Piperjaffray.
    April 8,2010
    KUBLlc DOCUMENT
    INDEX No.
    #9 1189
    0EX£t-ERK'sowce
    . MUSCATINE. IOWA
    3900 Inycrwll Ave, S«c 110 DwMoines,Iowa 50J12-3800
    Tci: SU-247-2353
    | Td: 800-333^008
    | Fax: 515-280-7SS7
    PiperJafftay
    tc Co.
    Since 1895. MembcrSIPCamiFINRA.
    Honorable Mayor and City Council
    Gty of Muscatine
    City Hall
    215 Sycamore
    Muscatine, IA 52761-3840
    RE:
    Electronic Bidding Procedure
    Mayor and Council Members:
    With respect to the upcoming sale of General Obligation Bonds, Series 2010 (Bonds), we are
    recommending thatyou allow for the receipt of bids via an electronic bidding platform. We have
    chosen to recommend theuse of the PARITY bidding system. This isallowed under Chapter 75.14
    of theCode of Iowa. While you will "allow" for the receipt of bids via an electronic platform, the
    bidding terms will not "mandate" that potential bidders use die electronic system. It is our
    recommendation thatbidders continue to have theoption tosubmit either sealed or faxed bids.
    There are specific issues that must be addressed touse Chapter 75.34 and use anelectronic platform.
    There are two specific requirements of diis Chapter. First, that the bidding procedure provides
    reasonable security and maintains the integrity of the bidding process; and second, that the
    procedure facilitates thedelivery ofbids by interested parries.
    Taking the second requirement first, we recommend die use of PARITY asthe bidding platform.
    PARITY is a service of i-Deal LLC, which provides a variety of services to securities bidders,
    including licensing the industry-leading software (BidComp) for the calculation of bids and also
    including providing theindustry with bid summary sheets diatthe industry uses to consolidate the
    data into one simple platform for the calculation of die bid. When a bidder begins the process of
    calculating its bid, itgoes toBidComp, which has all ofthe bidding parameters for a particular issue
    "built into" its software (i.e., discount, interest rate restrictions, form ofaward etc.). Bidders input
    the interest rate at which the bonds will besold toother investors and the gross profit thatthe bidder
    wishes to attain on a particular issue. BidComp automatically calculates the bid that a particular
    bidder is working on. Once reviewed, a bidder can simply push a button to send the bid to
    PARITY, where it is time stamped and received as a'valid and binding bid of that bidder. This
    process is far less cumbersome than the historic process, where bidders "call in" their bids to die
    offices ofthe Issuer and read them over the phone todie Issuer (or its agent). The "call in" process
    takes significant time to complete and lias the potential for error in the process of reading and
    writing the bids onto the authorized bid form. By using PARITY, a bidder quickly sends die bid
    without a phone conversation, and does so widiout the risk of"transcribing" the bid onto papa*. If
    the bid isinaccurate assubmitted, it isentirely the fault ofthe bidder submitting the bid. It isclear
    that reducing the rime commitment and improving the reliability of the bid submission process
    ".. .facilitates diedelivery of bidsbyinterested parries..."
    Mayor and Council Members
    Page Two
    April8,2010
    Regarding the reasonable security and maintain integrity requirement. PARITYisan electronic bid
    submission system whose access is restricted by password to those authorized to use the service.
    Firms that use die IPREO Systems (which include, but are not limited to, BidComp and PARITY)
    have dedicated lines allocated between theirtrading operation and IPREO. PARITY andBidComp
    license die right to use the software to die bidders and restrict access only to those at a particular
    bidder who the bidder
    designates to have such access. No individual or agent from one firm can
    access die bid platform for another firm. When a bid is submitted through PARITY, no other
    biddingfirm can "see" that the bid has been
    submitted, nor can they see the content of such bid.
    Further, at the appointed time,PARITY will no longer accept bids. Bidders whosendbids afterdiis
    time have them returned.
    There is no way to absolutely assure you that, in the event of internet failure, power outages,
    telephone interruptions, storms etc that bids will be received. This lack of ability to assureexists
    today. We do not believe that, in usingan electronic platformfor the submission of bond bids, the
    security or integrity of the process will deteriorate. It is possible diat events beyond your or our
    controlwillalterour ability to receive the bids. This possibility existswhether you usean electronic
    biddingsystem or not. However,you should be assured that the ultimateaward of the bid is made
    by the Council at its meeting that dayand not byanyelectronic or odier bidding means. You retain
    thedecision as to whether to accept thebidand, ifwcencounter a situation where wequestion that
    every bid was received, you retain the right to reject all bids and re-bid at a later date. As we have
    always done, we will continue to monitor the bids thatweexpect to receive bytracking thereceipt of
    the
    OS, the good faith process and by maintaining contact with the bidders personally, and, will
    follow upwith bidders intheevent thatwedonotreceive a bid thatwasexpected.
    ig in thisletterisrestricted to findings withrespect to The Code.
    Rex W. Ramsay
    Managing Director

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