PLACEMENT AGENT AGREEMENT
MUNICIPAL ISSUERS
November 11, 2024
Carmen Gil, City Manager
City of Gonzales
147 Fourth St.
Gonzales, CA 93926
Re: Placement Agent Engagement – City of Gonzales 2024 Installment Purchase Contract (SRF Interim Financing)
Dear Ms. Gil:
This letter confirms the agreement (the “Agreement”) between Hilltop Securities Inc. (“HilltopSecurities” or “we” or “us”) and The City of Gonzales (the “Issuer” or “you”). You desire to engage HilltopSecurities as a placement agent in connection with the placement of your 2024 Installment Purchase Contract (the “Securities”). Pursuant to MSRB Rule 15c2-12(d), the Securities will be issued in authorized denominations of $1.00 or more with, as currently contemplated, gross proceeds of approximately $10,000,000.00 for the purpose of providing interim financing for the City’s wastewater treatment project pursuant to the Resolution to be adopted on November 18, 2024 (the “Resolution”). As a placement agent, HilltopSecurities will have duties, roles and responsibilities that are different from those of a municipal advisor. You are directed to consider the MSRB Rule G-17 disclosures relevant to placement agent activity previously provided to you in a communication dated October 24, 2024. This agreement amends and supplements our earlier engagement letter dated September 26, 2024.
Engagement. The Issuer engages HilltopSecurities to act as its exclusive representative to assist you on a best-efforts basis in placing the Securities (the “Transaction”). You acknowledge and agree that our engagement hereunder is not an agreement by HilltopSecurities or any of its affiliates to underwrite, place or purchase the Securities or otherwise provide any financing to you. We accept this engagement upon the terms and conditions set forth in this Agreement. Sale and delivery of the Securities by the Issuer and purchase by the purchasers will occur on the day of closing (“Closing Date”).
Fees. For our services, you agree to pay us a Placement Agent Fee of $25,000.00 of the gross proceeds received by you on all sales of the Securities payable by wire transfer of immediately available funds on the Closing Date. For avoidance of doubt, the Placement Agent Fee shall be contingent upon the closing of the Transaction.
Disclosure and Due Diligence. The Issuer will prepare and provide to the Placement Agent the following:
A term sheet and/or other documents including financials, budgets, estimated debt service requirements and coverage, historical tax collections by relevant classification, litigation and regulatory materials, material contracts, Issuer demographic information, underlying credit ratings and other information the Issuer deems material to investors, (the “Information Package”).
EXHIBIT C
2 The draft Installment Purchase Contract and other legal documents to be used in connection with the Transaction (together with all supplements, modifications, and additions thereto prior to the Closing Date, which together with the Information Package are referred to as the “Placement Materials”).
The Issuer will make available to each Purchaser and the Placement Agent such documents and other information which the Purchaser or the Placement Agent reasonably deem appropriate, will provide access to its officers, directors, employees, accountants, counsel and other representatives, and will provide each Purchaser and the Placement Agent the opportunity to ask questions and receive answers from knowledgeable individuals.
The Issuer will cause its counsel to allow the Placement Agent to rely on any opinion provided to the Issuer, and will allow the Placement Agent to rely on any representations made to the Purchaser by the Issuer.
Representations, Warranties and Agreements of the Issuer. You represent and warrant to, and agree with us, that:
The Issuer is duly organized and validly existing under the general laws of the State of California (the “State”) with the power to enter into the Installment Purchase Contract, perform the agreements on its part contained therein and in the agreements approved thereby and cause the issuance of the Securities.
The Issuer: (i) has duly authorized and approved the execution and delivery of this Agreement; (ii) will adopt and on the Closing Date will have duly adopted an approving resolution with respect to the Transaction (the “Resolution”); (iii) will duly authorize and approve the Placement Materials and the use and distribution of the Placement Materials to prospective Purchasers; and (iv) will duly authorize and approve the execution and delivery of all financing or operative documents, including the Securities, to which the Issuer is a party relating to the issuance and security for the Securities, as such documents are amended and supplemented to the Closing Date, including but not limited to any trust indenture, loan agreement, or security instrument (the “Financing Documents”), and the performance of its obligations and the consummation by it of all other transactions contemplated thereby.
On the Closing Date, the Financing Documents will have been duly authorized, executed, and delivered by the Issuer, and, assuming due authorization, execution and delivery by the other parties thereto, as applicable, will constitute legal, valid and binding agreements of the Issuer enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other laws affecting the enforcement of creditors’ rights generally and by the application of equitable principles if sought and by the limitations on legal remedies imposed on actions against the Issuer in the State of California.
