ESCROW DEPOSIT AND TRUST AGREEMENT
Relating to
$19,725,000
Initial Principal Amount
Fremont Public Financing Authority
Lease Revenue Bonds, Series 2017B
(2017 Fixed Rate Refinancing Project)
This ESCROW DEPOSIT AND TRUST AGREEMENT (this “Agreement”), dated as of April 1, 2023 , is between the CITY OF FREMONT, a general law city and municipal corporation organized and existing under the laws of the State of California (the “ City”), the FREMONT PUBLIC FINANCING AUTHORITY, a joint exercise of powers authorized organized and existing under the laws of the State of California (the “Authority”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association organized and existing under the laws of the United States of America, acting as escrow agent the “Escrow Agent”) for the captioned bonds (the “2017B Bonds”) and as 2017B Trustee (as defined below).
B A C K G R O U N D :
1. In order to refinance the outstanding City of Fremont Certificates of Participation (2008 Refinancing Project), the City previously caused the Authority to issue the 2017B Bonds pursuant to an Indenture of Trust, dated as of August 1, 2017 (the “2017B Indenture”), between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “ 2017B Trustee”).
2. The 2017B Bonds are payable from lease payments (the “2017B Lease Payments”) made to the Authority by the City under a Lease Agreement, dated as of August 1, 2017 (the “2017B Lease Agreement”).
3. The City Council of the City has authorized the use of available general fund moneys to immediately prepay the 2017B Lease Payments in full and, as a result, provide funds to the Authority to establish an i rrevocable escrow with the 2017B Trustee that will be used to pay debt service on the 2017B Bonds through October 1, 2027 and redeem the remaining outstanding 2017B Bonds on October 1, 2027, which is the first available optional redemption date for the 2017B Bonds.
4. The City and the Authority wish to appoint the Escrow Agent for the purpose of establishing an irrevocable escrow fund to be funded, invested, held and administered for the purpose of providing for the payment and redemption in full of the principal and interest and premium (if any) on the outstanding 2017B Bonds, and to provide certain directions to the 2017B Trustee with respect to the 2017B Bonds.
2 5. As a result of the deposit and investment of funds in accordance with this Agreement, the 2017B Bonds will be discharged and defeased in accordance with the provisions of Article X of the 2017B Indenture and redeemed in accordance with the provisions of Section 4.01(a) of the 2017B Indenture.
A G R E E M E N T :
In consideration of the premises and the material covenants contained herein, the City, the Authority and The Bank of New York Mellon Trust Company, N.A. , as Escrow Agent and 2017B Trustee, hereby agree as follows:
SECTION 1. Appointment of Escrow Agent; Establishment of Escrow Fund . The City and the Authority hereby appoint the Escrow Agent to act as escrow agent for purposes of administering the funds required to defease , pay and redeem the 2017B Bonds in accordance with the 2017B Indenture. The Escrow Agent is directed to establish an escrow fund (the “ Escrow Fund ”) to be held by the Escrow Agent in trust as an irrevocable escrow securing the payment of the 2017B Bonds as set forth below. All cash and securities in the Escrow Fund are hereby irrevocably pledged as a special fund for the payment of the principal of and interest and premium (if any) with respect to the 2017B Bonds in accordance with the 2017B Indenture.
If at any time the Escrow Agent re ceives actual knowledge that the cash and securities in the Escrow Fund will not be sufficient to make any payment required by Section 4 in respect of the 2017B Bonds, the Escrow Agent shall notify the City of such fact and the City shall immediately cure such deficiency from any source of legally available funds. The Escrow Agent has no liability for any such insufficiency.
SECTION 2. Deposit and Investment of Amounts in Escrow Fund.
(a) Deposit in Escrow Fund. On or before April ___, 2023 (the “Closing Date”), the City will transfer to the Escrow Agent for deposit into the Escrow Fund the amount of $_________________ in immediately available funds.
In addition, the City and the Authority hereby directs the 2017B Trustee to transfer to the Escrow Agent for deposit into the Escrow Fund the amount of $__________, to be derived from moneys related to the 2017B Bonds that are available as a result of the defeasance of the 2017B Bonds.
As a result, the total amount to be deposited in the Escrow Fund is $____________.
(b) Investment of Amounts in the Escrow Fund. The City and the Authority hereby direct the Escrow Agent to use $_______ of the amounts dep osited in the Escrow Fund pursuant to Section 2(a) to acquire in its own name, as Escrow Agent, the non -callable Federal Securities (as defined in the 2017B Indenture) described in Exhibit D attached hereto. The Escrow Agent shall hold the balance ($________) uninvested in cash.
