U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
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(Mark One)
|X| Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934. For the fiscal year ended June 30, 1998.
|_| Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934. For the transition period from _________ to ________.
Commission File Number: 0-20753
SONICS & MATERIALS, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 060854713
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
53 Church Hill Road, Newtown, CT 06470
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (203) 270-4600
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.03 per share
(Title of class)
Warrants to purchase Common Stock
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:
Yes |X| No |_|
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|
The issuer's revenues for the most recent fiscal year were: $12,080,522
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Company's Common Stock on
September 24, 1998, as reported on the Nasdaq SmallCap Market, was
approximately $819,081. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of September 24, 1998, the issuer had outstanding 3,520,100 shares of Common
Stock, par value $.03 per share, and 1,805,000 Warrants to purchase shares of
Common Stock.
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Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement relating to the 1998 Annual Meeting of
Stockholders are incorporated by reference in Part III.
Pursuant to Rule 12b-25 under the Securities and Exchange Act of 1934, as
amended, Item 6, "Management's Discussion and Analysis or Plan of Operation",
Item 7, "Financial Statements", and Exhibit 27, "Financial Data Schedule" are
omitted from this document. Such items will be included in an amendment to this
Form 10-KSB.
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PART I
Item 1. DESCRIPTION OF BUSINESS
Sonics & Materials, Inc. (the "Company" or "Sonics") designs, manufactures
and sells (i) ultrasonic bonding equipment for the welding, joining and
fastening of thermoplastic components, textiles and other synthetic materials,
and (ii) ultrasonic liquid processors for dispersing, blending, cleaning,
degassing, atomizing and reducing particles as well as expediting chemical
reactions. To further address the needs of its customers, the Company also
manufactures a spin welder and the vibration welder, both of which are used for
the bonding of thermoplastic components.
The Company was incorporated in New Jersey in April 1969, and was
reincorporated in Delaware in October 1978. Robert S. Soloff, its chairman,
president and founder, invented the ultrasonic plastic welding process early in
his career. He has been granted nine patents in the field of power ultrasonics
and is considered to be a pioneer in the application of ultrasonic technology to
industrial processes. Howard Deans, general manager of the Company's Ultra Sonic
Seal division, has also invented ultrasonic devices and processes covered by
patents primarily for packaging and sealing. The patents granted to Messrs.
Soloff and Deans have expired and the technology related to them is now in the
public domain and is used in part in the development and manufacture of the
Company's products.
On July 25, 1997, the Company acquired Tooltex, Inc., an Ohio corporation
("Tooltex"), through a merger transaction (the "Merger"). Tooltex is a
manufacturer of automated systems used in the plastics industry. Pursuant to an
Agreement and Plan of Merger, dated July 25, 1997 (the "Plan of Merger"), among
Sonics,(SM) Sub, Inc., an Ohio corporation and a wholly owned subsidiary of
Sonics ("Sonics Sub"), Tooltex, and the shareholders of Tooltex, Tooltex was
merged with and into Sonics Sub. Sonics Sub then changed its name to Tooltex,
Inc. (the "Surviving Corporation"). Under the Plan of Merger the shareholders of
Tooltex received, in exchange for 100% of the stock of Tooltex, (i) an aggregate
of 70,000 shares of Sonics Common Stock, par value $.03 per share (the "Common
Stock"), (ii) $70,000 and (iii) options to purchase 10,000 shares of Sonics
Common Stock. The former shareholders of Tooltex have surrendered the 70,000
shares of Sonics Common Stock to the Company in satisfaction of certain
indemnification obligations provided in the Plan of Merger.
In September of 1997, the Company also formed a wholly owned subsidiary,
Vibra-Surge Corporation, for the manufacture and sale of its ultrasonic surgical
device. See "Products" below.
Products
The Company manufactures equipment in the following categories:
Ultrasonic Welders -- Manufactured by the Company since its founding, this
line of ultrasonic devices welds, bonds, fastens, sews and rivets thermoplastic
components and other synthetic materials. As new applications were requested by
industrial customers, the line has expanded over the years. Plastic welders and
related devices are used in a wide variety of industries and applications. These
include the automotive, computer, electronics, packaging, toy, home
entertainment, medical device, textile and garment, and home appliance
industries.
There are certain advantages to ultrasonic bonding in comparison to more
traditional welding techniques. Uniform production is often accomplished due to
the consistency, speed and focusing of the energy applied to the welded part.
The bond created between the components is generally strong and clean. Because
no solvents, adhesives or external heat are involved, adverse environmental
factors are minimized. Materials which may not be easily assembled or welded by
other technologies can be effectively bonded ultrasonically. Moreover,
ultrasonic bonding is generally faster and requires less skilled labor or
training than many other methods.
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Liquid Processors - Liquid processors, which are sold under the Company's
trade name "Vibra-Cell" or under private label, are ultrasonic devices that
disperse, break up, emulsify, atomize, mix and blend substances in a liquid or
semi-liquid media. Substances affected by liquid processing include molecules,
cells, tissues, fluids, chemicals and particles. These devices are available in
different power configurations for low, medium and high volume applications with
various capacities, features and accessories. Operating similarly to ultrasonic
bonding systems and composed of many of the same components, liquid processors
produce a different result because they are utilized in liquid, semi-liquid and
powdered media.
Liquid processors are utilized in biotechnology by scientists, biologists,
chemists and pharmacologists, primarily in laboratories for research and testing
purposes. The Company has extended the applications for its liquid processors
from the research laboratories to industrial settings. The liquid processor also
functions to process and test materials and substances on the production line
and in vats and tanks. In the manufacture of pharmaceuticals and in the
processing of petroleum products and certain specialty chemicals, they reduce
particle size and facilitate mixing; in the preparation of paint and dyes, they
blend and homogenize materials. In the ink industry, processors disperse black
carbon. In the beverage and other industries, they are used to de-gas carbonated
soda, wine, beer, spirits and solvents. The Company's liquid processors are also
used as high-intensity cleaners. These ultrasonic cleaning devices are effective
in spot cleaning and removing various contaminants, such as radioactive
particles, proteins, rust, blood, and oil from laboratory equipment.
The Company also manufactures a liquid processor with a spray nozzle that
atomizes fluids by producing ultra-fine sprays in precisely measured dosages or
at extremely low flow rates. Utilized in laboratories and plants, ultrasonic
atomizers can coat, moisten, or deposit micro-droplets of liquid on glass,
fabric, paper, semiconductors, pharmaceuticals, ceramics or tubes. They are also
used to apply silicone and Teflon, disinfect surfaces and lubricate small parts.
Vibration Welder -- Vibration welders are generally used to weld larger
plastic components together, and have the ability to weld a wider variety of
plastics. In this technology, a non-vibrating part is hydraulically lifted from
below to meet a horizontally-vibrating part. The vibrations cause friction and
heat, melting the plastic, and a bond is effectuated between the plastic parts.
The vibration welder that has been designed and is currently being manufactured
by the Company is computer-controlled and has a power supply, digital display
and other features similar to the Company's ultrasonic welder.
Spin Welder -- The Company has developed and currently manufactures spin
welders based on a non-ultrasonic process known as rotary friction welding.
Rotary friction welding is a bonding technology generally used only when
assembling cylindrical or round-shaped thermoplastic parts. It is also better
suited for plastics of a semi-crystalline nature and assemblies requiring
significant tooling relief. In spin welding, one plastic component is spun
against a mating plastic part that is held stationary in a nesting fixture.
Friction generated by the spinning action produces heat which melts the plastic
and fuses the two parts together.
The spin welding system offered by Sonics features, among other things, a
multi-function programmable controller, RPM display, and a two horsepower
electronic drive motor that spins the plastic part. The spin welder is composed
of a steel frame and column with a control box. Other components of the system
include a pneumatic head, an automotive spindle bearing, an air brake and clutch
system, and steel plates.
Ultrasonic Surgical Instrument -- The Company has designed and developed
an ultrasonic medical device, the Vibra-Surge(TM) System Model VS 2120
("Vibra-Surge"), for the removal of soft tissue in general and reconstructive
and plastic surgery. Sonics filed a patent application and a preliminary patent
application covering Vibra-Surge(TM) with the U.S. Patent and Trademark Office
on May 1, 1997. The preliminary patent application has been abandoned. It is not
certain whether a patent for the remaining application will be issued or, if
issued, that such patents will offer adequate protection or will not be
challenged by the holders of prior or other patents issued or to be issued for
similar purposes. The device received 510(k) clearance from the Food and Drug
Administration (the "FDA") on July 25, 1997 which permits Sonics to market the
device. In September 1997, Sonics created a wholly owned subsidiary, Vibra-Surge
Corporation, which signed an exclusive distribution agreement with Sonimedix,
Inc. ("Sonimedix") on September, 19, 1997. Under the distribution agreement,
Sonimedix serves as the exclusive worldwide distributor of Vibra-Surge(TM). On
September 25,
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1997, Sonics transferred to Vibra-Surge Corporation all of its rights and
obligations under the 510(k) FDA clearance and patent applications and all of
the technology related to Vibra-Surge(TM).
Industry Background
Management believes that in recent years the market for ultrasonic bonding
systems, and other plastic assembly systems has undergone steady and consistent
growth. It appears that more companies are seeking to replace metal components
with thermoplastics in order to reduce the weight of products or to capitalize
on other special properties of synthetic substances. Consequently, ultrasonic
bonding systems and related welding devices have been more extensively utilized
in industrial processing and in new assembly applications. In contrast,
management believes that the market for liquid processors in the past has
experienced inconsistent growth and occasional contractions. To a certain
extent, the past decline in sales of liquid processors in the research
laboratory area has been offset by new and more extensive applications of such
technology in other industries, such as the paint, chemical, petroleum and
beverage industries, and medical industries. The market for liquid processors
has only recently stabilized and appears to have resumed its growth. Ultrasonic
food processing systems were introduced to the market place approximately three
years ago. Sonics believes that while the market for these systems is relatively
young, the market will expand as ultrasonics cutters are accepted as an
alternative to conventional or waterjet cutters.
Manufacturing and Supply
Sonics' manufacturing operations, conducted at its facilities located in
Danbury, Connecticut, Aston, Pennsylvania, and Grove City, Ohio, are run on a
batch basis in which a series of products move irregularly from station to
station. The Company manufactures its products pursuant to historical and
projected sales data as well as specific customer orders.
Most supplies and materials required in the manufacture of the Company's
products are available from many sources. Many of its suppliers are based in the
same general locality as the Company's manufacturing operations. To date, Sonics
has experienced few shortages and delays regarding supplies and materials.
However, it is not certain that such shortages or delays may not have an adverse
impact on Sonics' operations in the future. No one supplier accounted for more
than 5% of its total purchases for inventory made in fiscal years 1997 or 1998.
Although management believes that in all cases alternate sources of supplies can
be located, a certain amount of time would inevitably be required to find
substitutes. During any such interruption in supplies, the Company may have to
curtail the production and sale of its devices and systems for an indefinite
period.
Sonics is not a party to any formal written contract regarding the
delivery of its supplies and materials. It generally purchases such items
pursuant to written purchase orders of both the individual and blanket
varieties. Blanket purchase orders usually entail the purchase of larger amounts
of items at fixed prices for delivery and payment on specific dates ranging from
two months to one year.
Sonics has qualified its Connecticut facility to meet the quality
management and assurance standards of an international rating organization (ISO
9001). ISO 9001 certification indicates that the Company has successfully
implemented a quality assurance system that satisfies this standard. Sonics has
also obtained CE approvals, which are now necessary for sales in Europe, for
many models of its ultrasonic welder and liquid processor. It is working towards
CE approvals for its other product lines.
Maintenance and Service
The Company offers warranties on all its products, including parts and
labor, that range from one year to three years depending upon the type of
product concerned. For the fiscal years ended June 30, 1997 and 1998, expenses
attributable to warranties were approximately $77,000 and $66,000, respectively.
Sonics performs repair services on all of its products sold domestically either
at its Connecticut or Pennsylvania facilities or at customer locations.
Servicing of foreign sales is usually handled by distributors abroad or in the
Company's Swiss branch office regarding its devices sold in
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Europe. These services are performed upon specific orders without contracts at
various rates. The Company usually charges for the time that its employees
expend on the task and the cost of the materials or parts involved in the
repair. For the fiscal years ended June 30, 1997 and 1998, the Company had
income of approximately $398,000 and $446,000, respectively, for out-of-warranty
services performed. Company devices generally have a long operating life, and
Sonics has repaired machines manufactured by it that are more than 28 years old.
Sales and Marketing
Sonics generally markets and sells its products in the United States and
abroad through a network of sales representatives and distributors to end users
and original equipment manufacturers ("OEMs"). In the United States, the Company
and its Ultra Sonic Seal division ("USS") utilize approximately 50 sales
representatives in 48 states throughout the country. The Company's wholly owned
subsidiary, Tooltex, utilizes two sales representatives throughout the Midwest.
In the overseas market, it relies on approximately 66 distributors and several
sales representatives to distribute its products in 49 countries. The areas
covered by these third parties include North and South America, the Middle and
Far East, Europe and Australia.
Sales Representatives
The Company's relationship with its sales representatives is usually
governed by a written contract which is generally terminable by either party on
30 days prior notice. The contract provides for exclusive territorial and
product representation and commissions payable to them on their sales depending
on whether basic units or accessories are involved and typically covers
ultrasonic bonding systems and liquid processors. OEM sales made by the Company
are excluded from the commission arrangements. Generally, the sales
representatives do not purchase for their own account, but merely sell Sonics'
products on the Company's behalf. They also may represent other manufacturers
but generally not those competitive with the Company's products. No one sales
representative accounted for more than 5% of Sonics' sales in either fiscal year
1997 or 1998. The loss of such representatives representing in the aggregate
significant sales may have a material adverse impact on the Company's business.
USS sells its plastic welder under its division name. USS maintains a
network of sales representatives in the United States different from those for
Sonics' main product lines. The terms of these arrangements with its sales
representatives are similar to the terms Sonics negotiates with its own sales
representatives.
The Company's wholly owned subsidiary, Tooltex, sells its automated
systems under its corporate name, Tooltex, Inc. Tooltex's sales organization
consists of two direct sales personnel, as well as two sales representatives.
Distributors
Sales of Sonics' products to distributors are also generally made pursuant
to written contracts. Under such contracts, distributors provide repair service
and are prevented from selling devices competitive to the Company's products.
Generally, payments must be made in U.S. dollars within 30 days of delivery of
the product. Distribution arrangements are either exclusive or non-exclusive and
are cancelable upon 30 days notice. The contracts generally exclude private
label sales made by Sonics in the distributor's territory even if the
relationship is of an exclusive type and typically covers sales of both
ultrasonic bonding systems and liquid processor lines. The Company now also
offers both its spin welder and vibration welder to its sales representatives
and distributors. The Company also sells these products directly to end-users or
under private label. The Company usually grants discounts to distributors,
depending on the product and quantity sold. No one distributor accounted for
more than 5% of Sonics' sales in either fiscal year 1997 or 1998. The loss of
such distributors in substantial numbers or at key locations could have a
material adverse effect on the Company's business. USS maintains separate but
similar arrangements with at least three foreign distributors abroad.
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The Company promotes the sale of its products through direct mailings,
trade shows, product literature, press releases, advertising in trade magazines
and listings in catalogs. The Company occasionally engages in cooperative
advertising with some of its distributors.
Sonics' wholly owned subsidiary, Vibra-Surge Corporation, will sell its
ultrasonic surgical device through its exclusive distributor of the product,
Sonimedix. Under the distribution contract, Sonimedix is prevented from selling
devices competitive to the ultrasonic surgical instrument. Payment must be made
within 60 days of receipt of the product by the end user. The contract may be
canceled by either party if certain terms and conditions are not satisfied.
Customers
Sonics sells its products, directly or indirectly, to numerous customers,
ranging in size from small companies to large Fortune 100 corporations. Its
customers are end-users, original equipment manufacturers, system integrators
and resellers as well as distributors. Many of its customers are repeat
purchasers. None of its customers represented more than 5% of Sonics' sales for
fiscal 1997 or 1998.
International Operations
The Company's international activities are an important portion of its
business. Approximately 37% and 28% of its sales for fiscal years 1997 and 1998,
respectively, are attributable to sales of its products outside the United
States. The Company also operates a branch office in Gland, Switzerland where it
sells and services its ultrasonic devices for the European market except for the
United Kingdom.
Internationally, the Company sells its ultrasonic products under its own
label to end users and distributors or under the trade name of the distributor.
In most cases, Sonics' devices are shipped to foreign distributors and end users
as completed units. However, in certain situations, especially with regard to
distributors of ultrasonic welders located in Asia and South America, the
Company's systems are made available in kit form and assembled there. Kits
frequently contain all components for devices but in some instances only a
portion of the requisite components is provided. For some foreign sales, no
written distribution arrangement exists.
Competition
The Company competes in each of its markets against a variety of other
concerns, many of which are larger and have greater financial, technical,
marketing, distribution and other resources than Sonics. It competes on the
bases of service, performance, reliability, price and delivery.
Prior to making a sale, the Company will expend time and resources
exploring whether it can profitably handle a new application for potential and
existing customers. Generally, the Company receives no compensation for this
pre-sale activity except when special tooling is required and payment for such
services only occurs when and if product sales are consummated. Like nearly all
manufacturers in this industry, the Company invests heavily in this pre-sale
examination of new applications. Such examination represents another area in
which such manufacturers compete, and those with greater resources and manpower
may possess a competitive advantage.
With respect to its ultrasonic bonding equipment, the Company encounters
competition from Branson Ultrasonics Co. ("Branson"), a subsidiary of Emerson
Electric Co., Dukane Corp. ("Dukane"), Herrmann Ultrasonics, Inc., Forward
Technology Industries, Inc. and other smaller manufacturers. The two dominant
companies in this area are Branson and Dukane. Some of these competitors also
offer spin and vibration devices as well as ultrasonic ones.
In the ultrasonic liquid processor market, the Company's principal
competitors are Branson and Misonix Inc. Management believes that in this market
Sonics has the largest market share.
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The Company's ultrasonic surgical instrument has three main competitors,
Mentor Corporation, Lysonix Inc., and Wells-Johnson Corporation. No one company
dominates this market. However, the Company's three major competitors have
entered the market place prior to Sonics.
Backlog
As of June 30, 1998, the Company's backlog was approximately $2,482,000 as
compared with a backlog of $1,195,000 as of June 30, 1997. No one customer
accounted for more than 10% of such backlog at June 30, 1998.
Substantially all of the Company's backlog figures are based on written
purchase orders executed by the customer and involve product deliveries and not
engineering services. All orders are subject to cancellation.
Research and Development
The Company maintains an engineering staff responsible for the improvement
of existing products, modification of products to meet customer needs and the
engineering, research and development of new products and applications.
Engineering and research and development expenses were approximately $418,000
for fiscal 1997 and $544,000 for 1998. The Company attributes this increase to
increased use of outside consulting services for several development projects.
The Company does not expect to use outside consulting services as much in fiscal
1999.
Intellectual Property
Proprietary information and know-how are important to the Company's
success. Sonics holds no active patents but has trademark protection for its
"Vibra-Cell" trade name and its "Vibra-Surge" trade name. There can be no
assurance that others have not developed, or will not develop, independently the
same or similar information or obtain and use proprietary information of the
Company. Sonics has obtained written assurances from its employees, sales
representatives and distributors under confidentiality agreements regarding its
proprietary information.
On February 23, 1996, the Company filed a patent application with the U.S.
Patent and Trademark office for one of its bonding machines. However, this
patent application has been abandoned. On May 1, 1997, the Company filed a
patent application and a preliminary patent application with the U.S. Patent and
Trademark Office covering its new ultrasonic surgical instrument. The
preliminary patent application for the ultrasonic surgical instrument has been
abandoned. The Company cannot predict whether a patent for the remaining patent
application will be granted or the extent of protection which would be offered
by a patent, if granted.
On September 25, 1997, Sonics transferred to its wholly owned subsidiary,
Vibra-Surge Corporation, the "Vibra-Surge" trade name, and its rights and
obligations under the Vibra-Surge patent application and preliminary patent
application. See "Products" above.
Government Regulation
Sonics' bonding and liquid processor lines generally are not governed by
specific legal rules and laws. The Company's ultrasonic surgical instrument,
however, is subject to a variety of FDA regulations relating to its manufacture
and sale in the United States. The FDA has rules which govern the design,
manufacture, distribution, approval and promotion of medical devices in the
United States.
Various states and foreign countries in which Sonics' products are, or may
be, sold may impose additional regulatory requirements, such as the Medical
Device Directive in the European Common Market.
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On May 1, 1997, Sonics filed a patent application and a preliminary patent
application for its ultrasonic surgical instrument, Vibra-Surge. The preliminary
patent application has been abandoned. The Company has obtained 510(k) clearance
from the FDA which permits the Company to market the device for aiding the
removal of soft tissue in general surgery and plastic and reconstructive
surgery. Vibra-Surge has signed an exclusive distribution agreement with
Sonimedix for the sale and marketing of its ultrasonic surgical instrument.
Sonics' sales abroad may make it subject to other U.S. and foreign laws.
The Company and its agents are also governed by the restrictions of the Foreign
Corrupt Practices Act of 1977, as amended (the "FCPA"). The FCPA prohibits the
promise or payments of any money, remuneration or other items of value to
foreign government officials, public office holders, political parties and
others with regard to obtaining or preserving commercial contracts or orders.
Sonics has urged its foreign distributors to comply with the requirements of the
FCPA. All these restrictions may hamper the Company in its marketing efforts
abroad.
In addition, other federal, state and local agencies, including those in
the environmental, fire hazard control, and working conditions areas could have
a material adverse affect upon the Company's ability to do business. Sonics is
not involved in any pending or threatened proceedings which would require
curtailment of, or otherwise restrict, its operations because of such
regulations and compliance with applicable environmental or other regulations.
None of these laws has had a material effect upon its capital expenditures,
financial condition or results of operations.
Employees
As of September 28, 1998, the Company, including its subsidiaries, had 115
full-time employees including its officers, of whom 65 were engaged in
manufacturing, 3 in repair services, 9 in administration and financial control,
16 in engineering and research and development, and 17 in marketing and sales.
None of Sonics' employees is covered by a collective bargaining agreement
or represented by a labor union. Sonics considers its relationship with its
employees to be good.
The design and manufacture of the Company's equipment requires substantial
technical capabilities in many disparate disciplines, from mechanics and
computer science to electronics and mathematics. While management believes that
the capability and experience of its technical employees compares favorably with
other similar manufacturers, there can be no assurance that it can retain
existing employees or attract and hire the highly capable technical employees
necessary in the future on favorable terms, if at all.
Company's Statement Regarding Forward Looking Statements
Any statements in this Annual Report that are not statements of historical
fact are forward-looking statements that are subject to a number of important
risks and uncertainties that could cause actual results to differ materially.
Specifically, any forward looking statements in this Annual Report related to
the Company's objectives of future growth, profitability and financial returns
are subject to a number of risks and uncertainties, including, but not limited
to, risks related to a growing market demand for Sonics' existing and new
products, continued growth in sales and market share of Sonics and its USS
products, pricing, market acceptance of existing and new products, a fluctuation
in the sales product mix, general economic conditions, competitive products, and
product and technology development. There can be no assurance that such
objectives will be achieved. The Company's objectives of future growth,
profitability and financial returns are also subject to the uncertainty of
Vibra-Surge Corporation being able to successfully market its ultrasonic
surgical device. It is also uncertain whether a patent will be granted for the
Company's ultrasonic surgical device, or whether any related patent litigation
may hinder the Company's ability to market the device. In addition, the
Company's objectives of future growth, profitability, and financial returns are
also subject to the uncertainty of the growth and profitability of its wholly
owned subsidiary, Tooltex. It is also uncertain whether the Company's recent
cost cutting measures will result in increased profitability. See "Management's
Discussion and Analysis or Plan of Operation."
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Item 2. Description of Property
The Company's primary manufacturing and office facility is located in
Newtown, Connecticut in one 62,500 square foot steel and cinder block building
(the "Newtown Property"). This facility is considered adequate for the Company's
current needs, as well as its anticipated future requirements. The facility was
purchased on September 19, 1997. The Company renovated the building and
consolidated all of its former Danbury facilities into the Newtown Property in
May of 1998. The Newtown Property was purchased for $1,265,000 and the cost of
improvements to the property was approximately $2,200,000. The Company intends
to lease 7,200 square feet of the building to an unrelated third party. Although
no party has yet been identified, the Company believes that it will be able to
find a lessee because there is minimal competition in Newtown for similar space.
The Newtown Property is insured against fire and other casualty in an amount the
Company believes to be adequate.
The Newtown Property is encumbered by a first mortgage lien in favor of a
bank ("Bank"), which secures two credit facilities dated September 19, 1997: (i)
a revolving line of credit facility in the original principal amount of up to
$1,500,000 (the "Line of Credit"), (ii) a term loan in the original principal
amount of $427,000 (the "Term Loan"); and (iii) a Bridge Loan in the original
principal amount of $1,600,000. On December 12, 1997, the Company issued
Industrial Revenue Bonds through the Connecticut Development Authority in the
amount of $3,810,000. The proceeds were used in part to pay in full the
outstanding interest and principal due on the Bridge Loan discussed above. The
remaining proceeds were used for the purchase and preparation of the Newtown
Property, and the purchase of new machinery and equipment. The Bonds mature in
November 2017 and bear interest at 75% of the Bank's base lending rate (6.375%
at September 22, 1998). The Company will redeem principal on the Bonds in 228
equal monthly installments of $16,700 beginning December 1998. The Company does
not intend to use the proceeds from the Line of Credit or the Term Loan to
acquire or improve the Newtown Property. For information about such borrowings,
see "Management's Discussion and Analysis or Plan of Operations-Liquidity and
Capital Resources."
The following table lists the Company's leased offices by location as of
September 25, 1998, and certain other information:
Approximate
Total Area Approximate
Leased in Expiration Date Current Annual
Square Footage of Lease Rent(1)
-------------- --------------- --------------
Aston, Pennsylvania.......... 4,900 September 30, 2002 $40,300
Naperville, Illinois......... 2,000 December 31, 1998 14,400
Gland, Switzerland........... 3,000 January 31, 1998(2) 13,800
Garner, North Carolina....... 800 April 30, 1999 6,600
Grove City, Ohio(3).......... 13,600 July 26, 2002(2) 77,900
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(1) Includes proportionate cost of utilities, repairs, cleaning, snow removal,
taxes and insurance.
(2) Contains renewal option as listed below:
Gland Switzerland.............1 year
Grove City, Ohio..............5 years
(3) Lease is with BPT, Limited, the sole partners of which are the former
shareholders and current President and Vice President of Tooltex.
The Company believes that it has adequate insurance coverage for all of
its leased properties. The Company also leases certain automobiles and
equipment.
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Item 3. Legal Proceedings
There is no pending or threatened material litigation or proceeding
against the Company.
9
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Item 4. Submission of Matters to a Vote of Security-Holders
Not applicable.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
From February 27, 1996 to July 24, 1998, the Common Stock and Warrants to
Purchase Common Stock of the Company had been traded and quoted through the
National Association of Securities Dealers Inc. ("NASDAQ") National Market
System under the symbols "SIMA" and "SIMAW," respectively. As of July 24, 1998,
the Company's Common Stock and Warrants to purchase Common Stock have been
traded and quoted through the NASDAQ SmallCap Market under the same symbols used
on NASDAQ's National Market System. The Company transferred to the NASDAQ
SmallCap Market when its Common Stock and Warrants no longer satisfied the
National Market System minimum maintenance requirements for the market
capitalization of the Common Stock's public float.
The following table sets forth the range of high and low bids for the
Company's Common Stock and Warrants for the periods indicated as reported by
NASDAQ.
Stock Warrants
-------------------------- --------------------------
Quarter Ended High Low High Low
- - ------------------ ------------ ------------ ------------ ------------
September 30, 1996 14 1/2 10 13/16 7 1/4 4 1/4
December 31, 1996 13 1/2 3 3/4 6 1/4 1/2
March 31, 1997 8 1/2 4 2 1/2 11/16
June 30, 1997 6 1/4 2 7/8 1 11/16 3/8
September 30, 1997 3 1/2 3 1/4 3/4 3/4
December 31, 1997 1 1/8 3/4 7/16 1/8
March 31, 1998 1 3/8 1 1/4 1/8 1/8
June 30, 1998 1 1/4 1 1/4 1/16 1/16
The prices presented in the table are bid prices, which represent prices
between broker-dealers and do not include retail mark-ups and mark-downs or any
commission to the dealer. The prices presented may not reflect actual
transactions.
On September 24, 1998, the closing price of the Common Stock of the
Company, as reported by the NASDAQ SmallCap Market, was $13/16 per share, and
the closing price of the Warrants, as reported by the NASDAQ SmallCap Market was
$1/16 per Warrant. On September 22, 1998, the Company had 39 stockholders of
record and 13 Warrant holders of record. The Company has been informed by its
registrar and transfer agent that these are holders in nominee name. The Company
believes that the number of beneficial holders is greater.
The Company intends to follow a policy of retaining any earnings to
finance the development and growth of its business. Accordingly, it does not
anticipate other payments of cash dividends in the foreseeable future. The
payment of dividends, if any, rests within the discretion of the Board of
Directors and will depend upon, among other things, the Company's earnings, its
capital requirements and its overall financial condition.
In connection with the Company's initial public offering, on June 20, 1996
the Company filed with the Securities and Exchange Commission (the "SEC") a Form
SR reporting the use of proceeds from such offering. Additional Forms SR were
subsequently filed by the Company. As of September 23, 1998, the Company has
applied proceeds from the offering in the following approximate amounts to the
following categories.
10
<PAGE>
Amount of Payments
------------------
Repayment of Indebtedness $ 1,670,000
Acquisition of other business 92,000
Working capital and general corporate use 1,519,000
-----------
Total $ 3,281,000
Item 6. Management's Discussion and Analysis or Plan of Operation
To be filed pursuant to Rule 12b-25.
Item 7. Financial Statements
To be filed pursuant to Rule 12b-25.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
Information required by this Item 9 is incorporated herein by reference
from the definitive proxy statement of Sonics to be filed with the Securities
and Exchange Commission ("SEC") within 120 days following the end of Sonics'
fiscal year ended June 30, 1998, or October 28, 1998, relating to its 1998
Annual Meeting of Stockholders.
Item 10. Executive Compensation
Information required by this Item 10 is incorporated herein by reference
from the definitive proxy statement of Sonics to be filed with the SEC within
120 days following the end of Sonics' fiscal year ended June 30, 1998, or
October 28, 1998, relating to its 1998 Annual Meeting of Stockholders.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Information required by this Item 11 is incorporated herein by reference
from the definitive proxy statement of Sonics to be filed with the SEC within
120 days following the end of Sonics' fiscal year ended June 30, 1998, or
October 28, 1998, relating to its 1998 Annual Meeting of Stockholders.
Item 12. Certain Relationships and Related Transactions
Information required by this Item 12 is incorporated herein by reference
from the definitive proxy statement of Sonics to be filed with the SEC within
120 days following the end of Sonics' fiscal year ended June 30, 1998, or
October 28, 1997, relating to its 1998 Annual Meeting of Stockholders.
11
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits.
3(i) Certificate of Incorporation of the Registrant, as amended
(incorporated by reference from Exhibit 3.1 of Amendment No. 3 to
Registration Statement No. 33-96414).
3(ii) Amended By-laws of the Registrant (incorporated by reference from
Exhibit 3.2 of Registration Statement No. 33-96414).
10(i) Form of Employment Agreement between the Registrant and Robert S.
Soloff (incorporated by reference from Exhibit 10.1 of
Registration Statement No. 33-96414).
10(ii) 1995 Incentive Stock Option Plan and form of Stock Option
Agreement (incorporated by reference from Exhibit 10.3 of
Registration Statement No. 33-96414).
10(iii) Lease between Registrant and Aston Investment Associates (Aston,
PA) (incorporated by reference from Exhibit 10.5 of Registration
Statement No. 33-96414).
10(iv) Amended lease between Registrant and Robert Lenert (Naperville,
IL) (incorporated by reference from Exhibit 10.6 of Amendment No.
4 to Registration Statement No. 33-96414).
10(v) Lease between Registrant and Janine Berger (Gland, Switzerland)
(incorporated by reference from Exhibit 10.7 of Registration
Statement No. 33-96414).
10(vi) Form of Sales Representation Agreement (incorporated by reference
from Exhibit 10.8 of Registration Statement No. 33-96414).
10(vii) Form of Sales Distribution Agreement (incorporated by reference
from Exhibit 10.9 of Registration Statement No. 33-96414).
10(viii) Agreement and Plan of Merger, dated as of July 25, 1997, among
the Registrant,(SM) Sub, Inc., Tooltex, Inc., and the persons
designated as the shareholders thereon (excluding schedules and
annexes). A list of omitted schedules and annexes appears on pages
iv and v of the Agreement and Plan of Merger. The Registrant
hereby undertakes to furnish supplementally a copy of any omitted
schedule and annex to the Commission upon request. (incorporated
by reference from Exhibit 2(a) of the Registrant's Form 8-K dated
July 25, 1997).
10(ix) Agreement of Merger, dated as of July 25, 1997, among the
Registrant,(SM) Sub, Inc. and Tooltex, Inc. (incorporated by
reference from Exhibit 2(b) of the Registrant's Form 8-K dated
July 25, 1997).
10(x) Credit Agreement, dated September 19, 1997, between Brown Brothers
Harriman & Co. and Registrant ( incorporated by reference from
Exhibit (xii) of the Registrant's Form 10KSB for the year ended
June 30, 1997).
10(xi) Term Loan Note of Registrant, dated September 19, 1997, payable to
the order of Brown Brothers Harriman & Co. in the original
principal amount of $427,000 (incorporated by reference from
Exhibit (xiii) of the Registrants Form 10KSB for the year ended
June 30, 1997).
10(xii) Line of Credit Note of Registrant, dated September 19, 1997,
payable to the order of Brown Brothers Harriman & Co. in the
original principal amount of $1,500,000 (incorporated by reference
from Exhibit (xiv) of the Registrants Form 10KSB for the year
ended June 30, 1997).
10(xiii) Bridge Loan Note of Registrant, dated September 19, 1997, payable
to the order of Brown Brothers Harriman & Co. in the original
principal amount of $1,600,000 (incorporated by reference from
Exhibit (xv) of the Registrants Form 10KSB for the year ended June
30, 1997).
10(xiv) Open-End Mortgage Deed from Registrant to Brown Brothers Harriman
& Co. dated September 19, 1997 (incorporated by reference from
Exhibit (xvi) of the Registrants Form 10KSB for the year ended
June 30, 1997).
10(xv) General Security Agreement from Registrant to Brown Brothers
Harriman & Co. dated September 19, 1997 (incorporated by reference
from Exhibit (xvii) of the Registrants Form 10KSB for the year
ended June 30, 1997).
10(xvi) Loan Agreement between Connecticut Development Authority and
Sonics & Materials dated December 1, 1997 (filed herewith).
12
<PAGE>
10(xvii) Indenture of Trust between Connecticut Development Authority and
Sonics & Materials, Inc. dated December 1, 1997 (filed herewith).
10(xviii) Tax Regulatory Agreement between Connecticut Development
Authority and Sonics & Materials, Inc., and Brown Brothers
Harriman Trust Company as Trustee dated December 12, 1997 (filed
herewith).
21 Subsidiaries of the Registrant (filed herewith).
27 Financial Data Schedule (to be filed pursuant to Rule 12b-25).
(b) The Company filed a Current Report on Form 8-K on May 1, 1998
announcing the Company's Board of Directors' approval of Schneider, Ehrlich &
Wengrover, LLP to perform its fiscal year 1998 audit and the termination of
Grant Thornton, LLP as the Company's independent auditors.
13
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: September 28, 1998
SONICS & MATERIALS, INC.
By: /s/ ROBERT S. SOLOFF
-------------------------------------
Robert S. Soloff
Chairman and President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ ROBERT S. SOLOFF Chairman, President, Treasurer, Chief September 25, 1998
(Robert S. Soloff) Executive and Chief Financial Officer
/s/ LAUREN H. SOLOFF Secretary and Director September 25, 1998
(Lauren H. Soloff)
/s/ Ronald Kalb Director September 25, 1998
(Ronald Kalb)
/s/ JACK T. TYRANSKY Director September 25, 1998
(Jack T. Tyransky)
/s/ CHRISTOPHER S. ANDRADE Accounting Manager September 25, 1998
(Christopher S. Andrade) Principal Accounting Officer
</TABLE>
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Location of Exhibit in
No. Description Sequential Numbering System
--- ----------- ---------------------------
<S> <C> <C>
3(i) Certificate of Incorporation of the Incorporated by reference from
Registrant, as amended. Exhibit 3.1 of Amendment No. 3
to Registration Statement No.
33-96414
3(ii) Amended By-laws of the Registrant. Incorporated by reference from
Exhibit 3.2 of Registration
Statement No. 33-96414
10(I) Form of Employment Agreement between the Incorporated by reference from
Registrant and Robert S. Soloff. Exhibit 10.1 of Registration
Statement No. 33-96414
10(ii) 1995 Incentive Stock Option Plan and form Incorporated by reference from
of Stock Option Agreement. Exhibit 10.3 of Registration
Statement No. 33-96414
10(iii) Lease between Registrant and Aston Incorporated by reference from
Investment Associates (Aston, PA). Exhibit 10.5 of Registration
Statement No. 33-96414
10(iv) Amended lease between Registrant and Incorporated by reference from
Robert Lenert (Naperville, IL). Exhibit 10.6 of Amendment No. 4
to Registration Statement No.
33-96414
10(v) Lease between Registrant and Janine Berger Incorporated by reference from
(Gland, Switzerland). 10.7 of Registration Statement
No. 33-96414
10(vi) Form of Sales Representation Agreement. Incorporated by reference from
Exhibit 10.8 of Registration
Statement No. 33-96414
10(vii) Form of Sales Distribution Agreement. Incorporated by reference from
Exhibit 10.9 of Registration
Statement No. 33-96414
10(viii) Agreement and Plan of Merger, dated as of Incorporated by reference from
July 25, 1997, among the Registrant,(SM) Exhibit 2(a) of Registrant's
Sub, Inc., Tooltex, Inc., and the persons Form 8-K dated July 25, 1997
designated as the shareholders thereon
(excluding schedules and annexes). A list
of omitted schedules and annexes appears
on pages iv and v of the Agreement and
Plan of Merger. The Registrant hereby
undertakes to furnish supplementally a
copy of any omitted schedule and annex to
the Commission upon request.
10(ix) Agreement of Merger, dated as of July 25, Incorporated by reference from
1997, among the Registrant,(SM) Sub, Inc. Exhibit 2(b) of the Registrant's
and Tooltex, Inc. Form 8-K dated July 25, 1997).
10(x) Credit Agreement, dated September 19, Incorporated by reference from
1997, between Brown Brothers Harriman & Exhibit 10 (xii) of the
Co. and Registrant. Registrant's Form 10-KSB for the
year ended June 30, 1997
10(xi) Term Loan Note of Registrant, dated Incorporated by reference from
September 19, 1997, payable to the order Exhibit 10 (xiii) of the of
Brown Brothers Harriman & Co. in the Registrant's Form 10-KSB for the
original principal amount of $427,000. year ended June 30, 1997
10(xii) Line of Credit Note of Registrant, dated Incorporated by reference from
September 19, 1997, payable to the order Exhibit 10 (xiii) of the of
Brown Brothers Harriman & Co. in the Registrant's Form 10-KSB for the
original principal amount of $1,500,000. year ended June 30, 1997
10(xiii) Bridge Loan Note of Registrant, dated Incorporated by reference from
September 19, 1997, payable to the order Exhibit 10 (xv) of the of
Brown Brothers Harriman & Co. in the Registrant's Form 10-KSB for the
original principal amount of $1,600,000. year ended June 30, 1997
10(xiv) Open-End Mortgage Deed from Registrant to Incorporated by reference from
Brown Brothers Harriman & Co. dated Exhibit 10 (xiv) of the
September 19, 1997. Registrant's Form 10-KSB for the
year ended June 30, 1997
10(xv) General Security Agreement from Registrant Incorporated by reference from
to Brown Brothers Harriman & Co. dated Exhibit 10 (xvii) of the
September 19, 1997. Registrant's Form 10-KSB for the
year ended June 30, 1997
10(xvi) Loan Agreement between Connecticut Filed Herewith
Development Authority and Sonics &
Materials dated December 1, 1997
10(xvii) Indenture of Trust between Connecticut Filed Herewith
Development
<PAGE>
Authority and Sonics & Materials, Inc.
dated December 1, 1997
10(xviii) Tax Regulatory Agreement between Filed Herewith
Connecticut Development Authority and
Sonics & Materials, Inc., and Brown
Brothers Harriman Trust Company as Trustee
dated December 12, 1997
21 Subsidiaries of the Registrant (filed Filed Herewith
herewith).
27 Financial Data Schedule. To be filed pursuant to Rule
12b-25
</TABLE>
================================================================================
Connecticut Development Authority
and
Sonics & Materials, Inc.
---------------------
LOAN AGREEMENT
---------------------
Dated as of December 1, 1997
Connecticut Development Authority
$3,810,000
Industrial Development Bonds
(Sonics & Materials, Inc.
Project) 1997 Series
================================================================================
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions.............................................. 4
Section 1.2. Interpretation........................................... 13
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations by the Authority......................... 15
Section 2.2. Representations by the Borrower.......................... 16
ARTICLE III
THE LOAN
Section 3.1. Loan Clauses............................................. 20
Section 3.2. Other Amounts Payable.................................... 21
Section 3.3. Manner of Payment........................................ 22
Section 3.5. Obligation Unconditional................................. 22
Section 3.6. Security Clauses......................................... 22
Section 3.7. Issuance of Initial Bonds................................ 23
Section 3.8. Issuance of Additional Bonds............................. 23
Section 3.9. Effective Date and Term.................................. 24
ARTICLE IV
THE PROJECT
Section 4.1. Completion of the Project................................ 25
Section 4.2. [Reserved]............................................... 27
Section 4.3. Completion Certificate................................... 27
Section 4.4. No Warranty Regarding Condition,
Suitability or Cost of Project.......................... 27
ARTICLE V
INSURANCE, CONDEMNATION,
DAMAGE AND DESTRUCTION
Section 5.1. Insurance Requirements................................... 28
Section 5.2. Casualty; Condemnation; Loss of Title.................... 30
Section 5.3. Proceeds of Hazard Insurance............................. 30
Section 5.4. Eminent Domain........................................... 32
Section 5.5. Reserved................................................. 33
Section 5.6. No Abatement of Payments Hereunder....................... 33
-i-
<PAGE>
ARTICLE VI
COVENANTS
Section 6.1. The Borrower to Maintain its Corporate
Existence; Exceptions Permitted......................... 34
Section 6.2. Indemnification, Payment of Expenses,
and Advances............................................ 34
Section 6.3. Incorporation of Tax Regulatory
Agreement; Payments Upon Taxability..................... 36
Section 6.4. Public Purpose Covenants................................. 37
Section 6.5. Further Assurances and Corrective
Instruments............................................. 38
Section 6.6. Covenant by Borrower as to Compliance
with Indenture.......................................... 38
Section 6.7. Assignment of Agreement or Note.......................... 38
Section 6.8. Inspection............................................... 39
Section 6.9. Default Notification..................................... 39
Section 6.10. Covenant Against Discrimination.......................... 39
Section 6.11. Books and Records; Financial Statements
and Other Information................................... 39
Section 6.12. Financial Covenants...................................... 41
Section 6.13. ERISA.................................................... 42
Section 6.14. Additional Negative Covenants............................ 42
Section 6.15. Reserved................................................. 44
Section 6.16. Reserved................................................. 44
Section 6.17. Reserved................................................. 44
Section 6.18. Maintenance of Mortgaged Property........................ 44
Section 6.19. Transfer or Release of Mortgaged
Property................................................ 45
Section 6.20. Preservation of Exempt Status............................ 46
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default........................................ 47
Section 7.2. Remedies on Default...................................... 48
Section 7.3. Remedies on Public Purpose Default....................... 48
Section 7.4. No Duty to Mitigate Damages.............................. 50
Section 7.5. Remedies Cumulative...................................... 50
ARTICLE VIII
PREPAYMENT PROVISIONS
Section 8.1. Optional Prepayment...................................... 51
Section 8.2. Reserved................................................. 51
Section 8.3. Mandatory Prepayment on Public Purpose
Default................................................. 51
Section 8.4. Mandatory Scheduled Prepayment........................... 51
Section 8.5. Mandatory Prepayment on Taxability....................... 51
-ii-
<PAGE>
ARTICLE IX
GENERAL
Section 9.1. Indenture................................................ 52
Section 9.2. Benefit of and Enforcement by
Bondholders............................................. 52
Section 9.3. Amendments............................................... 52
Section 9.4. Notices.................................................. 52
Section 9.5. Recording................................................ 53
Section 9.6. Filing................................................... 53
Section 9.7. Prior Agreements Superseded.............................. 53
Section 9.8. Agreed to and Accepted by Original
Purchaser............................................... 53
Section 9.9. Execution of Counterparts................................ 53
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions................................................4
Section 1.2. Interpretation........................................... 12
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations by the Authority......................... 14
Section 2.2. Representations by the Borrower.......................... 15
ARTICLE III
THE LOAN
Section 3.1. Loan Clauses............................................. 19
Section 3.2. Other Amounts Payable.................................... 20
Section 3.3. Manner of Payment........................................ 21
Section 3.4. Obligation Unconditional................................. 21
Section 3.5. Security Clauses......................................... 21
Section 3.6. Issuance of Initial Bonds................................ 22
Section 3.7. Issuance of Additional Bonds............................. 22
Section 3.8. Effective Date and Term.................................. 23
ARTICLE IV
THE PROJECT
Section 4.1. Completion of the Project................................ 24
Section 4.2. [Reserved]............................................... 26
Section 4.3. Completion Certificate................................... 26
Section 4.4. No Warranty Regarding Condition,
Suitability or Cost of Project.......................... 26
-iii-
<PAGE>
ARTICLE V
INSURANCE, CONDEMNATION,
DAMAGE AND DESTRUCTION
Section 5.1. Insurance Requirements................................... 27
Section 5.2. Casualty; Condemnation; Loss of Title.................... 29
Section 5.3. Proceeds of Hazard Insurance............................. 29
Section 5.4. Eminent Domain........................................... 31
Section 5.5. Reserved................................................. 32
Section 5.6. No Abatement of Payments Hereunder....................... 32
ARTICLE VI
COVENANTS
Section 6.1. The Borrower to Maintain its Corporate
Existence; Exceptions Permitted......................... 33
Section 6.2. Indemnification, Payment of Expenses, and
Advances................................................ 33
Section 6.3. Incorporation of Tax Regulatory Agreement;
Payments Upon Taxability................................ 35
Section 6.4. Public Purpose Covenants................................. 36
Section 6.5. Further Assurances and Corrective
Instruments............................................. 37
Section 6.6. Covenant by Borrower as to Compliance
with Indenture.......................................... 37
Section 6.7. Assignment of Agreement or Note.......................... 37
Section 6.8. Inspection............................................... 37
Section 6.9. Default Notification..................................... 38
Section 6.10. Covenant Against Discrimination.......................... 38
Section 6.11. Books and Records; Financial Statements
and Other Information................................... 38
Section 6.12. Financial Covenants...................................... 40
Section 6.13. ERISA.................................................... 40
Section 6.14. Additional Negative Covenants............................ 41
Section 6.15. Reserved................................................. 42
Section 6.16. Reserved................................................. 42
Section 6.17. Reserved................................................. 42
Section 6.18. Maintenance of Mortgaged Property........................ 42
Section 6.19. Transfer or Release of
Mortgaged Property...................................... 43
Section 6.20. Preservation of Exempt Status............................ 44
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default........................................ 45
Section 7.2. Remedies on Default...................................... 46
Section 7.3. Remedies on Public Purpose Default....................... 47
Section 7.4. No Duty to Mitigate Damages.............................. 48
Section 7.5. Remedies Cumulative...................................... 48
-iv-
<PAGE>
ARTICLE VIII
PREPAYMENT PROVISIONS
Section 8.1. Optional Prepayment...................................... 49
Section 8.2. Reserved................................................. 49
Section 8.3. Mandatory Prepayment on Public
Purpose Default......................................... 49
Section 8.4. Mandatory Scheduled Prepayment........................... 49
Section 8.5. Mandatory Prepayment on Taxability....................... 49
ARTICLE IX
GENERAL
Section 9.1. Indenture................................................ 50
Section 9.2. Benefit of and Enforcement by Bondholders................ 50
Section 9.3. Amendments............................................... 50
Section 9.4. Notices.................................................. 50
Section 9.5. Recording................................................ 51
Section 9.6. Filing................................................... 51
Section 9.7. Prior Agreements Superseded.............................. 51
Section 9.8. Agreed to and Accepted by Original
Purchaser............................................... 51
Section 9.9. Execution of Counterparts................................ 51
Appendices
A. Promissory Note
B. Description of Project Realty
C. Description of Project Equipment
-v-
<PAGE>
Connecticut Development Authority
Sonics & Materials, Inc.
LOAN AGREEMENT
THIS LOAN AGREEMENT, made and dated as of December 1, 1997, by and
between the Connecticut Development Authority, a body corporate and politic
constituting a public instrumentality and political subdivision of the State of
Connecticut, and Sonics & Materials, Inc., a corporation organized and existing
under the laws of the State of Delaware.
WITNESSETH THAT:
WHEREAS, the State Commerce Act, constituting Connecticut General
Statutes, Sections 32-1a through 32-23xx, as amended (the "Act"), declares that
there is a continuing need in the State (1) for industrial development and
activity to provide and maintain employment and tax revenues and to control,
abate and prevent pollution to protect the public health and safety, (2) for the
development of recreation facilities to promote tourism, provide and maintain
employment and tax revenues, and promote the public welfare, (3) for the
development of commercial and retail sales and service facilities in urban areas
to provide and maintain construction and permanent employment and tax revenues,
to improve conditions of deteriorated physical development, slow economic growth
and eroded financial health of the public and private sectors in urban areas and
to revitalize the economy of urban areas, and (4) for assistance to public
service businesses providing transportation and utility services in the State,
and that the availability of financial assistance and suitable facilities are
important inducements to industrial and commercial enterprises to remain or
locate in the State and to provide industrial, recreation, urban and public
service projects; and
WHEREAS, the Act provides that (1) the term "project" as used
therein means any facility, plant, works, system, building, structure, utility,
fixture or other real property improvement located in the State, and the land on
which it is located or which is reasonably necessary in connection therewith,
which is of a nature or which is to be used or occupied by any person for
purposes which would constitute it as an industrial project, recreation project,
urban project, public service project or health care project, and any real
property improvement reasonably related thereto, and (2) that a project may also
include or consist exclusively of machinery, equipment or fixtures; and
WHEREAS, the Act provides that the Authority shall have power (i) to
determine the location and character of, and to extend credit or make loans to
any person for the planning, designing, acquiring, improving and equipping of a
project, which may be
<PAGE>
secured by loan, lease or sale agreements, contracts and other instruments, upon
such terms and conditions as the Authority shall determine to be reasonable,
(ii) to require the inclusion in any contract, loan agreement or other
instrument such provisions for the construction, use, operation, maintenance and
financing of the project as the Authority may deem necessary or desirable, (iii)
to issue its bonds for such purposes, subject to the approval of the Treasurer
of the State, and, (iv) to enter into agreements with prospective mortgagees and
mortgagors, and as security for the payment of the principal or redemption
price, if any, of and interest on any such bonds, to pledge or assign such a
loan, lease or sale agreement and the revenues and receipts derived by the
Authority from such a project; and
WHEREAS, by resolution adopted June 18, 1997 in furtherance of the
purposes of the Act, the Authority has accepted the application of Sonics &
Materials, Inc. (the "Borrower") for assistance in the financing of certain
capital projects for the benefit of the Borrower and the acquisition and
installation therein of machinery and equipment related thereto, all to be used
for a manufacturing facility located in the Town of Newtown, Connecticut; and
WHEREAS, the Authority has by resolution adopted November 19, 1997
authorized the issuance of $3,810,000 principal amount of its Industrial
Development Revenue Bonds (Sonics & Materials, Inc. Project) 1997 Series (the
"Initial Bonds") for the purpose of refinancing the Bridge Loan Note which was
used to provide funds for the financing of certain capital projects for the
benefit of the Borrower, and paying necessary expenses incidental thereto, and
financing and refinancing certain additional capital projects for the benefit of
the Borrower; and
WHEREAS, pursuant to such resolution the Initial Bonds are to be
secured by an Indenture of Trust of even date herewith, by and between the
Authority and Brown Brothers Harriman Trust Company, as Trustee, and are also to
be secured by the Open-End Mortgage Deed, dated as of December 1, 1997, (the
"Mortgage") from the Borrower to the Authority (and assigned by the Authority to
the Trustee) and by the Security Agreement, dated as of December 1, 1997 from
the Borrower to the Authority (and assigned by the Authority to the Trustee);
and
WHEREAS, additional funds may be necessary to repair, relocate,
rebuild or restore the Project following damage, destruction, taking or
condemnation thereof or to provide extensions, additions, improvements or
facilities to the Project and provision is made in the Indenture for the
issuance from time to time of Additional Bonds on a parity with the Initial
Bonds; and
WHEREAS, the Initial Bonds and any Additional Bonds shall be special
obligations of the Authority, payable solely from the revenues or other
receipts, funds or moneys to be derived by the
-2-
<PAGE>
Authority under this Agreement, the Mortgage, the Security Agreement or the
Indenture and from any amounts otherwise available under the Indenture for the
payment of the Initial Bonds; and
WHEREAS, the Authority proposes with the proceeds of the Initial
Bonds to make a loan to the Borrower and the Borrower proposes to borrow such
proceeds from the Authority for the purpose of financing a portion of the cost
of undertaking and completing the Project upon the terms and conditions herein
set forth; and
WHEREAS, the Borrower acknowledges that the Authority is providing
financing for the Project in furtherance of the Authority's corporate purposes
under the Act, that the accomplishment of these purposes is dependent upon the
compliance of the Borrower with its covenants contained in this Agreement and
contained in the Mortgage and the Security Agreement, that the Authority has a
resulting beneficial interest in the Project, and that the Borrower's use of and
interest in the Project as provided hereby are in furtherance of the discharge
of a public purpose;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, covenants and agreements herein set forth, the Authority and
the Borrower, each binding itself, its successors and assigns, do mutually
promise, covenant and agree as follows (provided that in the performance of the
agreements of the Authority herein contained, any obligation it may incur for
the payment of money shall not be an obligation, debt or liability of the State
or any municipality thereof and neither the State nor any municipality thereof
shall be liable on any obligation so incurred, but any such obligation shall be
payable solely out of the revenues or other receipts, funds or moneys to be
derived by the Authority under this Agreement, the Mortgage, the Security
Agreement or the Indenture and from any amounts otherwise available under the
Indenture for the payment of the Initial Bonds):
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ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. For the purposes of this Agreement, the
following words and terms shall have the respective meanings set forth as
follows, and any capitalized word or term used but not defined herein is used as
defined in the Indenture:
"Act" means the State Commerce Act, constituting Connecticut General
Statutes, Sections 32-1a through 32-23xx, as amended.