The Issuer is not, and on the Closing Date will not be, in breach of or default under any applicable law or administrative regulation of the State or any department, division, agency or instrumentality thereof, or of the United States, or any applicable judgment or decree or any loan agreement, note, resolution, certificate, agreement or other instrument to which the Issuer is a party or is otherwise subject, which breach or default would materially and adversely affect the Issuer or its ability to perform its duties and obligations under the Financing Documents, and the execution and delivery of the Financing Documents, the adoption of the Resolution and the issuance of the Securities and compliance with the provisions of each will not conflict with or constitute a breach of or default 3 under any applicable law or administrative regulation of the State or under any certificate, agreement or other instrument to which the Issuer is a party or is otherwise subject, which breach or default would materially and adversely affect the Issuer or its ability to perform its duties under the Financing Documents and the Securities.
No action, suit, proceeding or investigation at law or in equity before or by any court, governmental agency, public board or body is, and on the Closing Date will not be, pending or, to the knowledge of the Issuer, threatened: (i) in any way affecting the existence of the Issuer or the titles of the members of the authorizing body of the Issuer to their respective offices, (ii) seeking to prohibit, restrain or enjoin the issuance, sale or delivery of the Securities or the collection or payment by the Issuer of any amounts pledged or to be pledged as security to pay the principal of and interest on Securities, (iii) in any way contesting or affecting the validity or enforceability of, or the power or authority of the Issuer to issue, adopt or to enter into (as applicable), the Securities, the Resolution or the Financing Documents, (iv) contesting in any way the completeness, truth, or accuracy of the Information Package, (v) except as disclosed in the Information Package, wherein an unfavorable decision, ruling or finding would materially adversely affect the financial position or condition of the Issuer or would result in any material adverse change in the ability of the Issuer to pledge or apply the security or source of payment of, or to pay debt service on the Securities, or (vi) contesting the status of the interest on the Securities as excludable from gross income for federal income tax purposes or as exempt from any applicable state tax.
Regarding information provided by the Issuer to the Purchaser and the Placement Agent, (i) the Issuer represents and warrants that all information made available to the Purchaser and the Placement Agent by the Issuer or contained in the Information Package, when provided will at all times thereafter during the period of the engagement of the Placement Agent hereunder, be true and accurate in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in light of the circumstances under which such statements are made and except as otherwise indicated to the contrary in the Issuer’s financial statements, all historical financial statements of the Issuer provided to the Placement Agent and each Purchaser fairly present the financial condition and operations of the entities covered thereby in all material respects.
Documents to be Delivered at Closing. On the Closing Date, the Issuer will deliver or cause to be delivered to the Placement Agent:
The Opinion of Bond Counsel to the Issuer, dated the Closing Date relating to the validity of the Securities, and if the Securities are tax-exempt, the tax-exempt status of the Securities, together with a reliance letter from such counsel, dated the Closing Date and addressed to Hilltop Securities Inc.
An Investor Letter, in the form attached to this Agreement as Appendix A, executed by each Purchaser and addressed to the Issuer and the Placement Agent; and A certificate of the Issuer, dated the Closing Date, attached to this Agreement as Appendix B. Such additional legal opinions, certificates, proceedings, instruments and other documents as the Placement Agent or its counsel, if any, and Bond Counsel may reasonably request to evidence compliance by the Issuer with legal requirements, the truth and accuracy, as of the Closing Date, of the representations of the Issuer, and the due performance or satisfaction by the Issuer at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Issuer.
4 Regulatory Disclosures. You acknowledge that you have retained us solely to provide the services to you as set forth in this agreement. As placement agent, HilltopSecurities may provide advice concerning the structure, timing, terms, and other similar matters concerning the Transaction. You acknowledge and agree that: (i) the primary role of HilltopSecurities as a placement agent, is to place securities to investors in an arms-length commercial transaction and that HilltopSecurities has financial and other interests that differ from your interests; (ii) HilltopSecurities is not acting as a municipal advisor, financial advisor or fiduciary to you or any other person or entity and has not assumed any advisory or fiduciary responsibility to you with respect to the transaction contemplated herein and the discussions, undertakings and proceedings leading thereto (irrespective of whether HilltopSecurities has provided other services or is currently providing other services to you on other matters); (iii) the only obligations HilltopSecurities has to you with respect to the transaction contemplated hereby expressly are set forth in this agreement; and (iv) you have consulted your own legal, accounting, tax, financial and other advisors, as applicable, to the extent deemed appropriate in connection with the transaction contemplated herein.
Termination. You or we may terminate our engagement under this agreement, with or without cause, upon ten days’ written notice to the other party provided that the provisions of the section entitled Fees and the obligations thereunder shall not be affected by such termination.
Survival of Certain Representations and Obligations. The respective agreements, covenants, representations, warranties and other statements of the Issuer and its officers set forth in or made pursuant to this Agreement shall survive delivery of and payment for the Securities and shall remain in full force and effect, regardless of any investigation, or statements as to the results thereof, made by or on behalf of the Placement Agent.