(c) Substitution of Non-Callable Federal Securities . The City and the Authority may at any time direct the Escrow Agent to substitute noncallable Federal Securities for any or all of the Federal Securities then deposited in the Escrow Fund, provided that any 3 such direction and substitution shall be accompanied by a certification of an independent certified public accountant or firm of certified public accountants of favorable national reputation experienced in the refunding of obligations of political subdivisions that the Non- callable Federal Securities then to be so deposited in the Escrow Fund, together with interest to be derived therefrom, shall be in an amount at all times at least sufficient to make the payments specified in Section 3 hereof and, further, to be accompanied with an opinion of nationally recognized bond counsel that the substitution will not affect, for Federal income tax purposes, the exemption from Federal income taxes of the interest on the 2017B Bonds. In the event that, following any such substitution of non-callable Federal Securities pursuant to this Section 2(c), there is an amount of moneys or non-callable Federal Securities in excess of an amount sufficient to make the payments required by Section 3 hereof, such excess shall be transferred to the City.
(d) Limited Power of Escrow Agent. Except as herein otherwise expressly provided, the Escrow Agent shall have no power or duty to make substitutions of the Federal Securities, or to sell, transfer or otherwise dispose of the Federal Securities.
(e) Records. The Escrow Agent will keep books of record and account in which complete and correct entries shall be made of all transactions relating to the receipts, disbursements, allocations and application of the money and Federal Securities accruing to the Escrow Agent hereunder, and such books shall be available for inspection at reasonable hours and under reasonable conditions with reasonable prior notice by the owners of the 2017B Bonds
SECTION 3. Application of Amounts in Escrow Fund. The Escrow Agent is hereby instructed to withdraw from the Escrow Fund and transfer to the 2017B Trustee an amount required to pay the principal of and interest and redemption premium (if any) on the 2017B Bonds, in accordance with the schedule attached as Exhibit A hereto.
Following the payment and redemption of the 2017B Bonds in full, the Escrow Agent shall transfer any amounts remaining on deposit in the Escrow Fund to the City according to written directions provided by the City.
SECTION 4. Defeasance Notice; Irrevocable Election to Redeem 2017B Bonds; Redemption Notice. On the Closing Date, the Escrow Agent shall post the written notice attached hereto as Exhibit B on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access.
The Authority has irrevocably elected to redeem the outstanding 2017B Bonds maturing on and after October 1, 2028, on October 1, 2027 , in accordance with the provisions of the 2017B Indenture. On the dates required by the 2017B Indenture, the 2017B Trustee shall distribute a redemption notice in substantially the form attached hereto as Exhibit C in accordance with the 2017B Indenture.
SECTION 5. Compensation to Escrow Agent. The City shall pay the Escrow Agent full compensation for its services under this Agreement, including out-of-pocket costs such as publication costs, redemption expenses, legal fees and other costs and expenses relating hereto and, in addition, all fees, costs and expenses relating to the purchase, substitution or withdrawal of any securities after the date hereof. Under no circumstances shall amounts deposited in or credited to the Escrow Fund be deemed to be available for 4 said purposes. The Escrow Agent has no lien upon or right of set off against the cash and securities at any time on deposit in the Escrow Fund.
SECTION 6. Immunities and Liability of Escrow Agent . The Escrow Agent undertakes to perform only such duties as are expressly set forth in this Agreement and no implied duties, covenants or obligations shall be read into this Agreement against the Escrow Agent. The Escrow Agent shall not have any liability hereunder except to the extent of its negligence or willful misconduct. In no event shall the Escrow Agent be liable for any special, indirect or consequential damages. The Escrow Agent shall not be liable for any loss from any investment made by it in accordance with the terms of this Agreement. The Escrow Agent may consult with legal counsel of its own choice and the Escrow Agent shall not be liable for any action taken or not taken by it in good fai th in reliance upon the opinion or advice of such counsel. The Escrow Agent shall not be liable for the recitals or representations contained in this Agreement and shall not be responsible for the validity of this Agreement, the sufficiency of the Escrow Fund or the moneys and securities to pay the principal, interest and redemption premium with respect to the 2017B Bonds.
Whenever in the administration of this Agreement the Escrow Agent deems it necessary or desirable that a matter be proved or established prior to taking or not taking any action, such matter may be deemed to be conclusively proved and established by a certificate of an authorized representative of the City and shall be full protection for any action taken or not taken by the Escrow Agent in good faith reliance thereon.
The Escrow Agent may conclusively rely as to the truth and accuracy of the statements and correctness of any opinions or calculations provided to it in connection with this Agreement and shall be protected in acting, or re fraining from acting, upon any notice, instruction, request, certificate, document, opinion or other writing furnished to the Escrow Agent in connection with this Agreement and believed by the Escrow Agent to be signed by the proper party, and it need not investigate any fact or matter stated therein.
None of the provisions of this Agreement shall require the Escrow Agent to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties he reunder. The Escrow Agent may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees appointed with due care.
