Attachment 7Attachment 7
Attachment 7
Attachment 7
ESCROW DEPOSIT AND TRUST AGREEMENT
Relating to
$12,445,000
Hesperia Joint Public Finance Authority
2013 Refunding Lease Revenue Bonds
(Refinancing of 2005 Civic Plaza Financing)
This Escrow Deposit and Trust Agreement (this “Agreement”), dated as of ______, 2023, is among the City of Hesperia, a general law city and municipal corporation organized and existing under the Constitution and laws of the State of California (the “City”), the Hesperia Joint Public Finance Authority, a joint exercise of powers authority organized and existing under the Constitution and laws of the State of California (the “Authority”), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, acting as escrow agent for the 2013 Bonds described below (the “Escrow Agent”) and as successor trustee (the “Prior Trustee”) for the 2013 Bonds.
BACKGROUND:
1. The Authority previously issued its 2013 Refunding Lease Revenue Bonds (Refinancing of 2005 Civic Plaza Financing) in the aggregate principal amount of $12,445,000 (the “2013 Bonds”), under an Indenture dated as of October 1, 2013 (the “2013 Indenture”); the 2013 Bonds are payable from lease payments made by the City under a Property Lease dated as of October 1, 2013 (the “2013 Lease Agreement”), between the Authority as lessor and the City as lessee.
2. The 2013 Bonds maturing on or after October 1, 2024 are subject to optional redemption, without premium, prior to maturity on any date on or after October 1, 2023, at the option of the Authority.
3. In order to achieve cash flow savings, the City wishes to prepay the lease payments payable by the City under the 2013 Lease Agreement and to cause the Authority to defease and redeem the 2013 Bonds, and, for that purpose, the Authority is issuing the 2023 Refunding Lease Revenue Bonds(the “2023 Bonds”) under an Indenture, dated as of [Month of Closing Date] 1, 2023 (the “2023 Indenture”) and Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the “Law”).
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) with respect to the outstanding 2013 Bonds, and to provide certain directions to the Prior Trustee with respect to the 2013 Bonds.
5. As a result of the deposit and investment of funds in accordance with this Agreement, the 2013 Bonds will be discharged and defeased in accordance with the provisions of Section 10.01 of the 2013 Indenture and redeemed in accordance with the provisions of Section 4.01(c) of the 2013 Indenture.
AGREEMENT:
In consideration of the premises and the material covenants contained herein, the City, the Authority and U.S. Bank Trust Company, National Association, as Escrow Agent and Prior 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 and redeem the 2013 Bonds in accordance with the 2013 Indenture. The Escrow Agent is directed to establish the Hesperia Joint Public Finance Authority 2013 Refunding Lease Revenue Bonds Escrow Fund (the “Escrow Fund”) to be held by the Escrow Agent in trust as an irrevocable escrow securing the payment of the 2013 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 2013 Bonds in accordance with the 2013 Indenture.
If at any time the Escrow Agent receives 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 2013 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) Deposits into the Escrow Fund. On _______, 2023 (the “Closing Date”), the Authority, pursuant to the 2023 Indenture, will cause to be transferred to the Escrow Agent for deposit into the Escrow Fund the amount of $________ in immediately available funds, to be derived from the proceeds of the 2023 Bonds.
In addition, the Authority hereby directs the Prior Trustee to transfer to the Escrow Agent for deposit into the Escrow Fund the amount of $_______, to be derived from moneys related to the 2013 Bonds that are available as a result of the defeasance of the 2013 Bonds.
As a result, the total amount to be deposited in the Escrow Fund on the Closing Date is $____________. (b) Investment of Amounts in the Escrow Fund. The City and the Authority hereby direct the Escrow Agent to use $_______ of the amounts deposited in the Escrow Fund pursuant to Section 2(a) to acquire in its own name, as Escrow Agent, the Government Obligations (as defined in the 2013 Indenture) described in Exhibit D attached hereto. The Escrow Agent shall hold the balance ($________) uninvested in cash. (c) Substitution of Government Obligations. The City and the Authority may at any time direct the Escrow Agent to substitute noncallable Government Obligations for any or all of the Government Obligations then deposited in the Escrow Fund, provided that any 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 Government Obligations 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 2013 Bonds or the 2023 Bonds. In the event that, following any such substitution of Government Obligations pursuant to this Section 2(c), there is an amount of moneys or Government Obligations in excess of an amount sufficient to make the payments required by Section 3 hereof, such excess shall be transferred to U.S. Bank Trust Company, National Association, as trustee for the 2023 Bonds, for deposit in the Interest Fund established under the 2023 Indenture, to be applied to pay interest next coming due and payable on the 2023 Bonds. (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 Government Obligations, or to sell, transfer or otherwise dispose of the Government Obligations. (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 Government Obligations 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 2013 Bonds or the 2023 Bonds, as applicable.