"Additional Bonds" means one or more series of additional Bonds,
other than the Initial Bonds, authorized and issued by the Authority pursuant to
the Indenture.
"Affiliate" shall mean an entity which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with the Borrower. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
management and policies of an entity, whether through the ownership of
securities, by contract or otherwise.
"Agreement" means this Loan Agreement and any amendments and
supplements hereto.
"Architect" shall mean an independent architect, engineer or firm of
architects or engineers which is appointed by the Borrower for the purpose of
passing on questions relating to the design and construction of any particular
facility, has all licenses and certifications necessary for the performance of
such services, has a favorable reputation for skill and experience in performing
similar services in respect of facilities of a comparable size and nature, and
is not unsatisfactory to the Trustee.
"Authority" means the Connecticut Development Authority, a body
corporate and politic constituting a public instrumentality and political
subdivision of the State of Connecticut duly organized and existing under the
laws of the State, and any body, board, authority, agency or other political
subdivision or instrumentality of the State which shall hereafter succeed to the
powers, duties and functions thereof.
"Authorized Authority Representative" shall mean the Chairman or
Vice Chairman of the Authority, Executive Vice President or any Senior Vice
President or any Vice President thereof.
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"Authorized Borrower Representative" shall mean the President or the
Vice President - Legal Affairs and Investor Relations of the Borrower or any
other person so designated by a Certified Resolution of the Borrower.
"Bond" means any bond authenticated and delivered pursuant to the
Indenture, including the $3,810,000 Industrial Development Revenue Bonds (Sonics
& Materials, Inc. Project - 1997 Series) and any Additional Bonds.
"Bondholder" or "holder" or "owner" or words of similar import, when
used with reference to Bonds, shall mean any person who shall be the registered
owner of any Outstanding Bond.
"Borrower" means (i) Sonics & Materials, Inc., a corporation
organized and existing under the laws of the State of Delaware, and its
successors and assigns and (ii) any surviving, resulting or transferee
corporation as provided in Section 6.1 hereof.
"Bridge Loan Note" means the note of the Borrower to the Original
Purchaser, dated September 19, 1997, as may be amended or supplemented.
"Business Day" means any day on which banks located in the State of
Connecticut or the State of New York are not required or authorized to remain
closed and on which the New York Stock Exchange, Inc. is not closed.
"Capital Expenditures" means, for any period, expenditures made by
the Borrower to acquire or construct fixed assets, plant or equipment during
such period, determined in accordance with GAAP.
"Capitalized Interest" shall mean interest on any Obligation which
is not a current expense of the Borrower under generally accepted accounting
principles and for the payment of which sufficient funds are available from the
proceeds of such Obligation.
"Certificate" shall mean a certificate or report, in form and
substance satisfactory to the Authority and the Trustee, executed: (a) in the
case of an Authority Certificate, by an Authorized Authority Representative; (b)
in the case of a Borrower Certificate, by an Authorized Borrower Representative;
and (c) in the case of a Certificate of any other Person, by such person, if an
individual, and otherwise by an officer, partner or other authorized
representative of such person. Any Borrower Certificate which relates to any
financial test or ratio shall set forth in reasonable detail the computations
involved in calculating such test or ratio and the assumptions or evidence used
as a basis for the figures used in making such computation.
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"Certified Resolution" shall mean, as the context requires: (a) one
or more resolutions of the governing body of the Authority, certified by the
Secretary or Assistant Secretary of the Authority to have been duly adopted and
to be in full force and effect as of the date of certification; or (b) one or
more resolutions of the board of directors of the Borrower or a duly authorized
committee thereof, certified by the Secretary or Assistant Secretary of the
Borrower or other officer serving in a similar capacity to have been duly
adopted and to be in full force and effect as of the date of certification.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Completion Date" means the date of completion of the Project as
specified and established in accordance with Section 4.3 hereof.
"Credit Agreement" means that certain Credit Agreement dated
September 19, 1997, between the Borrower and the Original Purchaser, as amended
from time to time
"Debt Service Fund" means the special trust fund so designated,
established pursuant to Section 5.3 of the Indenture.
"Determination of Taxability" means (1) a ruling by the Internal
Revenue Service, (2) the receipt by the owner of any Bonds from the Internal
Revenue Service of a notice of assessment and demand for payment (provided the
Borrower has been afforded the opportunity to participate at its own expense in
all appeals and proceedings to which the owner of any Bonds is a party relating
to such assessment and demand for payment) and the expiration of the appeal
period provided therein if no appeal is taken or, if an appeal is taken by the
owner of any Bonds as provided in Section 6.3 of this Agreement within the
applicable appeal period which has the effect of staying the demand for payment,
a final unappealable decision by a court of competent jurisdiction, or (3) the
admission in writing by the Borrower, in any case to the effect that the
interest on the Bonds is includable in the gross income for federal income tax
purposes.
"EBITDA" means, for any period, the sum of the amounts for such
period of (A) Net Income, (B) provision for federal, state and local taxes based
on income, (C) Interest Expense, and (D) charges for depreciation and
amortization and other non-cash charges, all for the Borrower, and all
determined in accordance with GAAP.
"Event of Default" means an Event of Default as defined in
subsection 7.1 hereof.
"Fair Market Value" shall mean (i) with respect to real property,
the market value for such property as evaluated by an
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independent real estate appraiser appointed by the Borrower and not
unsatisfactory to the Trustee and (ii) with respect to property other than real
property, the current market value of such property as evaluated by an
independent broker, appraiser or other expert appointed by the Borrower and not
unsatisfactory to the Trustee. Whenever the Fair Market Value of property is
required to be evaluated pursuant to this Agreement, such evaluation shall be
made in writing and delivered to the Authority and the Trustee.
"Financing Documents" (1), when used with respect to the Borrower,
means all documents and agreements executed and delivered by the Borrower as
security for or in connection with the issuance of the Bonds, including this
Agreement, the Tax Regulatory Agreement, the Note, the Mortgage, the Security
Agreement, and all other documents and agreements now or hereafter executed and
delivered by the Borrower in connection with any of the foregoing, and (2) when
used with respect to the Authority, means any of the foregoing documents and
agreements to which the Authority is a direct party and the Assignment of
Mortgage and the Assignment of Security Agreement. The Financing Documents do
not include any documents or agreements to which the Borrower is not a direct
party, including the Bonds or the Indenture.
"Fiscal Year" shall mean each twelve month period ending June 30 of
the Borrower.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
(i) EBITDA plus payments made by the Borrower under any lease, to (ii) required
principal and interest payments for all indebtedness of the Borrower plus
payments made by the Borrower under any lease plus Capital Expenditures for such
period up to $25,000.
"GAAP" means generally accepted accounting principles applied on a
consistent basis.
"Indenture" means the Indenture of Trust, of even date herewith, by
and between the Authority and the Trustee, together with all indentures
supplemental thereto made and entered into in accordance therewith.
"Initial Bonds" means the $3,810,000 Industrial Development Bonds
(Sonics & Materials, Inc. Project - 1997 Series) authorized and issued pursuant
to Section 2.3 of the Indenture.
"Intangibles" means, at a particular date, all assets of the
Borrower that would be classified as intangible assets in accordance with GAAP.
"Interest Expense" means, for any period, the aggregate amount of
interest accrued (whether or not paid) by the Borrower during such period.
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"Interest Payment Date" shall mean each date on which interest is
payable on the Bonds as provided in Article II of the Indenture (or, if such
date is not a Business Day, the immediately succeeding Business Day).
"Line of Credit Note" shall mean the Note of the Borrower to
Original Purchaser dated September 19, 1997, issued in accordance with the
Credit Agreement, as may be amended or supplemented.
"Mortgage" means the Open-End Mortgage Deed, dated as of December 1,
1997, from the Borrower to the Authority (and assigned by the Authority to the
Trustee) given to secure the payment by the Borrower of its obligations under
the Loan Agreement and the Note.
"Mortgaged Property" shall have the meaning set forth in the
Mortgage.
"Net Income" means, for any period, the net income (or net loss) of
the Borrower and its subsidiaries on a consolidated basis for such period
excluding extraordinary items, determined in accordance with GAAP.
"Net Proceeds" when used with respect to any insurance or
condemnation award, means the gross proceeds from such award less all expenses
(including attorney's fees and any expenses of the Trustee) incurred by the
Trustee in the collection thereof.
"Note" means the promissory note of the Borrower to the Authority,
dated December 12, 1997, in the form attached as an Appendix hereto, and any
amendments or supplements made in conformity with this Agreement, the Mortgage,
the Security Agreement and the Indenture.
"Outstanding", when used with reference to a Bond or Bonds, as of
any particular date, means all Bonds which have been authenticated and delivered
under the Indenture, except:
(1) any Bonds canceled by the Trustee because of payment or
redemption prior to maturity or surrendered to the Trustee for
cancellation;
(2) any Bond (or portion of a Bond) which has been paid or redeemed
or for the payment or redemption of which there has been separately set
aside and held in the Redemption Account either:
(a) moneys in an amount sufficient to effect payment of the
principal or applicable Redemption Price thereof, together with
accrued interest on such Bond to the payment or redemption date,
which payment or redemption date shall be specified in irrevocable
instructions given to the Trustee to
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apply such moneys to such payment on the date so specified; or
(b) obligations of the kind described in subsection 12.1(B) of
the Indenture in such principal amounts, of such maturities, bearing
such interest and otherwise having such terms and qualifications as
shall be necessary to provide moneys in an amount sufficient without
reinvestment to effect payment of the principal or applicable
Redemption Price of such Bond, together with accrued interest on
such Bond to the payment or redemption date, which payment or
redemption date shall be specified in irrevocable instructions given
to the Trustee to apply such obligations to such payment on the date
so specified; or
(c) any combination of (a) and (b) above;
(3) Bonds in exchange for or in lieu of which other Bonds shall have
been authenticated and delivered under Article III of the Indenture; and
(4) any Bond deemed to have been paid as provided in subsection
12.1(B) of the Indenture.
"Original Purchaser" means Brown Brothers Harriman & Co., and its
successors and assigns.
"Paying Agent" means any paying agent for the Bonds appointed
pursuant to subsection 9.1(B) of the Indenture (and may include the Trustee),
and its successor or successors and any other corporation which may at any time
be substituted in its place in accordance with the Indenture.
"Permitted Corporate Transaction" means: (a) any merger or
consolidation of Borrower with another corporation, partnership, trust or other
entity; (b) the purchase by the Borrower of assets other than in the ordinary
course of business; or (c) the acquisition by the Borrower of an interest in any
corporation, partnership, trust or other entity, in each case only if (i) the
business or assets acquired are in the same or a substantially similar line of
business as the Borrower; and (ii) the value of the consideration paid (whether
by cash, securities or other assets and including consideration by reason of the
assumption of any indebtedness or in respect of any noncompetition or other
collateral agreement) in connection therewith, together with the consideration
paid in respect of all other prior Permitted Corporate Transactions in the same
Fiscal Year, does not exceed $250,000; and (iii) immediately after the
completion of such transaction, no condition or event would exist which with the
lapse of time or the giving of notice or both would constitute an Event of
Default hereunder; and (iv) in the case of any merger or
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consolidation, the Borrower shall be the surviving entity; and (v) the Original
Purchaser shall have been notified of such Permitted Corporate Transaction, and
provided with all such information with respect thereto as the Original
Purchaser shall reasonably request, at least 30 days prior to its effectiveness.
"Permitted Encumbrances" means the encumbrances described in Section
6.14(E) hereof.
"Principal and Interest Account" means the special trust account of
the Debt Service Fund so designated, established pursuant to Section 5.3 of the
Indenture.
"Project" means, collectively, the financing and refinancing with
the proceeds of the Initial Bonds of (i) the acquisition of approximately 7.5
acres of land, (ii) renovations to an approximately 62,000 square foot building
located on the land and (iii) the acquisition and installation therein of
machinery and equipment related thereto, all to be used for manufacturing
purposes. Upon the issuance of Additional Bonds, "Project" shall also include
the facilities constructed, improved or renovated with the proceeds of such
Additional Bonds.
"Project Costs" means all costs and expenses of the Project for
which the Trustee is permitted to make payment as provided in subsection 5.2(B)
of the Indenture.
"Project Equipment" means all personal property, goods, leasehold
improvements, machinery, equipment, furnishings, furniture, fixtures, tools and
attachments, wherever located and whether now owned or hereafter acquired, used
in the operation of the Project and financed with the proceeds of any Bonds, as
reflected in the records of the Trustee in accordance with Section 9.11 of the
Indenture, and any accessions thereto, substitutions therefor and replacements
thereof and all proceeds and products thereof.
"Project Fund" means the special trust fund so designated,
established pursuant to Section 5.2 of the Indenture.
"Project Realty" means the realty and other interests in the real
property constituting the Premises (as such term is defined in the Mortgage),
together with all replacements, improvements, extensions, substitutions,
restorations and additions thereto which are made pursuant hereto, including
without limitation the Project Realty described in the Description of Project
Realty included in the appendices hereto.
"Redemption Price" means, when used with respect to a Bond or a
portion thereof, the principal amount of such Bond or portion plus the
applicable premium, if any, payable upon redemption thereof pursuant to the
Indenture.
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"Restricted Payment" means any dividend, distribution, stock
repurchase, other payment on account of the Borrower's outstanding stock,
payment in respect of any indebtedness subordinated to the debt of the Borrower
to the Original Purchaser, and any payment in respect of any non-competition
agreement.
"Security Agreement" means the Security Agreement, dated as of
December 1, 1997, by and among the Borrower, the Original Purchaser and the
Authority given to secure the payment of the Note.
"Scheduled Payment" means the amount required by the Indenture or
any Supplemental Indenture authorizing the issuance of Additional Bonds as
payable on a single future date for the retirement of any Outstanding Bonds
which are expected to mature after such future date, but does not include any
amounts payable by reason only of the maturity of a Bond.
"Subsidiaries" means (i) Tooltex, Inc., a Delaware corporation, (ii)
Vibra Surge, Inc., a Delaware corporation, and (iii) any other corporation,
partnership, limited liability company or other entity of which more than 50% of
the voting power is controlled directly or indirectly by the Borrower.
"State" means the State of Connecticut.
"Supplemental Indenture" means any indenture supplemental to the
Indenture or amendatory of the Indenture, adopted by the Authority in accordance
with Article X of the Indenture.
"Tangible Net Worth" means, as of the date of determination, the
Borrower's net worth less Intangibles, all as determined in accordance with
GAAP.
"Tax Incidence Date" means the date as of which interest on the
Bonds becomes or became includable in the gross income of the recipient thereof
for federal income tax purposes for any cause.
"Tax Regulatory Agreement" means the Tax Regulatory Agreement, dated
as of the date of delivery of the Bonds, among the Authority, the Borrower and
the Trustee, and any amendments and supplements thereto.
"Term", when used with reference to this Agreement, means the term
of this Agreement determined as provided in Article III hereof.
"Term Loan Note" means the Note of the Borrower to Original
Purchaser dated September 19, 1997, issued in accordance with the Credit
Agreement, as may be amended or supplemented.
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"Total Liabilities" means, as of the date of determination, all
liabilities of the Borrower that would, in accordance with GAAP, be classified
as liabilities of the Borrower.
"Trustee" means Brown Brothers Harriman Trust Company, New York, New
York, and its successor or successors hereafter appointed in the manner provided
in the Indenture.
Section 1.2. Interpretation. In this Agreement:
(1) The terms "hereby", "hereof", "hereto", "herein", "hereunder"
and any similar terms, as used in this Agreement, refer to this Agreement,
and the term "hereafter" means after, and the term "heretofore" means
before, the date of this Agreement.
(2) Words of the masculine gender mean and include correlative words
of the feminine and neuter genders and words importing the singular number
mean and include the plural number and vice versa.
(3) Words importing persons include firms, associations,
partnerships (including limited partnerships), trusts, corporations and
other legal entities, including public bodies, as well as natural persons.
(4) Any headings preceding the texts of the several Articles and
Sections of this Agreement, and any table of contents appended to copies
hereof, shall be solely for convenience of reference and shall not
constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
(5) Nothing contained in this Agreement shall be construed to cause
the Borrower to become the agent for the Authority or the Trustee for any
purpose whatsoever, nor shall the Authority or the Trustee be responsible
for any shortage, discrepancy, damage, loss or destruction of any part of
the Project wherever located or for whatever cause.
(6) All approvals, consents and acceptances required to be given or
made by any person or party hereunder shall be at the sole discretion of
the party whose approval, consent or acceptance is required.
(7) All notices to be given hereunder shall be given in writing
within a reasonable time unless otherwise specifically provided.
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(8) This Agreement shall be governed by and construed in accordance
with the applicable laws of the State.
(9) If any provision of this Agreement shall be ruled invalid by any
court of competent jurisdiction, the invalidity of such provision shall
not affect any of the remaining provisions hereof.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations by the Authority. The Authority
represents and warrants that:
(1) It is a body corporate and politic constituting a public
instrumentality and political subdivision of the State of Connecticut,
duly organized and existing under the laws of the State including the Act.
The Authority is authorized to issue the Bonds in accordance with the Act
and to use the proceeds thereof to finance and refinance the Project.
(2) The Authority has complied with the provisions of the Act and
has full power and authority pursuant to the Act to consummate all
transactions contemplated by the Bonds, the Indenture and the Financing
Documents.
(3) By resolution duly adopted by the Authority and still in full
force and effect, the Authority has authorized the execution, delivery and
due performance of the Bonds, the Indenture and the Financing Documents,
and the taking of any and all action as may be required on the part of the
Authority to carry out, give effect to and consummate the transactions
contemplated by this Agreement, and all approvals necessary in connection
with the foregoing have been received.
(4) The Bonds have been duly authorized, executed, authenticated,
issued and delivered, constitute valid and binding special obligations of
the Authority payable solely from revenues or other receipts, funds or
moneys pledged therefor under the Indenture and from any amounts otherwise
available under the Indenture, and are entitled to the benefit of the
Indenture. Neither the State nor any municipality thereof is obligated to
pay the Bonds or the interest thereon. Neither the faith and credit nor
the taxing power of the State nor any municipality thereof is pledged for
the payment of the principal, and premium, if any, of and interest on the
Bonds.
(5) The execution and delivery of the Bonds, the Indenture and the
Financing Documents and compliance with the provisions thereof, will not
conflict with or constitute on the part of the Authority a violation of,
breach of or default under its by-laws or any statute, indenture,
mortgage, deed of trust, note agreement or other agreement or instrument
to which the Authority is a party or by which the Authority is bound, or,
to the knowledge of the Authority, any order, rule or regulation
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of any court or governmental agency or body having jurisdiction over the
Authority or any of its activities or properties, and all consents,
approvals, authorizations and orders of governmental or regulatory
authorities which are required for the consummation of the transactions
contemplated thereby have been obtained.
(6) Subject to the provisions of this Agreement and the Indenture,
the Authority will apply the proceeds of the Bonds to the purposes
specified in the Indenture and the Financing Documents.
(7) There is no action, suit, proceeding or investigation at law or
in equity before or by any court, public board or body pending or
threatened against or affecting the Authority, or to the best knowledge of
the Authority, any basis therefor, wherein an unfavorable decision, ruling
or finding would adversely affect the transactions contemplated hereby or
by the Indenture, or which, in any way, would adversely affect the
validity of the Bonds, the Indenture or the Financing Documents, or any
agreement or instrument to which the Authority is a party and which is
used or contemplated for use in consummation of the transactions
contemplated hereby and by the Indenture.
(8) It has not made any commitment or taken any action which will
result in a valid claim for any finders or similar fees or commitments in
respect of the transactions contemplated by this Agreement.
(9) The representations of the Authority set forth in the Tax
Regulatory Agreement delivered concurrently with the execution and
delivery hereof are by this reference incorporated in this Agreement as
though fully set forth herein.
Section 2.2. Representations by the Borrower. The Borrower
represents and warrants that:
(1) The Borrower has been duly incorporated and validly exists as a
corporation in good standing under the laws of the State of Delaware and
duly qualified to do business as a foreign corporation in the State of
Connecticut, is not in violation of any provision of its certificate of
incorporation or its by-laws, has power to enter into and perform the
Financing Documents, and by proper corporate action has duly authorized
the execution and delivery of the Financing Documents.
(2) The Financing Documents constitute valid and legally binding
obligations of the Borrower, enforceable in accordance with their
respective terms, except as such
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enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting
creditors' rights and remedies generally or by general equitable
principles (whether applied by a court or law or equity).
(3) Neither the execution and delivery of the Financing Documents,
the consummation of the transactions contemplated thereby, nor the
fulfillment by the Borrower of or compliance by the Borrower with the
terms and conditions thereof is prevented or limited by or conflicts with
or results in a breach of, or default under the terms, conditions or
provisions of any contractual or other restriction on the Borrower,
evidence of its indebtedness or agreement or instrument of whatever nature
to which the Borrower is now a party or by which it is bound, or
constitutes a default under any of the foregoing. No event has occurred
and no condition exists which, upon the execution and delivery of any
Financing Documents, constitutes an Event of Default hereunder or an event
of default thereunder or, but for the lapse of time or the giving of
notice, would constitute an Event of Default hereunder or an event of
default thereunder.
(4) There is no action or proceeding pending or, to the knowledge of
the Borrower, threatened against the Borrower before any court,
administrative agency or arbitration board that may materially and
adversely affect the ability of the Borrower to perform its obligations
under the Financing Documents and all authorizations, consents and
approvals of governmental bodies or agencies required in connection with
the execution and delivery of the Financing Documents and in connection
with the performance of the Borrower's obligations hereunder or thereunder
have been obtained, except for such authorizations, consents or approvals
that can only be attained after the commencement of, or the completion of,
the Project.
(5) The execution, delivery and performance of the Financing
Documents and any other instrument delivered by the Borrower pursuant to
the terms hereof or thereof are within the corporate powers of the
Borrower and have been duly authorized and approved by the board of
directors of the Borrower and are not in contravention of law or of the
Borrower's certificate of incorporation or by-laws, as amended to date, or
of any undertaking or agreement to which the Borrower is a party or by
which it is bound.
(6) The Borrower represents that it has not made any commitment or
taken any action which will result in a valid claim for any finders' or
similar fees or
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commitments in respect of the transactions described in this Agreement.
(7) The Project is included within the definition of a "project" in
the Act, and its estimated cost is equal to or in excess of $3,810,000.
The Borrower intends the Project to be and to continue to be an authorized
project under the Act during the Term.
(8) All amounts shown in Schedule D-1 of the Tax Regulatory
Agreement are eligible costs of a project financed by bonds issued by the
Authority under the Act, and may be financed by amounts in the Project
Fund under the Indenture. None of the proceeds of the Bonds will be used
directly or indirectly as working capital or to finance inventory.
(9) The Project is in material compliance with all applicable
federal, State and local laws and ordinances (including rules and
regulations) relating to zoning, building, safety and environmental
quality. The Borrower intends to proceed with due diligence to complete
the Project pursuant to Section 4.1 hereof.
(10) The availability of financial assistance from the Authority as
provided herein and in the Indenture has induced the Borrower to locate
the Project in the State. The Borrower does not intend to lease the
Project, except in the ordinary course of business of the Borrower.
(11) The Borrower will not take or omit to take any action which
action or omission will in any way cause the proceeds of the Bonds to be
applied in a manner contrary to that provided in the Indenture and the
Financing Documents as in force from time to time.
(12) The Borrower has not taken and will not take any action and
knows of no action that any other person, firm or corporation has taken or
intends to take, which would cause interest on the Bonds to be includable
in the gross income of the recipients thereof for federal income tax
purposes. The representations, certifications and statements of reasonable
expectation made by the Borrower in the Tax Regulatory Agreement, dated
the date of delivery hereof and relating to the Project description,
composite issues, bond maturity and average asset economic life, use of
Bond proceeds, arbitrage and related matters are hereby incorporated by
this reference as though fully set forth herein.
(13) The Borrower has good and marketable title in fee simple to the
Project Realty, subject only to
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Permitted Encumbrances, sufficient for the purposes of this Agreement.
(14) The Borrower has obtained a standard American Land Title
Association ("ALTA") title insurance policy from a title insurance company
satisfactory to the Trustee in an amount at least equal to the face amount
of the Initial Bond (or such lesser amount as shall be approved by the
Original Purchaser) insuring the Authority and the Trustee on behalf of
the Bondholders as their respective interests may appear, and containing
only such exceptions as have been approved by an Authorized Representative
of the Authority and the Trustee.
(15) The Borrower has good and merchantable title to the Project
Equipment owned by the Borrower as of the date hereof, free and clear of
liens and encumbrances except for Permitted Encumbrances.
(16) As of the date hereof, neither the Borrower, nor to its
knowledge anyone acting on behalf of the Borrower, has entered into
negotiations with any person for the purpose of undertaking any borrowing
concurrently with or subsequent to the issuance of the Initial Bonds and
to be secured wholly or partially by a lien or encumbrance on the Project
or any part thereof, and the Borrower has no present intention of
undertaking any such borrowing, except in connection with the requirements
described in the Borrower's application to the Authority.
(17) The representations of the Borrower set forth in the Tax
Regulatory Agreement delivered concurrently with the execution and
delivery hereof are by this reference incorporated in this Agreement as
though fully set forth herein.
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ARTICLE III
THE LOAN
Section 3.1. Loan Clauses. (A) Subject to the conditions and in
accordance with the terms of this Agreement, the Authority agrees to make a loan
to the Borrower from the proceeds of the Initial Bonds in the amount of
$3,810,000 and the Borrower agrees to borrow such amount from the Authority.
(B) The loan shall be made at the time of delivery of the Initial
Bonds and receipt of payment therefor by the Authority against receipt by the
Authority of the initial Note duly executed and delivered to evidence the
pecuniary indebtedness of the Borrower hereunder. Any additional loan shall be
made at the time of delivery of the applicable series of Additional Bonds and
receipt of payment therefor by the Authority against receipt by the Authority of
a supplemental Note duly executed and delivered to evidence the additional
pecuniary indebtedness of the Borrower hereunder. As and for the loan the
Authority shall deposit the proceeds of the Initial Bonds into the Debt Service
Fund and the Project Fund as provided in the Indenture and such proceeds shall
be held, and invested and disbursed as provided in the Indenture on the terms
and conditions therein prescribed.
(C) On or before each due date for the payment of the principal of
or interest on the Bonds, until the principal or Redemption Price, if any, of
and interest on the Bonds shall have been fully paid or provision for the
payment thereof shall have been made in accordance with the Indenture, the
Borrower shall make loan payments to the Trustee for the account of the
Authority in an amount which, when added to any moneys then on deposit in the
Debt Service Fund and available therefor, shall be equal to the amount payable
on such due date with respect to the Bonds as provided in Section 5.3 of the
Indenture, including amounts due for the payment of the principal of and
interest on the Bonds. In addition, the Borrower shall pay to the Trustee, as
and when the same shall become due, all other amounts due under the Financing
Documents, together with interest thereon at the then applicable rate as set
forth herein. The Borrower shall have the option to prepay its loan obligation
in whole or in part at the times and in the manner provided in Article VIII
hereof.
(D) [Reserved]
(E) Anything herein to the contrary notwithstanding, any amount at
any time held in the Principal and Interest Account of the Debt Service Fund by
the Trustee pursuant to this Section shall be credited against the next
succeeding loan payment obligation of the Borrower as provided in subsection
3.1(C) hereof. If, on any due date for payments with respect to the Bonds, the
balance in the Debt Service Fund is insufficient to make such payments, the
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Borrower agrees forthwith to pay the amount of the deficiency. If at any time
the amount held by the Trustee in the Debt Service Fund shall be sufficient to
pay or provide for the payment of the Bonds in accordance with Section 12.1 of
the Indenture, the Borrower shall not be obligated to make any further payments
under the foregoing provisions.
Section 3.2. Other Amounts Payable. (A) The Borrower hereby further
expressly agrees to pay to the Trustee as and when the same shall become due,
(i) an amount, as may be agreed upon from time to time between the Borrower and
the Trustee and/or the Paying Agent, equal to the initial and annual fees of the
Trustee for the ordinary services of the Trustee rendered and its ordinary
expenses incurred under the Indenture, including fees and expenses as registrar
and in connection with the preparation of new Bonds upon exchanges or transfers,
and the fees and expenses of the Trustee and any Paying Agents on the Bonds for
acting as paying agents as provided in the Indenture, including the reasonable
fees and expenses of its counsel and (ii) the reasonable fees and expenses of
the Trustee for extraordinary services rendered by it and extraordinary expenses
incurred by it under the Indenture, including reasonable counsel fees and
expenses (iii) the reasonable fees and expenses of the Authority, including the
reasonable fees and expenses of its counsel, incurred by the Authority as a
result of an Event of Default or otherwise enforcing this Agreement, (iv) the
reasonable fees and expenses of the Bondholder as a result of an Event of
Default or otherwise enforcing this Agreement and for any consent, waiver or
amendment relating to the Indenture or any of the Financing Documents, including
reasonable fees and expenses of counsel for such Bondholders, and (v) any other
sums required to be paid by the Borrower under the terms of the Indenture and
the Note.
(B) The Borrower also agrees to pay all amounts payable by it under
the Tax Regulatory Agreement, including any expenses of the Authority incurred
in connection with rebate compliance pursuant to the Tax Regulatory Agreement,
and the Financing Documents at the time and in the manner therein provided.
(C) The Borrower also agrees to fund, replenish and maintain all
amounts required to be funded, replenished and maintained in the Funds and
Accounts established in and as required by Article V of the Indenture.
(D) The Borrower also agrees to pay directly to the Authority on the
date of issuance of the Bonds a fee equal to 1/2 of 1% of the principal amount
of the Initial Bonds, such fee to be payable, without notice, demand or invoice
of any kind at the Authority's address as set forth herein or at such other
address and to the attention of such other person, or to such account as the
Authority may stipulate by written notice to the Borrower.
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(E) The Borrower also agrees to perform all obligations required to
be performed by it under the Indenture in accordance with its terms.
(F) The Borrower also agrees to pay, or cause to be paid, when due,
any amounts necessary to redeem Bonds which have been called for redemption
under the Indenture (including, if any applicable premiums thereon).
Section 3.3. Manner of Payment. The payments provided for in Section
3.1 hereof shall be made by any reasonable method providing immediately
available funds at the time and place of payment directly to the Trustee for the
account of the Authority and shall be deposited in the Debt Service Fund. The
additional payments provided for in Section 3.2 shall be made in the same manner
directly to the entitled party or to the Trustee for its own use or disbursement
to the Paying Agents, as the case may be.
Section 3.4. Direct Payment to Original Purchaser. Notwithstanding
the provisions of this Loan Agreement to the contrary, so long as the Original
Purchaser is the owner of the Initial Bonds, the Borrower shall pay that portion
of the loan payments relating to the principal and redemption price of, and
interest on, the Initial Bonds directly to the Original Purchaser as provided in
Section 2.3(F) of the Indenture. In the event that the Borrower shall fail to
pay any installment of the loan payments so payable to the Original Purchaser in
accordance with this Section, interest on such overdue payment shall accrue from
the due date thereof at a rate equal to the Taxable Rate (as defined in the
Indenture).
Section 3.5. Obligation Unconditional. The obligations of the
Borrower under the Financing Documents shall be absolute and unconditional,
irrespective of any defense or any rights of setoff, recoupment or counterclaim
it might otherwise have against the Authority or the Trustee. The Borrower will
not suspend or discontinue any such payment or terminate this Agreement (other
than in the manner provided for hereunder) for any cause, including, without
limiting the generality of the foregoing, any acts or circumstances that may
constitute failure of consideration, failure of title, or commercial frustration
of purpose, or any damage to or destruction of the Project, or the taking by
eminent domain of title to or the right of temporary use of all or any part of
the Project, or any change in the tax or other laws of the United States, the
State or any political subdivision of either thereof, or any failure of the
Authority or the Trustee to perform and observe any agreement or covenant,
whether expressed or implied, or any duty, liability or obligation arising out
of or connected with the Financing Documents.
Section 3.6. Security Clauses. (A) The Authority hereby notifies the
Borrower and the Borrower acknowledges that, among other things, the Borrower's
loan payments and all of the
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Authority's right, title and interest under the Financing Documents to which it
is a party (except its rights under Sections 6.2, 6.4 and 7.3 hereof) are being
concurrently with the execution and delivery hereof endorsed, pledged and
assigned without recourse by the Authority to the Trustee as security for the
Bonds as provided in the Indenture.
(B) In order to further secure its loan obligation hereunder, the
Borrower has executed and delivered to the Authority and the Original Purchaser
the Mortgage and the Security Agreement. The Borrower hereby acknowledges and
consents to the assignment thereof to the Trustee as security for the payment of
the Bonds according to their tenor and effect.
(C) From time to time, at the request of the Authority or the
Trustee, the Borrower shall obtain, execute and deliver one or more financing
statements and other instruments, and shall do all other acts and things, as the
Authority or the Trustee deems necessary or desirable in order to fully secure
its interest in Project Equipment acquired after the date hereof and to
effectuate the transactions contemplated hereby.
(D) The Authority and the Borrower acknowledge that buildings or
improvements on the Project Realty are in the process of construction or repair
or are to be erected or repaired, that the Authority has agreed to make the
proceeds of the Bonds available to the Borrower in installments as the work
progresses and to pay over any balance of the proceeds remaining upon the
completion of the Project in accordance with Section 5.2 of the Indenture and
that the Borrower has agreed to complete the erection or repair of the buildings
and improvements to the satisfaction of the Authority in accordance with Article
IV hereof.
This Agreement shall constitute a security agreement within the
meaning of the Connecticut Uniform Commercial Code. In addition to all other
rights and remedies hereunder, the Authority and the Trustee as its assignee
shall have all rights and remedies of a secured party under the Connecticut
Uniform Commercial Code.
Section 3.7. Issuance of Initial Bonds. The Authority has
concurrently with the execution and delivery hereof sold and delivered the
Initial Bonds under and pursuant to a resolution adopted by the Authority on
November 19, 1997, authorizing their issuance under and pursuant to the
Indenture. The proceeds of sale of the Initial Bonds shall be applied as
provided in Articles IV and V of the Indenture.
Section 3.8. Issuance of Additional Bonds. (A) If the Borrower is
not in default hereunder or under the Financing Documents, the Authority may, on
written request of an Authorized Representative of the Borrower (but, if the
Original Purchaser is the Owner of any Bonds Outstanding under the Indenture,
only with the written consent of the Original Purchaser), from time to time,
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in its absolute discretion issue Additional Bonds on a parity with the Initial
Bonds in aggregate amounts as requested by the Borrower, but only for the
purposes and upon the terms and conditions stated herein, in the Indenture and
in the Act. Additional Bonds shall be issued only for the purposes described in
Section 2.7 of the Indenture. In each case, the costs of the issuance and sale
of the Additional Bonds and capitalized interest for such period and other costs
reasonably related to the financing as shall be agreed upon by the Borrower and
the Authority may be included in the cost thereof.
(B) No Additional Bonds shall be issued unless (1) the terms of such
Additional Bonds, the purchase price to be paid therefor and the manner in which
the proceeds therefrom are to be disbursed shall have been approved in writing
by the Borrower and the Authority, (2) the Borrower and the Authority shall have
entered into a supplement to the Financing Documents reaffirming the
representations and covenants of the Authority and the Borrower therein
contained, describing the completion, restoration, additions, extensions,
improvements or facilities to be acquired and constructed or performed and
making provisions for the conveyance, transfer and securing of such real
property or interests therein as may be necessary or required therefor, and
adjusting the aggregate amount payable hereunder and under the Note to an amount
sufficient to pay, as and when the same matures and becomes due, the principal
or Redemption Price, if any, of and interest on such Additional Bonds and other
amounts due under the Financing Documents, and (3) the Authority and the Trustee
shall have entered into a Supplemental Indenture authorizing the issuance of
such Additional Bonds and setting forth the terms thereof and describing or
otherwise identifying any real or personal property to be secured by the
Indenture in connection with the issuance of such Additional Bonds, and the
Authority shall have otherwise complied with the provisions of the Indenture and
the Act with respect to the issuance of such Additional Bonds.
Section 3.9. Effective Date and Term. (A) This Agreement shall
become effective upon its execution and delivery by the parties hereto, shall
remain in full force from such date and, subject to the provisions hereof
(including particularly Articles VII and VIII), shall expire on such date as the
Indenture shall be discharged and satisfied in accordance with the provisions of
subsection 12.1(A) thereof. The Borrower's obligations under Sections 6.2, 6.4
and 7.3 hereof, however, shall survive the expiration of this Agreement.
(B) Within three days of such expiration the Authority shall deliver
to the Borrower any documents and take or cause the Trustee to take, at the
expense of the Borrower, any such actions as may be necessary to effect the
cancellation, release and satisfaction of the Indenture and the Financing
Documents.
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ARTICLE IV
THE PROJECT
Section 4.1. Completion of the Project. (A) The Borrower agrees that
it will undertake and complete the Project for the purposes and in the manner
intended hereby and by the Borrower's application for assistance to the
Authority and in accordance with the plans and specifications therefor which
have been prepared by or on behalf of the Borrower, and that it will cause such
improvements to be made to the Project Realty as are necessary for the operation
thereof in the manner herein provided.
(B) The Borrower affirms that it shall bear all of the costs and
expenses in connection with the preparation of the Financing Documents and the
Indenture, the preparation and delivery of any legal instruments and documents
necessary in connection therewith and their filing and recording, if required,
and all taxes and charges payable in connection with any of the foregoing. Such
costs and all other costs of the Project shall be paid from the Project Fund in
the manner and to the extent provided in the Indenture.
(C) The Borrower hereby agrees that in order to effectuate the
purposes of the Financing Documents, it will make, execute, acknowledge and
deliver any contracts, orders, receipts, writings and instructions with any
other persons, firms or corporations and in general do all things which may be
requisite or proper, all for the purpose of carrying out and completing the
Project. The Borrower shall complete the Project with all reasonable dispatch,
but not later than December 31, 1999. If for any reason the completion of such
work does not occur within this period, there shall be no liability on the part
of the Authority and no diminution in or postponement of the payments required
in Section 3.1 hereof to be paid by the Borrower.
(D) The Borrower shall obtain all necessary approvals from any and
all governmental agencies requisite to the completion of the Project and in
compliance with all State and local laws, ordinances and regulations applicable
thereto. Upon completion of the Project, the Borrower shall obtain all required
permits and authorizations from appropriate authorities, if any be required,
authorizing the operation and uses of the Project for the purposes contemplated
hereby.
(E) [Reserved].
(F) The Borrower covenants that it will take such action and
institute such proceedings as shall be necessary to cause and require all
contractors and material suppliers to complete their contracts diligently in
accordance with the terms of the contracts,
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including, without limitation, the correcting of any defective work.
(G) In the event of default by any contractor or subcontractor or
supplier under any contract made by it in connection with the Project, the
Borrower will promptly proceed, to the extent it deems appropriate in the
circumstances, either separately or in conjunction with others, to exhaust the
remedies of the Borrower against the contractor or subcontractor or supplier so
in default and against each surety for the performance of such contract.
(H) Any proceeds of the title insurance maintained by the Borrower
shall be paid to the Trustee for deposit in the Debt Service Fund and credited
to the Redemption Account except to the extent that such proceeds shall be
applied to remedy the defect in title if the Borrower so requests and such
proceeds are sufficient with other amounts made available by the Borrower to
remedy the defect.
(I) The Borrower shall maintain or cause to be maintained builder's
risk (or equivalent coverage) insurance upon any work done or materials
furnished under construction contracts except excavations, foundations and any
other structures not customarily covered by such insurance. The policies shall
be issued by responsible companies qualified to do business in Connecticut and
shall be written in completed value form for one hundred percent (100%) of the
insurable value of the contract in the names of the Borrower, the Trustee, the
contractor and subcontractors as their interests may appear. Such coverage shall
be on an all risk form approved by the Borrower and not unsatisfactory to the
Trustee and shall include flood coverage if economically available. The
occupancy restriction shall be removed as of policy inception. Transportation
insurance shall be included in a sufficient amount to protect the interests of
the Borrower and the contractor for loss of goods in transit to the Project
site. During the period of any construction, the Borrower shall also maintain or
cause to be maintained:
(1) worker's compensation insurance and employer's liability
insurance underwritten by responsible companies qualified to do business
in Connecticut, covering all employees of contractors and subcontractors
in amounts required by law;
(2) public liability insurance, on an occurrence basis, insuring the
Borrower and the Trustee as additional insureds, in an amount not less
than $1,000,000 combined single limit, such policy to cover premises and
operations, independent contractors and products and completed operations,
to be endorsed with a broad form comprehensive general liability
endorsement or its equivalent including at least personal injury and
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broad form property damage coverage, provided that the contractor shall
maintain completed operations coverage for at least one year after
completion of the Project;
(3) automobile liability insurance covering owned, non-owned and
hired automobiles in an amount not less than $1,000,000 combined single
limit; and
(4) in addition to the above, until completion of the Project, the
contractor shall maintain an umbrella liability policy in the amount of
$5,000,000 applying in excess of the employers liability, comprehensive
general liability (including endorsements) and automobile liability
insurance required.
Section 4.2. [Reserved].
Section 4.3. Completion Certificate. The date of completion of the
Project shall be evidenced to the Trustee by the certificate of an Authorized
Representative of the Borrower stating that the Project has been completed in
accordance with the Agreement and in accordance with the plans and
specifications therefor. Notwithstanding the foregoing, such certificate shall
state (1) that it is given without prejudice to any rights of the Borrower
against third parties which exist at the date of such certificate or which may
subsequently come into being, (2) that it is given only for the purposes of this
Section and (3) that no person other than the Trustee or the Authority may
benefit therefrom.
Section 4.4. No Warranty Regarding Condition, Suitability or Cost of
Project. Neither the Authority, nor the Trustee, nor any Bondholder makes any
warranty, either expressed or implied, as to the Project or its condition or
that it will be suitable for the Borrower's purposes or needs, or that the
insurance required under the Mortgage will be adequate to protect the Borrower's
business or interest, or that the proceeds of the Bonds will be sufficient to
pay the costs of the Project.
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ARTICLE V
INSURANCE, CONDEMNATION,
DAMAGE AND DESTRUCTION
Section 5.1. Insurance Requirements.
(A) The Borrower covenants that, following completion of the Project
(or at such earlier time as may be specified in this Section 5.1) it shall
provide or cause to be provided and to maintain continuously, or cause to be
maintained continuously during the term of this Agreement, the following types
and amounts of insurance, subject to the proviso in Subsection (B) below.
(1) Insurance against loss and/or damage to the Mortgaged Property
under a policy or policies in form and amount covering such risks as are
ordinarily insured against by similar facilities, including without
limiting the generality of the foregoing, fire, wind, and lightning and
uniform standard extended coverage endorsements, limited only as may be
provided in the standard form of extended coverage endorsements at the
time in use in Connecticut. Such insurance shall be for an amount at least
equal to the lesser of the replacement cost or the full insurable value of
the Mortgaged Property or the principal of the Outstanding Bonds. No
policy of insurance shall be so written that the proceeds thereof will
produce less than the minimum coverage required by the preceding sentence,
by reason of co-insurance provisions or otherwise, without the prior
consent thereto in writing by the Trustee, except that each policy of
insurance required hereunder may contain a loss deductible clause
specifying such sum or sums as the Borrower may determine as the sum or
sums to be deducted from the amount of loss resulting from particular
perils. The Trustee shall consent to such coinsurance or other like
reductions.
(2) Business interruption insurance, protecting the Borrower and the
Trustee, covering the Borrower's payments due under this Agreement and the
salaries and expenses of key personnel and other minimum operating
expenses required for the operation of the Mortgaged Property during such
period or periods not less than twelve (12) months following damage or
destruction of the Mortgaged Property by one of the hazards insured
against by the insurance provided for in paragraph (A)(1) above.
(3) Commencing with the date of settlement for the Initial Bonds,
public liability insurance (including interests of the Borrower) and
automobile liability insurance, in an occurrence form, in the minimum
amount
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of $1,000,000 bodily injury and property damage combined single limit and
aggregate where applicable.
(4) Worker's compensation and employer's liability insurance meeting
the Borrower's statutory obligations; provided, however, that, if the
Borrower becomes an approved self-insured, employer's liability coverage
in the amount of at least $100,000 shall be purchased.
(5) Boiler and machinery coverage (direct damage and use and
occupancy) on a replacement cost basis where deemed advisable by the
Borrower, or where otherwise required.
(6) Excess liability coverage in the amount of at least either
straight excess or umbrella excess, covering excess of paragraphs (3) and
(8) to be maintained in force so that the total coverage available under
each of the aforementioned paragraphs, including this subsection, is not
less $5,000,000 per occurrence and in the aggregate, where applicable, as
excess of employer's liability, general liability, professional liability
and automobile liability coverage.
(B) All policies of insurance and bonds required by this Section
5.1: shall be in such amounts and shall contain such provisions as comply with
the foregoing requirements; and in every applicable case shall contain standard
mortgagee clauses; provided, however, that the Borrower shall not be required to
provide insurance coverage which, is for risks not normally covered or is in
excess of standard requirements, if any, for facilities similar in size,
location and nature to the Mortgaged Property. All policies and bonds shall
provide, so far as the same may be obtainable without the payment of additional
premium, that coverage shall not be canceled without thirty (30) days' prior
written notice to the Trustee.
(C) All policies of insurance and bonds shall be issued by
responsible insurance or surety companies, acceptable to the Borrower, qualified
to do business in Connecticut and qualified under the laws of Connecticut to
assume risks covered by such policy or policies or bond or bonds and shall be
non-assessable.
(D) All policies of insurance required under paragraphs (A)(1), (2),
and (5) above shall be for the benefit of the Borrower and the Trustee, as their
respective interests may appear, and shall be made payable to the Trustee. The
Trustee shall have the exclusive right after obtaining the advice and consent of
the Borrower which shall not be unreasonably withheld (and after the occurrence
of an Event of Default, without notice to or consent of the Borrower) to receive
the proceeds from such insurance and settle and receipt for claims thereunder.
Policies evidencing the insurance required by paragraphs (A)(3), (4) and (6)
above shall
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be for the benefit of the Borrower. The Borrower shall have the right to receive
payments due and to receipt for claims under policies of insurance and fidelity
bonds required by subparagraph (A)(3), (4), and (6) above. The original or a
copy of each policy or bond or a certificate that the same has been issued and
is currently in effect shall be delivered to the Trustee.
(E) In the event that any insurance required by this Section 5.1 is
not commercially available at a reasonable cost or has been otherwise provided,
the Trustee shall accept such substitute coverage, if any.
(F) In the event that the Borrower fails to maintain, or cause to be
maintained, any insurance as provided in this Section 5.1, the Trustee may (but
shall be under no obligation to), upon such notice to the Borrower as is
reasonable under the circumstances, procure and maintain such insurance, and any
amounts so advanced therefor by the Trustee shall become an additional
obligation of the Borrower secured by this Agreement, which amounts, together
with interest thereon at one percent above the prime rate of the Trustee from
the date thereof, the Borrower agrees and covenants to pay.
Section 5.2. Casualty; Condemnation; Loss of Title. If the Mortgaged
Property shall be wholly or partially destroyed or damaged by fire or other
casualty covered by insurance required under Section 5.1(A)(1) or (5), or if the
Mortgaged Property shall be wholly or partially condemned, taken or injured by
any person, including any person possessing the right to exercise the power of
or a power in the nature of eminent domain or transferred to such a person, by
way of a conveyance in lieu of the exercise of such a power by such person, or
if any part of the Mortgaged Property shall be lost because of failure of title,
the Borrower covenants that it will take all actions and will do all things
which may be necessary to enable recovery to be made upon such policies of
insurance or on account of such taking, condemnation, conveyance, damage, injury
or loss of title in order that moneys due on account of losses suffered may be
collected and paid to the Trustee. Any appraisement or adjustment of loss or
damage and any settlement or payment therefor, which may be agreed upon by the
Borrower and the appropriate insurer or condemnor or person, shall be evidenced
to the Trustee by a certificate signed by an Authorized Borrower Representative.
The Trustee may rely conclusively upon such certificate.
Section 5.3. Proceeds of Hazard Insurance.
(A) Immediately after the occurrence of loss or damage covered by
insurance required under Section 5.1(A)(1) or (5), the Borrower shall notify the
Authority, the Architect, and the Trustee in writing. The Architect promptly
shall determine and advise the Authority, the Trustee, and the Borrower, in
writing, whether it is practicable to repair, reconstruct or replace such
damaged or
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destroyed or condemned or lost property and, if so, the estimated time and funds
required for such repair, reconstruction or replacement.
(B) If the Architect shall advise that such repair, reconstruction
or replacement is practicable, and if, within ninety (90) days from the receipt
of the Architect's report (or such later date as may be reasonably acceptable to
the Trustee), the Borrower delivers to the Trustee (i) an executed construction
contract for such work at a price not greater than the amount stated in such
Architect's report and (ii) cash or an irrevocable letter of credit in an amount
equal to the funds, if any, required by such Architect's report in excess of the
available net insurance proceeds, then the Borrower shall promptly proceed to
repair, reconstruct and replace such part of the Mortgaged Property, including
all fixtures, furniture, equipment and affects, to its original condition
insofar as possible. The moneys required for such repair, reconstruction and
replacement shall be paid from: (x) the net proceeds of insurance (other than
proceeds of business interruption insurance which shall be applied as provided
in Subsection (D) below) received by reason of such occurrence, which net
proceeds (after deducting any reasonable expenses incurred by the Trustee or the
Borrower in collecting the same, the "Net Insurance Proceeds") shall be
deposited into the Project Fund and disbursed in accordance with the requisition
procedure established for the Project Fund under Section 5.2(C) of the
Indenture; and (y) to the extent such Net Insurance Proceeds are not sufficient,
from moneys to be provided by the Borrower. Notwithstanding the foregoing, if
the Architect's estimate of the cost of such repair, reconstruction or
replacement is $50,000 or less, the Borrower shall not be required to deliver
the construction contract and funds and items referred to in clauses (i) and
(ii) above, the Net Insurance Proceeds shall be paid to the Borrower and the
Borrower shall promptly proceed with such repair, reconstruction or replacement.
Any Net Insurance Proceeds remaining after the completion of such repair,
replacement or reconstruction shall be paid to the Borrower.
(C) If the Architect advises that such repair, reconstruction or
replacement is not practicable, or not appropriate given the damaged property's
age or lack of marketability or if the Architect's report and the other
documents described in Subsection (B) above are not delivered within the
required time period, then the parties hereto agree that all respective Net
Insurance Proceeds shall be deposited in the Redemption Account and applied to
the redemption of Bonds pursuant to Section 2.4(B) of the Indenture, and the
Borrower shall pay to the Trustee prior to the redemption date any additional
amount required to effect such redemption; provided, that in the case of damage
to or destruction of all or substantially all of the Mortgaged Property, the
Borrower shall pay to the Trustee an amount sufficient, together with the Net
Insurance Proceeds, to redeem all Bonds Outstanding.
