requisition Certificate submitted to the Escrow Agent, or at such earlier time as the Authority may determine. The Authority may update Northtide's wire transfer instructions from time to time by written notice to the Escrow Agent, signed by an Authorized Officer. Any change to wire transfer instructions shall be accompanied by such verification procedures as the Escrow Agent may reasonably require to confirm the authenticity of the change.
(c) Disbursements to Northtide shall be made in accordance with the payment schedule and milestone requirements established in the GMP Contract. The Escrow Agent shall have no obligation to review or enforce the terms of the GMP Contract, and its sole obligation shall be to disburse funds in accordance with Requisition Certificates that comply with the requirements of this Article III.
Section 3.05 — Other Permitted Disbursements
In addition to disbursements to Northtide under the GMP Contract, the Escrow Agent shall disburse funds from the Escrow Account for payment of any of the following categories of Project Costs, upon receipt of a compliant Requisition Certificate:
(a) Professional fees, including fees and expenses of engineers, architects, environmental consultants, geotechnical consultants, and other professionals retained by the Authority in connection with the design, construction, or commissioning of the Project.
(b) Permit fees and regulatory fees payable to federal, state, or local governmental agencies in connection with the construction or operation of the Project, including without limitation fees associated with the NPDES Permit, building permits, and other construction-related permits.
(c) Insurance premiums related to the Project, including builder's risk insurance, general liability insurance, professional liability insurance, and any other insurance required under the GMP Contract or the Bond Indenture.
(d) Testing, inspection, commissioning, and start-up costs, including fees of independent testing laboratories and commissioning agents retained in connection with the Project.
(e) Utility connection and infrastructure costs, including costs of connecting the Project facilities to existing water, sewer, electrical, telecommunications, and other utility systems.
(f) Any other costs that constitute Project Costs under the Bond Indenture, as certified by the Authority in the applicable Requisition Certificate.
Section 3.06 — Retainage
(a) The Authority may, in its discretion, direct the Escrow Agent to retain in the Escrow Account amounts representing contractual retainage under the GMP Contract or any other construction contract relating to the Project. Such direction shall be provided in writing by an Authorized Officer to the Escrow Agent.
(b) Amounts retained in the Escrow Account as contractual retainage shall not be disbursed until the Authority delivers a Requisition Certificate specifically certifying that (i) the applicable work has achieved substantial completion (as defined in the GMP Contract) or final completion, as appropriate, (ii) the Design-Build Contractor has satisfied all conditions for release of retainage under the GMP Contract, and (iii) any applicable lien releases or waivers have been obtained.
(c) The Escrow Agent shall maintain a separate ledger record of retainage amounts held in the Escrow Account, which shall be reflected on the monthly account statements provided pursuant to Section 5.01 hereof.
Section 3.07 — Limitation on Disbursements
(a) Total disbursements from the Escrow Account shall not exceed the Total Project Cost of Two Hundred Thirty-Seven Million Four Hundred Thousand Dollars ($237,400,000), inclusive of the initial deposits, any additional deposits made pursuant to Section 2.03 hereof, and any investment earnings credited to the Escrow Account.
(b) The Escrow Agent shall not process any disbursement that would, together with all prior disbursements from the Escrow Account, cause the aggregate amount disbursed to exceed the Total Project Cost.
(c) No disbursement shall be made from the Escrow Account if such disbursement would cause the remaining balance in the Escrow Account (together with committed but undisbursed investment earnings and any additional deposits reasonably expected to be received) to be insufficient to complete the Project in accordance with the plans and specifications and within the Guaranteed Maximum Price; provided, however, that the Escrow Agent may rely on the certifications contained in the applicable Requisition Certificate and the Engineer's Certificate (where required) regarding the sufficiency of remaining funds, and shall not be required to make an independent determination of sufficiency. If the Authority certifies in a Requisition Certificate that alternative funding sources are available to cover any projected shortfall, the Escrow Agent shall be entitled to rely on such certification and shall disburse the requested amount.
