Jones Hall Draft June 11, 2023
ESCROW AGREEMENT
Relating to the Redemption of:
$67,190,000
Patterson Public Financing Authority
Revenue Bonds, Senior Series 2013A
(Community Facilities District 2001-1)
and
$6,465,000
Patterson Public Financing Authority
Revenue Bonds, Senior Series 2013B
(Community Facilities District 2001-1)
This ESCROW AGREEMENT (this “Agreement”), made and entered into as of __________ 1, 2023, by and among the PATTERSON PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority duly organized and existing under and by virtue of the Constitution and laws of the State of California (the “Authority”) and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, national banking association duly organized and existing under the laws of the United States of America, as escrow agent (the “Escrow Agent”).
B A C K G R O U N D:
WHEREAS, the Governing Board of the West Patterson Financing Authority (the “WPFA”) has heretofore undertaken proceedings and declared the necessity to issue bonds captioned “Special Tax Refunding Bonds, Series 2013-A-1 and Series 2013-A-2,” and “Special Tax Bonds, Series 2013-B” on behalf of its Community Facilities District No. 2001-1 (Public Improvements) (the “District”) under the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the California Government Code; and WHEREAS, in order to purchase the WPFA Special Tax Bonds, on August 14, 2013, the Authority issued its revenue bonds captioned $67,190,000 “Patterson Public Financing Authority 2013 Revenue Bonds, Senior Series 2013A (Community Facilities District No. 2001-1)” and $6,465,000 “Patterson Public Financing Authority Revenue Bonds Subordinate Series 2013B (Community Facilities District No. 2001-1) (the “2013 Authority Bonds”) pursuant to an Indenture of Trust dated as of August 1, 203 (the “2013 Indenture”) by and between the Authority and U.S.
Bank National Association (as successor trustee to the Bank of New York Mellon Trust Company, N.A.) (the “2013 Trustee”); and
WHEREAS, the 2013 Authority Bonds are subject to optional redemption on any date on or after September 1, 2023, at a redemption price equal to the principal amount of the 2013 Authority Bonds to be redeemed, together with accrued interest to the date of redemption, without premium.
WHEREAS, in order to refund and defease the 2013 Authority Bonds, the Authority has determined to issue its bonds captioned “Patterson Public Financing Authority Public Financing 2 Authority 2023 Refunding Special Tax Revenue Bonds” (the “2023 Bonds”), under the MarksRoos Local Bond Pooling Act of 1985, being Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code, and an Indenture of Trust dated as of _________ 1, 2023 (the “2023 Indenture”) to be entered into between the Authority and U.S. Bank Trust Company, National Association, as trustee; and
WHEREAS, the Authority wishes to enter into this Agreement to provide for the proceeds of sale of the 2023 Bonds, together with other funds held by the Escrow Agent, in its capacity as trustee for the 2013 Authority Bonds, to be deposited in an irrevocable special escrow fund created and maintained with the Escrow Agent for the purpose of providing for the defeasance and redemption in full of the outstanding 2013 Authority Bonds.
WHEREAS, the Escrow Agent has full powers to act with respect to said escrow fund and to perform the duties and obligations to be undertaken pursuant to this Agreement.
NOW, THEREFORE, in consideration of the above premises and of the mutual promises and covenants herein contained and for other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
Section 1. Appointment of Escrow Agent. The Authority hereby appoints U.S. Bank Trust Company, National Association as escrow agent for all purposes of this Agreement and in accordance with the terms and provisions of this Agreement, and the Escrow Agent hereby accepts such appointment.
Section 2. Establishment of Escrow Fund. There is hereby created the Escrow Fund to be held by the Escrow Agent, separate and apart from any funds or accounts of the Escrow Agent or the Authority, as an irrevocable escrow securing payment of principal of and interest on the 2013 Authority Bonds as hereinafter set forth.
All cash and Defeasance Securities (as defined herein) in the Escrow Fund are hereby irrevocably pledged as a special fund for the payment and prepayment of the 2013 Authority Bonds in accordance with the terms hereof. If at any time the Escrow Agent receives actual knowledge that the cash and amounts in the Escrow Fund will not be sufficient to make any payment required by Section 4 hereof, the Escrow Agent will notify the Authority of such fact and the Authority will immediately cure such deficiency from any source of legally available funds.