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(D) The proceeds of business interruption insurance required by
Section 5.1(A)(2) shall be deposited in the Debt Service Fund and applied to the
payment of the principal of and interest on the Bonds.
Section 5.4. Eminent Domain. Immediately after the commencement of
any condemnation or similar proceedings by a third party in the exercise of a
power of eminent domain, or a power in the nature of eminent domain affecting
the Mortgaged Property the Borrower shall notify the Authority, the Trustee and
the Architect in writing.
(A) The proceeds of any condemnation award or other compensation
paid by reason of a conveyance in lieu of the exercise of such power (after
deducting any costs or expenses incurred by the Trustee or the Borrower in
collecting the same, the "Net Condemnation Proceeds") received with respect to
all or substantially all the Mortgaged Property shall be paid to the Trustee for
deposit in the Redemption Account and applied to the redemption of all
Outstanding Bonds pursuant to Section 2.4(B) of the Indenture, and the Borrower
shall pay to the Trustee prior to the redemption date any additional amount
required to effect such redemption. Any Net Condemnation Proceeds received for a
taking of less than substantially all of the Mortgaged Property shall be applied
as provided in Subsections (B) and (C) below.
(B) If Net Condemnation Proceeds do not exceed $500,000, and if the
Borrower certifies to the Trustee that the efficient utilization of the
Mortgaged Property has not been impaired, notwithstanding such taking, then the
Net Condemnation Proceeds shall be paid to the Borrower.
(C) If the Net Condemnation Proceeds exceed $500,000:
(1) The Borrower may elect to replace or restore the portion of the
Mortgaged Property affected by such taking or conveyance, in which event
the Borrower shall promptly proceed to replace or restore such portion of
the Mortgaged Property, including any fixtures, furniture, equipment and
effects, to its original usefulness and condition insofar as possible,
provided that the Borrower has delivered to the Trustee within ninety (90)
days of receipt of such condemnation award (or by such later date as may
be reasonably acceptable to the Trustee) (i) a written report of the
Architect stating such Architect's estimate of the cost of replacing or
restoring the portion of the Mortgaged Property affected by such taking or
conveyance, (ii) an executed construction contract for such work at a
price not greater than the amount stated in such Architect's report and
(iv) cash or an irrevocable letter of credit in an amount equal to the
funds, if any, required by such Architect's report in excess of the
available Net
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Condemnation Proceeds and (v) the items described in Section 4.1(J) and
(K). The moneys required for such replacement or restoration shall be
paid: (x) from the Net Condemnation Proceeds which shall be deposited into
the Project Fund and disbursed in accordance with the requisition
procedure established for the Project Fund under Section 5.2(C) of the
Indenture; and (y) to the extent that such proceeds are not sufficient,
from moneys to be provided by the Borrower; or
(2) The Borrower may elect to have all or part of such Net
Condemnation Proceeds deposited in the Redemption Account and applied by
the Trustee to the redemption of Outstanding Bonds, and the Borrower shall
pay any additional amount required to effect such redemption.
If the report of the Architect required by the preceding paragraph are not
delivered within the required time period, then the Net Condemnation Proceeds
shall be deposited in the Redemption Account and applied to the redemption of
all Outstanding Bonds pursuant to Section 2.4(B) of the Indenture, and the
Borrower shall pay to the Trustee prior to the redemption date any additional
amount required to effect such redemption.
Section 5.5. Reserved.
Section 5.6. No Abatement of Payments Hereunder. If the Project
Realty or the Project Equipment shall be damaged or either partially or totally
destroyed, or if title to or the temporary use of the whole or any part thereof
shall be taken or condemned by a competent authority for any public use or
purpose, there shall be no abatement or reduction in the amounts payable by the
Borrower hereunder and the Borrower shall continue to be obligated to make such
payments. In any such case the Borrower shall promptly give written notice
thereof to the Authority and the Trustee.
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ARTICLE VI
COVENANTS
Section 6.1. The Borrower to Maintain its Corporate Existence;
Exceptions Permitted. The Borrower covenants and agrees that during the Term of
this Agreement it will maintain its corporate existence, will continue to be a
corporation either organized under the laws of or duly qualified to do business
as a foreign corporation in the State and in all jurisdictions necessary in the
operation of its business, will not dissolve and will not consolidate with or
merge into another corporation or permit one or more other corporations to
consolidate with or merge into it, except as permitted in Section 6.14 hereof.
Section 6.2. Indemnification, Payment of Expenses, and Advances. (A)
The Borrower agrees to protect, defend and hold harmless the Trustee, the Paying
Agent, the Original Purchaser (including any partner thereof), the Authority,
the State, agencies of the State, members, servants, agents, directors, officers
and employees, now or forever, of the Trustee, the Paying Agent, the Original
Purchaser, the Authority or the State (each an "Indemnified Party") from any
claim, demand, suit, action or other proceeding and from all costs, liabilities
and expenses whatsoever by any person or entity whatsoever, arising or
purportedly arising from or in connection with the Financing Documents, the
Indenture, the Bonds, or the transactions contemplated thereby or actions taken
thereunder by any person (including without limitation the filing of any
information, form or statement with the Internal Revenue Service), caused by the
negligence or wilful misconduct of Borrower, except for any wilful misconduct or
gross negligence on the part of the Indemnified Party or bad faith on the part
of any Indemnified Party other than the Authority.
(B) The Authority, the Original Purchaser (including any partner
thereof), and the Trustee shall not be liable for any damage or injury to the
persons or property of the Borrower or its members, directors, officers, agents,
servants or employees, or any other person who may be about the Project Realty
and the Project Equipment due to any act or omission of any person other than
the Authority, the Original Purchaser or the Trustee or their respective
members, officers, agents, servants and employees.
(C) The Borrower releases each Indemnified Party from, agrees that
no Indemnified Party shall be liable for, and agrees to hold each Indemnified
Party harmless against any attorney fees, expenses or damages incurred because
of any investigation, review or lawsuit commenced by the Trustee or Authority in
good faith with respect to the Financing Documents, the Indenture, the Bonds and
the Project Realty and the Project Equipment, and the Authority or the Trustee
shall promptly give written notice to the Borrower with respect thereto.
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(D) All covenants, stipulations, promises, agreements and
obligations of the Authority, the Trustee and the Original Purchaser contained
herein shall be deemed to be the covenants, stipulations, promises, agreements
and obligations of the Authority and the Trustee and not of any member,
director, officer or employee of the Authority or the Trustee in its individual
capacity, and no recourse shall be had for the payment of the Bonds or for any
claim based thereon or hereunder against any member, director, officer or
employe of the Authority or the Trustee or any natural person executing the
Bonds.
(E) In case any action shall be brought against one or more of the
Indemnified Parties based upon any of the above and in respect of which
indemnity may be sought against the Borrower, such Indemnified Party shall
promptly notify the Borrower in writing, enclosing a copy of all papers served,
but the omission so to notify the Borrower of any such action shall not relieve
it of any liability which it may have to any Indemnified Party otherwise than
under this Section 6.2. In case any such action shall be brought against any
Indemnified Party and it shall notify the Borrower of the commencement thereof,
the Borrower shall be entitled to participate in and, to the extent that it
shall wish, to assume the defense thereof with counsel satisfactory to such
Indemnified Party, and after notice from the Borrower to such Indemnified Party
of the Borrower's election so to assume the defense thereof, the Borrower shall
not be liable to such Indemnified Party for any subsequent legal or other
expenses attributable to such defense except as provided below, other than
reasonable costs of investigation subsequently incurred by such Indemnified
Party in connection with the defense thereof. The Indemnified Party shall have
the right to employ its own counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the employment of counsel by such Indemnified Party has been
authorized by the Borrower, (ii) the Indemnified Party shall have reasonably
concluded that there may be a conflict of interest between the Borrower and the
Indemnified Party in the conduct of the defense of such action (in which case
the Borrower shall not have the right to direct the defense of such action on
behalf of the Indemnified Party) or (iii) the Borrower shall not in fact have
employed counsel satisfactory to the Indemnified Party to assume the defense of
such action.
(F) The Borrower also agrees to pay all reasonable or necessary
out-of-pocket expenses of the Authority in connection with the issuance of the
Bonds, the administration of the Financing Documents and the enforcement of its
rights thereunder, including particularly any fees, charges and expenses
(including counsel fees) incurred by the Authority in connection with matters of
title, collateral security and financing and continuation statements.
(G) In the event the Borrower fails to pay any amount or perform any
act under the Financing Documents, within ten (10)
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Business Days following receipt of written notice, the Trustee or Authority may
pay the amount or perform the act, in which event the costs, disbursements,
expenses and reasonable counsel fees thereof, together with interest thereon
from the date the expense is paid or incurred at the prime interest rate
publicly announced from time to time by the Trustee as a commercial bank plus 2%
shall be an additional obligation hereunder payable on demand by the Authority
or the Trustee.
(H) Any obligation of the Borrower to the Authority under this
Section shall be separate from and independent of the other obligations of the
Borrower hereunder, shall not be secured by the Financing Documents, and may be
enforced directly by the Authority or the Trustee against the Borrower
irrespective of any action taken by or on behalf of the Bondholders.
(I) The obligations of the Borrower under this Section,
notwithstanding any other provisions contained in the Financing Documents, shall
survive the termination of this Agreement and, shall be recourse to the
Borrower, and for the enforcement thereof each Indemnified Party shall have
recourse to the general credit of the Borrower.
Section 6.3. Incorporation of Tax Regulatory Agreement; Payments
Upon Taxability. (A) The representations warranties, covenants and statements of
expectation of the Borrower set forth in the Tax Regulatory Agreement are by
this reference incorporated in this Agreement as though fully set forth herein.
(B) If any Bondholder receives from the Internal Revenue Service a
notice of assessment and demand for payment with respect to interest on any Bond
which when issued purported to be not subject to such assessments or demands, an
appeal may be taken by the Bondholder at the option of either the Bondholder or
the Borrower. In either case all expenses of the appeal including reasonable
counsel fees shall be paid by the Borrower, and the Bondholder and the Borrower
shall cooperate and consult with each other in all matters pertaining to any
such appeal, except that no Bondholder shall be required to disclose or furnish
any non-publicly disclosed information, including, without limitation, financial
information and tax returns. Before the taking of any appeal, however, the
Bondholder shall have the right to require the Borrower to pay the tax assessed
and conduct the appeal as a contest for reimbursement.
(C) Not later than sixty days following a Determination of
Taxability, the Borrower shall pay to the Trustee an amount sufficient, when
added to the amount then in the Debt Service Fund and available for such
purpose, to retire and redeem all Bonds then Outstanding, in accordance with
Section 2.4 of the Indenture.
(D) In the event that any Bonds are paid at maturity, or in the
event any Bonds are purchased by the Borrower, or purchased
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by the Trustee pursuant to subsection 5.3(E) of the Indenture, or in the event
any Bonds are redeemed by application of Scheduled Payments or otherwise
subsequent to the Tax Incidence Date without the Bondholder entitled thereto
receiving payment of an amount at least equal to the applicable Redemption Price
thereof, plus accrued interest to the redemption date at the rate applicable
following a Determination of Taxability, and other amounts required to be paid
hereunder, the Borrower shall, promptly upon receipt from the Trustee of a
notice to that effect, pay to the Trustee for payment to the former Bondholders
entitled thereto an amount equal to the difference between the amount actually
applied to the payment, purchase or redemption of such Bonds and the applicable
Redemption Price thereof, plus accrued interest to the redemption date at the
rate applicable following a Determination of Taxability, and other amounts
required to be paid hereunder.
(E) The obligation of the Borrower to make the payments provided for
in this Section shall be absolute and unconditional, and the failure of the
Authority or the Trustee to execute or deliver or cause to be delivered any
documents or to take any action required under this Agreement or otherwise shall
not relieve the Borrower of its obligation under this Section. Notwithstanding
any other provision of this Agreement or the Indenture, the Borrower's
obligations under this Section shall survive the termination of this Agreement
and the Indenture.
(F) The occurrence of a Determination of Taxability shall not
constitute an Event of Default hereunder but shall require only the performance
of the obligations of the Borrower stated in this Section, the breach of which
shall constitute an Event of Default as provided in Section 7.1 hereof.
Section 6.4. Public Purpose Covenants. (A) The Borrower covenants
that it will complete the Project in accordance with Section 4.1 hereof, and
that it will operate the Project Realty and the Project Equipment for the
purposes and in a manner consistent with the Borrower's application for
assistance to the Authority. The Borrower further covenants and agrees that it
will, throughout the term of this Agreement, (1) comply with all applicable
laws, regulations, ordinances, rules, and orders relating to the Project Realty
or the Project Equipment as provided in the Financing Documents, (2) maintain
and insure the Project Realty or the Project Equipment and pay all taxes,
payments-in-lieu-of-taxes, assessments and other governmental charges in
accordance with the Financing Documents, (3) not cause or permit the Project
Realty or the Project Equipment to become or remain a public nuisance, (4) not
allow any change in the nature of the occupancy, use or operation of the Project
Realty or the Project Equipment which is substantially inconsistent with the
Borrower's application for assistance to the Authority, except that the Borrower
may after notice to the Authority permit any such change which does not
disqualify the Project as an authorized project under the Act as in effect on
the date hereof and (5)
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except as otherwise provided herein, not sell, assign, convey, lease or
otherwise dispose of its interest in the Project Realty or the Project Equipment
without the prior written consent of the Authority. Nothing in this Section is
intended to require the Borrower to operate the Project Realty or the Project
Equipment in such manner as, in the good faith judgment of the Borrower, shall
materially and adversely impair the operating results of the Borrower in
connection with the use of the Project Realty or the Project Equipment.
(B) A breach of any covenant contained in this Section 6.4 shall
constitute an Event of Default, but shall permit only the exercise by the
Authority of the remedies provided in Section 7.3 hereof.
(C) The obligations of the Borrower under this Section, and all
others contained in the Financing Documents, shall be recourse to the Borrower,
and for the enforcement thereof the Authority shall have recourse to the general
credit of the Borrower.
Section 6.5. Further Assurances and Corrective Instruments. The
Authority and the Borrower agree that they will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such supplements hereto and such further instruments as may reasonably be
required for correcting any inadequate or incorrect description of the Project
Realty or the Project Equipment or for carrying out the intention of or
facilitating the performance of this Agreement, provided that no such supplement
or instrument shall alter Borrower's rights or obligations under the Financing
Documents.
Section 6.6. Covenant by Borrower as to Compliance with Indenture.
The Borrower covenants and agrees that it will comply with the provisions of the
Indenture with respect to the Borrower and that the Trustee and the Bondholders
shall have the power and authority provided in the Indenture. The Borrower
further agrees to aid in the furnishing to the Authority or the Trustee of
opinions that may be required under the Indenture. The Borrower covenants and
agrees that the Trustee shall be entitled to and shall have all the rights,
including the right to enforce against the Borrower the provisions of the
Financing Documents, pertaining to the Trustee notwithstanding the fact that the
Trustee is not a party to the Financing Documents. The Borrower has also
reviewed the Indenture and the forms of the Bonds and the Borrower hereby
approves the forms of the Indenture and the Bonds.
Section 6.7. Assignment of Agreement or Note. (A) The Borrower may
not assign its rights, interests or obligations hereunder or under the Note.
(B) The Authority agrees that it will not assign or transfer any of
the Financing Documents or the revenues and other
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receipts, funds and moneys to be received thereunder during the Term except to
the Trustee as provided in this Agreement and the Indenture.
Section 6.8. Inspection. The Authority, the Trustee and their duly
authorized agents shall have (1) the right at all reasonable times upon
reasonable notice to enter upon and to examine and inspect the Project Realty
and the Project Equipment and (2) such rights of access thereto as may be
reasonably necessary for the proper maintenance and repair thereof in the event
of failure by the Borrower to perform its obligations under this Agreement. The
Authority and the Trustee shall also be permitted, at all reasonable times, to
examine the books and records of the Borrower with respect to the Project Realty
and the Project Equipment.
Section 6.9. Default Notification. The Borrower shall deliver to the
Authority and the Trustee within ninety (90) days after the close of each Fiscal
Year, commencing with the first Fiscal Year ending following the Completion
Date, a certificate signed by an Authorized Representative of the Borrower to
the effect that the Borrower is in compliance with the provisions of the
Financing Documents or specifying the nature of the non-compliance and the steps
the Borrower is taking to correct any non-compliance.
Section 6.10. Covenant Against Discrimination. (A) The Borrower in
the performance of this Agreement will not discriminate or permit discrimination
against any person or group of persons on the grounds of race, color, religion,
age, marital status, national origin, ancestry, sex, sexual orientation,
political beliefs, mental retardation, physical or learning disability, or
history of mental disorder, in any manner prohibited by the laws of the United
States or of the State of Connecticut.
(B) The Borrower will comply with the provisions of the resolution
adopted by the Authority on June 14, 1977, as amended, and the policy of the
Authority implemented pursuant thereto concerning the promotion of equal
employment opportunity through affirmative action plans. The resolution requires
that all borrowers receiving financial assistance from the Authority adopt and
implement an affirmative action plan prior to the closing of the loan. The plan
shall be updated annually as long as the Bonds remain Outstanding.
Section 6.11. Books and Records; Financial Statements and Other
Information. The Borrower covenants that it shall keep proper books of records
and accounts in which full, true and correct entries will be made of all
dealings or transactions of or in relation to the business and financial affairs
of the Borrower, in accordance with generally accepted accounting principles,
consistently applied. The Authority and the owner and their duly authorized
agents shall have the right at all reasonable times to
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examine and make copies of the books and records of the Borrower. The Borrower
shall furnish to the Bondholder the following:
(a) within 90 days after the last day of each Fiscal Year of the Borrower,
(i) a copy of the annual consolidated and consolidating financial
statements of the Borrower prepared in accordance with GAAP, which shall
be accompanied by an unqualified audit report of the Borrower's certified
public accountants, who shall be reasonably acceptable to the Bondholder,
and (ii) a letter of the Vice President - Legal Affairs & Investor
Relations of the Borrower to the effect that to the best of his or her
knowledge, no event has occurred which constitutes or would, with the
passage of time or the giving of notice or both, constitute an Event of
Default hereunder, or otherwise describing any such event known to such
officer, which letter shall include, in reasonable detail, the
calculations demonstrating the compliance or non-compliance by the
Borrower, as of the end of such Fiscal Year, with each applicable
financial covenant set forth in Section 6.12 hereof;
(b) within 45 days of the end of each fiscal quarter, (i) a copy of the
Borrower's unaudited consolidated and consolidating financial statements
for such quarter and for the Fiscal Year to date, including a balance
sheet, income statement and statement of cash flows, and (ii) a letter of
the Vice President - Legal Affairs & Investor Relations of the Borrower to
the effect that, in the opinion of such officer (A) such unaudited
financial statements have been prepared in accordance with GAAP and
reflect all eliminations and adjustments (consisting only of normal
recurring adjustments, except as noted in such letter) necessary for a
fair presentation of the Borrower's financial position and results of
operation for such quarter and the year to date, and (B) no event has
occurred which constitutes or would, with the passage of time or the
giving of notice or both, constitute an Event of Default hereunder, or
otherwise describing any such event known to such officer, which letter
shall include, in reasonable detail, the calculations demonstrating the
compliance or non-compliance by the Borrower, as of the end of such
quarter, with each applicable financial covenant set forth in Section 6.12
hereof;
(c) as soon as practicable, but in any event within ten (10) Business Days
after Borrower becomes aware thereof (or should have become so aware with
the exercise of reasonable diligence), notice of any material adverse
change in the business or financial condition of the Borrower;
(d) as soon as practicable, but in any event within ten (10) Business Days
of the time the Borrower becomes aware thereof (or should have become so
aware with the exercise of reasonable diligence), notice of the
institution of, or of any
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material adverse development with respect to, any suit or proceeding,
against the Borrower in which the amount of damages which is sought, or
which in the Borrower's reasonable opinion may be at controversy, shall
exceed $100,000;
(e) as soon as possible, but in any event within ten (10) Business Days
after the Borrower becomes aware thereof (or should have become so aware
with the exercise of reasonable diligence), notice of the occurrence of
any Event of Default or any Determination of Taxability or of any act,
omission, thing or condition which upon the giving of notice or lapse of
time, or both, would or might constitute an Event of Default or
Determination of Taxability, which notice shall describe the Event of
Default or Determination of Taxability or other act, omission, thing or
condition in question and shall set forth in detail what action the
Borrower proposes to take with respect thereto;
(f) as soon as possible, but in any event within ten (10) Business Days
after the Borrower becomes aware thereof (or should have become so aware
with the exercise of reasonable diligence), notice of the occurrence of
any "reportable event" or "prohibited transaction" (as each is defined in
ERISA) with respect to any employee benefit plan; and
(g) upon request, or within a reasonable time thereafter, such other
information concerning the Borrower and its operations and financial
condition and results as the Bondholder may reasonably request.
The Authority and the Trustee shall have the right to receive the
statements referred to in this Section upon its written request.
Section 6.12. Financial Covenants. So long as any Bonds are
Outstanding, the Borrower shall comply with each of the following financial
covenants as used in this Section (and in each definition applicable hereto) the
term "Borrower" means the Borrower and each of its consolidated subsidiaries on
a consolidated basis.
A. Tangible Net Worth. The Borrower shall maintain, at all times,
Tangible Net Worth in an amount which is not less than (i) $5,800,000 from the
date of this Agreement through June 30, 1998, and (ii) at all times thereafter,
an amount which is equal to the minimum Tangible Net Worth required hereunder
for the prior Fiscal Year, plus 50% of Net Income (with no reduction for net
losses) for such prior Fiscal Year.
B. Leverage Ratio. The Borrower shall maintain, at all times, a
ratio of Total Liabilities to Tangible Net Worth of not more than 1.5 to 1.0.
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C. Fixed Charge Coverage Ratio. The Borrower shall maintain, in each
Fiscal Year, a Fixed Charge Coverage Ratio of:
Minimum Fixed Charge
Period Coverage Ratio
------ --------------
Fiscal Year ending - June 30, 1998 1.2 to 1.0
Each Fiscal Year thereafter 1.5 to 1.0
D. Loans and Investments. The Borrower shall not make any loan or
advance to, or acquire the stock or any equity or debt security of or make any
capital contribution to, any person or entity (including any Subsidiary),
except:
(1) normal advances in the ordinary course of business to
officers and employees in connection with their duties;
(2) the investment of cash of the Borrower for temporary
periods in the ordinary course of business and in accordance with
prudent investment strategy;
(3) loans, advances or capital contributions to any Subsidiary
which has guaranteed the obligations of the Borrower hereunder and
under the Credit Agreement; and
(4) except as provided in (3) above, loans, advances or
capital contributions to Subsidiaries not exceeding $600,000 in the
aggregate.
Section 6.13. ERISA. Each employee benefit plan as to which the
Borrower may have any liability complies in all material respects with all
applicable provisions of ERISA, including minimum funding requirements, and (i)
no Prohibited Transaction (as defined under ERISA) has occurred with respect to
any such plan, (ii) no Reportable Event (as defined under Section 4043 of ERISA)
has occurred with respect to any such plan which would cause the Pension
Guaranty Corporation to institute proceedings under Section 4042 of ERISA, (iii)
the Company has not withdrawn from any such plan or initiated steps to do so,
and (iv) no steps have been taken to terminate any such plan.
Section 6.14. Additional Negative Covenants. So long as any Bond is
outstanding, the Borrower shall not, without the written consent of the
Bondholder:
A. Corporate Transactions. (a) Merge or consolidate with any other
corporation, partnership, trust or other entity, (b) sell, lease, transfer
or otherwise dispose of all or any material portion of its assets other
than in the
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ordinary course of business, (c) directly or through any entity
consolidated with the Borrower for financial reporting purposes, purchase
any assets other than in the ordinary course of business, or (d) acquire
any equity interest in any other corporation, partnership, trust or other
entity, except, in each case, in connection with a Permitted Corporate
Transaction.
B. Nature of Business. Make any material change in the nature of its
business as conducted at the date hereof.
C. Borrowings. Create, incur, assume, guarantee, endorse, or
otherwise become liable for, or permit to exist any direct or contingent
obligation for borrowed money (including obligations under capital
leases), except:
(a) obligations with respect to the Bond under this Agreement;
and
(b) any other indebtedness to the Original Purchaser
(including indebtedness under the Credit Agreement).
D. Guarantees. Assume, guarantee, endorse, or otherwise become
directly or contingently liable for the indebtedness of any other Person.
E. Permitted Encumbrances. Create, incur, assume or suffer to exist
any mortgage, lien, security interest, restriction or encumbrance with
respect to any of its property, including the Collateral and the Mortgaged
Property, other than (collectively, the "Permitted Encumbrances"):
(a) liens and security interests granted in favor of Original
Purchaser;
(b) utility, access or other easements and rights of way,
restrictions and exceptions which do not materially impair the
operation or value thereof;
(c) deposits under workers' compensation, unemployment and
social security or similar laws, or to secure performance of bids,
tenders, contracts (other than for the repayment of borrowed money)
or leases to secure indemnity, performance or similar bonds in the
ordinary course of business;
(d) liens imposed by law (whether or not inchoate), such as
carriers', warehousemen's, materialmen's or mechanics' liens,
incurred in good faith in the ordinary course of business, and which
are not delinquent, and liens arising out of a judgment or award
with respect to which an appeal is being prosecuted, a stay of
execution
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pending such appeal having been secured or applied for and not
denied or rendered ineffective; and
(e) liens for taxes, assessments or governmental charges or
levies on property if the same shall not at the time be delinquent,
or are being contested in good faith and by appropriate proceedings.
(f) other liens and security interests on the property of
Borrower listed on the Disclosure Schedule attached as Exhibit "E"
to the Credit Agreement; provided that no such lien or security
interest shall be extended, replaced, modified or enlarged.
F. Restricted Payments. Directly or indirectly, declare, order, pay,
make or set apart any sum or property for any Restricted Payment, without
the written consent of the Bank.
G. Leasebacks. Directly or indirectly sell or otherwise transfer, in
one or more related transactions, any property (whether real, personal or
mixed) and thereafter rent or lease such transferred property or
substantially identical property.
H. Transactions with Shareholders and Affiliates. Directly or
indirectly, engage in any transaction with (a) any holder of 5% or more of
any class of the capital stock or ownership interest of the Borrower, or
(b) any corporation controlling, controlled by, or under common control
with the Borrower or any such holder, on terms that are less favorable to
the Borrower than those which might be obtained at the time from Persons
which are not such a holder or affiliated corporation.
I. Fiscal Year. Change its Fiscal Year.
Section 6.15. Reserved.
Section 6.16. Reserved.
Section 6.17. Reserved.
Section 6.18. Maintenance of Mortgaged Property. (A) The Borrower
covenants that it will maintain the Mortgaged Property in good repair, working
order and condition and will from time to time make or cause to be made all
necessary and proper repairs, replacements and renewals. The Mortgaged Property
and any use thereof by the Borrower shall conform in all material respects with
all applicable zoning, planning, building, environmental protection, sanitary,
safety and other laws, rules and regulations of governmental authorities having
jurisdiction over the Mortgaged Property, and the Borrower shall not permit a
nuisance thereon; but it shall not be a breach of this Section if the Borrower
fails to
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comply with such laws, rules and regulations during any period in which the
Borrower shall in good faith be diligently contesting the validity thereof.
Subject to the foregoing, the Borrower may at its cost remodel or make
substitutions, modifications and improvements to the Mortgaged Property as it
deems desirable for its use and purposes and the same shall be the property of
the Borrower and be included as part of the Mortgaged Property and the Project.
(B) The Borrower agrees that all repairs, renewals, replacements,
improvements, additions and extensions, extraordinary repairs, or property in
the nature thereof, which shall be made or acquired by the Borrower during the
term hereof in connection with the Mortgaged Property forthwith shall become
part of the Mortgaged Property. The Borrower agrees to execute such instruments
as may be requested, from time to time, by the Trustee to effect the foregoing.
(C) The Borrower shall duly pay or cause to be paid all taxes and
governmental charges of any kind that may at any time be lawfully assessed or
levied against or with respect to the Mortgaged Property, all utility and other
charges incurred in the operation, maintenance, use, occupancy and upkeep of the
Mortgaged Property and all assessments and charges lawfully made by any
governmental body for public improvements that may be secured by a lien on the
Mortgaged Property. However, the Borrower may contest in good faith any such
items, assessments and other charges and, in such event, may permit the taxes,
assessments or other charges so contested to remain unpaid during any period,
including appeals, when the Borrower is in good faith contesting the same, so
long as adequate reserves have been established and enforcement of the contested
item is effectively stayed. In the event that the Borrower fails to pay any such
taxes, assessments or other charges (other than in connection with a contest
permitted by the preceding sentence), the Trustee may (but shall be under no
obligation to), upon such notice to the Borrower as is reasonable under the
circumstances, pay such amounts, and any amounts so advanced therefor by the
Trustee shall become an additional obligation of the Borrower secured by the
Financing Documents, which amounts, together with interest thereon at the prime
rate of the Trustee from the date thereof, the Borrower agrees and covenants to
pay.
Section 6.19. Transfer or Release of Mortgaged Property. Except as
expressly permitted in this Section and except for Permitted Encumbrances, the
Borrower will not sell or transfer any part of the tangible real or personal
property included in the Mortgaged Property, except as permitted in Section
3.6(B) hereof, or create, incur, assume or permit to exist any encumbrance, lien
or charge of any kind on the Mortgaged Property.
(A) If no Event of Default shall have happened and be continuing,
the Borrower may, from time to time:
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(1) grant Permitted Encumbrances with respect to any real or
personal property included in the Mortgaged Property; or
(2) release unnecessary existing easements, licenses, rights of way
and other rights or privileges; or
(3) lease or license the use of a part or parts of the Mortgaged
Property to any person for use in performing services necessary or
desirable for proper and economical operation and use of the Mortgaged
Property; provided, that prior to entering into any lease or license the
Borrower shall deliver to the Trustee an opinion of Bond Counsel that such
lease or license will not adversely affect the exclusion from gross income
for federal income tax purposes of interest on the Bonds; or
(4) remove, sell or otherwise dispose of property which has been
replaced in the ordinary course of its business; or
(B) The Borrower covenants that the net proceeds of any sale or
other disposition made pursuant to paragraph (A)(6) or (A)(7) above shall be
applied to the replacement of the property, fixtures or equipment sold or
disposed of, or shall otherwise be reinvested in the Mortgaged Property.
Section 6.20. Preservation of Tax-Exempt Status of Bonds.
(A) The Borrower agrees that (i) the Project conforms to the
description contained in the Appendices hereto; (ii) it shall not take any
action or permit any circumstances within its control to arise or continue, if
such action or circumstances, or its expectation on the date of issue of the
Bonds, would cause the Bonds to be "arbitrage bonds" under the Code or cause the
interest paid by the Authority on the Bonds to be subject to Federal income tax
in the hands of the holders thereof; and (iii) it shall use its best efforts to
maintain the tax-exempt status of the Bonds.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. Any one or more of the following
shall constitute an "Event of Default" hereunder:
(1) Any representation or warranty made by the Borrower in the
Financing Documents or any certificate, statement, data or information
furnished by the Borrower in connection therewith or included by the
Borrower in its application to the Authority for assistance proves at any
time to have been incorrect when made in any material respect.
(2) Failure by the Borrower to pay any amount that has become due
and payable pursuant to the Financing Documents, subject to any applicable
notice and cure provisions (if any) contained therein.
(3) Failure by the Borrower to comply with the default notification
provisions of Article VI hereof.
(4) The occurrence of an "event of default" under Section 8.1 of the
Indenture.
(5) Failure by the Borrower to observe or perform any covenant,
condition or agreement hereunder or under the Financing Documents (except
those referred to above) continuance of such failure for a period of
thirty days after receipt by the Borrower of written notice specifying the
nature of such failure.
(6) The Borrower shall (a) apply for or consent to the appointment
of a receiver, trustee, liquidator or custodian or the like of itself or
of its property, (b) admit in writing its inability to pay its debts
generally as they become due, (c) make a general assignment for the
benefit of creditors, (d) be adjudicated a bankrupt or insolvent, or (e)
commence a voluntary case under the Federal bankruptcy laws of the United
States of America or file a voluntary petition or answer seeking
reorganization, an arrangement with creditors or an order for relief or
seeking to take advantage of any insolvency law or file an answer
admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding; or corporate action
shall be taken by it for the purpose of effecting any of the foregoing; or
if without the application, approval or consent of the Borrower, a
proceeding shall be instituted in any court of competent jurisdiction,
seeking in respect of the Borrower an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or
arrangement with creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or the like of the
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<PAGE>
Borrower or of all or any substantial part of its assets, or other like
relief in respect thereof under any bankruptcy or insolvency law, and, if
such proceeding is being contested by the Borrower in good faith, the same
shall continue undismissed, or pending and unstayed, for any period of 75
consecutive days.
(7) The occurrence of an event of default under the Credit Agreement
as set forth in Section 6.1 of the Credit Agreement (the provisions of
which are herein incorporated by reference and shall survive herein
regardless of the payment of all other obligations issued under the Credit
Agreement).
Section 7.2. Remedies on Default. (A) Whenever any Event of Default
shall have occurred, the Trustee, or the Authority where so provided herein, may
take any one or more of the following actions:
(1) The Trustee, as and to the extent provided in Article VIII of
the Indenture, may cause all amounts payable under the Financing Documents
to be immediately due and payable without notice or demand of any kind,
whereupon the same shall become immediately due and payable.
(2) The Authority, without the consent of the Trustee or any
Bondholder, may proceed to enforce the obligations of the Borrower to the
Authority, to the Trustee and to the appropriate taxing jurisdictions
under Section 6.2 of this Agreement.
(3) The Trustee may exercise any and all rights and remedies it may
have under the Financing Documents.
(4) The Trustee may take whatever action at law or in equity it may
have to collect the amounts then due and thereafter to become due, or to
enforce the performance or observance of the obligations, agreements, and
covenants of the Borrower under the Financing Documents.
(5) The Trustee may require the Borrower to obtain the prior written
consent of the Trustee to the taking of any action otherwise permitted by
the Financing Documents including, without limitation, the incurrence of
any obligation or any transfer of Mortgaged Property.
(B) In the event that any Event of Default or any proceeding taken
by the Authority (or by the Trustee on behalf of the Authority) thereon shall be
waived or determined adversely to the Authority, then the Event of Default shall
be annulled and the Authority and the Borrower shall be restored to their former
rights hereunder, but no such waiver or determination shall extend to any
subsequent or other default or impair any right consequent thereon.
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<PAGE>
Section 7.3. Remedies on Public Purpose Default. (A) If the Borrower
shall default in the performance of any of its covenants contained in Section
6.4 hereof and such default shall constitute an Event of Default under Section
7.1 hereof, and such Event of Default shall continue for thirty (30) days
without the Trustee's or Bondowners' instituting the remedial steps provided for
in subsection 7.2(A)(1) hereof or subsection 8.1(B) of the Indenture, the
Authority may, so long as such Event of Default is continuing, send a notice to
the Trustee calling for the acceleration of all of the Borrower's obligations
under the Financing Documents and for the redemption of all of the Bonds then
Outstanding. Any such notice shall set forth in reasonable detail the default by
the Borrower giving rise thereto and shall specify the date upon which (1)
notice of Bond redemption is to be given by the Trustee (which shall be not less
than one hundred twenty days from the date of the Authority's determination
notice) and (2) the redemption of the Bonds is to occur (which shall be thirty
days after notice of redemption is given by the Trustee). Within thirty days
following receipt of the notice, the Trustee shall forward a copy thereof to the
Borrower and each registered Bondowner, together with a copy of Sections 6.4 and
7.3 of this Agreement.
(B) If, within sixty days after the mailing of notice by the Trustee
to the Borrower and Bondowners, the Trustee receives no objection (as
hereinbelow provided) to such redemption, the Trustee shall give such notice and
effect to acceleration of the Borrower's obligations and the redemption of all
Outstanding Bonds in accordance with the Authority's notice and pursuant to
Section 2.4 of the Indenture. If, however, the Borrower or any Bondowner
disputes the existence of such Event of Default, the Borrower or such Bondowner
shall mail a notice to the Authority and the Trustee containing a statement of
such person's belief with respect to the claimed default. The receipt of such
notice by the Trustee shall serve to suspend the proceedings for redemption of
Bonds initiated by the Authority's notice of default.
(C) If upon receipt of such notice from the Borrower or any
Bondowner, the Authority determines to affirm its earlier determination, either
the Borrower or any Bondowner shall have the right to bring an action in any
court of competent jurisdiction to enjoin the proceedings for the redemption of
the Bonds, and during the pendency of any such action the redemption proceedings
shall be suspended. Neither the Authority, the Borrower nor any Bondowner shall
be responsible for any costs, fees, expenses, or counsel fees incurred by any
other party in connection with any such action except that the Borrower shall be
responsible for the payment of the costs, fees and expenses of the Trustee and
its counsel. In the event the Authority is successful in such a proceeding, and
a final judgment is rendered which is not appealable or appealed within sixty
days thereafter finding the Borrower in default under Section 6.4 hereof, the
Trustee shall, promptly upon receipt of notice of the entry of the decision,
give notice of the redemption of all Outstanding Bonds under Section 6.4 of the
Indenture, and
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redeem all such Bonds upon the date fixed for redemption in the notice (which
shall be thirty days after the notice is given). In the event the Borrower or
such Bondowners are successful in such a proceeding, and a final judgment is
rendered which is not appealable or appealed within sixty days thereafter
finding the Borrower not to be in default under Section 6.4 hereof, all
proceedings for the redemption of Bonds commenced under this Section shall be
terminated. No such judgment, however, shall prejudice the exercise of the
Authority's rights under this Section upon the occurrence of any subsequent
failure of performance under Section 6.4 hereof.
(D) Within fifteen days of the date the Trustee gives notice of any
redemption of Bonds pursuant to this Section, the Borrower shall pay as a final
loan payment a sum sufficient, together with other funds on deposit with the
Trustee and available for such purpose, to redeem all Bonds then Outstanding
under the Indenture at 100% of the principal amount thereof plus accrued
interest to the redemption date. The Borrower shall also pay or provide for all
reasonable and necessary fees and expenses of the Trustee and any Paying Agent
accrued and to accrue through the date of redemption of all such Bonds.
(E) Nothing contained in this Section shall be deemed to prevent the
Authority or the Borrower from seeking equitable relief if it asserts or
disputes, as the case may be, the existence of an event of a public purpose
default.
Section 7.4. No Duty to Mitigate Damages. Unless otherwise required
by law, neither the Authority, the Trustee nor any Bondholder shall be obligated
to do any act whatsoever or exercise any diligence whatsoever to mitigate the
damages to the Borrower if an Event of Default shall occur.
Section 7.5. Remedies Cumulative. No remedy herein conferred upon or
reserved to the Authority or the Trustee is intended to be exclusive of any
other available remedy or remedies but each and every such remedy shall be
cumulative and shall be in addition to every remedy given under this Agreement
or now or hereafter existing at law or in equity or by statute. Delay or
omission to exercise any right or power accruing upon any default or failure by
the Authority or the Trustee to insist upon the strict performance of any of the
covenants and agreements herein set forth or to exercise any rights or remedies
upon default by the Borrower hereunder shall not impair any such right or power
or be considered or taken as a waiver or relinquishment for the future of the
right to insist upon and to enforce, by injunction or other appropriate legal or
equitable remedy, strict compliance by the Borrower with all of the covenants
and conditions hereof, or of the right to exercise any such rights or remedies,
if such default by the Borrower be continued or repeated.
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ARTICLE VIII
PREPAYMENT PROVISIONS
Section 8.1. Optional Prepayment. The Borrower shall have the option
to prepay its loan obligation in the manner required to effectuate the
redemption of the Bonds in accordance with the optional redemption provisions of
Section 2.4 of the Indenture.
Section 8.2. Reserved.
Section 8.3. Mandatory Prepayment on Public Purpose Default. The
Borrower shall pay or cause the prepayment of its loan obligation in the manner
provided in Section 7.3 hereof following a default in the performance of the
public purpose covenants sets forth in Section 6.4 hereof.
Section 8.4. Mandatory Scheduled Prepayment. The Borrower shall pay
or cause the prepayment of its loan obligation in the amounts, at the times and
in the manner required to effectuate the redemption of the Bonds in accordance
with the mandatory scheduled redemption provisions of Section 2.4 of the
Indenture.
Section 8.5. Mandatory Prepayment on Taxability. The Borrower shall
pay or cause the prepayment of its loan obligation following a Determination of
Taxability in the manner provided in Section 6.3 of this Agreement.
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ARTICLE IX
GENERAL
Section 9.1. Indenture. (A) Moneys received from the sale of the
Bonds and all loan payments made by the Borrower and all other moneys received
by the Authority or the Trustee under the Financing Documents shall be applied
solely and exclusively in the manner and for the purposes expressed and
specified in the Indenture and in the Bonds and as provided in this Agreement.
(B) The Borrower shall have and may exercise all the rights, powers
and authority given the Borrower in the Indenture and in the Bonds, and the
Indenture and the Bonds shall not be modified, altered or amended in any manner
which adversely affects such rights, powers and authority or otherwise adversely
affects the Borrower without the prior written consent of the Borrower.
Section 9.2. Benefit of and Enforcement by Bondholders. The
Authority and the Borrower agree that this Agreement is executed in part to
induce the purchase by others of the Bonds and for the further securing of the
Bonds, and accordingly that all covenants and agreements on the part of the
Authority and the Borrower as to the amounts payable with respect to the Bonds
and the Note hereunder are hereby declared to be for the benefit of the holders
from time to time of the Bonds and may be enforced as provided in the Indenture
on behalf of the Bondholders by the Trustee.
Section 9.3. Amendments. This Agreement may be amended only with the
concurring written consent of the Trustee and the Bondholders given in
accordance with the provisions of the Indenture.
Section 9.4. Notices. All notices, certificates or other
communications hereunder shall be sufficiently given and shall be deemed given
when delivered or when mailed by registered or certified mail, postage prepaid,
addressed as follows: if to the Authority, at 999 West Street, Rocky Hill,
Connecticut 06067, Attention: Senior Vice President - Public Finance; if to the
Borrower: (i) for all communications sent before May 1, 1998 at West Kenosia
Avenue, Danbury, Connecticut 06810, Attention: Vice-President-Legal Affairs and
Investor Relations and (ii) for all communications sent after May 1, 1998 at 55
Church Hill Road, Newtown, Connecticut 06470, Attention: Vice President - Legal
Affairs & Investor Relations; and if to the Trustee, at 63 Wall Street, New
York, New York 10005, Attention: Corporate Trust Administration; and if to the
Original Purchaser, at 59 Wall Street, New York, New York 10005, Attention:
Chief Credit Officer. A duplicate copy of each notice, certificate or other
communication given hereunder by either the Authority or the Borrower to the
other shall also be given to the Trustee. A copy of each notice given hereunder
to the Trustee shall also be given to each
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institutional Bondholder upon its written request. The Authority, the Borrower
and the Trustee may, by notice given hereunder, designate any further or
different addresses to which subsequent notices, certificates or other
communications shall be sent.
Section 9.5. Recording. The Mortgage and every assignment and
modification thereof shall be recorded in the Office of the Town Clerk of the
Town of Newtown, Connecticut and a financing statement covering Service
Equipment shall be filed in the Office of the Secretary of the State of
Connecticut and in any such other Office as may be at the time provided by law
as the proper place for the recordation of any of the foregoing.
Section 9.6. Filing. Financing statements reflecting the security
interest of the Authority in the Project Equipment created by the Security
Agreement and the assignment of such security interests to the Trustee shall be
filed in a form which fully complies with the State Uniform Commercial
Code--Secured Transactions in the office of the Secretary of the State. The
parties further agree that all necessary continuation statements shall be filed
by the Trustee within the time prescribed by the State Uniform Commercial
Code--Secured Transactions in order to continue the perfection of such security
interest.
Section 9.7. Prior Agreements Superseded. This Agreement, together
with all agreements executed by the parties concurrently herewith or in
conjunction with the sale of the Initial Bonds, shall completely and fully
supersede all other prior understandings or agreements, both written and oral,
between the Authority and the Borrower relating to the lending of money and the
Project, including those contained in any commitment letter executed in
anticipation of the issuance of the Initial Bonds.
Section 9.8. Agreed to and Accepted by Original Purchaser. By
agreeing to and accepting this Agreement, the Original Purchaser agrees to
purchase the Bonds in the manner set forth herein.
Section 9.9. Execution of Counterparts. This Agreement may be
executed simultaneously in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the Authority has caused this Agreement to be
executed in its corporate name by a duly Authorized Representative and the
Borrower has caused this Agreement to be executed in its corporate name and
attested by its duly authorized officer all as of the date first above written.
Connecticut Development Authority
By /s/ [ILLEGIBLE]
--------------------------------
Authorized Representative
Sonics & Materials, Inc.
By /s/ [ILLEGIBLE]
--------------------------------
Authorized Representative
Agreed To And Accepted By
per pro. Brown Brothers Harriman
& Co., as the Original Purchaser
By /s/ W. Carter Sullivan
--------------------------------
W. Carter Sullivan
Senior Manager
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<PAGE>
APPENDICES
<PAGE>
Sonics & Materials, Inc.
PROMISSORY NOTE
No. 1 $3,810,000
Sonics & Materials, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Borrower"), for value received, hereby
promises to pay to the order of the Connecticut Development Authority (the
"Authority") the principal sum of $3,810,000, together with interest on the
unpaid principal balance thereof from the date hereof until fully and finally
paid, together with all taxes levied or assessed on this Note or the debt
evidenced hereby against the holder hereof. Subject to Section 3.1 of the
Agreement (as hereinafter defined), the Borrower shall make monthly payments of
interest, the size being one-sixth of the next interest payment due under the
Indenture and monthly payments of principal or Scheduled Installments, the size
being one-twelfth of the next such principal installment or Scheduled
Installment under the Indenture. This Note shall bear interest at the rate of
interest borne by the Initial Bonds referred to below.
This Note has been executed under and pursuant to a Loan Agreement,
dated as of December 1, 1997, by and among the Authority and the Borrower (the
"Agreement") and is secured by an Open-End Mortgage, dated as of December 1,
1997, from the Borrower to the Authority and Brown Brothers Harriman & Co. (the
"Original Purchaser") on premises located in Newtown, Connecticut (the
"Mortgage") and by a Security Agreement, dated as of December 1, 1997, by and
among the Authority, the Borrower and the Original Purchaser (the "Security
Agreement"). This Note is issued to evidence the obligation of the Borrower
under the Agreement to repay the loan made by the Authority from the proceeds of
its $3,810,000 (Sonics & Materials, Inc. Project) 1997 Series (the "Initial
Bonds"), together with interest thereon and all other amounts, fees, penalties,
premiums, adjustments, expenses, counsel fees and other payments of any kind
required to be paid by the Borrower under the Agreement and the Mortgage and the
Security Agreement. The Agreement includes provision for mandatory and optional
prepayment of this Note as a whole or in part, and in such event the prepayment
shall be credited in inverse order of principal installments due. The Agreement
further provides for the payment of interest on this Note at other rates in
certain circumstances. Advances made pursuant to Section 6.2 of the Agreement
shall bear interest at Base Rate (as defined in the Indenture), plus 2%.
The rate of interest on this Note shall be the Applicable Percentage
of the Base Rate, determined as of the opening of business on each Interest
Payment Date (or if such Interest Payment Date is not a Business Day, on the
next succeeding Business Day), except that from and after any Determination of
Taxability (as
--------
SPECIMEN
--------
<PAGE>
defined in the Agreement), the rate of interest on this Bond shall be the
Taxable Rate.
For such purpose, the following definitions shall apply:
"Applicable Percentage" means seventy-five percent (75%); provided
that, so long as the Original Purchaser shall be the Owner of the Bond, the
Applicable Percentage may be adjusted by such owner (i) to offset any decrease
in net interest income allocable to the Bond due to a change in the portion of
its interest expense allocable to the Bond that is disallowed as a deduction
under Section 165 of the Code, or (ii) to reflect changes in federal marginal
tax rates which adversely affect the taxable equivalent yield of the Bond to
such owner. The Applicable Percentage shall be determined as of the opening of
business on each Interest Payment Date (or if such Interest Payment Date is not
a Business Day, on the next succeeding Business Day).
"Base Rate" means the rate determined from time to time by Original
Purchaser as its "base rate."
"Interest Payment Date" means the last day of each month, commencing
January 1, 1998, and continuing until the maturity date hereof.
This Note shall bear interest on the overdue principal and, to the
extent permitted by law, on overdue interest at the Base Rate plus 2%.
The Agreement, the Mortgage, the Security Agreement and this Note
(hereinafter, together with the Tax Regulatory Agreement, collectively referred
to as the "Financing Documents") have been assigned to Brown Brothers Harriman
Trust Company (the "Trustee") acting pursuant to an Indenture of Trust, dated as
of December 1, 1997 (the "Indenture"), between the Authority and the Trustee.
Such assignment is made as security for the payment of the Initial Bonds and any
Additional Bonds issued by the Authority pursuant to the Indenture.
As provided in the Agreement and subject to the provisions thereof,
payments hereon are to be made at the principal office of Brown Brothers
Harriman Trust Company, New York, New York, or at the office designated for such
payment by any successor trustee in an amount which, together with other moneys
available therefor pursuant to the Indenture, will equal the amount payable as
principal or Redemption Price, if any, of and interest on the Initial Bonds
outstanding under the Indenture on such due date.
The Borrower shall make payments on this Note on the dates and in
the amounts specified herein and in the Agreement and in addition shall make
such other payments as are required pursuant to the Financing Documents, the
Indenture and the Bonds. In the event of default, as defined in any of the
Financing Documents, the
--------
SPECIMEN
--------
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<PAGE>
principal of and interest on this Note may be declared immediately due and
payable as provided in the Agreement. Upon any such declaration the Borrower
shall pay all costs, disbursements, expenses and reasonable counsel fees of the
Authority and the Trustee in seeking to enforce their rights under any of the
Financing Documents.
THE BORROWER ACKNOWLEDGES THAT THE LOAN EVIDENCED BY THIS NOTE IS A
COMMERCIAL TRANSACTION AND WAIVES ITS RIGHTS TO NOTICE AND HEARING AS ALLOWED
UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR OTHERWISE UNDER ANY
STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER
HEREOF MAY DESIRE TO USE. The Borrower further (1) waives diligence, demand,
presentment for payment, notice of nonpayment, protest and notice of protest,
notice of any renewals or extension of this Note, and all rights under any
statute of limitations, (2) agrees that the time for payment of this Note may be
changed and extended at the sole discretion of the Trustee without impairing its
liability hereon, and (3) consents to the release of all or any part of the
security for the payment thereof at the discretion of the Trustee or the release
of any party liable for this obligation without affecting the liability of the
other parties hereto. Any delay on the part of the Authority or the Trustee in
exercising any right hereunder shall not operate as a waiver of any such right,
and any waiver granted with respect to one default shall not operate as a waiver
in the event of any subsequent default.
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SPECIMEN
--------
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<PAGE>
IN WITNESS WHEREOF, Sonics & Materials, Inc. has caused this Note to
be executed in its corporate name by its duly authorized officers on December
12, 1997.
Sonics & Materials, Inc.
By /s/ [ILLEGIBLE]
--------------------------------
Authorized Representative
Authority Endorsement
Pay to the order of Brown Brothers Harriman Trust Company, as
Trustee, without recourse.
Connecticut Development Authority
By /s/ [ILLEGIBLE]
--------------------------------
Authorized Representative
--------
SPECIMEN
--------
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<PAGE>
DESCRIPTION OF PROJECT EQUIPMENT
All personal property, goods, leasehold improvements, machinery,
equipment, furnishings, furniture, fixtures, tools, and attachments, wherever
located and whether now owned or hereafter acquired, used in the operation the
Facilities and financed with the proceeds of any Bonds, as reflected in the
records of the Trustee in accordance with Section 9.11 of the Indenture, any
accessions thereto, substitutions therefor and replacements thereof, and
proceeds and products thereof.