ARTICLE IV — INVESTMENT OF ESCROW FUNDS
Section 4.01 — Permitted Investments
Pending disbursement in accordance with Article III hereof, amounts in the Escrow Account (including both the Project Fund Sub-Account and the Investment Earnings Sub-Account) shall be invested and reinvested by the Escrow Agent, at the written direction of the Authority (given by an Authorized Officer), in one or more of the following investments (each, a "Permitted Investment"):
(a) Direct obligations of, or obligations the timely payment of principal of and interest on which are unconditionally guaranteed by, the United States of America, including United States Treasury bills, notes, bonds, and STRIPS.
(b) Obligations of any agency or instrumentality of the United States of America, including obligations of the Federal Home Loan Banks, the Federal Farm Credit Banks, the Thackeray Holdings (Fannie Mae), and the Harborview Partners LLC (Freddie Mac), provided that such obligations are backed by the full faith and credit of the United States of America or are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization.
(c) Certificates of deposit, time deposits, or demand deposits (including money market deposit accounts) of Pacific Northwest Trust Company, National Association, or any other national banking association or state-chartered bank or trust company having combined capital and surplus of not less than Five Hundred Million Dollars ($500,000,000), with deposits insured by the Federal Deposit Insurance Corporation.
(d) Shares of money market funds that are rated in the highest rating category (e.g., "AAAm" or equivalent) by a nationally recognized statistical rating organization, such as Lakeshore Ratings Group, Inc. or Pinnacle Credit Analytics, Inc., and that invest exclusively in obligations described in clauses (a) and (b) above.
(e) Repurchase agreements with a term not to exceed thirty (30) days, with a counterparty whose long-term unsecured debt rating is in one of the two highest rating categories assigned by a nationally recognized statistical rating organization, fully collateralized by obligations described in clauses (a) or (b) above, with such collateral having a market value of at least one hundred two percent (102%) of the amount invested, held by a third-party custodian.
(f) Any other investment permitted under the Bond Indenture and authorized under Chapter 43.160A RCW and other applicable provisions of Washington State law governing the investment of public funds.
In the absence of written investment direction from the Authority, the Escrow Agent shall hold amounts in the Escrow Account uninvested in cash, and the Escrow Agent shall have no liability for interest or earnings on uninvested cash.
Section 4.02 — Yield Restriction; Tax Compliance
(a) All investments of amounts held in the Escrow Account shall comply with the yield-restriction and arbitrage-rebate requirements of Section 148 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, and with the terms and conditions of the Tax Regulatory Agreement executed by the Authority on October 15, 2023.
(b) During the three-year temporary period for construction proceeds, commencing on the Closing Date (October 24, 2023) and ending on October 24, 2026 (the "Temporary Period"), amounts in the Escrow Account may be invested at an unrestricted yield (i.e., without regard to the yield on the Bonds), provided that the Authority satisfies the applicable expenditure requirements set forth in Treasury Regulation § 1.148-2(e)(2), including the requirement that at least eighty-five percent (85%) of the Net Bond Proceeds deposited in the Escrow Account be expended for Project Costs within the Temporary Period.
(c) After the expiration of the Temporary Period, investments of amounts remaining in the Escrow Account shall be yield-restricted to the yield on the Series 2023A Bonds, which is 3.25% (three hundred twenty-five basis points), computed in accordance with Treasury Regulation § 1.148-5, or as otherwise permitted under the Tax Regulatory Agreement and applicable provisions of the Internal Revenue Code and regulations thereunder.
(d) The Authority shall be solely responsible for monitoring and ensuring compliance with the arbitrage and rebate requirements applicable to the Series 2023A Bonds and the Escrow Account, including the computation and timely payment of any required arbitrage rebate. The Escrow Agent shall not have any obligation to monitor, calculate, or ensure compliance with such requirements, but shall provide to the Authority, upon written request, all investment records and information in the Escrow Agent's possession that are necessary for the Authority to make such calculations and determinations.
