CITY OF HERCULES
DISCLOSURE PROCEDURES
PURPOSE
The purpose of these Disclosure Procedures (the “Procedures”) is to memorialize and communicate key principles and procedures in connection with obligations, including notes, bonds and certificates of participation, issued by the City of Hercules (the “City”), the Hercules Public Financing Authority (the “Authority”), and the Successor Agency to the Hercules Redevelopment Agency (the “Successor Agency”) or any community facilities district (each, a “District” and together, the “Districts”) subsequently authorized or approved by the City. Because the governing body of the Authority and the Successor Agency and its officers/staff are the same as the City, and because the governing body of the Districts and its staff are the same as the City, all references in these Procedures to “City” shall also refer to the Successor Agency, the Authority in the case of land assessment/tax-backed securities that secure payment of obligations issued by the Authority, and the applicable District in the case of Mello-Roos bonds and other land assessment/tax-backed securities issued by the applicable District.
DISTRIBUTION
The Procedures shall be provided to all members of the City Council, the City Manager, the City Attorney, the Finance Director and any other member of the City staff involved in the City’s disclosure obligations.
BACKGROUND
From time to time, the City issues certificates of participation, revenue bonds, notes or other obligations, the Successor Agency may issue certain tax-increment obligations, a District may issue Mello-Roos bonds or other land assessment/tax-backed securities, and the Authority may issue obligations in various forms, including among others debt secured by and payable from debt obligations issued by the applicable District (collectively, “Obligations”), in order to fund or refund capital investments, new development within the City, other long-term programs and working capital needs. In offering Obligations to the public, and at other times when the City, the Authority, the Successor Agency, or the Districts, as the case may be, makes certain reports, the City, the Authority, the Successor Agency, or the Districts, as the case may be, must comply with the Anti-Fraud Rules of federal securities laws even though material portions of official statements are written by developers, their counsel and other market participants. As used herein, “Anti-Fraud Rules” refers to Section 17 of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934, and regulations adopted by the Securities and Exchange Commission under those Acts, particularly Rule 10b-5 under the 1934 Act.
At their core, these rules require all material information relating to the offered Obligations be provided to potential investors. The information provided to potential investors must not contain any material misstatements, and the City must not omit material information which would be necessary to provide to investors a complete and transparent description of the Obligations and the City’s financial condition. In the context of the sale of securities, a fact is considered to be material if there is a substantial likelihood that a reasonable investor would consider it to be important in determining whether or not to purchase the securities being offered.
When the City issues Obligations, two central disclosure documents are prepared: (1) a preliminary official statement (“POS”); and (2) a final official statement (“OS”, and collectively with the POS, “Official Statement”). The Official Statement generally consists of (i) the forepart (which describes the specific transaction including maturity dates, interest rates, redemption provisions, the specific type of financing, the leased premises (in certificate of participation financings) and other matters particular to the financing, including, depending on the type of financing, the City’s or enterprise’s financial condition, the development within the community facilities district, the developer and its development and financing plan, and (ii) various other appendices, including the City’s audited financial report (for City general fund or enterprise fund financings), form of the proposed legal opinion, and form of continuing disclosure undertaking. Investors use the Official Statement as one of their primary resources for making informed investment decisions regarding the City’s Obligations.
ENGAGEMENT OF OUTSIDE DISCLOSURE COUNSEL
For every Obligation, the City shall engage outside legal counsel with expertise in securities laws for advice with respect to the City’s disclosure obligations and requirements under the federal securities laws (“Disclosure Counsel”). Disclosure Counsel assists the City in preparing the Official Statement, and reviews all new data and updates to the Official Statement. Throughout the process of receiving and incorporating material, Disclosure Counsel provides advice as to standards of materiality and other securities law issues. Disclosure Counsel has a confidential, attorney-client relationship with officials and staff of the City.
