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1986-08-04 W&S Exhibit ~ ~ ~ ESCROW DEPOSIT AGREEMENT This ESCROW DEPOSIT AGREEMENT, dated August 14, 1986 by and between the New Hanover County Water and Sewer District, North Carolina (the "District") and First-Citizens Bank & Trust Company, Raleigh, North Carolina as escrow agent hereunder (the "Escrow Agent"): WITNESSETH: WHEREAS, the District, pursuant to The Local Gov- ernment Finance Act and a bond order adopted by the Board of Commissioners of the County of New Hanover, sitting as the governing body of the District, on December 19, 1983, issued its $17,000,000 Sanitary Sewer Bonds, Series 1985, dated June 1, 1985 (the "Sanitary Sewer Bonds"), and $16,150,000 of the Sanitary Sewer Bonds are outstanding: and WHEREAS, the District, pursuant to The Local Gov- ernment Finance Act, a bond order adopted by the Board of Commissioners of the County of New Hanover, sitting as the governing body of the District, on June 23, 1986 and resolu- tions adopted by said Board of Commissioners of the County of New Hanover, sitting as the governing body of the Dis- trict on July 22, 1986 and August 4, 1986, authorized the issuance and provided for the sale of $16,150,000 General Obligation Refunding Bonds (the "Refunding Bonds") for the purpose of providing funds, together with cash of the Dis- trict, to advance refund the outstanding Sanitary Sewer Bonds (the "Refunded Bonds"); and WHEREAS, the District has determined to provide for the advance refunding, payment and redemption of the Sanitary Sewer Bonds by depositing with the Escrow Agent cash and direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America ("Government Obligations") in such amounts and maturing or redeemable at stated fixed prices as to principal and interest at such times so that sufficient moneys will be available from such principal and interest to pay, as the same mature and become due, all principal of and interest on the Sanitary Sewer Bonds matur- ing on or prior to June 1, 1995 and to redeem on June 1, 1995 at the applicable redemption price as stated in each ~ Sanitary Sewer Bond, the Sanitary Sewer Bonds maturing after Jun~ 1, 1995; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the par- ties hereto agree as follows: 1. Creation of Escrow Account and Expense Ac- count. There is hereby created and established with the Escrow Agent a special and irrevocable escrow account, des- ignated "1986 General Obligation Refunding Bonds Escrow Account" or "1986 Escrow Account", and the following subaccounts within the 1986 Escrow Account to be held in the custody of the Escrow Agent separate and apart from other funds of the District or of the Escrow Agent as a trust fund for the benefit of the holders of the Refunded Bonds: (a) 1986 Refunded Bonds Restricted Subaccount and (b) 1986 Re- funded Bonds Unrestricted Subaccount. There is also hereby created and established with the Escrow Agent the special account designated "1986 Ex- pense Account" to be held in the custody of the Escrow Agent separate and apart from other funds of the District or of the Escrow Agent. 2. Deposit of Moneys. Concurrently with the execution of this Agreement, the District deposits or causes to be deposited with the Escrow Agent, and the Escrow Agent acknowledges receipt of, immediately available moneys for deposit in the following Accounts, in the amounts and from the sources indicated, to be supplied solely as provided in this Agreement: (a) $ , to be deposited in the 1986 Refunded Bonds Restricted Subaccount, from the proceeds of the Refunding Bonds. (b) $ to be deposited in the 1986 Refunded Bonds Unrestricted Subaccount, from the District's fund balances. (c) $ , to be deposited in the 1986 Expense Account, $ from the pro- ceeds of the Refunding Bonds and $ from the District's fund balances. -2- 3. Irrevocable Trusts Created. The deposit of moneys in the Accounts, as provided in paragraph 2 hereof, shall constitute an irrevocable deposit and pledge of said moneys for the equal and ratable benefit of the holders of the Refunded Bonds. The holders of the Sanitary Sewer Bonds shall have an express lien on all moneys deposited in the 1986 Escrow Account, and on the Government Obligations cred- ited to the 1986 Escrow Account, until applied in accordance with this Agreement. The matured principal of the Govern- ment Obligations and the interest thereon, together with the money initially deposited in the 1986 Escrow Account, shall be held in trust by the Escrow Agent, and shall be applied as hereinafter set forth, solely to the payment of the prin- cipal of and premium and interest on the Refunded Bonds, respectively, a~ the same become due and payable, whether at maturity or upon the redemption thereof. 