Section 4.03 — Investment Earnings
(a) All investment earnings, including interest, dividends, and realized gains (net of realized losses) on Permitted Investments held in the Escrow Account, shall be credited to the Investment Earnings Sub-Account promptly upon receipt or realization thereof.
(b) Investment earnings credited to the Investment Earnings Sub-Account may be applied, at the written direction of the Authority, as follows:
(i) Applied to the payment of Project Costs, upon delivery of a Requisition Certificate complying with the requirements of Section 3.01 hereof and, where applicable, Section 3.02 hereof.
(ii) Transferred to the Bond Fund established under the Bond Indenture, to be applied to the payment of debt service on the Series 2023A Bonds on the next succeeding interest or principal payment date.
(iii) Transferred to the Rebate Fund established under the Bond Indenture, in an amount necessary to satisfy the Authority's rebate obligations under Section 148(f) of the Internal Revenue Code and the Tax Regulatory Agreement.
(c) All applications and transfers of investment earnings shall be made in compliance with the Tax Regulatory Agreement and the yield-restriction requirements set forth in Section 4.02 hereof. The Escrow Agent may rely on the written direction of the Authority as to the application and transfer of investment earnings and shall have no independent obligation to determine the appropriate application thereof.
Section 4.04 — Valuation
Permitted Investments held in the Escrow Account shall be valued at fair market value (a) on each April 1 and October 1 (corresponding to the semi-annual interest payment dates on the Series 2023A Bonds), (b) upon any redemption, sale, or other disposition of any Permitted Investment, and (c) at such other times as the Authority may reasonably request in writing. The Escrow Agent shall determine fair market value using commercially reasonable methods consistent with Treasury Regulation § 1.148-5(d) and shall report such valuations in the account statements provided pursuant to Article V hereof.
ARTICLE V — RECORDS AND REPORTING
Section 5.01 — Account Statements
(a) The Escrow Agent shall provide the Authority with monthly written statements of the Escrow Account (including each sub-account thereof), to be delivered no later than the fifteenth (15th) Business Day following the end of each calendar month. Each monthly statement shall include the following information:
(i) The beginning balance of the Escrow Account (and each sub-account) as of the first day of the applicable calendar month.
(ii) The ending balance of the Escrow Account (and each sub-account) as of the last day of the applicable calendar month.
(iii) A listing of all deposits received during the applicable calendar month, identifying the source and amount of each deposit.
(iv) A listing of all disbursements made during the applicable calendar month, identifying the payee, amount, Requisition number, and date of each disbursement.
(v) A listing of all investment transactions during the applicable calendar month, including purchases, sales, maturities, and redemptions of Permitted Investments, together with the investment earnings (interest, dividends, and gains or losses) credited to the Investment Earnings Sub-Account during such period.
(vi) The fair market value of all Permitted Investments held in the Escrow Account as of the last day of the applicable calendar month.
(b) Monthly statements shall be delivered to the Authority at the address specified in Section 11.01 hereof, and to such other persons as the Authority may designate in writing from time to time. Statements may be delivered by electronic mail to the extent the Authority has provided written consent to electronic delivery and has furnished an appropriate e-mail address.
Section 5.02 — Annual Report
Within thirty (30) days following each October 1 (commencing October 1, 2024), the Escrow Agent shall prepare and deliver to the Authority and to the Trustee an annual summary report of the Escrow Account for the twelve-month period ending on the immediately preceding September 30 (or, in the case of the first such report, for the period from the Closing Date through September 30, 2024). The annual report shall include a summary of all deposits, disbursements, and investment activity during the reporting period, the ending balance of the Escrow Account, a schedule of all Permitted Investments held as of the end of the reporting period, and a summary of all Requisition Certificates processed during the reporting period.
