1-3 detroit pension lawsuit exhibit c

8/13/2019 1-3 Detroit Pension Lawsuit Exhibit C

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GRSService Contract 2005between the

Detroit General Retirement System Service Corporationand the

City of Detroit

Dated May 25, 2005

II I

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Table of ContentsSection.Definitions......................................................................................................... 1Section 2. Constituent Parts of the Service Contract and Incorporation byReference........................................................................................................... 1Section.Certainarticularsf the Initial Funding.......................................................... 1Section. InitialFunding................................................................................................... 4Seetion . OptionalrepaymentFixedRate ortion...................................................... 4Seetion . OptionalrepaymentVariable ate ortion.................................................. 5Seetion. Stated edges.................................................................................................... 6Section . Special rovisions oncerninghe Transfer arty ............................................ 6SignaturePages ... ~ ........................................................................................................S-1AttachmentsSchedule 1 - Stated AmountsFunding Schedule

Schedule 2 - Scheduled Payments AttachmentSchedule 3 - Sinking Fund Installments AttachmentSchedule 4 - Scheduleof Credit InsuranceSchedule 5 - Schedule of Stated HedgesGeneral Terms and Conditions



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GRSService Contract 2005, dated May25, 2005, between the Detroit GeneralRetirementSystemService Corporation,a Michigannonprofit corporation (the Corporation),and the Ci.ty of Detroit,Michiganthe City),WITNESSTH:

Whereas, he City is authorized by Ordinance No. 05-05 (the Funding Ordinance) toenter into this Service Contract to obtain the services of the Corporationof assisting the City inmaintaining the actuarial integrity of the General RetirementSystem the Retirement System);Now,Therefore, in consideration of the premises and the mutual promises containedhere, the parties hereto agree as follows:

Section1. Definitions(a) Undefined apitalized terms used herein and defined in the first paragraphhereofor the preamble ereto are used herein as therein defined.(b) The following terms have the following respective meanings or the purpose

this Service Contractunless the context otherwiseclearly requires:Business Daymeans a day on which both the City and the Trustee areopen or the transaction of business.Trust Agreementmeans he trust agreement, to be dated the Closing Date,between the Corporation and the Trustee establishing the Funding Trust andproviding or the issuance of the Certificates.Trustee means U.S. Bank National Association and its successors astrustee under the Trust Agreement.Underwriting Agreement means the Underwriting Agreement, dated thedate hereof, among he Corporation, the City and the Representative on behalf of

the Underwriters.Section 2. Constituent Parts of the Service Contractand Incorporationby Reference

The Service Contract consists of this instrument (the Specific Terms)and the GeneralTermsand Conditions of GRSService Contracts, dated as of May1, 2005 (the GeneralTerms),which s incorporatedby reference and made part hereof as if set forth in full in theService Contract.Section 3. CertainParticulars of the Initial Funding

(a) Stated Funding Amount,Subiect UAALnd Ancillary AmountsThe Stated Funding Amountand the Subject UAAL,he Ancillary Amountsand the

components hereof are set forth in Schedule 1 (the Stated AmountsFundingSchedule).(b) Scheduled PaymentDates and Amounts,Service Charge ClassesThe Scheduled PaymentDates, the amounts of Scheduled Paymentsdue on the respectiveScheduledPaymentDates and the respective Service ChargeClasses are set forth in Schedule 2(the Scheduled PaymentsAttachment).



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(c) Sinking Fund InstallmentsThe Scheduled Payments subject to Sinking Fund Installments, the amount of therespective Sinking Fund Installments and Scheduled PaymentDates on which the Sinking FundInstallments are due are set forth in Schedule3 (the Sinking Fund nstallments Attachment).(d) Fixed Rate Funding PortionThe otal of the ScheduledPayments or the Fixed Rate Class constitute the Fixed RateFundingPortion. Such total is $510,530,000.

(1) The Fixed Rate Service Charges applicable to the Fixed Rate FundingPortion are set forth in the ScheduledPayments ttachmentpposite the ScheduledPayments omprising the Fixed Rate FundingPortion.(2) TheFixed Rate Service ChargePaymentDates are the fifteenth day ofeach June and December, commencingDecember15, 2005.

(e) Variable Rate FundingPortion(1) The total of the Scheduled Payments for the Index Rate Class constitutethe Variable Rate FundingPortion. Such otal is $269,000,000.(2) Index Rate Service Charges are the only Type of Variable Rate ServiceCharges.

(f) Index Rate Fundin~ Cost Supplement(1) The Index Rate Service Charges for any Index Rate Service ChargePeriod are equal to Three-Month LIBORplus 0.28% determined by the ContractAdministrator on the Index Rate Service Charge Determination Date immediatelypreceding such Index Rate Service Charge Period and computedusing the Index RateDay Count Convention.(2) Index Rate Service Charges determined for any Index Rate Service ChargePeriod are effective on the Index Rate Service Charge AdjustmentDate for such IndexRate Service Charge Period.(3) The following terms have the respective meanings for the purposedetermining ndex Rate Service Chargesunless the context clearly otherwise requires:

Index Rate Day Count Convention is the actual number of days elapsedin a year of 12, 30-daymonths.Index Rate Service Charge Determination Dates are the LI]3ORRateDeterminationDates.Index Rate Service Charge Adjustment Dates are the first day of each

Index Rate Service ChargePeriod.Index Rate Service Charge Payment Dates are the 15th day of eachcalendar quarter (or, if such day is not a Business Day, the immediately ollowingBusiness Day), commencingwith September 2005.Index Rate Service Charge Period is the period beginning on (andincluding) the Closing Date or the most recent Index Rate Service Charge

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PaymentDate and ending on (but not including) the Index Rate Service ChargePaymentDate on which ndex Rate Service Charges were paid in full by the City.(4) The following terms have the respective meanings for the purposedetermining Three-Month IBORnless the context clearly otherwise requires:

LIBOR Business Day means a Business Day on which banks in bothLondon nd NewYork City also are open for the transaction of business.LIBORRate Determination Date means, with respect to a particularIndex Rate Service Charge Adjustment Date, the second L]]3ORBusiness Dayimmediately before such Index Rate Service Charge AdjustmentDate.Reference Bank means a leading bank other than the ContractAdministrator engaged n transactions in Eurodollar deposits in the internationalEurocurrency market and not controlled by or under eornmoncontrol with theContract Administrator.Three-Month LIBORmeans for a particular LIBORRate Determination

Date, the London nterbank Offered Rate for deposits in U.S. dollars with a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m., Londontime. If such rate does not appear on Telerate page 3750, then the rate for that dayshall be determinedby the alternative methoddescribed in paragraph (5), below.(5) The following constitutes the alternative methodfor determining Three-Month LIBORwhen a rate for a London Interbank Offered Rate for deposits with athree-month maturity in U.S. dollars does not appear on Telerate Page 3750 as of 11:00a.m., Londonime, for a particular LIBOR ate DeterminationDate.

(i) The rate for such LIBORRate Determination Date shall be determinedon the basis of the rates at which deposits in U.S. dollars for a three-monthmaturity and in a principal amount of at least US$1,000,000are offered atapproximately 11:00 a.m., London ime, on such LIBOR ate Determination Dateto prime banks in the London nterbank market by at least three Reference Banksselected by the Contract Administrator. The Contract Administrator shall requestthe principal London ffice of each Reference Bank o provide a quotation of itsrate. If at least two quotations are provided then Three-MonthLIBORor suchL]]3ORRate DeterminationDate shall be the arithmetic meanof such quotations.

(ii) If fewer than two quotations are provided, then the Three-MontltLIBORor such LIBOR ate Determination Date shall be the arithmetic meanofthe rates quoted by three major banks in NewYork City, selected by the ContractAdministrator, at approximately 11:00 a.m., NewYork City time, on such L]~I3ORRate DeterminationDate, for loans to leading Europeanbanks in U.S. dollars in aprincipal amountof at least US$1,000,000 aving a three-month maturity.(iii) If banks selected by the Contract Administrator for the purposes ofclause (ii), above, are not quoting rates for such loans, then Three-Montl~ IBORfor such LIBORRate Determination Date shall be the Three-MonthLIBOR orthe immediately preceding LIBOR ate Determination Date.

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(g) Credit InsuranceThe Corporation shall enter into the Credit Insurance described in Schedule 4 (theSchedule of Credit Insurance) for, respectively, all Service Charge Classes and the StatedHedges.(h) Stated HedgesThe Corporation shall enter in the Hedges described in Schedule 5 (the Schedule ofStated Hedges) with respect to the Index Rate Service Charge Class. The Stated Hedges areacceptable to the FinanceDirector.(i) RepresentativeThe Representative is UBS inancial Services Inc.(j) Closing DateThe Closing Date is provided for in the UnderwritingAgreement.(k) Contract Administration AgreementThe Contract Administration Agreement s the Contract Administration Agreement 005,dated the Closing Date among he Corporation and the other Persons named herein, for theadministration,nter alia, of this ServiceContract.