4. Purchase of Government Obligations. The Es- crow Agent is hereby directed to immediately purchase the Government Obligations listed on Exhibit A hereto, solely for the account of and from the moneys deposited in the respective Subaccounts in the 1986 Escrow Account, as therein set forth. The Escrow Agent shall apply the moneys deposited in the respective Subaccounts in the 1986 Escrow Account, and the Government Obligations purchased therewith, together with all income or earnings thereon, in accordance with the provisions hereof. The Escrow Agent shall have no power or duty to invest any moneys held hereunder or to make substitutions of the Government Obligations held hereunder or to sell, transfer or otherwise dispose of the Government Obligations acquired hereunder except as provided in this Agreement. 5. Substituted Government Obligations. Except as otherwise expressly provided in paragraphs 3, 4 and 6 hereof and this paragraph 5, the Escrow Agent shall have no power or duty to invest any moneys held hereunder or to make sub- stitutions of the Government Obligations held hereunder or to sell, transfer or otherwise dispose of the Government Obligations acquired hereunder, or to pay interest on any such moneys not required to be invested hereunder; provided, however, that at the written direction of the Finance Direc- tor of the District and upon compliance with the conditions hereinafter stated, the Escrow Agent shall have the power to sell, transfer, otherwise dispose of, or request the redemp- tion of, the Government Obligations acquired hereunder, to substitute therefor other Government Obligations and shall -3- have the power to release excess cash from the 1986 Escrow Account and pay such cash to the District for its lawful purposes. The Escrow Agent shall purchase such substitute Government Obligations and shall pay such excess cash to the District with the proceeds derived from the sale, transfer, disposition or redemption of the Government Obligations. The substitution of Government Obligations described above and/or the payment of such excess cash to the District may be effected only if (i) the moneys and Government Obliga- tions on deposit immediately after such substitution will be sufficient to meet or exceed the amount required to advance refund the Refunded Bonds as hereinbefore provided, (ii) the District, the Local Government Commission of North Carolina and the Escrow Agent shall receive, at the expense of the District, and may rely conclusively upon, a verification of an independent certified public accountant or firm of inde- pendent certified public accountants designated by the Dis- trict and not unacceptable to the Escrow Agent that the moneys and Government Obligations on deposit immediately after such substitution will be sufficient to meet or exceed the amount required to advance refund the Refunded Bonds as hereinbefore provided, (iii) the substitute Government Ob- ligations will be of equal credit standing to those origi- nally purchased, (iv) notification of substitution will be given to Moody's Investors Service and Standard and Poor's Corporation and (v) the Escrow Agent shall receive an un- qualified opinion of LeBoeuf, Lamb, Leiby & MacRae to the effect that the substitution and payment of excess cash to the District will not cause any of the Refunding Bonds to be an "arbitrage bond" within the meaning of Section l03(c) of the Internal Revenue Code of 1954, as amended, and the regu- lations thereunder. 6. Deposit and Reinvestment of Earnings Received. The Escrow Agent shall deposit, as received, to the credit of the 1986 Escrow Account, all maturing principal of and interest on the Government Obligations purchased with the moneys deposited in the 1986 Escrow Account. The Escrow Agent shall immediately reinvest at prevailing market rates such amounts received in respect of maturing principal of Government Obligations credited to the 1986 Unrestricted Subaccount in Government Obligations until such time as such amounts are needed for payment of Refunded Bonds as provided herein; provided, however, that any such reinvestments shall mature on or before the date on which interest or principal payments shall be due and payable for the Refunded Bonds. -4~ 7. Transfers from Accounts for Payment of Re- funded Bonds and Expenses. (a) The Escrow Agent shall, on or immediately prior to each interest or principal payment date for the Sanitary Sewer Bonds, transfer from cash on hand first from moneys, and investments and proceeds of