<PAGE>
DESCRIPTION OF PROJECT REALTY
================================================================================
Connecticut Development Authority
to
Brown Brothers Harriman Trust Company
as Trustee
------------------
INDENTURE OF TRUST
------------------
Dated as of December 1, 1997
Connecticut Development Authority
$3,810,000 Industrial Revenue Bonds
(Sonics & Materials, Inc. Project)
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
Parties, Preambles and Form of Bonds....................................... 1
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions ................................................. 19
ARTICLE II
AUTHORIZATION, TERMS AND ISSUANCE OF BONDS
Section 2.1. Authorization for Indenture.................................. 27
Section 2.2. Authorization and Obligation of Bonds........................ 27
Section 2.3. Issuance and Terms of the Initial Bonds...................... 27
Section 2.4. Redemption of Initial Bond................................... 29
Section 2.5. Execution and Authentication of Bonds........................ 32
Section 2.6. Delivery of Bonds............................................ 32
Section 2.7. Issuance of Additional Bonds................................. 33
ARTICLE III
GENERAL TERMS AND PROVISIONS OF BONDS
Section 3.1. Date of Bonds................................................ 37
Section 3.2. Form and Denominations....................................... 37
Section 3.3. Legends...................................................... 37
Section 3.4. Medium of Payment............................................ 37
Section 3.5. Bond Details................................................. 37
Section 3.6. Interchangeability, Transfer and Registry.................... 38
Section 3.7. Bonds Mutilated, Destroyed, Stolen or Lost................... 38
Section 3.8. Cancellation and Destruction of Bonds........................ 39
Section 3.9. Requirements With Respect To Transfers....................... 39
Section 3.10. Registrar.................................................... 39
ARTICLE IV
APPLICATION OF BOND PROCEEDS
Section 4.1. Accrued Interest............................................. 40
Section 4.2. Bond Proceeds and Premium.................................... 40
ARTICLE V
CUSTODY AND INVESTMENT OF FUNDS
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<PAGE>
Page
Section 5.1. Creation of Funds and Accounts............................... 41
Section 5.2. Project Fund................................................. 41
Section 5.3. Debt Service Fund............................................ 44
Section 5.4. Reserved..................................................... 46
Section 5.5. Reserved..................................................... 46
Section 5.6. Earnings Fund and Rebate Fund................................ 46
Section 5.7. Investment of Funds and Accounts; Valuation.................. 47
Section 5.8. Non-presentment of Bonds..................................... 47
ARTICLE VI
REDEMPTION OF BONDS
Section 6.1. Privilege of Redemption and Redemption Price................. 49
Section 6.2. Selection of Bonds to be Redeemed............................ 49
Section 6.3. Notice of Redemption......................................... 49
Section 6.4. Payment of Redeemed Bonds.................................... 50
Section 6.5. Cancellation of Redeemed Bonds............................... 50
ARTICLE VII
PARTICULAR COVENANTS
Section 7.1. No Pecuniary Liability on Authority or
Officers.................................................... 51
Section 7.2. Payment of Principal, Redemption Price, if any,
and Interest................................................ 51
Section 7.3. Performance of Covenants..................................... 51
Section 7.4. Further Assurances........................................... 52
Section 7.5. Inspection of Project Books.................................. 52
Section 7.6. List of Bondholders.......................................... 52
Section 7.7. Rights under Financing Documents............................. 52
Section 7.8. Creation of Liens, Indebtedness.............................. 53
Section 7.9. Recording and Filing......................................... 53
ARTICLE VIII
REMEDIES OF BONDHOLDERS
Section 8.1. Events of Default; Acceleration of Due Dates................. 54
Section 8.2. Foreclosure and Enforcement of Remedies...................... 55
Section 8.3. Application of Revenues and Other Moneys After
Default..................................................... 55
Section 8.4. Actions by Trustee........................................... 57
Section 8.5. Majority Bondholders Control Proceedings..................... 57
Section 8.6. Individual Bondholder Action Restricted...................... 57
Section 8.7. Effect of Discontinuance of Proceedings...................... 58
Section 8.8. Remedies Not Exclusive....................................... 58
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Page
Section 8.9. Delay or Omission Upon Default............................... 58
Section 8.10. Notice of Default............................................ 58
Section 8.11. Waivers of Default........................................... 59
ARTICLE IX
TRUSTEE AND PAYING AGENTS
Section 9.1. Appointment and Acceptance of Duties......................... 60
Section 9.2. Indemnity.................................................... 60
Section 9.3. Responsibilities of Trustee.................................. 60
Section 9.4. Compensation................................................. 61
Section 9.5. Evidence on Which Trustee May Act............................ 61
Section 9.6. Evidence of Signatures of Bondholders and
Ownership of Bonds.......................................... 62
Section 9.7. Trustee and Paying Agents May Deal in Bonds and
With Borrower............................................... 63
Section 9.8. Resignation or Removal of Trustee............................ 63
Section 9.9. Successor Trustee............................................ 63
Section 9.10. Resignation or Removal of Paying Agent;
Successors.................................................. 65
Section 9.11. Project Equipment Description................................ 65
Section 9.12. Continuation Statements...................................... 66
Section 9.13. Obligation to Report Defaults................................ 66
Section 9.14. Payments Due on non-Business Days............................ 66
Section 9.15. Moneys Held for Particular Bonds............................. 66
Section 9.16. Appointment of Co-Trustee.................................... 66
ARTICLE X
AMENDMENTS OF INDENTURE
Section 10.1. Limitation on Modifications.................................. 68
Section 10.2. Supplemental Indentures Without Bondholders'
Consent..................................................... 68
Section 10.3. Supplemental Indentures with Bondholders'
Consent..................................................... 69
Section 10.4. Supplemental Indenture Part of the Indenture................. 70
Section 10.5. Trustee Authorized to Join in Supplements;
Reliance on Counsel......................................... 70
ARTICLE XI
AMENDMENTS OF FINANCING DOCUMENTS
Section 11.1. Rights of Borrower........................................... 72
Section 11.2. Amendments of Financing Documents Not Requiring
Consent of Bondholders...................................... 72
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Page
Section 11.3. Amendments of Financing Documents Requiring
Consent of Bondholders...................................... 72
ARTICLE XII
DISCHARGE OF INDENTURE
Section 12.1. Defeasance................................................... 74
ARTICLE XIII
GENERAL PROVISIONS
Section 13.1. Notices...................................................... 76
Section 13.2. Covenant Against Discrimination.............................. 76
Section 13.3. Parties Interested Herein.................................... 76
Section 13.4. Effective Date; Counterparts................................. 76
Section 13.5. Date for Identification Purposes Only........................ 77
Appendices
A. Description of Project Realty........................................... 83
B. Description of Project Equipment........................................ 86
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<PAGE>
THIS INDENTURE OF TRUST, made and dated as of December 1, 1997, by
and between the Connecticut Development Authority, a body corporate and politic
constituting a public instrumentality and political subdivision of the State of
Connecticut (the "Authority"), and Brown Brothers Harriman Trust Company, a
limited purpose trust company organized under the laws of the State of New York,
with its principal office located in New York, New York, as Trustee.
WITNESSETH THAT:
WHEREAS, the State Commerce Act, constituting Connecticut General
Statutes, Sections 32-1a through 32-23xx, as amended (the "Act"), declares that
there is a continuing need in the State (1) for industrial development and
activity to provide and maintain employment and tax revenues and to control,
abate and prevent pollution to protect the public health and safety, (2) for the
development of recreation facilities to promote tourism, provide and maintain
employment and tax revenues, and promote the public welfare, (3) for the
development of commercial and retail sales and service facilities in urban areas
to provide and maintain construction and permanent employment and tax revenues
to improve conditions of deteriorated physical development, slow economic growth
and eroded financial health of the public and private sectors in urban areas and
to revitalize the economy of urban areas, and (4) for assistance to public
service businesses providing transportation and utility services in the State,
and that the availability of financial assistance and suitable facilities are
important inducements to industrial and commercial enterprises to remain or
locate in the State and to provide industrial, recreation, urban and public
service projects; and
WHEREAS, the Act provides that (1) the term "project" as used
therein means any facility, plant, works, system, building, structure, utility,
fixture or other real property improvement located in the State, and the land on
which it is located or which is reasonably necessary in connection therewith,
which is of a nature or which is to be used or occupied by any person for
purposes which would constitute it as an industrial project, recreation project,
urban project, public service project or health care project, and any real
property improvement reasonably related thereto, and (2) a project may also
include or consist exclusively of machinery, equipment or fixtures; and
WHEREAS, the Act provides that the Authority shall have power to
determine the location and character of, and extend credit or make loans to any
person for the planning, designing, acquiring, improving and equipping of, a
project which may be secured by loan, lease or sale agreements, contracts and
other instruments upon such terms and conditions as the Authority shall
determine to be reasonable, to require the inclusion in any contract, loan
agreement or other instrument of such provisions for the construction, use,
operation, maintenance and financing of the
<PAGE>
project as the Authority may deem necessary or desirable, to enter into
agreements with prospective mortgagees and mortgagors, to issue its bonds for
such purposes, subject to the approval of the Treasurer of the State, and, as
security for the payment of the principal or redemption price, if any, of and
interest on any such bonds, to pledge or assign such a loan, lease or sale
agreement and the revenues and receipts derived by the Authority from such a
project; and
WHEREAS, by resolution adopted June 18, 1997 in furtherance of the
purposes of the Act, the Authority has accepted the application of Sonics &
Materials, Inc. (the "Borrower") for assistance in the refinancing of certain
capital projects for the benefit of the Borrower and the acquisition and
installation therein of machinery and equipment related thereto, all to be used
for a manufacturing facility located in Town of Newtown, Connecticut; and
WHEREAS, the Authority has by a resolution adopted November 19, 1997
authorized the issuance of $3,810,000 principal amount of its Industrial
Development Bonds (Sonics & Materials, Inc. Project ) 1997 Series (the "Initial
Bonds") for the purpose of refinancing the Bridge Loan Note which was used to
provide funds for the financing of certain capital projects for the benefit of
the Borrower, and paying necessary expenses incidental thereto, and financing
and refinancing certain additional capital projects for the benefit of the
Borrower; and
WHEREAS, the Authority has determined that the issuance, sale and
delivery of the Initial Bonds, as hereinafter provided, is needed to refinance
the cost of the Project (as hereinafter defined), including necessary expenses
incidental thereto, and concurrently herewith the Authority and the Borrower
have entered into a Loan Agreement, dated as of December 1, 1997, providing for
a loan by the Authority to the Borrower for such purpose in an amount equal to
the principal amount of the Initial Bonds; and
WHEREAS, additional funds may be necessary to repair, relocate,
rebuild or restore the Project following damage, destruction, taking or
condemnation thereof or to provide extensions, additions, improvements or
facilities to the Project and provision should therefore be made for the
issuance from time to time of additional bonds on a parity with the Initial
Bonds; and
WHEREAS, the Initial Bonds and any Additional Bonds (as hereinafter
defined) shall be secured by the Mortgage and the Security Agreement (as such
terms are hereinafter defined); and
WHEREAS, the Initial Bonds and any Additional Bonds shall be special
obligations of the Authority, payable solely out of the revenues and other
receipts, funds or moneys derived by the Authority under the Agreement (as
hereinafter defined), the Mortgage, the Security Agreement or the Indenture (as
hereinafter
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defined) and from any amounts otherwise available under this Indenture for the
payment of the Initial Bonds; and
WHEREAS, the Initial Bonds are to be originally issued as fully
registered bonds and such Bonds and the Trustee's certificate of authentication
to be endorsed thereon shall be in substantially the following form, with
appropriate variations, omissions and insertions as permitted or required by
this Indenture, to wit:
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<PAGE>
(FORM OF BONDS)
THE STATE OF CONNECTICUT IS NOT OBLIGATED TO PAY, AND NEITHER THE
FAITH AND CREDIT NOR TAXING POWER OF THE STATE OF CONNECTICUT IS
PLEDGED TO THE PAYMENT OF, THE PRINCIPAL OR REDEMPTION PRICE, IF
ANY, OF OR INTEREST ON THIS BOND
Industrial Revenue Bonds
Connecticut Development Authority
(Sonics & Materials, Inc. - 1997 Series)
Bond Date:
Maturity Date:
Registered Owner: Brown Brothers Harriman & Co.
Principal Amount:
Bond Number: R-
CONNECTICUT DEVELOPMENT AUTHORITY (the "Authority"), a body
corporate and politic constituting a public instrumentality and political
subdivision of the State of Connecticut (the "State"), for value received,
hereby promises to pay to the Registered Owner identified above or registered
assigns on the maturity date set forth above, solely from the sources and in the
manner hereinafter provided, the principal sum set forth above, and in like
manner to pay interest on the unpaid principal balance thereof from the date
hereof until the Authority's obligation with respect to the payment of such sum
shall be discharged.
The rate of interest on this Bond shall be the Applicable Percentage
of the Base Rate, determined as of the opening of business on each Interest
Payment Date (or if such Interest Payment Date is not a Business Day, on the
next succeeding Business Day), except that from and after any Determination of
Taxability (as defined in the Indenture), the rate of interest on this Bond
shall be the Taxable Rate.
For such purpose, the following definitions shall apply:
"Applicable Percentage" means seventy-five percent (75%); provided that,
so long as Brown Brothers Harriman & Co. shall be the Registered Owner of the
Bond, the Applicable Percentage may be adjusted by such Registered Owner (i) to
offset any decrease in net interest income allocable to the Bond due to a change
in the portion of its interest expense allocable to the Bond that is disallowed
as a deduction under Section 165 of the Code, or (ii) to
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reflect changes in federal marginal tax rates which adversely affect the taxable
equivalent yield of the Bond to such Registered Owner. The Applicable Percentage
shall be determined as of the opening of business on each Interest Payment Date
(or if such Interest Payment Date is not a Business Day, on the next succeeding
Business Day).
"Base Rate" means the rate determined from time to time by Brown Brothers
Harriman & Co. as its "base rate."
"Interest Payment Date" means the first day of each month, commencing
January 1, 1998, and continuing until the maturity date hereof.
"Registered Owner" means Brown Brothers Harriman & Co., its successors and
assigns and each other party who becomes a Registered Owner pursuant to Section
3.6 of the Indenture.
"Taxable Rate" means the Base Rate plus 2%.
Interest, calculated on the basis of a 360-day year for the actual number
of days elapsed, shall accrue daily in each interest period and shall be payable
monthly in arrears on each Interest Payment Date to the Registered Owner hereof,
as shown on the registration books of the Trustee on the Business Day preceding
such interest payment date (a "Record Date"). The interest due hereon shall be
calculated by the Original Purchaser in accordance with Section 2.3 of the
Indenture hereinafter described. Interest on this Bond shall be paid in such
manner as the Borrower and the Registered Owner shall agree.
This Bond shall bear interest on the overdue principal and, to the extent
permitted by law, on overdue interest at the Taxable Rate.
Payment of Principal and Interest. The principal or Redemption Price
of and interest on this Bond are payable at the corporate trust office of Brown
Brothers Harriman Trust Company, in New York, New York, as trustee (the
"Trustee"), or at the office designated for such payment of any successors as
paying agents, in any coin or currency of the United States of America, which,
on the respective dates of payment thereof, is legal tender for the payment of
public and private debts. As used herein, "Redemption Price", means, with
respect to a Bond, or a portion thereof, the principal amount of such Bond or
portion plus the applicable premium, if any, payable upon redemption pursuant to
the Indenture. Interest shall be payable by check or draft mailed or, if
requested by a Registered Owner of at least $1,000,000 aggregate principal
amount of Bonds, by wire transfer, to the Registered Owners of the Bonds as
shown on the registration books maintained by the Trustee in accordance with
Section 3.10 of the Indenture as of the close of business on the Record Date.
The "Regular Record Date" shall be the Business Day immediately preceding each
date on which interest
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is to be paid, except for a Special Record Date. Any request for payment of
interest by wire transfer shall be delivered to the Trustee in writing not later
than the Regular or Special Record Date in respect of such interest payment. The
Bonds shall be issued in registered form in a single denomination equal to the
entire principal balance thereof. Notwithstanding the foregoing, so long as the
Original Purchaser is the registered owner of this Bond, the principal of and
the interest on this Bond shall be paid to the Original Purchaser as provided in
Section 2.3(F) of the Indenture.
Defaulted Interest. Any interest on any Bond which is payable, but
is not punctually paid or provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
Registered Owner on the relevant Record Date by virtue of having been such
Registered Owner, and such Defaulted Interest shall be paid to the Registered
Owner in whose name the Bond is registered at the close of business on a
"Special Record Date" to be fixed by the Trustee, such Special Record Date to be
not more than twenty (20) nor less than ten (10) days prior to the date of the
proposed payment. The Trustee shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed, first
class postage prepaid, to each Bondholder, at such Bondholder's address as it
appears on the registration books, not less than ten (10) days prior to such
Special Record Date but not more than thirty (30) days prior to the date of
proposed payment.
Authorization and Purpose. This Bond is one of an authorized issue
of bonds of the Authority in the aggregate principal amount of $3,810,000
designated: Industrial Revenue Bonds (Sonics & Materials, Inc. - 1997 Series)
(the "Bonds") which are issued for the purpose of refinancing the Bridge Loan
Note which was issued for the purpose of financing certain capital projects for
the benefit of Sonics & Materials, Inc. (the "Borrower"), a corporation
organized and existing under the laws of the State of Delaware, and paying
necessary expenses incidental thereto, and financing and refinancing certain
additional capital projects for the benefit of the Borrower. The project
consists of certain capital projects, to be refinanced with the proceeds of the
Bonds, together with related facilities, and the acquisition and installation
therein of machinery and equipment related thereto, all to be used for
manufacturing purposes (collectively, the "Project"). The Bonds are issued
pursuant to the State Commerce Act, constituting Connecticut General Statutes,
Sections 32-1a through 32-23xx, as amended, a resolution adopted by the
Authority on November 19, 1997 and an Indenture of Trust, dated as of December
1, 1997 (which Indenture as from time to time amended and supplemented is herein
referred to as the "Indenture"), duly executed and delivered by the Authority to
the Trustee, and are equally and ratably secured by and entitled to the
protection of the Indenture, which is on file in the office of the Trustee.
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<PAGE>
Pledge and Security. Pursuant to the Indenture, the Authority has
assigned to the Trustee all of its right, title and interest in and to a Loan
Agreement (the "Agreement"), dated as of December 1, 1997, between the Authority
and the Borrower, and the Note of the Borrower evidencing its obligations under
the Agreement (except for certain enforcement rights with respect to the Project
which are reserved in the Indenture), including all rights to receive loan
payments sufficient to pay the principal or Redemption Price, if any, of and
interest and all other amounts due on the Bonds as the same become due, to be
made by the Borrower pursuant to the Agreement. The Agreement sets forth the
terms and conditions under which the Authority will provide financing and
refinancing for the Project and under which the Borrower will use and occupy the
Project and make loan payments to the Authority in such amounts as are necessary
to pay the principal of, premium, if any, and interest on the Bonds. Reference
is hereby made to the Indenture for the definition of any capitalized word or
term used but not defined herein and for a description of the property pledged,
assigned and otherwise available for the payment of the Bonds, the provisions,
among others, with respect to the nature and extent of the security, the rights,
duties and obligations of the Authority, the Trustee and the holders of the
Bonds, and the terms upon which the Bonds are, and additional bonds on a parity
therewith may be, issued and secured and the holders of the Bonds are deemed to
assent to the provisions of the Indenture by the acceptance of this Bond. The
Bonds are also secured by a Mortgage with respect to the Project Realty and a
Security Agreement with respect to the Project Equipment.
Additional Bonds. So long as the Financing Documents are in effect
and the Borrower shall not be in default thereunder, one or more series of
Additional Bonds on a parity with the Bonds may be authorized by resolution of
the Authority and thereupon authenticated and delivered upon original issuance
for the purposes and under the conditions stated in the Agreement and upon
compliance with the provisions of the Indenture with respect to the terms upon
which Additional Bonds may be issued and delivered.
Optional Redemption. The Bond may be redeemed at the election of the
Authority at the written direction of the Borrower, in whole or in part (but if
in part in the principal amount of $100,000 or integral multiples of $5,000 in
excess thereof), on any Interest Payment Date, at a price equal to 100% of the
principal amount thereof to be redeemed, together with accrued interest to the
date of redemption (as defined in the Indenture). The Borrower shall provide the
Registered Owner with notice of the date of any optional redemption pursuant to
this paragraph and the principal amount of the Bond to be redeemed by
first-class mail, postage prepaid, sent at least fifteen (15) days before such
redemption date to the Registered Owner at the registered address of the
Registered Owner appearing on the registration books maintained pursuant to the
Indenture as of the close of business on the Business Day prior to such mailing.
On each such redemption date,
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<PAGE>
payment of the redemption price having been made to the Registered Owner as
provided herein and in the Indenture, the Bond or the portion thereof so called
for redemption shall become due and payable on the redemption date and interest
shall cease to accrue thereon from and after the redemption date.
Optional Public Purpose Redemption. If the Borrower fails to perform
its obligations under the public purpose covenants contained in Section 6.4 of
the Agreement, the Bond shall be subject to redemption prior to maturity as a
whole at the option of the Authority in accordance with Section 7.3 of the
Agreement, at the Redemption Price of 100% of the principal amount thereof plus
accrued interest to the redemption date.
Mandatory Scheduled Redemption. The Bond shall be redeemed in part
by the Authority in equal monthly installments of $16,710.52 on each Interest
Payment Date, commencing January 1, 1999, at a redemption price equal to 100% of
the principal amount thereof, without premium; provided, however, that the
Registered Owner and the Borrower, with notice to the Authority, may agree to a
different schedule of principal amortization, provided that (1) no such schedule
shall provide for the deferral of the payment of any principal beyond the final
maturity of the Bond, and (2) prior to the effectiveness of such schedule, there
shall be delivered to the Registered Owner an opinion of nationally recognized
bond counsel to the effect that the adoption of such schedule will not cause
interest on the Bond to no longer be excluded from gross income for Federal
income tax purposes.
Mandatory Taxability Redemption. In the event of a Determination of
Taxability, the Bond shall be redeemed at the time and in the manner as provided
in the Indenture, at the Redemption Price applicable at the first optional
redemption date. If any Bonds are paid at maturity or purchased by the Borrower
or the Trustee or redeemed subsequent to a Tax Incidence Date without payment of
an amount at least equal to the amounts that would have been received if such
Bonds had been redeemed on the date of such retirement at the applicable
Redemption Price and otherwise in accordance with the provisions hereof, the
holders of such Bonds at the time of maturity, purchase or redemption, upon
establishing their then ownership thereof, shall be entitled to receive as an
additional premium thereon an amount equal to the difference between the amounts
actually received and the amounts that would have been received upon such
retirement of such Bond.
Mandatory Redemption at Option of the Registered Owner of the Bond.
All or any portion of the Bond shall be redeemed by the Authority on or after
the 5th anniversary of date of original issuance of the Initial Bonds, at a
redemption price equal to 100% of the principal amount thereof plus accrued
interest to the date of redemption, upon the written demand, in the form
attached as an exhibit to this Bond, of the Registered Owner of the Bond, with a
copy to the Authority. The Bond, or any portion thereof, shall be
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<PAGE>
redeemed, and the redemption of the Bond shall be paid to the Registered Owner
of the Bond, on the date specified by the Registered Owner of the Bond.
Notwithstanding the foregoing, if the Registered Owner of the Bond shall demand
the redemption of the Bond in whole pursuant to this paragraph, the Borrower
shall have the right to purchase the Bond on any date after the date of the
Bondholder's written demand and prior to the next Business Day preceding the
date of the proposed redemption, at a purchase price equal to 100% of the
principal amount of the Bond, together with accrued interest to the date of
purchase.
In the event of a redemption of this Bond in whole, the redemption
price shall be paid to the Registered Owner of this Bond only upon surrender of
this Bond at the principal office of the Borrower or such other place as the
Borrower shall designate on such Interest Payment Date. In the event of a
partial optional or mandatory redemption, payment shall be made by wire transfer
of immediately available funds without presentation and surrender of this Bond,
provided that the Borrower's record of such payment shall be conclusive and
binding upon such holder and each succeeding Owner of the Bond, absent manifest
error.
Additional Amounts Payable on Redemption. Upon any whole or partial
redemption of the Bonds there shall also be due and payable, concurrently with
the payment of the Redemption Price, interest accrued on the Bonds to the date
of redemption and all other amounts then due under the Financing Documents.
Redemption Procedures. If any of the Bonds are to be called for
redemption, other than an optional or mandatory scheduled redemption by the
Borrower, the Indenture requires a copy of the redemption notice to be mailed at
least thirty but not more than sixty days prior to such redemption date to the
registered owner of each Bond to be redeemed at the address shown on the
registration books. All Bonds so called for redemption will cease to bear
interest after the date fixed for redemption if funds for their redemption are
on deposit at the place of payment at that time.
Amendment of Indenture. The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Authority and the rights of the holders of the
Bonds at any time by the Authority with the consent, in certain cases, of the
holders of not less than a majority in aggregate principal amount of each series
of the Bonds at the time outstanding thereunder. Any such consent shall be
conclusive and binding upon each such holder and upon all future holders of each
Bond and of any such Bond issued upon the transfer thereof, whether or not
notation of such consent is made thereon.
Exchange of Bonds. The holder of this Bond may surrender the same,
at the corporate trust office of the Trustee, in exchange for an equal aggregate
principal amount of Bonds of any of the
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authorized denominations of the same maturity and maturities as this bond or the
Bonds so surrendered, subject to the conditions and upon payment of the charges
provided in the Indenture.
Transfer of Bonds. This Bond is transferable only upon the books of
the Authority kept for that purpose at the corporate trust office of the Trustee
by the registered owner hereof in person, or by his duly authorized attorney,
upon surrender of this bond (together with a written instrument of transfer
satisfactory to the Trustee duly executed by the registered owner or his duly
authorized attorney), and thereupon a new fully registered Bond in the same
aggregate principal amount shall be issued to the transferee in exchange
therefor as provided in the Indenture and upon payment of the charges therein
prescribed. The Authority, the Trustee and any Paying Agent may deem and treat
the person in whose name this bond is registered as the absolute owner hereof
for the purpose of receiving payment of, or on account of, the principal or
Redemption Price hereof and interest due hereon and for all other purposes
whatsoever.
Limitation on Bondholder Enforcement Rights. The holder of this Bond
shall have no right to enforce the provisions of the Indenture, to institute an
action to enforce the provisions and covenants thereof or to institute, appear
in or defend any suit or other proceedings with respect thereto, except as
provided in the Indenture.
Special Obligations of the Authority. This Bond and the issue of
which it forms a part are special obligations of the Authority, payable solely
out of the revenues or other receipts, funds or moneys of the Authority pledged
under the Indenture and from any amounts otherwise available under the Indenture
for the payment of the Bonds. Neither the State nor any municipality thereof
shall be obligated to pay the principal or Redemption Price, if any, of or
interest on this bond and neither the faith and credit nor taxing power of the
State or any municipality thereof is pledged to such payment. The Bonds do not
now and shall never constitute a debt or liability of the State or any
municipality thereof or bonds issued or guaranteed by either of them within the
meaning of any constitutional or statutory limitation.
Estoppel Clause. This Bond is issued pursuant to and in full
compliance with the Constitution and laws of the State. It is hereby certified,
recited and declared that all acts, conditions and things required to exist,
happen and be performed precedent to and in the issuance of this Bond do exist,
have happened and have been performed in due time, form and manner as required
by law and that the issuance of this Bond and of the issue of which it forms a
part, together with all other obligations of the Authority, do not exceed or
violate any constitutional or statutory limitation.
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No Personal Liability. Neither the officers, directors or employees
of the Authority or the Trustee nor any person executing this Bond shall be
liable personally or be subject to any personal liability or accountability by
reason of the issuance hereof.
Authentication by Trustee. This Bond shall not be valid or become
obligatory for any purpose or be entitled to any Security or benefit under the
Indenture until the certificate of authentication hereon shall have been signed
by the Trustee.
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IN WITNESS WHEREOF, the CONNECTICUT DEVELOPMENT AUTHORITY has caused
this bond to be executed in its name by the manual or facsimile signature of an
Authorized Representative as of _________________, 1997.
Connecticut Development Authority
By_________________________________
Authorized Representative
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(FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
TRUSTEE'S CERTIFICATE
This Bond is one of the Bonds of the issue described in the within
mentioned Indenture.
Brown Brothers Harriman Trust Company,
Trustee
By_________________________________
Authorized Officer
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EXHIBIT TO FORM OF BOND
NOTICE OF MANDATORY REDEMPTION
To: TRUSTEE AND SONICS & MATERIALS
Attention:
The undersigned, being the Owner of the Bond issued under and pursuant to
that certain Indenture of Trust dated as of December 1, 1997 (the "Agreement"),
among the Connecticut Development Authority (the "Issuer"), Sonics & Materials,
Inc. (the "Company") and Brown Brothers, Harriman & Co., hereby irrevocably
elects that the principal amount of said [all] [$________*] of the principal
amount of the Bond shall be redeemed by the Issuer on __________________ [DATE
TO BE SPECIFIED BY BBH, which date shall not be earlier than the 5th anniversary
of date of original issuance of Initial Bonds.
If the Bond is to be redeemed in full, the undersigned shall surrender the
Bond, duly endorsed for transfer or accompanied by a bond power endorsed in
blank, to the Company at its office at the address set forth in the Agreement
against payment of the redemption price.
If the Bond is to be redeemed in part, payment of the redemption price
shall be made on the redemption date to or to the order of the undersigned, as
hereby authorized, as follows:
By Wire Transfer: By Check:
Bank:_____________________________ Payee:_______________________________
ABA No.:__________________________ Address:_____________________________
Credit:___________________________ _____________________________________
Instructions:_____________________ _____________________________________
__________________________________ _____________________________________
Payment shall be made without presentation and surrender of the Bond (and
the undersigned acknowledges that the Trustee's record of such redemption and
payment shall be conclusive, absent manifest error).
- - ----------
* If less than all of the principal amount of the Bond is to be redeemed,
the principal amount to be redeemed shall be $100,000 or any integral
multiple of $5,000 in excess thereof.
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(FORM OF ASSIGNMENT)
ASSIGNMENT
FOR VALUE RECEIVED the undersigned sells, assigns and transfers unto
________________________________________________________________________________
_____________________________________________________________________ the within
bond and does hereby irrevocably constitute and appoint ________________________
Attorney to transfer the such bond on the books kept for the registration
thereof, with full power of substitution in the premises.
Dated: ______________________
__________________________________________
NOTICE: The signature to this assignment
must correspond with the name as
it appears on the face of the
within bond in every particular.
In the presence of:
__________________________
__________________________ (Title)
__________________________ (Name of NASD firm or commercial bank)
NOTE: Assignment form should
state both the name and
address of the assignee
in the space provided.
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All capitalized terms not defined herein shall have the meanings assigned
to them in the Agreement.
Dated:
_______________________________________________________
Signature of Owner or Authorized Representative
_______________________________________________________
Please Insert Social Security Number or
Tax I.D. Number of Owner_______________________________
(END OF FORM OF INITIAL BONDS)
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WHEREAS, all things necessary to make the Bonds, when authenticated
by the Trustee and issued as in this Indenture provided, the valid, binding and
legal obligations of the Authority according to the import thereof, and to
constitute this Indenture a valid pledge of revenues to the payment of the
principal or Redemption Price, if any, of and interest on the Bonds and all
other amounts due in connection therewith and a valid assignment of the rights
of the Authority (except as stated below) under the Agreement, the Mortgage, the
Security Agreement and the Note have been done and performed, and the creation,
execution and delivery of this Indenture and the creation, execution and
issuance of the Bonds subject to the terms hereof, have in all respects been
duly authorized;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS:
GRANTING CLAUSES
That the Authority in consideration of the premises and the
acceptance by the Trustee of the trusts hereby created and of the purchase and
acceptance of the Bonds by the holders and owners thereof, and of the sum of One
Dollar, lawful money of the United States of America, to it duly paid by the
Trustee at or before the execution and delivery of these presents, and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
and in order to secure the payment of the principal or Redemption Price, if any,
of and interest on the Bonds according to their tenor and effect and all other
amounts due in connection therewith and the performance and observance by the
Authority of all the covenants expressed or implied herein and in the Bonds,
does hereby grant, bargain, sell, convey, pledge and assign unto, and grant a
security interest in and to the Trustee, and unto its respective successors in
trust, and to their respective assigns, forever, for the securing of the
performance of the obligations of the Authority hereinafter set forth, the
following:
I.
The Agreement, the Mortgage, the Security Agreement and the Note
(except to the extent to which any such document provides for the
indemnification or the payment of expenses of the Authority, rights of the
Authority to inspect the Project, receive notices and grant approvals, or the
right of the Authority independently to enforce public purpose covenants with
respect to the Project) including all extensions and renewals of the term
thereof, if any, together with all right, title and interest of the Authority
therein, including, but without limiting the generality of the foregoing, the
present and continuing right to claim, collect and receive any of the moneys,
income, revenues, issues, profits and other amounts payable or receivable
thereunder, to bring actions and proceedings thereunder or for the enforcement
thereof, and to do any and all things which the Authority is or may become
entitled to do under the Agreement, the Mortgage, the
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Security Agreement and the Note but reserving, however, to the Authority its
rights under Sections 6.2, 6.4 and 7.3 of the Agreement upon the conditions
therein set forth;
II.
All Funds and Accounts (except the Earnings Fund and the Rebate
Fund) and moneys therein; and
III.
All moneys and securities from time to time held by the Trustee
under the terms of this Indenture (except moneys and securities in the Earnings
Fund and the Rebate Fund) and any and all other real or personal property of
every name and nature concurrently herewith or from time to time hereafter by
delivery or by writing of any nature conveyed, mortgaged, pledged, assigned or
transferred as and for additional security hereunder by the Authority or by
anyone in its behalf, or with its written consent, to the Trustee, which is
hereby authorized to receive any and all such property at any and all times and
to hold and apply the same subject to the terms hereof;
TO HAVE AND TO HOLD all and singular the trust estate, whether now
owned or hereafter acquired, unto the Trustee and its respective successors and
assigns in trust forever to its and their own proper use and behoof but:
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth
for the equal and proportionate benefit, security and protection of all present
and future holders and owners of the Bonds from time to time issued and to be
issued under and secured by this Indenture without privilege, priority or
distinction as to the lien or otherwise of any of the Bonds over any of the
other Bonds;
PROVIDED, HOWEVER, that if the Authority, its successors or assigns,
shall well and truly pay, or cause to be paid, the principal or redemption
price, if any, of and interest on, the Bonds due or to become due thereon, and
all other amounts due thereunder, at the times and in the manner mentioned in
the Bonds according to their tenor, and shall cause the payments to be made on
the Bonds as required under Article VII hereof, or shall provide, as permitted
hereby, for the payment thereof by depositing with the Trustee the entire amount
due or to become due thereon, and shall well and truly keep, perform and observe
all the covenants and conditions pursuant to the terms of this Indenture to be
kept, performed and observed by it, and shall pay or cause to be paid to the
Trustee all sums of money due or to become due to it in accordance with the
terms and provisions of the Agreement, the Mortgage, the Security Agreement, the
Note, and this Indenture, then upon the final payment thereof this Indenture and
the rights
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hereby granted shall cease, terminate and be void; otherwise this Indenture to
be and remain in full force and effect.
THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is expressly
declared, that all Bonds issued and secured hereunder are to be issued,
authenticated and delivered and all of the property rights and interests,
including, without limitation, the loan payments and other amounts hereby
assigned and pledged are to be dealt with and disposed of under, upon and
subject to the terms, conditions, stipulations, covenants, agreements, trusts,
uses and purposes as hereinafter expressed, and the Authority has agreed and
covenanted, and does hereby agree and covenant with the Trustee and with the
respective holders and owners of the Bonds as follows:
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ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. For the purposes of this Indenture, the
following words and terms shall have the respective meanings set forth as
follows, and any capitalized word or term used but not defined herein is used as
defined in the Agreement:
"Act" means the State Commerce Act, constituting Connecticut General
Statutes, Sections 32-1a through 32-23xx, as amended.
"Additional Bonds" means one or more series of additional Bonds,
other than the Initial Bonds, authorized and issued by the Authority pursuant to
this Indenture.
"Agreement" means the Loan Agreement of even date herewith between
the Authority and the Borrower, and any amendments and supplements thereto.
"Applicable Percentage" means seventy-five percent (75%); provided
that, so long as Brown Brothers Harriman & Co. shall be the Owner of the Bond,
the Applicable Percentage may be adjusted by such owner (i) to offset any
decrease in net interest income allocable to the Bond due to a change in the
portion of its interest expense allocable to the Bond that is disallowed as a
deduction under Section 165 of the Code, or (ii) to reflect changes in federal
marginal tax rates which adversely affect the taxable equivalent yield of the
Bond to such owner. The Applicable Percentage shall be determined as of the
opening of business on each Interest Payment Date.
"Authority" means the Connecticut Development Authority, a body
corporate and politic constituting a public instrumentality and political
subdivision of the State of Connecticut duly organized and existing under the
laws of the State, and any body, board, authority, agency or other political
subdivision or instrumentality of the State which shall hereafter succeed to the
powers, duties and functions thereof.
"Authorized Investments" means United States government obligations,
United States agency obligations, commercial paper having the highest rating by
a nationally recognized securities rating service, savings accounts with banks
or savings and loan associations the accounts of which are federally insured,
and bank acceptances which are eligible collateral for borrowing from Federal
Reserve Banks, certificates of deposit of the Trustee (but only to the extent
such certificates of deposit do not exceed 10% of the amounts held in all funds
and accounts hereunder), tax-exempt bonds and tax-exempt notes rated in the
highest rating category by a nationally recognized securities rating service,
money market funds having assets of at least $150 million and rated
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in the highest rating category of a nationally recognized securities rating
service, and investment agreements, including guaranteed investment contracts,
acceptable to the Authority and, so long as the Original Purchaser is the owner
of any Bonds Outstanding hereunder, the Original Purchaser.
"Authorized Representative" means, in the case of the Authority, the
Chairman or Vice-Chairman, Executive Vice President or any Senior Vice President
or any Vice President thereof, in the case of the Borrower, the President or
Vice President - Legal Affairs and Investor Relations thereof, and, when used
with reference to the performance of any act, the discharge of any duty or the
execution of any certificate or other document, any officer, employee or other
person authorized to perform such act, discharge such duty or execute such
certificate or other document, and, in the case of the Trustee, means any
officer in the Trustee's Corporate Trust Administration Department.
"Base Rate" means the rate determined from time to time by the
Original Purchaser as its "base rate."
"Bond" means any bond authenticated and delivered pursuant to this
Indenture, including the $3,810,000 Industrial Development Bond (Sonics &
Materials - 1997 Series) and any Additional Bonds.
"Bondholder" or "holder" or "owner" or words of similar import, when
used with reference to Bonds, shall mean any person who shall be the registered
owner of any Outstanding Bond.
"Borrower" means (i) Sonics & Materials, Inc., a corporation
organized and existing under the laws of the State of Delaware, and its
successors and assigns and (ii) any surviving, resulting or transferee
corporation as provided in Section 6.1 of the Agreement.
"Business Day" means any day on which banks located in the City of
New York, New York, are not required or authorized to remain closed and on which
the New York Stock Exchange, Inc. is not closed.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Completion Date" means the date of completion of the Project as
specified and established in accordance with Article IV of the Agreement.
"Computation Period" shall mean each period from the date of issue
through the date on which a determination of the Rebate Amount is made or
required to be made pursuant to Section 5.3 of the Tax Regulatory Agreement.
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<PAGE>
"Credit Agreement" means that certain credit agreement dated
September 19, 1997, between the Borrower and the Original Purchaser, as amended
from time to time.
"Debt Service Fund" means the special trust fund so designated,
established pursuant to Section 5.1 hereof.
"Determination of Taxability" means (1) a ruling by the Internal
Revenue Service, (2) the receipt by the owner of any Bonds from the Internal
Revenue Service of a notice of assessment and demand for payment (provided the
Borrower has been afforded the opportunity to participate at its own expense in
all appeals and proceedings to which the owner of any Bonds is a party relating
to such assessment and demand for payment) and the expiration of the appeal
period provided therein if no appeal is taken or, if an appeal is taken by the
owner of any Bonds as provided in Section 6.3 of the Agreement within the
applicable appeal period which has the effect of staying the demand for payment,
a final unappealable decision by a court of competent jurisdiction, or (3) the
admission in writing by the Borrower, in any case to the effect that the
interest on the Bonds is includable in the gross income for federal income tax
purposes.
"Earnings Fund" means the special trust fund, so designated,
established pursuant to Section 5.1 hereof.
"EBITDA" means, for any period, the sum of the amounts for such
period of (A) Net Income, (B) provision for federal, state and local taxes based
on income, (C) Interest Expense, and (D) charges for depreciation and
amortization and other non-cash charges, all for the Borrower, and all
determined in accordance with GAAP.
"Federal Securities" means (i) any direct and general obligations
of, or any obligations guaranteed by, the United States of America, including
but not limited to interest obligations of the Resolution Funding Corporation or
any successor thereto, (ii) any obligations of any state or political
subdivision of a state (collectively "Municipal Bonds"), which Municipal Bonds
are fully secured as to principal and interest by an irrevocable pledge of
moneys or direct and general obligations of, or obligations guaranteed by, the
United States of America, which moneys or obligations are segregated in trust
and pledged for the benefit of the holders of the Municipal Bonds, and (iii)
certificates of ownership of the principal or interest of direct and general
obligations of, or obligations guaranteed by, the United States of America,
which obligations are held in trust by a commercial bank which is a member of
the Federal Reserve System.
"Financing Documents" (1), when used with respect to the Borrower,
means all documents and agreements executed and delivered by the Borrower as
security for or in connection with the issuance of the Bonds, including the
Agreement, the Tax Regulatory
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Agreement, the Note, the Mortgage, the Security Agreement, and all other
documents and agreements now or hereafter executed and delivered by the Borrower
in connection with any of the foregoing, and (2) when used with respect to the
Authority, means any of the foregoing documents and agreements to which the
Authority is a direct party and the Assignment of Mortgage, the Assignment of
Security Agreement. The Financing Documents do not include any documents or
agreements to which the Borrower is not a direct party, including the Bonds or
the Indenture.
"Indenture" means this Indenture as from time to time amended or
supplemented by Supplemental Indentures in accordance with Article X hereof.
"Initial Bonds" means the $3,810,000 Industrial Revenue Bonds
(Sonics & Materials - 1997 Series) authorized and issued pursuant to Section 2.3
hereof.
"Interest Expense" means, for any period, the aggregate amount of
interest accrued (whether or not paid) by the Company during such period.
"Interest Payment Date" shall mean the first day of each month,
commencing January 1, 1998 and continuing until the maturity date hereof.
"Mortgage" means the Open-End Mortgage Deed, dated as of December 1,
1997, from the Borrower to the Authority (and assigned by the Authority to the
Trustee) given to secure the payment by the Borrower of its obligations under
the Loan Agreement and the Note.
"Note" means the promissory note of the Borrower to the Authority,
dated December 12, 1997, in the form attached as an Appendix to the Agreement,
and any amendments or supplements made in conformity with the Agreement, the
Mortgage, the Security Agreement and this Indenture.
"Outstanding", when used with reference to a Bond or Bonds, as of
any particular date, means all Bonds which have been authenticated and delivered
hereunder, except:
(1) Any Bonds cancelled by the Trustee because of payment or
redemption prior to maturity or surrendered to the Trustee for
cancellation;
(2) any Bond (or portion of a Bond) which has been paid or redeemed
or for the payment or redemption of which there has been separately
set aside and held in the Redemption Account either:
(a) moneys in an amount sufficient to effect payment of the
principal or applicable Redemption Price thereof, together
with accrued interest on
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such Bond to the payment or redemption date, which payment or
redemption date shall be specified in irrevocable instructions
given to the Trustee to apply such moneys to such payment on
the date so specified; or
(b) obligations of the kind described in subsection 12.1(B)
hereof in such principal amounts, of such maturities, bearing
such interest and otherwise having such terms and
qualifications as shall be necessary to provide moneys in an
amount sufficient without reinvestment to effect payment of
the principal or applicable Redemption Price of such Bond,
together with accrued interest on such Bond to the payment or
redemption date, which payment or redemption date shall be
specified in irrevocable instructions given to the Trustee to
apply such obligations to such payment on the date so
specified; or
(c) any combination of (a) and (b) above;
(3) Bonds in exchange for or in lieu of which other Bonds shall have
been authenticated and delivered under Article III hereof; and
(4) any Bond deemed to have been paid as provided in subsection
12.1(B) hereof.
"Original Purchaser" means Brown Brothers Harriman & Co., and its
successors and assigns.
"Paying Agent" means any paying agent for the Bonds appointed
pursuant to subsection 9.1(B) hereof (and may include the Trustee), and its
successor or successors and any other corporation which may at any time be
substituted in its place in accordance herewith.
"Principal and Interest Account" means the special trust account of
the Debt Service Fund so designated, established pursuant to Section 5.3 hereof.
"Project" means, collectively, the financing and refinancing with
the proceeds of the Initial Bonds of (i) the acquisition of approximately 7.5
acres of land, (ii) renovations to an approximately 62,000 square foot building
located on the land, and (iii) the acquisition and installation therein of
machinery and equipment related thereto, all to be used for manufacturing
purposes. Upon the issuance of Additional Bonds, "Project" shall also include
the facilities constructed, improved or renovated with the proceeds of such
Additional Bonds.
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"Project Costs" means all costs and expenses of the project for
which the Trustee is permitted to make payment as provided in subsection 5.2(B)
hereof.
"Project Equipment" means all personal property, goods, leasehold
improvements, machinery, equipment, furnishings, furniture, fixtures, tools and
attachments, wherever located and whether now owned or hereafter acquired, used
in the operation of the Project, and any accessions thereto, substitutions
therefor and replacements thereof, including without limitation the Project
Equipment described in the Description of Project Equipment included in the
appendices to the Agreement and in the Security Agreement, as amended from time
to time in accordance with the Agreement and with the Security Agreement and
herewith.
"Project Fund" means the special trust fund so designated,
established pursuant to Section 5.2 hereof.
"Project Realty" means the realty and other interests in the real
property constituting the Premises (as such term is defined in the Mortgage),
together with all replacements, improvements, extensions, substitutions,
restorations and additions thereto which are made pursuant to the Agreement,
including without limitation the Project Realty described in the Description of
Project Realty included in the appendices to the Agreement.
"Rebate Amount" shall mean, with respect to the Bonds, the amount
computed as described in the Tax Regulatory Agreement.
"Rebate Fund" means the special trust fund so designated,
established pursuant to Section 5.1 hereof.
"Record Date" means the fifteenth day of the month preceding the
date on which interest is to be paid, except for a Special Record Date.
"Redemption Account" means the special trust account of the Debt
Service Fund so designated, established pursuant to Section 5.3 hereof.
"Redemption Price" means, when used with respect to a Bond or a
portion thereof, the principal amount of such Bond or portion plus the
applicable premium, if any, payable upon redemption thereof pursuant to this
Indenture.
"Scheduled Payment" means the amount required by this Indenture or
any Supplemental Indenture authorizing the issuance of Additional Bonds as
payable on a single future date for the retirement of any Outstanding Bonds
which are expressed to mature after such future date, but does not include any
amounts payable by reason only of the maturity of a Bond.
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"Security Agreement" means the Security Agreement, dated as of
December 1, 1997, from the Borrower to the Authority (and assigned by the
Authority to the Trustee) given to secure the payment of the Note.
"Special Record Date" means a day not more than twenty days prior to
the date set for payment of Defaulted Interest, as provided in Section 2.3(E)
hereof.
"State" means the State of Connecticut.
"Supplemental Indenture" means any indenture supplemental hereto or
amendatory hereof, adopted by the Authority in accordance with Article X hereof.
"Tax Incidence Date" means the date as of which interest on the
Bonds becomes or became includable in the gross income of the recipient thereof
for federal income tax purposes for any cause as determined by a Determination
of Taxability.
"Tax Regulatory Agreement" means the Tax Regulatory Agreement, dated
as of the date of delivery of the Bonds, among the Authority, the Borrower and
the Trustee, and any amendments and supplements thereto.
"Term", when used with reference to the Agreement, means the term of
the Agreement determined as provided in Article III thereof.
"Trustee" means Brown Brothers Harriman Trust Company, New York, New
York, and its successor or assigns hereafter appointed in the manner provided in
this Indenture.
Section 1.2. Interpretation. (A) In this Indenture:
(1) The terms "hereby", "hereof", "hereto", "herein", "hereunder"
and any similar terms, as used in this Indenture, refer to this Indenture,
and the term "hereafter" means after, and the term "heretofore" means
before, the date of execution of this Indenture.
(2) Words of the masculine gender mean and include correlative words
of the feminine and neuter genders and words importing the singular number
mean and include the plural number and vice versa.
(3) Words importing persons include firms, associations,
partnerships (including limited partnerships), trusts, corporations and
other legal entities, including public bodies, as well as natural persons.
(4) Any headings preceding the texts of the several Articles and
Sections of this Indenture, and any table of
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contents appended to copies hereof, shall be solely for convenience of
reference and shall not constitute a part of this Indenture, nor shall
they affect its meaning, construction or effect.
(5) All approvals, consents and acceptances required to be given or
made by any person or party hereunder shall be at the sole discretion of
the party whose approval, consent or acceptance is required.
(6) This Indenture shall be governed by and construed in accordance
with the applicable laws of the State.
(B) Whenever the Authority is named or referred to, it shall be
deemed to include its successors and assigns whether so expressed or not. All of
the covenants, stipulations, obligations, and agreements by or on behalf of, and
other provisions for the benefit of, the Authority contained in this Indenture
shall bind and inure to the benefit of such successors and assigns and shall
bind and inure to the benefit of any officer, board, commission, authority,
agency or instrumentality to whom or to which there shall be transferred by or
in accordance with law any right, power or duty of the Authority, or of its
successors or assigns, the possession of which is necessary or appropriate in
order to comply with any such covenants, stipulations, obligations, agreements
or other provisions hereof.
(C) Nothing in this Indenture expressed or implied is intended or
shall be construed to confer upon, or to give to, any person other than the
Authority, the Trustee, the Borrower, the Paying Agents and the holders of the
Bonds any right, remedy or claim under or by reason of this Indenture or any
covenant, condition or stipulation thereof. All the covenants, stipulations,
promises and agreements herein contained by and on behalf of the Authority shall
be for the sole and exclusive benefit of the Authority, the Trustee, the Paying
Agents, the Borrower and the holders of the Bonds.
(D) If any one or more of the covenants or agreements provided
herein on the part of the Authority, the Trustee or any Paying Agent to be
performed should be contrary to law, then such covenant or covenants or
agreement or agreements, shall be deemed separable from the remaining covenants
and agreements hereof, and shall in no way affect the validity of the other
provisions of this Indenture or of the Bonds.
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ARTICLE II
AUTHORIZATION, TERMS AND ISSUANCE OF BONDS
Section 2.1. Authorization for Indenture. This Indenture is made and
entered into by virtue of and pursuant to the provisions of the Act. The
Authority has ascertained and hereby determines and declares that the execution
and delivery of this Indenture is necessary to carry out the powers and duties
expressly provided by the Act, that each and every act, matter, thing or course
of conduct as to which provision is made herein is necessary or convenient in
order to carry out and effectuate the purposes of the Authority in accordance
with the Act and to carry out powers expressly given thereby, and that each and
every covenant or agreement herein contained and made is necessary, useful or
convenient in order to better secure the Bonds and necessary, useful or
convenient to carry out and effectuate its corporate purposes under the Act.
Section 2.2. Authorization and Obligation of Bonds. (A) Bonds of the
Authority issued hereunder, each to be entitled Industrial Revenue Bonds (Sonics
& Materials, Inc. - Series 1997), with the designation of the series inserted in
the space provided, shall be subject to the terms, conditions and limitations
established herein. No Bonds may be authenticated and delivered except in
accordance with this Article.
(B) All Bonds shall be entitled to the benefit of the continuing
pledge and lien created by this Indenture to secure the full and final payment
of the principal or Redemption Price, if any, thereof and the interest thereon
and all other amounts due under the Financing Documents. The Bonds shall be
special obligations of the Authority, payable solely out of the revenues or
other receipts, funds or moneys pledged therefor pursuant to this Indenture and
from any amounts otherwise available under this Indenture for the payment of the
Bonds. Neither the State nor any municipality thereof shall be obligated to pay
the principal or Redemption Price, if any, of or the interest on the Bonds and
neither the faith and credit nor the taxing power of the State or any
municipality thereof is pledged to pay such principal, Redemption Price or
interest. The Bonds shall never constitute a debt or liability of the State or
any municipality thereof or bonds issued or guaranteed by the State or any
municipality thereof within the meaning of any constitutional or statutory
limitation.
Section 2.3. Issuance and Terms of the Initial Bonds. (A) There
shall be issued under and secured by this Indenture a series of Initial Bonds to
be designated Industrial Revenue Bonds (Sonics & Materials, Inc. Project - 1997
Series) in the principal amount of $3,810,000. The Initial Bonds shall be
issuable in fully registered form without coupons, shall be dated as provided in
Section 3.1 hereof and shall be in the denominations as provided in Section 3.2
hereof.
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(B) The Initial Bond shall mature on December 1, 2017.
The rate of interest on the Initial Bond shall be the Applicable
Percentage of the Base Rate, determined as of the opening of business on each
Interest Payment Date (or if such Interest Payment Date is not a Business Day,
on the next succeeding Business Day), except that from and after any
Determination of Taxability, the rate of interest on shall be the Taxable Rate.