Section 4. Initial FundingThe Corporation shall enter into the Trust Agreement n the Closing Date in order toestablish Detroit Retirement SystemsFundingTrust 2005 (the FundingTrust) for the purpose ofissuing Certificates of Participation captionedas provided herein to provide he Initial Funding.

Section5. Optional Prepayment Fixed Rate Portion(a) The City mayprepay the Scheduled Payments each, a Selected ScheduledPayment)of the Fixed Rate Portion in wholeor in part on any date by paying the Corporationanamount qual to the greater of:

(i) 100 percent of the outstanding balance of the particular SelectedScheduled Paymentbeing prepaid; or(ii) the sum of the present values of the remaining Sinking FundInstallments of such Selected Scheduled Paymentand related Service Chargesthat would have accrued after the date fixed for prepayment (the PrepaymentDate) discounted to the Prepaymentdate on a semiannual basis (assuming a 360-day year consisting of 12, 30-day months) at the Treasury Rate (defined below)plus 12.5 basis points (0.125%),

plus, in either case, Service Charges accrued from the last Service ChargePayment Date to which Service Charges were paid in full on the particularSelected Scheduled Payment to the Prepayment Date. The Prepayment Premiumis the amount y whichclause (ii), above, exceedsclause (i) above.(b) The following definitions are used to determine the Treasury Rate:

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Treasury Rate means, with respect to the Prepayment Date for anyparticular Selected Scheduled Payment, the rate per annum, expressed as apercentage of the principal amount, equal to the semiannual equivalent yield tomaturity or interpolated maturity of the Comparable reasury Issue, assuming hatthe ComparableTreasury Issue is purchased on the PrepaymentDate for a priceequal to the Comparable reasury Price, as calculated by the DesignatedTreasuryDealer.

ComparableTreasury Issue means, with respect to the Prepayment Datefor any particular Selected Scheduled Payment, the United States Treasurysecurity or securities selected by the Designated Treasury Dealer which has anactual or interpolated maturity comparable o the remaining average life of suchSelected Scheduled Payment, and that would be utilized in accordance withcustomary financial practice in pricing new issues of debt securities ofcomparable maturity to the remaining average life of such Selected ScheduledPayment.ComparableTreasury Price means, with respect to the Prepayment Datefor any particular Selected Scheduled Payment, (i) /f the Designated TreasuryDealer receives at least four Reference Treasury Dealer Quotations, the average ofsuch quotations for such PrepaymentDate, after excluding the highest and lowestReference Treasury Dealer Quotations, or (ii)/f the Designated Treasury Dealerreceives fewer than four such Reference Treasury Dealer Quotations, the averageof all ReferenceTreasury Dealer Quotations eceived by it.Designated Treasury Dealer means one of the Reference TreasuryDealers appointed by the Contract Administrator.Reference Treasury Dealer means UBSFinancial Services Inc. or itssuccessors, and four other firms, selected by the Contract Administrator rom time

to time, that are primary U.S. Governmentecurities dealers in the City of NewYork (each, a Primary Treasury Dealer);/fany Reference Treasury Dealer ceasesto be a PrimaryTreasury Dealer, then the City will select a replacementReferenceTreasury Dealer that is a PrimaryTreasury Dealer.Reference Treasury Dealer Quotations means, with respect to eachReference Treasury Dealer and any Prepayment Date for a particular SelectedScheduled Payment, the average, as determined by the Designated TreasuryDealer, of the bid and asked prices for the Comparable reasury Issue (expressedin each case as a percentage of its principal amount)quoted in writing to theDesignated Treasury Dealer by such Reference Treasury Dealer at 3:30 p.m., NewYork City time, on the third business day preceding such PrepaymentDate.

Section 6. Optional Prepayment Variable Rate PortionThe City mayprepay any Scheduled Paymentpayable on and after June 15, 2007, in theVariable Rate Portion in whole or in part on any Variable Rate Service Charge PaymentDate atthe amount hereof plus Service Charges accrued from the last Service Charge PaymentDate towhich Service Charges were paid in full on the particular ScheduledPayment o the PrepaymentDate.

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Section7. Stated Hedges(a) The City acknowledgeshat it derives a direct benefit from the Stated Hedgesbyreducing the FundingCost volatility of the Index Rate Service Charges.(b) Stated Hedges may provide that the rights and obligations of the parties

thereunder shall be governed by the laws of a State of the United States other than Michigan.Such governing law provision may exclude the conflicts of law rules of the particularjurisdiction.(c) The City understands that the Corporation intends to follow customary practicemitigate possible interest rate risk and enter into the Stated Hedges rior to the ClosingDate. Asa consequence, the City will be obligated to make Service Payments in respect of HedgePayables thereunder even though the Stated FundingAmounts not funded l~orn the proceeds ofthe anticipated COPs.The CiW nderstands and accepts the risk that the Subject UAAL ill notbe so fundedand it will be nonethelessobligated to make uch Service Pa~tments.

Section 8. Special Provisions Concerningthe Transfer Party(a) The following terms have the following respective meanings:Siebert means SBSFinancial Products Company,LLC nd its permitted successors andassigns under the Transfer Agreement.Siebert Swap means the ISDA Master Agreement dated May 25, 2005 between theCorporation and Siebert, together with the Schedule thereto and the Confirmation of the SwapTraasaction thereunder dated May26, 2005.Transfer Agreement means the Transaction Transfer Agreement dated May25, 2005amongSiebert, the Corporation and the Transfer Party, as the same may be amended rom time

to time with the consentof each Insurer not then in default under its respective Credit Insurance.Transfer Event means he occurrence of an Early Termination Date (as defined in theSiebert Swap)with respect to the Siebert Swap nd all Transactions thereunder and the enteringinto of Transfer Transactions (as defined in the Transfer Agreement) in accordance withParagraph2(a) of the Transfer Agreement.Transfer Hedge means the Transfer Swap Agreement identified in the TransferAgreement.Transfer Party meansMerrill LynchCapital Services, Inc. and its permitted successors

and assigns under the Transfer Agreement.(b) As betweenSiebert and the Transfer Party, the exercise by Siebert or the TransferParty of any right or remedy under the Service Contract shall be governed by the TransferAgreement.(c) Upon he occurrence of a Transfer Event:

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(i) the Transfer Hedge hall constitute a Stated Hedge;and(ii) the Transfer Party shall be a Specified HedgeCounterparty for purposes of theContract Administration Agreementnd shall accede to all the fights and remedies, and be bound

by the obligations, of Siebert as a Specified HedgeCounterparty hereunder and shall also accedeto all the fights and remedies f Siebert under his ServiceContract.(d) Siebert and the Transfer Party shall give prompt written notice to the ContractAdministrator of the occurrence of a Transfer Event (and the Insurer maygive such a writtennotice to the ContractAdministrator); provided, however, he failure to give such notice shall notaffect the operation of clause (c) above. Until the Contract Administrator eceives such a noticeand in the absence of actual knowledgeo the contrary, it shall be entitled to assume hat noTransfer Event has occurred and Siebert is the Specified HedgeCounterpartyunder the ContractAdministration Agreement.In WitnessWhereof, he parties hereto have set their respective hands on the date first

set forth above.[Signatures appearon pages S-1 et seq.]

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[Signature Page toGRSService Contract 2005between the Detroit General RetirementSystem Service Corporation andthe City of Detroit]

[Service ContractSpecificTerms]

City of Detroit

BySean K. WerdlowFinance Director

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Schedule 1Stated Amounts Funding Schedule

toGRS Service Contract

The Corporation is obligated to fund the amounts (which constitute the Stated FundingAmount) set forth opposite the respective purposes. Such amounts shall be disposed of asprovided below.purpose AmountSubjectAAL...................... $739,793,898.00Ancillary Amounts

Costs f Issuance................ $21,278,589.26PrepaidServiceCharges...... 12,606,007.48

Underwriters iscount.......Total AncillaryAmounts.....

5,851,505.26$39,736,102.00

DispositionTo be paid to the Retirement System

To be paid to the Personsentitled theretoTo be paid to the Contract Administrator forapplication in accordancewith the ContractAdministration AgreementPaid as a discount from the purchaseprice of theCertificates

Stated Funding mount....... $779,530,000.00

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Schedule 2Scheduled Payments Attachment

ToGRS Service Contract 2005

ScheduledPaymentsare due on the following Scheduled PaymentDates in the respectiveamounts et forth opposite such dates.