Disclosure Counsel provides a negative assurance letter as to the disclosure set forth in the Official Statement for each Obligation. The letter advises the City and the Obligations underwriters that as a matter of fact and not opinion that no information came to the attention of the attorneys working on the transaction which caused them to believe that Official Statement as of its date and as of the date of their letter (except for any financial, statistical, economic or demographic data or forecasts, charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, and other customary exclusions), contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
DISCLOSURE PROCESS
The City Manager shall be primarily responsible for the administration of these Procedures as they pertain to primary market disclosure. The City Manager shall delegate to other officers responsibilities for certain of these functions as the City Manager from time to time determines. As used herein, “Finance Staff” shall mean the City Manager and its delegates.
When the City decides to issue Obligations, the Finance Staff requests the involved departments to commence preparation of the portions of the Official Statement for which they are responsible. Finance Staff and the City Attorney are separately responsible for reviewing and preparing or updating certain portions of the Official Statement which are within their particular area of knowledge. Additionally, all participants in the disclosure process are separately responsible for reviewing the entire Official Statement. Disclosure Counsel assists the Finance Staff in determining the materiality of any particular item, and in the development of specific language in the Official Statement. For general fund financings, Disclosure Counsel also assists the City in the development of a “big picture” overview of the City’s financial condition, included in the forepart of the Official Statement. This overview highlights particular areas of concern. The Finance Staff schedules one or more meetings or conference calls of the financing team working group (which includes City officials, the City’s financial advisor, Disclosure Counsel, bond counsel, the underwriter of the Obligations, and their counsel, and, for land secured financings, the developer, its attorneys and consultants), and new drafts of the Official Statement are circulated and discussed. During this part of the process, there is substantial contact among City staff, other members of the financing team and Disclosure Counsel, to discuss issues which may arise, determine the materiality of particular items and ascertain the prominence in which the items should be disclosed.
Prior to distributing a POS to potential investors, there is a formal meeting which includes City officials involved in the preparation of the POS and the underwriters and their counsel, during which the Official Statement is reviewed in its entirety, page by page or section by section, to obtain final comments and to allow the underwriters to ask questions of the City’s senior officials. This is referred to as a “due diligence” meeting.
The City Manager or its delegate (if involved in the due diligence meeting described above and, if applicable, the “page turning” session described below is authorized to cause to be “deemed final” by the City, the Authority, the Successor Agency, or by the applicable District for obligations issued directly to the public market by such entity, as applicable, the Preliminary Official Statement for purposes of Rule 15c2-12 of the Securities Exchange Commission.
Between the POS and final OS, any new changes and developments will have been incorporated into the Official Statement if required by the entity responsible for the applicable portion of the Official Statement. If necessary to reflect developments following publication of the POS or OS, as applicable, supplements will be prepared and published.
In connection with the closing of the transaction, one or more senior City officials execute a certificate stating that the Official Statement, as of the date of each OS and as of the date of closing, does not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements contained in the Official Statement in light of the circumstances under which they were made, not misleading.
The information contained in the Official Statement is primarily developed by Finance Staff, the City Attorney or the developer (in the case of land assessment/tax-back securities). In addition, the City’s financial adviser participates throughout the process of preparing the Official Statement and developing the structure of the financing.
Land Assessment/Tax-Backed Securities. The following principles apply specifically to land assessment/tax-backed securities that secure payment of obligations issued by the Authority and the Districts in the case of Mello-Roos bonds and other land assessment/tax-backed securities issued by the Districts.
Appraiser. Where the financial advisor, developer, Disclosure Counsel (or bond counsel), and/or underwriter determines that an appraisal is required for disclosure, the Official Statement should contain a description of the following:
How the appraiser was selected (e.g., by RFP or direct selection); The basic qualifications of the appraiser; and
A summary of the primary criteria that resulted in the final appraisal of the relevant property.
The City shall require the appraiser to review such information for accuracy. Further, Disclosure Counsel and/or bond counsel shall discuss and decide whether and to what extent written assurances as to the accuracy of such information may be needed from the appraiser.
Developer Questionnaire. The City shall require the developer to submit and certify as to accuracy and completeness a detailed questionnaire covering the developer and the proposed project (the “Developer Questionnaire”) at the start of each new money financing through Land Assessment/Tax-Backed Securities and for which there will be ongoing vertical development or a significant portion of the project site (e.g., greater than 20%) will be owned by the developer at the time of issuance.