investment of mon- eys, deposited in the 1986 Refunding Bonds Restricted Subaccount and then from moneys, and investments. and pro- ceeds of investment of moneys, deposited in the 1986 Refund- ing Bonds Unrestricted Subaccount to the paying agents for such Bonds amounts sufficient to pay the interest on and any principal or redemption price of the Sanitary Sewer Bonds payable on such date, as set forth in Exhibit B hereto. (b) If the Escrow Agent shall determine that amounts in the 1986 Escrow Account available to make the payments required by paragraph (a) of this section 7 are insufficient for such required payments, the Escrow Agent shall immediately notify the Finance Director of the Dis- trict in writing of such shortfall, c/o 320 Chestnut Street, Wilmington, North Carolina 28401. (c) The Escrow Agent shall, upon receipt of sat- isfactory invoices, pay from the Expense Account expenses incurred in connection with the refunding, including those approximate expenses, stated in the aggregate, set forth below: Bond Issuance Expenses Bond Counsel - Financial Advisor - Verification of Cash Flows - Escrow Agent - Ratings - Printing, Postage, Publication, Travel and Miscellaneous- $20,000 50,000 2,700 3,600 8,000 11,700 Total Expenses $96,000 8. Redemption; Notice of Redemption. The Dis- trict shall specifically and irrevocably elect to redeem on June 1, 1995 the Sanitary Sewer Bonds maturing on and after June 1, 1996. The Escrow Agent is hereby irrevocably autho- rized and directed, and hereby agrees, to cause to be given a notice of redemption as set forth above of the Sanitary -5- Sewer Bonds and a notice of deposit of moneys and Government Obligations in substantially the form set forth in Exhibit C attached hereto. The Escrow Agent hereby agrees to inform the District promptly and in writing of the required publi- cation and mailing of said notice of redemption. Said notice of redemption, stating the redemption date, redemption price and identifying the bonds to be re- deemed by reference to their numbers and further stating that on such redemption date there shall become due and payable upon each bond so to be redeemed, the principal thereof, redemption premium and interest accrued to the redemption date and that from and after such date interest thereon shall cease to accrue, shall be given by publication at least once in a newspaper of general circulation pub- lished in the New Hanover County Water and Sewer District, North Carolina and at least once in a daily newspaper of general circulation or a financial journal distributed in the Borough of Manhattan, City and State of New York not less than 30 days nor more than 60 days prior to the redemp- tion date fixed in said notices. Said notice of redemption, substantially in the form given in Exhibit C attached hereto, shall also be given not less than 30 days nor more than 60 days prior to the redemption date stated in said notice in writing to each of the registered owners of the Sanitary Sewer Bonds, by pre-paid first class mail, at his address as such address appears on the records of First- Citizens Bank & Trust Company, Raleigh, North Carolina, the bond registrar for the Sanitary Sewer Bonds. 9. Surplus Funds. When all the Refunded Bonds and interest due thereon have been paid and discharged, this Escrow Deposit Agreement shall terminate and all remaining moneys and Government Obligations, together with any income and interest thereon, in the 1986 Escrow Account shall be transferred to the District by the Escrow Agent for applica- tion to any lawful District purpose. Any money remaining in the 1986 Expense Account on November 1, 1986 shall be transferred to the District by the Escrow Agent. 10. Acceptance by Escrow Agent; Liability. (a) By execution of this Agreement, the Escrow Agent accepts the duties and obligations as Escrow Agent hereunder. The Escrow Agent represents that it has all -6- requisite power, and has taken all corporate actions neces- sar~, to execute the trusts hereby created. (b) The Escrow Agent shall not be liable in con- nection with the performance of its duties hereunder except for its own negligence or default. The Escrow Agent shall not be liable for any loss resulting from any investment made pursuant to the terms and provisions of this Agreement. The Escrow Agent shall have no lien whatsoever upon any of the moneys or investments in the Escrow Account for the payment of fees and expenses for services rendered by the Escrow Agent under this Agreement. (c) The Escrow Agent shall not be liable for the accuracy of the calculations as to the sufficiency of moneys deposited, and of the principal amount of