Scheduled Payment Dates

(June 15 of each year)

Service ChargeClassFixed RateService Index Rate ServiceFixed Rate Charges Index Rate Charge

2007200820092010201120122013201420152016201720182019202020212022202320242025

5,055,000 4.004%7,435,000 4.154%10,095,000 4.234%12,930,000 4.314%15,995,000 4.404%19,270,000 4.453%22,885,000 4.503%26,750,000 4.563%20,170,000 4.613%

141,090,000 4.813%

228,855,000 4.948% 269,000,000 3M LIBOR + 0.28%Totals 510;530,000 269,000,000



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Schedule 3Sinking Fund Installments Attachment

toGRS Service Contract 2005

Scheduled Payments due on the following Scheduled PaymentDates are subject tomandatory prepayment on the following Scheduled Payment Dates in the respectiveamounts set forth opposite such dates, each of which constitutes the Sinking FundInstallment due on the respective SinkingFund nstallment Date.Sinking Fund nstallments of Scheduled PaymentsDue 2020

Scheduled PaymentDates(June 15 of each year)

Service ChargeClassFixed Rate Index Rate

2016 22,575,0002017 25,200,0002018 28,015,0002019 31,035,0002020 34,265,000

Totals 141,090,000

Sinking Fund nstallments of Scheduled PaymentsDue 2025Scheduled PaFmentDates Service ChargeClass

(June 15 of each year) Fixed Rate Index Rate20152016201720182019202020212022202320242025

37,730,00041,475,00045,490,00049,785,00054,375,000

10,754,00012,859,00015,210,00017,713,00020,414,00023,300,00026,465,00029,844,00033,480,00037,376,00041,585,000

Totals 228,855,000 269,000,000

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Schedule 4Schedule of Credit Insurance

toGRS Service Contract 2005

Service ChargeClass/Scheduled PaymentDateFixed Rate / 2007Fixed Rate / 2008Fixed Rate / 2009Fixed Rate / 2010Fixed Rate /2011Fixed Rate / 2012Fixed Rate / 2013Fixed Rate / 2014Fixed Rate / 2015Fixed Rate / 2020Fixed Rate / 2014Index Rate / 2025

Financial AgreementBond nsurance PolicyBond nsurance PolicyBond Insurance PolicyBond Insurance PolicyBond Insurance PolicyBond Insurance PolicyBond nsurance PolicyBond nsurance PolicyBond Insurance PolicyBond Insurance PolicyBond Insurance PolicyBond nsurance Policy

ProviderXL apitalXL apitalXL apitalXL apitalXL apitalXL apitalXL apitalX.L CapitalFGICFGICXLCapitalFGIC



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[GRS ervice ContractGeneralTermsJIFinall

Ill

General Terms and Conditionsof

GRSService Contract 2005between the

Detroit General Retirement System Service Corporationand the

City of Detroit

Dated as of May 25, 2005

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[GRS ervice Contract General Terms]

Table of ContentsArticle -- DefinitionsndRelated atters............................................................................ 1Section.01.Certain efinitions..............................................................................................

Section.02.Other efinitions................................................................................................. 5Section .03.Service aymentomponents............................................................................. 6Section.04.Businessays..................................................................................................... 6Section.05. nterpretation....................................................................................................... 6Article I -- Termsf Service ontract.................................................................................... 6Section .01.Particulars f Specific emps.............................................................................. 6Section 2.02. Variation of GeneralTerms;Conflict with GeneralTerms................................ 7Article II-- Representationsnd Warranties......................................................................... 8Section .01.Representationsf the Corporation..................................................................... 8Section .02.Representationsf the City ................................................................................. 8

Section3.03. LaborRelated Representations f City and Corporation.................................... 9Article IV -- ServiceandFundingrrangements.................................................................Section.01.Provisionf Services......................................................................................... 10Section .02.Paymentbligation........................................................................................... 10Section .03.Fundingbligation........................................................................................... 10Section .04.Dispositionf CertificateProceeds................................................................... 11ArticleVu Scheduledayments............................................................................................. 11Section .01.Scheduledayments.......................................................................................... 11Section 5.02. Mandatory repaymenty SinkingFund nstallments ...................................... 1Section5.03. OptionalPrepaymentf Scheduled ayments.................................................. 1Section 5.04. Satisfaction of Scheduled ayments y Delivery of Certificates ....................... 13ArticleVI - Service harges................................................................................................... 14Section6.01. Agreemento Pay ServiceCharges;FundingCosts ......................................... 14Section6.02. PrepaidServiceCharges;Hedge eceivables................................................... 14Section .03. FixedRateFunding ethodology.................................................................... 14Section .04. VariableRateFunding ethodology................................................................ 15Article VII ~ General Provisions Governing Service Payments and ContractAdministratorayments........................................................................................................... 16Section .01.Time f Service ayments................................................................................. 16Section.02.Hedgeayables................................................................................................. 16Section.03.Subrogation....................................................................................................... 16Section.04. nvestment......................................................................................................... 16

Section .05.Satisfying eficiencies...................................................................................... 17Section.06.No et-Off......................................................................................................... 17Article VIII m Satisfaction of Service Payments and Contract AdministratorPayments..................................................................................................................................... 17Section .01.CertainDefinederms...................................................................................... 17Section8.02. Preservation f Parity among elwiceContracts ............................................... 18Section .03.Satisfaction f Service ayments...................................................................... 181974114.0058k394283 [GRSService Contract General Temps][Final]



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[GRSService Contract General Terms]

GENERAL TERMS AND CONDITIONSOF

GRS SERVICE CONTRACT 2005OF THE

DETROIT GENERAL RETIREMENT SYSTEM SERVICE CORPORATIONDated as of May 5, 2005(the General TermsThe General Terms govern the GRSService Contract 2005 between the Detroit GeneralRetirement SystemService Corporation (the Corporation)and the City of Detroit (the City) inwhich hey are incorporated by reference for the funding of unfunded ccrued actuarial liability(UAAL) f the Detroit General Retirement System the Retirement System).

Article I -- Definitions and Related MattersSection 1.01. Certain DefinitionsIn addition to terms elsewheredefined in this Service Contract, the following erms shallhave the following respective meanings nless the context otherwise clearly indicates:

Additional Service Paymentmeans an amountpayable as General Corporate Expenses orpursuant to Section 9.09 other than Contract Administrator Payments.Ancillary Amountsmeans the Costs of Issuance, Prepaid Service Charges mad Under-waiters Discotmt.Authorized Investments means

(i) direct obligations of, or obligations unconditionally guaranteed by, theUnited States of America(US Governments)and(ii) repurchase agreements whereby he counterparty agrees to repurchaseobligations described in clause(i) so long as the obligations to be repurchased reunder the exclusive control (as defined in Article 8 of the applicable UniformCommercial odeor correlative Treasury Regulations) of the Corporation.

STRIPSssued by the United States Treasury are Authorized Investments for the purposes ofclause (i), but private proprietary stripped USGovernments, hether nterest or principal strips,are not Authorized nvestments.Business Daymeansany day on which both City and the Trustee are open for the trans-action of business and in respect of any Service Charge Class has the meaninggiven in accor-dance with the Funding Rate Methodology or such Service Charge Class for actions taken inrespect of such FundingRate Methodology.Certificates or Certificates of Participationmean he Certificates of Participation issuedby the FundingTrust representing beneficial interests in the Service Payments ther than HedgePayables, Contract Administrator Payments nd Additional Service Payments.

1974114 0058\394283 [GRS Service Contract General Tennsl][Final]



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Closing means the delivery of particular Certificates to the Underwriters upon receipt ofpayment therefor and the other actions comemplated by the Underwriting Agreement to occur incomaection therewith.