A sample of a Developer Questionnaire is attached hereto as Exhibit A. However, each Developer Questionnaire should be tailored to the specific transaction at hand. The Developer Questionnaire should mirror the type of questionnaires underwriters will require for similar developer-driven financings. Each Developer Questionnaire should cover topics specific to the developer, such as:
The ownership structure of the developer and all affiliates relevant to the project, including entity type (e.g., corporation, partnership, LLC) and percentage of controlling interests of members/partners/etc.; If publicly-traded, instructions or a website link for how investors can access annual and other disclosures on EDGAR; General background and experience of the developer and its affiliates, as applicable; and A history of previous projects developed by the developer and/or relevant entities with controlling interests, which shall include, without limitation, information concerning material delays in construction, history of defaults, etc.
Each Developer Questionnaire should also contain relevant details concerning the development at issue, such as:
Location;
Size;
How long the developer has owned the development site;
Information concerning environmental diligence, applicable zoning and related issues; and Whether the developer or related entities are under investigation or subject of current inquiry by any federal or state regulatory agencies.
The City shall require that each Developer Questionnaire be signed and certified as true and complete by the developer. The Finance Director shall be responsible for double-checking the receipt of the Developer Questionnaire.
Offering Statements. Offering statements for Land Assessment/Tax-Backed Securities respecting districts under development shall provide the following:
Total development budget (including public infrastructure improvements and the home developments); A listing of sources of funds (e.g., developer equity, line of credit, commercial loan, other equity investor funds); and The status of such funding sources (e.g., if a construction loan, the extent to which it has been funded).
If a financing occurs while material portions of the project are under development, the offering statement shall disclose the status of construction and projected costs to complete (whether based on the initial budget or otherwise).
For developments that contain 500 or more units, discussion should occur among bond counsel, Disclosure Counsel, the financial advisor, the underwriter and other relevant participants as to whether a market absorption or feasibility study is needed for the offering statement. The City shall give deference to the determinations of the financial advisor, Disclosure Counsel and bond counsel over recommendation from other participants like the developer and its counsel.
Formal “Page Turning” Session. Prior to the due diligence meeting described under “DISCLOSURE PROCESS” above, there shall be a formal “page turning” session where the special tax consultant, Disclosure Counsel, bond counsel, financial advisor, the developer and its counsel, the City Manager, the City Attorney, any other relevant City officials as identified by the City Manager, review key portions of the preliminary official statement and, to the extent of changes other than those reflecting pricing terms following sale, the final official statement. This type of “page turning” session is a very important element of the disclosure process. The Finance Director shall be responsible for ensuring that such “page turning” session occurs prior to the Preliminary Official Statement or similar offering statement being made available to investors.
Prior to printing the Official Statement, the City shall require the developer to deliver a “10b5” certificate to the City covering those portions of the Preliminary Official Statement relating to the developer, its project and its financing plans. Additionally, prior to printing the Preliminary Official Statement, the City Manager and its delegates, and Disclosure Counsel or bond counsel, shall have reviewed and agreed upon the form of developer counsel opinion required, if any, and the form of written assurances, if any, from the special tax consultant and financial advisor as to accuracy and completeness of relevant portions of the Preliminary Official Statement in connection with the financing. The Finance Director shall be responsible for double-checking the receipt of all 10b-5 and related certificates, instruments or opinions required to be delivered by the developer in a land assessment/tax-backed securities offering.
Recordkeeping. The City, the Authority, the Successor Agency, or the Districts, as applicable, shall retain in a central depository for a period of five years from the date of delivery of any series of bonds the following materials:
The printed copy of the Preliminary Official Statement and final Official Statement (or similar offering documents); The executed copies of all opinions, letters or other certifications concerning the accuracy or adequacy of disclosure provided by the developer, developer’s counsel, Disclosure Counsel, bond counsel and all other participants in the financing pursuant to these Procedures; The Developer Questionnaire, if applicable;
The bond purchase agreement;
Copies of any “deemed final” certification provided by an official with the City, the Authority, the Successor Agency, or the applicable District, as the case may be, to the underwriter of bonds in accordance paragraph (b)(1) of Rule 15c2-12 of the Securities Exchange Commission; and Any written certification or opinions executed by a developer, its counsel, the special tax consultant, financial advisor and any other financing participants outside the City delivered at the time of delivery of the related series of bonds.