As used herein, the term “Defeasance Securities” means the federal securities set forth on Exhibit A hereto and hereby incorporated herein.
Section 3. Deposit into Escrow Fund; Investment of Amounts. (a) Deposits into Escrow Accounts. Within the Escrow Fund the Escrow Agent shall establish a “2013A Bonds Account” and “2013B Bonds Account” for the payment and prepayment of the 2013 Bonds. Such accounts shall be funded in the amounts set forth below from the sources set forth below:
2013A Bonds Account: Total Deposit: $_____________;
(i) from the 2023 Trustee out of the proceeds of the 2023 Bonds, the amount of $__________; and
3 (ii) from the 2013 Trustee from funds on hand related to the 2013A Bonds held by the Escrow Agent as 2013 Trustee, the amount of $__________ from [the 2013A Bonds Project Fund] and the amount of $__________ from the 2013A Bonds Reserve Account, for a total amount of $__________.
2013B Bonds Account: Total Deposit: $___________;
(i) from the 2023 Trustee out of the proceeds of the 2023 Bonds, the amount of $__________; and
(ii) from the 2013 Trustee from funds on hand related to the 2013A Bonds held by the Escrow Agent as 2013 Trustee, the amount of $__________ from [the 2013A Bonds Project Fund] and the amount of $__________ from the 2013A Bonds Reserve Account, for a total amount of $__________.
After the foregoing transfers have been made, any amounts remaining in any funds or accounts established under the 2013 Indenture shall be transferred to the 2023 Trustee and deposited into the Interest Account of the Debt Service Fund established for the 2023 Bonds, and such accounts and funds shall be closed.
(b) Investment of Amounts Deposited.
(i) 2013A Bonds Account. With respect to the aggregate $____________ deposited into the 2013A Bonds Account of the Escrow Fund, the Escrow Agent will:
(1) invest $__________ of the moneys deposited in the Defeasance Securities described in Exhibit A hereto; and
(2) hold the remaining $____ in cash uninvested.
(ii) 2013B Bonds Account. With respect to the aggregate $3,894,485.45 deposited into the 2013B Bonds Account of the Escrow Fund, the Escrow Agent will:
(1) invest $________ of the moneys deposited in the Defeasance Securities described in Exhibit A hereto; and
(2) hold the remaining $____ in cash uninvested.
The Defeasance Securities and cash will be deposited with and held by the Escrow Agent in the Escrow Fund solely for the uses and purposes set forth herein. The Escrow Agent will have no lien upon or right of set off against the Defeasance Securities and cash at any time on deposit in the Escrow Fund. The Escrow Agent may create such subaccounts within the Escrow Fund as it may require to accomplish the purposes of this Escrow Agreement. Each account has been funded with an amount sufficient to pay interest and principal set forth in Exhibit B; any investment earnings on amounts on deposit in each account shall be invested in a money market fund of the Escrow Agent’s bank, and such interest earnings shall be maintained in the Escrow Fund until the fund is terminated.
Section 4. Instructions as to Application of Deposit. The total amount of Defeasance Securities and cash deposited in the Escrow Fund pursuant to Section 3 will be applied by the Escrow Agent to the payment and prepayment of the 2013 Authority Bonds in accordance with 4 the agreements governing the 2013 Authority Bonds on the date(s) and in the amounts set forth on Exhibit B hereto. Any amounts remaining in the Escrow Fund following the full prepayment of all of the 2013 Authority Bonds will be transferred by the Escrow Agent to the 2013 Trustee, for deposit to the Interest Account of the Revenue Fund established under the 2023 Indenture to be used to pay debt service on the 2023 Bonds.
Section 5. Election to Prepay and Redeem; Notices. The Authority hereby irrevocably elects to (i) prepay adn redeem all of the 2013 Bonds outstanding on September 1, 2023. The Escrow Agent is hereby directed to give a Notice of Defeasance and Redemption of the 2013 Bonds on the issuance date of the 2023 Bonds, substantially in the form attached hereto as Exhibit C, to the Municipal Securities Rulemaking Board (MSRB)’s Electronic Municipal Market Access (EMMA) system accessible at the emma.msrb.org website.
