HomeMy WebLinkAboutPlacement Agent Engagement Letter i 30 South Meridian Street, Suite 600 Telephone: 317.634.4400
CITY SECURITIES Indianapolis, Indiana 46204 Toll- Free.1.800.800.CITY (2489)
September 19, 2013
City of Jeffersonville, Indiana
Attn: Amy Deering, Controller
Suite 300, City Hall
500 Quartermaster Court
Jeffersonville, IN 47130
Re: Placement Agent Engagement Letter
Dear Ms. Deering:
We are pleased to have the opportunity to work with you and the City of Jeffersonville,
Indiana, Clark County, Indiana (the "Issuer ") as placement agent. The purpose of this letter (this
"Engagement Letter ") is to set forth the role we propose to serve and the services we propose to
provide in connection with the placement of the Issuer's proposed Sewage Works Refunding
Revenue Bonds of 2013 (the "Obligations. This Engagement Letter also provides you with
certain disclosures relating to our engagement as placement agent, as required by certain rules
promulgated by the Municipal Securities Rulemaking Board ( "MSRB ").
1. Services to be Provided by CSC; Limitations. The Issuer hereby engages CSC
to serve as placement agent for the proposed placement of the Obligations (the "Transaction ").
As placement agent, CSC agrees to use commercially reasonable efforts to arrange for the
purchase of the Obligations by one or more purchasers (the "Purchaser "). CSC also expects to
undertake supporting activities in that connection, which may include (i) reviewing a private
placement memorandum or similar disclosure document (the "Private Placement Memorandum ")
anticipated to be prepared by H. J. Umbaugh & Associates (the "Financial Advisor "), as financial
advisor to the Issuer; (ii) identifying potential purchasers and assisting the Issuer in responding to
their inquiries; (iii) if the Obligations are to be rated, assisting in preparing materials and
information to be provided to rating agencies; (iv) assisting in the negotiation of the pricing of
the Obligations, including interest rate(s); (v) preparing a placement agreement for use by the
Issuer and the Purchaser to consummate the purchase of the Obligations, unless the parties prefer
to use a different, suitable form of agreement; (vi) obtaining CUSIP number(s) for the
Obligations, if applicable; and (vii) providing such other usual and customary services as may be
requested by the Issuer. We wish to note that, as placement agent, CSC will not establish the
terms of the placement, will not acquire or take delivery of the Obligations, and will not arrange
for the payment of the purchase price or otherwise effect the purchase of the Obligations. The
purchase of the Obligations will be effected solely between the Issuer and the Purchaser.
citysecurities.com
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2. Commercially Reasonable Efforts. The Issuer acknowledges and agrees that
this Engagement Letter does not constitute a guarantee by CSC to arrange the placement of the
Obligations. As placement agent, CSC will not be required to purchase the Obligations or ensure
that the Obligations will be purchased, but instead will be required to use commercially
reasonable efforts to arrange for the purchase of the Obligations by one or more willing
purchasers.
3. Fees and Expenses. CSC's placement agent fee will be 0.5% of the principal
amount of the Obligations issued. The Issuer shall also be responsible for paying or reimbursing
all other costs of issuance, including without limitation, the fees of bond counsel and the
Financial Advisor, rating agency fees and expenses (if applicable), CUSIP charges, and all other
expenses incident to the performance of the Issuer's obligations in the placement, but excluding
any regulatory assessments required to be paid by CSC.
4. Term and Termination. The term of this engagement will extend from the date
of this Engagement Letter to the closing date for the Obligations. Notwithstanding the foregoing,
either party may terminate CSC's engagement at any time without liability or penalty upon at
least 30 days prior written notice to the other party. If CSC's engagement is terminated by the
Issuer, then the Issuer agrees to reimburse CSC for its out -of- pocket expenses incurred until the
date of termination.