It is not necessary that drafts of such instruments be retained; only final copies. Note that for bonds designated as federally “tax-exempt,” records relating to the expenditure of bond proceeds and the tax treatment of the bonds must be maintained for the term of the bonds and any future debt issued to refinance any portion of such bonds.
GOVERNING PRINCIPLES FOR CITY OFFICIALS AND STAFF
The following principles govern the work of the respective staffs that contribute information to the Official Statement:
City staff involved in the disclosure process are responsible for being familiar with federal securities laws as they relate to disclosure.
City staff involved in the disclosure process should be instructed to err on the side of raising issues when preparing or reviewing information for disclosure. Officials and staff are encouraged to consult with Disclosure Counsel if there are questions regarding whether an issue is material.
City staff involved in the disclosure process, along with the developer, special tax counsel, the financial advisor and all other participants in preparing portions of an offering statement and that are involved in any meetings where portions of an offering statement are reviewed or discussed should be instructed that general disclosure of a potential risk is no substitute for known facts specific to that risk, and that participants should strive to ensure known facts are disclosed.
Care should be taken not to shortcut or eliminate any steps outlined in the Procedures on an ad hoc basis. However, the Procedures are not necessarily intended to be a rigid list of procedural requirements, but instead to provide guidelines for disclosure review. If warranted, based on experience during financings or because of additional SEC pronouncements or other reasons, the City should consider revisions to the Procedures.
The City must make sure that the particular officials involved in the disclosure process are of sufficient seniority such that it is reasonable to believe that, collectively, they are in possession of material information relating to the City and its finances.
Any concerns regarding the accuracy of an Official Statement should be immediately reported to the City Attorney or the City’s Disclosure Counsel.
Care should be taken that any information produced and maintained for public consumption, and which may be relied upon by an investor in making an investment decision in the primary or secondary market, does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading.
Consideration should be made, based on consultation with Disclosure Counsel (or, if there is not Disclosure Counsel, bond counsel) as to whether a public statement by a City official or the response by the City to an investor inquiry (e.g., a question from one of City’s investors) may be material enough to merit a voluntary filing on EMMA to ensure that Obligations are trading based on equal access to material information.
The City Manager and Finance Director shall review these Procedures on an annual or bi-annual basis and may, from time to time, as may be necessary, update these Procedures in consultation with Disclosure Counsel and/or bond counsel.
The Finance Director, together with Disclosure Counsel and/or bond counsel, shall review the continuing disclosure section of the preliminary offering statement – particularly that portion describing the five-year compliance history of the applicable District or of any other obligated person under the purview of the City – before it is finalized and sent to prospective investors.
ANNUAL CONTINUING DISCLOSURE REQUIREMENTS
In connection with the issuance of Obligations, the City has entered into a number of contractual agreements (each a “Continuing Disclosure Certificate” and, collectively, “Continuing Disclosure Certificates”) to provide annual reports related to its financial condition (including its audited financial statements) as well as notice of certain events relating to the Obligations specified in the Continuing Disclosure Certificates. Continuing Disclosure Certificates that are entered into in the future should not be “canned” and Disclosure Counsel (or, if there is not Disclosure Counsel, bond counsel or underwriter’s counsel) shall prepare the continuing disclosure agreement based upon the specific transaction at hand.
The City must comply with the specific requirements of each Continuing Disclosure Certificate. The City’s Continuing Disclosure Certificates generally require that the annual reports be filed within a certain number of days after the end of the City’s fiscal year, and event notices are generally required to be filed within 10 days of their occurrence.