Closing Date means, with respect to particular Certificates, the date provided for in theparticular Specific Terms on which the Closing occurs pursuant to the Underwriting Agreement.Contract Payments means Service Payments and Additional Service Payments.Contract Administration Agreement means the agreement identified in the SpecificTerms as the Contract Administration Agreement .Contract Administrator means the Person serving as the Contract Administrator under

the Contract Administration Agreement.Contract Administrator Payments means anaounts equal to amounts payable as fees, ex-

penses and indenmification of the Contract Administrator pursuant to Section 9.09.Costs of Issuance means the amount set forth in the particular Specific Terms as the

Costs of Issuance .Credit Insurance means any insurance intended to protect owners of Certificates from

loss arising from a failure of the City to timely pay Service Charges or Scheduled Pay-lnents. Credit Insurance also means any financial arrangement intended to protect a HedgeCounterparty from a failure of the Corporation to timely pay any Hedge Payable.Deficiency means any unsatisfied amount under a Deficiency Clause.Deficiency Clause means the following clauses set forth in Section 8.03: First (to theextent any fees, expenses and indemnity is at the time due and unpaid to the Contract Admizais-

trator), Second, Fourth and Sixth.Disclosure Documentmeans any preliminary or fmal offering document or other disclo-sure documentprepared for use by the Underwriters in connection with the initial public offeringof Certificates.Finance Director means the Finance Director of the City.Fixed Rate Funding Portion means that the portion, if any, of the amount to be fundedpursum~t to the particular Specific Terms equal to the total of the Scheduled Payments set forthfor Fixed Rate Service Charges.Funding Cost Supplement means the document or particular provisions, if any, identi-fied in the particular Specific Terms as a Funding Cost Supplement .Funding means the Initial Funding or an Additional Funding.Funding Ordinance means the ordinance or resolution of the City Council identified inthe particular Specific Tenr~s as the Funding Ordinance .Funding Rate Methodolo~, means the Fixed Rate Funding Methodology or any VariableRate Funding Methodology as the context may require.Funding Rate Portion means the Fixed Rate Funding Portion or the Variable Rate Fund-ing Portion as the context may equire.

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[GRS erviceContractGeneral erms]

FundingTrust means he ta-ust established by the Trust Agreement.General Corporate Expenses means such periodic amounts as may be necessary to pro-vide for the general administrative expenses of the Corporation as authorized or permitted byOrdinanceNo. 05-05, as in effect on the date hereof.Hedgemeans n interest rate swapor other derivative instrument authorized or permittedby the FundingOrdinance.HedgeCounterparO,means, as to any Stated Hedge, he Person identified in the particu-lar Specific Terms s the HedgeCounterparty .HedgePayable means, after giving effect to any netting under the particular StatedHedge, any HedgePeriodic Payable or mayHedge Termination Payable as the context may re-quire.HedgePeriodic Payable means, after giving effect to any netting under the particularStated Hedge,a periodic anaount owingby the Corporation under a Stated Hedge o the respec-

tive HedgeCounterparty.HedgePeriodic Receivablesmeans, after giving effect to any netting under the particularStated Hedge, periodic paymentsowingby the HedgeCounterparty under a Stated Hedge.Hedge Receivable means any HedgePeriodic Receivable or Hedge Termination Receiv-able as the context may equire.HedgeTerminationPayablemeans, after giving effect to any netting under the particularStated Hedge, any termination paymentowingby the Corporation under a Stated Hedge o therespective HedgeCounterparty.HedgeTermination Receivable means, after giving effect to any netting under the par-ticular Stated Hedge, any termination paymentowingby the HedgeCounterparty under a Stated

Hedge.Insurer means he Person obligated under Credit Insurance to makepaymentswith re-spect to Certificates or a Stated Hedge.Investable Fundsmeans anaounts representing Costs of Issuance and Prepaid ServiceCharges.PaymentTimemeans noon (12:00), Detroit time.Personmeans ny natural person, firm, association, corporation, trust, partnership, jointventure, joint-stock company,municipal corporation, public body or other entity, howeveror-ganized.Prepaid Service Chargesmeans he amount et forth in the particular Specific Termsasthe Prepaid Service Charges .Regular Scheduled Payment means the anaount of a Scheduled Payment due on itsScheduled PaymentDate.Representativemeans he Person identified in the particular Specific Terms s the Rep-resentative .

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Scheduled PaymentDates means he dates set forth in the particular Specific Termsasthe Scheduled PaymentDates .Scheduled Paymentsmeans he amounts et forth in the particular Specific Termsas theScheduled Payments .Service Charge Payment Date means a Fixed Rate Service Charge Payment Date or aVariable Rate Service Charge PaymentDate for a particular Variable Rate FundingType, as thecontext may equire.Service Charge Class means all Scheduled Payments that have the same Funding RateMethodology.Service Contract meansan agreementbetween he City and the Corporation for the fund-ing of particular UAALnd which consists of these General Terms and one or more SpecificTerms.Service Paymentmeans any Contract Administrator Payment, Service Charge (regardless

of Funding Rate Methodology), Regular Scheduled Payment or Sinking Fund Installment,amounts n respect of any HedgePayable, Optional Prepaymentor Accrued Service Charge asthe context may equire.Specific Termsmeans hat part of the Service Contract that provides the particulars of thea Funding.Stated Funding Amountmeans he amount dentified in the particular Specific Termsasthe Stated FmadingAmount .Stated Hedgemeans a Hedge dentified in the particular Specific Terms as a StatedHedge .Subject UAA_L eans he amount et forth in the particular Specific Termsas the Sub-

ject UAAL .Third Party Beneficiary means ny Person so identified in Seetio~ 9.12.Trust Agreementmeans he Trust Agreementdentified in the particular Specific Terms.Trust Estate means he property identified as the Trust Estate in the Trust Agreement.Trustee means he Person acting as trustee under the Trust Agreement.Type as in Variable Rate Funding Type (and correlative usages) means a methodwhich Variable FundingRates are determine& uch as by Dutch auction, by reference to an iden-tified index (such as the London nterbank Offered Rate or LIBOR ) r by remarketing or anyother meanscustomarily used to detemaine variable rates in municipal or corporate finance.

Type whenused with respect to a Service ChargeClass has the correlative meaning.Underwritersmeans he Representative and the other Persons identified in the Under-writing Agreement s the Underwriters .Underwriters Discount means he amount et forth in the particular Specific Termsasthe Underwriters Discount .Underwriting Agreementmeans he agreement among he Corporation, the City and theUnderwriters roviding for the public offering of Certificates to fund a Funding.

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[GRS Service Contract General Terms]

Variable Rate FundingPortion meansall or that portion, if any, of the Stated FundingAmountqual to the total of the ScheduledPayments et forth for all types of Variable Rate Ser-vice ChargeClasses.Section 1.02. Other DefinitionsTermsdefined elsewhere in these General Terms nclude the following:

Term Defined InAccruedervice harges...................................................................... Section 5.03Additionalunding............................................................................... Section 4.01Component......................... : ..................................................................ection 1.03Corporation............................................................ General Terms, First ParagraphDay ountonvention......................................................................... Section 6.04Deliveryotice..................................................................................... Section 5.04Eligibleertificates.............................................................................. Section 5.04Fixed ateFunding ethodology........................................................ Section 6.03Fixed ate cheduledayments........................................................... Section 6.03FixedRateServiceChargeaymentate............................................ Section 6.03Fixed ate erviceharges.................................................................. Section 6.01Fundingosts....................................................................................... Section 6.01Hedgemount...................................................................................... Section 5.03InitialFunding...................................................................................... Section 4.01Investment............................................................................................. Section 7.04Optionalrepaymentmount.............................................................. Section 5.03Optionalrepaymentates.................................................................. Section 5.03Optionalrepayments........................................................................... Section 5.03Prepaymentotice................................................................................ Section 5.03Prepaymenteceiptate..................................................................... Section 5.03Ratinggency...................................................................................... Section 9.02Relatederviceayment...................................................................... Section 7.03Retirementystem................................................. General Terms, First ParagraphServiceharges.................................................................................... Section 6.01Service harge eterminationates.................................................... Section 6.04Serviceayment................................................................................... Section 1.01Serviceaymentomponent................................................................ Section 1.03Sinldngundnstallmentates............................................................ Section 5.02Sinldngundnstallments.................................................................... Section 5.02Total repaymentmount.................................................................... Section 5.03UAAL.................................................................... General Terms, First ParagraphVariable ateFunding ethodology................................................... Section 6.04VariableateScheduledayments...................................................... Section 6.04Variable ateServiceChargeaymentates...................................... Section 6.04Variableate erviceharges............................................................. Section 6.01

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(2) State the Stated Funding Amountand the Subject UAALnd AncillaryAlnount components hereof;(3) Set forth the ScheduledPayments o be madepursuant to the Service Contractand classify the ScheduledPayments y Service ChargeClass;(4) Set forth any Scheduled Paymentssubject to mandatoryprepayment SinkingFund hlstallments), the anaount of the Sinldng Fund Installments and the ScheduledPaymentDates on whichsuch Sinking Fund Instalhnents are due;(5) Provide for the terms required by Section 6.03 if the particular Specific Termsprovides for Fixed FundingRate Portion;(6) Identify the FundingCost Supplement which shall include the terms requiredby Section 6.04) for each Type of Variable FundingRate Service ChargeClass if the par-ticular Specific Termsprovides for a Variable Rate FundingPortion;(7) Identify the FundingTrust for Certificates and the Trust Agreement stablish-

ing such FundingTrust;(8) Identify any Hedgeand any Credit Insurance to be entered into by the Corpo-ration with respect to one or more Service ChargeClasses and state that any such Hedgeor Credit hasurance s acceptable to the FinanceDirector;(9) Identify the Representative;(10) Provide for the Closing Date and the disposition of the proceeds of the par-ticular funding;(11) Identify the Contract AdministrationAgreement, f any; and(12) Containsuch other particulars as agreed to by the Corporationand the City.