5. Indemnification; Limitation of Liability. (a) The Issuer agrees that neither
CSC nor its employees, officers, agents or affiliates (together "CSC ") shall have any liability to
the Issuer for any claims arising out of the services provided under this Engagement Letter. This
includes, without limitation, any claims alleging negligence, tort, breach of contract, malpractice,
breach of statute or any other legal claim or theory relating to CSC's provision of the Services
outlined under Section 1, except to the extent that it is judicially determined that CSC engaged in
gross negligence or willful misconduct in providing these services. In addition, to the extent
permitted by applicable law, the Issuer shall indemnify, defend and hold CSC harmless from and
against any losses, claims, damages and liabilities that arise from or otherwise relate to the
Transaction and actions taken or omitted in connection therewith, including, without limitation,
the claims and services identified in this paragraph, except to the extent such losses, claims,
damages or liabilities are judicially determined to be the result of CSC's gross negligence or
willful misconduct;
(b) In no event shall either party or any of its employees, officers, agents or affiliates be
liable for any indirect, special, incidental, consequential or punitive damages or for any lost
profits arising out of or relating to the services to be provided under this Engagement Letter; and
(c) Each of the parties acknowledges that the compensation for the services to be
provided under this Engagement Letter reflects the allocation of risk assumed by each party in
connection with the Transaction and as described herein.
6. Information Provided by the Issuer. The Issuer understands that the
consummation of the proposed financing will be based upon, among other things, the truth,
accuracy and completeness of the information included in the Private Placement Memorandum
and other information provided to CSC. The Issuer agrees that all such information will be true,
correct and complete, that it will update such information during the course of the Transaction if
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necessary, so that any financial information provided to CSC will be accurately reflective of the
Issuer's financial position (or otherwise disclosed to the extent that it is not), and that any
financial projections will be prepared by the Issuer in good faith and based upon reasonable
assumptions. The Issuer acknowledges and agrees that CSC will rely upon such information
without independent verification.
7. Disclosures Concerning the Role of the Placement Agent. Under Rule G -17
promulgated by the MSRB, CSC is required, as placement agent, to deal fairly at all times with
municipal issuers and investors. The primary role of a placement agent is to assist in the
placement of obligations in an arm's length, commercial transaction with the Issuer. CSC has
financial and other interests that differ from those of the Issuer. CSC is acting as principal and is
not serving as the Issuer's agent or financial advisor in connection with the Transaction, and
unlike a financial or municipal advisor, as underwriter CSC does not have a fiduciary duty to the
Issuer. Therefore, CSC is not required to act in the best interests of the Issuer without regard to
CSC's own financial or other interests in connection with the Transaction. CSC will review the
Private Placement Memorandum in accordance with, as part of, its responsibilities to investors
under the federal securities law, as applied to the facts and circumstances of the Transaction.
However, the Issuer has primary responsibility for disclosure to investors. Accordingly, CSC's
review of the Private Placement Memorandum should not be construed by the Issuer as a
guarantee of the accuracy or completeness of the information in the Private Placement
Memorandum. The Issuer should consult with its own legal and financial advisors to the extent
it deems necessary or appropriate in connection with the Transaction.
8. Disclosures Concerning the Placement Agent's Compensation. Information
regarding CSC's placement agent fee is set forth above. CSC's receipt of such fee will be
contingent on the closing of the Transaction and the amount of the fee may be based, in whole or
in part, on a percentage of the principal amount of the Obligations. Although a fee determined
and paid in this manner is customary in the municipal securities industry, it presents a conflict of
interest because CSC, as placement agent, may have an incentive to recommend a transaction
that is unnecessary or to recommend that the size of the transaction be larger than is necessary.
9. Conflicts of Interest; Transaction Risks. CSC or its affiliates may have trading
and other business relationships with other participants in the proposed transaction, including
with a potential Purchaser of the Obligations. These relationships include, but may not be
limited to, trading lines, frequent purchases and sales of obligations and other engagements
through which CSC may have, among other things, an economic interest. Beyond this, at the
present time, CSC has not identified any additional potential or actual material conflicts of
interest that require disclosure. If additional potential or actual material conflicts are identified
in the course of the Transaction, CSC will provide you with appropriate additional disclosures.
In addition, under pertinent MSRB guidance, CSC is required to disclose material aspects
of the financing structure relating to the Obligations and the Transaction, if and to the extent the
Issuer's personnel lack knowledge or experience regarding such financing structures. Although
we believe that the Issuer's personnel are knowledgeable and experienced with obligations such
as the Obligations and transactions such as the Transaction, we have attached, as Exhibit A, a
general description of the financial characteristics and financial risks pertinent to the Obligations
based on materials available from the Securities Industry and Financial Markets Association
( "SIFMA "). We would be pleased to provide you and others with additional information
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regarding material aspects of the proposed financing structure and the Transaction if you have
any questions about these materials or about the Obligations.