Specific events which require material event notices generally consist of the following:
(a) Any of the following events with respect to the Obligations (in a timely manner not more than ten (10) business days after the event):
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting financial difficulties;
3. Unscheduled draws on credit enhancements reflecting financial difficulties;
4. Substitution of credit or liquidity providers, or their failure to perform;
5. Issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);
6. Tender offers;
7. Defeasances;
8. Rating changes;
9. Bankruptcy, insolvency, receivership or similar event of the obligated person; or
10. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation, any of which reflect financial difficulties. (b) Any of the following events with respect to the particular Obligations, if material:
1. Unless described in paragraph 5(a)(5), adverse tax opinions or other material notices or determinations by the Internal Revenue Service with respect to the tax status of the particular Obligations or other material events affecting the tax status of the Series 2013 Bonds;
2. Modifications to rights of holders of the particular Obligations;
3. Optional, unscheduled or contingent calls of the particular Obligations;
4. Release, substitution, or sale of property securing repayment of the particular Obligations;
5. Non-payment related defaults;
6. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms;
7. Appointment of a successor or additional trustee or the change of name of a trustee; or
8. Incurrence of a financial obligation, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation, any of which affect Obligation holders.
For purposes of the events identified in subparagraphs (a)(10) and (b)(8), the term “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term financial obligation shall not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with Rule 15c2-12 of the Securities Exchange Commission.
The Finance Director shall be responsible for preparing and filing the annual reports and material event notices required pursuant to the Continuing Disclosure Certificates. Particular care shall be paid to the timely filing of any changes in credit ratings on Obligations (including changes resulting from changes in the credit ratings of insurers of particular Obligations).
Moreover, with regard to the filing of annual financial statements, the Finance Director and the City Manager (or its delegate) shall maintain calendar reminders for the filing such statements. The City shall consider the use of a dissemination agent or other reminder resources provided by the Municipal Securities Rulemaking Board or similar authorities to assist in the timely filing of materials on EMMA.
The City shall have Disclosure Counsel (or, if there is no Disclosure Counsel, bond counsel) to the City prepare a checklist for the specific items required to be filed on an annual basis (the “Annual Report Checklist”). The Annual Report Checklist should be modified by Disclosure Counsel (or, if there is not Disclosure Counsel, bond counsel) as new issues are sold, and by the City or its counsel as issues of Obligations debt are paid off and no longer outstanding. A separate Annual Report Checklist should be prepared and similarly modified for any District obligations hereafter issued.
The Finance Director, at the time of each annual filing, shall execute the Annual Report Checklist and then delivered it to the City Manager. The City Manager, or its delegate, shall review the filings on EMMA against the Annual Report Checklist as a double-check for compliance accuracy.
Upon the advice of Disclosure Counsel or bond counsel, the City may identify a different compliance method if determined to be more effective or feasible than the Annual Report Checklist.
The City Manager (or its delegate) shall double-check the timeliness of filing of audited financial statements and annual reports against the Annual Report Checklist or different compliance method described above.
When a continuing disclosure agreement requires data that does not exist or that the City cannot obtain, the Finance Director will consult with bond counsel and/or Disclosure Counsel on how to report such information.
TRAINING
The City will provide training for the staff involved in the preparation of the Official Statement, which will be coordinated by the City Manager and the City Attorney, with the assistance of Disclosure Counsel. The City Manager shall be primarily responsible for maintaining a record (including attendance) of such training. Training will be provided at least annually or prior to the offering of any new Obligation. The training sessions shall be provided to assist staff members involved in identifying relevant disclosure information to be included in the Official Statement. The training sessions also provide an overview of federal laws relating to disclosure, situations in which disclosure rules apply, the purpose of the Official Statement, a description of previous SEC enforcement actions and a discussion of recent developments in the area of municipal disclosure. Attendees at the training sessions shall be provided the opportunity to ask questions of Disclosure Counsel concerning disclosure obligations and are encouraged to contact Disclosure Counsel at any time if they have questions.
The Finance Director shall receive training from bond counsel or Disclosure Counsel on the mechanics for making filings on EMMA, as well as the information required to be filed in the applicable District’s annual reports. This training will take place after the Annual Report Checklist is prepared or more effective or feasible compliance method is established.
