Tax-Exempt Revenue Bonds:

1. Tax-Exempt Revenue Bonds: Low-Interest Rate Financing for Industrial, Commercial & Community Development

2. Presentation By: Dan Bronfman, Growth Capital Associates, Inc. 925-386-0760 Sam Balisy, Kutak Rock, LLP 213-312-4000 Michael Sarina, Rogers Family Company Moderated by: Mona Dmitrenko 916-448-8252 x16

3. Agenda: • Overview • Interest Rate Advantage • Revenue Bond Structure • Revenue Bond Qualifications • Project Qualifications: • Industrial Development Bonds • Non-Profit Bonds – 501 (c ) 3 • Recycling, Solid Waste Disposal Bonds

4. Overview: • Qualified projects undertaken by private companies can be funded with the proceeds of a tax-exempt revenue bond issue – “Private-Activity Bonds”. • Tax-Exemption results in low-interest rates; similar to rates paid by governmental entities. • Repayment of the bonds are not guaranteed by the government (i.e. City, State or Federal). • Borrower must be creditworthy and merit financing for the project.

5. Interest Rate Advantage (estimated) Securities Industry & Financial Markets Association Municipal Swap Index History Annual fee ranges from 1.25% to 1.75% for most borrowers.

6. Revenue Bond Structure • Bonds are “issued” by a governmental entity to obtain tax-exempt status. Proceeds are “loaned” to borrower to fund the project. The issuer acts as a “conduit” to the tax-exempt marketplace. • Bonds are not guaranteed by the government (city, county, state or federal). Bonds are a special, limited obligation of the Issuer. Borrower is directly responsible for repaying the bonds – principal and interest. • Funds are held by a Trustee until used for project costs. Unspent proceeds are invested in conservative investments such as money market funds, governmental securities. • “Credit Support” for the Bond Issue: • Direct-Pay Letter of Credit – Payments of interest & principal to bondholders are made via draws on the direct-pay letter of credit. Borrower reimburses the letter of credit bank for payment of these draws. • Tax-Exempt Loan or Private Placement – Bonds are sold directly to an institutional investor, bank or individuals. The investor evaluates the credit worthiness of the borrower / project.

7. Revenue Bond Qualifications • Each project must meet qualifications established by Congress and written in the Federal Tax Code – These rules don’t change; “don’t ask”. • State of California has created public-policy overlays for IDBs and solid waste programs, including job-creation/retention, living wages, target “distressed” communities, payment of insurance benefits, etc. • Generally, bond proceeds can only be used to fund acquisition of fixed, depreciable assets: land, building, and equipment. • Generally, expenses incurred prior to beginning the bond issuance process cannot be paid for with tax-exempt bond proceeds. Refinancing is permitted for non-profit borrowers. • Minimum financing need of about $2.0 million; bond proceeds must be spent over a 36 month period after issuance.

8. Industrial Development Bonds • Acquisition of Land, Buildings and/or New Equipment Associated with Manufacturing or Value-Added Processing Operations. • Project size not to exceed about $15.0 million, including land, buildings and equipment. • Funds can be used for: • No location restrictions.

9. IDB Borrower Profile • Annual Sales Ranging from $10.0 to $25.0 million. • Most are Family-Owned and Operated • Financially Strong • In Business Over 10 to 20 Years. • Project Results in “Public Benefits”. • Target Projects in State Enterprise and Federal Empowerment Zones…but no location restrictions.

10. Non-Profit Bonds • Bond proceeds can be used to fund the acquisition/development of capital assets (i.e. real estate & equipment) that further the nonprofit goals of the organization. • Examples of potentially qualified non-profit organizations: • Able to refinance existing commercial debt with low-interest, tax exempt bonds; a limited amount of working capital can be financed with bonds.

11. Recycling /Solid Waste Disposal Bonds • Projects that divert solid-waste materials from the household or commercial waste stream. • Qualified Projects Include: • State has a grant (free $) program to pay transaction costs for waste financings.