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IMPORTANT DOCUMENTS AND MANAGING DEBT SERVICE

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

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IMPORTANT DOCUMENTS AND MANAGING DEBT SERVICE

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

  2. Introduction • Important provisions in financing documents • Indenture • Loan Agreement • Tax Certificate • Continuing Disclosure Undertaking • Reimbursement Agreement • Other Agreements • Questions QUATEMAN LLP

  3. 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…) QUATEMAN LLP

  4. 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 QUATEMAN LLP

  5. 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 QUATEMAN LLP

  6. 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 . . .) QUATEMAN LLP

  7. 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 QUATEMAN LLP

  8. 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 QUATEMAN LLP

  9. Other Agreements • Financial guaranty insurance • Commitment letter • “Standard” terms and conditions • Continuing disclosure • Swap documents • BABs filing agreement QUATEMAN LLP

  10. 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 QUATEMAN LLP

  11. 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? QUATEMAN LLP

  12. Questions?

  13. IMPORTANT DOCUMENTSAND MANAGING DEBT SERVICE For additional information, please contact: Timothy J. Reimers, Esq. QUATEMAN LLP, Attorneys at Law Century Park Plaza 1801 Century Park East, Suite 1801 Los Angeles, California 90067 Telephone: 310/556-1801 treimers@quateman.com www.quateman.com QUATEMAN LLP

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