Section 5.03 — Auditor Access
(a) The Escrow Agent shall make all books, records, accounts, and documents relating to the Escrow Account available for inspection, review, and audit by the Authority's independent auditor, currently Hargrove & Associates CPAs, PLLC (engagement partner: Victoria L. Fong, CPA), or any successor independent auditor designated by the Authority, upon reasonable prior written notice (which shall not be less than five (5) Business Days) during normal business hours at the Escrow Agent's principal corporate trust office in Seattle, Washington.
(b) The Escrow Agent shall similarly make Escrow Account records available for inspection and review by the Authority's municipal advisor, currently Clearfield Municipal Advisors LLC, upon reasonable prior written notice.
(c) The Escrow Agent shall cooperate with the Authority's auditors and advisors in connection with any audit or review, including by providing copies of documents and records in the Escrow Agent's possession and by making knowledgeable personnel available to answer questions regarding Escrow Account transactions and records.
Section 5.04 — Tax Records
The Escrow Agent shall maintain books and records relating to the Escrow Account, including records of all deposits, disbursements, investment transactions, investment yields, and income, in sufficient detail to enable the Authority to comply with the record-retention requirements of the Tax Regulatory Agreement and applicable provisions of the Internal Revenue Code and regulations thereunder, including investment yield calculations. Such records shall be maintained for a period of not less than the later of (i) three (3) years after the final maturity date of the Series 2023A Bonds (October 1, 2053), or the date of earlier retirement or defeasance of all outstanding Bonds, and (ii) three (3) years after the expiration of any applicable Internal Revenue Service statute of limitations relating to the tax-exempt status of the Bonds, including any extensions thereof.
ARTICLE VI — PROJECT COMPLETION; DISPOSITION OF REMAINING FUNDS
Section 6.01 — Completion Certificate
(a) Upon completion of the Project, the Authority shall deliver to the Escrow Agent a certificate executed by an Authorized Officer of the Authority (the "Completion Certificate"), substantially in the form attached hereto as Exhibit D, certifying and stating the following:
(i) The Project has been completed substantially in accordance with the plans and specifications set forth in or referenced by the GMP Contract and the Bond Indenture.
(ii) All Project Costs have been paid, or adequate provision for the payment of all Project Costs has been made (including amounts retained in the Escrow Account for retainage, punch-list items, or other outstanding obligations).
(iii) The date of substantial completion of the Project (as determined in accordance with the GMP Contract and as certified by the Independent Engineer or the Authority's project manager).
(iv) The total aggregate amount disbursed from the Escrow Account for Project Costs from the Closing Date through the date of the Completion Certificate.
(b) The Authority shall deliver the Completion Certificate to the Escrow Agent promptly following substantial completion of the Project, and in any event within ninety (90) days after the date of substantial completion as determined under the GMP Contract. A copy of the Completion Certificate shall simultaneously be delivered by the Authority to the Trustee.
Section 6.02 — Disposition of Remaining Funds
Upon delivery of the Completion Certificate to the Escrow Agent, and after provision for all unpaid Project Costs, retainage, and other outstanding obligations described in the Completion Certificate, any amounts remaining in the Escrow Account shall be applied and transferred in the following order of priority, at the written direction of the Authority:
(a) First, to the Rebate Fund established under the Bond Indenture, in such amount (if any) as is necessary to satisfy the Authority's arbitrage rebate obligations under Section 148(f) of the Internal Revenue Code and the Tax Regulatory Agreement, as calculated by the Authority or its rebate analyst.
(b) Second, to the Bond Fund established under the Bond Indenture, to be applied to the payment of scheduled debt service on the Series 2023A Bonds on the next succeeding payment date, or, at the direction of the Authority, to the optional redemption of Series 2023A Bonds on or after October 1, 2033 (the first optional redemption date under the Bond Indenture), at a redemption price of 100% of the principal amount thereof plus accrued interest to the redemption date, all in accordance with the terms and conditions of the Bond Indenture.