(b) The Specific Terms for an Additional Funding shall contain particulars to thesalne effect as the Initial Funding o far as necessaryor appropriate and such other particulars asshall relate to the particular AdditionalFunding.(c) Specific Terms or an Additional Fundingdo not constitute an amendment f theService Contract to provide newservices but rather an implementation f services agreed to beprovided on the date of the Service Contract. The Service Contract maybe restated to includethe Specific Terms or an Additional Funding or convenience f reference.

Section 2.02. Variation of GeneralTerms;Conflict with GeneralTerms(a) Specific Termsmaynot changethis Section of these General Terms.(b) Except as provided above, Specific Terms maydelete, modify or otherwise varythese General Ten-nsbut only as related to a particular Fundingand then only so long as suchdoes not adverselyaffect any of the rights of successors to any interest of the Corporation r therights of any Third Party Beneficiaryarising in any prior Funding.(c) Anyconflict between hese General Termsand the terms set forth in maySpecificTerms f the Service Contract shall be resolved in favor of the particular Specific Terms o far asnot ha conflict withthis Section.

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Article III -- Representations and WarrantiesEach of the Corporation and the City represent and warrant as set forth in this Article forthe mutual benefit of each other and for the benefit of the Funding Trust and the holders from

time to time of the Certificates.Section 3.01. Representations of the Corporation

The Corporation makes the following representations and warranties on the date hereofand shall make he same on and as of the Closing Date:

(a) Corporate Existence and Power. The Corporation is a nonprofit corporation dulyincorporated, validly existing and in good standing under the laws of the State of Michigan.

(b) Corporate and Governmental Authorization; Contravention. The execution,delivery and performance by the Corporation of the Service Contract are within theCorporations corporate powers, have been duly authorized by all necessary corporate action,require no action by or in respect of, or filing with, may governmental body, agency or officialmad do not contravene, or constitute a default under, any provision of applicable law orregulation or of the articles of incorporation or bylaws of the Corporation or of any agreement,judgment, injunction, order, decree or other instrument binding upon the Corporation.

(c) Binding Effect. The Service Contract constitutes a valid and binding agreementof the Corporation enforceable in accordance with its terms except as may be limited bybankruptcy, insolvency or similar laws affecting the rights of creditors generally.

(d) LitiCation. There is no action, suit or proceeding pending against, or to thelmowledgeof the Corporation threatened against or affecting the Corporation before may court orarbitrator or any governmental body, agency or official in which there is a reasonable possibilityof an adverse decision which could materially adversely the ability of the Corporation to performits obligations under the Service Contract or which in any manner questions the validity of theService Contract.

(e) No Taxation. The Corporation is not subject to federal income tax or taxation bythe State of Michigan.

(f) Not an Investar~ent Corporation. The Corporation is not an investment companywitlfin the meaning of the Investment CompanyAct of 1940, as amended.Section 3.02. Representations of the City

The City makes the following representations and warranties on the date hereof and shallmake he same on and as of the Closing Date:

(a) Corporate and Govenm~ental Authorization; Contravention. The execution,delivery and performance by the City of the Service Contract are within the Citys powers, havebeen duly authorized by all necessary action, require no action by or in respect of., or filing with,any govenunental body, agency or official and do not contravene, or constitute a default under,any provision of applicable law or regulation or of the City Charter or of any agreement,judgment, injunction, order, decree or other instrument binding upon the City.

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(b) ConditionsPrecedent. All acts, conditions and things required by the Constitutionand laws of the State of Michiganor the FundingOrdinance o exist, to have happenedand tohave been performedprecedent to and in the execution and delivery of the Service Contract bythe City and the authorization of the Contract Payments n connection with the Initial Funding(htitial Funding Contract Payments)exist, have happened and been performed in due time,form and mannerrequired by the Constitution or law in order to make he Service Contract avalid and binding obligation of the City, including the obligation to make he Initial FundingContract Payments.

(c) No Indebtedness. The obligation of the City to makeContract Paymentsdoes notconstitute or create any indebtedness of the City within the meaningof the limitation of TheHomeRule City Act or any Michiganconstitutional or other non-tax statutory or City charterlimitation.(d) Valid and Bindin A~reement. The Service Contract constitutes a valid andbinding agreemem f the City enforceable in accordance with its terms except as maybe limitedby ban_kxuptcy,nsolvencyor similar lawsaffecting the rights of creditors generally.(e) Subiect UAAL. he amount of the Subject UAALoes not exceed the amount ofUAALor which City is authorized by the Funding Ordinance to engage the services of theCorporationby entering into the Service Contract.(f) Ancillar7 Amounts. The Costs of Issuance, Prepaid Service Charges andUnderwriters Discount epresent the costs, fees and expenses hat the City is authorized to payby the FundingOrdinancefor the respective purposes and do not exceed the amountspermittedby the FundingOrdinance.

Section 3.03. LaborRelated Representations of City and CorporationEach of the City and the Corporation respectively represents and warrants as to itself,

severally and not jointly, that noneof the(1) execution, delivery and performance f the Service Contract by the City or theCorporation;(2) the execution, delivery and performanceof the Trust Agreement y the Cor-poration;(3) the conveyance of the Corporations interests in the Service Charges andScheduledPaymentso the FundingTrust (or the granting of a security interest therein tothe Funding rust) and the issuance and sale of the Certificates; or(4) the performanceby the Trustee of its duties under the Trust Agreementn re-spect of the Certificates

requires any action by or in respect of, or filing with any labor union or any governmental ody,agencyor official responsible for enforcing federal or State of Michigan abor laws or regula-tions (collectively, LaborLawsor Regulations), or contravenes or constitutes a default under,any provision of applicable Labor Lawsor Regulations or maycollective bargaining agreement(as the same may have been modified by custom or practice) or other labor agreement, or anyjudgment, injunction, order or decree or other instrument in respect of any Labor Lawsor Regu-lations.1974114 058~394283 9 [Service ContractGeneralTerms][Final]14-04112-swr Doc 1-3 Filed 01/31/14 Entered 01/31/14 17:33:52 Page 28 of 43


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Article IV -- Service and FundingArrangementsSection 4.01. Provision of Services

(a) The services of the Corporation consist of reducing the financial burden of theSubject UAALo the City in the current and in future years. The Corporation shall provide itsservices through aldng the actions set forth below.(1) The Corporation(the h, itial Funding).(2) The Corporationpart as requestedof the City

shall fund the Stated Funding Amount n the Closing Dateshall fund any Hedge Termination Payable in whole or inand approvedby the City Council.

(3) The Corporation shall fund a reduction or rescheduling (or both) of ServicePaymentsas requested by the City and approved by City Council (funding pursuant tothis paragraphor paragraph(2), an Additional Funding).(4) An Additional Fundingmay nclude such th.ings in the nature of Costs of Issu-

ance, Prepaid Service Charges and Underwriters Discount as authorized or permitted bythe approval of the City Councilof the Additional Funding.(b) Funding , as used above, means he provision of money hrough the issuanceCertificates and does not meanor imply any further authorization of the City to makemayContract Payment ther than Contract Payments n connection with any Additional Funding.

Section 4.02. PaymentObligation(a) The City agrees to makeContract Payments o the Corporation in return for thepresent and future services of the Corporation under Section 4.01 as and when ContractPayments becomedue and payable.(b) The obligations of the City hereunder, including its obligation to makeContractPayments,are contractual obligations of the City, enforceable in the samemamaer s any othercontractual obligation of the City, and are not general obligations of the City to which he Cityhas pledged ts full faith and credit.

Section 4.03. FundingObligation(a) The obligation of the Corporation o provide the Initial Fundingor any AdditionalFunding s subject to the receipt by the Corporationof proceeds sufficient for the Funding l omthe sale of Certificates.(b) The Corporation shall use its best efforts to cause the consummation f theoffering and sale by the Underwriters of Certificates to provide sufficient proceeds for the

particular Funding.(c) The City agrees to provide such information about the City of Detroit as mayreasonably required by the Underwriters for inclusion in the Disclosure Document nd tootherwise reasonablycooperate in the offering and sale of Certificates by the Underwriters.(1) The City agrees to become party to the Underwriting Agreementf the Un-derwriting Agreements satisfactory in form and substance to the FinanceDirector.