Section Headings. Section headings contained herein are for convenience of reference only and are not part of this agreement.
Amendment. This agreement may be amended only by a written instrument executed by each of the Parties. The terms of this agreement may be waived only by a written instrument executed by the party waiving compliance.
Entire Agreement. This Agreement embodies the entire agreement and understanding between you and us and supersedes all prior agreements and understandings relating to the subject matter of this Agreement.
No Assignment. This agreement has been made by the Issuer and HilltopSecurities, and no other person shall acquire or have any right under or by virtue of this agreement.
Governing Law. This agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this agreement or the negotiation, execution or performance of this agreement, will be governed by and construed in accordance with the laws of California. You and we hereby waive all right to trial by jury in any action, proceeding, or counterclaim (whether based upon contract, tort or otherwise) in connection with any dispute arising out of this agreement or any matters contemplated by this agreement.
Consent to Jurisdiction; Service of Process. The parties each hereby (i) submits to the jurisdiction of any state or federal court sitting in the County of Sacramento, California for the resolution of any claim or dispute with respect to or arising out of or relating to this agreement or the relationship between the parties; (ii) agrees that all claims with respect to such actions or proceedings may be heard and determined in such court; (iii) waives the defense of an inconvenient forum; (iv) agrees not to commence any action or proceeding relating to this agreement other than in a state or federal court sitting in the County of Sacramento, State of California; and (v) agrees that a final judgment in any such action or proceeding shall 5 be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party hereto irrevocably consents to service of process in the manner provided for in the section entitled Notices. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
Effectiveness. This Agreement shall become effective upon its execution by duly authorized officials of all parties hereto and shall be valid and enforceable from and after the time of such execution.
Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. You and we will endeavor in good faith negotiations to replace the invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid or unenforceable provisions.
Counterparts. This Agreement may be executed in several counterparts (including counterparts exchanged by email in PDF format), each of which shall be an original and all of which shall constitute but one and the same instrument.
Notices. Any notice required or permitted to be given under this Agreement shall be given in writing and shall be effective from the date sent by registered or certified mail, by hand, facsimile or overnight courier to the addresses set forth on the first page of this agreement with a copy sent to the General Counsel of such Party.
Sincerely,
_________________________________
Todd Smith, Managing Director
Hilltop Securities Inc.
Acknowledgment and Approval of Engagement
___________________________________
Carmen Gil, City Manager
City of Gonzales
Date: _____________________________
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APPENDIX A
FORM OF INVESTOR LETTER
[Address to Issuer and Placement Agent]
CITY OF GONZALES
2024 INSTALLMENT PURCHASE CONTRACT
BANK LETTER
November 26, 2024
City of Gonzales
Gonzales, California
Kutak Rock LLP
Irvine, California
Re: Installment Purchase Contract, dated as of November 1, 2024, by and between Banner Bank and the City of Gonzales
Ladies and Gentlemen:
The undersigned, Banner Bank, a Washington state-chartered bank (including its successors and permitted assigns, the “Purchaser”), has agreed to purchase the rights, title and interest set forth in the Installment Purchase Contract, dated as of November 1, 2024 (the “Installment Purchase Contract”), by and between the City of Gonzales (the “City”) and the Purchaser, including its rights to receive certain Installment Payments up to the aggregate principal amount of $10,000,000, all of which are scheduled to be paid by the City under and pursuant to the Installment Purchase Contract. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Installment Purchase Contract. In connection with such purchase, the Purchaser hereby agrees and certifies to the City and Kutak Rock LLP, as special counsel, that:
1. The Purchaser is: (i) an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act of 1933; or (ii) a “qualified institutional buyer” within the meaning of Rule 144A promulgated under the Securities Act of 1933, as amended, and has sufficient knowledge and experience in financial and business matters, including purchase and ownership of municipal and other obligations of a nature similar to the Installment Purchase Contract and the Conveyance Agreement, dated as of November 1, 2024 (the “Conveyance Agreement”), between the Purchaser and the City to be able to evaluate the risks and merits of the extension of credit represented by the purchase of the rights, title and interest described under the Installment Purchase Contract;
2. The Purchaser is acquiring the rights, title and interest described in the Installment Purchase Contract and the Conveyance Agreement for its own account and not with a view to, or for sale in connection with, any distribution thereof or any part thereof. The Purchaser has not A-2
offered to sell, solicited offers to buy, or agreed to sell the rights, title and interest described under the Installment Purchase Contract or the Conveyance Agreement or any part thereof, and the Purchaser has no current intention of reselling or otherwise disposing of such rights, title and interest under the Installment Purchase Contract or the Conveyance Agreement; provided, however, that such representation shall not preclude the Purchaser from transferring or selling of such rights, title and interest under the Installment Purchase Contract or the Conveyance Agreement in accordance with the Installment Purchase Contract. The Purchaser is not acting in a broker-dealer capacity in connection with its purchase of the rights, title and interest described under the Installment Purchase Contract or the Conveyance Agreement;
3. The Purchaser has made its own credit inquiry and analysis with respect to the City, the Installment Purchase Contract and the Conveyance Agreement and has made an independent credit decision based upon such inquiry and analysis and in reliance on the truth, accuracy, and completeness of the representations and warranties of the City set forth in the Installment Purchase Contract and in the information set forth in any materials submitted to the Purchaser by the City.