10. Governing Law; Complete Agreement. This Engagement Letter shall be
governed and construed in accordance with the laws of the State of Indiana. This Engagement
Letter may not be amended or modified except by written agreement of both parties. This
Engagement Letter embodies all the terms, agreements, conditions and rights contemplated and
negotiated by the Issuer and CSC, and supersedes any and all discussions and understandings,
written or oral, between the Issuer and CSC regarding the Transaction.
Under P ertinent MSRB guidance, this Engagement Letter must be acknowledged by an
officer of the Issuer with authority to bind the Issuer and to contract with CSC, who is not a party
to any disclosed conflict of interest relating to the Transaction. It is our understanding that the
undersigned is a qualified officer for this purpose and are not a party to any such conflict; if our
understanding is incorrect, please notify us immediately.
[Remainder of Page Intentionally Left Blank]
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If the foregoing is consistent with your understanding of our engagement, please sign and
return a copy of this Engagement Letter at your earliest convenience.
Sincerely,
CITY SECURITIES CORPORATION
By•
Name: Damian Maggos
Title: Vice President
Email: dmaggos @citysecurities.com
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Acceptance:
Accepted this 19 day of September, 2013:
CITY OF JEFFERSONVILLE, INDIANA rTh
By: . >' L Attest: , AzkA /'L n
Name: // /le A l 46 Name: V'cti C0 /1 ,?
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Title: Title: CS?
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Upon acceptance, please return an executed copy of this agreement to Damian Maggos
at the email address provided above.
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EXHIBIT A
The following is a general description of the financial characteristics and security
structures of fixed rate municipal bonds such as the Obligations (referred to herein as the "Fixed
Rate Bonds "), as well as a general description of certain financial risks that are known to us and
reasonably foreseeable at this time and that you should consider before deciding whether to issue
Fixed Rate Bonds. If you have any questions or concerns about these disclosures, please make
those questions or concerns known to us immediately. In addition, you should consult with your
financial and /or municipal, legal, accounting, tax and other advisors, as applicable, to the extent
you deem appropriate. If you decide that you would like to pursue this financing alternative, we
may provide you with additional information more specific to your particular issue.
Financial Characteristics
Maturity and Interest. Fixed Rate Bonds are interest - bearing debt securities issued by
state and local governments, political subdivisions and agencies and authorities. Maturity dates
for Fixed Rate Bonds are fixed at the time of issuance and may include serial maturities (specified
principal amounts are payable on the same date in each year until final maturity) or one or more
term maturities (specified principal amounts are payable on each term maturity date) or a
combination of serial and term maturities. The final maturity date typically will range between
ten and 30 years from the date of issuance. Interest on the Fixed Rate Bonds typically is paid
semiannually at a stated fixed rate or rates for each maturity date.
Redemption. Fixed Rate Bonds may be subject to optional redemption, which allows
you, at your option, to redeem some or all of the bonds on a date prior to scheduled maturity, such
as in connection with the issuance of refunding bonds to take advantage of lower interest rates.
Fixed Rate Bonds will be subject to optional redemption only after the passage of a specified
period of time, often approximately ten years from the date of issuance, and upon payment of the
redemption price set forth in the bonds, which may include a redemption premium. You will be
required to send out a notice of optional redemption to the holders of the bonds, usually not less
than 30 days prior to the redemption date. Fixed Rate Bonds with term maturity dates also may
be subject to mandatory sinking fund redemption, which requires you to redeem specified
principal amounts of the bonds annually in advance of the term maturity date. The mandatory
sinking fund redemption price is 100% of the principal amount of the bonds to be redeemed.
Security
Payment of principal of and interest on a municipal security, including Fixed Rate Bonds,
may be backed by various types of pledges and forms of security, some of which are described
below.
Revenue Bonds. "Revenue bonds" are debt securities that are payable only from a specific
source or sources of revenues. Revenue bonds are not a pledge of your full faith and credit and
you are obligated to pay principal and interest on your revenue bonds only from the revenue
source(s) specifically pledged to the bonds. Revenue bonds do not permit the bondholders to
compel you to impose a tax levy for payment of debt service. Pledged revenues may be derived
from operation of the financed project or system, grants or excise or other specified taxes.