Interest on the Initial Bond, calculated on the basis of a 360-day
year for the actual number of days elapsed, shall accrue daily in each Interest
Period and shall be payable monthly in arrears on each Interest Payment Date to
the Bondholder thereof, as shown on the registration books of the Borrower on
the Business Day preceding such interest payment date (a "Record Date"). The
interest due thereon shall be calculated by the Original Purchaser in accordance
with the provisions herein described. Interest on shall be paid in such manner
as the Borrower and the Bondholder shall agree.
Following any Determination of Taxability and prior to the redemption of the
Initial Bonds, interest on the Initial Bonds shall be payable at the Taxable
Rate (as defined in the Initial Bond).
(C) The Initial Bond shall be numbered from one upward in
consecutive numerical order. Initial Bond issued in exchange shall be numbered
in such manner as the Trustee in its discretion shall determine.
(D) Subject to the provisions of subsection F below, the principal
or Redemption Price, if any, of and interest on the Initial Bond as they
respectively become due shall be payable at the corporate trust office of the
Trustee in New York, New York, or at the office designated for such payment of
any successor Paying Agent. Interest shall be payable by check or draft mailed
or, if requested by an owner of at least $1,000,000 aggregate principal amount
of Bonds, by wire transfer, to the registered owners of the Bonds as shown on
the registration books as of the close of business on the Record Date. Any
request for payment of interest by wire transfer shall be delivered to the
Trustee in writing not later than the Regular or Special Record Date in respect
of such interest payment.
(E) Any interest on any Bond which is payable, but is not punctually
paid or provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered owner on the
relevant Record Date by virtue of having been such registered owner, and such
Defaulted Interest shall be paid to the registered owner in whose name the Bond
is registered at the close of business on a Special Record Date to be fixed by
the Trustee, such Special Record Date to be not more than twenty (20) nor less
than ten (10) days prior to the date
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of proposed payment. The Trustee shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be mailed, first
class postage prepaid, to each Bondholder, at such Bondholder's address as it
appears on the registration books, not less than ten (10) days prior to such
Special Record Date but not more than thirty (30) days prior to the date of
proposed payment.
(F) So long as the Original Purchaser shall be the owner of all of
the Initial Bonds Outstanding, and notwithstanding any other provisions of this
Indenture to the contrary, in accordance with the provisions of Section 3.4 of
the Loan Agreement, all payments by the Borrower of the loan payments under the
Loan Agreement attributable to the principal and Redemption Price of, and the
interest on, the Initial Bonds, shall be paid directly by the Borrower to the
Original Purchaser, and the Trustee shall have no responsibility with respect
to, and shall not be deemed to have any knowledge of, any Event of Default as a
result of any failure by the Borrower to make any payment described above
directly to the Original Purchaser, unless and until the Trustee shall have
received written notification from the Original Purchaser of such failure.
Section 2.4. Redemption of Initial Bond. (A) Optional Redemption.
The Bond may be redeemed at the election of the Authority at the written
direction of the Borrower, in whole or in part (but if in part in the principal
amount of $100,000 or integral multiples of $5,000 in excess thereof), on any
Interest Payment Date, at a price equal to 100% of the principal amount thereof
to be redeemed, together with accrued interest to the date of redemption (as
defined in the Agreement). The Borrower shall provide the Bondholder with notice
of the date of any optional redemption pursuant to this paragraph and the
principal amount of the Bond to be redeemed by first-class mail, postage
prepaid, sent at least fifteen (15) days before such redemption date to the
Bondholder at the registered address of the Bondholder appearing on the
registration books maintained pursuant to this Agreement as of the close of
business on the Business Day prior to such mailing. On each such redemption
date, payment of the redemption price having been made to the Bondholder as
provided herein, the Bond or the portion thereof so called for redemption shall
become due and payable on the redemption date and interest shall cease to accrue
thereon from and after the redemption date.
(B) Mandatory Scheduled Redemption. The Initial Bonds shall be
redeemed in part by the Authority in equal monthly installments on each Interest
Payment Date, commencing January 1, 1999, at a redemption price equal to 100% of
the principal amount thereof, without premium; provided, however, that the
Bondholder and the Borrower, with notice to the Authority, may agree to a
different schedule of principal amortization, provided that (1) no such schedule
shall provide for the deferral of the payment of any principal beyond the final
maturity of the Bond, and (2) prior to
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the effectiveness of such schedule, there shall be delivered to the Bondholder
an opinion of nationally recognized bond counsel to the effect that the adoption
of such schedule will not cause interest on the Bond to no longer be excluded
from gross income for Federal income tax purposes.
(C) Mandatory Taxability Redemption. In the event of a Determination
of Taxability, the Initial Bonds shall be redeemed at the time and in the manner
and as provided in this Indenture, at the Redemption Price applicable at the
first optional redemption date. If any Initial Bonds are paid at maturity,
purchased by the Borrower or the Trustee or redeemed subsequent to the Tax
Incidence Date without payment of an amount at least equal to the amounts that
would have been received if such Bonds had been redeemed on the date of such
retirement at the applicable Redemption Price set forth above, the holders of
such Bonds at the time of maturity, purchase or redemption, upon establishing
their then ownership thereof, shall be entitled to receive as an additional
payment thereon an amount equal to the difference between the amounts actually
received and the amounts that would have been received upon such retirement of
such Bonds. In the case of any redemption pursuant to this subsection, the
Authority or the Borrower shall deliver to the Trustee a certificate of an
Authorized Representative specifying the event giving rise to such inclusion in
the gross income of the recipient thereof and the dates which are the Tax
Incidence Date and the date of the Determination of Taxability. Such certificate
shall be delivered at least ten days before notice of redemption is required to
be given.
(D) Mandatory Redemption at Option of the Bondholder. All or any
portion of the Initial Bonds shall be redeemed by the Issuer on or after the 5th
anniversary of date of original issuance, at a redemption price equal to 100% of
the principal amount thereof plus accrued interest to the date of redemption,
upon the written demand, in the form attached as an exhibit to the form of Bond,
of the Bondholder, with a copy to the Authority. The Initial Bond, or any
portion thereof, shall be redeemed, and the redemption of the Bond shall be paid
to the holder of the Bond, on the date specified by the Bondholder.
Notwithstanding the foregoing, if the Bondholder shall demand the redemption of
the Initial Bond in whole pursuant to this paragraph, the Borrower shall have
the right to purchase the Bond on any date after the date of the Bondholder's
written demand and prior to the next Business Day preceding the date of the
proposed redemption, at a purchase price equal to 100% of the principal amount
of the Bond, together with accrued interest to the date of purchase.
(E) Optional Public Purpose Redemption. If the Borrower fails to
perform its obligations under Section 6.4 of the Agreement, the Initial Bonds
shall be subject to redemption prior to maturity as a whole at the option of the
Authority in accordance with Section 7.3 of the Agreement, at the Redemption
Price of 100%
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of the principal amount thereof plus accrued interest to the redemption date.
(F) Upon any redemption of Bonds there shall also be due and
payable, concurrently with the payment of the Redemption Price, interest accrued
on the Bonds and all other amounts then due under the Financing Documents.
(G) Redemption of Initial Bonds permitted or required by this
Article II shall be made as follows, and the Trustee shall give the notice of
redemption referred to in Section 6.3 hereof in respect of each such redemption:
(1) Redemption shall be made pursuant to the general optional
redemption provisions of Section 2.4(A) on any Interest Payment Date and
in such principal amounts as the Borrower shall request in a written
notice to the Trustee in accordance with Section 8.2 of the Agreement.
(2) Redemption shall be made pursuant to the mandatory scheduled
redemption provisions of Section 2.4(C) as and when required by this
Section without the necessity of any request by, or notification from the
Authority or from the Borrower, but subject to the provisions of Section
5.3 hereof.
(3) Redemption shall be made pursuant to the Tax Incidence Date
redemption provisions of Section 2.4(D) at the earliest possible date
following receipt of the payments made by the Borrower prescribed in
Section 6.3 of the Agreement, without the necessity of any instructions or
further act of the Authority or the Borrower.
(4) Redemption shall be made pursuant to the Authority's right of
optional public purpose redemption under Section 2.4(E) upon the default
of the Borrower under Section 6.4 of the Agreement at such time as the
Authority shall request in a written notice to the Trustee in accordance
with Section 7.3 of the Agreement.
(H) Any Additional Bonds shall be subject to redemption prior to
maturity at such times and prices, in the manner and upon such terms and
conditions, not inconsistent with this Indenture, as shall be specified in the
Supplemental Indenture authorizing such Bonds.
(I) Subject to the direct payment provisions of Section 2.3(F) above
and Section 3.4 of the Loan Agreement, all payments of the redemption price of
any of the Initial Bonds shall be made by the Trustee by wire transfer of
immediately available funds to the bank account designated by the Original
Purchaser in writing not less than two Business Days prior to the date of such
payment (or in the absence of such designation by check mailed to the Original
Purchaser at the address set forth in the Bond Register). Except
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in the event of the redemption of the Initial Bonds in their entirety, any such
redemption shall be made without surrender of any of the Initial Bonds by the
Original Purchaser for payment, provided that the Trustee's records of such
payment shall be conclusive and binding on the Holder of the Initial Bonds,
absent manifest error.
Section 2.5. Execution and Authentication of Bonds. (A) After their
authorization as provided in this Article, Bonds may be executed by or on behalf
of the Authority and delivered to the Trustee for authentication. Each Bond
shall be executed in the name of the Authority by the manual or facsimile
signature of any one or more Authorized Representatives of the Authority.
(B) In case any officer who shall have signed any of the Bonds shall
cease to be such officer before the Bonds so signed shall have been
authenticated and delivered by the Trustee, such Bonds may nevertheless be
authenticated and delivered as herein provided as if the person who so signed
such Bonds had not ceased to be such officer. Any Bond may be signed on behalf
of the Authority by any person who, on the date of such act, shall hold the
proper office, notwithstanding that at the date of such Bond such person may not
have held such office.
(C) The Bonds shall each bear thereon a certificate of
authentication, in the form set forth in the recitals to this Indenture,
executed manually by the Trustee. Only such Bonds as shall bear thereon such
certificate of authentication shall be entitled to any right or benefit under
this Indenture and no Bond shall be valid or obligatory for any purpose until
such certificate of authentication shall have been duly executed by the Trustee.
Such certificate of the Trustee upon any Bond executed on behalf of the
Authority shall be conclusive evidence that the Bond so authenticated has been
duly authenticated and delivered under this Indenture and that the holder
thereof is entitled to the benefits hereof.
Section 2.6. Delivery of Bonds. The Initial Bonds and each series of
Additional Bonds shall be executed in the form and manner set forth herein and
shall be deposited with the Trustee and thereupon shall be authenticated by the
Trustee. Upon payment to the Trustee of the proceeds of sale thereof, such Bonds
shall be delivered by the Trustee to or upon the order of the purchasers
thereof, but only upon receipt by the Trustee of:
(1) A certified copy of the Authority's resolution authorizing the
issuance of such Bonds and, in the case of the Initial Bonds, the
execution and delivery of this Indenture and the Financing Documents;
(2) Original executed counterparts of the Financing Documents other
than the Note, and the originally executed Note and, in the case of
Additional Bonds, the supplement to
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or modification or amendment of the Agreement, this Indenture and the Note
entered into prior to such delivery and such other documents as the
Trustee or the purchaser of such Additional Bonds may require;
(3) A request and authorization to the Trustee on behalf of the
Authority to authenticate and deliver such Bonds to the purchasers therein
identified upon payment to the Trustee, for the account of the Authority,
of a sum specified in such request and authorization, plus any accrued
interest on such Bonds to the date of such delivery. The proceeds of such
payment shall be paid over to the Trustee and deposited in the Debt
Service Fund, and the Project Fund pursuant to Article IV hereof; and
(4) A written opinion by an attorney or firm of attorneys of
recognized national standing on the subject of municipal bonds, to the
effect that the issuance of such Bonds has been duly authorized and that
all conditions precedent to the delivery thereof have been fulfilled and,
in the case of any series of Additional Bonds, to the effect that the
issuance of such Additional Bonds will not impair the exemption from
federal income taxation of any Bonds Outstanding on the date of issuance
of such Additional Bonds.
Section 2.7. Issuance of Additional Bonds. (A) The Authority may
issue Additional Bonds hereunder from time to time on a parity with the Bonds
then Outstanding for any of the purposes listed below:
(1) To pay the cost of completing the Project based on the original
general design and scope of the Project set forth in the original plans
and specifications therefor, with such changes as may have become
necessary to carry out such original design, or to reimburse the Borrower
for any such costs;
(2) To pay the cost of refunding through redemption of any
Outstanding Bonds issued under this Indenture and subject to such
redemption.
(B) In any such event the Trustee shall, at the request of the
Authority, authenticate the Additional Bonds and deliver them as specified in
the request, but only upon receipt of:
(1) A Supplemental Indenture: (a) setting forth the terms of the
Additional Bonds; (b) providing for additional payments to be made by the
Borrower hereunder sufficient to cover the debt service on the Additional
Bonds; and (c) for Additional Bonds described in paragraph (A)(1) above,
providing for a supplemental mortgage and security interest relating to
any specified increase in other payments to the funds hereunder;
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(2) For Additional Bonds described in paragraph (A)(1) above, a
certificate of the Architect stating (i) the estimated cost of completion
of the Project and (ii) that all approvals required for completion of the
Project have been obtained, other than approvals which, based on
consultations with the Borrower, will be obtained in due course so as not
to interrupt or delay construction of the Project and other than licenses
or permits, if applicable, required for occupancy or operation of the
Project upon its completion;
(3) For any Additional Bonds, a certified resolution of the
Authority (a) stating the purpose of the issue, (b) establishing the
series of Bonds to be issued and providing the terms and form of Bonds
thereof and directing the payments to be made into the funds hereunder,
(c) authorizing the execution and delivery of the Additional Bonds to be
issued and (d) authorizing redemption of any previously issued Bonds which
are to be refunded;
(4) For any Additional Bonds described in paragraph (A)(3) above,
(a) a certificate of the Borrower that notice of redemption of the Bonds
to be refunded has been given or that provisions have been made therefor,
and (b) a certificate of an Independent Public Accountant stating that the
proceeds of the Additional Bonds plus the other amounts, if any, stated to
be available for the purpose, will be sufficient to accomplish the purpose
of the refunding and to pay the cost of refunding, which shall be itemized
in reasonable detail;
(5) For any Additional Bonds, a certificate of the Borrower stating
(a) that it has no knowledge that an Event of Default hereunder has
occurred and is continuing (except, in the case of Additional Bonds
described in paragraph (A)(1) above, for an Event of Default, if any,
resulting from non-completion of the applicable Project) and (b) that the
proceeds of the Additional Bonds plus other amounts, if any, stated to be
available for that purpose will be sufficient to pay the costs for which
the Additional Bonds are being issued, which shall be itemized in
reasonable detail;
(6) For any Additional Bonds, a certified resolution of the Borrower
(a) approving the issuance of the Additional Bonds and the terms thereof,
(b) authorizing the execution of any required amendments or supplements to
this Indenture, (c) for Additional Bonds described in paragraphs (A)(1) or
(2) above, approving plans and specifications for the Project, and (d) for
Additional Bonds described in paragraph (A)(3) above, authorizing
redemption of the Bonds to be refunded;
(7) For any Additional Bonds, an opinion or opinions of bond counsel
that (a) the purpose of the Additional Bonds is one for which Additional
Bonds may be issued under this Section, (b) all conditions prescribed
herein as precedent to
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the issuance of the Additional Bonds have been fulfilled, (c) the
Additional Bonds have been validly authorized and executed and when
authenticated and delivered pursuant to the request of the Authority will
be valid, legally binding, limited obligations of the Authority,
enforceable against the Authority in accordance with their terms (except
to the extent that the rights and remedies created thereby are subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws
effecting the rights and remedies of creditors and secured parties, and
that the availability of specific enforcement, injunctive relief or other
equitable remedies is subject to the discretion of the court before which
any proceeding therefor may be brought) and are entitled to the benefit
and security of this Indenture, (d) all consents of any regulatory bodies
required as a condition to the valid issuance of the Additional Bonds have
been obtained and (e) issuance of such Additional Bonds will not adversely
affect the tax status of the interest on Outstanding Bonds; and
(8) For any Additional Bonds, an opinion of counsel to the Borrower
if the acquisition of any real property or interest therein is included in
the purpose of such issue, that (a) the Borrower has good and marketable
title thereto free of all liens and encumbrances except Permitted
Encumbrances (provided that in lieu of such opinion, the Borrower may
provide a policy of title insurance insuring the Borrower's interest is
subject only to Permitted Encumbrances), (b) the Mortgage, as
supplemented, constitutes a valid lien on such additional real property,
subject only to Permitted Encumbrances (which opinion may be stated in
reliance on the opinion of other counsel satisfactory to the signer or on
a certificate of title or a title insurance policy issued by a reputable
title company) and (c) for any Additional Bonds described in paragraphs
(A)(1) or (2) above, all approvals of any regulatory bodies required as a
condition to the acquisition or construction of the Project have been
obtained except for such approvals as based on consultation with the
Borrower, will be obtained in due course so as not to interrupt or delay
construction.
(9) So long as the Original Purchaser is the owner of any Bonds
Outstanding, written consent of the Original Purchaser.
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ARTICLE III
GENERAL TERMS AND PROVISIONS OF BONDS
Section 3.1. Date of Bonds. Each Initial Bond shall be dated and
bear interest from December 12, 1997 or the date of original issuance thereof,
and each Additional Bond shall be dated and bear interest from the date set
forth in the Supplemental Indenture authorizing the issuance of such Additional
Bonds, except in the case of Bonds delivered in any exchange or transfer
hereunder on or subsequent to the first Interest Payment Date of the Bond for
which it is exchanged or transferred, which shall be dated and bear interest
from the Interest Payment Date next preceding the date of such delivery, unless,
as shown by the records of the Trustee, interest on the Bond surrendered in
exchange for such Bond shall be in default, in which case such Bond shall be
dated as of the date to which interest has been paid in full on the Bond so
surrendered, and such Bond shall bear interest from such date.
Section 3.2. Form and Denominations. The Initial Bonds shall be
issued in fully registered form, without coupons, in a single denomination equal
to the entire principal amount thereof. Any Additional Bonds shall be issued in
such form and denominations as shall be authorized in a Supplemental Indenture
providing for the issuance thereof. Subject to the provisions of Section 3.3
hereof the Bonds shall be in substantially the form set forth in the recitals to
this Indenture, with such variations, omissions and insertions as are permitted
or required by this Indenture.
Section 3.3. Legends. Each Bond shall contain on the face thereof a
statement to the effect that neither the State nor any municipality thereof
shall be obligated to pay the principal of the Bond or interest thereon and
neither the faith and credit nor taxing power of the State or any municipality
thereof is pledged to such payment. The Bonds may in addition contain or have
endorsed thereon such provisions, specifications and descriptive words not
inconsistent with the provisions of this Indenture as may be necessary or
desirable to comply with custom or otherwise as may be determined by the
Authority prior to the delivery thereof. Additional Bonds shall be lettered so
as to distinguish each series.
Section 3.4. Medium of Payment. The principal or Redemption Price,
if any, of and interest on the Bonds shall be payable in any coin or currency of
the United States of America which, on the respective dates of payment thereof,
is legal tender for the payment of public and private debts. Such payment may be
made as provided in Section 2.3 hereof.
Section 3.5. Bond Details. Subject to the provisions hereof, the
Bonds shall be dated, shall mature in such years and such amounts, shall bear
interest at such rate or rates per annum,
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shall be subject to redemption on such terms and conditions and shall be payable
as to principal or Redemption price, if any, and interest at such place or
places as shall be specified, in the case of the Initial Bonds, in this
Indenture and, in the case of a series of Additional Bonds, in the Supplemental
Indenture or the resolution of the Authority authorizing the issuance of such
Additional Bonds. All Initial Bonds, or Bonds of the same series of Additional
Bonds, maturing in any particular year shall bear interest at the same rate or
rates per annum.
Section 3.6. Interchangeability, Transfer and Registry. (A) Each
Bond shall be transferable only upon compliance with the restrictions on
transfer set forth on such Bond and only upon the books of the Authority, which
shall be kept for the purpose at the principal office of the Trustee, by the
registered owner thereof in person or by his attorney duly authorized in
writing, upon presentation thereof together with a written instrument of
transfer satisfactory to the Trustee duly executed by the registered owner or
his duly authorized attorney. Upon the transfer of any Bond the Trustee shall
prepare and issue in the name of the transferee one or more new Bonds of the
same aggregate principal amount, series and maturity as the surrendered Bond.
(B) Any Bond, upon surrender thereof at the corporate trust office
of the Trustee in New York, New York with a written instrument of transfer
satisfactory to the Trustee, duly executed by the registered owner or his
attorney duly authorized in writing, may, at the option of the owner thereof, be
exchanged for an equal aggregate principal amount of Bonds of the same series
and maturity of any other authorized denominations.
(C) The Authority, the Borrower, the Trustee and any Paying Agent
may deem and treat the person in whose name any Bond shall be registered as the
absolute owner of such Bond, whether such Bond shall be overdue or not, for the
purpose of receiving payment of, or on account of, the principal and Redemption
Price, if any, of and interest on such Bond and for all other purposes, and all
payments made to any such registered owner or upon his order shall be valid and
effectual to satisfy and discharge the liability upon such Bond to the extent of
the sum or sums so paid, and neither the Authority, the Trustee nor any Paying
Agent shall be affected by any notice to the contrary.
Section 3.7. Bonds Mutilated, Destroyed, Stolen or Lost. In case any
Bond shall become mutilated or be destroyed, stolen or lost, the Authority shall
execute and thereupon the Trustee shall authenticate and deliver, a new Bond of
like series, maturity and principal amount as the Bond so mutilated, destroyed,
stolen or lost, in exchange and substitution for such mutilated Bond, upon
surrender and cancellation of such mutilated Bond or in lieu of and substitution
for the Bond destroyed, stolen or lost, upon filing with the Trustee of evidence
satisfactory to the Authority and the Trustee that such Bond has been destroyed,
stolen or lost and proof
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of ownership thereof, and upon furnishing the Authority and the Trustee with
indemnity satisfactory to them and complying with such other reasonable
requirements as the Authority and the Trustee may prescribe and paying such
expenses as the Authority and the Trustee may incur. All Bonds so surrendered to
the Trustee shall be cancelled by it. Any such new Bonds issued pursuant to this
Section in substitution for Bonds alleged to be destroyed, stolen or lost shall
constitute original additional contractual obligations on the part of the
Authority, whether or not the Bonds so alleged to be destroyed, stolen or lost
be at any time enforceable by anyone, and shall be equally secured by and
entitled to equal and proportionate benefits with all other Bonds issued
hereunder in any moneys or securities held by the Authority, the Trustee or any
Paying Agent for the benefit of the Bondholders.
Section 3.8. Cancellation and Destruction of Bonds. All Bonds paid
or redeemed, either at or before maturity, shall be delivered to the Trustee
when such payment or redemption is made, and such Bonds together with all Bonds
purchased by the Trustee, shall thereupon be promptly cancelled. Bonds so
cancelled shall be cremated or otherwise destroyed by the Trustee, who shall
execute a certificate of cremation or destruction in duplicate under signature
of one of its authorized officers describing the Bonds so cremated or otherwise
destroyed, and one executed certificate shall be filed with the Authority and
the other executed certificate shall be retained by the Trustee.
Section 3.9. Requirements With Respect To Transfers. In all cases in
which the privilege of transferring Bonds is exercised, the Authority shall
execute and the Trustee shall authenticate and deliver Bonds in accordance with
the provisions of this Indenture. All Bonds surrendered in any such transfer
shall forthwith be cancelled by the Trustee. For every such transfer of Bonds,
the Authority or the Trustee may, as a condition precedent to the privilege of
making such transfer, make a charge sufficient to reimburse it for any tax, fee
or other governmental charge required to be paid with respect to such transfer
and may charge a sum sufficient to pay the cost of preparing and delivering each
new Bond issued upon such transfer, which sum or sums shall be paid by the
person requesting such transfer. The Trustee shall not be required to transfer
any Bond for which notice of redemption has been given.
Section 3.10. Registrar. The Trustee shall also be Registrar for the
Bonds, and shall maintain a register showing the names of all registered holders
of Bonds, Bond numbers and amounts, and other information appropriate to the
discharge of its duties hereunder. The Trustee shall make available to the
Borrower for its inspection during normal business hours the registration books
for the Bonds, as may be requested by the Borrower in connection with any
purchase or tender offer by it with respect to the Bonds.
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ARTICLE IV
APPLICATION OF BOND PROCEEDS
Section 4.1. Accrued Interest. Simultaneously with the delivery of
any Bonds by the Trustee, the amount received as accrued interest thereon, if
any, shall be deposited in the Principal and Interest Account of the Debt
Service Fund.
Section 4.2. Bond Proceeds and Premium. Proceeds of the sale and
delivery of the Initial Bonds received on account of the sale thereof in the
amount of $3,810,000 shall be deposited in the Project Fund. The proceeds of
Additional Bonds shall be applied in accordance herewith and with the provisions
of the Supplemental Indenture authorizing their issuance, which Supplemental
Indenture may establish and create one or more additional funds and accounts
relating to said Additional Bonds.
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ARTICLE V
CUSTODY AND INVESTMENT OF FUNDS
Section 5.1. Creation of Funds and Accounts. (A) The Authority
hereby establishes and creates the following special trust Funds and Accounts
within such Funds:
(1) Project Fund
(2) Debt Service Fund
(a) Principal and Interest Account
(b) Redemption Account
(3) Earnings Fund
(4) Rebate Fund
(B) All of the Funds and Accounts created hereunder shall be held by
the Trustee, including one or more depositories in trust for the Trustee. All
moneys and investments deposited with the Trustee shall be held in trust and
applied only in accordance with this Indenture and shall be trust funds for the
purposes of this Indenture.
Section 5.2. Project Fund. (A) There shall be deposited in the
Project Fund any and all amounts required to be deposited therein pursuant to
Section 4.2 and Section 5.6 hereof or otherwise required to be deposited therein
pursuant to the Agreement or this Indenture.
(B) Provided that no Event of Default shall have occurred and be
continuing, the Trustee shall apply the amounts in the Project Fund, subject to
the provisions of subsection (H) below, upon requisition submitted in accordance
with subsection 5.2(C) hereof, to pay the costs of the Project and the issuance
of the Bonds, including, but not limited to:
(1) The costs of title insurance, surveys, legal fees and recording
and other closing expenses;
(2) Obligations incurred for labor and materials;
(3) All costs of contract bonds and of insurance of all kinds that
may be required or necessary during the course of construction of the
Project;
(4) All costs of engineering services, including the costs of test
borings, surveys, estimates, plans and specifications and preliminary
investigation therefor and for supervising construction, as well as for
the performance of
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all other duties required by or consequent upon the proper construction
of, and alterations, additions and improvements to, the Project;
(5) All expenses incurred in connection with the issuance, execution
and sale of the Bonds, including compensation and expenses of the Trustee,
legal, accounting and consulting expenses and fees, costs of printing and
engraving, and recording and filing fees;
(6) All costs which the Borrower shall be required to pay, under the
terms of any contract or contracts, for the acquisition, construction,
installation or equipping of the Project, including any amounts required
to reimburse the Borrower for advances made for any of the above items or
for any other costs incurred and for work done which are properly
chargeable to the Project;
(7) Interest due and payable on the Bonds from the date of issuance
to the Completion Date of the Project; and
(8) Any other costs and expenses relating to the Project or the
issuance of Additional Bonds.
(C) The Trustee is hereby authorized and directed to issue its
checks or to effect wire transfers for each disbursement from the Project Fund
(excepting any fees and expenses payable to the Trustee as to which no further
authority is required) upon a requisition submitted to the Trustee and signed by
an Authorized Representative of the Borrower and approved by the Original
Purchaser. Such requisition shall state with respect to each payment to be made:
(1) the requisition number, (2) the name and address of the person, firm or
corporation to whom payment is due, or to whom a reimbursable advance, if any,
has been made, (3) the amount to be paid, (4) that each obligation mentioned
therein has been properly incurred within the provisions of the Agreement, is a
proper charge against the Project Fund, is unpaid or unreimbursed, and has not
been the basis of any previous withdrawal, and (5) that the requisition and the
use of proceeds set forth therein are consistent in all material respects with
the Tax Regulatory Agreement and (6) unless the Trustee has received the
certificate described in subsection 5.3(F)(2) hereof, 95% or more of the amount
requisitioned is to be applied to costs (a) paid or incurred no more than 60
days prior to and cost paid or incurred after the adoption of the Authority's
inducement and other resolutions for the Project, (b) for the acquisition,
construction or reconstruction of land or property of a character subject to the
allowance for depreciation provided in Section 167 of the Internal Revenue Code
of 1986, as amended, and (c) which are chargeable to the capital account of the
Project or would be so chargeable either with an election by the Borrower or but
for the election of the Borrower to deduct the amount of the item.
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(D) In making any such payment from the Project Fund the Trustee may
rely on such requisitions and proof delivered to it and the Trustee shall be
relieved of all liability with respect to making such payments in accordance
with the foregoing.
(E) The Trustee shall hold in the Project Fund an amount equal to
five percent (5%) of the net proceeds of the Bonds until the Trustee has
received, with respect to the Bonds, a certified statement of Project Costs
together with the Borrower's certificate accompanied by an accountant's report
to the effect that Project Costs in an amount equal to 95% or more of the
Proceeds of the Bonds (as defined in the Tax Regulatory Agreement) have been
paid or incurred for the acquisition, construction or reconstruction of land or
depreciable property under the Code and have been or could be capitalized by the
Borrower for federal income tax purposes. Such documents may be delivered upon
issuance of the Bonds and may anticipate the use of the final amounts to be
requisitioned permitted by subsections 5.3(E) and (F) hereof. Upon the receipt
of such documents, the Trustee shall apply the balance in the Project Fund
(including any amounts deposited therein from the Earnings Fund calculated for
the Computation Period ending with the completion of the Project) to or at the
direction of the Borrower in accordance with such documents. The Borrower shall
notify the Trustee of any inability to deliver such documents, and in that event
the Trustee shall upon the receipt of such notification transfer the balance in
the Project Fund to the Redemption Account.
(F) The completion of the Project shall be evidenced by the filing
with the Authority and the Trustee of a certificate of an Authorized
Representative of the Borrower in accordance with Article IV of the Agreement,
stating the date of such completion and the amount, if any, required in its
opinion for the payment of any remaining part of the costs of the Project. Upon
the filing of such certificate, the balance in the Project Fund in excess of the
amount, if any, stated in such certificate, shall be applied by the Trustee in
accordance with the written order of any Authorized Representative of the
Borrower in one or more of the following ways:
(1) Deposited in the Redemption Account of the Debt Service Fund; or
(2) Used in any other manner which preserves the exemption of
interest on the Bonds from Federal income taxation, provided there is
delivered to the Trustee an opinion of counsel by an attorney or firm of
attorneys of recognized national standing on the subject of municipal
bonds to the effect that the use of such moneys is permitted by law and
will not adversely affect the exemption from federal income taxation of
interest on the Bonds. The Trustee may rely on such opinion in any
disbursement of funds pursuant to this subsection 5.2(F)(2).
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Thereafter, upon payment of all the costs and expenses incident to the Project,
any balance in the Project Fund shall be deposited in the Redemption Account of
the Debt Service Fund.
(G) Promptly following June 30 in each year following the issuance
of the applicable series of Bonds, until there is no balance remaining in the
Project Fund, the Borrower shall deliver a report to the Authority setting forth
the amount remaining in the Project Fund as of such date and a schedule of the
securities in which such amounts are invested (which shall be based upon reports
of the Trustee).
(H) In the event the Borrower shall be required to or shall elect to
cause the Bonds to be redeemed in full pursuant to Article VIII of the
Agreement, the balance in the Project Fund which is not required to pay incurred
Project Costs shall be deposited in the Redemption Account of the Debt Service
Fund.
(I) Notwithstanding anything herein to the contrary, upon and during
the continuance of any Event of Default, the Trustee shall not make any
disbursement of any amounts constituting proceeds of the Initial Bonds deposited
in the Project Fund except with written consent of the owner of the Initial
Bonds.
Section 5.3. Debt Service Fund. (A) The Trustee shall establish two
separate accounts within the Debt Service Fund to be respectively designated
"Principal and Interest Account" and "Redemption Account".
(B) The Trustee shall promptly deposit the following receipts in the
Debt Service Fund:
(1) Any amount required pursuant to Section 4.1 hereof to be
deposited from the proceeds of the Bonds, which shall be credited to the
Principal and Interest Account.
(2) All amounts received by the Trustee pursuant to Section 3.1 of
the Agreement, which shall be credited to the Principal and Interest
Account, in the manner set forth in this Indenture and the Agreement, and
applied together with amounts available in the Principal and Interest
Account, to pay (i) the interest due on the Outstanding Bonds on the
Interest Payment Date next succeeding such payment and (ii) the principal,
if any, of the Outstanding Bonds due (otherwise than by call for
redemption) on such interest payment date.
(3) Excess or remaining amounts in the Project Fund required to be
deposited in the Redemption Account of the Debt Service Fund pursuant to
subsections 5.2(E) and 5.2(F) hereof, which shall be credited to the
Redemption Account.
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(4) Any other amounts required to be paid to the Debt Service Fund
for payment of principal and interest due on the Bonds, which shall be
credited to the Principal and Interest Account.
(5) Prepayments under the Agreement received by the Trustee pursuant
to Article VIII thereof, which shall be credited to the Redemption
Account.
(6) All other receipts when and if required by the Financing
Documents or any subsequent agreement or by this Indenture to be paid into
the Debt Service Fund, which shall be credited to the Principal and
Interest Account.
(C) There shall be paid from the Principal and Interest Account to
the respective Paying Agents on each Interest Payment Date for the Bonds the
amounts required for the payment of the principal and interest due on the Bonds
on such date. Such amounts shall be applied by the Paying Agents to the payment
of principal and interest on the Bonds when due. All other amounts payable on
the Bonds from the Principal and Interest Account shall be paid to the
respective Paying Agents upon receipt, and shall promptly be paid by such Paying
Agents to the Bondholders.
(D) There shall be paid from the Principal and Interest Account to
the Paying Agents on each Interest Payment Date for the Bonds in immediately
available funds the amounts required for the payment of the Redemption Price.
(E) Amounts in the Redemption Account shall be applied, as promptly
as practicable, to the purchase of Bonds at prices not exceeding the Redemption
Price thereof applicable on the next redemption date plus accrued interest and
all other amounts then due under the Financing Documents in connection with such
redemption. Such redemption date shall be the earliest date upon which Bonds are
subject to redemption from such amounts. Any amount in the Redemption Account
not so applied to the purchase of Bonds by forty-five days prior to the next
date on which the Bonds are so redeemable shall be applied to the redemption of
Bonds on such redemption date; provided that if such amount aggregates less than
$10,000, it need not be then applied to such redemption. The Bonds to be
purchased or redeemed shall be selected by the Trustee in the manner provided in
Section 6.2 hereof. Amounts in the Redemption Account to be applied to the
redemption of Bonds shall be paid to the respective Paying Agents on or before
the redemption date and applied by them on such redemption date to the payment
of the Redemption Price of the Bonds being redeemed plus interest on such Bonds
accrued to the redemption date and all other amounts then due under the
Financing Documents in connection with such redemption.
(F) The Authority shall receive a credit in respect of the Scheduled
Payment for any Bonds which have been delivered by
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the Authority or the Borrower to the Trustee and for any Bonds which prior to
such date have been purchased or redeemed and cancelled by the Trustee.
(G) Any amounts remaining in the Debt Service Fund after payment in
full of the Bonds, the fees, charges and expenses of the Trustee and any Paying
Agent and all other amounts required to be paid hereunder or under the Financing
Documents shall be paid to the Borrower upon the expiration or sooner
termination of the Term of the Agreement.
Section 5.4. Reserved.
Section 5.5. Reserved.
Section 5.6. Earnings Fund and Rebate Fund. (A) There shall be
credited to the Earnings Fund all amounts required to be credited thereto from
interest earnings or net gain on disposition of investments pursuant to this
Article V.
(B) On the first Business Day following each Computation Period, the
Trustee, upon written instructions of an Authorized Representative of the
Borrower, shall withdraw from the Earnings Fund and deposit to the Rebate Fund
an amount such that the amount held in the Rebate Fund after such deposit is
equal to the Rebate Amount calculated as of the last day of the Computation
Period. In the event of any deficiency, the balance required shall be provided
by the Borrower pursuant to Section 3.11 of the Rebate Memorandum attached as an
exhibit to the Tax Regulatory Agreement. Computations of the amounts on deposit
in each Fund and of the Rebate Amount shall be furnished to the Trustee by the
Borrower in accordance with Section 4.5 of the Rebate Memorandum attached as an
exhibit to the Tax Regulatory Agreement.
(C) Any amounts on deposit in the Earnings Fund following the
transfers to the Rebate Fund required by this Section shall be deposited to the
Project Fund prior to the Completion Date of the Project, and to the Debt
Service Fund subsequent to the Completion Date.
(D) The Trustee, upon receipt of written instructions from an
Authorized Representative of the Borrower in accordance with Section 4.4 of the
Rebate Memorandum attached as an exhibit to the Tax Regulatory Agreement, shall
pay to the United States out of amounts in the Rebate Fund (1) not later than 30
days after the end of each five-year period following the date of issuance of
the Bonds of each series, an amount such that, together with amounts previously
paid, the total amount paid to the United States is equal to 90% of the Rebate
Amount calculated as of the end of the most recent Computation Period, and (2)
not later than 30 days after the date on which all of the Bonds of any series
have been paid or redeemed, 100% of the Rebate Amount as of the end of the
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final Computation Period. Absent such instructions, the Trustee shall pay all
amounts then in the Rebate Fund to the United States.
Section 5.7. Investment of Funds and Accounts; Valuation. (A)
Amounts in the Funds and Accounts held hereunder shall, if and to the extent
then permitted by law, be invested in Authorized Investments. Investments
authorized under this Section shall be made by the Trustee at the written
request of an Authorized Representative of the Borrower, and may be made by the
Trustee through its own bond department. Any investment hereunder shall be made
in accordance with written instructions of the Borrower. Such investments shall
mature in such amounts and at such times as may be necessary to provide funds
when needed to make payments from such Funds or Accounts.
(B) The income or interest earned and gains realized in excess of
losses suffered by any Fund or Account held hereunder shall be credited to the
Earnings Fund, except in the case of income or interest earned and gains
realized in excess of losses suffered:
(1) by the Rebate Fund, which shall be credited to the Rebate Fund;
and
(2) from investments in any fund or account in tax-exempt securities
rated in the highest rating category by a nationally recognized rating
agency and the interest on which is not subject to the alternative minimum
tax, which shall be credited to the fund or account in question; and
(3) from any Authorized Investments having a yield which is less
than the yield on the Bonds, provided that, first, computations of such
yields in accordance with the Tax Regulatory Agreement is shown in a
certificate of the Borrower delivered to the Trustee stating that the
requirements of this paragraph (3) are satisfied in accordance with the
Tax Regulatory Agreement, which shall be credited to the Fund or Account
in question; provided, however, that such amounts on deposit in the Debt
Service Reserve Fund in excess of the Debt Service Reserve Fund
Requirement shall be transferred to the Debt Service Fund.
(C) The Funds and Accounts established hereunder shall be valued as
of each Interest Payment Date on the basis of market value.
Section 5.8. Non-presentment of Bonds. In the event any Bond shall
not be presented for payment when the principal thereof becomes due, either at
maturity, or at the date fixed for redemption thereof, or otherwise, and funds
sufficient to pay any such Bond shall have been made available to the Trustee
for the benefit of the holder or holders thereof, all liability of the Authority
to the holder thereof for the payment of such Bond shall
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forthwith cease, determine and be completely discharged, and thereupon it shall
be the duty of the Trustee to pay such funds to the person or persons entitled
thereto in the case of a fully registered bond or if the person is not known to
the Trustee, to hold such funds, without liability for interest thereon, for the
benefit of the holder of such Bond, who shall thereafter be restricted
exclusively to such funds, for any claim of whatever nature on his part under
this Indenture or on, or with respect to, such Bond. Subject to applicable
escheat laws, funds remaining with the Trustee as above and unclaimed for six
years shall be deposited in the Redemption Account or, in the event there are no
longer any Bonds Outstanding, shall be paid to the Borrower.
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ARTICLE VI
REDEMPTION OF BONDS
Section 6.1. Privilege of Redemption and Redemption Price. Bonds or
portions thereof subject to redemption prior to maturity shall be redeemable,
upon mailed notice as provided in this Article, at the times, at the Redemption
Prices and upon such terms in addition to and consistent with the terms
contained in this Article as shall be specified in Sections 2.3 and 2.4 hereof
and in such Bonds.
Section 6.2. Selection of Bonds to be Redeemed. In the event of
redemption of less than all the Outstanding Bonds of like series and maturity,
the Trustee shall assign to each such Outstanding Bond a distinctive number for
each $25,000 in principal amount thereof, and shall select by lot, using such
method of selection as it shall deem proper in its discretion, from the numbers
assigned to such Bonds as many numbers as, at $25,000 for each number, shall
equal the principal amount of such Bonds to be redeemed. The Bonds to be
redeemed shall be Bonds to which are assigned numbers so selected, but only so
much of the principal amount of such Bond of a denomination of more than $25,000
shall be redeemed as shall equal $25,000 for each number assigned to it and so
selected. For purposes of this Section, Bonds which have theretofore been
selected by lot for redemption shall not be deemed Outstanding. Notwithstanding
the foregoing, redemption of the Initial Bonds shall be effected in accordance
with Section 2.4(I) hereof.
Notwithstanding the foregoing, redemption of the Initial Bonds shall
be effected on accordingly with Section 2.4(I) hereof.
Section 6.3. Notice of Redemption. When redemption is required by
this Indenture, the Trustee shall give notice of such redemption in the name of
the Authority, specifying the subsection of Section 2.4 hereof under which the
redemption is to be made, the series, maturities, numbers and amounts of the
Bonds or portions thereof to be redeemed, the redemption date and the place or
places where amounts due upon such redemption will be payable. Such notice shall
further state that on such date there shall become due and payable upon each
Bond or portion thereof to be redeemed the Redemption Price thereof together
with interest accrued to the redemption date and all other amounts then due
under the Financing Documents, and that from and after such date interest
thereon shall cease to accrue and be payable. Notice of redemption shall be
given by the Trustee in the name and on behalf of the Authority by mailing a
copy of each such notice to the registered owner of each Bond by first-class
mail postage prepaid, addressed to him at his last known address as it appears
upon the bond register, not more than 60 nor less than 30 days prior to the date
fixed for redemption. Such notice shall be effective when mailed and any failure
to receive such notice shall not affect the validity of the
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proceedings for redemption. In the event of a postal strike, the Trustee shall
give notice by other appropriate means selected by the Trustee in its
discretion.
Section 6.4. Payment of Redeemed Bonds. (A) Notice having been given
in the manner provided in Section 6.3 hereof, the Bonds or portions thereof so
called for redemption shall become due and payable on the redemption dates so
designated at the Redemption Price, plus interest accrued to the redemption date
and all other amounts then due under the Financing Documents. If, on the
redemption date, moneys for the redemption of all the Bonds or portions thereof
to be redeemed, together with interest to the redemption date, and all other
amounts then due under the Financing Documents, shall be held by the Paying
Agents so as to be available therefor on such date and if notice of redemption
shall have been given as aforesuch, then, from and after the redemption date,
interest on the Bonds or portions thereof so called for redemption shall cease
to accrue and become payable. If such moneys shall not be so available on the
redemption date, such Bonds or portions thereof shall continue to bear interest
until paid at the same rate as they would have borne had they not been called
for redemption.
(B) Payment of the Redemption Price together with interest and all
other amounts then due to the Bondholder under the Financing Documents shall be
made to or upon the order of the registered owner, only upon presentation of the
Bond for cancellation or notation as provided in Section 6.5 hereof.
Section 6.5. Cancellation of Redeemed Bonds. (A) All Bonds redeemed
in full under the provisions of this Article shall forthwith be cancelled and
destroyed by the Trustee and a certificate of destruction furnished to the
Authority, and no Bonds shall be executed, authenticated, issued or delivered in
exchange or substitution therefor or for or in respect of any paid portion of a
fully registered Bond.
(B) If there shall be drawn for redemption less than all of a Bond,
the Authority shall execute and the Trustee shall authenticate and deliver, upon
the surrender of such Bond, without charge to the owner thereof, for the
unredeemed balance of the principal amount of the Bond so surrendered, Bonds of
like series and maturity in any of the authorized denominations.
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ARTICLE VII
PARTICULAR COVENANTS
Section 7.1. No Pecuniary Liability on Authority or Officers. (A) No
provision, covenant or agreement contained in this Indenture or in the Bonds or
any obligations herein or therein imposed upon the Authority or the breach
thereof, shall constitute or give rise to a charge upon its general credit, or
impose upon the Authority a pecuniary liability except as set forth herein. In
making the agreements, provisions and covenants set forth in this Indenture, the
Authority has not obligated itself except with respect to the Project and the
application of the revenues derived in connection therewith as hereinabove
provided.
(B) All covenants, stipulations, promises, agreements and
obligations of the Authority contained herein shall be deemed to be covenants,
stipulations, promises, agreements and obligations of the Authority and not of
any member, officer, agent or employe thereof in his individual capacity. No
recourse shall be had for the payment of the principal or Redemption Price, if
any, of or interest on the Bonds, for the performance of any obligation
hereunder, or for any claim based thereon or hereunder against any such member,
officer, agent or employe or against any natural person executing the Bonds. No
such member, officer, agent, employe or natural person is or shall become
personally liable for any such payment, performance or other claim, and in no
event shall any monetary or deficiency judgment be sought or secured against any
such member, officer, agent, employe or other natural person.
Section 7.2. Payment of Principal, Redemption Price, if any, and
Interest. The Authority covenants that it will promptly pay, solely from the
revenues or other moneys derived in connection with the Project or otherwise
available hereunder, the principal or Redemption Price, if any, of and interest
on every Bond issued under this Indenture, together with all other amounts due
under the Financing Documents, at the place, on the dates and in the manner
provided herein and in the Bonds according to the true intent and meaning
thereof.
Section 7.3. Performance of Covenants. The Authority covenants that
it will faithfully perform at all times any and all covenants, undertakings,
stipulations and provisions contained in this Indenture, in any and every Bond
executed, authenticated and delivered hereunder and in all of its proceedings
pertaining thereto. The Authority covenants that it is duly authorized under the
Constitution and laws of the State, including particularly and without
limitation the Act, to issue the Bonds authorized hereby and to execute this
Indenture, to create, accept and assign the liens in the property described
herein and created hereby, to grant the security interest herein provided, to
assign the Financing Documents and to pledge the revenues and other amounts
hereby pledged in the manner and to the extent herein set forth; that all
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action on its part for the issuance of the Bonds and the execution and delivery
of this Indenture has been duly and effectively taken, and that the Bonds in the
hands of the holders and owners thereof are and will be valid and enforceable
obligations according to their terms and the terms of this Indenture.
Section 7.4. Further Assurances. The Authority and the Trustee each
covenants that it will do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered, such indentures supplemental hereto and
such further acts, instruments and transfers as the other may reasonably require
for the better assuring, transferring, conveying, pledging, assigning and
confirming unto the Trustee all and singular the property and rights assigned
hereby and the amounts pledged hereby to the payment of the principal or
Redemption Price, if any, of and interest on the Bonds and all other amounts due
under the Financing Documents.
Section 7.5. Inspection of Project Books. The Authority covenants
and agrees that all books and documents in its possession relating to the
Project and the revenues derived from the Project shall at all times be open to
inspection by such accountants or other agents as the Trustee may from time to
time designate.
Section 7.6. List of Bondholders. To the extent that such
information shall be known to the Authority under the terms of this Section, it
will keep on file at the principal office of the Trustee a list of names and
addresses of the last known holders of all Bonds and the Bonds believed to be
held by each of such last known holders. Any Bondholder may request that his
name and address be placed on such list by filing a written request with the
Authority or with the Trustee. Neither the Authority nor the Trustee shall be
under any responsibility with regard to the accuracy of such list. At reasonable
times and under reasonable regulations established by the Trustee, such list may
be inspected and copied by the Borrower or by the owner of any Bond.
Section 7.7. Rights under Financing Documents. The Financing
Documents, originals or duly executed counterparts of which have been filed with
the Trustee, set forth the covenants and obligations of the Authority and the
Borrower, including provisions that subsequent to the issuance of Bonds and
prior to their payment in full or provision for payment thereof in accordance
with the provisions hereof the Financing Documents may not be effectively
amended, changed, modified, altered or terminated without the written consents
provided for therein, and reference is hereby made to the same for a detailed
statement of the covenants and obligations of the Borrower thereunder. The
Trustee agrees, subject to the provisions of Article IX hereof, to enforce all
covenants and obligations of the Borrower under the Financing Documents and it
is agreed that the Trustee may and is hereby granted the right to enforce all
rights of the Authority and all obligations of the Borrower under and pursuant
to the Financing
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Documents. Nothing in this Section shall permit any reduction in the payments
required to be made by the Borrower under or pursuant to the Financing Documents
or any alteration in the terms of payment thereof. All covenants and agreements
on the part of the Authority shall be for the benefit of the holders from time
to time of the Bonds and may be enforced in the manner provided by Article VIII
hereof on behalf of such holders by the Trustee.
Section 7.8. Creation of Liens, Indebtedness. The Authority shall
not create or suffer to be created any lien or t charge upon or pledge of the
revenues and other income from or in connection with the Project, except the
lien, charge and pledge created by this Indenture and the Bonds. The Authority
shall not incur any indebtedness or issue any evidence of indebtedness, other
than the Bonds herein authorized, secured by a lien on or pledge of such
revenues and income.
Section 7.9. Recording and Filing. The Authority covenants that it
will cause the Financing Documents, this Indenture and all supplements thereto
and hereto, as well as such other security agreements, financing statements, and
other instruments as may be required from time to time to be kept, to be
recorded and filed in such manner and in such places as may be required by law
in order to fully preserve and protect the security of the holders and owners of
the Bonds and the rights of the Trustee hereunder.
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ARTICLE VIII
REMEDIES OF BONDHOLDERS
Section 8.1. Events of Default; Acceleration of Due Dates. (A) Each
of the following events is hereby defined as and shall constitute an "event of
default":
(1) Failure to duly and punctually pay (a) the interest, (b) any
installment of the principal or Redemption Price of any Bond, whether at
the stated maturity thereof or upon proceedings for redemption thereof, or
(c) any other amount due under the Financing Documents.
(2) Failure to perform or observe any other of the covenants,
agreements or conditions on the part of the Authority in this Indenture or
in the Bonds contained and not otherwise a default hereunder and the
continuance thereof for a period of thirty days after written notice given
by the Trustee or by the holders of not less than 25% of the principal
amount of Bonds then Outstanding.
(3) The occurrence of an event of default under any of the Financing
Documents.
(B) Upon the happening and continuance of any event of default
specified in subsection 8.1(A) hereof, unless the principal of all the Bonds
shall have already become due and payable, either the Trustee (by notice in
writing to the Authority) or the holders of not less than 25% in principal
amount of the Bonds Outstanding (by notice in writing to the Authority and the
Trustee) may declare the principal or Redemption Price, if any, of all the Bonds
then Outstanding, and the interest accrued thereon, to be due and payable
immediately, and upon such declaration the same shall become and be immediately
due and payable, anything in this Indenture or in any of the Bonds contained to
the contrary notwithstanding.
(C) The right of the Trustee or of the holders of not less than 25%
in principal amount of the Bonds to make any declaration authorized under
subsection 8.1(B) hereof with respect to any failure under subsection 8.1(A)(1)
hereof, however, is subject to the condition that if, at any time before such
declaration, all overdue installments of interest upon the Bonds and the
principal of all Bonds which shall have matured by their terms, together with
the reasonable and proper charges, expenses and liabilities of the Trustee,
shall either be paid by or for account of the Authority or provision
satisfactory to the Trustee shall be made for such payment, then in every such
case any such default and its consequences shall ipso facto be deemed to be
annulled, but no such annulment shall extend to or affect any subsequent default
or impair or exhaust any right or power consequent thereon.
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Section 8.2. Foreclosure and Enforcement of Remedies. (A) Upon the
happening and continuance, of any event of default, then and in every case the
Trustee may proceed, and upon the written request of the holders of not less
than 25% in the principal amount of the Bonds Outstanding shall proceed, to
protect and enforce its rights and the rights of the Bondholders under the Act,
the Bonds, the Financing Documents and this Indenture, and under any agreement
executed in connection with the foregoing, forthwith by such suits, actions or
special proceedings in equity or at law, or by proceedings in the office of any
board or officer having jurisdiction, whether for the specific performance of
any covenant or agreement contained in this Indenture or in aid of the execution
of any power granted therein or in the Act or for the enforcement of any legal
or equitable rights or remedies as the Trustee, being advised by counsel, shall
deem most effectual to protect and enforce such rights or to perform any of its
duties under this Indenture.