CERTIFICATE OF RECEIPT AND UNDERSTANDING
I certify that I have received a copy of the City of Hercules’s Disclosure Procedures. I have reviewed and understand its contents and agree to abide by the principles and requirements in the Disclosure Procedures.
Name:__________________________ Date: __________________________
EXHIBIT A
DEVELOPER QUESTIONNAIRE
This questionnaire is intended to provide information that will be used by Disclosure Counsel in connection with the preparation of the Preliminary Official Statement and the final Official Statement for the bonds proposed to be issued by [___________] (the “District”). Although the bonds are exempt from the requirement that they be registered with the Securities and Exchange Commission, they are subject to the anti-fraud provisions of the federal securities laws and the laws of the State of California. Therefore, it is critical that the Preliminary Official Statement and final Official Statement not contain any material misstatements or omissions. Accordingly, the information that you provide in response to this Questionnaire must be complete and accurate in every respect.
As used herein the term “Property” refers to all of the property within the applicable District. The term “Project” refers to the proposed improvements to be made within the applicable District including all residential and commercial development.
OWNERSHIP
Name of the developer (the “Developer”) of the property (the “Property”) within the applicable District:
Please describe the ownership structure of the Developer. Include a description of any partnership, limited liability company or other arrangements, and names of all general partners, members and officers. Attach resumes of key individuals and a copy of any partnership agreements, operating agreements, articles of incorporation and bylaws.
Please attach copies of the Developer’s most recent annual and quarterly financial statements. If the Developer is a publicly held company, please provide copies of the most recent 10Q or 10K filing.
Include at least one reference from a bank or financial institution.
Note: Financial statements and information obtained from bank references are necessary as part of the due diligence process required to issue the bonds. Any nonpublic information will remain strictly confidential unless and until published as part of the Official Statement.
Who is the contact person for the Project?
Name:
Title:
Phone Number:
E-Mail:
Please provide the contact information of the attorney who will be representing the Developer in connection with the issuance of bonds by the applicable District.
Name:
Title:
Phone Number:
E-Mail:
Please attach your most recent copy of a preliminary title report for the Property.
PROJECT INFORMATION
Name of Project:
Location of Project:
Description of Project
Number of gross acres:
Number of developable acres:
How long has Developer owned the Property?
Describe the existing land uses on the Property:
Please summarize the existing entitlements for the Project (i.e., number and type of residential units, commercial square footage, industrial square footage, recreation uses, other public uses) and provide a list of the governmental approvals that govern development of the Property:
Please attach a copy of each Purchase and Sale Agreement including any amendments executed by Developer for Property in the applicable District.
Please summarize the improvements to be completed by the Developer with respect to the Project and the status of the construction of the improvements and a timeline for completion.
Please provide a budget for the improvements to be installed by the Developer and describe how the improvements are to be financed.
Please answer the following questions and provide any of the following received with respect to the Property.
Has an environmental impact report been approved for the Project? ___ YES ___ NO. If yes, please provide a copy along with any supplement thereto.
Has a Phase I Environmental Site Assessment been prepared for the property? ___ YES ___ NO. If yes, please provide a copy of all assessments prepared.
Has a soils report been prepared for the Project? ___ YES ___ NO. If yes, please provide copies of all reports.
List any approved tentative, final or parcel maps applicable to development of the Project and provide a copy of all conditions to development.
Are any impact fees owing as a condition to develop? ___ YES ___ NO. If yes, please describe, list below and provide copies of any agreements or documents which contain such conditions.
Is there any endangered species habitat on the Property? ___ YES ___ NO. If yes, please describe.
Are there any legal impediments that could delay or prevent the buildout of the Project as planned? ___ YES ___ NO. If yes, please describe.
Are you aware of any proposed restrictions on the rate of future growth in the jurisdiction where the Project is to be located which may impact the development of the Project (i.e., proposed growth control ordinances or initiatives or limitations on water availability)? ___ YES ___ NO If YES, please explain:
Are there any geological impediments (earthquake faults, flood zones, high ground water, soil slippage, etc.) to buildout of the Project? If so, please describe.