The Escrow Agent may at any time resign by giving 30 days written notice of resignation to the City. Upon receiving such notice of resignation, the City shall promptly appoint a successor and, upon the acceptance by the successor of such appointment, release the resigning Escrow Agent from its obligations hereunder by written instrument, a copy of which instrument shall be delivered to the resigning Escrow Agent and the successor. If no successor shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor.
Any bank, corporation or association into which the Escrow Agent may be merged or converted or with which it may be consolidated, or any bank, corporation or association resulting from any merger, conversion or consolidation to which the Escrow Agent shall be a party, or any bank, corporation or association succeeding to all or substantially all of the corporate trust business of the Escrow Agent shall be the successor of the Escrow 5 Agent hereunder without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties hereto except on the part of any of the parties hereto where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding.
The City shall indemnify, defend and hold harmless the Escrow Agent and its officers, director s, employees, representatives and agents, from and against and reimburse the Escrow Agent for any and all claims, obligations, liabilities, losses, damages, actions, suits, judgments, reasonable costs and expenses (including reasonable attorneys’ and agent s’ fees and expenses) of whatever kind or nature regardless of their merit, demanded, asserted or claimed against the Escrow Agent directly or indirectly relating to, or arising from, claims against the Escrow Agent by reason of its participation in the transactions contemplated hereby except to the extent caused by the Escrow Agent’s negligence or willful misconduct. The provisions of the foregoing sentence shall survive the termination of this Agreement or the earlier resignation or removal of the Escrow Agent.
The Escrow Agent agrees to accept and act upon instructions or directions pursuant to this Agreement sent by unsecured e-mail (provided, that for purposes of this Agreement, an e -mail does not constitute a notice, request or other communication hereunder but rather the portable document format or similar attachment attached to such e-mail shall constitute a notice, request or other communication hereunder ), facsimile transmission or other similar unsecured electronic methods, provided, however, that, the Escrow Agent shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and repla ced whenever a person is to be added or deleted from the listing. If the City elects to give the Escrow Agent e-mail or facsimile instructions (or instructions by a similar electronic method) and the Escrow Agent in its discretion elects to act upon such instructions, the Escrow Agent ’s reasonable understanding of such instructions shall be deemed controlling. The Escrow Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Escrow Agent’s reliance upon and com pliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The City agrees to assume all risks arising out of the use of such electronic methods to submit instructions and direction s to the Escrow Agent, including without limitation the risk of the Escrow Agent acting on unauthorized instructions, and the risk of interception and misuse by third parties.
SECTION 7. Termination of Agreement. Upon payment in full of the principal of and interest and redemption premium on the 2017B Bonds and all fees, expense and charges of the Escrow Agent as described above, this Agreement shall terminate and the Escrow Agent shall be discharged from any further obligation or responsibility hereunder.
SECTION 8. Execution in Counterparts . This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
SECTION 9. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.
6 CITY OF FREMONT
By:
Finance Director
FREMONT PUBLIC FINANCING
AUTHORITY
By:
Executive Director
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Escrow
Agent and as 2017B Trustee
By
Authorized Officer
A-1
EXHIBIT A
ESCROW REQUIREMENTS
Payment
Date
Interest
Payment
Scheduled
Principal
Payment
Redeemed
Principal
Total
Payment
B-1
EXHIBIT B
FORM OF DEFEASANCE NOTICE
$19,725,000
Initial Principal Amount
Fremont Public Financing Authority
Lease Revenue Bonds, Series 2017B
(2017 Fixed Rate Refinancing Project)
NOTICE IS HEREBY GIVEN, by the Fremont Public Financing Authority (the “Authority”) that, on the date hereof, moneys and investments have been set aside in an Escrow Fund held by The Bank of New York Mellon Trust Company, N.A. , as escrow agent (the “Escrow Agent”), pursuant to an Escrow Deposit and Trust Agreement, dated as of April 1, 2023 (the "Escrow Agreement"), by and among the City of Fremont (the “City”), the Authority and the Escrow Agent, for the purpose of defeasing, paying and redeeming the outstanding captioned bonds (the “2017B Bonds”).
The moneys and investments in the Escrow Fund shall be sufficient to (i) pay principal of and interest due on the 2017B Bonds through October 1, 2027 and (ii) redeem on October 1, 2027, all of the outstanding 2017B Bonds maturing on or after October 1, 2028, at a redemption price equal to the principal amount to be redeemed , without premium.