The City has furnished to the Purchaser with all of the information which the Purchaser, as a reasonable lender, has requested of the City as a result of the Purchaser having attached significance thereto in making its credit decision with respect to the Installment Purchase Contract and the Conveyance Agreement, and the Purchaser has had the opportunity to ask questions of and receive answers from knowledgeable individuals concerning the City, the Installment Purchase Contract and the Conveyance Agreement. The Purchaser is able and willing to bear the economic risk of the purchase and ownership of the rights, title and interest described under the Installment Purchase Contract and the Conveyance Agreement;
4. The Purchaser understands that the Installment Purchase Contract has not been registered under the United States Securities Act of 1933 or under any state securities laws, and is not registered or otherwise qualified for sale under the “blue sky” laws and regulations of any state.
The Purchaser agrees that it will comply with any applicable state and federal securities laws then in effect with respect to any disposition of its rights with respect to the Installment Purchase Contract by it, and further acknowledges that any current exemption from registration of the Installment Purchase Contract and the Conveyance Agreement does not affect or diminish such requirements. The Purchaser further acknowledges that it is responsible for consulting with its advisors concerning any obligations, including, but not limited to, any obligations pursuant to federal and state securities and income tax laws, it may have with respect to subsequent assignees of the Installment Payments if and when any such future disposition of the Installment Payments may occur;
5. The Purchaser has authority to obtain the rights, title and interest set forth under the Installment Purchase Contract and the Conveyance Agreement and all requisite corporate or other necessary action by the Purchaser for the delivery of this Bank Letter, and the execution of the Installment Purchase Contract and the Conveyance Agreement have been duly and validly completed;
6. The Purchaser acknowledges that rights, title and interest described under the Installment Purchase Contract are transferable with certain requirements, as described in the Installment Purchase Contract. The Purchaser shall not assign or offer the Installment Purchase A-3
Contract, or any participation therein, for sale or transfer without complying with all applicable securities laws;
7. The Purchaser acknowledges that the Installment Purchase Contract and the Conveyance Agreement are exempt from the requirements of Rule 15c2-12 of the Securities and Exchange Commission and that the City has not undertaken to provide any initial or continuing disclosure with respect to the Installment Purchase Contract and the Conveyance Agreement, but that the City has agreed to provide certain other ongoing financial information to the Purchaser pursuant to the Installment Purchase Contract;
8. The purchase price of the Installment Purchase Contract and the Conveyance Agreement was negotiated in an arm’s-length transaction between the Purchaser, a willing buyer of the Installment Purchase Contract and the Conveyance Agreement, and the City, a willing seller of the Installment Purchase Contract and the Conveyance Agreement, neither being under any compulsion to buy or sell. The Purchaser is not relying upon the City, Kutak Rock LLP, or any of their affiliates or employees for advice as to the merits and risks of the extension of credit with respect to the Installment Purchase Contract or the Conveyance Agreement. The Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed credit decision; and
(Remainder of page intentionally left blank)
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9. The undersigned is a duly appointed, qualified, and acting officer of the Purchaser and is authorized: (i) to cause the Purchaser to make the representations and warranties contained herein on behalf of the Purchaser; and (ii) to cause any instruments and documents and certificates, including this Bank Letter, required to be executed by the Purchaser in connection with the purchase of the rights, title and interest set forth under the Installment Purchase Contract to be so executed and delivered.
Very truly yours,
BANNER BANK
By:
Authorized Officer
[Signature Page to Bank Letter]
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APPENDIX B
ISSUER CLOSING CERTIFICATE
Pursuant to the Placement Agent Engagement Agreement, dated November 5, 2024 between City of Gonzales and Hilltop Securities (the “Agreement”), as City Manager of the Issuer duly authorized to execute this Certificate on behalf of the Issuer, I hereby certify:
The representations and warranties of the Issuer contained in the Agreement are true and correct as if made on the date hereof;
The Issuer has complied with and fully satisfied all of its agreements with and obligations to the Placement Agent under this Agreement; and
As of its date and the date hereof, the information contained in the Placement Materials is complete, true, and accurate and such information does not contain any untrue statement of a material fact or state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
Carmen Gil, City Manager
City of Gonzales