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(2) The City agrees to enter imo a continuing disclosure agreement and take suchother actions as shall be necessary or appropriate to assist the Underwriters in meetingtheir obligations under Rule 15c2-12 of the Securities and ExchangeConmlission.Section 4.04. Disposition of Certificate ProceedsThe Corporation shall apply the proceeds of the sale of Certificates as provided in theSpecific Termsfor the particular Funding.Article V -- Scheduled PaymentsSection 5.01. Scheduled Payments

The City agrees to pay the Scheduled Payments of each Funding Rate Portion to the Cor-poration on the respective Scheduled Payment Dates for such Funding Rate Portion. For theavoidance of doubt, Scheduled Payments do not include Hedge Payables.Section 5.02. Mandatory Prepayment by Sinking Fund Installments

The City agrees to prepay such Scheduled Payments of each Funding Rate Portion insuc5 anaounts (Sinking Fund Installments) and on the dates (Sinking Fund Installment Dates)as shall be set forth in the Specific Terms.Section 5.03. Optional Prepayment of Scheduled Payments

(a) The City shall not voluntarily prepay any Scheduled Payments of a Funding RatePortion (an Optional Prepayment) fl~ whole or in part unless (i) such voluntary prepaymentexpressly permitted fl~ the Service Contract, (ii) it concurrently pays the Hedge Amount o theCorporation and (iii) it has met the condition precedent contained in subsection (d), below.

(b) The following terms have the following respective meanings:Accrued Service Charges means, /fan Optional Prepayment Date is not a ServiceCharge Payment Date, the amount of Service Charges accrued on the anaount of theScheduled Payment to be prepaid from the last Service Charge Payment Date before the

Optional Prepayment Date to the Optional Prepayment Date.Hedge Amount means the amount, if any, of may Hedge Termination Payable thatwill be owed by the Corporation pursuant to may Stated Hedge relating to the Scheduled

Payments being prepaid as a result of any required reduction in the notional amount ofsuch Stated Hedge due to such prepayment and the Hedge Periodic Payable, if any, ac-crued to the date of termination.

Optional Prepayment Amount means the sum of (i) the anaount of the prepay-ment premium, if any, required by the Service Contract in co~mection with the prepay-ment of any selected Scheduled Paymentsand (ii) the anaount of Scheduled Payments se-lected to be prepaid.

PrepaymentNotice meansa notice of the City to the Corporation stating its inten-tion to prepay the Scheduled Payments specified therein on the Optional PrepaymentDate specified in such notice.

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Prepayment Receipt Day means the Payment Time on the day before the OptionalPrepayment Date.

Total Prepayment Amount means, as to any Optional Prepayment, the anaount ofthe 0ptional Prepayment Amount, Accrued Service Charges, if any, and the HedgeAmount, f any.(c) The City shall exercise its option to make any Optional Prepaymem y delivering

a Prepayment Notice at least 45 days (or such fewer days as is acceptable to the Corporation)before the Optional Prepayment Date on which the City shall pay the Total Prepayment Amoumto the Corporation in connection with such Optional Prepayment. Such Prepayment Notice shallstate:

(1) the Scheduled Paymemsof the particular Funding Rate Portion to be prepaidin whole or in part by such Optional Prepayment and the date on which such ScheduledPayments are to be prepaid (Optional PrepaymentDate) subject to the following:

(i) a Scheduled Payment may be selected by the City only/fit is permittedby the Service Contract to be prepaid on the particular Optional Prepayment Dateand

(ii) a Scheduled Payment may be selected by the City for partial prepay-ment only in an amount of at least $100,000 unless otherwise provided in the Ser-vice Contract;

(2) the Optional Prepayment Amount;(3) the Accrued Service Charges, if any;(4) the Hedge Amount, if any;(5) such information in tabular or other form so as to readily permit the Corpora-

tion to identify:(i) the Scheduled Payments of the particular Funding Rate Portion selectedfor prepayment,

(ii) the provisions of the Service Contract authorizing or permitting suchprepayment,(iii) the prepayment premium, if any, required to be paid in connection with

the prepayment of each such Scheduled Payment;(iv) Accrued Service Charges, if any, due in respect of the prepayment

the particular Scheduled Payments; and(v) the Hedge Amount, f any, due in respect of the prepayment of the par-ticular Scheduled Payments.

(d) It is a condition precedent to the City giving an Optional Prepayment Noticethe Corporation with respect to any Optional Prepayment that would obligate the Corporationthat the City provide reasonable evidence satisfactory to the Corporation that the particularHedge Amountwill be paid when due and such prepayment will not cause the Corporation to bedefault under any agreement to which it is party in colmection with the particular Funding.

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[GRSService Contracl General Terms]

(e) The reasonable evidence satisfactory to the Corporation in subsection (d),above, shall be such evidence as the Corporation is informed by the HedgeCounterparty orCounterparties and the Insurer (if the Insurer is not in default under its Credit Insurance at thetime) is reasonably atisfactory to them.(f) The delivery by the City of a PrepaymentNotice to the Corporation s a statementof the intention of the City to pay the Total PrepaymentAmounto the Corporation on thePrepaymentReceipt Dayfor the OptionaI PrepaymentDate stated therein but does not obligatethe City to so pay the Total Prepayment mounto the Corporation, and no default shall occur bythe City not so paying the Total Prepayment Amountor by the Optional Prepayment nototherwise being effected on the PrepaymentReceipt Date.(g) AnyTotal PrepaymentAmount eceived by the Corporation shall be used on thePrepaymentReceipt Date to the satisfaction of each of the priorities set forth in Section 8.03higher than clause Eighth.

(1) If none of the Total PrepaymentAmounts used as provided above, then theOptional Prepayment hall be effectuated by using such Total PrepaymentAmounto sat-isfy the Optional Prepayment Amount, he Accrued Service Charges, if any, and theHedgeAmount, f any.

(2) If any part of the Total PrepaymentAmount s used as provided above, thenthe OptionalPrepaymenthall not be effectuated, and the balance, if any of the Total Pre-paymentAmount hall be returned to the City on the PrepaymentReceipt Date.(3) Use of the Total PrepaymentAmounts subject to Section 8.02.

(h) The City shall not pay the Total PrepaymentAmounto the Corporation on anyday prior to the particular Prepayment eceipt Day.Section 5.04. Satisfaction of ScheduledPayments y Delivery of Certificates

(a) The City maydeliver or cause to be delivered Certificates to the Corporationsatisfaction (whether in whole or in part) of Scheduled Payments at any time and in maydenomination pon45 days prior notice to the Corporation(or such fewer days as is acceptableto the Corporation) a DeliveryNotice)subject to the following imitations.(1) A ScheduledPaymentmaybe satisfied by delivery of Certificates entitledpayment rom such ScheduledPaymentEligible Certificates).(2) The amount of a Scheduled Paymentdeemedpaid shall be equal to the de-nominations f the particular Eligible Certificates.(3) No Certificate shall be delivered in payment n wholeor in part of the respec-

tive Scheduled Payment whether as paymentof a Sinking Fund Instalhnent or as otherprepayment)more han 45 days before the respective due date/fat the time of such deliv-ery the City has not paid all Service Payments then and theretofore due.(4) NoScheduledPayment hall be satisfied by the delivery of Certificates umilsuch Certificates have been delivered to the Trustee.

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[GRS ervice Contract GeneralTerms]

(b) If Sinldng Fund Installmems are to be satisfied (whether in whole or in part)the delivery of Eligible Certificates, the City shall indicate in the respective Delivery Notice theparticular Sinking Fund Instalhnents and amounts hereof to be so satisfied.

(c) All Certificates received by the Corporation in payment of Scheduled Paymentspursuant to this Section shall be immediatelydelivered to the Trustee for cancellation.Article VI w Service ChargesSection 6.01. Agreement to Pay Service Charges; Funding Costs

(a) The City agrees to pay amounts (Service Charges) to the Corporation on ServiceCharge PaymentDates sufficient to pay the periodic costs of capital (Funding Costs) incurred bythe Funding Trust for the particular Funding. For the avoidance of doubt, Service Charges do notinclude Hedge Payables.(b) Funding Costs shall be determined by the particular Funding Rate Methodology.

(1) Funding Costs for any Fixed Rate Funding Portion shall be determined in ac-Col dmace with the Fixed Rate Funding Methodology described in Section 6.03, and thecorresponding Service Charges shall be Fixed Rate Service Charges.(2) Funding Costs for a Variable Rate Funding Portion shall be periodically de-termined in accordance with the Variable Rate Funding Methodology described in Sec-tion 6.04, and the corresponding periodic Service Charges shall be Variable Rate Service

Charges and may be referred to by the particular Type of Variable Rate Service Charges;e.g., Index Rate Service Charges.Section 6.02. Prepaid Service Charges; Hedge Receivables

(a) Prepaid Service Charges shall be used to meet the Citys obligation to pay the firstoccurring Service Charges and Hedge Periodic Payables of the Corporation except as otherwisemay be provided in the Specific Terms.

