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PROPOSED UNLIMITED TAX GENERAL OBLIGATION BONDS Fire Station Bond Issue A PROPOSAL FOR INVESTMENT BANKING SERVICES D.A. DAVIDSON & Co. August 10, 2001 • • 2001-37 ---PAGE BREAK--- 1. FINANCING PROFESSIONALS D.A. Davidson & Co. bel ieves that an important el ement in assisting cl ients with successful bond issues is personal service. We travel thousands of mil es every year to meet with our cl ients face to face. The technical skil l , intricate knowl edge of markets and commitment to service of our publ ic finance professional s make most of the issuers we serve repeat cl ients. Brief resumes of key personnel that woul d primaril y be invol ved in the City's Bond issue are provided bel ow. Mr. McLaughl in wil l be the primary contact and wil l attend meetings on behal f of D.A. Davidson & Co. Ms. Ekstrom wil l assist Mr. McLaughl in al ong with other associates. Jack McLaughlin, Vice President Address: Ol d City Hal l , Suite 400 Spokane, W A 9 9 21 0 Phone: (800) 676-8323 Email : jmcl aughl in@dadco. com Mr. Jack McLaughl in is headquartered in our regional office in Spokane. In addition to assisting the City of Moscow on the swimming pool project and the LID refinancing, his experience incl udes extensive school district, city/county/special purpose revenue bonds, other general obl igation bonds and special assessment bond financing. He is currentl y working on or has recentl y compl eted projects for Chel an County, Spokane County, Benton County, City of Wenatchee, City of Cl arkston, Nine Eastern Washington Counties (Martin Hal l Juvenil e Detention Center) , Adams County, Asotin County, City of Airway Heights, the City of Kel l ogg, Central Shoshone County Water District, the City of Dayton, the City of Pul l man and the City of Union Gap, Sil verdal e Water District, and Val Vue Sewer District, to name a few. In the past he has assisted many Eastern Washington School Districts incl uding, Central Val l ey, West Val l ey (Spokane) , Cl arkston, Sel ah and Mt. Adams, to name a few. Whil e managing Eastern Washington and Idaho publ ic finance in the 70's for Foster & Marshal l , and in the earl y 9 0's with SeaFirst Jack assisted many other Idaho and Eastern Washington cl ients on the sal e of their bonds. Mr. McLaughl in hol ds Bachel or of Arts Degrees in Marketing and in Business, Govern ment and Society and attended the MBA program in Finance at the University of Washington. Bridget R. Ekstrom, Vice President, Public Finance Address: 529 East Main Street, Bozeman, MT 59 715 Phone: (800) 233-4359 Email : [EMAIL REDACTED] ---PAGE BREAK--- Bridget Ekstrom, Associate Vice President Publ ic Finance, is l ocated in our Bozeman Publ ic Finance office and is primaril y responsibl e for providing Investment Banking Services to counties, cities, and school districts across the States of Washington, Montana and Idaho. In serving as Financial Advisor and al so in her extensive experience in various underwriting capacities, she bas gained useful insights in working with rating agencies and insurance companies. Since joining the firm in 1 9 9 2, Ms. Ekstrom has headed up D.A. Davidson's efforts in the preparation of discl osure and marketing material s for a broad array of Bond issues in the Rocky Mountain and Pacific Northwest regions. In addition to assisting on previous City of Moscow bond issues, she has prepared hundreds of discl osure documents used by underwriters in eval uating credits and marketing bonds to investors and is considered a l eader in our industry in this area. Ms. Ekstrom hol ds a Bachel or of Science Degree in Business from Montana State University. 2. FINANCING POINTS AND STRUCTURING IDEAS Interest Rates. We anticipate that the City of Moscow coul d capture interest rates in the range of 2.75%- 5.20% for a bond issue with maturities ranging from 1 to 20 years. In the past 3 years several benchmark interest rate indicators (such as the 1 0-Year Treasury Notes and 30-Year Treasury Bonds) hit l ows not reached since the 1 9 70's. From a historical perspective it is a very good time to finance capital projects. Rating. We anticipate that the City of Moscow woul d benefit in terms of improved marketabil ity and l ower borrowing costs by securing a bond rating from one of the major rating agencies. If it is deemed advisabl e to obtain Bond Insurance and/or an underl ying Bond Rating D. A. Davidson & Co. wil l provide al l necessary services. Municipal Bond Insurance. If determined to be in the best interest of the City, we woul d appl y for insurance with the four primary insurance companies that provide municipal bond insurance. The City of Moscow woul d l ikel y "qual ify" for insurance from al l of the four companies and we wil l prepare a present val ue anal ysis of the cost/benefit of bond insurance. Investment Opportunities for Local Investors. 