Generally, subject to state law or local charter requirements, you are not required to obtain voter
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approval prior to issuance of revenue bonds. If the specified source(s) of revenue become
inadequate, a default in payment of principal or interest may occur. Various types of pledges of
revenue may be used to secure interest and principal payments on revenue bonds. The nature of
these pledges may differ widely based on state law, the type of issuer, the type of revenue stream
and other
factors.
The description above regarding "Security" is only a brief summary of certain possible
security provisions for the bonds and is not intended as legal advice. You should consult with
your Bond Counsel for further information regarding the security for the bonds.
Financial Risk Considerations
Certain risks may arise in connection with your issuance of Fixed Rate Bonds, including some or
all of the following:
Issuer Default Risk. You may be in default if the funds pledged to secure your bonds are
not sufficient to pay debt service on the bonds when due. The consequences of a default may be
serious for you and, depending on applicable state law and the terms of the authorizing
documents, the holders of the bonds, the trustee and any credit support provider may be able to
exercise a range of available remedies against you. For example, if the bonds are secured by a
general obligation pledge or an ad valorem property tax first mortgage please, failure to make
bond (and lease rental) payments would implicate the state intercept act, and could result in court
action to raise taxes. Other budgetary adjustments also may be necessary to enable you to
provide sufficient funds to pay debt service on the bonds. If the bonds are revenue bonds, you
may be required to take steps to increase the available revenues that are pledged as security for
the bonds. A default may negatively impact your credit ratings and may effectively limit your
ability to publicly offer bonds or other securities at market interest rate levels. Further, if you are
unable to provide sufficient funds to remedy the default, subject to applicable state law and the
terms of the authorizing documents, you may find it necessary to consider available alternatives
under state law, including (for some issuers) state - mandated receivership or bankruptcy. A
default also may occur if you are unable to comply with covenants or other provisions agreed to
in connection with the issuance of the bonds.
This description is only a brief summary of issues relating to defaults and is not intended
as (and does not constitute) legal advice. You should consult with your bond counsel for further
information regarding defaults and remedies.
Redemption Risk. Your ability to redeem the bonds prior to maturity may be limited,
depending on the terms of any optional redemption provisions. In the event that interest rates
decline, you may be unable to take advantage of the lower interest rates to reduce debt service.
Refinancing Risk If your financing plan contemplates refinancing some or all of the
bonds at maturity (for example, if you have term maturities or if you choose a shorter final
maturity than might otherwise be permitted under the applicable federal tax rules), market
conditions or changes in law may limit or prevent you from refinancing those bonds when
required. Further, limitations in the federal tax rules on advance refunding of bonds (an advance
refunding of bonds occurs when tax - exempt bonds are refunded more than 90 days prior to the
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date on which those bonds may be retired) may restrict your ability to refund the bonds to take
advantage of lower interest rates.
Reinvestment Risk. You may have proceeds of the bonds to invest prior to the time that
you are able to spend those proceeds for the authorized purpose. Depending on market
conditions, you may not be able to invest those proceeds at or near the rate of interest that you are
paying on the bonds, which is referred to as "negative arbitrage."
Tax Compliance Risk. The issuance of tax - exempt bonds is subject to a number of
requirements under the United States Internal Revenue Code, as enforced by the Internal Revenue
Service (IRS). You must take certain steps and make certain representations prior to the issuance
of tax- exempt bonds. You also must covenant to take certain additional actions after issuance of
the tax- exempt bonds. A breach of your representations or your failure to comply with certain
tax- related covenants may cause the interest on the bonds to become taxable retroactively to the
date of issuance of the bonds, which may result in an increase in the interest rate that you pay on
the bonds or the mandatory redemption of the bonds. The IRS also may audit you or your bonds,
in some cases on a random basis and in other cases targeted to specific types of bond issues or tax
concerns. If the bonds are declared taxable, or if you are subject to audit, the market price of your
bonds may be adversely affected. Further, your ability to issue other tax- exempt bonds also may
be limited.
This description of tax compliance risks is not intended as legal advice and you should
consult with your bond counsel regarding tax implications of issuing the bonds.
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