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D.A. Davidson & Co. January 22, 2002 memberS!PC $2,500,000 CITY OF MOSCOW LATAH COUNTY, IDAHO Unlimited Tax General Obligation Bonds, 2002 BOND PURCHASE AGREEMENT Honorable Mayor and Members of the City Council City of Moscow 206 East 3'd Street P.O. Box 9203 Moscow, ID 83843 On the date hereof, the City Council (the "City Council") of the City of Moscow, Latah County, Idaho (the "City") adopted an ordinance (the "Ordinance") authorizing the sale, issuance and delivery of the City's Unlimited Tax General Obligation Bonds, 2002 (the "Bonds"), and the City's execution and delivery of this Bond Purchase Agreement (the "Agreement"). In light of such authority, D. A. Davidson & Co. (the "Underwriter") hereby offers to enter into this Agreement with the City. Upon your acceptance, this Agreement shall be in full force and effect in accordance with its terms and shall be binding upon the City and the Underwriter. I) Upon the terms and conditions and in reliance upon the representations set forth herein, the Underwriter hereby agrees to purchase from the City and the City hereby agrees to sell to the Underwriter all (but not less than all) of the Bonds in the aggregate principal amount of $2,500,000, at an aggregate purchase price of $2,476,331.25, which accounts for the underwriter's fee of $18,668.75 ($7.46750/$1,000 of the par value of the Bonds) and (ii) expenses for the preparation, printing and mailing of the Preliminary Official Statement and the Official Statement of $5,000 together with accrued interest on the Bonds from February I, 2002 to the Closing Date defined herein. The Bonds shall be issued and secured under and pursuant the Ordinance dated January 22, 2002 and shall mature, bear interest and be subject to redemption as set forth in Schedule A hereto. The Underwriter agrees to make a public offering of the Bonds at the initial offering prices set forth in the Official Statement referred to in Section 2 herein, which prices may be changed from time to time by the Underwriter. Public Finance D.A. Davidson & Co. Old City Hall I Suite 400 I 221 N, Wall Street I Spokane, WA 99201 Telephone Local 456-8323 I Outside Spokane (800) 676Z8323/ Te!efax (509) 456-6692 fdaho in Moscow, Lewiston, Coeur d' Alene, Sandpoin[ Boise, & Pocatello Other offices in Washington, Oregon, Montana, Wyoming, Utah and Colorado rl<>uiri At> ---PAGE BREAK--- 2) The City shall deliver or cause to be delivered to the Underwriter, after acceptance hereof, five copies of the Official Statement, substantially in the form of the Preliminary Official Statement dated January 10, 2002 (the "Preliminary Official Statement") with only such changes therein as shall have been accepted by us (such Preliminary Official Statement with such changes, if any, and including the cover page and all appendices, exhibits and statements included therein or attached thereto being called the "Official Statement''). The Official Statement is to be dated January 22, 2002. The City hereby authorizes the distribution by the Underwriter of the Preliminary Official Statement in offering the Bonds for sale to prospective purchasers of the Bonds. 3) On February 6, 2002, or at such other time, or on such earlier or later date as the Underwriter and the City may mutually agree (the "Closing Date"), the Underwriter will accept delivery of the Bonds and pay the purchase price thereof as set forth in Section 1 herein by Federal Reserve System wire transfer in immediately available Federal funds or by any other form of immediately available Federal funds. The Bonds shall be delivered through The Depository Trust Company, New York, New York ("DTC") in definitive form, bearing CUSIP numbers and issued under a book-entry system. 4) The City makes the following representations and warranties: a) The City is a public body corporate organized and existing under the laws of the State of Idaho and is authorized to issue the Bonds, to enter into this Agreement and all other agreements contemplated hereby and to adopt the Ordinance. b) The City has complied to date with all applicable provisions of the laws of the State of Idaho in connection with the execution and issuance of the Bonds. c) The Ordinance and this Agreement have been, duly and validly authorized and executed by the City. d) The City has authorized all necessary action to be taken by it for the issuance and sale of the Bonds upon the terms set forth herein, in the Official Statement and in the Ordinance; (ii) the execution, delivery, receipt and due performance of this Agreement, the Bonds and the Ordinance and all other agreements contemplated hereby or required in order to carry out, give effect to and consummate the transactions contemplated hereby; and (iii) carrying out, giving effect to and consummation of the transactions contemplated hereby. e) The Bonds when issued, delivered and