2 ---PAGE BREAK--- D. A. Davidson & Co. is recognized as a l eader in sel l ing municipal bonds to the retail market (l ocal investors) . We guarantee that l ocal investors wil l have first choice on the bonds rather than what is l eft over after the institutional orders. We recognize the importance of providing this service to our cl ients, as we bel ieve that l ocal investors, who are paying for the bonds, shoul d have the first opportunity to purchase the bonds. Most City taxpayers and investors are al ready famil iar with D.A. Davidson through our l ocal offices in Moscow and Lewiston. Local investors in the City of Moscow Bonds wil l have the opportunity to tal k directl y with our financial professional s about the financing. If requested, we wil l gl adl y provide the zip codes to the City of the purchasers of the bonds. 13. FEE FOR SERVICES Our fee for services described herein wil l be a maximum $8.25/$1,000. Our fee wil l incl ude travel in Washington and Idaho, presentations to the City Council and meetings with the el ection committee as necessary, and al l other expenses incurred by the Underwriter except preparation, printing and distribution of the prel iminary and final official statements, and travel outside the states of Idaho and Washington, if any. It is understood that the City of Moscow wil l be responsibl e for al l other fees incl uding the fees of bond counsel , bond rating (if any) , bond insurance (if any) , out of state travel , paying agent and miscel l aneous expenses. 3 ---PAGE BREAK--- 14. ACCEPTANCE/CANCELLATION If the foregoing is in accordance with your understanding, kindl y confirm your acceptance by signing in the space provided bel ow, whereupon this Agreement shal l become effective. It is understood that the City of Moscow reserves the right to cancel this contract with D. A. Davidson & Co. at anytime, upon providing I 0 days written notice, with no compensation due the underwriter except for out-of-state travel , if any. Very tn!l y yours, D.A. DAVIDSON & CO. Accepted As Of The Date Hereof By: CITY OF MOSCOW, IDAHO Clerk 4 ---PAGE BREAK--- SUPPLEMENTAL INFORMATION- EXHIBIT B I FIRM PROFILE D.A. Davidson & Co. is the largest investment firm headquartered in the Pacific Northwest and Rocky Mountain regions. Founded in 1 9 35, D.A. Davidson & Co. has evolved from a small brokerage firm to a full-service investment house providing brokerage services, corporate finance, institutional sales, professional money management, fixed-income trading, equity trading equity research, and a very active and experienced public finance group. We offer the following facts relating to D.A. Davidson & Co.: • Equity Capital in excess of$76 million; • Assets under management of over $11 billion (over one-third m fixed-income securities); • Thirty-five retail offices in 5 states including: • Washington • Oregon • Idaho (6 offices including Moscow) • Montana • Wyoming • Utah • Over l 00, 000 active client accounts; • Fourteen specialists posts (which traded over 1 .09 billion shares in 19 9 9 ) on the Pacific Stock Exchange, making us the largest operator of posts on the Pacific; and • Over 800 employees, in the Pacific Northwest/Northern Rocky Mountain region including 325 registered securities sales representatives. ---PAGE BREAK--- I P!JBI.IC FINANCE EXPERIENCE Since the formation of the Public Finance Department, D.A. Davidson & Co. has served as the premier investment banking firm for the entire spectrum of Montana, Idaho and Washington issuers. This broad experience serves as tbe cornerstone for our public finance and Investment Banking Services in the new millennium. Our unmatched experience in serving as underwriter or financial advisor for over 80% of the municipal bond issues offered in Montana and a substantial presence in Idaho, Washington and Utah enables us to offer our clients unique insights into structuring and marketing considerations tailored to the marketplace. As a result, our clients enjoy the lowest interest rates available. We have served as financial advisor or underwriter for virtually every type of municipal financing, ranging from school district general obligation issues to health care revenue bonds to housing bonds to airport improvement revenue bonds. The bond issues for which we have served as managing underwriter range in size from several hundred thousand dollars to $1 40 million. Our municipal clients include the vast majority of issuers in Montana, including 52 of the 56 counties, 1 0 separate State agencies (80 separate bond issues) , 1 1 0 of the 1 27 municipalities, Over 1 50 School District's; and a number of special purpose issuers. In Idaho we serve as an underwriter to the State Housing Authority, and have had the pleasure of serving the City of