the Government Obligations as provided herein, and the earnings thereon, to pay the Refunded Bonds or any of them. So long as the Es- crow Agent applies any moneys, the Government Obligations and the earnings therefrom to pay the Refunded Bonds as provided herein, and complies fully with the terms of this Agreement, the Escrow Agent shall not be liable for any deficiencies in the amounts necessary to pay the Refunded Bonds caused by such calculations. (d) In the event of the Escrow Agent's failure to account for any of the Government Obligations or moneys received by it, such Government Obligations or moneys shall be and remain the property of the City in trust for the holders of the Refunded Bonds as herein provided, and if for any reason such Government Obligations or moneys are not applied as herein provided, or cannot be identified, the assets of the Escrow Agent shall be impressed with a trust in the amount thereof for the benefit of the holders of the Refunded Bonds until the required application or identifica- tion shall be made. 11. Escrow Agent Reports. The Escrow Agent shall, no later than July 15th in each year during which this Agreement is in effect, furnish the District a written report of the receipts, investments, redemptions and pay- ments of and from the Escrow Account as of the immediately preceding July 1. 12. Receipt of Proceedings. Receipt of true and correct copies of the bond orders and resolutions authoriz- ing the issuance and providing for the sale of the Refunding -7- Bonds is hereby acknowledged by the Escrow Agent, and refer- ence herein to or citation herein of any provision of said documents shall be deemed to incorporate the same as a part hereof in the same manner and with the same effect as if they were fully set forth herein. 13. Severability. If anyone or more of the covenants or agreements provided in this Agreement on the part of the District or the Escrow Agent to be performed should be determined by a court of competent j~risdiction to be contrary to law, such covenant or agreement shall be deemed and construed to be severable from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. 14. Counterparts. This Agreement may be executed in several counterparts, all or any of which shall be re- garded for all purposes as one original and shall constitute and be but one and the same instrument. -8- 15. Governin~ Law. This Agreement shall be gov- erned by and construed in accordance with the applicable law of the State of North Carolina. IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly autho- rized officers and their official seals to be hereunto af- fixed and attested as of the date first above written. NEW HANOVER COUNTY WATER AND SEWER DISTRICT, NORTH CAROLINA By Chairman, governing body of New Hanover County Water and Sewer District [Seal] Attest: Clerk, New Hanover County Water and Sewer District FIRST-CITIZENS BANK & TRUST COMPANY By Title: [Seal] Attest: Assistant Secretary -9- EXHIBIT A GOVERNMENT OBLIGATIONS PURCHASED ON AUGUST 14, 1986 United States Treasury Obligations to be purchased with amounts on deposit in the 1986 Refunded Bonds , Unrestricted Subaccount EXHIBIT B DEBT SERVICE REQUIREMENTS EXHIBIT C NOTICE OF REDEMPTION New Hanover County Water and Sewer District Sanitary Sewer Bonds, Series 1985 Dated June 1, 1985 NOTICE IS HEREBY GIVEN by the Board of Commission- ers of the County of New Hanover, sitting as the governing body of the New Hanover County Water and Sewer Distr ict, that all of the outstanding Sani tary Sewer Bonds, Ser ies 1985, of the New Hanover County Water and Sewer District, dated as of June 1, 1985 numbered [ to , inclu- sive,] and maturing on June 1, in the years 1996 to 2005, inclusive, are hereby called for redemption and prepayment on June 1, 1995. Each of the bonds so called for redemption and prepayment shall be redeemed and prepaid at the appli- cable redemption price (100 1/2% of the principal amount thereof for bonds numbered [ to , inclusive]; 101% of the principal amount thereof for bonds numbered [ to , inclusive]; 101 1/2% of the principal amount thereof for bonds numbered [ to , inclusive]; and 102% of the principal amount thereof for bonds numbered [ to , inclusive]) plus accrued interest to the date of redempt ion. The bonds so called for redempt ion shall be payable at the principal office of First-Citizens Bank & Trust Company, Raleigh, North Carolina, and the bonds shall cease to bear interest as of June 1, 1995. BOARD OF COMMISSIONERS OF THE COUNTY OF NEW HANOVER, SITTING AS THE GOVERNING BODY OF NEW HANOVER COUNTY WATER AND SEWER DISTRICT, NORTH CAROLINA By Clerk of the District