Authorization to Issue Bonds for Deficit Financing

(a)Authorization of Issuance of Bonds. I Maga’hågan/Maga’låhen Guåhan is authorized to issue one or more series of bonds of the Government of Guam as provided in this Section, in an aggregate principal amount not to exceed the amount necessary to provide Two Hundred Forty-six Million Eight Hundred Twenty Thousand Eight Hundred Fifty-six Dollars ($246,820,856) for the payment of authorized expenses listed in Subsection

(i)hereof, to fund necessary reserves and to pay expenses incurred in connection with the issuance of such bonds not already included in an existing appropriation for or the regular budget of any government agency or instrumentality or public corporation providing any service in connection with the issuance of such bonds; provided, however, that bonds may not be issued in an amount that would cause a violation of the debt limitation provisions of 48 U.S.C. §1423a (§ 11 of the Organic Act of Guam).

(b)Terms and Conditions Determined by Certificate or Indenture. The terms and conditions of the bonds shall be as determined by I Maga’hågan/Maga’låhen Guåhan, and approved by I Liheslaturan CH. 1 OFFICE OF I MAGA’HÅGA/MAGA’LÅHI [THE GOVERNOR] Guåhan, by the execution of a certificate or indenture authorizing the issuance of the bonds prior to the issuance of the bonds; provided, however, that such terms and conditions shall be consistent with this Section, and that the bonds shall mature not later than November 15, 2039 and shall bear interest at such rates and be sold for such price or prices as shall result in a yield to the bond holders that does not exceed ten percent (10%) per annum.

(c)[No text]

(1)Valid and Binding. The bonds authorized by this Section shall constitute the valid and legally binding general or limited obligations of the government of Guam. The government of Guam pledges its full faith and credit for the punctual payment of both principal of and interest on the bonds and covenants that there shall be collected annually in the same manner and at the same time as government revenue for other purposes is collected, such sum as is required to pay the principal of and interest on the bonds. There are hereby appropriated from the General Fund such sums as may be necessary in each year to equal the amount of money necessary to pay the principal and interest on such bonds. The certificate or indenture shall require interest only payments for Fiscal Years 2009 and 2010 and shall not require bond principal payments until after such Fiscal Years. All officers charged by law with any duty in the collection of the revenues of the government from which debt service on the bonds will be payable shall do every lawful thing necessary to collect such sum. The validity of any such bonds shall not be affected by the validity or regularity of any proceedings for the payment of the General Fund expenses paid or to be paid with the proceeds of the bonds.

(2)Pledge of Section 30 Revenues. All or any part of the revenues derived by the government of Guam under Section 30 of the Organic Act may be pledged to secure the repayment of any bonds issued pursuant to this Section and pay costs incurred in the creation of such debts, subject to any previously created lien on or pledge of such revenues. Any pledge made to secure the bonds shall be valid and binding from the time the pledge is made. The revenues pledged and thereafter received by the government of Guam or by any trustee, depository or custodian shall be deposited in a separate account and shall be immediately subject to the lien of such pledge without physical delivery thereof or further act, and the lien of such pledge shall be valid and binding against all parties having claims of any kind in tort, contract or otherwise, against the government of Guam, such trustee, depository or custodian, irrespective of whether the parties have notice thereof. The certificate or indenture by which such pledge is created need not be recorded. All revenues pledged are hereby continuously appropriated for the purpose for which they have been pledged.

(d)Additional Bonds. This Section does not prohibit the government of Guam from issuing, after appropriate enabling legislation, other obligations of the government secured by the general obligation of the government on a parity with or subordinate to the bonds authorized by this Section on such terms as are created by the indenture or certificate pursuant to which the bonds are issued.

(e)Waiver of Immunity; Submission to Jurisdiction. Notwithstanding any substantive or procedural provision of Chapter 6 of Title 5, Guam Code Annotated, the government of Guam waives immunity from any suit or action in contract on the bonds, but does not waive immunity as to the personal liability of elected officials and employees of the government of Guam. Any such suit or action shall be brought in the District Court of Guam.