Section 3. Application of Amounts in Escrow Fund. The Escrow Agent is hereby instructed to withdraw from the Escrow Fund and transfer to the Prior Trustee an amount required to pay the principal of and interest and redemption premium (if any) on the 2013 Bonds, in accordance with the schedule attached as Exhibit A hereto.
Following the payment and redemption of the 2013 Bonds in full, the Escrow Agent shall transfer any amounts remaining on deposit in the Escrow Fund to U.S. Bank Trust Company, National Association, as trustee for the 2023 Bonds, for deposit in the Interest Fund established under the 2023 Indenture, to be applied to pay interest next coming due and payable on the 2023 Bonds.
Section 4. Irrevocable Election to Redeem 2013 Bonds; Redemption Notice; Defeasance Notice. The City and the Authority have irrevocably elected to pay and redeem all of the outstanding 2013 Bonds on the date set forth in Exhibit A, in accordance with the provisions of the 2013 Indenture. The City and the Authority hereby direct the Prior Trustee to give notice of the redemption of the 2013 Bonds in accordance with the requirements of the 2013 Indenture, at the expense of the City, using the form set forth in Exhibit B. The City and the Authority further hereby direct the Prior Trustee to give notice of the defeasance of the 2013 Bonds on the Closing Date, using the form set forth in Exhibit C.
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 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 faith 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 (if any) with respect to the 2013 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 refraining 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 hereunder. 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 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, directors, 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 agents’ 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 replaced 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 compliance 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 directions 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. Tax-Exempt Nature of 2013 Bonds and 2023 Bonds. The City and the Authority covenant and agree for the benefit of the owners of the 2013 Bonds and the 2023 Bonds that they will not perform or permit to be performed any thing or act in such manner as would cause interest on the 2013 Bonds or the 2023 Bonds to be included in the gross income of the recipients thereof for federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), and, in particular, they will not use any of the proceeds received from the sale of the 2023 Bonds, directly or indirectly, in any manner which would result in such 2023 Bonds being classified as “arbitrage bonds” within the meaning of Section 148(a) of the Code.
Section 8. Termination of Agreement. Upon payment in full of the principal of and interest and redemption premium (if any) on the 2013 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 9. 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.
City of Hesperia
By:
City Manager
HESPERIA JOINT PUBLIC FINANCE AUTHOrity
By:
Executive Director
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Escrow Agent and as Prior Trustee By
Authorized Officer
EXHIBIT A
ESCROW REQUIREMENTS
Payment
Date
Interest
Payment
Principal
Due
Redeemed
Principal
Total
Payment
10/1/23
EXHIBIT B
FORM OF REDEMPTION NOTICE
$12,445,000
Hesperia Joint Public Finance Authority
2013 Refunding Lease Revenue Bonds
(Refinancing of 2005 Civic Plaza Financing)
Date of issuance: October 30, 2013
NOTICE IS HEREBY GIVEN, by the Hesperia Joint Public Finance Authority (the “Authority”) that all of the captioned bonds maturing on or after October 1, 2024 (the “2013 Bonds”), have been called for redemption under and within the meaning of the Indenture, dated as of October 1, 2013 (the “2013 Indenture”), on October 1, 2023 (the “Redemption Date”), at a redemption price equal to the principal amount of the 2013 Bonds together with accrued interest thereon to the redemption date, without premium (the “Redemption Price”).
The 2013 Bonds consist of the following:
Maturity Date
(October 1)
Initial
Principal Amount
Interest Rate
CUSIP
(Base: 42806H)
2024
$500,000
3.750%
BJ8
2025
535,000
4.000
BK5
2026
575,000
4.000
BL3
2027
620,000
4.250
BM1
2028
665,000
4.250
BN9
2031 (T)
2,305,000
4.750
BP4
2035 (T)
3,950,000
5.000
BQ2
T Term Bond.
On the Redemption Date, the Redemption Price will become due and payable on each of the 2013 Bonds, and interest shall cease to accrue on the 2013 Bonds on the Redemption Date.
