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POINTS OF OBJECTION TO CASH DEPOSITS REQUIRED FOR USFS 

 CONTRACTS: 



1. Limits cash flow drastically for smaller operation. 

 Since the cash deposit is required to be 10% of 

 advertised value plus 20% of the total bid premium 

 of the sale, the amount the Company must "tie up" 

 limits its cash flow capabilities during the timber 

 contract. 



For example: On an $882,000.00 timber sale, the 

 cash deposit is $93,400.00, which the buyer 

 must deposit before the contract is awarded. 

 The $93,400.00 remains with the USFS until the 

 contract is 25 percent complete, which could 

 be between one and four years. During that 

 time, the business does not have the 

 $93,400.00 with which to operate and generate 

 new revenues. 



2. The cash deposit is earning no interest during the 

 time period of sale for the depositor. On the other 

 hand, the USFS is earning interest on the deposit 

 that is not being returned to the depositor! 



POINTS OF OBJECTION TO LETTERS OF CREDIT IN LIEU OF BONDS: 



1. If a Bank Letter of Credit is used, the borrowing 

 power of the company is reduced by the amount of the 

 outstanding amount on the letter of credit until 

 such time as the sale is complete. 



Banks are reluctant to issue Letters of Credit 

 because of the time period involved for the timber 

 sale. Usually Letters of Credit cover one year, 

 but since the timber sale may go beyond the one 

 year, the Letters of Credit are having to be for a 

 longer time period, which enhances the risk for the 

 bank. 



2. Increased difficulty related to acquiring bonding. 



Bonding companies issue their bonds based on the 

 strength of the financial statements of the 

 business. If a bond is required for a longer time 

 period than one year, many bonding companies are 

 refusing to issue bonds. The bonding company is not 

 willing to take a risk beyond the one year's 

 financial statements that they have required. 