paid for as provided for herein and in the Ordinance, will have been duly and validly authorized and issued and will constitute general obligations of the City secured as provided in the Ordinance and as described in the Official Statement. f) To the best knowledge of the City, there are no legal or governmental proceedings pending or threatened, or any basis therefore, wherein an unfavorable decision, ruling or finding would have a material adverse effect on the validity or security of the Bonds, the Ordinance, this Agreement or the transactions contemplated thereby or the power of the City to execute and deliver the Bonds or this Agreement, or adopt the Ordinance. g) As of the date hereof, the Preliminary Official Statement does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. ---PAGE BREAK--- h) The Preliminary Official Statement is deemed "final" in accordance with Rule 15c2- 12(b)(l) under the Securities Exchange Act of 1934. 5) The Underwriter enters into this Agreement in reliance upon the representations and warranties of the City contained herein and in the Ordinance and in reliance upon the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the City and its obligations hereunder both on and as of the date hereof and as of the Closing Date. Accordingly, the Underwriter's obligation under this Agreement to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the City of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions: a) the representations and warranties of the City contained herein shall be true and correct on the date hereof and of the Closing, as if made on and at the Closing; b) at or prior to the Closing, the Underwriter shall receive the following documents: i) certified copies of the Ordinance; ii) the opinion of Preston Gates & Ellis LLP, as Bond Counsel, dated the Closing Date, substantially in the form of Appendix C to the Official Statement; iii) evidence of the insurance policy issued by FGIC; iv) evidence satisfactory to the Underwriter that Moody's Investors Service has issued ratings for the Bonds not lower than Aaa, and that such rating has not been withdrawn; and v) such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Bond Counsel may reasonably request. If the conditions to the Underwriter's obligations contained in this Agreement are not satisfied (unless otherwise waived in writing by the Underwriter) or if the Underwriter's obligations shall be terminated for any reason permitted herein, this Agreement shall terminate and neither the Underwriter nor the City shall have any further obligation hereunder except to reimburse the Underwriter for expenses related to the preparation, printing and mailing of the preliminary and final ofticial statements, as detailed in paragraph I of this Agreement. 6) During the initial public offering of the Bonds (a period of concluding the final date the Underwriter is charged with furnishing a copy of the Official Statement to a potential customer under SEC Rule l5c2-12 but no later than six months after the Closing Date), the City will not consent to the distribution of any amendment of or supplement to the Official Statement to which, after having been furnished with a copy, the Underwriter shall object in writing or which shall be disapproved by counsel for the Underwriter and if any event shall occur as a result of which it is necessary, in the opinion of the Underwriter, to amend or supplement the Official Statement in order to make the Official Statement not misleading in light of the circumstances existing at the time it is delivered to a purchaser, consent to the distribution of an amendment of or supplement to the Official Statement, prepared without expense to the City (in form and substance satisfactory to the Underwriter) in a reasonable number of copies which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser, not misleading. ---PAGE BREAK--- 7) The Underwriter shall have the right to cancel its obligation to purchase the Bonds if between the date hereof and the Closing, legislation shall have been enacted by the Congress of the United States or the legislature of the State of Idaho or legislation shall have been reported out of committee of either body or be pending in committee of either body, or a decision shall have been rendered by a court of the United States or of the State of Idaho or the Tax Court of the United States, or a ruling shall have been made or a regulation or temporary regulation shall have been proposed or made or any other release or announcement shall have been made by the Treasury Department of the United States or the Internal Revenue Service, with respect to federal taxation upon revenues or other income of the general character of the Bonds which, in the reasonable judgment of the of the Underwriter, materially adversely affects the market for the Bonds, or (ii) there shall exist any event which, in the reasonable