Moscow, Central Shoshone County Water District, the City of Kellogg, Bottle Bay Water and Sewer District and the Consolidated Free Library District of Kootenai County. In Washington we have recently served or are currently working with many clients such as Chelan County, Spokane County, Benton County, Asotin County, City of Newport, City of Pullman, City of Wenatchee, City of Airway Heights, City of Dayton, City of Warden, City of Colville, East Wenatchee Water District, Val Vue Sewer District, Benton County Fire Protection District No. 1 , Snohomish County Fire Protection District No. 4, Spokane County Fire Protection Districts No. 1, 4, 9 , 8 and 1 3, and the Spokane International Airport to name a few. In addition to our investment banking expertise, we have the most active Montana municipal bond trading desk in the country and one of the leading trading desks in Washington and Idaho. Often, the first call made by an institution or dealer wishing to sell a block of Montana, Washington or Idaho Bonds is to Mark Froio (Seattle) , Alouette Wadman or Bob Kelly at D.A. Davidson & Co. We have been told by our investment industry colleagues that no other firm dominates a given state's municipal finance market like D. A. Davidson & Co. does Montana's. With our new offices and investment banking presence we are establishing the same reputation in Idaho and Washington. We take great pride in our extensive experience, and we're confident this 11 ---PAGE BREAK--- experience can serve City of Moscow as well. I OuR SERVICES The services that D.A. Davidson & Co. provide as underwriter are designed to encompass all elements of a successful financing. We believe a successful financing is characterized by a bond issue that is properly structured under state and federal law, achieves the goals and objectives of the issuer and results in the lowest possible borrowing costs. D.A. Davidson & Co. is careful to pursue this optimal financing structure in the context of the specific financial situation of our client and to make appropriate recommendations based on that situation. In addition, we feel that it is imperative to minimize the administrative burden on the issuer. Specifically, our services include: • Structuring Analysis • Sizing • Cash Flow Analysis • Capitalized Cost Estimates • Repayment Schedules • Funding Sources • Investment Earn ings Analysis • Cost Analysis • Taxpayer Impact Analysis • Preliminary and final Official Statement Preparation (Disclosure Documents) • Review of All Resolutions and Necessary Govern mental Actions • Coordination with All Project Professionals • Preparation of Financing Time and Responsibility Schedule • Rating Agency Preparation and Presentations ( if necessary) • Bond Insurance Cost/Benefit Analysis and Presentations • Bond Market Monitoring and Timing • Preliminary and Final Pricing Calls and Meetings • Comparative Analysis oflnterest Rates • Market of Bonds, Including Local Advertising • Retail and Institutional Sales • Preparation of Debt Service and other Financing Schedules • Administration and Coordination of Closing the Bond Issue 1ll ---PAGE BREAK--- I REFERENCES We encourage the City of Moscow to contact the following references to get an issuer's perspective of our work. CHELAN COUNTY- recently assisted the County in issuing general obligation bonds for economic development purposes throughout Chelan County. Contact: Mr. David Griffiths, County Treasurer (509) 6 6 4-5405. CITY OF WENATCHEE -Served as underwriter on recent general obligation and revenue bonds totaling $9,995,000. Contact: Mr. Mark Calhoun, Finance Director (509) 6 6 4-3300. SPOKANE COUNTY- Jack McLaughlin, with D.A. Davidson & Co. and with previous employers, has been very active as an underwriter in County Revenue, G.O. and R.l.D. bond issues including $23,500,000 in 1999 and $1 4,700,000 in 2000 for various airport improvements. Contact: Mr. Marshall Farn ell (509) 447-26 00. STEVENS COUNTY- Served County on L.T.G.O. bond issue (Insured Aaa!AAA), including structure, market timing, insurance evaluation, etc., and as underwriter on R.LD. No. 1 Assessment Bonds (Non-Rated). Completed refinancing of $3,1 45 L.T.G.O bonds and $6 ,000,000 L.T.G.O. Bonds (Martin Hall) Contact: Commissioner Vickie Strong, (509) 6 84- 3751. EAST WENATCHEE WATER DISTRICT- recently assisted the District in funding new facilities and in refinancing outstanding bonds. Contact: Mr. Greg Brizendine, Manager, (509) 884-356 9. BENTON COUNTY-Recently acted as underwriter on a $23,6 15,000 General Obligation Bond Issue. Contact: Mr. Max Benitz, Jr., Chairman, (509) 736 -3080. CITY OF PULLMAN- assisted the City of Pullman on various projects including the $1 ,985,000 Voted General Obligation Bonds for various improvements in the City. Contact: Mr. John Tonkovich, Finance Director, (509) 334-4555. IV