(b) Hedge Receivables received by the Corporation shall be used to satisfy the Citysobligation in respect of then existing Deficiencies in accordance with Section 7.05 or thencmTent Service Charges not otherwise paid.Section 6.03. Fixed Rate Funding Methodology

(a) The provisions of this Section constitute the Fixed Rate Funding Methodology.(b) The particular Specific Terms shall state the dates (Fixed Rate Service ChargePayment Dates) on which the Fixed Rate Service Charges are payable.(c) The Fixed Rate Service Charges applicable to the Fixed Rate Funding Portionshall be set forth for the respective Scheduled Payments comprising the Fixed Rate FundingPolntion (Fixed Rate Scheduled Payments). Fixed Rate Service Charges may be different fordifferent Scheduled Payment Dates in the Fixed Rate Funding Portion.(d) Fixed Rate Service Charges shall be computed as if the Fixed Rate Scheduled

Payments bore interest at the respective rates at which Fixed Rate Service Charges aredetermined and computed on the basis of a 360-day year consisting of 12, 30-day months.1974114 0058~394283 14 [Sen, ice ContractGeneralTerms][Final]14-04112-swr Doc 1-3 Filed 01/31/14 Entered 01/31/14 17:33:52 Page 33 of 43


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Article VII -- General Provisions Governing Service Payments and ContractAdministrator PaymentsSection 7.01. Time of Service Payments

The City shall make all Service Payments other than Contract Administrator Payments bythe Payment Time on the day immediately before the date when due. The City shall make allContract Administrator Payments on the date when due.Section 7.02. Hedge Payables

The City agrees to pay the amount of any Hedge Payable to the Corporation promptlyupon receipt of notice thereof from the Corporation; provided that the City is not required to paysuch amount before the Payment Time on the day before the due date of the particular HedgePayable.Section 7.03. Subrogation

(a) No payment of any amount to a holder of Certificates or a Hedge Counterpartymade fiom an amount paid by an Insurer under its Credit Insurance (a Credit InsurancePayment) shall discharge the Citys obligation to pay any Service Payment in respect of whichsuch Credit Insurance Payment was paid (a Related Service Payment).

(b) An Insurer making a Credit Insurance Payment shall be subrogated to the rightsCertificateholders or a Hedge Counterparty, as the case may be, to receive the Related ServicePayment nd shall be entitled to exercise all rights and remedies that the Person to which it is thesubrogee would have otherwise been entitled to exercise.Section 7.04. Investment

(a) The Corporation shall not invest any amounts received by it under the ServiceContract except as provided in this Section. Invest means the transfer, disposition or other useof such amounts in expectation of gain, and Investment means any investment of InvestableFunds.

(b) Investable Funds shall be invested by the Corporation as directed by the CityAuthorized Investments that mature in the amounts and at the times the related Investable Fundsare needed to make the payments for which such Investable Funds were received by theCorporation.(c) Investments shall be made by Funding Rate Portion but may be co~mningled forinvestment purposes so long as records are kept showing each particular Funding Rate Portion

and the gain and loss attributable to it.(d) No Investment shall be sold prior to the maturity thereof.(e) All Investments shall be made directly by the Corporation having exclusive

control over the related securities entitlement (as control and security entitlement are definedin Article 8 of the applicable Uniform Commercial Code or correlative Treasury Regulations)except that Investments may also be made through one or more investment companies registeredunder the Investment Companies Act of 1940, as amended,/f(i) such investment company hasrating by Standard & Poors Corporation or any national statistical ratings organization (as1974114 0058L394283 16 [Service Contract General Terms][Final]14-04112-swr Doc 1-3 Filed 01/31/14 Entered 01/31/14 17:33:52 Page 35 of 43


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defined by the Securities and Exchange Act of 1934, as amended, or any successor to it) at leastequal to the rating of the Authorized Investment and (ii) such registered investment companyinvests only in debt instruments.

(f) Gain and loss from Investments shall be attributed to the type of Investable Fundsgivingrise to it.

(1) Gain shall be paid to the City when realized to the extent it is not neededsatisfy any then existing Deficiency in accordance with Section 7.05 or satisfy any thencunent Service Payment.

(2) The City is responsible for all such loss and shall reimburse the Corporationfor such loss upon demandby the Corporation.Section 7.05. Satisfying Deficiencies

(a) This Section governs the use of certain amounts to satisfy Deficiencies. /f theCity has not provided funds sufficient to satisfy the requirements of Seetion 8.03, then theamounts subject to this Section, in an amount not exceeding any Deficiency, shall be applied inaccordance with Section 8.03.

(b) The amounts subject to this Section and the order of use are (i) HedgeReceivables and (ii) gain from Investments

(c) Such amounts are subject to Section 8.02.Section 7.06. No Set-Off

The obligation of the City to make payments hereunder shall be absolute and uncondi-tional, irrespective of any defense or any rights of set-off, recoupmentor counterclaim or deduc-tion and without any rights of suspension, deferment, diminution or reduction it might otherwisehave against the Corporation, the Trustee, any holder or beneficial owner of any Certificate orany other person whether in colmection herewith or with any unrelated transaction mad the obli-gation of the City to make such payments shall not be conditioned on its receipt of future ser-vices of the Corporation under Sections 4.01(a)(2) tllrough (4). The City will not suspenddiscontinue its obligation to make any such payment for any cause whatsoever, and, to the extentpermitted by law, the City waives all rights now or hereafter conferred by statute or otherwise toquit, terminate, cancel or surrender any such obligation of the City under the Service Contract orto any abatenaent, suspension, deferment, diminution or reduction in such payments.Article VIII ~ Satisfaction of Service Payments and Contract Administrator PaymentsSection 8.01. Certain Defined Terms

An amount is about t become due for the purposes of Section 8.03 (i) whenthere are 6 or fewer days before its due date except when he amount s payable more fie-quently than once a calendar week and (ii) when an amount is payable more frequentlythan once a calendar week, tlaat amount is about to become due the day after its most re-cent due date.all Service ConO actsmeans the Service Contract and the Other Service Contract.

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each Service Contract means he Service Contract or the Other Service Contractas the context may equire.each Service Corporation means the Service Corporation or the Other ServiceCorporationas the context may equire.Other Service Contract meansa service contract between he City and the OtherService Corporation for the funding of unfundedaccrued actuarial liability of the Citywith respect to a different pension systemmaintainedby the City, certain paymentsunderwhichOther Service Contractare part of the Trust Estate.Other Service Corporation means he nonprofit corporation party to the OtherService Contract.pro-rata for the purposes of this Article means or any priority class underSec-tion 8.03 and as of any computation date, a fraction, the numerator of which is theamount wing o mayparticular Person who s entitled to a payment n such priority classand the denominatorof which s the total of all such paymentsowing o all such Persons

in suchpriority class.Section 8.02. Preservation of Parity among ervice Contracts

All Service Payments ayable under this Service Contract shall be made nd the Corpora-tion shall be entitled to receive such payments n a pro-rata basis with the Service Payments n-der the Other Service Contract so that each Service PaymentComponentaving a specified pri-ority under Section 8.03 is madeon a pro-rata basis with the Service PaymentComponentsav-ing the samedefined term under Section 8.03 of the Other Service Contract, and no Service Pay-ment Componenthall be satisfied until all Service PaymentComponents nder all Service Con-tracts havhag the same defined term but having a greater priority under Section 8.03 of eachServiceContract re first satisfied in full.Section 8.03. Satisfaction of Service Payments

Service Paymentsrader all Service Contracts shall be satisfied in the following order andpriority:First: Contract Administrator Payments; henSecond: all theretofore due and unpaid Service Charges (regardless of the FundingRate Methodology) and amounts in respect of Hedge Periodic Payables;thenThird: all then due or about to becomedue Service Charges (regardless of theFunding Rate Methodology)madamounts n respect of HedgePeriodic Pay-ables; thenFourth: all theretofore due and unpaid Regular Scheduled Payments and SinkingFund nstallments; thenFifth: all then due or about to becomedue Regular ScheduledPaymentsand Sink-ing Fund nstalhnents; then

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Sixth: all theretofore due and unpaid amounts in respect of Hedge TerminationPayables; thenSeventh: all then due or about to become due amounts in respect of Hedge Termina-tion Payables; thenEighth: all then due or about to become due Optional Prepayment Amounts and Ac-crued Service Charges.