(f)No Personal Liability. No employee or elected official of the Government of Guam shall be individually or personally liable for the payment of any amounts due on any bonds issued under this Section, or for any other liability arising in connection with the bonds; provided, however, that nothing in this Section shall relieve any employee or elected official from the performance of a ministerial duty required by law. CH. 1 OFFICE OF I MAGA’HÅGA/MAGA’LÅHI [THE GOVERNOR]

(g)Form of Bonds; Covenants; Appointment of Fiduciaries. The technical form and language of the bonds, including provisions for execution, exchange, transfer, registration, paying agency, lost or mutilated bonds, negotiability, cancellation and other terms or conditions not inconsistent with this Section, including covenants relating to the collection of Revenues, shall be as specified in the certificate or indenture executed by I Maga’hågan/Maga’låhen Guåhan authorizing issuance of the bonds. Said certificate or indenture shall appoint one or more trustees, co-trustees or other fiduciaries authorized to receive and hold in trust the proceeds of the bonds, the Revenues and other moneys relating thereto, to protect the rights of bondholders and to perform such other duties as may be specified in the indenture. I Maga’hågan/Maga’låhen Guåhan is also authorized to execute any appropriate agreements, certificates or other instruments relating to the bonds and the sale of bonds.

(h)Authorization for Credit Enhancement. I Maga’hågan/Maga’låhen Guåhan is authorized to enter into such contracts or agreements with such banks, insurance companies or other financial institutions as she/he determines are necessary or desirable to improve the security and marketability of the bonds issued under this Section. Such contracts or agreements may obligate the government to reimburse, with interest, any such banks, insurance companies or other financial institutions for advances they make to pay principal of or interest on the bonds and to indemnify any such banks, insurance companies or other financial institutions for costs and expenses incurred in connection with any such advance. Any such reimbursement obligation and any other obligations of the government under such contracts or agreements shall be general obligations of the government of Guam. Any such reimbursement obligation and any other obligations of the government under such contracts or agreements shall be treated, under § 11 of the Organic Act, as creating an obligation issued to refund the bonds.

(i)Use of Proceeds from the Sale of the Bonds. The proceeds from the sale of the bonds shall be used and are hereby appropriated to

(i)pay the General Fund expenses described below in this Subsection;

(ii)establish necessary reserves;

(iii)pay expenses relating to the authorization, sale and issuance of the bonds, including, without limitation, printing costs, costs of reproducing documents, credit enhancement fees, underwriting, legal, financial advisory and accounting fees and charges, fees paid to banks or other financial institutions providing credit enhancement, costs of credit ratings and other costs, charges and fees in connection with the issuance, sale and delivery of the bonds; and

(iv)fund capitalized interest on the bonds for a period ending not later than thirty

(30)months after their issuance. The General Fund expenses authorized to be paid with the proceeds of the bonds are as follows and shall be paid in the following order of priority:

(1)Cost of Living Adjustment

(COLA)to discharge finally and permanently the obligations of the government incurred pursuant to the settlement agreement entered into between the Government of Guam and the COLA Class as ordered by the Judgment in Rios v. Camacho, Superior Court Case No. SP0206-93: $92,000,000.00;

(2)2008 and prior year individual tax refunds including interest shall be paid first. Any remaining proceeds shall be used to pay 2008 and prior year corporate tax refunds including interest: $112,000,000.00;

(3)Health Care Capital Improvement Projects at the Guam Memorial Hospital: $11,000,000.00;

(4)amounts past due as contributions to the Government of Guam Retirement Fund, including interest, if any, thereon, on behalf of the following:

(A)Guam Memorial Hospital: $10,953,216.00

(B)Department of Education: $10,867,640.00 Total $236,820,856.00 CH. 1 OFFICE OF I MAGA’HÅGA/MAGA’LÅHI [THE GOVERNOR] Payments made pursuant to this Subsection shall apply to any other appropriations for the same items and shall not constitute double appropriations.

(j)Permitted Investments. The bond proceeds and any revenues generated by said bonds shall be invested only in those investments permitted by the certificate or indenture pursuant to which such bonds are issued.

(k)Approval by Guam Economic Development and Commerce Authority. No bonds authorized by this Section shall be sold until the Board of Directors of GEDCA has approved the sale by resolution.

(l)Approval of Voters Not Required. The issuance of bonds pursuant to this Section shall not be subject to the approval of the voters of Guam.

(m)Approval of Bonds. I Liheslaturan Guåhan, pursuant to § 50103 (k), Title 12 Guam Code Annotated, hereby approves the issuance and sale by the government of Guam of bonds for the purposes and in the principal amounts mandated by § 1512.1, Title 5 Guam Code Annotated; provided that the bonds are issued and sold subject to the terms, conditions, requirements and limitations mandated therein.

(n)Approval of Form of Certificate of Issuance. The bonds shall be issued pursuant to an certificate of issuance in substantially the form of the certificate of issuance presented to this I Liheslatura, as evidenced by the attached “Exhibit A” made part of this Act, subject to such modifications to and changes in such certificate of issuance as I Maga’hågan/Maga’låhen Guåhan may approve consistent with §1512.1, Title 5 Guam Code Annotated and subject to the terms, conditions, requirements and limitations therein.