Section 6. Extraordinary Matters for Redemption of 2013 Bonds. Pursuant to Section
2.2(a)(iii) of the 2013 Indenture, the Authority the delivery of this Escrow Agreement to the Escrow Agent, in its capacity as Trustee under the 2013 Indenture, constitutes notice of the proposed optional redemption of the Bonds.
Section 7. Excess Moneys in Escrow Fund. Upon prepayment of all of the 2013 Bonds outstanding on September 1, 2023, all moneys remaining in the 2013A Bonds Account of the Escrow Fund or the 2013B Bonds Account of the Escrow Fund shall be transferred to the 2023 Trustee with direction to the 2023 Trustee to deposit such moneys in the Interest Account of the Revenue Fund established under the 2023 Indenture and to be used to pay debt service on the 2023 Bonds.
Section 8. Compensation to Escrow Agent. From proceeds of the 2013 Authority Bonds or other lawfully available sources, the Authority will pay the Escrow Agent full compensation for its duties under this Agreement, including out-of-pocket costs such as publication costs, prepayment expenses, legal fees and other costs and expenses relating hereto and, in addition, all fees, costs and expenses relating to the purchase of any Defeasance Securities after the date hereof. Under no circumstances will amounts deposited in or credited to the Escrow Fund be deemed to be available for said purposes.
Section 9. Immunities and Liabilities of Escrow Agent.
(i) The Escrow Agent undertakes to perform only such duties as are expressly and specifically set forth in this Agreement and no implied duties or obligations will be read into this Agreement against the Escrow Agent.
(ii) The Escrow Agent will not have any liability hereunder except to the extent of its own gross negligence or willful misconduct.
(iii) The Escrow Agent may consult with counsel of its own choice (which may be counsel to the Authority) and the opinion of such counsel will be full and complete authorization to take or suffer in good faith any action in accordance with such opinion of counsel. (iv) The Escrow Agent will not be responsible for any of the recitals or representations contained herein.
5 (v) The Escrow Agent will not be liable for the accuracy of any calculations provided as to the sufficiency of the moneys or Defeasance Securities deposited with it to pay the principal of, and interest on, the 2013 Authority Bonds.
(vi) The Escrow Agent will not be liable for any action or omission of the Authority or the Corporation under this Agreement or any related agreement. (vii) 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 suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Escrow Agent, be deemed to be conclusively proved and established by a certificate of an authorized representative of the Authority, and such certificate will, in the absence of negligence or willful misconduct on the part of the Escrow Agent, be full warrant to the Escrow Agent for any action taken or suffered by it under the provisions of this Agreement upon the faith thereof. (viii) The Escrow Agent may conclusively rely, as to the truth and accuracy of the statements and correctness of the opinions and the calculations provided, and will be protected and indemnified, in acting, or refraining from acting, upon any written notice, instruction, request, certificate, document or opinion furnished to the Escrow Agent signed or presented by the proper party, and it need not investigate any fact or matter stated in such notice, instruction, request, certificate or opinion.
(ix) The Escrow Agent may at any time resign by giving written notice to the Authority of such resignation. The Authority will promptly appoint a successor Escrow Agent by the resignation date. Resignation of the Escrow Agent will be effective upon acceptance of appointment by a successor Escrow Agent. If the Authority does not promptly appoint a successor, the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor Escrow Agent, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Escrow Agent.
After receiving a notice of resignation of an Escrow Agent, the Authority may appoint a temporary Escrow Agent to replace the resigning Escrow Agent until the Authority appoints a successor Escrow Agent. Any such temporary Escrow Agent so appointed by the Authority will immediately and without further act be superseded by the successor Escrow Agent so appointed. (x) The Authority covenants to indemnify and hold harmless the Escrow Agent against any loss, liability or expense, including legal fees, in connection with the performance of any of its duties hereunder, except the Escrow Agent will not be indemnified against any loss, liability or expense resulting from its gross negligence or willful misconduct.
