5.3.3 Documentation for a Negotiated Public Offering

UNDERWRITING DOCUMENTS – If there is more than one underwriter, there may also be an “Agreement Among Underwriters” (AAU) allocating rights and obligations among the underwriters. A selling group agreement may also be used if bonds will be sold through broker-dealers who are not underwriters and party to the bond purchase contract. The GFOA recommends that the issuer be aware of its important role in evaluating an AAU and other agreements between underwriters or selling groups.85 The agreements may include consideration of the rules of a transaction and should reflect a tone consistent with the issuer’s underwriting, legal, administrative, and financial policies.

BOND PURCHASE AGREEMENT – In a negotiated public offering, the agreement for the purchase and sale of the bonds is formalized in a purchase agreement between the underwriter(s) and the public agency. The bond purchase agreement, which covers the timeframe beginning on the date of sale and ending on the financing’s closing date generally specifies the following:

Purchase price of the securities to be paid by the underwriters, which considers the underwriter’s compensation and reimbursements.
Interest rates, maturity dates, and principal amounts of each maturity of the bonds.
Time, date, and place of the closing of the financing.
The public agency’s representations and warranties to the underwriters, including representations respecting authorization of the transaction and the completeness and accuracy of disclosure.
Any agreements required to allow the underwriters to meet their obligations under U.S. Securities and Exchange Commission (SEC) Rule 15c2-12 (including requiring the execution and delivery of a continuing disclosure agreement or similar document) See Section 8.4, Continuing Disclosure.
A list of market disruption events that allow the underwriters to terminate the contract.
An enumeration of the documents, certificates, and opinions that must be delivered concurrently with the delivery of the bonds.
The identification of eligible costs (see Section5.4.2, Underwriting Fees and Expenses) to be borne by the issuer and expenses (including regulatory fees)86 incurred in connection with the financing that are the responsibility of the underwriters.
Liquidated damages (often secured by a good faith deposit) in the event the underwriters fail to take delivery of and pay for the bonds as required.
The rights, if any, the underwriters and the public agency have to indemnification from each other.