judgment of the Underwriter, either makes untrue or incoJTect in any material aspect as of such time any statement or information contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information contained therein not misleading in any material respect, or (iii) there shall have occuJTed any outbreak of hostilities or any other national or international calamity or crisis, the effect of which outbreak, calamity or crisis on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would make it impracticable for the Underwriter to market or enforce contracts for the sale of the Bonds, or (iv) there shall be in force a general suspension of trading on the New York Stock Exchange or minimum or maximum prices for trading shall have been fixed and in force, or maximum ranges for prices for securities shall have been required and be in force on the New York Stock Exchange, whether by virtue of a determination by that Exchange or by order of the Securities and Exchange Commission or any other governmental authority having jurisdiction, or a general banking moratorium shall have been declared by either Federal, State of Idaho or New York authorities having jurisdiction and be in force, or (vi) there shall be established any new restriction on transactions in securities materially affecting the free market for securities (including the imposition of any limitation on interest rates) or extension of credit by, or charge to the net capital requirements of, Underwriter established by the New York Stock Exchange, the Securities and Exchange Commission, any other federal or state agency or the Congress of the United States, or by Executive Order. 8) All fees, expenses and costs incident to the execution and performance of this Agreement and to the authorization, issuance and sale of the Bonds to the Underwriter, including, but not limited to, the cost of printing the Bonds (and full execution thereof), the fees and charges of Moody's Investors Service, FGIC Bond Insurance, the fees and charges of Paying Agent/Registrar, and the fees and expenses of Bond Counsel shall be paid by the City. All expenses to be paid by the City pursuant to this Agreement may be paid from Bond proceeds to tbe extent permitted by the Ordinance. The obligation of the City under this Section 8 shall survive the payment of the Bonds. 9) Any notice or other communication to be given to the City under this Agreement may be given by delivering the same in writing at the address set forth above and any such notice or other communications to be given to the Underwriter may be given by delivering the same in writing to D.A. Davidson & Co., P.O. Box 423, Spokane, Washington 99210, Attention: Mr. Jack McLaughlin. The approval of the Underwriter when required hereunder or the determination of its satisfaction as to any document refeJTed to herein shall be in writing signed by the Underwriter and delivered to you. I 0) This Agreement is made solely for the benefit of the City and the Underwriter (including successors or assigns of the Underwriter, but excluding any purchaser, as such purchaser, of ---PAGE BREAK--- Bonds from the Underwriter) and, to the extent expressed herein, controlling persons thereof, and no other persons, partnership, association or corporation shall acquire to have any right hereunder or by virtue hereof. All representations and agreements of the parties to this Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Underwriter and shall survive the delivery of and payment for the Bonds. Time shall be of the essence of this Agreement. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Idaho. This Agreement may be executed in any number of counterparts each of which shall be an original but all of which together will constitute one and the same instrument. Very truly yours, D.A. DAVIDSON & CO. Accepted and Agreed to: CITY OF MOSCOW, LATAH COUNTY, IDAHO, ac.ferY and through its Mayor and City Council ---PAGE BREAK--- Exhibit A Terms of the Bonds DATED: February 1, 2002 DUE: August 1, as shown below The Bonds mature on August 1, in each of the years and amounts set forth below, subject to prior redemption as hereinafter described, and will bear interest from February 1, 2002, to their respective maturities or dates of prior redemption, at the rates per annum as shown below. Principal Reoffering Maturity Amount Coupon Price 2003 $150,000 2.10% 100% 2004 $200,000 2.30% 100% 2005 $205,000 2.90% 100% 2006 $210,000 3.20% 100% 2007 $220,000 3.55% 100% 2008 $230,000 3.75% 100% 2009 $235,000 3.90% 100% 2010 $245,000 4.05% 100% 2011 $255,000 4.15% 100% 2012 $270,000 4.25% 100% 2013 $280,000 4.35% 100% Interest is payable each August I and Februwy I. commencing August 1, 2002 No Prior Redemption. The Bonds are not subject to redemption prior to their stated dates of maturity. The City has reserved the right to purchase Bonds on the open market at any time and at any price.