What are your long-term plans for any portion of the Property not already conveyed to merchant builders? For any portion to be constructed by Developer please describe planned improvements and timing.
Are there any existing trust deeds/loans on the Property? ____ YES ____ NO. Please state the name of the lending institution, the approximate maximum loan amount and approximate current balance of the loan.
Has construction financing for the Project been obtained? ____ YES ____ NO. If yes, please describe the source and amount of such loan and any acquisition and development loans, and provide copies of all loan agreements and promissory notes. If no, describe whether any loans are required to develop.
Other than the applicable District, is there any existing or proposed community facilities district or assessment district that includes all or a portion of the Property? ____ YES ____ NO. If yes, please describe the name, dollar amount and a contact person for information regarding each district.
Have any property taxes or assessments on the Property been delinquent at any time during the past 3 years? ___ YES ____ NO. If yes, please explain.
Please attach a copy of the most recent tax bill for each parcel of the Property and evidence that current installments due have been paid (in the form of a copy of check, wire or receipt for payment).
Has any claim been made or suit been filed, or is any claim or suit now threatened against the Developer or the Property with respect to the Project? ____ YES ____ NO.
If yes, please attach a copy of the complaint, or if unavailable, please list the court in which the action is pending and the case number, or if the claim or action has not yet been filed please attach any documents summarizing the claim or action.
RELATED PROJECT INFORMATION
Has an absorption study been done for the Project within the last two years? __ YES ___ NO. If yes, please provide a copy.
Has an appraisal been done for the Property within the last two years? __ YES __ NO. If yes, please provide a copy.
Is any of the Property (other than portions thereof that have been improved with completed residential or commercial structures) currently for sale? __ YES __ NO. If yes, please provide a copy of the sale terms.
EXPERIENCE AND FINANCIAL CAPACITY OF DEVELOPER
Has the Developer, or any individual or entity which has an ownership interest in the Developer, ever defaulted in the payment of a special tax or an assessment on property owned by it? ___ YES ___ NO. If yes, please explain.
Is the Developer, or any individual or entity which has an ownership interest in the Developer, now in default on any loans, lines of credit or other obligation, or has the Developer (or related entity) been in default on any loans lines of credit or other obligation in the past five years? ____ YES ____ NO. If yes, please explain.
Has the Developer, or any individual or entity which has an ownership interest in the Developer, ever filed for bankruptcy or been declared a bankrupt? YES NO. If yes, specify date and location of court where bankruptcy action took place.
Have you prepared a business plan and/or pro forma for the proposed Project? ____ YES ____ NO. If YES, please attach a copy. If NO, please prepare a detailed pro forma and provide it as soon as possible.
Has the Developer, or any individual or entity which has an ownership interest in the Developer, ever failed to comply within the last five years with the terms of any agreement to provide continuing disclosure with respect to a bond issue? ____ YES ____ NO. If YES, please describe the bond issue and the nature of the failure to comply.
NOTICE REGARDING DISCLOSURE.
The Securities and Exchange Commission recently adopted amendments (the “Amendments”) to Rule 15c2-12 under the Securities Exchange Act of 1934 relating to certain required disclosure information that must be made available to prospective purchasers of municipal bonds. Under the Amendments, certain material information must be disclosed (i) in connection with the initial offering of bonds with respect to “material persons”; and (ii) on an ongoing basis with respect to “obligated persons.” Whether a property owner/developer might be a material person or an obligated person will depend on all of the facts and circumstances. If the information you provide in response to this questionnaire indicates this might be the case, the financing team will review with you the information that may need to be disclosed to potential bond investors in order to satisfy the Amendments.
The undersigned hereby certifies that all responses provided herein are true and correct.
By: [ ]
By:
[President/CEO/CFO/or Equivalent]
2 4880-2902-7335v2/200861-0005
1 4880-2902-7335v2/200861-0005
A-6
4880-2902-7335v2/200861-0005
4838-6512-4508v2/024344-0003
The list set forth above is applicable for transactions after December 1, 2010. Continuing disclosure undertakings for transactions prior to that date contained a similar, but less extensive list of material events.