(B) In the enforcement of any right or remedy under this Indenture
or under the Act, the Trustee shall be entitled to sue for, enforce payment on
and receive any or all amounts then or during any default becoming, and any time
remaining, due from the Authority for principal, Redemption Price, interest or
otherwise under any of the provisions of the Financing Documents, this Indenture
or of the Bonds, and unpaid, with interest on overdue payments at the applicable
rate or rates of interest specified in the Bonds, together with any and all
costs and expenses of collection and of all proceedings under the Financing
Documents, this Indenture and under the Bonds, without prejudice to any other
right or remedy of the Trustee or of the Bondholders, and to recover and enforce
any judgment or decree against the Authority, but solely as provided in the
Financing Documents, this Indenture and in the Bonds, for any portion of such
amounts remaining unpaid, with interest, costs, and expenses, and to collect in
any manner provided by law, the moneys adjudged or decreed to be payable.
(C) Regardless of the happening of an event of default, the Trustee,
if requested in writing by the holders of not less than 25% in principal amount
of the Bonds then Outstanding and furnished with reasonable security and
indemnity, shall institute and maintain such suits and proceedings as it may be
advised shall be necessary or expedient to prevent any impairment of the
security under this Indenture by any acts which may be unlawful or in violation
of the Indenture or of any resolution authorizing Bonds, and such suits and
proceedings as the Trustee may be advised shall be necessary or expedient to
preserve or protect its interests and the interests of the Bondholders; but no
such request shall be otherwise than in accordance with the provisions of law
and of the Indenture or be unduly prejudicial to the interests of the holders of
Bonds not making such request.
Section 8.3. Application of Revenues and Other Moneys After Default.
(A) All moneys received by the Trustee pursuant to
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any right given or action taken under the provisions of this Article, after
payment of the costs and expenses of the proceedings resulting in the collection
of such moneys and of the expenses liabilities and advances incurred or made by
the Trustee, shall be deposited in the applicable account of the Debt Service
Fund and all moneys so deposited in such Fund and available for payment of the
Bonds shall be applied as follows:
(1) Unless the principal of all of the Bonds shall have become or
have been declared due and payable:
FIRST To the payment of all amounts due under the Financing
Documents, exclusive of unpaid principal and interest on the Note;
SECOND To the payment to the persons entitled thereto of all
installments of interest then due on the Bonds, in the order of the
maturity of the installments of such interest and, if the amount
available shall not be sufficient to pay in full any particular
installment, then to the payment ratably, according to the amounts
due on such installment, to the persons entitled thereto, without
any discrimination or preference; and
THIRD To the payment to the persons entitled thereto of the unpaid
principal or Redemption Price, if any, of any of the Bonds or
principal installments which shall have become due (other than Bonds
called for redemption for the payment of which moneys are held
pursuant to the provisions of this Indenture), in inverse order of
maturity, from the respective dates upon which they become due and,
if the amount available shall not be sufficient to pay in full Bonds
or principal installments due on any particular date, then to the
payment ratably, according to the amount of principal due on such
date, to the persons entitled thereto without any discrimination or
preference.
(2) If the principal of all the Bonds shall have become or have been
declared due and payable, to the payment of the principal and interest (at
the rate or rates expressed thereon) then due and unpaid upon the Bonds
without preference or priority of principal over interest or of interest
over principal, or of any installment of interest over any other
installment of interest, or of any Bond over any other Bond, ratably,
according to the amounts due respectively for principal and interest, to
the persons entitled thereto without any discrimination or preference.
(B) Whenever moneys are to be applied pursuant to the provisions of
this Section, such moneys shall be applied at such times, and from time to time,
as the Trustee shall determine, having due regard to the amount of such moneys
available for
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application and the likelihood of additional moneys becoming available for such
application in the future. Whenever the Trustee shall apply such funds, it shall
fix the date upon which such application shall be made. The Trustee shall give
such notice as it may deem appropriate of the deposit with it of any such moneys
and of the fixing of any such date, and shall not be required to make payment to
the holder of any Bonds until such Bonds shall be presented to the Trustee for
appropriate endorsement or for cancellation if fully paid.
(C) Whenever all Bonds and interest thereon and all other amounts
due under the Financing Documents have been paid under the provisions of this
Section and all fees, expenses and charges of the Trustee and Paying Agents have
been paid, any balance remaining in the Debt Service Fund shall be paid to or
upon the order of the Borrower.
Section 8.4. Actions by Trustee. All rights of action under this
Indenture or under any of the Bonds may be enforced by the Trustee without the
possession of any of the Bonds or the production thereof in any trial or other
proceedings relating thereto and any such suit or proceedings instituted by the
Trustee shall be brought in its name as Trustee without the necessity of joining
as plaintiffs or defendants any holders of the Bonds, and any recovery of
judgment, subject to the provisions of Section 8.3 hereof, shall be for the
benefit of the holders of the Outstanding Bonds.
Section 8.5. Majority Bondholders Control Proceedings. The holders
of a majority in aggregate principal amount of Bonds then Outstanding shall have
the right, at any time, by an instrument or instruments in writing executed and
delivered to the Trustee, to direct the method and place of conducting all
proceedings to be taken in connection with the enforcement of the terms and
conditions of the Indenture, or for any other proceedings hereunder; but such
direction shall not be otherwise than in accordance with the provisions of law
and of the Indenture.
Section 8.6. Individual Bondholder Action Restricted. (A) No holder
of the Bonds shall have any right to institute any suit, action or proceeding at
law or in equity for the enforcement of any provision of this Indenture or the
execution of any trust under this Indenture or for any remedy under this
Indenture, unless such holder shall have previously given to the Trustee written
notice of the happening of an event of default, as provided in this Article, and
the holders of at least 25% in principal amount of the Bonds then Outstanding
shall have filed a written request with the Trustee, and shall have offered it
reasonable opportunity, either to exercise the powers granted in this Indenture
or by the Act or by the laws of the State or to institute such action, suit or
proceeding in its own name, and unless such holders shall have offered to the
Trustee adequate security and indemnity against the costs, expenses and
liabilities to be incurred therein or thereby,
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and the Trustee shall have refused to comply with such request for a period of
sixty days after receipt by it of such notice, request and offer of indemnity,
it being understood and intended that no holder of any Bond shall have any right
in any manner whatever by his or their action to affect, disturb or prejudice
the pledge created by the Indenture, or to enforce any right under the
Indenture, except in the manner therein provided; and that all proceedings at
law or in equity to enforce any provision of the Indenture shall be instituted,
had and maintained in the manner provided in the Indenture and for the equal
benefit of all holders of the Outstanding Bonds.
(B) Nothing herein or in the Bonds contained shall affect or impair
the right of any Bondholder to payment of the principal or Redemption Price, if
any, of and interest on any Bond or other amounts due under the Financing
Documents at and after the maturity thereof, or the obligation of the Authority
to pay the principal or Redemption Price, if applicable, of and interest on each
of the Bonds or other amounts due under the Financing Documents to the
respective holders thereof at the time, place, from the source and in the manner
herein and in such Bonds expressed.
Section 8.7. Effect of Discontinuance of Proceedings. In case any
proceeding taken by the Trustee on account of any event of default shall have
been dismissed, discontinued or abandoned for any reason, or shall have been
determined adversely, then and in every such case the Authority, the Trustee,
and the Bondholders shall be restored, respectively, to their former positions
and rights hereunder, and all rights, remedies, powers and duties of the Trustee
shall continue as though no such proceedings had been taken.
Section 8.8. Remedies Not Exclusive. No remedy by the terms of this
Indenture conferred upon or reserved to the Trustee or to the holders of the
Bonds is intended to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to any other remedy given
hereunder or now or hereafter existing at law or in equity or by statute.
Section 8.9. Delay or Omission Upon Default. No delay or omission of
the Trustee or of the holder of any Bond to exercise any right or power arising
upon any event of default shall impair any right or power or shall be construed
to be a waiver of any such default or any acquiescence therein; and every power
and remedy given by this Article to the Trustee and the holder of any Bond,
respectively, may be exercised from time to time and as often as may be deemed
expedient by the Trustee or by the Bondholders.
Section 8.10. Notice of Default. The Trustee shall promptly mail to
each Bondholder written notice of the occurrence of any event of default of
which it has actual knowledge. The Trustee shall not, however, be subject to any
liability to any
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Bondholder by reason of its failure to mail any notice required by this Section.
The Trustee shall not be deemed to have actual knowledge of any event of default
(other than a default specified in subsections 8.1(A)(l)(a) or (b)) unless it
shall be notified in writing thereof by the Borrower, the Authority, or the
holders of 25% in aggregate principal amount of the Bonds Outstanding.
Section 8.11. Waivers of Default. The Trustee shall waive any event
of default hereunder and its consequences upon the written request of the
holders of one-half in aggregate principal amount of each series of the Bonds
then Outstanding; except that there shall not be waived without the consent of
the holders of all the Bonds Outstanding (a) any default in the payment of the
principal or Redemption Price of any Outstanding Bonds at the date of maturity
specified therein or (b) any default in the payment when due of the interest on
any such Bonds unless, prior to such waiver, all arrears of interest, with
interest (to the extent permitted by law) at the rate borne by the Bonds on
overdue installments of interest in respect of which such default shall have
occurred or all arrears of payments of principal when due, as the case may be,
and all expenses of the Trustee in connection with such default shall have been
paid or provided for, and in case of any such waiver, or in case any proceeding
taken by the Trustee on account of any such default shall have been dismissed,
discontinued or abandoned or determined adversely, then and in every such case
the Authority, the Trustee and the Bondholders shall be restored to their former
positions and rights hereunder respectively, but no such waiver, dismissal,
discontinuance, abandonment or determination shall extend to any subsequent or
other default, or impair any right consequent thereon.
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ARTICLE IX
TRUSTEE AND PAYING AGENTS
Section 9.1. Appointment and Acceptance of Duties. (A) Brown
Brothers Harriman Trust Company, New York, New York, is hereby appointed as
Trustee. The Trustee shall signify its acceptances of the duties and obligations
of the Trustee by executing this Indenture. All provisions of this Article shall
be construed as extending to and including all the rights, duties and
obligations imposed upon the Trustee under the Agreement as fully for all
intents and purposes as if this Article were contained in the Agreement.
(B) The Trustee is hereby appointed as Paying Agent for the Bonds.
The Authority may also from time to time appoint one or more other Paying Agents
in the manner and subject to the conditions set forth in Section 9.10 hereof for
the appointment of a successor Paying Agent. Each Paying Agent shall signify its
acceptance of the duties and obligations imposed upon it by this Indenture by
executing and delivering to the Authority and to the Trustee a written
acceptance thereof. The principal offices of the Paying Agents are designated as
the respective offices or agencies of the Authority for the payment of the
principal or Redemption Price of and the interest on the Bonds.
Section 9.2. Indemnity. The Trustee shall be under no obligation to
institute any suit, or to take any remedial proceeding under this Indenture, or
to enter any appearance in or in any way defend any suit in which it may be made
defendant, or to take any steps in the execution of the trusts hereby created or
in the enforcement of any rights and powers hereunder, until it shall be
indemnified to its satisfaction against any and all reasonable costs and
expenses, outlays, and counsel fees and other disbursements, and against all
liability not due to its wilful misconduct, gross negligence or bad faith.
Section 9.3. Responsibilities of Trustee. (A) The Trustee shall have
no responsibility in respect of the validity or sufficiency of this Indenture or
the security provided hereunder or the due execution hereof by the Authority, or
in respect of the title or the value of the Project, or in respect of the
validity of any Bonds authenticated and delivered by the Trustee in accordance
with this Indenture or to see to the recording or filing (but not refiling) of
the Indenture or any financing statement or any other document or instrument
whatsoever. The recitals, statements and representations contained herein and in
the Bonds shall be taken and construed as made by and on the part of the
Authority and not by the Trustee, and it does not assume any responsibility for
the correctness of the same; except that the Trustee shall be responsible for
its representation contained in its certificate on the Bonds.
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(B) The Trustee shall not be liable or responsible because of the
failure of the Authority to perform any act required of it by the Indenture or
the Financing Documents or because of the loss of any moneys arising through the
insolvency or the act or default or omission of any depositary other than itself
in which such moneys shall have been deposited. The Trustee shall not be
responsible for the application of any of the proceeds of the Bonds or any other
moneys deposited with it and paid out, invested, withdrawn or transferred in
accordance herewith or for any loss resulting from any such investment or for
any interest thereon. The Trustee shall not be liable in connection with the
performance of its duties hereunder except for its own willful misconduct, gross
negligence or bad faith. The immunities and exemptions from liability of the
Trustee shall extend to its directors, officers, employees and agents.
(C) The Trustee, prior to the occurrence of an event of default (as
defined in Section 8.1 hereof), undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an event of
default has occurred the Trustee shall exercise such of the rights and powers
vested in it hereby and use the same degree of care and skill in their exercise,
as a prudent person would exercise under the circumstances in the conduct of his
own affairs.
(D) The Trustee shall not be liable or responsible for the failure
of the Borrower to effect or maintain insurance on the Project as provided in
the Financing Documents nor shall it be responsible for any loss by reason of
want or insufficiency in insurance or by reason of the failure of any insurer in
which the insurance is carried to pay the full amount of any loss against which
it may have insured the Authority, the Borrower, the Trustee or any other
person.
(E) The Trustee shall not be responsible for compliance by the
Borrower with the covenants under Sections 6.12, 6.13, 6.14 and 6.15 of the Loan
Agreement, inclusive, except that the Trustee shall be responsible for
determining whether any certificate or report required by any such Section to be
delivered to the Trustee has been received in the prescribed form.
Section 9.4. Compensation. The Trustee and Paying Agents shall be
entitled to receive and collect from the Borrower as provided in the Financing
Documents payment [reasonable fees for services rendered hereunder and] for all
advances, counsel fees and other expenses reasonably made or incurred by the
Trustee or Paying Agents in connection therewith.
Section 9.5. Evidence on Which Trustee May Act. (A) In case at any
time it shall be necessary or desirable for the Trustee to make any
investigation concerning any fact preparatory to taking or not taking any
action, or doing or not doing anything, as such Trustee, and in any case in
which this Indenture or the Financing
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Documents provides for permitting or taking any action, it may rely upon any
certificate required or permitted to be filed with it under the provisions
hereof or of the Financing Documents, and any such certificate shall be evidence
of such fact or protect it in any action that it may or may not take, or in
respect of anything it may or may not do, in good faith, by reason of the
supposed existence of such fact.
(B) The Trustee shall be protected and shall incur no liability in
acting or proceeding, or in not acting or not proceeding, in good faith,
reasonably and in accordance with the terms of this Indenture or the Financing
Documents, upon any resolution, order, notice, request, consent, waiver,
certificate, statement, affidavit, requisition, bond or other paper or document
which it shall in good faith reasonably believe to be genuine and to have been
adopted or signed by the proper board or person, or to have been prepared and
furnished pursuant to any of the provisions of this Indenture or the Financing
Documents, or upon the written opinion of any attorney (who may be an attorney
for the Authority or the Borrower), engineer, appraiser, or accountant believed
by the Trustee to be qualified in relation to the subject matter.
Section 9.6. Evidence of Signatures of Bondholders and Ownership of
Bonds. (A) Any request, consent, revocation of consent or other instrument which
this Indenture may require or permit to be signed and executed by the
Bondholders may be in one or more instruments of similar tenor, and shall be
signed or executed by such Bondholders in person or by their attorneys appointed
in writing. Proof of (i) the execution of any such instrument, or of any
instrument appointing any such attorney, or (ii) the holding by any person of
the Bonds shall be sufficient for any purpose of this Indenture (except as
otherwise herein expressly provided) if made in the following manner, or in any
other manner satisfactory to the Trustee, which may nevertheless in its
discretion require further or other proof in cases where it deems the same
desirable:
(1) The fact and date of the execution by any Bondholder or his
attorney of such instruments may be proved by a guarantee of the signature
thereon by an officer of a bank or trust company or by the certificate of
any notary public or other officer authorized to take acknowledgements of
deeds, that the person signing such request or other instrument
acknowledged to him the execution thereof, or by an affidavit of a witness
of such execution, duly sworn to before such notary public or other
officer. Where such execution is by an officer of a corporation or a
member of a partnership, on behalf of such corporation, association or
partnership, such signature guarantee, certificate or affidavit shall be
accompanied by sufficient proof of his authority.
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(2) The ownership of registered Bonds and the amount, numbers and
other identification, and date of holding the same shall be proved by the
registry books.
(B) Except as otherwise provided in Section 10.3 hereof with respect
to revocation of a consent, any request or consent by the holder of any Bond
shall bind all future holders of such Bond in respect of anything done or
suffered to be done by the Authority or the Trustee or any Paying Agent in
accordance therewith.
Section 9.7. Trustee and Paying Agents May Deal in Bonds and With
Borrower. Any national banking association, bank or trust company acting as a
Trustee, or Paying Agent, and its directors, officers, employees or agents, may
in good faith buy, sell, own, hold and deal in any of the Bonds and may join in
any action which any Bondholder may be entitled to take and may otherwise deal
with the Borrower with like effect as if such association, bank or trust company
were not such Trustee or Paying Agent.
Section 9.8. Resignation or Removal of Trustee. (A) The Trustee may
resign and thereby become discharged from the trusts created under this
Indenture by notice in writing to be given to the Authority and by notice
mailed, postage prepaid to the Bondholders not less than sixty days before such
resignation is to take effect, but such resignation shall take effect
immediately upon the appointment of a successor Trustee, pursuant to Section 9.9
hereof, if such successor Trustee shall be appointed before the time specified
by such notice and shall accept such trust.
(B) The Trustee may be removed at any time by an instrument or
concurrent instruments in writing, filed with the Trustee and signed by the
holders of not less than a majority in principal amount of the Bonds then
Outstanding or their attorneys-in-fact duly authorized. The Trustee shall
promptly give notice of such filing to the Authority.
Section 9.9. Successor Trustee. (A) If at any time the Trustee shall
resign, or shall be removed, be dissolved or otherwise become incapable of
acting or shall be adjudged a bankrupt or insolvent, or if a receiver,
liquidator or conservator thereof, or of its property, shall be appointed, or if
any public officer shall take charge or control of the Trustee or of its
property or affairs, the position of Trustee shall thereupon become vacant. If
the position of Trustee shall become vacant for any of the foregoing reasons or
for any other reason, the Authority shall appoint a successor Trustee to fill
such vacancy provided that if the Authority fails to make such appointment, a
successor Trustee may be appointed by a majority of the holders of Outstanding
Bonds. Within twenty days after such appointment, the Authority shall cause
notice of such appointment to be mailed, postage prepaid, to all Bondholders.
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(B) At any time within one year after such vacancy shall have
occurred, the holders of a majority in principal amount of the Bonds then
Outstanding, by an instrument or concurrent instruments in writing, signed by
such Bondholders or their attorneys-in-fact thereunto duly authorized and filed
with the Authority, may appoint a successor Trustee, which shall, immediately
and without further act, supersede any Trustee theretofore appointed. If no
appointment of a successor Trustee shall be made pursuant to the foregoing
provisions of this Section, the holder of any Bond then Outstanding or any
retiring Trustee may apply to any court of competent jurisdiction to appoint a
successor Trustee. Such court may thereupon, after such notice, if any, as such
court may deem proper and prescribe, appoint a successor Trustee.
(C) Any Trustee appointed under this Section shall be a national
banking association or a bank or trust company duly organized under the laws of
the State or under the laws of any state of the United States authorized to
exercise corporate trust powers. At the time of its appointment, any successor
Trustee shall have a capital stock and surplus aggregating not less than
$10,000,000 (provided, however, that so long as the Original Purchaser is the
owner of all of the Bonds outstanding hereunder such requirement may be waived
by the Original Purchaser in its sole discretion).
(D) Every successor Trustee shall execute, acknowledge and deliver
to its predecessor, and also to the Authority, an instrument in writing
accepting such appointment, and thereupon such successor Trustee, without any
further act, deed, or conveyance, shall become fully vested with all moneys,
estates, properties, rights, immunities, powers and trusts, and subject to all
the duties and obligations of its predecessor, with like effect as if originally
named as such Trustee; but such predecessor shall, nevertheless, on the written
request of its successor or of the Authority, and upon payment of the
compensation, expenses, charges and other disbursements of such predecessor
which are due and payable pursuant to Section 9.4 hereof, execute and deliver an
instrument transferring to such successor Trustee all the estate, properties,
rights, immunities, powers and trusts of such predecessor (except for such
predecessor's rights to be indemnified). Every predecessor Trustee shall also
deliver all property and moneys held by it under the Indenture to its successor.
Should any instrument in writing from the Authority be required by any successor
Trustee for more fully and certainly vesting in such Trustee, the estate,
properties, rights, immunities, powers and trusts vested or intended to be
vested in the predecessor Trustee any such instrument in writing shall, on
request, be executed, acknowledged and delivered by the Authority. Any successor
Trustee shall promptly notify the Paying Agents of its appointment as Trustee.
(E) Any company into which the Trustee may be merged or converted or
with which it may be consolidated or any company
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resulting from any merger, conversion or consolidation to which it shall be a
party or any company to which the Trustee may sell or transfer all or
substantially all of its corporate trust business, provided such company shall
be a national banking association or a bank or trust company duly organized
under the laws of any state of the United States, and shall be authorized by law
to perform all the duties imposed upon it by the Indenture, shall be the
successor to such Trustee without the execution or filing of any paper or the
performance of any further act.
(F) Any Trustee which becomes incapable of acting as Trustee shall
pay over, assign and deliver to its successor any moneys, funds or investments
held by it and shall render an accounting to the Authority.
Section 9.10. Resignation or Removal of Paying Agent; Successors.
(A) Any Paying Agent may at any time resign and be discharged of the duties and
obligations created by the Indenture by giving at least sixty days' written
notice to the Authority and the Trustee. Any successor Paying Agent shall be
appointed by the Authority, with the approval of the Trustee, and shall be a
bank or trust company duly organized under the laws of any state of the United
States or a national banking association, having a capital stock and surplus
aggregating at least $5,000,000 (provided that, so long as the Original
Purchaser is the owner of all of the Bonds Outstanding hereunder such
requirement may be waived by the Original Purchaser in its sole discretion), and
willing and able to accept the office on reasonable and customary terms and
authorized by law to perform all the duties imposed upon it by this Indenture.
(B) In the event of the resignation or removal of any Paying Agent,
such Paying Agent shall pay over, assign and deliver any moneys held by it as
Paying Agent to its successor, or if there be no successor, to the Trustee. In
the event that for any reason there shall be a vacancy in the office of any
Paying Agent, the Trustee shall act as such Paying Agent.
Section 9.11. Project Equipment Description. (A) The Trustee shall
maintain a list of the property constituting the Project Equipment in the form
of the descriptions furnished by the Borrower pursuant to the Agreement.
(B) The description of each listed item of collateral constituting
the Project Equipment contained in an Appendix to the Agreement shall be in a
form sufficient for the creation and perfection of a security interest therein
under the Uniform Commercial Code of the State pursuant to the Security
Agreement, and the Borrower shall file or cause the filing of all UCC-1
financing statements in all places necessary to perfect the security interest of
the Trustee therein. Such list, as from time to time amended in accordance with
this Indenture and the Agreement, shall be maintained by the Trustee at its
principal
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office available for reasonable inspection during normal business hours by
interested persons.
Section 9.12. Continuation Statements. The Trustee shall cause all
continuation statements necessary to preserve and protect the security interest
of the Trustee in the Project Equipment pursuant to the Security Agreement as
assignee of the Authority's rights as secured party thereunder and of the
Trustee in the collateral pledged by the Authority in the granting clauses
hereof to be filed in the applicable State and local offices so as to continue
the effectiveness of the financing statements furnished by the Borrower to the
Trustee pursuant to the Uniform Commercial Code of the State.
Section 9.13. Obligation to Report Defaults. The Trustee shall give
the Authority an annual report as to whether or not it has become aware of any
failure of any party to the Agreement or to the Indenture to comply with the
provisions thereof and, if so, shall specify the details thereof. Subject to the
same limitations, set forth in the last sentence of Section 8.10, upon becoming
aware of any condition or event which constitutes, or with the giving of notice
or the passage of time would constitute, an event of default under the Financing
Documents or this Indenture, the Trustee shall deliver to the Authority a
written notice stating the existence thereof and the action it proposes to take
with respect thereto.
Section 9.14. Payments Due on non-Business Days. In any case where
the date of maturity of interest on or principal of the Bonds or the date fixed
for redemption of any Bonds shall, in the city of payment, be a day other than a
Business Day, then payment of such amount shall be made on the next succeeding
Business Day with the same force and effect as if made on the date of maturity
or the date fixed for redemption, and no interest shall accrue for the period
after such date.
Section 9.15. Moneys Held for Particular Bonds. The amounts held by
the Trustee or Paying Agents for the payment of the interest, principal or
Redemption Price due on any date with respect to particular Bonds, on and after
such date and pending such payment, shall be set aside on its books and held in
trust by it for the holders of the Bonds entitled thereto.
Section 9.16. Appointment of Co-Trustee. (A) It is the purpose of
this Indenture that there shall be no violation of any law of any jurisdiction
denying or restricting the right of banking corporations or associations to
transact business as trustee in such jurisdiction. It is recognized that in case
of litigation under this Indenture or the Agreement, and in particular in case
of the enforcement of either on default, or in case the Trustee deems that by
reason of any present or future law of any jurisdiction it may not exercise any
of the powers, rights or remedies herein granted to the Trustee or hold title to
the properties, in trust,
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as herein granted, or take any other action which may be desirable or necessary
in connection therewith, it may be necessary that the Trustee appoint an
additional individual or institution as a separate trustee or co-trustee. The
following provisions of this Section are adapted to these ends.
(B) In the event that the Trustee appoints an additional individual
or institution as a separate trustee or co-trustee, each and every remedy,
power, right, claim, demand, cause of action, immunity, estate, title, interest
and lien expressed or intended by this Indenture to be exercised by or vested in
or conveyed to the Trustee with respect thereto shall be exercisable by and vest
in such separate trustee or co-trustee but only to the extent necessary to
enable such separate trustee or co-trustee to exercise such powers, rights and
remedies, and every covenant and obligation necessary to the exercise thereof by
such separate trustee or co-trustee shall run to and be enforceable by either of
them.
(C) Should any instrument in writing from the Authority be required
by the separate trustee or co-trustee so appointed by the Trustee for more fully
and certainly vesting in and confirming to him or it such properties, rights,
powers, trusts, duties and obligations, any and all such instruments in writing
shall, on request, be executed, acknowledged and delivered by the Authority. In
case any separate trustee or co-trustee, or a successor to either, shall die,
become incapable of acting, resign or be removed, all the estates, properties,
rights, powers, trusts, duties and obligations of such separate trustee or
co-trustee, so far as permitted by law, shall vest in and be exercised by the
Trustee until the appointment of a new trustee or successor to such separate
trustee or co-trustee.
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ARTICLE X
AMENDMENTS OF INDENTURE
Section 10.1. Limitation on Modifications. This Indenture shall not
be modified or amended in any respect except as provided in and in accordance
with and subject to the provisions of this Article.
Section 10.2. Supplemental Indentures Without Bondholders' Consent.
(A) The Authority may, from time to time and at any time, adopt Supplemental
Indentures without consent of the Bondholders for any of the following purposes:
(1) To cure any formal defect, omission or ambiguity in this
Indenture or in any description of property subject to the lien hereof.
(2) To amend any provision of this Indenture, in a manner which is
not materially adverse to the interests of the Bondholders and does not
impair the security for the Bonds.
(3) To grant to or confer upon the Trustee for the benefit of the
Bondholders any additional rights, remedies, powers, authority or security
which may lawfully be granted or conferred and which are not contrary to
or inconsistent with this Indenture as theretofore in effect.
(4) To add to the covenants and agreements of the Authority in this
Indenture other covenants and agreements to be observed by the Authority
which are not contrary to or inconsistent with this Indenture as
theretofore in effect.
(5) To add to the limitations and restrictions in this Indenture
other limitations and restrictions to be observed by the Authority which
are not contrary to or inconsistent with this Indenture as theretofore in
effect.
(6) To confirm, as further assurance, any pledge under, and the
subjection to any lien or pledge created or to be created by, this
Indenture, of the properties of the Project, or revenues or other income
from or in connection with the Project or of any other moneys, securities
or funds, or to subject to the lien or pledge of this Indenture additional
revenues, properties or collateral.
(7) To authorize the issuance of Additional Bonds and prescribe the
terms, forms and details thereof not inconsistent with this Indenture.
(B) Before the Authority shall adopt any Supplemental Indenture
pursuant to this Section, there shall have been filed with the Trustee an
opinion of counsel satisfactory to the Trustee
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stating that such Supplemental Indenture is authorized or permitted by this
Indenture and complies with its terms, and that upon enactment it will be valid
and binding upon the Authority in accordance with its terms.
(C) Notwithstanding the foregoing, so long as the Original Purchaser
is the Owner of all of the Initial Bonds Outstanding, no amendment or supplement
to this Indenture shall be effected without the written consent of the Original
Purchaser.
Section 10.3. Supplemental Indentures with Bondholders' Consent. (A)
Subject to the terms and provisions contained in this Article, the holders of
not less than a majority in aggregate principal amount of the Bonds then
Outstanding shall have the right from time to time, to consent to and approve
the adoption by the Authority of any Supplemental Indenture as shall be deemed
necessary or desirable by the Authority for the purpose of modifying, altering,
amending, adding to or rescinding, in any particular, any of the terms or
provisions contained herein. Nothing herein contained shall permit, or be
construed as permitting, without the consent of all of the Bondholders (i) a
change in the terms of redemption or maturity of the principal of or the
interest on any Outstanding Bond, or a reduction in the principal amount or
Redemption Price of any Outstanding Bond or the rate of interest thereon,
without the consent of the holder of such Bond, or (ii) the creation of a lien
upon or pledge of revenues or other income from or in connection with the
Project other than the lien or pledge created by this Indenture or (iii) a
preference or priority of any Bond or Bonds over any other Bond or Bonds, or
(iv) a reduction in the aggregate principal amount of the Bonds required for
consent to such Supplemental Indenture.
(B) If at any time the Authority shall determine to adopt any
Supplemental Indenture for any of the purposes of this Section, it shall cause
notice of the proposed Supplemental Indenture to be mailed, postage prepaid, to
all Bondholders. Such notice shall briefly set forth the nature of the proposed
Supplemental Indenture, and shall state that a copy thereof is on file at the
offices of the Trustee for inspection by all Bondholders.
(C) Within one year after the date of such notice, the Authority may
adopt such Supplemental Indenture in substantially the form described in such
notice only if there shall have first been filed with the Authority (i) the
written consents of holders of not less than a majority in aggregate principal
amount of the Bonds then Outstanding and (ii) an opinion of counsel satisfactory
to the Trustee stating that such Supplemental Indenture is authorized or
permitted by this Indenture and complies with its terms, and that upon adoption
it will be valid and binding upon the Authority in accordance with its terms.
Each valid consent shall be effective only if accompanied by proof of the
holding, at the date of such consent, of the Bonds with respect to which such
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consent is given. A certificate or certificates by the Trustee that it has
examined such proof and that such proof is sufficient in accordance with this
Indenture shall be conclusive that the consents have been given by the holders
of the Bonds described in such certificate or certificates. Any such consent
shall be binding upon the holder of the Bonds giving such consent and upon any
subsequent holder of such Bonds and of any Bonds issued in exchange therefor
(whether or not such subsequent holder thereof has notice thereof), unless such
consent is revoked in writing by the holder of such Bonds giving such consent or
a subsequent holder thereof by filing such revocation with the Trustee prior to
the adoption of such Supplemental Indenture.
(D) If the holders of not less than the percentage of Bonds required
by this Section shall have consented to and approved the execution thereof as
herein provided, no holder of any Bond shall have any right to object to the
enactment of such Supplemental Indenture, or to object to any of the terms and
provisions contained therein or the operation thereof, or in any manner to
question the propriety of the adoption thereof, or to enjoin or restrain the
Authority from adopting the same or from taking any action pursuant to the
provisions thereof.
(E) Upon the adoption of any Supplemental Indenture pursuant to the
provisions of this Section, this Indenture shall be deemed to be modified and
amended in accordance therewith, and the respective rights, duties and
obligations under this Indenture of the Authority, the Trustee and all holders
of Bonds then Outstanding shall thereafter be determined, exercised and enforced
under this Indenture, subject in all respects to such modifications and
amendments.
(F) Notwithstanding the foregoing, so long as the Original Purchaser
is the Owner of all of the Initial Bonds Outstanding, no amendment or supplement
to this Indenture shall be effected without the written consent of the Original
Purchaser.
Section 10.4. Supplemental Indenture Part of the Indenture. Any
Supplemental Indenture adopted in accordance with the provisions of this Article
shall thereafter form a part of this Indenture and all the terms and conditions
contained in any such Supplemental Indenture as to any provisions authorized to
be contained therein shall be deemed to be part of the terms and conditions of
this Indenture for any and all purposes. The Trustee shall execute any
Supplemental Indenture adopted in accordance with the provisions of Sections
10.2 or 10.3 hereof; provided, however, that the Trustee may refuse to execute
any Supplemental Indenture which it reasonably believes would subject it to
liability or materially change its rights, duties or obligations hereunder in a
manner adverse to the Trustee.
Section 10.5. Trustee Authorized to Join in Supplements; Reliance on
Counsel. The Trustee is authorized to join with the
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Authority in the execution and delivery of any Supplemental Indenture permitted
by this Article X and in so doing shall be fully protected by an opinion of
counsel that such Supplemental Indenture is so permitted and has been duly
authorized by the Authority and that all things necessary to make it a valid and
binding agreement have been done.
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ARTICLE XI
AMENDMENTS OF FINANCING DOCUMENTS
Section 11.1. Rights of Borrower. Anything herein to the contrary
notwithstanding, any Supplemental Indenture under Article X hereof which affects
any rights, powers and authority of the Borrower under the Financing Documents
or of any subsequent user of the Project or requires a revision of the Financing
Documents or subsequent agreement with respect to the Project shall not become
effective unless and until the Borrower or such subsequent user, as the case may
be, shall have given its written consent signed by its duly Authorized
Representative to such Supplemental Indenture.
Section 11.2. Amendments of Financing Documents Not Requiring
Consent of Bondholders. The Authority and the Trustee may, without the consent
of or notice to the Bondholders, consent to any amendment, change or
modification of the Financing Documents for the purpose of curing any ambiguity
or formal defect therein or making any amendment to any provision of the
Financing Documents which is not materially to the prejudice of the Trustee or
the holders of the Bonds. The Trustee shall have no liability to any Bondholder
or any other person for any action taken by it in good faith pursuant to this
Section and shall be fully protected by an opinion of counsel that any such
action is permitted by this Section.
Notwithstanding the foregoing, so long as the Original Purchaser is
the Owner of all of the Initial Bonds Outstanding, no amendment or supplement to
this Indenture shall be effected without the written consent of the Original
Purchaser.
Section 11.3. Amendments of Financing Documents Requiring Consent of
Bondholders. Except as provided in Section 11.2 hereof, the Authority and the
Trustee shall not consent to any amendment, change or modification of the
Financing Documents, including the substitution of an assignee for the Borrower
and the release of the Borrower from the obligations of the Financing Documents,
except in the event of a corporate reorganization of the Borrower, without
mailing of notice and the written approval or consent of the holders of not less
than a majority in aggregate principal amount of the Bonds at the time
Outstanding given and procured as in Section 10.3 hereof provided. If at any
time the Borrower or a subsequent user of the Project shall request the consent
of the Trustee to any such proposed amendment, change or modification, the
Trustee shall cause notice of such proposed amendment, change or modification to
be mailed in the same manner as is provided in Article X hereof with respect to
Supplemental Indentures. Such notice shall briefly set forth the nature of such
proposed amendment, change or modification and shall state that copies of the
instrument embodying the same are on file
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at the principal office of the Trustee for inspection by all Bondholders.
Notwithstanding the foregoing, so long as the Original Purchaser is
the Owner of all of the Initial Bonds Outstanding, no amendment or supplement to
this Indenture shall be effected without the written consent of the Original
Purchaser.
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ARTICLE XII
DISCHARGE OF INDENTURE
Section 12.1. Defeasance. (A) If the Authority shall pay or cause to
be paid, or there shall otherwise be paid, to the holders of all Bonds the
principal or Redemption Price, if applicable, interest and all other amounts due
or to become due thereon or in respect thereof, at the times and in the manner
stipulated therein and in this Indenture, and if all the fees, expenses and
liabilities of the Trustee shall have been paid or provided for, then the pledge
of any revenues or receipts from or in connection with the Financing Documents
or the Project under this Indenture and the estate and rights hereby granted,
and all covenants, agreements and other obligations of the Authority to the
Bondholders hereunder shall thereupon cease, terminate and become void and be
discharged and satisfied and such Bonds shall thereupon cease to be entitled to
any lien, benefit or security hereunder, except as to moneys or securities held
by the Trustee or the Paying Agents as provided below in this subsection. At the
time of such cessation, termination, discharge and satisfaction, (1) the Trustee
shall cancel and discharge the lien of this Indenture and of the Mortgage and
the Security Agreement and execute and deliver to the Borrower all such
instruments as may be appropriate to satisfy such liens and to evidence such
discharge and satisfaction, and (2) the Trustee, the Authority and the Paying
Agents shall pay over or deliver to the Borrower or on its order all moneys or
securities held by them pursuant to the Indenture which are not required (a) for
the payment of principal or Redemption Price, if applicable, or interest on
Bonds not theretofore surrendered for such payment or redemption, or (b) for the
payment of all such other amounts due or to become due under the Financing
Documents.
(B) Bonds or interest installments for the payment or redemption of
which moneys (or Federal Securities, the principal of and interest on which when
due, together with the moneys, if any, set aside at the same time, will provide
funds sufficient without reinvestment for such payment or redemption) shall then
be set aside and held in trust by the Trustee or Paying Agents, whether at or
prior to the maturity or the redemption date of such Bonds, shall be deemed to
have been paid within the meaning and with the effect expressed in subsection
(A) of this Section, if (a) in case any such Bonds are to be redeemed prior to
the maturity thereof, all action necessary to redeem such Bonds shall have been
taken and notice of such redemption shall have been duly given or provision
satisfactory to the Trustee shall have been made for the giving of such notice,
and (b) if the maturity or redemption date of any such Bond shall not then have
arrived, provision shall have been made by deposit with the Trustee or other
methods satisfactory to the Trustee for the payment to the holders of any such
Bonds upon surrender thereof, whether or not prior to the maturity or redemption
date thereof, of the full amount to which they would be entitled by way of
principal or Redemption Price and interest and
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all other amounts then due under the Financing Documents to the date of such
maturity or redemption, and provision satisfactory to the Trustee shall have
been made for the mailing of a notice to, the holders of such Bonds that such
moneys are so available for such payment.
Notwithstanding the foregoing, so long as the Original Purchaser is
the owner of all of the Initial Bonds Outstanding, no defeasance of the Initial
Bonds shall be effected in accordance with this subsection (B) without the prior
written consent of the Original Purchaser, which consent may be granted or
withheld by the Original Purchaser in its sole discretion and, if granted, may
be conditioned upon such further provision with respect thereto as the Original
Purchaser shall reasonably require.
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<PAGE>
ARTICLE XIII
GENERAL PROVISIONS
Section 13.1. Notices. Any notice, request, demand, communication or
other paper shall be sufficiently given and shall be deemed given when delivered
or mailed by registered or certified mail, return receipt requested, postage
prepaid, or sent by telegram, addressed as follows: if to the Authority, at 999
West Street, Rocky Hill, Connecticut 06067, Attention: Senior Vice President -
Public Finance; if to the Borrower, at (i) West Kenoshia Avenue, Danbury,
Connecticut 06810 - Attention: Vice President - Legal Affairs and Investor
Relations and (ii) for notices sent after May 1, 1998 to the Borrower at 55
Church Hill Road, Newtown, Ct 06470, Attention: Vice President - Legal Affairs
and Investor Relations; if to the Trustee, at 63 Wall Street, New York, New York
10005, Attention: Corporate Trust Administration, and if to the Original
Purchaser, at 59 Wall Street, New York, New York 10005, Attention: Chief Credit
Officer. A duplicate copy of each notice required to be given hereunder by the
Trustee to either the Authority or the Borrower shall also be given to the
other. Any Notice Party may designate any further or different addresses to
which subsequent notices, certificates or other communications shall be sent.
Section 13.2. Covenant Against Discrimination. The Trustee agrees
and warrants that in the performance of this Indenture it will not discriminate
against any person or group of persons on the grounds of race, color, religion,
national origin, age, sex, sexual orientation, marital status, physical or
learning disability, political beliefs, mental retardation, or history of mental
disorder in any manner prohibited by the laws of the United States or of the
State.
Section 13.3. Parties Interested Herein. Except as otherwise
specifically provided herein, nothing in this Indenture expressed or implied is
intended or shall be construed to confer upon, or to give to, any person or
entity, other than the Authority, the Trustee, the Borrower, the Paying Agent,
if any, and the registered owners of the Bonds, any right, remedy or claim under
or by reason of this Indenture or any covenant, condition or stipulation hereof,
and all covenants, stipulations, promises and agreements in this Indenture
contained by and on behalf of the Authority shall be for the sole and exclusive
benefit of the Authority, the Trustee, the Borrower, the Paying Agent, if any,
and the registered owners of the Bonds.
Section 13.4. Effective Date; Counterparts. This Indenture shall
become effective on delivery. It may be simultaneously executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
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<PAGE>
Section 13.5. Date for Identification Purposes Only. The date of
this Indenture shall be for identification purposes only and shall not be
construed to imply that this Indenture was executed as of any date other than
the respective dates of the acknowledgements of the parties hereto.
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IN WITNESS WHEREOF, the Connecticut Development Authority has caused
these presents to be signed in its name and behalf by an Authorized
Representative, and to evidence its acceptance of the trusts hereby created
Brown Brothers Herriman Trust Company, as trustee, has caused these presents to
be signed in its name and behalf by its duly authorized officer, as of the date
first above written.
CONNECTICUT DEVELOPMENT AUTHORITY
By /s/ [ILLEGIBLE]
--------------------------------------
Authorized Representative
BROWN BROTHERS HARRIMAN
TRUST COMPANY,
as Trustee
By /s/ Thomas J. Mullin
--------------------------------------
Thomas J. Mullin
Vice President
AGREED TO AND ACCEPTED BY:
per pro. BROWN BROTHERS HARRIMAN & CO.,
as Original Purchaser
By /s/ W. Carter Sullivan, III
--------------------------------------
W. Carter Sullivan, III
Senior Manager
AGREED TO AND ACCEPTED BY:
SONICS & MATERIALS, INC.,
as Borrower
By /s/ [ILLEGIBLE]
--------------------------------------
Authorized Representative
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APPENDICES
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DESCRIPTION OF PROJECT REALTY
<PAGE>
DESCRIPTION OF PROJECT EQUIPMENT
All personal property, goods, leasehold improvements, machinery,
equipment, furnishings, furniture, fixtures, tools, and attachments, wherever
located and whether now owned or hereafter acquired, used in the operation of
the Project and financed with the proceeds of any Bonds, as reflected in the
records of the Trustee maintained in accordance with Section 9.11 of the
Indenture, any accessions thereto, substitutions therefor and replacements
thereof, and proceeds and products thereof.
CONNECTICUT DEVELOPMENT AUTHORITY
and
SONICS & MATERIALS, INC.
and
BROWN BROTHERS HARRIMAN TRUST COMPANY
AS TRUSTEE
================================================================================
TAX REGULATORY AGREEMENT
================================================================================
Dated as of December 12, 1997
Connecticut Development Authority
$3,810,000 Industrial Development Bonds
(Sonics & Materials, Inc. Project) Series 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION..................... 2
Section 1.1. Definitions................................................. 2
Section 1.2. Interpretation.............................................. 12
Section 1.3. Covenant with Owners........................................ 13
ARTICLE II
THE PROJECT.............................. 14
Section 2.1. Description of the Project.................................. 14
Section 2.2. Project Representations..................................... 14
ARTICLE III
GENERAL REPRESENTATIONS AND COVENANTS OF THE AUTHORITY......... 16
Section 3.1. Authorization and Public Approval........................... 16
Section 3.2. Reporting Requirements; Volume Cap;
Election as to Issue Size................................ 16
Section 3.3. Issuance Costs.............................................. 17
ARTICLE IV
USE OF PROCEEDS OF THE BONDS...................... 18
Section 4.1. Company's Certification as to Project Costs................. 18
Section 4.2. Final Disbursement.......................................... 20
Section 4.3. Excess Proceeds Redemption.................................. 20
Section 4.4. Form 8038................................................... 21
Section 4.5. Issuance Costs of Bonds..................................... 21
Section 4.6. Sale of the Project......................................... 21
Section 4.7. Change in Use............................................... 21
ARTICLE V
AGGREGATE FACE AMOUNT......................... 23
Section 5.1. Prior Issues................................................ 23
Section 5.2. Capital Expenditures and Other Facilities................... 23
Section 5.3. Aggregate Face Amount....................................... 24
Section 5.4. Action Affecting Aggregate Face Amount...................... 24
Section 5.5. Aggregation of Projects with Respect to
Capital Expenditures..................................... 25
Section 5.6. Covenant.................................................... 25
Section 5.7. Violation of $10,000,000 Limit; Loss of
Interest Deduction....................................... 25
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TABLE OF CONTENTS (cont'd)
Page
----
ARTICLE VI
AVERAGE ECONOMIC LIFE AND
AVERAGE MATURITY OF BONDS....................... 26
Section 6.1. Average Economic Life....................................... 26
Section 6.2. Average Maturity of the Bonds............................... 27
ARTICLE VII
COMPOSITE ISSUES AND FEDERAL GUARANTEES................ 28
Section 7.1. Composite Issues............................................ 28
Section 7.2. Federal Guarantees.......................................... 28
ARTICLE VIII
COVENANTS AGAINST ARBITRAGE BONDS................... 29
Section 8.1. Covenants Against Arbitrage Bonds........................... 29
Section 8.2. Responsibility for Rebate Compliance........................ 29
Section 8.3. Covenants Pertaining to Rebate Requirement.................. 29
Section 8.4. Non-Arbitrage Certifications of the Authority............... 41
Section 8.5. Universal Cap Limit on Allocation of
Nonpurpose Investments................................... 47
Section 8.6. Yield Reduction Payments.................................... 48
Section 8.7. Non-Arbitrage Certifications of the Company................. 48
ARTICLE IX
$40 MILLION LIMITATION ON PAB ACTIVITY................. 50
Section 9.1. Current Test-Period Beneficiaries of the Bonds.............. 50
Section 9.2. Current Compliance.......................................... 50
Section 9.3. Future Compliance........................................... 50
Section 9.4. Allocation Rules............................................ 51
ARTICLE X
COVENANTS AND AMENDMENTS........................ 52
Section 10.1. Compliance with Code....................................... 52
Section 10.2. Amendments................................................. 52
Section 10.3. Reliance................................................... 52
Section 10.4. Execution in Counterpart................................... 52
Section 10.5 Trustee Notice Requirements ............................... 53
Schedule A PUBLIC HEARING PROCEDURES
FOR FEDERAL TAX COMPLIANCE PURPOSES........................ 54
Schedule B RECORD OF PUBLIC HEARING................................... 57
Schedule C APPROVAL OF APPLICABLE ELECTED REPRESENTATIVE.............. 58
Schedule D-1 USE OF BOND PROCEEDS....................................... 59
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TABLE OF CONTENTS (cont'd)
Page
----
Schedule D-2 SUMMARY OF USE OF BOND PROCEEDS............................ 61
Schedule E [RESERVED]................................................. 63
Schedule F1 IDENTIFICATION OF ASSETS................................... 64
Schedule F2 ECONOMIC LIFE.............................................. 65
Schedule F3 ADJUSTED ECONOMIC LIFE..................................... 67
Schedule F4 AVERAGE ECONOMIC LIFE...................................... 68
Schedule F5 AVERAGE MATURITY OF THE BONDS.............................. 69
Schedule G CERTIFICATE OF COMPLIANCE WITH
$40 MILLION TAX-EXEMPT PRIVATE
ACTIVITY BOND LIMIT........................................ 70
Schedule H ISSUE PRICE LETTER......................................... 71
Schedule I FORM OF CERTIFICATION IN CONNECTION
WITH AN INVESTMENT CONTRACT................................ 72
Schedule J FORM OF CERTIFICATION OF POSTED YIELD
OF A CERTIFICATE OF DEPOSIT................................ 73
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<PAGE>
TAX REGULATORY AGREEMENT
THIS TAX REGULATORY AGREEMENT, dated as of December 12, 1997, is by and
among the CONNECTICUT DEVELOPMENT AUTHORITY, a body politic and corporate
constituting a public instrumentality and political subdivision of the State of
Connecticut (the "Authority"), Sonics & Materials, Inc., a corporation, duly
constituted and validly existing under the laws of the State of Delaware
("Company"), and Brown Brothers Harriman Trust Company, as trustee (the
"Trustee") under the Indenture of Trust dated as of December 1, 1997, which
parties agree as follows:
W I T N E S S E T H:
WHEREAS, pursuant to a bond resolution duly adopted and the Indenture, the
Authority is issuing the Connecticut Development Authority $3,810,000 Variable
Rate Demand Industrial Development Bonds (Sonics & Materials, Inc. Project)
Series 1997 ("Bonds") on the date hereof and, pursuant to a loan agreement with
the Company, is loaning the proceeds of the Bonds to the Company in order to
finance and refinance the acquisition, construction and equipping of the
Project;
WHEREAS, the acquisition, construction and equipping of the Project will
proceed with due diligence;
WHEREAS, in order to ensure that the requirements of the Internal Revenue
Code of 1986, as amended, are and will continue to be met, the Authority, the
Company, and the Trustee have determined to enter into this Tax Regulatory
Agreement in order to set forth certain representations, expectations,
conditions and covenants relating to the activities of the Authority, the
Company and the Trustee, the Bonds, the Project and the application of proceeds
of the Bonds and other related amounts and unexpended proceeds and other amounts
relating to the Bonds;
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the Authority, the Company, and
the Trustee hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. Except as otherwise provided in this section
1.1, capitalized terms used in this Agreement (including the recitals to this
Agreement) shall have the meaning given such terms in the Indenture, or if not
defined therein, in the Loan Agreement. The following words and terms as used in
this Tax Regulatory Agreement shall have the following meanings:
"Act" means Connecticut General Statutes, Section 32-1a et seq.
"Administrative Costs" includes reasonable, direct costs paid by or on
behalf of an issuer for brokerage or selling commissions (but not legal and
accounting fees), investment advisory fees, recordkeeping, safekeeping, custody,
and similar costs, but not general overhead and similar indirect costs (such as
employee salaries and office expenses) and rebate computation costs.
Administrative costs include a brokerage commission, but only to the extent that
the Present Value of the commission does not exceed the Present Value of annual
payments equal to .05 percent of the weighted average amount reasonably expected
to be invested each year of the term of the contract, for an investment contract
purchased with Gross Proceeds regardless of whether the brokerage commission is
paid or incurred on behalf of the Authority or the provider of the investment
contract. For this purpose, Present Value is computed using the taxable discount
rate used by the parties to compute the commission, or, if not readily
ascertainable, a reasonable taxable discount rate. Administrative costs are not
reasonable unless they are comparable to administrative costs that would be
charged for the same investment or a reasonable comparable investment if the
investment were made from a source of funds other than gross proceeds of
tax-exempt bonds. In the case of publicly offered regulated investment companies
(as defined in Code Section 67(c)(2)(B)) and Commingled Funds in which the
Issuer and related parties own less than a 10% interest, reasonable
administrative costs include indirect costs. For any semi-annual period, a
Commingled Fund satisfies the 10% requirement if, based on average amounts on
deposit, this requirement is satisfied for the prior semi-annual period and the
fund does not accept deposits that would cause to fail to meet this requirement.
"Aggregate Face Amount" means the aggregate face amount of the Bonds
determined in accordance with Section 144(a) of the Code.
"Annual Debt Service" means the scheduled amount of interest and
amortization of principal payable for any Bond Year with respect to the issue.
For purposes of determining the debt
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<PAGE>
service on an issue, there shall not be taken into account amounts scheduled
with respect to any obligation (or portion thereof) that has been retired before
the beginning of the Bond Year.
"Applicable Elected Representative" means the Governor of the State of
Connecticut.
"Average Economic Life" means the average reasonably expected economic
life, within the meaning of Section 147(b) of the Code, of the assets financed
with the proceeds of the Bonds.