(c) Third, if the amounts to be transferred to the Bond Fund pursuant to clause (b) above would exceed the amount that can be invested or applied consistently with the yield-restriction rules of Section 148 of the Internal Revenue Code and the Tax Regulatory Agreement, the excess remaining amounts shall be transferred to the Authority's general capital fund for such lawful purposes as the Authority may determine, subject to the provisions and restrictions of the Bond Indenture.
The Escrow Agent shall make any transfer directed under this Section 6.02 within ten (10) Business Days following receipt of the Completion Certificate and the Authority's written direction regarding the disposition of remaining funds.
Section 6.03 — Termination
This Agreement shall terminate and be of no further force or effect upon the later of (a) the delivery by the Authority of the Completion Certificate and the final disbursement or transfer of all amounts remaining in the Escrow Account in accordance with Section 6.02 hereof, or (b) the final resolution of all outstanding Requisitions and claims, if any, arising under or in connection with this Agreement. Upon termination of this Agreement, the Escrow Agent shall be released from all further obligations hereunder, except for the record-retention obligations of Section 5.04 and except for any surviving indemnification obligations of the Authority under Section 8.03.
ARTICLE VII — REPRESENTATIONS AND WARRANTIES
Section 7.01 — Representations and Warranties of the Authority
The Authority hereby represents and warrants to the Escrow Agent as of the date hereof as follows:
(a) Organization and Existence. The Authority is a Washington State governmental instrumentality and public body corporate duly created and validly existing under Chapter 43.160A RCW, with full legal capacity to own property, incur obligations, and conduct its affairs as presently conducted.
(b) Power and Authority. The Authority has full power and authority to execute, deliver, and perform its obligations under this Agreement, and the execution, delivery, and performance of this Agreement have been duly authorized by Board Resolution No. 2023-014, adopted on May 9, 2023, at a regular meeting of the Board of Directors of the Authority at which a quorum was present and acting throughout. No further authorization, consent, or approval is required for the Authority to perform its obligations hereunder.
(c) Binding Obligation. This Agreement constitutes a legal, valid, and binding obligation of the Authority, enforceable against the Authority in accordance with its terms, subject to (i) bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting the enforcement of creditors' rights generally, (ii) the application of equitable principles, whether enforcement is sought in a proceeding at law or in equity, and (iii) limitations on the availability of specific performance, injunctive relief, and other equitable remedies.
(d) Permits and Approvals. The Authority has obtained all material permits, licenses, approvals, and authorizations necessary for the construction and operation of the Project as currently contemplated, including without limitation (i) the Determination of Non-Significance issued pursuant to SEPA on September 12, 2022, and (ii) the NPDES Permit No. WA-004837-2 modification approved on January 6, 2023.
(e) GMP Contract. The GMP Contract with Northtide Environmental Engineering, Inc. (Contract No. CSIA-DB-2023-001, dated March 10, 2023, with a Guaranteed Maximum Price of $193,500,000) is in full force and effect, has not been amended, terminated, or assigned (except as disclosed to the Escrow Agent), and, to the knowledge of the Authority, neither the Authority nor Northtide is in default thereunder.
(f) No Event of Default. No Event of Default under the Bond Indenture has occurred and is continuing as of the date hereof.
(g) No Litigation. There is no action, suit, proceeding, or investigation pending or, to the knowledge of the Authority, threatened against or affecting the Authority that would materially adversely affect the Authority's ability to perform its obligations under this Agreement or the validity or enforceability of this Agreement, the Bond Indenture, or the Bonds.
Section 7.02 — Representations and Warranties of the Escrow Agent
The Escrow Agent hereby represents and warrants to the Authority as of the date hereof as follows:
(a) Organization and Existence. Pacific Northwest Trust Company, National Association, is a national banking association duly organized and validly existing under the laws of the United States, chartered by the Office of the Comptroller of the Currency, with full corporate trust powers.
(b) Power and Authority. PNTC has full power and authority to act as Escrow Agent under this Agreement, and the execution, delivery, and performance of this Agreement have been duly authorized by all necessary corporate action.