The outstanding 2017B Bonds consist of the following:
Maturity Date
(October 1)
Initial
Principal Amount Interest Rate
CUSIP
(Base: 357144)
2023 $730,000 5.000% AF1
2024 765,000 5.000 AG9
2025 805,000 5.000 AH7
2026 845,000 5.000 AJ3
2027 890,000 5.000 AK0
2028 935,000 5.000 AL8
2029 985,000 5.000 AM6
2030 1,035,000 5.000 AN4
2031 1,075,000 3.000 AP9
2032 1,110,000 3.000 AQ7
2033 1,145,000 3.000 AR5
2034 1,175,000 3.000 AS3
2035 1,215,000 3.000 AT1
2036 1,250,000 3.125 AU8
2037 1,290,000 3.125 AV6
2038 1,335,000 3.250 AW4
In accordance with the terms of the Indenture of Trust, dated as of August 1, 2017 related to the 2017B Bonds (the “2017B Indenture”) notice of redemption of the captioned Bonds to be redeemed is required to be given by The Bank of New York Mellon Trust Company, N.A., as trustee for the 2017B Bonds (the “2017B Trustee”), on a date not more than 60 days or less than 30 days prior to the date fixed for redemption thereof.
B-2
The moneys deposited in the Escrow Fund, including the earnings derived from the investment thereof, are irrevocably pledged to the payment of principal or redemption price of and interest on the 2017B Bonds. Said moneys have been invested in certain United States Treasury Bonds State and Local Government Series issued by the United States Treasury (“SLGS”) and which bear interest and mature on such dates as to insure the payment of all principal, premium, as applicable, and interest on the 2017B Bonds.
Pursuant to the Escrow Agreement, the Authority may substitute securities for those initially allocated to the Escrow Fund and withdraw moneys from the Escrow Fund subject to the terms and conditions set forth in the Escrow Agreement.
As a consequence of the foregoing actions and in accordance with the 2017B Indenture, the pledge of the Revenues provided for in the 2017B Indenture and all other obligations of the Authority under the 2017B Indenture have ceased and terminate d, except as otherwise provided in the 2017B Indenture and except for the obligation of the Authority to pay or cause to be paid to the owners of the 2017B Bonds all sums due thereon.
The CUSIP number of the 2017B Bonds has been assigned by an independent service and is included in this notice solely for the convenience of the Owners and neither The Bank of New York Mellon Trust Company, N.A., as trustee for the 2017B Bonds (the “2017B Trustee”), the Authority nor the City of Fremont shall be liable for any inaccuracies in such numbers.
Additional information regarding the foregoing actions may be obtained from the 2017B Trustee, [address to come].
Date: __________, 2023
C-1
EXHIBIT C
FORM OF REDEMPTION NOTICE
$19,725,000
Initial Principal Amount
Fremont Public Financing Authority
Lease Revenue Bonds, Series 2017B
(2017 Fixed Rate Refinancing Project)
NOTICE IS HEREBY GIVEN, by the Fremont Public Financing Authority (the “Authority”) that all of the captioned bonds maturing on or after October 1, 2028 (the “2017B Bonds”) have been called for redemption under and within the meaning of the Indenture of Tr ust, dated as of August 1, 2017 (the “2017B Indenture”), on October 1, 2027 (the “Redemption Date”), at a redemption price equal to the par amount of the 2017B Bonds to be redeemed together with accrued interest thereon to the redemption date, without premium (the “Redemption Price”).
The 2017B Bonds that are being redeemed on the Redemption Date consist of the following:
Maturity Date
(October 1)
Initial
Principal Amount Interest Rate
CUSIP
(Base: 357144)
2028 $935,000 5.000% AL8
2029 985,000 5.000 AM6
2030 1,035,000 5.000 AN4
2031 1,075,000 3.000 AP9
2032 1,110,000 3.000 AQ7
2033 1,145,000 3.000 AR5
2034 1,175,000 3.000 AS3
2035 1,215,000 3.000 AT1
2036 1,250,000 3.125 AU8
2037 1,290,000 3.125 AV6
2038 1,335,000 3.250 AW4
The CUSIP number of the 2017B Bonds has been assigned by an independent service and is included in this notice solely for the convenience of the Owners and neither The Bank of New York Mellon Trust Company, N.A., as trustee for the 2017B Bonds (the “2017B Trustee”), the Authority nor the City of Fremont shall be liable for any inaccuracies in such numbers.
Payment of the Redemption Price of the 2017B Bonds will become due and payable on the Redemption Date upon presentation and surrender thereof in the following manner:
Interest on the principal amount designated to be prepaid shall cease to accrue on and after the Redemption Date.
IMPORTANT NOTICE
C-2
Federal law requires the 2017B Trustee to withhold taxes at the applicable rate from the payment if an IRS Form W-9 or applicable IRS Form W-8 is not provided. Please visit www.irs.gov for additional information on the tax forms and instructions.
Dated: _____, 2027
D-1
EXHIBIT D
DESCRIPTION OF NON-CALLABLE FEDERAL SECURITIES
Type
Maturity
Date
Par
Amount
Rate
Cost