Article IX -- MiscellaneousSection 9.01. Acceleration on Bankruptcy

/fthe City shall (i) cornmence ny proceeding or file any petition seeking relief under Ti-tle 11 of the United States Code, (ii) consent to the institution of any such proceeding or the fil-ing of any such petition or (iii) make a general assignment for the benefit of creditors, then allpayments due hereunder shall become immediately due and payable without presentment, de-mand, protest or notice of any kind, all of which are expressly waived notwithstanding anythingto the contrary herein.Section 9.02. Termination or Assignment of Stated Hedges

(a) At the request of the City and with the prior written consent of the Insurer that hasCredit Insurance in respect of the particular Stated Hedge, the Corporation shall terminate anyStated Hedge or assign its interest in mayStated Hedge o a Person that agrees to perform andobserve all of the duties and obligations of the Counterparty to such Stated Hedge.(b) Any such substitute Hedge Counterparty shall have the rating required by PublicAct 34 of the Public Acts of 2001, as amended,as if the City were a party to the particular StatedHedge.(c) No such termination or substitution of a Hedge Counterparty shall take effect

unless each Rating Agency oldirms its rating of the particular Certificates.(d) Rating Agency means each national statistical rating organization (as defined inthe Sectuities and Exchange Act of 1934, as amended) that at the time has a rating of theCertificates in effect.

Section 9.03. Required Ratings of Hedge Counterparties(a) The Corporation shall only enter into Hedges with Persons who have, on the datethe Hedge s entered into, or, alternatively, whose Hedge obligations are guaranteed by a Personwho has on the date the Hedge s entered into, a rating of its long-term, senior secured debt atleast A- by Standard & Poors Corporation and at least A3 by Moodys nvestment Service.(b) It is not a breach of subsection (a), above if the Hedge s subject to an Insurerapproved transaction transfer agreement with a Person who qualifies, or whose Hedgeobligations are guaranteed by a Person who qualifies, under subsection (a), above.

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Section 9.04. Addresses for Notices.All notices and other communications provided for hereunder shall be in writing nnlessotherwise stated herein mailed, sent or deliveredif to the City, at

City of Detroit, Michigan - Finance Department1200 Colemma A. Young Municipal Center2 Woodward AvenueDetroit, Michigan 48226Attention: Finance Director

if to the Corporation, atc/o Lewis & Munday, P.C.Suite 2490660 Woodward AvenueDetroit, MiclfiganAttention: President

or to such other address as such Person mayspecify to the other Person and shall be effective (i)if given by mail, 3 Business Days after such communication s deposited in the mails with firstclass postage prepaid or (ii) if given by any other means, whendelivered at the address specifiedin or pursuant to this Section.Section 9.05. Amendment

The Selwice Contract may be amended only by written instrument signed by the partieshereto except that no amendment hall be valid:

(i) /f such amendment diminishes the rights and remedies of may ThirdParty Beneficiary without the prior written consent of such Third Party Benefici-ary;

(ii) unless the Trustee of any Funding Trust that is a transferee of or suc-cessor to any rights or entitlements hereunder and that received an opinion ofcounsel in connection with the organization of the Funding Trust to the effect thatsuch Funding Trust will qualify as a grantor trust under Subpart E, Part I of Sub-chapter J of the Internal Revenue Code of 1986, as amended, shall have receivedan opinion reasonably acceptable in form and substance to such Trustee of coun-sel reasonably acceptable to such Trustee to the effect that such amendment hallnot result in such Funding Trust being treated as other than such a grantor trust;

(iii) unless the Trustee has received an opinion in form and substance rea-sonably satisfactory to the Trustee of counsel reasonably acceptable to the Trusteeto the effect that such amendmentwill not result in the Service Charges andScheduled Payments failing to constitute payments in respect of indebtedness forU.S. federal income tax purposes; and

(iv) unless every Insurer who s not in default under its Credit Insurance atthe time has consented to the amendment, ncluding such prior written consent as

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may be set forth in the Contract Administration Agreement or any other agree-merit to which he Corporation is a party.

Section 9.06. No Waiver; Remedies.No failure on the part of the Corporation or any permitted successor or assign or anyThird Party Beneficiary to exercise, and no delay in exercising, any right hereunder shall be awaiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other

fmther exercise thereof or the exercise of mayother right.Section 9.07. Binding Obligation.

The Service Contract is a continuing obligation of the City mad shall until the date onwhich all amounts due and owing hereunder are paid in full (i) be binding upon the City and itssuccessors and (ii) inure to the benefit of and be enforceable by the Corporation, its successorsand permitted assigns, and by Tltird Party Beneficiaries.Seetion 9.08. General Corporate ExpensesThe City shall pay the General Corporate Expenses of the Corporation as and when theybecome due.Section 9.09. Fees and Expenses.

(a) The Corporation shall pay compensation, expenses and indemnification due theTrustee in accordance with the Trust Agreement, including reasonable fees and expenses ofcounsel, ha connection with any waiver or consent thereunder or any amendment hereof, or inconnection with the enforcement thereof.

(b) The Corporation shall pay compensation, expenses and indemnification due theContract Administrator and the Enforcement Officer (defined in the Contract AdministrationAgreement), if any, in accordance with the Contract Administration Agreement, includingreasonable fees and expenses of counsel, in connection with any waiver or consent hereunder orany amendment ereof or thereof, or in connection with the enforcement hereof.

(c) The Corporation shall pay the fees of renaarketing agents, auction agents andbroker-dealers, or any of them, as provided for any particular Variable Rate Funding Type.

(d) The Corporation shall pay the expenses and other amounts due each Insureraccordance with Section 10.5 of the Contract Administration Agreement;

(e) The Corporation shall pay all amounts due the Enforcement Officer under Section8.19 of the Contract Administration Agreementand not otherwise paid by an Affected Party(as such terms defined in the Contract Administration Agreement), but the Corporation shall haveno obligation to pay any inde~rmity required by the Enforcement Officer;(f) The Corporation shall pay all other payments required to be paid by theColporation under Contract Administration Agreement and not otherwise paid.

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Section 9.10. Permitted Assignment.(a) The Service Contract shall be binding upon the parties hereto mad heir respective

successors and permitted assigns. No assignment by either party of its interests herein shall bevalid except as provided in this Section.(b) The Corporation may transfer (as defined below thi s sub section) theScheduled Payments and Service Charges to the Funding Trust, provided that the Corporation

shall not do so without:(1) delivering prior written notice thereof to the City,(2) listing the Funding Trust as the owner of the Scheduled Payments and ServiceCharges on the registration book (described below), and(3) obtaining the agreement of the Funding Trust not to effect any subsequenttransfer of any Scheduled Payments and/or the Service Charges without

(i) delivering to the City prior written notice of any such transfer(s) ofScheduled Payments and/or the Service Charges and(ii) obtaining the agreement of the transferee (x) not to effect may furthertransfer without prior delivery to the Corporation of notice thereof in the mannerof the notice described in clause (i) above, and (y) to obtain the same agreementof any further transferee (i.e., to give such notice and obtain such agreement offurther transferees).For the avoidance of doubt, the prior written notice referred to in this subsectiononly applies to the holder of legal title to the Scheduled Payments and the ServiceCharges mad not to owners of Certificates.A provision in the Trust Agreement o the effect, For the avoidance of doubt, the

Trustee acknowledges that it has no power to transfer, assign or otherwise convey legaltitle to the FmadingTrust Receivables and that beneficial interests in the Funding TrustReceivables maybe transferred as transfers of Certificates. shall satisfy the agreememreferred to in clause (ii), above.

The City shall record each such transfer of the Scheduled Payments and/or theService Charges for which it receives any such notice in its official records (which shallconstitute the registration book referred to in this subsection), mad uch recording shallidentify the subsequent transferee.

The tema transfer in this subsection means a sale, assignment, transfer or con-veyance.(c) No assiglmaent of the Service Contract or any amomats eceivable thereunder shallinclude the right to receive Additional Service Payments, Contract Administrator Payments orHedge Payables except that the Corporation may assign or grant a security interest in anaounts

received by it as payment of Hedge Payables to the Hedge Counterparties.Section 9.11. Direct Payment of Service Payments; Successor Defined

(a) Additional Service Payments shall be payable by the City to the Personsoriginally entitled to receive them or their successors on the dates whendue.1974114.0058L394283 22 [Service Contract General Temas][Final]14-04112-swr Doc 1-3 Filed 01/31/14 Entered 01/31/14 17:33:52 Page 41 of 43


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(b) The erm successor n this Article means ither a successor to a particular Personby law (e.g., the surviving corporation in a merger)or a successor to the particular office forwhich Additional Service Paymemsr Contract Administrator Payments re payable (e.g., a newPerson, not by operation of law, becomes uccessor Trustee). Successor does not include anyother Person without he written consent of the City.Section 9.12. ThirdParty Beneficiaries

(a) Persons hat are Third Part3, Ben

1-3 detroit pension lawsuit exhibit c

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