"Average Maturity" means the average maturity of the Bonds within the
meaning of Section 147(b) of the Code.
"Bona Fide Debt Service Fund" means "Bona Fide Debt Service Fund" as such
term is defined in Treas. Reg. ss. 1.148-1(b).
"Bond" or "Bonds" means the Authority's $3,810,000 Industrial Development
Bonds (Sonics & Materials, Inc. Project) Series 1997.
"Bond Counsel" means a firm of attorneys which is nationally recognized as
having experience in the field of municipal finance and which is satisfactory to
the Authority.
"Bond Proceeds" means the amount paid to the Authority by the initial
purchasers of the Bonds as the purchase price, including accrued interest as
defined in Treas. Reg. 1.148-1(b), if any.
"Bond Year" shall mean the period beginning on the date hereof (the date
of delivery of the Bonds) and ending on December 12, 1998; each subsequent
one-year period ending on the anniversary of the day so selected, during which
the Bonds are outstanding; and the period ending on the date the last
outstanding Bond is discharged and beginning the day after the end of the
previous Bond Year.
"Bond Yield" means the Yield on the Variable Yield Issue or the Fixed
Yield Issue, as computed below in Sections 8.3(g) and (h).
"Calculation Date" shall mean the last day of each Bond Year through the
Final Bond Year of the issue.
"Code" means the Internal Revenue Code of 1986 as amended, and the final,
temporary and proposed regulations of the Department of the Treasury promulgated
thereunder.
"Commingled Fund" means any fund or account (A) that contains both Gross
Proceeds of the Bonds and amounts in excess
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<PAGE>
of $25,000 that are not such Gross Proceeds (e.g., revenues, proceeds of other
obligations) and (B) in which the Gross Proceeds and other amounts are invested
collectively without regard to the source of moneys in the fund or account. An
open-end regulated investment company as defined in Code Section 851 (i.e., a
regulated investment company that offers for sale or has outstanding any
redeemable security as defined in section 2(a)(32) of the Investment Company Act
of 1940) is not a Commingled Fund.
"Common Reserve Fund or Sinking Fund" means a Commingled Fund that serves
as a reserve or sinking fund for the Bonds and at least one other issue of
obligations.
"Computation Date" shall mean an Installment Computation Date or the Final
Computation Date.
"Computation Credit" shall mean with respect to the Bonds a credit equal
to $1,000 on the last day of each Bond Year during which there are amounts
allocable to Gross Proceeds that are subject to the Rebate Requirement and on
the final maturity date of the Bonds.
"Computation Period" means the period between Computation Dates.
"Conversion Date" means the date the Bonds first become a Fixed Yield
Issue.
"Date of Issue" means the date indicated on the cover hereof.
"De Minimis Amount" shall mean with respect to original issue discount or
premium on an obligation an amount that does not exceed 2% multiplied by the
obligations's stated redemption price at maturity.
"Established Securities Market" shall mean any of the following: a
national securities exchange registered under section 6 of the Securities
Exchange Act of 1934; an interdealer quotation system sponsored by a national
securities association registered under section 15A of the Securities Exchange
Act of 1934; the International Stock Exchange of the United Kingdom and the
Republic of Ireland, Limited, the Frankfurt, Luxembourg and Tokyo Stock
Exchanges and any other foreign exchange or board of trade designated by the
IRS; a board of trade designated as a contract market by the Commodities Futures
Trading Commission or on an interbank market; a system of general circulation (a
quotation medium) that provides a reasonable basis to determine fair market
value by disseminating either recent price quotations of certified brokers and
dealers (including those of a single, identified broker or dealer) or actual
prices of recent sales
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<PAGE>
transactions; and dealers and brokers having readily available price quotations.
"Fair Market Value" means, when applied to an Investment, the fair market
value of such investment as determined by the Authority in accordance with
Section 8.3(e) hereof.
"Final Computation Date" shall mean the date that the last outstanding
Bond is discharged.
"Fixed Yield Bond" means any Bond during the period after the date on
which the interest rate and yield on the Bond is fixed and determinable through
its final maturity (i.e. any Bond from the date that it bears interest at a
Fixed Rate.
"Fixed Yield Investment" shall mean any Investment the yield on which is
fixed and determinable on the date of original issue.
"Fixed Yield Issue" means the Bonds as of the first date that all the
Bonds are Fixed Yield Bonds, or at the election of the Authority, on the first
Computation Date following the date on which all the Bonds are Fixed Yield
Bonds.
"Gross Proceeds" shall mean:
(i) the proceeds derived by the Authority from the sale of the Bonds;
(ii) amounts held in the Debt Service Fund;
(iii) other amounts pledged directly or indirectly as security for the
payment of debt service on the Bonds or for any credit enhancement provider,
including amounts, if any, pledged by the Company or any Related Person as
security for the Loan Agreement or credit enhancement agreement, but only if
there is reasonable assurance that such other amounts will be available to pay
debt service on the Bonds, or amounts due under such agreements in the event
financial difficulties are encountered;
(iv) all amounts received by or on behalf of the Authority under the Loan
Agreement with respect to the Bonds, other than amounts properly allocable to
administrative costs set forth in Treasury Regulations Section 1.148-5(e)
(which costs include the cost of issuing, carrying, or repaying the Bonds,
underwriter's discount, and the cost of purchasing, carrying and selling or
redeeming the Loan Agreement) and other than amounts within the allowed .125%
spread between the Bond Yield and the yield on the Loan Agreement;
(v) amounts treated as "replacement proceeds" of the Bonds, as defined in
Treasury Regulations Section 1.148-1(c), if any (i.e., amounts sufficiently
connected to the Project to conclude that such amounts would have been used for
the Project if the
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Bonds had not been issued). The mere availability or preliminary earmarking of
such amounts for the Project is not a sufficient connection. Amounts held under
an agreement to maintain the amounts at a particular level for the direct or
indirect benefit of the Bondholders or any guarantor of the Bonds are
replacement proceeds unless the Authority or Company can grant rights in the
amounts that are superior to the rights of the Holders or guarantor, or the
amounts are reasonably needed at a level that is tested no sooner than every six
months and may be spent subject to a requirement to replenish by the next
testing date; and
(vi) any amounts received as a result of investing the amounts described
in (i), (ii), (iii), (iv) and (v) above.
"Guaranteed Investment Contract" means an investment that has specifically
negotiated withdrawal or reinvestment provisions and a specifically negotiated
interest rate and also means any agreement to supply investments on two or more
future dates (i.e., forward supply contract).
"Hedge" means a contract entered into by the Authority or the Company
primarily to reduce the risk of interest rate changes with respect to the Bonds
(e.g., an interest rate swap, an interest rate cap, a future contract, a forward
contract, or an option.
"Indenture" means that certain Indenture of Trust, dated as of December 1,
1997, by and between the Authority and the Trustee relating to the Bonds.
"Inducement Resolution" means the resolution adopted by the Authority on
June 18, 1997 accepting the application of the Company for assistance in the
financing of the Project.
"Installment Computation Date" shall mean December 12, 2002, and the end
of each succeeding fifth Bond Year.
"Investment" shall mean any security or obligation, any annuity contract,
or any other investment-type property. An investment includes any property held
principally as a passive vehicle to provide income, e.g., a prepayment for
property or services where the principal purpose is to receive an investment
return over the time the prepayment otherwise would be made. A prepayment is not
an investment if it is made for a substantial non-investment purpose and there
is no commercially reasonable alternative to the prepayment or if it is made
substantially on the same terms as the terms permitted a substantial percentage
of similarly situated persons who are not beneficiaries of tax-exempt financing.
An investment includes a contract that would be a hedge (within the meaning of
Treas. Reg. ss.1.148-4(h)) except that it contains a significant investment
element. An interest rate cap contains a significant investment element if the
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payments for the cap are made more quickly than in level annual installments
over the term of the cap or the cap hedged a bond that is not a variable rate
debt instrument under Treas. Reg. ss.1.1275-5. A cap generally contains a
significant investment element if the cap rate is less than the on-market swap
rate on the date the cap is entered into. A Tax-Exempt Investment is not an
Investment.
"Investment Proceeds" means all income, gain or other increment derived
from the investment and reinvestment of proceeds derived from the sale of the
Bonds.
"Issuance Costs" shall have the meaning ascribed to such phrase in Section
147(g) of the Code which describes the same to mean in general all costs
incurred in connection with the borrowing, including, but not limited to,
underwriter's spread, discount or fees, counsel fees (including bond counsel,
underwriter's counsel, Authority's counsel, Company's counsel and specialized
counsel fees), initial fee of the Trustee, fees to the Authority, rating agency
fees, holder fees, accountant fees, printing costs and costs incurred in
connection with obtaining the required public approval for the issuance of the
Bonds.
"Issue Price of the Bonds" shall mean the issue price as defined in Code
Section 1273 and 1274 and generally is the first price at which a substantial
(i.e., 10%) amount of the Bonds is sold to the public (not including bond
houses, brokers, or a similar person or organizations acting in the capacity of
underwriters or wholesalers). The issue price of Bonds for which a bona fide
public offering is made is determined as of the date of sale based on reasonable
expectations regarding the initial public offering price.
"Loan Agreement" means the Loan Agreement, dated as of December 1, 1997,
between the Authority and the Company.
"Municipality" means the Town of Newtown, Connecticut.
"Net Proceeds" means Proceeds reduced by the amount of Proceeds deposited
in a debt service reserve fund.
"Net Sale Proceeds" means Sale Proceeds of the Bonds less the portion
thereof invested as a reasonably required reserve fund and as part of a "minor
portion" under Code Section 148(e).
"Nonpurpose Investment" means all Investment Property in which Gross
Proceeds are invested other than Tax-Exempt Investments and the Loan Agreement.
"Nonqualified Costs" means nonqualified costs as set forth in Schedule D-1
hereto.
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"Opinion of Counsel" means a written opinion of Counsel who may not
(except as otherwise expressly provided herein) be Counsel for the Company or
the Authority and who shall be acceptable to the Authority.
"Plain Par Bond" or "Plain Par Investment" means a Bond or an investment
(i) issued with not more than a De Minimis Amount of original issue discount or
premium (or in the case of investments only, if acquired after its issue date
not more than a De Minimis Amount of market discount), (ii) issued for a price
that does not include accrued interest other than Pre-Issuance Accrued Interest,
(iii) bears interest at either a single, fixed rate at all times or variable
interest calculated pursuant to an objective index (see section 1275 of the
Code), payable at least annually and (iv) its lowest redemption price is not
less than its outstanding principal. The Bonds are Plain Par Bonds.
"Pre-issuance Accrued Interest" means amounts representing interest that
accrued on an obligation for a period not greater than one year before its issue
date but only if paid within one year after the issue date.
"Present Value" shall mean an amount to be determined by using the formula
PV = FV divided by (1+i)^n, where PV equals the Present Value of the amount to
be received or paid, FV equals the amount to be received or paid, i equals the
discount rate (expressed as a decimal) divided by the number of compounding
intervals in a year and n equals the sum of the number of whole compounding
intervals beginning on the date as of which the present value is computed and
ending on the date the amount is to be received or paid, and a fraction, the
numerator of which is the length of any short compounding interval during such
period, and the denominator of which is the length of a whole compounding
interval.
"Present Value of a Bond" in the case of any bond shall mean the Present
Value as of a date of all unconditionally payable payments after such date of
interest on and principal of the bond and Qualified Guarantee payments assuming
its retirement on its final maturity date and using the Yield of such Bond as
the discount rate. The Present Value of a bond subject to the same mandatory
sinking fund installment payment schedule as other Bonds (e.g., term bonds
subject to mandatory sinking fund installment payments) shall be computed in the
same manner, except that the composite Yield of all such Bonds is treated as the
Yield of each such Bond and each mandatory sinking fund installment payment date
is treated as a final maturity date. The Present Value of a Variable Yield Bond
shall be computed using the initial interest rate on the bond as set by the
interest rate setting mechanism to determine the interest payments. If such
substantially identical Bonds have original issue discount not in excess of 1/4%
times the product of the stated redemption price and the number of years to the
weighted average maturity of the
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bonds, the bonds must be treated as redeemed at its outstanding principal amount
plus accrued unpaid interest.
"Present Value of the Investment" shall mean the Present Value as of a
date of all unconditionally payable receipts to be received from and payments to
be paid for the investment after that date, using the Yield on the investment as
the discount rate. All yield restricted investments (other than the Loan
Agreement) may be treated as a single investment with a single yield, whether or
not held concurrently. All yield restricted investments allocable to a refunding
issue that are held in one or more Refunding Escrows are treated as a single
investment with a single yield, whether or not held concurrently.
"Principal User" means any principal user of the Project within the
meaning of Section 144(a)(2)(B) of the Code and Prop. Treas. Reg. ss.
1.103-10(h)(1) including without limitation any person who is the owner, lessee
or user of more than 10% of the Project measured either by occupiable space or
fair rental value under any formal or informal agreement or, under the
particular facts and circumstances, anyone who is a principal customer of the
Project, or anyone who is a Related Person to any of the foregoing. The term
"principal customer" means any person who purchases output of the Project under
a contract if the percentage of output taken or to be taken by such person
multiplied by a fraction the numerator of which is the term of such contract and
the denominator of which is the economic life of the Project, exceeds 10%, and
if such person has an extraordinary degree of control over the use and
operations of the Project, or a part thereof. In the case of a person who
purchases output of an electric or thermal energy, gas, water or other similar
facility, such person is a principal customer if the total output purchased by
such person during any one-year period beginning with the date the facility is
placed in service is more than 10 percent of the facility's output during each
such period. Co-owners or co-lessees who are shareholders in a corporation or
who are collectively treated as a partnership subject to subchapter K under
section 761(a) of the Code are not treated as Principal Users merely by reason
of their ownership of corporate or partnership interests.
"Proceeds" means Sale Proceeds and Investment Proceeds.
"Project" means, collectively, the financing and refinancing with the
proceeds of the Bonds of (i) the acquisition of approximately 7.5 acres of land,
(ii) renovations to an approximately 62,500 square feet building located on the
land, and (iii) the acquisition and installation therein of machinery and
equipment related thereto, all to be used for manufacturing purposes.
"Qualified Costs" means qualified costs as set forth in Schedule D-1
annexed hereto.
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"Qualified Guarantee" means a qualified guarantee within the meaning of
Treas. Reg. Section 1.148-4(f). The Credit Facility issued by Fleet National
Bank is a Qualified Guarantee.
"Rebate Agent" has the meaning given such term in Section 8.3 hereof.
"Rebatable Arbitrage means the difference between the future value of all
the receipts with respect to Nonpurpose Investments, and the future value of all
the payments with respect to Nonpurpose Investments computed as of any date of
calculation based upon the Bond Yield.
"Related Person" means with respect to any Principal User, a person or
entity which is a Related Person as defined in Section 144(a)(3) of the Code by
reference to Sections 267, 707(b) and 1563(a) of the Code, except that "more
than 50 percent" is substituted for "at least 80 percent" in Section 1563(a).
With respect to Substantial Users, the term shall also have the meaning as
defined in Section 147(a)(2) of the Code.
"Sale Proceeds" means any amounts actually or constructively received from
the sale of the Bonds, including amounts used to pay underwriters' discount (if
any) or compensation and accrued interest other than Pre-Issuance Accrued
Interest.
"Stated Redemption Price" means the redemption price of an obligation
under the terms of that obligation, including any call premium.
"Substantial User" means any person constituting a "substantial user"
within the meaning of Section 147(a) of the Code.
"Successor Person" means (i) the transferee (or two or more transferees
who are Related Persons) of substantially all of the properties of a Test-Period
Beneficiary or (ii) a corporation acquiring the assets of a Test-Period
Beneficiary in a transaction described in Code Section 381(a), regardless of
whether the transferor remains in existence after the transfer.
"Tax-Exempt Investment" means an obligation the interest on which is
excluded from gross income pursuant to Section 103 of the Code and which is not
a specified private activity bond as defined in Section 57(a)(5)(C) of the Code
(hereafter "AMT bond"). For this purpose, an obligation the interest on which is
excluded from gross income pursuant to Section 103 of the Code shall include an
interest in a regulated investment company to the extent that at least 95% of
the income to the holder of the interest is interest that is excludable from
gross income under Section 103(a) of the Code.
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"Tax-Exempt Private Activity Bond" means any bond (other than the Bonds)
issued as part of an issue described in Section 141(e)(1)(A), (D) or (F) of the
Code or Section 103(b)(2) of the 1954 Code, as in effect on the day before
enactment of the Tax Reform Act of 1986, provided that interest on such bond is
excludable from gross income for federal income tax purposes.
"Test-Period Beneficiary" means any Person who was, is or will be (i) a
Principal User of the facilities financed by the particular bond issue in
question at any time during the three-year period beginning on the later of the
date the facilities are or were placed in service or the date of original
issuance of such bond issue; (ii) a Related Person to such Principal User at any
time during such three year period; or (iii) a Successor Person to either of the
foregoing.
"Universal Cap" shall mean as of any required date of computation, the
value of all Bonds then outstanding. The value of a Bond shall equal the Present
Value of the Bond but using the Yield on the issue of which such Bonds is a
part, or if the Bonds are Plain Par Bonds, the outstanding principal amount of
Bonds shall be their value.
"Value of a Bond" means in the case of a Plain Par Bond, its outstanding
principal amount plus accrued, unpaid interest and in the case of any other Bond
is its Present Value.
"Value of an Investment" shall mean the following:
A. In the case of an Investment acquired directly with Gross Proceeds
which is:
(i) a Plain Par Investment, the outstanding principal thereof plus
accrued interest;
(ii) a Fixed Rate Investment, its Present Value;
However, at the option of the Authority, any Investment may be valued at its
Fair Market Value. In the case of transferred proceeds, the method of valuing
investments for the refunding bonds must be consistent with the valuing method
for the refunded bonds.
B. In the case of an Investment allocated or reallocated to Bonds (other
than as a result of the application of the transferred proceeds rules, Universal
Cap rule, or the commingled fund rules), its Fair Market Value. Nonpurpose
Investments in a refunding escrow (including transferred proceeds) are treated
as a single investment for valuing and yield purposes. Yield restricted
Investments must be valued at Present Value.
"Variable Yield Bond" means any Bond other than a Fixed Yield Bond.
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"Variable Yield Investment" means any obligation the interest rate on
which, under the terms of the obligation, is adjusted periodically according to
a prescribed formula such that the Yield over the term of the obligation cannot
be determined on the date of original issuance.
"Variable Yield Issue" means the Bonds during any period that they are not
a Fixed Yield Issue.
"Weighted Average Rate of Interest" of an obligation for any period means
the total interest paid or deemed paid during such period divided by the product
of (i) the principal amount of such obligation, and (ii) the amount of time from
the beginning of such period that the obligation is outstanding (expressed in
percentage of years). Weighted Average Rate of Interest for two or more
obligations for any period means the total interest paid during such period
divided by the sum of the products described above.
"Yield" except as otherwise modified herein, means that discount rate
which when used in computing (by the economic accrual method using a 360 day
year semi-annual compounding and other reasonable standard financial accounting
conventions, consistently applied) the Present Value of all unconditionally
payable receipts on an obligation produces an amount equal to the Present Value
of all unconditionally payable payments to acquire the obligation.
"Yield-to-Maturity" shall mean, with respect to a Bond, the Yield which
when used in computing the Present Value of payments of principal of and
interest on a Bond, assuming its retirement on its final maturity date, produces
an amount equal to the initial offering price of the Bond to the public (not
including bond houses or brokers or other persons or organizations acting in the
capacity of underwriters or wholesalers). In the case of Bonds subject to the
same mandatory Sinking Fund Installment payment schedule, the composite
Yield-to-Maturity of such Bonds is determined by assuming the Bonds are retired
in accordance with such schedule and by treating the mandatory Sinking Fund
Installment payment dates as final maturity dates.
"Yield Reduction Payments" means the payments described in Section 8.7.
Section 1.2. Interpretation. In this Tax Regulatory Agreement:
(a) Unless the context requires otherwise, words of the masculine gender
mean and include correlative words of the feminine and neuter genders and words
importing the singular number mean and include the plural number and vice versa.
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(b) Words importing persons include firms, associations, partnerships,
trusts, corporations and other legal entities, including public bodies, as well
as natural persons.
(c) This Tax Regulatory Agreement shall be governed by and construed in
accordance with the applicable laws of the State of Connecticut.
(d) The Table of Contents and the Headings of the several Sections in this
Tax Regulatory Agreement have been prepared for convenience of reference only
and shall not control, affect the meaning or be construed as an interpretation
of any provision of this Tax Regulatory Agreement.
(e) If any provision of this Tax Regulatory Agreement shall be ruled
invalid by any court of competent jurisdiction, the invalidity of such provision
shall not affect any of the remaining provisions hereof.
(f) This Tax Regulatory Agreement shall survive the purchase and sale of
the Bonds, the obligations of the Company to make payments required by Article
VIII hereof, and all indemnities shall survive any termination or expiration of
this Tax Regulatory Agreement and the payment of the Bonds.
Section 1.3. Covenant with Owners. The Authority and the Company agree
that this Tax Regulatory Agreement is executed in part to induce the beneficial
owners to purchase the Bonds. Accordingly, all covenants, agreements,
representations and warranties by the Authority and the Company herein are
declared to be for the benefit of the beneficial owners. Unless the Trustee is
expressly referenced in connection with a particular covenant or representation
under this Agreement, the covenants and representations contained in this
Agreement are the obligations of the Authority or the Company only and shall not
be deemed obligations of the Trustee.
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ARTICLE II
THE PROJECT
Section 2.1. Description of the Project. The Company represents, warrants,
covenants and agrees that:
(a) The financing and refinancing of land, an existing building, and
renovations to the building, together with the acquisition and installation of
equipment to be located in the building, which constitute the Project has
commenced and will be completed within 18 months of the Date of Issue. The
Project is currently in service.
(b) The Project consists of land, an existing building and equipment,
located in Newtown, Connecticut, all to be used for manufacturing, including the
manufacture of liquid processors and welding equipment used in the bonding of
plastics.
(c) Based on current tax and accounting principles, the Project is and
will continue to be land or depreciable property.
(d) So long as any of the Bonds shall be outstanding, the Company
covenants and agrees to maintain and operate the Project as it is described in
this Agreement.
(e) So long as any of the Bonds is outstanding, the Company will not take
any action, nor fail to take any action, which would adversely affect the
tax-exempt status of the Bonds and that it will take and cause to be taken all
actions that may be required of it for the Bonds to be and remain tax exempt.
(f) No portion of the Bond Proceeds (except for the 3% amount discussed in
Section 3.2(a) below) will be used to finance or refinance the costs of
acquiring or renovating its 7,120 square feet of space in the facility which may
be leased to other unrelated persons.
Section 2.2. Project Representations. The Company hereby represents as
follows:
(a) The Project consists only of a facility used in the manufacturing and
production of tangible personal property together with directly related and
ancillary activities located at the same site; except that portions of the
Project to which are allocated not more than 3% of the Bond proceeds may be used
for other activities (e.g. executive offices, sales area). Manufacturing
constitutes substantially all of the economic activity on the site.
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(b) The Project is not, and will not become, part of a single building,
enclosed shopping mall or strip of offices, stores or warehouses any of which
use or will use substantially common facilities such as, but not limited to,
common heating, cooling or other utilities, or common entrances, plazas, malls,
lobbies, parking, elevators or stairways for use by employees, patrons or other
persons, which is, has been or will be financed with the proceeds of any
Tax-Exempt Private Activity Bonds, other than the Bonds.
(c) No more than 25% of the Net Proceeds will be used to finance, a
facility the primary purpose of which is retail food and beverage services,
automobile sales and service or the provision of recreation or entertainment.
(d) None of the proceeds of the Bonds will be used to finance:
(i) any private or commercial golf course, country club, massage
parlor, tennis club, skating facility (including roller skating,
skateboard, and ice skating), racquet sports facility (including any
handball or racquetball court), hot tub facility, suntan facility or
racetrack;
(ii) any airplane, skybox or other private luxury box, any facility
used primarily for gambling, any store the principal business of which is
the sale of alcoholic beverages for consumption off-premises or health
club facility;
(iii) residential real property for family units; or
(iv) farmland.
(e) All office space, if any, included as part of the Project is located
on the premises of the manufacturing building and is used (except for a de
minimis extent) solely for day-to-day operations at such manufacturing facility.
(f) The Standard Industrial Classification Code (SIC Code) for the Project
is 3623.
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ARTICLE III
GENERAL REPRESENTATIONS AND COVENANTS OF THE AUTHORITY
Section 3.1. Authorization and Public Approval. The Authority makes the
following representations, warranties, covenants and agreements as the basis for
the undertakings on its part contained in the financing documents in respect of
the Bonds:
(a) The Inducement Resolution describes the Project and states that,
subject to the conditions therein, the Authority will issue bonds to finance the
Project.
(b) In compliance with Section 147(f) of the Code, the Authority on
November 18, 1997 held a public hearing on the issuance of the Bonds and the
nature and location of the Project following publication of notice of the
hearing on November 4, 1997. The public hearing was conducted by an authorized
representative of the Authority at the offices of the Authority, located at 999
West Street, Rocky Hill, Connecticut. On November 28, 1997, the Applicable
Elected Representative approved the issuance of the Bonds. To the best of the
Authority's knowledge, said approval has not been withdrawn, revoked, amended or
superseded and it remains in full force and effect.
Section 3.2. Reporting Requirements; Volume Cap; Election as to Issue
Size.
(a) The Authority has complied or will comply with the information
reporting requirements applicable to the issuance of the Bonds under Section
149(e) of the Code.
(b) The limit on the amount of Private Activity Bonds as defined in the
Code which may be issued by the Authority was established by an allocation made
by the State of Connecticut Legislature in Public Act 87-539 as amended by
Public Act 91-210, pursuant to the requirements of Section 146 of the Code. To
the best of the Authority's knowledge, the statute has not been repealed,
withdrawn, amended, or superseded and remains in full force and effect.
(c) The Authority has received from the State of Connecticut private
activity bond volume cap (within the meaning of Section 146 of the Code), and
has remaining unused cap, in an amount at least equal to the greater of the
principal amount or Issue Price of the Bonds.
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(d) In connection with the issuance of the Bonds, the Authority elects to
utilize the $10,000,000 exemption authorized in Section 144(a)(4)(A) of the
Code.
Section 3.3. Issuance Costs.
In no event will the amount of the proceeds derived from the sale of the
Bonds, or the investment income thereon, used to pay Issuance Costs of the Bonds
exceed 2% of the Issue Price of the Bonds. The Company shall provide for the
payment of all Issuance Costs in excess of 2% of the Issue Price of the Bonds
from other available money and not from the proceeds of any obligation the
interest on which is excludable from gross income for federal income tax
purposes under Section 103(a) of the Code sold by a governmental unit within 15
days of the date hereof.
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ARTICLE IV
USE OF PROCEEDS OF THE BONDS
Section 4.1. Company's Certification as to Project Costs. The Company
hereby certifies as follows:
(a) No part of the Project was placed in service (for purposes of the
investment tax credit or cost recovery deductions) by or on behalf of the
Company more than eighteen months before the Date of Issue.
(b) The amount of earnings expected to be received from the investment of
Bond proceeds is as shown in Schedule D-1. Such estimated investment earnings is
based on a projected expenditure schedule for Bond proceeds that is consistent
with the schedule used to estimate interest during acquisition and construction
of the Project.
(c) The amounts shown in Schedule D-1 as Issuance Costs consist only of
costs which are directly related to and necessary for the issuance of the Bonds
and the sum of such amounts do not exceed 2% of the Issue Price of the Bonds.
(d) The amounts shown in Schedule D-1 as Qualified Costs consist only of
Project Costs paid or incurred not earlier than 60 days prior to the adoption of
the Authority's Inducement Resolution which are chargeable to the tax basis of
the Project under Section 1012 of the Code or would be so chargeable but for (or
with) a proper election by the Company.
(e) No person who (i) was a Substantial User of the Project, or any part
or component thereof (or Related Person to such a Substantial User) within the
five-year period preceding the issuance of the Bonds, and (ii) is or will be a
Substantial User of the Project, or any part or component thereof (or a Related
Person to such a Substantial User), within the five-year period immediately
following the issuance of the Bonds has or will receive, directly or indirectly,
an amount equal to five percent or more of the Bond Proceeds for his interest in
the Project or any part or component thereof, except to the extent of any Bond
Proceeds paid as reimbursement for any Project Costs paid or incurred after the
date of the Inducement Resolution to a person who first became a Substantial
User of the Project (or Related Person to such Substantial User) no more than 60
days prior to such date.
(f) The total amount shown in Item 5 of Schedule D-1 as Qualified
Costs (land or depreciable property) is 95% or more of the amount of Net
Proceeds of the Bonds shown in Item 4 of Schedule D-1.
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(g) The amount included in Qualified Costs shown in Item 5 of
Schedule D-1 as costs of "facilities directly related and ancillary to a
manufacturing facility" does not exceed 25% of the Net Proceeds of the Bonds.
"Facilities directly related and ancillary to a manufacturing facility" consist
of short-term warehousing for raw materials and finished products; laboratory
for quality control and for testing potential raw materials; loading docks; rail
spurs; fork lifts (but not delivery trucks or vans); employee parking (provided
it is free of charge and requires no parking attendants); employee restrooms,
locker rooms and eating area (but not in cafeteria or vending machines); display
area stocked with samples to show buyers (but not area staffed with sales
persons); and administrative offices for billing, receiving, inspection and
bookkeeping, provided they are not located in separate building or wing (but not
executive office space).
(h) The amount shown in Item 5 of Schedule D-1 as cost of Land, if
any, is less than 25% of the Net Proceeds of the Bonds.
(i) No amount shown in Item 5 of Schedule D-1 represents a cost
incurred to acquire used equipment unless such equipment was purchased with the
Net Proceeds as an integral component of an existing structure.
(j) No part of the Net Proceeds of the Bonds is or will be used (i)
to finance inventory or for working capital or (ii) to pay any element of profit
(above actual costs incurred) to the Company or any other Principal User or any
Related Person thereto.
(k) No amount shown in Item 5 of Schedule D-1 represents a cost
incurred to acquire an existing building unless "rehabilitation expenditures"
described in paragraph (l) are being made in the amount described in paragraph
(m).
(l) All amounts shown in Item 5 of Schedule D-1 as "rehabilitation
expenditures" consist of costs which are chargeable to capital account, incurred
or to be incurred by the person acquiring the building or equipment (or by a
successor to such person or by the seller of the property under a sales
contract) before the date which is 2 years after the later of the date of
acquisition of the property or the date of issue of the Bonds for property in
connection with the rehabilitation of the building or equipment. In the case of
an integrated operation contained in a building before its acquisition, the term
"rehabilitation expenditures" includes the cost of rehabilitating existing
equipment in the building or replacing it with equipment having substantially
the same function. No portion of the costs listed as "rehabilitation
expenditures" represents (i) costs of
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acquiring the property, (ii) any expenditure attributable to the enlargement of
a building, (iii) any expenditure attributable to a certified historic structure
or to a building located in a registered historic district unless either the
rehabilitation has been certified by the Secretary of the Interior or, in the
case of a building located in a registered historic district, the Secretary of
the Interior has certified that the building is not of historic significance, or
(iv) any expenditure of a lessee if, on the date the rehabilitation is
completed, the remaining term of the lease (determined without regard to renewal
periods) is less than 15 years.
(m) The amounts shown in Item 5 of Schedule D-1 as "rehabilitation
expenditures - Existing Building," together with equity to be expended on
rehabilitation expenditures for the existing building, are 15% or more of that
portion of the cost of acquiring the building financed with Net Proceeds.
Section 4.2. Final Disbursement. Upon the final requisition of Bond
Proceeds to pay Project Costs, the Company shall deliver to the Trustee the
following:
(a) A schedule of the actual amount and use of Proceeds of the Bonds
substantially identical in form and substance to Schedule D-1, Use of Bond
Proceeds.
(b) A certificate of an Authorized Representative of the Company as
to use of Proceeds of the Bonds setting forth substantially the same material as
set forth in Section 2.2 and Section 4.1 hereof.
(c) A report of a certified public accountant to the effect that he
or she is a public accountant as defined under the Rules of Conduct of the Code
of Professional Ethics of the American Institute of Certified Public
Accountants; that they have read the Company's certificate as to use of proceeds
of the Bonds and accompanying schedule of use of proceeds of the Bonds as
referred to in (a) above; that, they have conducted an examination of such
certificate and schedule in accordance with generally accepted auditing
standards and accordingly included such tests of the accounting records and such
other auditing procedures as they considered necessary in the circumstances; and
that in their opinion the amounts shown in the schedule and the statements made
in the certificate are accurate.
Section 4.3. Excess Proceeds Redemption. The Bonds do not have call
protection for a period longer than 10.5 years from the date hereof. Any
redemption of Bonds pursuant to Section 5.2(F) of the Indenture shall comply
with the requirements of Section 1.142-2(c) of the Income Tax Regulations and
the Bonds will be redeemed on the earliest call date or such other
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requirements as Bond Counsel determines to be necessary to assure that interest
on the Bonds remains not includable in gross income for federal income tax
purposes.
Section 4.4. Form 8038. The Summary of Use of Bond Proceeds (the
"8038 Schedule") annexed to Schedule D sets forth the allocation of the Sale
Proceeds to Project Costs. Said summary will be included in the Form 8038 to be
submitted by the Authority to the Internal Revenue Service.
Section 4.5. Issuance Costs of Bonds. The Company hereby certifies
as follows in respect of the Issuance Costs of the Bonds:
(a) The Company or a Related Person shall provide for the payment of
the portion of the Issuance Costs of the Bonds which exceeds 2% of the Issue
Price of the Bonds. This amount is not derived from the proceeds of any
obligation the interest on which is excludable from gross income for purposes of
Section 103(a) of the Code sold by a governmental unit within 15 days of the
date hereof.
(b) The amount paid by the Company or any Related Party as a fee to
the Authority in respect of the Bonds shall be paid at the closing in an amount
equal to .50% of the original principal amount. No other fees are to be paid by
the Company or a Related Person to the Authority in respect of the Bonds.
Section 4.6. Sale of the Project. Prior to any sale or disposition
by the Company (including the grant of a purchase option or a long term
leasehold interest) of or interest in any portion of the Project, the Company
shall furnish to the Authority a written opinion of bond counsel acceptable to
the Authority to the effect that such sale or disposition will not adversely
affect the exclusion of interest on the Bonds from gross income for federal
income tax purposes pursuant to Code Section 103(a). The foregoing shall not
apply to the sale or other disposition of personal property for cash which has
become worn out or obsolete or which is disposed of in the ordinary course of
business due to the other reasons described above, provided that the amount
received from such sale or other disposition shall be used within 6 months for
such purpose as would qualify for tax-exempt financing under Code Section
144(a).
Section 4.7. Change in Use. The Company understands that a change in
the use of the property financed with the Net Proceeds to a use that causes any
of the representations in Article II or the certifications in Section 4.1 to be
inaccurate will result in a loss of income tax deductions for rent, interest, or
equivalent amounts paid by the person making the unqualified use, in addition to
the loss of tax exemption on bond inter-
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est. The Company covenants that the Project will be used as set forth in Section
2.1 of this Tax Regulatory Agreement and the Net Proceeds will be spent in a
manner consistent with Sections 2.2 and 4.1 of this Tax Regulatory Agreement.
The Company agrees that in the event of post-issuance date noncompliance, as
determined in an opinion of Bond Counsel, it will use its best efforts to redeem
the Bonds at the earliest call date or establish a defeasance escrow to call
Bonds at the earliest call date.
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ARTICLE V
AGGREGATE FACE AMOUNT
Section 5.1. Prior Issues. The Company hereby represents that:
(a) The aggregate face amount of the Bonds includes certain
previously issued and outstanding bonds, notes or other debts which are tax
exempt under Section 144(a) of the Code or under the predecessor Section
103(b)(6) of the Internal Revenue Code of 1954 ("Prior Issues"). The Prior
Issues included in the aggregate face amount of the Bonds are those used to
finance property:
(i) a Principal User of such property is also a Principal User
of the Project (or is a Related Person to a Principal User of the Project), and
(ii) the property financed by the Prior Issues is located in,
or is based in, the same incorporated municipality (or same county if the
Project is in an unincorporated area) as the Project, or is located in an
adjacent jurisdiction and the other property is either contiguous with the
Project or is integrated with the Project operations.
(b) The principal amount of such outstanding Prior Issues described
in (a) above is $-0-.
(c) The amount listed in (b) above plus the principal amount of the
Bonds is $3,810,000.
Section 5.2. Capital Expenditures and Other Facilities.
(a) If the amount in Section 5.1(c) above exceeds $1,000,000,
certain capital expenditures with respect to the Project and certain other
facilities are included in determining the aggregate face amount of the Bonds
for purposes of the $10,000,000 limitation in Section 144(a) of the Code. Such
expenditures must be included if paid or incurred within the six year period
beginning three years prior to the date hereof and ending three years after the
date hereof.
(b) Capital expenditures include any amount which may be treated as
chargeable to capital account under general principles of federal income tax law
and accounting, without regard to any rule that would also permit the payor to
elect to treat such expenditures as a current expense and regardless of the
treatment actually elected. Amounts financed from the
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principal of the Bonds or from Prior Issues are not included as capital
expenditures.
(c) Capital expenditures for certain other facilities are included
in the determination of face amount. Such capital expenditures include those
made by any person (not just by the owner or lessee) with respect to the Project
and with respect to facilities:
(i) a Principal User of such facility is also a Principal User
of the Project (or is a Related Person to a Principal User of the Project), and
(ii) the facility is located in the same incorporated
municipality (or the same county if the Project is in an unincorporated area) as
the Project, or is located in an adjacent jurisdiction and the facility is
either contiguous with the Project or is integrated with the Project operations.
Such facilities are "Other Facilities" for purposes of this Section.
(d) The capital expenditures paid or incurred with respect to the
Project and with respect to the other facilities described in (c) above which
have been incurred within the three year period prior to the date hereof are in
the amount of $-0-. The Company reasonably expects that capital expenditures
with respect to the Project and such other facilities during the period three
years after the date hereof will be $50,000.
Section 5.3. Aggregate Face Amount. The amount listed in Section
5.1(c), and the amounts listed in Section 5.2(d), equals $3,860,000.
Section 5.4. Action Affecting Aggregate Face Amount. If at any time
during which any of the Bonds are Outstanding, the Company, any other Principal
User or Related Person proposes (a) to merge or consolidate with, acquire more
than a fifty percent (50%) interest in, or have more than a fifty percent (50%)
interest acquired by any other Person having Other Facilities located in the
Municipality; (b) to lease more than ten percent (10%) of the Project measured
by space or rental value to any other Person having Other Facilities; (c) to
enter into any contract with any Person having Other Facilities under which such
Person is entitled to take output of the Project under terms that would cause
such Person to be a Principal User of the Project; or (d) otherwise take any
action causing any Person not previously considered as a Related Person or a
Principal User to be so considered, the Company hereby covenants and agrees that
it shall first file with the Trustee and the Authority an Opinion of Counsel
satisfactory to the Trustee and the Authority to the
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effect that such action would not cause the interest on the Bonds to be
includable in the gross income of the recipient thereof for Federal income tax
purposes.
Section 5.5. Aggregation of Projects with Respect to Capital
Expenditures. The Company hereby covenants and agrees that it shall use its best
efforts to prohibit any Person from applying any portion of the proceeds of any
Tax-Exempt Private Activity Bond to any financing with respect to the Project or
to any single building, any shopping center or any strip of buildings sharing
substantial common facilities of which the Project is a part, without first
filing with the Trustee and the Authority, an Opinion of Counsel, satisfactory
to the Trustee and the Authority, to the effect that such action would not cause
interest on the Bonds to be includable in the gross income of the recipient
thereof for Federal income tax purposes.
Section 5.6. Covenant. The Company covenants that it will take no
action and will permit no action to be taken which would cause the Aggregate
Face Amount of the Bonds, computed as set forth herein as of this date or any
date prior to three years from the date hereof, to exceed $10,000,000.
Section 5.7. Violation of $10,000,000 Limit; Loss of Interest
Deduction. The Company understands that from such time as the sum of the
original aggregate face amount of the Bonds and the amount of capital
expenditures as described in Section 5.2 paid or incurred during the six year
period beginning three years before, and ending three years after, the Date of
Issue, exceeds $10,000,000, no income tax deduction will be allowed for interest
accruing on the Bonds.
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ARTICLE VI
AVERAGE ECONOMIC LIFE AND
AVERAGE MATURITY OF BONDS
Section 6.1. Average Economic Life.
(a) The Company represents that Schedules F1-F4 set forth the computation
of the Average Economic Life of the Project. As shown in Schedule F4, the
Average Economic Life is 38.8 years.
(b) Computation of Average Economic Life. The Company represents in
connection with the computation of Average Economic Life as follows:
(i) The amount shown in Item 1 of Schedule F1 is the total cost of
all assets eligible for financing under the Indenture whether or not such assets
are actually being financed with the Net Proceeds.
(ii) Schedule F1 sets forth for each asset eligible for financing,
its cost, the ratio of asset cost to total cost and the Net Proceeds allocable
to such asset.
(iii) Schedule F2 sets forth for each asset eligible for financing
its economic life based on Rev. Proc. 62-21 (1962-2 C.B. 418) (for real
property), the Class Life Asset Depreciation Range midpoint life as set forth in
Rev. Proc. 83-35 (for new property other than real property) or an appraisal, a
copy of which is attached to Schedule F2.
(iv) Land is not taken into account in the computation of Average
Economic Life and has been omitted from the list in Schedule F2 because the cost
of Land represents less than 25% of the Net Proceeds.
(v) Column E of Schedule F3 sets forth the adjusted economic life of
each asset listed in Schedule F2, taking into account the period of construction
or acquisition from the date of issue of the Bonds or the period the asset has
been placed in service before the date of issue of the Bonds.
(vi) Column D of Schedule F4 sets forth the weighted life of each
asset calculated by multiplying the amount set forth in Column B of Schedule F4
as Net Proceeds allocable to the asset by its Adjusted Economic Life.
(vii) The Average Economic Life is computed by dividing the total of
the weighted lives set forth in Column D of
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Schedule F4 for all assets by the total amount set forth in Column B of Schedule
F4 as Net Proceeds allocable to the assets.
Section 6.2. Average Maturity of the Bonds.
(a) The Company represents that Schedule F5 sets forth the computation of
the Average Maturity of the Bonds. As shown in Schedule F5, the Average Maturity
of the Bonds is 10.511.
(b) Computation of Average Maturity. The Company represents in connection
with the computation of the Average Maturity of the Bonds, as follows:
(i) Column A of Schedule F5 sets forth the Issue Price of each
separate maturity of Bonds issued as part of such issues, including serial bonds
and mandatory sinking fund installments of term bonds. In the case of a single
term bond being amortized on a level debt, level principal or some other basis,
Column A sets forth the amount of principal maturing in each year.
(ii) Column B of Schedule F5 sets forth the length of term (the
number of years carried to the first decimal point from the date of issue to the
maturity date) for each maturity of Bonds listed in Column A of Schedule F5.
(iii) Column C of Schedule F5 sets forth the weighted maturity for
each maturity of Bonds determined by multiplying the Issue Price (Column A) by
the length of term (Column B).
(iv) The Average Maturity of the Bonds is computed by dividing the
total of the weighted maturities shown in Column C of Schedule F5, by the total
of the Issue Price (Column A).
(c) 120 Percent Rule. Based on the representations described above, the
Average Maturity of the Bonds does not exceed 120 percent of the Average
Economic Life of the Project.
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ARTICLE VII
COMPOSITE ISSUES AND FEDERAL GUARANTEES
Section 7.1. Composite Issues.
(a) Company Representation. The Company represents that no state or
political subdivision thereof, or entity acting on behalf of any state or
political subdivision, has sold any other Tax-Exempt Private Activity Bonds in
the 15 day period preceding the date of sale of the Bonds the proceeds of which
were or are to be used in whole or in part, directly or indirectly, for the
benefit of the Company, any other Principal User of the Project or any Related
Person and that no state or political subdivision thereof, or any entity acting
on behalf of any state or political subdivision, will sell any other Tax-Exempt
Private Activity Bonds in the 15 day period following the date of sale of the
Bonds the proceeds of which are to be applied to such use.
(b) Date of Sale of Variable Rate Obligations. For purposes of Section
7.1(a), the date of sale of Variable Rate Obligations (such as the Bonds) is the
date of sale of such obligations.
Section 7.2. Federal Guarantees.
(a) The Company represents that the United States (or any agency or
instrumentality thereof) will not guarantee (in whole or in part), directly or
indirectly, the payment of principal or interest on the Bonds within the meaning
of Section 149(b) of the Code, and will not lease any portion of the Project.
(b) Other than amounts invested pending use to pay Project Costs or in a
reasonably required reserve fund, if any, none of the Net Proceeds of the Bonds
will be (a) used to make loans or other investments the payments on which are
guaranteed, in whole or in part, by the United States (or any agency or
instrumentality thereof) or (b) invested, directly or indirectly, in deposits or
accounts in a federally insured financial institution within the meaning of
Section 149(b) of the Code.
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ARTICLE VIII
COVENANTS AGAINST ARBITRAGE BONDS
Section 8.1. Covenants Against Arbitrage Bonds.
(a) The Authority and the Company covenant and agree that the Proceeds,
Investments acquired with Proceeds and any other moneys on deposit in any fund
or account maintained in respect of the Bonds (whether such moneys were derived
from the proceeds of the sale of the Bonds or from other sources) will not be
used in a manner which would cause the Bonds to be "arbitrage bonds" within the
meaning of such term in Section 148 of the Code.
(b) The Authority and the Company specifically covenant and agree to
comply with the provisions contained in this Article VIII and all other
provisions of Section 148 of the Code and of Treasury Regulations Sections
1.148-O through and 1.148-11, 1.150-1 and -2, Temporary Treasury Regulations
Sections 1.148-1T through 1.148-11T and 1.150-1T and any successor regulation
for the purpose of assuring that the Bonds do not become "arbitrage bonds"
within the meaning of such term in Section 148 of the Code.
Section 8.2. Responsibility for Rebate Compliance. The Company covenants
and agrees to be responsible for compliance with the provisions contained in
Section 148(f) of the Code and of Treasury Regulations 1.148-0 through 1.148-11
, 1.150-1, and -2, Temporary Treasury Regulations Sections 1.148-1T through
1.148-11T and 1.150-1T and any successor regulations thereto, for the purpose of
assuring that the Bonds do not become "arbitrage bonds" within the meaning of
such term in Section 148 of the Code.
Section 8.3. Covenants Pertaining to Rebate Requirement.
(a) Responsibilities of Parties.
(i) Company. The Authority and the Company acknowledge that the
continued exclusion from federal gross income of interest on the Bonds depends,
in part, upon compliance with the rebate requirement of Section 148(f) of the
Code. The Authority authorizes the Company to take any action necessary to
comply with this requirement. The Company hereby agrees and covenants that it
shall do and perform all acts and things necessary, to the extent such actions
are within the control of the Company, in order to assure that the rebate
requirement of Section 148(f) of the Code is met. To that end, the Company, on
behalf of the Authority, shall take the actions described in Section 8.3.
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(ii) Trustee. The Trustee shall furnish the investment information
and make the transfers, dispositions and payments required by this Section 8.3
and Section 5.6 of the Indenture upon receipt of proper direction by the
Company. The Trustee shall be deemed conclusively to have complied with the
provisions of this Section 8.3 and Section 5.6 of the Indenture if it follows
the directions made to it by or on behalf of the Company pursuant to this
Section 8.3, including supplying all necessary information. The Trustee shall
have no obligation to rebate any amounts required to be rebated to the federal
government pursuant to this Section 8.3, other than from moneys held in the
funds or accounts created under the Indenture or from other funds provided it by
the Authority or the Company. The Trustee shall be fully protected in acting on
any determination made by the Company or its Rebate Agent regarding rebate
payments of any kind or contained in any certificate and shall not be liable or
responsible in any manner, except for gross negligence or wilful misconduct, to
any person so acting, notwithstanding any error in such determination. The
Trustee shall not be responsible or liable to the Authority or the Company, or
any other party, for the failure of the Authority or the Company to comply with
the provisions of this Section 8.3 or Section 5.6 of the Indenture and shall
have no obligation to notify the Company of its failure to so comply.
Notwithstanding any other provision herein or in any supplement hereto, the
Trustee shall have no responsibility or liability as to the accuracy of the
representations of the Authority or the Company herein or in any supplement
hereto or as to compliance by the Authority or the Company with the covenants
and agreements of the Authority and the Company herein or in any supplement
hereto.
(iii) Cooperation of Authority. The Authority covenants and agrees
that it shall do and perform all acts and things necessary, to the extent such
actions are within the control of the Authority, in order to assure that the
rebate requirement of Section 148 is met in respect of the Bonds. Upon request
of the Company or the Trustee, the Authority agrees to render all reasonable
cooperation and assistance as may be required to carry out the provisions of
this Section 8.3 and Section 5.6 of the Indenture, such cooperation to include
the Authority's authorization of the Company to communicate with the Internal
Revenue Service on behalf of the Authority and in respect of the rebate
requirement of Code Section 148(f) as applied to the Bonds and any related
administrative or judicial proceedings.
(iv) Company's Indemnification of Authority and Trustee. The Company
shall be liable and shall indemnify and hold the Authority and the Trustee
harmless against liability for any and all payments due to the United States
pursuant to Section 148(f) of the Code. Further, the Company agrees that the
Authority and the Trustee shall not be held liable for any mistake or
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error, other than, in the case of the Trustee, an act of gross negligence or
wilful misconduct, in the filing of the payment or the determination of the
amount due the United States or the providing of information necessary for such
determination, resulting in any consequence other than liability for payments
due to the United States.
(b) Exceptions from Rebate Requirement
(i) General. Each of the following exceptions from the rebate
requirement operates independently. Gross Proceeds may qualify for one exception
without regard to whether another of the exceptions is also available. If an
exception is applicable, the Company may nevertheless choose not to use the
exception, except in the case of Section 8.3(b)(v).
(ii) Six Month Exception. The rebate requirement does not apply if
95% of the Gross Proceeds (other than certain types of Gross Proceeds described
below) are spent for the Project within six months of the Date of Issue and 100%
within one year. The Gross Proceeds not eligible for this exception, and thus
subject to the rebate requirement (unless another exception applies), are:
amounts in a Bona Fide Debt Service Fund, amounts in a reasonably required
reserve fund (including amounts in any collateral fund for a credit facility),
Gross Proceeds arising after the six month period that were not reasonably
expected as the Date of Issue, and payments on the Loan Agreement. The exception
will not apply if on the Date of Issue Gross Proceeds are reasonably expected to
arise after the six month period.
(iii) Eighteen Month Exception. The rebate requirement does not
apply if all of the Gross Proceeds (other than certain types of Gross Proceeds
described below) are spent for the Governmental Purpose in accordance with the
following schedule: at least 15% within the 6 months from the Date of Issue, at
least 60% within 12 months of the Date of Issue, and 100% within 18 months of
the Date of Issue, except that a reasonable retainage (not to exceed 5% of such
Gross Proceeds) to promote performance or to cover disputes need not be expended
until 30 months after the Date of Issue. Also, failure to satisfy the third
spending requirement is disregarded if the Company exercises due diligence to
complete the Project and the amount of the failure does not exceed the lesser of
3% of the Issue Price or $250,000. To determine compliance with the first two
spending periods, the amounts of Investment Proceeds included in Gross Proceeds
is the amount estimated as of the Date of Issue. The Gross Proceeds not eligible
for this exception and thus subject to the rebate requirement (unless another
exception applies) are: amount in a Bona Fide Debt Service Fund, amount in a
reasonably required reserve fund (including amounts in any collateral fund for a
credit facility), Gross Proceeds arising more
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than 18 months after the Date of Issue that were not reasonably expected as of
the Date of Issue; and payments on the Loan.
(iv) Project Purpose. In applying Sections 8.3(b)(ii) and (iii), the
Project includes payments of interest, but not principal, on the Bonds.
(v) Bona Fide Debt Service Fund Exception. Any amount earned on a
Bona Fide Debt Service Fund for a Bond Year shall not be subject to the Rebate
Requirement if the gross earnings on such fund for such year is less than
$100,000. Gross earnings shall be deemed to be less than $100,000, if the
average annual debt service on the Bonds is less than $2,500,000.
(c) Investment Information Requirements.
(i) Investment Information to be obtained from the Trustee. The
Company shall obtain from the Trustee the following information:
(A) the date upon which each Investment is purchased with
amounts in funds and accounts under the Indenture;
(B) the purchase price of each Investment (net of commissions,
administrative expenses and similar expenses);
(C) the date of sale or maturity of each Investment;
(D) the proceeds received on the sale or maturity of each
Investment (recording separately commissions, administrative
expenses and similar expenses to the extent such information is
obtainable with a good faith effort); and
(E) earnings received with respect to each Investment.
The Trustee agrees to supply the foregoing information not later
than 20 days after the end of each Bond Year.
