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<br />permitting the commingling of funds, require that bond proceeds be "carved-out" for purposes of calculating rebate. <br />Interest must be allocated to the portion of the commingled fund that represents bond proceeds of the issue in question. <br /> <br />3. Transferred Proceeds Calculations. When a bond issue is refInanced (refunded) by another issue, special services <br />relating to "transferred proceeds" calculations may have to be performed. /Under the regulations, when proceeds of a <br />refunding issue are used to pay principal on a prior issue, a pro rata portion of the refunded bond proceeds are treated <br />as "transferred" to the refunding issue. Although no funds are physically transferred from one issue to another, it is <br />often necessary to perform these calculations for rebate purposes. <br /> <br />4. Debt Service Fund Residual Calculations. Because tax rates are established using an estimated collection <br />percentage, the balance in the debt service fund (often referred to as the Interest & Sinking Fund) may exceed the <br />amount necessary to pay the current year's debt service requirements. Any such excess amounts in a debt service fund <br />must be treated as a "reserve fund," thereby subjecting the excess balance to the rebate requirements. To the extent <br />that any amounts deposited in the debt service fund remain for more than thirteen months on a frrst-in, frrst-out basis, <br />that excess is classified as a "reserve fund portion" until used for payment of debt service. Special services are <br />required to complete these debt service fund residual calculations. <br /> <br />5. VariablelFIoating Rate Bond Issues. Special services are also required to perform the arbitrage rebate calculations <br />for variable rate bonds. A bond is a variable rate bond if the interest rate paid on the bond is dependent upon an index <br />which is subject to changes subsequent to the issuance of the bonds. The computational requirements of a variable rate <br />issue are more complex than those of a fixed rate issue and, accordingly, require significantly more time to calculate. <br />For example, it is necessary to evaluate both a fIve-year yield as well as one-year yield increments to determine which <br />yield is most benefIcial to the issuer. <br /> <br />6. Yield Restriction AnalysislYield Reduction Computations. The Code provides that proceeds of a bond issue may <br />not be invested above the yield on the bond unless an applicable exception applies which provides a temporary period <br />during which proceeds are not yield restricted. First Southwest provides analysis to determine the amount of proceeds <br />which must be yield restricted and provides computations to verify that the proceeds have been properly restricted. In <br />addition, the 1993 Treasury Regulations provide that a yield reduction payment may be made in lieu of yield <br />restricting proceeds. First Southwest will provide the necessary computations to determine the amount of yield <br />reduction payment which must be made. <br /> <br />The fee for any Bonds under this contract shall only be payable if a computation is required under Section 148(t)(2) of the Code. <br />In the event that any of the Bonds, fall within an exclusion to the computation requirement as defmed by Section 148 of the <br />Code or related regulations and no calculations were required by First Southwest to make that determination, no fee will be <br />charged for such issue. For example, certain bonds are excluded from the rebate computation requirement if the proceeds are <br />spent within specific time periods. In the event a particular issue of Bonds fulfills the exclusion requirements of the Code or <br />related regulations, the specified fee will be waived by First Southwest if no calculations were required to make the <br />determination. <br /> <br />Recognizing that computational complexities are reduced when all or the majority of the gross proceeds of an issue are <br />expended, it is First Southwest's policy to reduce fees to the following levels, as appropriate: <br /> <br />Per issue fees for each circumstance itemized below shall be: <br /> <br />Q Proceeds expended in prior year. Liability updated and report issued. <br />Q Debt Service Residual Calculation only. <br />Q Reserve Fund calculation only. <br />Q Escrow Fund only. <br />Q Rebate Fund only. <br />Q Yield RestrictionlYield Reduction Computation only. <br /> <br />$500 <br />$1,250 <br />$1;250 <br />$500 <br />$500 <br />$2,000 <br /> <br />5 <br />