The CUSIP number of the 2013 Bonds has been assigned by an independent service and is included in this notice solely for the convenience of the Owners and neither U.S. Bank Trust Company, National Association, as trustee for the 2013 Bonds (the “2013 Trustee”), the Authority nor the City of Hesperia shall be liable for any inaccuracies in such numbers.
Pursuant to the 2013 Indenture, the Redemption Price of the 2013 Bonds will be paid without presentation of the 2013 Bonds if presentment is not required and upon presentation of the 2013 Bonds if presentment is required. If presentment is required, surrender thereof can be made in the following manner:
Delivery Instructions:
U.S. Bank
Global Corporate Trust
111 Fillmore Ave E
St. Paul, MN 55107
The owners of the 2013 Bonds presenting their bonds in person for same day payment must surrender their bond(s) by 1:00 P.M. CST on the Redemption Date and a check will be available for pick up after 2:00 P.M. CST. Checks not picked up by 4:30 P.M. CST will be mailed out to the bondholder via first class mail. If payment of the Redemption Price is to be made to the registered owner of the 2013 Bond, the owner of the 2013 Bond is not required to endorse the 2013 Bond to collect the Redemption Price.
For a list of redemption requirements please visit our website at www.usbank.com/corporatetrust and click on the “Bondholder Information” link for Redemption instructions. You may also contact our Bondholder Communications team at 1 800-934-6802 Monday through Friday from 8 A.M. to 6 P.M. CST.
IMPORTANT NOTICE
Federal law requires the 2013 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: ______, 2023 U.S. Bank Trust Company,
National Association, as Trustee
EXHIBIT C
FORM OF DEFEASANCE NOTICE
$12,445,000
Hesperia Joint Public Finance Authority
2013 Refunding Lease Revenue Bonds
(Refinancing of 2005 Civic Plaza Financing)
Date of issuance: October 30, 2013
NOTICE IS HEREBY GIVEN, by the Hesperia Joint Public Finance Authority (the “Authority”) that, on the date hereof, moneys and investments have been set aside in an Escrow Fund held by U.S. Bank Trust Company, National Association, as escrow agent (the “Escrow Agent”), pursuant to an Escrow Deposit and Trust Agreement, dated as of _______, 2023 (the "Escrow Agreement"), by and among the City of Hesperia (the “City”), the Authority and the Escrow Agent, for the purpose of paying the outstanding captioned bonds (the “2013 Bonds”).
The moneys and investments in the Escrow Fund shall be sufficient to (i) pay principal of and interest due on the 2013 Bonds on October 1, 2023 and (ii) redeem on October 1, 2023, all of the outstanding 2013 Bonds maturing on or after October 1, 2024, at a redemption price equal to the principal amount to be redeemed, without premium.
The outstanding 2013 Bonds consist of the following:
Maturity Date
(October 1)
Initial
Principal Amount
Interest Rate
CUSIP
(Base: 42806H)
2023
$460,000
4.000%
BH2
2024
500,000
3.750
BJ8
2025
535,000
4.000
BK5
2026
575,000
4.000
BL3
2027
620,000
4.250
BM1
2028
665,000
4.250
BN9
2031 (T)
2,305,000
4.750
BP4
2035 (T)
3,950,000
5.000
BQ2
T Term Bond.
In accordance with the terms of the Indenture, dated as of October 1, 2013 related to the 2013 Bonds (the “2013 Indenture”) notice of redemption of the captioned Bonds to be redeemed is required to be given by U.S. Bank Trust Company, National Association, as trustee for the 2013 Bonds (the “2013 Trustee”), on a date not more than 60 days or less than 30 days prior to the date fixed for redemption thereof.
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 2013 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 2013 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 2013 Indenture, the pledge of the Revenues provided for in the 2013 Indenture and all other obligations of the Authority under the 2013 Indenture have ceased and terminated, except as otherwise provided in the 2013 Indenture and except for the obligation of the Authority to pay or cause to be paid to the owners of the 2013 Bonds all sums due thereon.
The CUSIP number of the 2013 Bonds has been assigned by an independent service and is included in this notice solely for the convenience of the owners of the 2013 Bonds and neither the Escrow Agent, the Authority nor the City of Hesperia shall be liable for any inaccuracies in such numbers.
Dated: ______, 2023 U.S. Bank Trust Company,
National Association, as Escrow Agent
EXHIBIT D
DESCRIPTION OF GOVERNMENT OBLIGATIONS
Type
Maturity
Date
Par
Amount
Rate
Cost
6 A-1
C-1
B-1
C-1
C-2
D-2