IMPORTANT DOCUMENTS AND MANAGING DEBT SERVICE Presented by: Timothy J. Reimers, Esq. QUATEMAN LLP February 3, 2011 Oakland, California CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION MUNICIPAL DEBT ESSENTIALS

1 Q UATEMAN LLP Introduction  Important provisions in financing documents  Indenture  Loan Agreement  Tax Certificate  Continuing Disclosure Undertaking  Reimbursement Agreement  Other Agreements  Questions

2 Q UATEMAN LLP Indenture (Trust Agreement, Fiscal Agent Agreement, Paying Agent Agreement, Bond Resolution, Bond Ordinance) Purpose: Provides the terms and conditions of the securities (bonds, certificates of participation, notes...) and for the security pledged for repayment of the securities. Important Provisions:  Pledge  Interest rate  Payment and redemption (prepayment)  Permitted investment of proceeds  Terms for additional parity debt (continued…)

3 Q UATEMAN LLP Indenture (Trust Agreement, Fiscal Agent Agreement, Paying Agent Agreement, Bond Resolution, Bond Ordinance) Important Provisions (continued):  Funds and accounts  Rate covenants  Prohibitions on senior debt  Terms of subordinate debt  Defeasance provisions  Default and remedy provisions  Insurance provisions  Financial guaranty  Liability, hazard, title...  Compliance with debt policy

4 Q UATEMAN LLP Loan Agreement (Financing Agreement, Installment Sale Agreement, Facilities or Project Lease) Purpose: For “conduit” financings, provides the terms and conditions under which the Issuer lends proceeds to the Borrower or otherwise provides for the project being financed. Important Provisions:  Representations, warranties and covenants  Restrictions on use  Assignment provisions  Special covenants  Pledge provisions  Title provisions  Insurance – liabilities, hazard, title, business interruption  Abatement provisions (in leases)  Remedies  Re-enter, re-let, termination, damages

5 Q UATEMAN LLP Tax Certificate (Tax Regulatory Agreement, Arbitrage Agreement, Land Use Restriction Agreement) Purpose: Provides agreements or certifications required to be made by the Issuer (or Borrower) to satisfy requirements of the Internal Revenue Code for tax exempt treatment of the securities. Important provisions:  Representations and warranties – rebate and arbitrage  Sources and uses of proceeds  Document retention  BABs filing information  Various other provisions depending on type of issue – consult bond counsel (tax compliance, private use, refunding...)

6 Q UATEMAN LLP Continuing Disclosure Agreement (Continuing Disclosure Certificate) Purpose: Provides undertakings of any obligated person (Issuer, Borrower...) to provide ongoing disclosure. Important provisions:  Contents of annual reports  Delivery/timing of annual reports  Filing of audited financial statements and budgets  Reporting significant events  Note – changes in Rule 15c2-12 for post-December 1, 2010 transactions

7 Q UATEMAN LLP Reimbursement Agreement (Financial Guaranty Agreement) Purpose: Provides terms of obligation to repay letter of credit bank (or surety provider) amounts drawn on credit facility. Important provisions:  Representations and warranties  Waivers  Remedies  Letter of Credit  Covenants  Financial  Disclosure

8 Q UATEMAN LLP Other Agreements  Financial guaranty insurance  Commitment letter  “Standard” terms and conditions  Continuing disclosure  Swap documents  BABs filing agreement

9 Q UATEMAN LLP Documents that do not provide for continuing administrative responsibilities:  Authorizing Document/Resolutions Purpose: Authorizes the issuance and sale of securities, execution and delivery of documents, directs staff to take other actions necessary to complete financing.  Purchase Agreement; Notice of Sale Purpose: Provides for the sale of the bonds to the underwriter or purchaser. But there may be certain obligations for a period of time through and after the underwriting period.  Official Statement Purpose: Provides disclosure to investors and potential investors.  Tips Consider: Debt Calendar and website updates

10 Q UATEMAN LLP Typical Questions:  What exactly have we pledged for the repayment of our securities?  How much is our debt service and what does it consist of?  Is our Reserve Fund fully/adequately funded?  We have these sureties, they have been downgraded, are they still good for something?

Questions?

12 Q UATEMAN LLP IMPORTANT DOCUMENTS AND MANAGING DEBT SERVICE For additional information, please contact: Timothy J. Reimers, Esq., Q UATEMAN LLP, Attorneys at Law Century Park Plaza 1801 Century Park East, Suite 1801 Los Angeles, California Telephone: 310/