Section 10. Amendment. This Agreement may be amended by the parties hereto, (i) without the consent of the owners of the 2013 Authority Bonds, but only if such amendment is made (a) to cure, correct or supplement any ambiguous or defective provision contained herein, (b) to pledge additional security to the payment and prepayment of the 2013 Authority Bonds, or (c) to deposit additional monies for the purposes of this Agreement, or (ii) with the consent of 100% of the owners of the 2013 Authority Bonds outstanding, and only if there will have been filed with the Authority, the Corporation and the Escrow Agent a written opinion of Jones Hall, A Professional Law Corporation, as special counsel, stating that any such amendment will not materially adversely affect the interests of the owners of the 2013 Authority Bonds, and that any such amendment will not cause the portion of lease payments representing interest payable with 6 respect to the 2013 Authority Bonds to become includable in the gross income of the owners thereof for federal income tax purposes.
Section 11. Execution in Counterparts. This Agreement may be executed in several counterparts, each of which will be an original and all of which will constitute but one and the same instrument.
Section 12. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of California.
Section 13. Severability. In the event any provision of this Agreement will be held invalid or unenforceable by any court of competent jurisdiction, such holding will not invalidate or render unenforceable any other provision hereof.
[Remainder of page intentionally left blank. Signature on next page.] [Signature Page to Escrow Agreement dated as of _____________ 1, 2023] IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly authorized officers all as of the date first above written.
PATTERSON PUBLIC FINANCING
AUTHORITY
By:
Executive Director
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION,
as Escrow Agent
By:
Authorized Officer
A-1
EXHIBIT A
DEFEASANCE SECURITIES
2013A BONDS ACCOUNT
Type of
Security Maturity Date Amount Rate Total Receipts
9/1/2023
2013B BONDS ACCOUNT
Type of
Security Maturity Date Amount Rate Total Receipts
9/1/2023
B-1
EXHIBIT B
SCHEDULE OF PAYMENT AND PREPAYMENT/REDEMPTION
2013A Bonds
Period
Ending Interest
Principal
Prepaid Total
9/1/2023
2013B Bonds
Period
Ending Interest
Principal
Prepaid Total
9/1/2023
EXHIBIT C
NOTICE OF DEFEASANCE AND REDEMPTION
67,190,000
Patterson Public Financing Authority
Revenue Bonds, Senior Series 2013A
(Community Facilities District 2001-1)
and
$6,465,000
Patterson Public Financing Authority
Revenue Bonds, Senior Series 2013B
(Community Facilities District 2001-1)
Date of Issuance: August 14, 2023
NOTICE IS HEREBY GIVEN, by the Patterson Public Financing Authority (the “Authority”) with respect to the captioned securities (the “Bonds”), that it has defeased the Bonds set forth below as of _________, 2023 and has irrevocably elected to optionally prepay such Bonds on September 1, 2023. Amounts sufficient for such prepayment have been deposited into an escrow fund held by U.S. Bank Trust Company, National Association, for such purpose.
The Bonds that have been defeased and that the Authority has elected to optionally prepay on September 1, 2023 consist of the following:
Senior Series 2013A:
Maturity Date
(September 1)
Outstanding
Principal
Amount
Interest
Rate
*CUSIP No.
(703380)
2030 $_________,000 5.250% CH6
2039 _________,000 5.750 CJ2
Subordinate Series 2013B:
Maturity Date
(September 1)
Outstanding
Principal
Amount
Interest
Rate
*CUSIP No.
(703380)
2039 _$________,000 5.875 CK9
* CUSIP data are provided by CUSIP Global Services, which is managed on behalf of the American Bankers Association by S&P Capital IQ. The Agency and the Trustee shall not be responsible for the selection or use of the CUSIP numbers listed above, nor is any representation made as to the accuracy of the CUSIP numbers listed above or as printed on any Bond; the CUSIP numbers are included solely for the convenience of the owners of the Bonds.
Dated: __________, 2023 U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION,
as Trustee for the Bonds and as Escrow Agent