(ii) Investment Information Requirements Applicable to the Company.
The Company will maintain records adequate to determine the Rebate Requirement.
Such records will include, but are not necessarily limited to, information
regarding the following with respect to each and every Nonpurpose Investment by
the Company allocated to Gross Proceeds:
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(A) the date of expenditure of all amounts held in the funds and
accounts under the Loan Agreement and Indenture and
(B) with respect to each Investment held in the funds or accounts
under the Indenture:
(1) the purchase price (recording separately commissions,
administrative expenses and similar expenses);
(2) nominal rate of interest;
(3) amount of accrued interest (included in purchase price)
(4) par or face amount;
(5) purchase date;
(6) maturity date;
(7) amount of original issue discount or premium (if any);
(8) type of Investment;
(9) frequency of periodic payments;
(10) period of compounding;
(11) yield to maturity;
(12) date of disposition;
(13) amount realized on the disposition (including accrued
interest) recording separately commissions, administrative expenses
and similar expenses)
(14) market price data sufficient to establish that the
purchase price was equal to the fair market value on the date of
acquisition or, if earlier, on the date of a binding contract to
acquire such Investment; and
(15) market price data sufficient to establish the fair market
value of any Investment as of any Computation Date, and as of the
date such Investment becomes allocable to, is sold, or otherwise
ceases to be allocable to, Gross Proceeds.
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(d) Record-Keeping Obligation. The Company shall retain such information,
together with the records described in Section 8.3(c)(i) hereof and the records
of the determinations required by Section 8.3 hereof until six years after the
Final Computation Date or for such other period as the Treasury Department may,
by regulations or rulings, provide.
In the event, as a result of a failure of the Company to provide
directions, the Trustee invests amounts held under the Indenture without
direction from the Company, the Trustee shall retain with respect to such
investments documentation to establish that all such investments have been
acquired and disposed of in arms'-length transactions at prices equal to their
Fair Market Value. In particular, the Trustee shall retain evidence to show that
the requirements relating to the specific investments described in Section
8.3(e)(i)(C) and Section 8.3(e)(i)(D) have been met. For United States Treasury
obligations purchased directly from the Treasury, proof of the price paid
therefor shall be sufficient evidence.
(e) Investment Valuation Rules.
(i) In General. The Company agrees to comply with the following
provisions and procedures in respect of the acquisition and disposition of
Nonpurpose Investments. In this regard, the Company agrees, among other things,
that it will not acquire or cause to be acquired any Nonpurpose Investment
acquired with Gross Proceeds for an amount in excess of its Fair Market Value or
sell or otherwise dispose of any such Nonpurpose Investment for an amount less
than its Fair Market Value.
(A) The Fair Market Value of any Nonpurpose Investment for which
there is an Established Securities Market shall be determined as provided
below. Except as otherwise provided below, any market especially
established to provide a Nonpurpose Investment to an issuer of municipal
obligations shall not be treated as an established market. Any investment
not of a type traded on an Established Securities Market is rebuttably
presumed to be acquired or disposed of for a price that is not equal to
its Fair Market Value, except for the safe harbors set forth in paragraphs
3 and 4 hereof.
(B) The Fair Market Value of any Nonpurpose Investment for which
there is an Established Securities Market shall mean the price at which a
willing buyer would purchase the investment from a willing seller in a
bona fide arms'-length transaction determined on the date on which the
contract to purchase or sell becomes binding (i.e. the trade date).
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If a United States Treasury obligation is acquired directly from or
disposed of directly to the United States Treasury, such acquisition or
disposition shall be treated as establishing a market for the obligation
and as establishing the Fair Market Value of the obligation.
(C) In the case of a certificate of deposit issued by a commercial
bank which has a fixed interest rate, a fixed principal payment schedule,
and a substantial penalty for early withdrawal, the certificate of deposit
shall be considered acquired or disposed of for an amount equal to the
Fair Market Value of the certificate of deposit if the certificate of
deposit has a yield not less than the yield on reasonably comparable
direct obligations of the United States and the yield on the certificate
of deposit is not less than the highest yield that is published or posted
by the provider to be currently available from the provider on comparable
certificates of deposit offered to the public (See Schedule J for the
certification).
(D) In the case of a Guaranteed Investment Contract, the obligations
acquired thereunder shall be considered acquired or disposed of for an
amount equal to the Fair Market Value of such obligations if:
(1) the purchaser makes a bona fide solicitation for a
Guaranteed Investment Contract with specified material terms and
receives at least three bids on the contract from persons other than
those with an interest in the Bonds (e.g., underwriters or brokers);
(2) the purchaser purchases the highest yielding
investment contract for which a qualified bid is made (determined
net of broker's fees);
(3) the determination of the price of the Guaranteed
Investment Contract takes into account as significant factors, the
purchaser's reasonably expected draw-down schedule for the funds to
be invested, exclusive of float funds and reasonably required
reserve or replacement funds;
(4) the collateral security requirements and other terms
for the Guaranteed Investment Contract are reasonable, based on all
the facts and circumstances;
(5) the provider of the Guaranteed Investment Contract
certifies those administrative costs that are reasonably expected to
be paid to third parties in connection with the contract (see
Schedule I); and
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(6) the yield on the Guaranteed Investment Contract
(determined net of brokers' fees) is not less than the yield
currently available from the provider on reasonably comparable
contracts offered by the provider to other persons, if any, from a
source of funds other than gross proceeds of an issue of tax-exempt
bonds.
(f) Computation of Bond Yield; Variable Yield Issue.
(i) General. When the Bonds are a Variable Yield Issue, the Bond
Yield is computed separately for each Computation Period and means the Yield
that produces, as of the first day of the Computation Period, a Present Value of
all payments made on the Bonds attributable to the Computation Period equal to
the Present Value of all prices received for the Bonds during such period.
(ii) Bond Payments. Payments on the Bonds attributable to a
Computation Period are:
(A) the Purchase Price of Bonds actually tendered for by
Bondholders for purchase during such period, the Redemption Prices (or, if
greater, Value) of the Bonds actually redeemed during such period and the
principal of the Bonds coming due during such period;
(B) payments during such period for Bond interest that accrued
during such period or that accrued during the preceding Computation Period and
was included in the Value of a Bond outstanding at the end of such preceding
period;
(C) the Value of the Bonds outstanding on the last day of such
period; and
(D) amounts properly allocable to fees for a Qualified
Guarantee of the Bonds for such period.
(iii) Bond Prices. Prices received for the Bonds attributable to the
Computation Period are:
(A) in the case of the first day of the first Computation
Period (i.e., the Date of Issue), the Issue Price of the Bonds; and in the case
of the first day of each succeeding Computation Period, the Value of the Bonds
outstanding as of the last day of the preceding Computation Period; and
(B) the Purchase Prices of Bonds paid by buyers in a
remarketing of the Bonds which occurs during the period.
(iv) Fixed Yield Bonds Included in a Variable Yield Issue. If, when
the Bonds are Variable Yield Issue, some of the
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Bonds are Fixed Yield Bonds, the Bond Yield shall be computed pursuant to this
Section 8.3(f); however, the special rules set forth in Section 8.3(g)(iii) for
certain Fixed Yield Bonds shall apply to determine Bond payments and Bond prices
in respect of such Bonds in a Computation Period.
(g) Computation of Bond Yield: Fixed Yield Issue.
(i) General. When the Bonds are a Fixed Yield Issue, the Bond
Yield shall be the Yield that produces, as of the Conversion Date, a Present
Value of all unconditionally payable payments of principal and interest paid
after such date and fees for a Qualified Guarantee properly allocable to the
period after such date equal to the Value of the Bonds outstanding on such date.
(ii) Mandatory Sinking Fund Redemption. In determining Bond
Yield, Bonds of the same maturity subject to the same mandatory sinking fund
redemption schedule shall be treated as redeemed in accordance with the
redemption schedule for an amount equal to their Present Value, unless the
Stated Redemption Price at maturity of such Bonds does not exceed the Value of
the Bonds at the Conversion Date by 1/4% times the product of the Stated
Redemption Price at maturity and the number of years to the weighted average
maturity date of the Bonds subject to the same redemption schedule, in which
case the Bonds are treated as redeemed at their outstanding principal amount
plus accrued, unpaid interest.
(iii) Optional Early Redemption. In determining Bond Yield,
certain Bonds subject to optional early redemption shall be treated as redeemed
for their Stated Redemption Price on the optional redemption date that produces
the lowest Bond Yield. This rule applies to Bonds subject to optional redemption
if (1) the first optional redemption date is within 5 years of the Conversion
Date and the Bond Yield (assuming no optional redemptions occur) is .125%
greater than the Bond Yield (assuming all Bonds optionally redeemable within 5
years of the Conversion Date are redeemed at their earliest redemption date);
(2) the Value of the Bonds exceeds their Stated Redemption Price at Maturity by
more than the product of 1/4% and the number of complete years to the first
optional redemption date of the Bonds; or (3) the Bonds bear interest at
increasing interest rates (i.e. stepped coupon bond).
(iv) No Recomputation of Bond Yield. The Bond Yield of a Fixed
Yield Issue shall be computed as of the Conversion Date and shall not be
recomputed unless the Authority transfers, waives, modifies, or engages in a
similar transaction regarding any right that is part of the terms of a Bond or
is otherwise associated with the Bond (e.g., a redemption right) in
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a transaction separate and apart from the event that causes the Bonds to be a
Fixed Yield Issue. If such a transfer, waiver, etc., occurs the Bond Yield shall
be recomputed as if the Bonds were retired and reissued on the date of such
occurrence for a price equal to the Value of the Bonds on such date and the
recomputed Bond Yield shall take into account any amounts received by the
Authority or the Company or a Related Person to the foregoing as consideration
for the transfer, waiver, etc.
(h) Allocation of Qualified Guarantee Payments.
(A) General. Payments for a Qualified Guarantee must be
allocated to Bonds and Computation Periods in a manner properly reflecting the
proportionate credit risk to the guarantor.
(B) Initial Fees. Reasonable credit facility set-up fees may
be allocated ratably during the initial term of the credit facility.
(C) Variable Yield Bonds.
(1) If a Variable Yield Bond is redeemed early, the fees
otherwise allocable to the period after redemption are allocable to Bonds that
remain outstanding, or, if none, the period before the redemption.
(2) Non-level fees for a Qualified Guarantee for
Variable Yield Bonds are properly allocated if, after each Bond Year the
guarantee is in effect, an equal amount (proportionately reduced for any short
Bond Year) is treated as paid at the beginning of that Bond Year. The Present
Value (computed using a discount rate equal to the yield on the guaranteed Bonds
determined without regard for the non-level payments) of the annual amounts must
equal the fee for the guarantee allocated to that Bond.
(i) Hedge. Neither the Authority nor the Company nor any Related Person to
the foregoing has entered into, or expects to enter into a hedge in respect of
the Bonds. In the event a hedge is entered into for the Bonds, the Authority and
the Company covenant to consult with Bond Counsel as to the computation of Bond
Yield.
(j) Rebatable Arbitrage.
(i) Frequency of Calculation; Rebate Exceptions. Rebatable Arbitrage
shall be calculated as of each Computation Date and as of the last day of each
Bond Year. However, see Section 8.3(b) above for instances in which Rebatable
Arbitrage need not be computed in respect of certain Gross Proceeds.
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(ii) Special Rule for End of Bond Year Calculations. When the Bonds
are a Variable Yield Issue, Rebatable Arbitrage shall be calculated as of the
last day of a Bond Year based on a Bond Yield determined in a manner similar to
the method of determination set forth in Section 8.3(f), using the Bond Year as
the period of computation. Calculations performed at the end of a Bond Year are
performed solely for determining the deposits to the Rebate Fund and do not
affect the calculation of the Rebatable Arbitrage on each Computation Date.
(iii) Receipts. Receipts with respect to a Nonpurpose Investment
include all constructive as well as all actual receipts with respect to such
investment. Constructive receipts include (1) in the case of a Nonpurpose
Investment that is allocated to Gross Proceeds as of the last day of the
Computation Period (or as of the last day of the Bond Year), the Value of the
Nonpurpose Investment on such date and (2) in the case of a Nonpurpose
Investment that ceases to be allocated to Gross Proceeds before its disposition
or redemption (e.g., the investment becomes allocable to transferred proceeds of
another issue or ceases to be allocated to the issue by operation of the
Universal Cap) the Value of the Nonpurpose Investment on the date it ceases to
be allocated to the issue. Receipts in respect of a Nonpurpose Investment are
reduced by reasonable direct Administrative Costs (see paragraph (v) below).
Receipts in respect of Investments do not include recoveries of overpayments of
rebate.
(iv) Payments. Payments with respect to a Nonpurpose Investment
include all amounts of Gross Proceeds directly used to purchase such Nonpurpose
Investment, adjusted for direct Administrative Costs. Where a Nonpurpose
Investment is allocated to Gross Proceeds but was not directly purchased with
Gross Proceeds, there shall be treated as a payment in respect of such
investment the Value of such investment on the date it is allocated to Gross
Proceeds. For a Nonpurpose Investment allocated to an issue at the end of the
Computation Period (or at the end of the Bond Year), the Value of that
investment on the first day of the next Computation Period (or on the first day
of the next Bond Year) shall be treated as a payment. Payments in respect of
Nonpurpose Investments include the Computation Credit and any Yield Reduction
Payments made on Nonpurpose Investments.
(v) Reasonable, direct and indirect Administrative Costs may be
taken into account with respect to investments of Gross Proceeds in both
regulated investment companies (within the meaning of Section 67(c)(2)(b) of the
Code) and in a Commingled Fund in which the Authority and the Company and all
members of the same controlled group as the Authority or the Company own less
than 10% of the beneficial interest in the investments of the Commingled Fund.
For purposes of regulated investment companies and Commingled Funds only,
"administrative costs"
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include costs paid by or on behalf of an issuer for brokerage or selling
commissions, legal and accounting fees, investment advisory fees, recordkeeping,
safekeeping, custody, and similar costs and expenses of a fund as well as
indirect costs such as general overhead. Administrative Costs also include
12(b)-1 fees charged by a regulated investment company.
Administrative Costs for other investments include a brokerage
commission for an investment contract purchased with Gross Proceeds regardless
of whether the brokerage commission is paid or incurred on behalf of the
Authority or the provider of the investment contract. Whether the administrative
costs are reasonable is based on all the facts and circumstances including,
without limitation, whether or not comparable in nature and amount to customary
administrative costs that would be charged for the same investment if the
investment were made from a source of funds other than Gross Proceeds. See
Section 1.148-5T(e) (2)(iii) of the Temporary Treasury Regulations for the
special rule for administrative costs of a Guaranteed Investment Contract.
Under no circumstances, however, may administrative costs paid or
incurred for computing Rebateable Arbitrage be taken into account.
(vi) Future Value Formula. The future value of a receipt or payment
in respect of a Nonpurpose Investment shall be determined by using the following
formula:
FV=PV(1 + i)^n
where:
FV = the future value of the receipt or payment;
PV = the amount of the receipt or payment;
i = Bond Yield divided by the number of compounding
intervals in a year; and
n = the number of whole or fractional compounding intervals from the
date of the receipt or payment to the last day of a Bond Year or the
Computation Period.
(vii) Maintenance of Rebate Requirement in the Rebate Fund; Deposits
and Withdrawals from Rebate Fund. There shall be maintained in the Rebate Fund
an amount equal to the Rebatable Arbitrage for the Bonds determined from time to
time as of each date of calculation of the Rebatable Arbitrage. If the Rebatable
Arbitrage as so determined exceeds the amount on deposit in the Rebate Fund,
then within 60 days of such calculation date, the Company shall transfer from
its own funds (or the Company shall
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direct the Trustee to withdraw from the funds and accounts held under the
Indenture and transfer) to the Rebate Fund an amount such that the balance in
the Rebate Fund after such transfer equals the Rebatable Arbitrage as of such
date of calculation. If the amount on deposit in the Rebate Fund exceeds the
Rebatable Arbitrage as so determined, the Trustee, upon written direction of the
Company, shall withdraw such excess amount and transfer such amount as provided
in the Indenture. Any amounts remaining in the Rebate Fund after payment with
respect to all the Bonds and payment of the amounts described in subsection (ix)
of this Section 8.3(j), or provision made therefor satisfactory to the Trustee,
including accrued interest and payment of any applicable fees to the Trustee and
satisfaction of the requirements of this Section 8.3(j), shall be withdrawn by
the Trustee and paid to the Company upon written direction of the Company. The
Company covenants to make deposits to the Rebate Fund in the event the amounts
in the Rebate Fund and transfers of the available amounts from the funds and
accounts under the Indenture are insufficient to meet the Rebatable Arbitrage
requirement on the end of any Bond Year or any Computation Date.
(viii) Withdrawals to Pay United States. Within 60 days after each
Computation Date, the Company shall direct the Trustee to make any required
rebate payments related to such date to the United States. The rebate payment as
of any Installment Computation Date shall be an amount which, when added to the
future value of previous rebate payments, equals at least 90% of the Rebatable
Arbitrage calculated as of such Computation Date. The rebate payment as of the
Final Computation Date shall be an amount, which when added to the future value
of all previous rebate payments, equals 100% of the Rebatable Arbitrage
calculated as of such Final Computation Date.
(ix) Place and Manner of Rebate Payments. Each rebate payment shall
be made to the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255
on or before the date such payment is due and shall be accompanied by IRS Form
8038-T.
(k) Survival of Defeasance or Payment. Notwithstanding anything in this
Tax Regulatory Agreement or the Indenture to the contrary, the obligation of the
Authority and the Company to remit the amount determined pursuant to section 8.3
to the Internal Revenue Service, and to comply with all other requirements
contained in this Section 8.3, shall survive the defeasance or payment in full
of the Bonds.
Section 8.4. Non-Arbitrage Certifications of the Authority. The Authority
hereby certifies that:
(a) Authorized Officer. The undersigned officer of the Authority is a duly
chosen, qualified official of the Authority,
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and as such is charged, together with other officials, with the responsibility
for issuing the Bonds. The undersigned officer of the Authority is familiar with
the facts, estimates and expectations of the Authority set forth herein and is
duly authorized to deliver the certifications contained in this Section 8.4 on
behalf of the Authority.
(b) Authorization and Purpose. The Bonds are being issued pursuant to the
Act and the Indenture for the purpose of providing funds to pay a portion of the
Project Costs and Costs of Issuance.
(c) Facts, Estimates and Circumstances. On the basis of the facts,
estimates and circumstances in existence on the date hereof, the undersigned
officer of the Authority reasonably expects the following with respect to the
amount and use of proceeds of the Bonds and certain other funds.
(i) Proceeds.
(A) Sale Proceeds.
(1) Total. The Bonds are being delivered on this day to the
initial purchaser in exchange for Sale Proceeds of $3,810,000.
Such amount is calculated as the principal amount of the Bonds
($3,810,000) plus accrued interest, if any, and minus
underwriter's discount, if any.
(2) Accrued Interest. The amount of Proceeds received as
accrued interest on the Bonds (i.e., $-0-) will be deposited
in the Debt Service Fund and will be used to pay a portion of
the interest on the Bonds on the next interest payment date.
(3) Project Fund. $3,810,000 of the proceeds of the Bonds will
be deposited in the Project Fund which will be used to pay the
costs of the Project including costs of issuance in the amount
of $47,768.
(4) Capitalized Interest. Proceeds in the amount of $112,488
will be deposited in the Project Fund to pay a portion of the
interest during the acquisition, construction and installation
of the Project.
(5) Binding Obligations. An amount greater than 5% of the net
sale proceeds has been expended on the Project.
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(6) Due Diligence. Work on the Project will proceed with due
diligence.
(7) Expenditure. A portion of the proceeds and Investment
Proceeds in the Project Fund are expected to pay Project Costs
before December 12, 2000. A portion of the proceeds may be
used to reimburse costs incurred by the Company prior to the
date of issue of the Bonds. No proceeds will be used to
reimburse expenditures made earlier than 60 days prior to date
of the Inducement Resolution.
(ii) Investment Proceeds. The Investment Proceeds of the Bonds
derived from Bond proceeds in the funds held under the Indenture, will be
deposited to the Earnings Fund and after any transfers to the Rebate Fund,
credited to the Project Fund prior to the Completion Date. After the
Completion Date, the earnings on such funds will be credited first to the
Earnings Fund and Rebate Fund, if necessary, and then applied to pay debt
service on the Bonds. Earnings on all funds and accounts will be deposited
in the Rebate Fund to the extent required by the Indenture and this Tax
Regulatory Agreement.
(iii) No Overissuance. The Net Proceeds and Investment Proceeds of
the Bonds do not exceed the amount necessary to pay the costs of the
Project, to pay accrued interest and interest on the Bonds, and to pay the
Costs of Issuance of the Bonds.
(d) Debt Service. The Authority expects that debt service on the Bonds
will be paid from payments of principal and interest under the Loan Agreement,
amounts transferred to the Debt Service Fund as accrued interest and earnings on
amounts in the Debt Service Fund. Payments of principal and interest shall be
paid to the Trustee for deposit in the Debt Service Fund. Amounts so deposited
in the Debt Service Fund (other than prepayments, which shall be used for the
optional redemption of Bonds) will be applied (i) on the next Interest Payment
Date to pay interest then due on the Bonds, principal of the Bonds, at maturity
or upon redemption prior to maturity and (ii) to pay the Trustee's annual fee.
The Debt Service Fund (other than any carryover amount exceeding
one-twelfth of annual debt service) will be used primarily to properly match
payments of interest and principal on the Loan Agreement with debt service
payments on the Bonds in each Bond Year and the Authority expects that such
account and fund will be depleted at least once a year, except possibly for any
capitalization interest account and a carryover amount which
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will not exceed one year's earnings on such account and fund or, in the
aggregate, one-twelfth of the debt service on the Bonds for the immediately
preceding Bond Year. Optional prepayments are not anticipated, but if made, they
will be deposited in the Debt Service Fund and it is expected that they will be
expended to redeem Bonds on the earliest available date for redemption.
Earnings from amounts in the Debt Service Fund will be deposited in the
Earnings Fund and after provision for rebate, if any, to the Debt Service Fund
and applied for the purposes thereof.
(e) Renewal Fund. No renewal fund has been created for the Project.
(f) Earnings and Rebate Funds. Amounts will be transferred to the Earnings
Fund and the Rebate Fund pursuant to section 5.7(B) of the Indenture and this
Tax Regulatory Agreement. Amounts in the Rebate Fund shall be paid to the United
States in the amounts and at the times set forth in this Tax Regulatory
Agreement, or to the extent remaining after final payment of the Rebate
Requirement, shall be remitted to the Company.
(g) No Other Sinking Funds or Funds Pledged with Reasonable Assurance of
Availability for Debt Service. Except for the Debt Service Fund, no other funds
have been created by the Authority or the Company as to which amounts deposited
therein are reasonably expected to be used directly or indirectly to pay debt
service on the Bonds or which directly or indirectly secure the Bonds and for
which there is a reasonable assurance that amounts therein will be available to
pay debt service on the Bonds in the event financial difficulties are
encountered.
(h) No Replacement. No portion of the Bond Proceeds will be used as a
substitute for other funds of the Authority or the Company (i) which were
otherwise to be used to pay the cost of the Project, (ii) which will not be so
used, and (iii) which have been or will be so used to acquire directly or
indirectly, Investments producing a Yield in excess of the Yield on the Bonds.
(i) Yield on the Bonds.
(i) General. For purposes of this Tax Regulatory Agreement, Yield on
the Bonds means that percentage rate which, when used in computing (by the
actuarial method using semi-annual compounding) the present value of all
payments of interest on and principal of Bonds and of all Qualified
Guarantee Payments, if any, produces an amount equal to the
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Issue Price of the Bonds. Because the interest rate on the Bonds to
maturity is not determinable on the date hereof, the yield to maturity
cannot be determined on the date hereof.
(j) Yield on the Loan Agreement.
(i) General. Pursuant to the terms and limitations of the Loan
Agreement, the Company has promised to pay the principal and interest on
the Bonds. The Yield on the loan is calculated as the percentage rate
which, when used in computing (by the actuarial method and using
semi-annual compounding) the present value of all scheduled and expected
payments and of certain fees paid to the Authority, produces an amount
equal to the adjusted purchase price of the loan. The purchase price of
the loan shall be equal to the Issue Price of the Bonds. Calculated in
such manner, Bond Counsel, based on the calculations of Brown Brothers
Harriman & Co., has advised the Authority that the Yield on the loan will
not exceed the Yield on the Bonds by more than .125 percent.
(k) Yield on the Investments Other Than Loan Agreement.
(i) Accrued Interest. The amount of Proceeds received as accrued
interest, if any, will be invested without Yield restriction until used on
the next interest payment date to pay a portion of the interest then due
on the Bonds.
(ii) Project Fund. Amounts on deposit in the Project Fund (including
capitalized interest) may be invested without regard to Yield restriction
until the earlier of the date of expenditure of such amounts or the date
three years from the date hereof.
(iii) Investment Proceeds. Investment Proceeds will be invested
without restriction as to Yield for one year from the date of receipt of
the amount earned.
(iv) Debt Service Fund (Other Than Excess Carryover Amounts).
Amounts in the Debt Service Fund (other than carryover amounts exceeding
one-twelfth of debt service on the Bonds for the immediately preceding
Bond Year and other than any capitalized interest account) will be
invested without Yield restriction for a period not exceeding thirteen
months from the date of deposit of such amounts in such fund. Carryover
amounts in the Debt Service Fund exceeding one-twelfth of debt service on
the Bonds for the immediately preceding Bond Year (other than any
capitalized interest account) will be invested, at a yield not exceeding
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the Yield on the Bonds, in Tax Exempt Investments or will be the subject
of Yield Reduction Payments as described in section 8.7 hereof.
(v) Rebate Fund. Amounts deposited in the Rebate Fund which are
Investment Proceeds and other amounts in the Rebate Fund will be invested
without Yield limitation while they are held in the Rebate Fund.
(vi) Yield Limitation. Amounts referenced above as subject to a
three year, one year, or 13 month period of investment which remain
unexpended at the end of such period, will be invested at a Yield not
exceeding the Yield on the Bonds, in Tax-Exempt Investments or will be the
subject of Yield Reduction Payments to the extent that such amounts in the
aggregate (with other Yield-restricted amounts) exceeds $100,000, unless a
ruling of the Internal Revenue Service, or an Opinion of Counsel, is first
obtained to the effect that no such Yield restriction is necessary.
Notwithstanding the foregoing, no Yield restriction shall apply to any
Nonpurpose Investment not allocated to the Bonds pursuant to Section 8.6.
(vii) Valuation of Investments. In determining the amounts on
deposit in any account for purposes of this Section 8.5(o), the purchase
price of Investments, including accrued interest, shall be added together,
and there shall be added to or subtracted from such purchase price any
discount or premium computed ratably on an annual basis.
(l) Bonds Not Hedge Bonds. At least eighty-five percent (85%) of the Net
Proceeds of the Bonds will be expended within three years of the date hereof and
no amount of the Net Proceeds or Investment Proceeds is or will be invested in
either Nonpurpose Investments or Tax-Exempt Investments, having a guaranteed
yield for 4 years or more.
(m) Reliance Upon Certification, Advice and Computations. The Authority's
certifications contained in Section 8.4(c)(iii) No Overissuance, Section 8.4(g)
No Other Sinking Funds or Funds Pledged with Reasonable Assurance of
Availability for Debt Service, and Section 8.4(h) No Replacement are made in
reliance upon the Non-Arbitrage Certifications of the Company contained in
Section 8.7. The Authority's certification as to the Yield on the loan has been
made in reliance on the advice of Bond Counsel and calculation by Brown Brothers
Harriman & Co. The Authority is not aware of any facts or circumstances that
would cause it to question the accuracy of such certifications, representations,
computations and advice.
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(n) Hedging Transactions. The Company has not entered into, nor does it
expect to enter into, any "hedging" transactions (i.e. transactions involving
interest rate swaps, caps, collars, or similar mechanisms to shift interest rate
risk) in respect of the Bonds or the loan. If the Company does enter into a
"hedging" transaction in respect of the Bonds or the loan, the Company will
obtain and furnish to the Authority the written Opinion of Counsel with respect
to such transaction and its effect on the tax exemption for the interest on the
Bonds.
(o) Reasonable Expectations. To the best of the knowledge and belief of
the undersigned officer of the Authority, there are no facts, estimates or
circumstances other than those expressed herein that would adversely affect the
expectations expressed above and the Authority's expectations are reasonable.
The certifications set forth above are made for the purpose of establishing the
reasonable expectations of the Authority as to the amount and use of proceeds of
the Bonds and certain other amounts. They are intended and may be relied upon as
a certification described in Section 1.148-2(b) of the Treasury Regulations or
successor regulations and delivered as part of the record of proceedings in
connection with the issuance of the Bonds.
Section 8.5. Universal Cap Limit on Allocation of Nonpurpose Investments.
(a) General Rule. Nonpurpose Investments of Gross Proceeds are allocated
to the Bonds only to the extent that the Value of such investments does not
exceed the Universal Cap.
(b) Exception. Nonpurpose Investments of Gross Proceeds in a Bona Fide
Debt Service Fund (e.g., the Debt Service Fund other than a carryover amount in
excess of one-twelfth of debt service on the Bonds for the preceding Bond Year
and any capitalized interest account) are allocated to the Bonds without regard
to the Universal Cap.
(c) Dates of Application of Universal Cap. The Universal Cap is applied on
the second anniversary date of the Date of Issue and on of the first day of each
Bond Year thereafter.
(d) Valuation of Nonpurpose Investments. On each date of application of
the Universal Cap, all Nonpurpose Investments shall be valued at their Value.
(e) Allocation of Amounts Exceeding Universal Cap. If on a date of
application of the Universal Cap, Nonpurpose Investments have a Value in excess
of the Universal Cap, the Value of such investments equal to such excess shall
cease to be allocated to the Bonds in the following order: (i) Nonpurpose
Investments of
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replacement proceeds, (ii) Nonpurpose Investments of "transferred proceeds" and
(iii) Nonpurpose Investments of Sale Proceeds and Investment Proceeds.
Nonpurpose Investments which cease to be allocated to the Bonds shall be deemed
sold at their Value for purpose of the Rebate Requirement and shall be no longer
subject to Yield restriction.
(f) Failure to Apply Universal Cap. A failure to apply the Universal Cap
does not violate the Code or applicable Treasury Regulations, if, in the absence
of the failure, the Bonds would have satisfied the Universal Cap rule.
Section 8.6. Yield Reduction Payments. Any amount paid to the United
States, including a rebate amount, shall be treated as a payment for the
investment that reduces the yield on the investment. Eligible investments
include:
(a) Nonpurpose investments allocable to proceeds of an issue that
qualified for a temporary period under Treasury Regulation Section
1.148-2(e)(2), (3), (4) or (6);
(b) Investments allocable to an issue in which at least 5% of the Value of
the issue is composed of Variable Yield Bonds, unless the issue is a
"hedge bond";
(c) Nonpurpose Investments allocable to transferred proceeds of a current
refunding issue or an advance refunding issue which cannot comply with
Yield restriction by investing in zero yield obligations;
(d) Replacement proceeds in a nonqualified reserve fund (due to exceeding
the size limitation) and such amounts are either (i) not greater than 15%
of the principal amount or the issue price if there is more than de
minimis original issue discount or premium or (ii) such amounts are not
expected to be used for debt service on the Bonds; and
(e) Replacement proceeds of a refunded issue due to the Universal Cap
rule.
Yield Reduction Payments shall be made at the same time and in the same
manner as rebate payments or as the Commissioner of Internal Revenue prescribes
otherwise.
Section 8.7. Non-Arbitrage Certifications of the Company. The Company has
read Section 8.5 of this Tax Regulatory Agreement. The Company acknowledges that
said section sets forth (i) the Authority's reasonable expectations as to the
amount, investment, expenditure and use of the proceeds of the Bonds, other
amounts held under the Indenture, and earnings derived from the investment of
the foregoing, all in respect of the Bonds,
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(ii) amounts due to the Authority under the Loan Agreement and (iii) the facts,
estimates and circumstances existing on the date hereof which form the basis for
such expectations of the Authority. The Company recognizes that certain of the
facts, estimates and circumstances forming the basis of the Authority's
certifications are within the knowledge of the Company and that, as indicated in
Section 8.4(m), the Authority is relying on the Company as to the accuracy and
completeness of such matters. The Company hereby certifies that the statements
made in the paragraphs referenced in Section 8.4(m) as made in reliance on the
Company are accurate, complete and reasonable in all material respects and the
Company consents to the Authority's reliance on this certification for the
purpose of delivering its Non- Arbitrage Certifications. The Company certifies
that it is not aware of any facts or circumstances that would cause it to
question the accuracy or completeness of the matters recited in Section 8.4 of
this Tax Regulatory Agreement.
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ARTICLE IX
$40 MILLION LIMITATION ON PAB ACTIVITY
Section 9.1. Current Test-Period Beneficiaries of the Bonds. The Company
represents that currently, the only Test- Period Beneficiaries of the Bonds are
the Company and any Related Person to the foregoing.
Section 9.2. Current Compliance. The Company represents that as of this
date, except as set forth in Schedule G hereto, there are no outstanding
Tax-Exempt Private Activity Bonds that finance facilities which are or were used
by the Company and any Related Person or any Successor Person in a manner
causing any of them to be a Test-Period Beneficiary of such obligations.
Section 9.3. Future Compliance. The Company covenants that before taking
any of the actions described in subsections (a),(b) or (c) below, it shall file
with the Authority a Certificate of Compliance with the $40 Million Tax-Exempt
Private Activity Bond Limit establishing that the portion of the original
principal amount of the Bonds allocable to a Test-Period Beneficiary plus the
amount of Tax-Exempt Private Activity Bonds which are allocable to such
Test-Period Beneficiary and which are outstanding on the Date of Issue of the
Bonds does not exceed $40 million.
(a) Other Facilities. The action described in this paragraph is that the
Company or a Related Person or another Test-Period Beneficiary, if any, of the
Bonds, becomes an owner or user of a facility financed with Tax-Exempt Private
Activity Bonds outstanding on the Date of Issue of the Bonds.
(b) Other Test-Period Beneficiaries. The actions described in this
paragraph are that the Company or any Related Person to the foregoing in cases
(i) and (iii) below, or another Test-Period Beneficiary, if any, of the Bonds
(including a Related Person thereto) in cases (i) - (iii) below: (i) leases or
sells more than 10% of the Project, measured by space, capacity or value to
another person; (ii) increases its percentage of ownership or use of the
Project; or (iii) otherwise takes any action causing any person not previously
treated as a Test-Period Beneficiary of the Bonds to become a Test-Period
Beneficiary of the Bonds.
(c) Additional Related Persons. The actions described in this paragraph
are that the Company, or another Test-Period Beneficiary, if any, of the Bonds,
or a Related Person to any of the foregoing, (i) merges, consolidates with,
acquires more than a 50% interest in, or is acquired by another person or entity
or
-50-
<PAGE>
(ii) transfers substantially all of its properties to any person or entity, who
is not, prior to such transfer, a Related Person, (iii) receives substantially
all of the assets of any person or entity, who is not, prior to such transfer, a
Related Person, or (iv) acquires or transfers assets to or from a corporation
(who is not, prior to such event, a Related Person) in a transaction described
in Code Section 381(a). Actions described in this paragraph also include a
Test-Period Beneficiary (including the Company) of the Bonds or a Related Person
to such Test Period Beneficiary taking action that results in another person or
entity becoming a Related Person to such Test-Period Beneficiary or Related
Person.
Section 9.4. Allocation Rules.
(a) General. The allocation of portions of issues of Bonds and Tax-Exempt
Private Activity Bonds and portions of facilities financed thereby to
Test-Period Beneficiaries shall be made in accordance with Code Section
144(a)(10)(C) and Proposed Treasury Regulation Section 1.103-10(i)(4) or any
successor regulation.
(b) Maximum Allocation Rule. The portion of a bond issue allocable to a
Test-Period Beneficiary is the highest percent of the facility financed by the
issue that the beneficiary owned or used during the three-year period described
in the definition of Test-Period Beneficiary.
(c) Amount of Issue Allocable to Related Person; No Double Counting. The
portion of a bond issue allocable to a Related Person of a Principal User of
facilities financed by the issue is the same portion allocable to such Principal
User. However, if both such persons use the same bond-financed facility, then
the portion of the bonds allocable to each such person shall be allocated only
once.
(d) Certain Redeemed Bonds Not Counted. Tax-Exempt Private Activity Bonds
otherwise allocable to a Test-Period Beneficiary of the Bonds will not be so
allocated to the extent they are redeemed (other than from the proceeds of a
tax-exempt refunding issue) no later than 180 days after such beneficiary
becomes a Test-Period Beneficiary of the bonds to be redeemed.
-51-
<PAGE>
ARTICLE X
COVENANTS AND AMENDMENTS
Section 10.1. Compliance with Code.
(a) The Company agrees and covenants that it shall at all times do and
perform all acts and things necessary or desirable and within their reasonable
control in order to ensure that interest paid on the Bonds shall, for the
purpose of Federal income taxation, be excludable from the gross income of the
recipients thereof, except in the event that such recipient is a Substantial
User or Related Person.
(b) The Company acknowledges that the covenants and conditions set forth
in this Tax Regulatory Agreement are based upon the Code as it exists on the
date hereof and that the Code may be subsequently interpreted or modified by the
Federal government in a manner which is inconsistent with the covenants set
forth herein. The Company agrees that any such subsequent modification or
interpretation of the Code will be deemed a requirement that must be met
pursuant to the general tax covenant set forth in (a) above.
Section 10.2. Amendments. This Tax Regulatory Agreement may be amended
only by a writing signed by Authorized Representatives of the Authority and the
Company, after approval by Bond Counsel. No amendment shall be made to any
provision relating to the Trustee, and no amendment adding to the duties,
covenants or representations of the Trustee shall be made without the prior
written consent of the Trustee.
Section 10.3. Reliance. The Authority and the Company acknowledge that all
parties to the transaction for the Bonds, including the Beneficial Owners, the
Trustee, Bond Counsel and counsel to the parties are relying on and are entitled
to rely on the representations and expectations made by the Authority and the
Company herein.
Section 10.4. Execution in Counterpart. This Tax Regulatory Agreement may
be executed by the various parties hereto in several counterparts, each of which
shall be executed by the Authority, the Company and the Trustee and be deemed to
be an original and all of which shall constitute together but one and the same
agreement.
-52-
<PAGE>
Section 10.5 Trustee Notice Requirements. In the event that the Trustee
has not received from the Company an instruction, computation, calculation,
notice or payment (based upon such computation) required to be delivered to the
Trustee at the time and in the manner as specifically required by, and set forth
in, this Tax Regulatory Agreement, the Trustee shall notify the Authority of
such failure of the Company to furnish such item.
IN WITNESS WHEREOF, the Authority, the Company and the Trustee have caused
this Tax Regulatory Agreement to be executed on their behalf by their respective
authorized representatives as of the date first above written.
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Antone C. Botelho III
-------------------------------
SONICS & MATERIALS, INC.
By: /s/ [ILLEGIBLE]
-------------------------------
Authorized Officer
BROWN BROTHERS HARRIMAN TRUST
COMPANY
By: /s/ [ILLEGIBLE]
-------------------------------
Authorized Officer
-53-
<PAGE>
Schedule A
PUBLIC HEARING PROCEDURES
FOR FEDERAL TAX COMPLIANCE PURPOSES
The Authority is required by current federal tax law to conduct a public
hearing regarding issues of industrial development bonds. Reasonable public
notice must be given in advance of the hearing. These procedures are adopted by
the Authority to guide the conduct of the federally required hearings.
Reference. These procedures may be referred to by the Authority in its
certifications regarding industrial development bonds as "Public Hearing
Procedures for Federal Tax Compliance Purposes."
Purpose. The purpose of these procedures is to provide general guidance
for the conduct of the public notice and public hearing requirements of Section
147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), relating
to the issuance of certain tax-exempt industrial development bonds.
Scope. Hearings concerning Self-Sustaining Program and Umbrella Program
notes and bonds shall be conducted substantially in accordance with these
guidelines, except to the extent alternative procedures may be approved by Bond
Counsel or by an Authorized Representative of the Authority as sufficient to
achieve the purpose of the hearings. No hearing need be conducted for issues or
portions of issues exempted from the hearing requirement by the Code.
Authorization. The adoption of these procedures is authorized by the State
Commerce Act. Nothing contained therein, however, shall be construed to imply
that a public hearing regarding industrial development bonds is or shall be
required for the purposes of State law or that hearings conducted under these
procedures must be conducted under the Uniform Administrative Procedure Act.
Timing. The public hearing for any industrial development bond issue may
be conducted at any time prior to the approval of the bonds by an appropriate
elected official of the State and authorization of the issuance of the bonds by
the Authority.
Notice. Notice of the hearing scheduled for any proposed bond issue shall
be published, substantially in the form attached hereto as Appendix A, at least
14 calendar days in advance of the scheduled public hearing date.
-54-
<PAGE>
Newspaper. Notice shall be published in the newspaper for the city or town
in which the proposed project is to be located. The Authority, based on
reasonable inquiry and investigation, hereby determines that the publication of
notice in the manner provided herein is reasonably designed to apprise residents
of the affected city or town of the proposed issuance of the bonds.
Location. The hearing shall be conducted at the offices of the Authority
in Rocky Hill, Connecticut. The Authority, based on reasonable inquiry and
investigation, hereby further determines that locating the hearing at such
offices would be convenient for persons affected by the facilities financed by
the bonds.
Hearing Officer. Any Authorized Representative of the Authority may
conduct the public hearing. For this purpose, Authorized Representatives include
any member or duly designated alternate member of the Authority, the Executive
Director, the Deputy Director, any Program Manager and any Loan Officer.
Subject. The public hearing shall address the subject of the nature and
location of the proposed project and the issuance of bonds to finance the
project.
Conduct. The hearing shall be conducted at a time and in a manner that
provides reasonable opportunity for persons with differing views on the subject
of the hearing to be heard. The hearing officer shall present a short statement
regarding the subject of the hearing, including the identity of the
participants, the nature and location of the proposed project, the nature of the
bond issue, and the public purpose of the transaction. Reasonable questions and
verbal comment shall be entertained.
In the discretion of the hearing officer, the time for verbal expression
may be limited or written statements accepted if appropriate in the
circumstances of the hearing. Priority of appearance and all other matters
necessary to assure the expeditious and orderly conduct of the hearing in the
interests of its purpose shall be determinatively established by the hearing
officer present. Hearings may be conducted in conjunction with or apart from
board meetings.
For the convenience of the Authority or any other cause, hearings once
scheduled may be postponed, canceled, rescheduled, discontinued or recontinued
without restriction, except that notice shall be again published regarding any
rescheduled hearing to the extent it is required by the Code.
In the event that for any proposed issue no persons appear to address the
hearing within one-half hour of the time scheduled
-55-
<PAGE>
for its commencement, the hearing officer may declare the hearing to have been
held unattended and to be concluded.
Plan of Financing. The public hearing also may address subsequent issues
of obligations to occur within three years of the initial issue providing
financing for a proposed project. The subsequent obligations may be issued for
refunding purposes or to provide financing for further phases of construction or
acquisition initially approved.
-56-
<PAGE>
Schedule B
RECORD OF PUBLIC HEARING
-57-
<PAGE>
[LETTERHEAD OF THE NEWS-TIMES, DANBURY, CONNECTICUT]
CT DEVELOPMENT AUTHORITY 501966
VERA GALKA
845 BROOK STREET
ROCKY HILL CT 06067
THE NEWS-TIMES
AFFIDAVIT OF PUBLICATION
STATE OF CONNECTICUT
COUNTY OF FAIRFIELD SS. DANBURY
- - --------------------------------------------------------------------------------
LEGAL NOTICE
NOTICE OF PUBLIC HEARING
The Connecticut Development Authority (the "Authority") is empowered under
the State Commerce Act to issue its tax exempt revenue bonds for authorized
projects subject to a public hearing, as required by Section 147(f) of the
Internal Revenue Code of 1986, as amended. The project(s) to be financed with
the proceeds of the bonds will general consist of land, buildings and equipment,
and it is expected they will increase or maintain the tax base, employment and
economic diversity in the State of Connecticut.
The following loan(s) have been requested and a hearing is scheduled for
10:00 a.m. on Tuesday, November 18, 1997, at the Authority offices located at
999 West Street, Rocky Hill, CT 06067. The subject of the hearing will be the
nature and location of the proposed project and the issuance of bonds by the
Authority to provide financing. Interested persons are invited to attend and
will have an opportunity to make a statement regarding the project or the
financing. Written comments and general inquiries may be directed to the
Authority at the address above, attention Antone C. Botelho, III.
NAME OF BORROWER/OCCUPANT -- Sonics & Materials, Inc.
PROJECT ADDRESS -- 55 Church Hill Road Newtown, CT 06470.
TYPE OF PROJECT AND PROJECT DESCRIPTION -- A loan to a manufacturer of
ultrasonic bonding equipment and ultrasonic liquid processors for the purchase
of 7.5 acres of land with an existing 62,000 sq. ft. building situated thereon,
the construction of renovations thereto and other site improvements thereon, the
acquisition and installation of new production machinery and equipment therein
and other related project costs.
MAXIMUM AMOUNT OF FINANCING -- $4,000,000.
ASSETS TO BE FINANCED -- Land, buildings, machinery & equipment and other
costs including costs of issuance and required reserves, if any.
- - --------------------------------------------------------------------------------
ON THIS 6th OF NOV, 1997 PERSONALLY APPEARED BEFORE THE UNDERSIGNED, A NOTARY
PUBLIC, WITHIN AND FOR SAID COUNTY AND STATE, CHERI PANZICA OF THE NEWS TIMES, A
DAILY NEWSPAPER PUBLISHED AT DANBURY IN SAID COUNTY OF FAIRFIELD AND STATE OF
CT, WHO, BEING DULY SWORN, STATES ON OATH THAT THE FOLLOWING ADVERTISEMENT S
APPEARED IN THE NEWS-TIMES ON THE BELOW LISTED DATES.
/s/ Cheri Panzica
-------------------------------------------
CHERI PANZICA
SUBSCRIBED AND SWORN TO BEFORE ME, ON THIS 6 DAY OF NOV 1997 A.D.
/s/ Virginia [ILLEGIBLE]
-------------------------------------------
NOTARY PUBLIC 10 31 99
PUBLICATION EXPIRE DATE AD CAPTION # TIMES AMOUNT
THE NEWS TIMES 11/04/97 SONICS/MATERIAL 1 478.32
11/04/97
<PAGE>
[LETTERHEAD OF CONNECTICUT DEVELOPMENT AUTHORITY]
VIA FACSIMILE (860) 241-3866
October 30, 1997
The Hartford Courant
285 Broad Street
Hartford, Connecticut 06115
Attention: Classified - Legal Notices
To Whom it May Concern:
Please find enclosed our Notice of Public Hearing information which must
be published in your newspaper on Tuesday, November 4,1997.
Please send us an "Affidavit of Publication Certificate" and a cutout of
the newspaper notice immediately upon publication. Such Affidavit and Cutout
should be received by this office not later than Friday, November 14, 1997.
Any questions regarding the notice should be directed to Antone C.
Botelho, III at (860) 258-7890. All correspondence should be addressed to:
Ms. Verna Galka
Connecticut Development Authority
999 West Street
Rocky Hill, CT 06067
Very truly yours,
/s/ Antone C. Botelho III
Antone C. Botelho III
Senior Vice President
enc.
cc: V. Galka
W. Loafman
<PAGE>
NOTICE OF PUBLIC HEARING
The Connecticut Development Authority (the "Authority") is empowered under
the State Commerce Act to issue its tax exempt revenue bonds for authorized
projects subject to a public hearing, as required by Section 147(f) of the
Internal Revenue Code of 1986, as amended. The project(s) to be financed with
the proceeds of the bonds will general consist of land, buildings and equipment,
and it is expected they will increase or maintain the tax base, employment and
economic diversity in the State of Connecticut.
The following loan(s) have been requested and a hearing is scheduled for
10:00 a.m. on Tuesday, November 18, 1997, at the Authority offices located at
999 West Street, Rocky Hill, CT 06067. The subject of the hearing will be the
nature and location of the proposed project and the issuance of bonds by the
Authority to provide financing. Interested persons are invited to attend and
will have an opportunity to make a statement regarding the project or the
financing. Written comments and general inquiries may be directed to the
Authority at the address above, attention Antone C. Botelho, III.
PROPOSED PROJECT(S)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
Name of Project Address Type of Project and Project Description Maximum Amount Assets to be
Borrower/Occupant of Financing Financed
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sonics & Materials, 55 Church Hill Road A loan to a manufacturer of ultrasonic bonding $4,400,000 Land, buildings,
Inc. Newtown, CT 06470 equipment and ultrasonic liquid processors for machinery &
the purchase of 7.5 acres of land with an equipment and
existing 62,000 sq. ft. building situated other costs
thereon, the construction of renovations including costs of
thereto and other site improvements thereon, issuance and
the acquisition and installation of new required reserves,
production machinery and equipment therein if any.
and other related project costs.
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
077699
Affidavit of Publication
State of Connecticut )
) ss. HARTFORD, CONN.
County of Hartford )
I Diane Luka do solemnly swear that I am credit representative of the Hartford
Courant, printed and published at Harftord, in the State of Connecticut and that
from my own personal knowledge and reference to the files of said publication
the advertisement of
(SEE ATTACHED)
11/18/97 Hearing $251.10
was inserted in the regular editions on dates as follows: 11/4/97
- - --------------------------------------------------------------------------------
Connecticut
- - --------------------------------------------------------------------------------
NOTICE OF PUBLIC HEARING
The Connecticut Development Authority (the "Authority") is empowered under
the State Commerce Act to issue its tax exempt revenue bonds for authorized
projects subject to a public hearing, as required by Section 147(f) of the
Internal Revenue Code of 1986, as amended. The project(s) to be financed with
the proceeds of the bonds will general consist of land, buildings and equipment,
and it is expected they will increase or maintain the tax base, employment and
economic diversity in the State of Connecticut.
The following loan(s) have been requested and a hearing is scheduled for
10:00 a.m. on Tuesday, November 18, 1997, at the Authority offices located at
999 West Street, Rocky Hill, CT 06067. The subject of the hearing will be the
nature and location of the proposed project and the issuance of bonds by the
Authority to provide financing. Interested persons are invited to attend and
will have an opportunity to make a statement regarding the project or the
financing. Written comments and general inquiries may be directed to the
Authority at the address above, attention Antone C. Botelho, III.
PROPOSED PROJECT(S)
<TABLE>
<CAPTION>
Name of Project Address Type of Project and Project Description Maximum Amount Assets to be
Borrower/Occupant of Financing Financed
<S> <C> <C> <C> <C>
Sonics & Materials, 55 Church Hill Road A loan to a manufacturer of ultrasonic bonding $4,400,000 Land, buildings,
Inc. Newtown, CT 06470 equipment and ultrasonic liquid processors for machinery &
the purchase of 7.5 acres of land with an equipment and
existing 62,000 sq. ft. building situated other costs
thereon, the construction of renovations including costs of
thereto and other site improvements thereon, issuance and
the acquisition and installation of new required reserves,
production machinery and equipment therein if any.
and other related project costs.
</TABLE>
- - --------------------------------------------------------------------------------
/s/ [ILLEGIBLE]
Subscribed and sworn to before me this 7th day of November 1997
/s/ William B. McDonald
..................................
Notary Public
[SEAL] WILLIAM B. McDONALD
NOTARY PUBLIC, HARTFORD COUNTY, CT
<PAGE>
CONNECTICUT DEVELOPMENT AUTHORITY
999 West Street
Rocky Hill, Connecticut 06067
MINUTES
Public Hearing
NOVEMBER 18, 1997
Members present from the Authority included Antone C. Botelho, III,
Hearing Officer, and Verna Galka, Recording Secretary.
Mr. Botelho called the hearing to order at 10:00 a.m.
PROJECTS HEARD:
1. SONICS & MATERIALS, INC., 55 Church Hill Road, Newtown, CT 06470,
$4,400,000 to finance a loan to a manufacturer of ultrasonic bonding equipment
and ultrasonic liquid processors for the purchase of 7.5 acres of land with an
existing 62,000 sq. ft. building situated thereon, the construction of
renovations thereto and other site improvements thereon, the acquisition and
installation of new production machinery and equipment therein and other related
project costs. (L&B; M&E; & other costs including costs of issuance and required
reserves, if any)
There being no one present from the general public or comments or
corrections, the hearing was adjourned at 10:30 a.m.
/s/ Verna Galka /s/ Antone C. Botelho, III
- - --------------------------- -----------------------------
Verna Galka Antone C. Botelho, III
Recording Secretary Hearing Officer
<PAGE>
- - --------------------------------------------------------------------------------
Connecticut
- - --------------------------------------------------------------------------------
NOTICE OF PUBLIC HEARING
The Connecticut Development Authority (the "Authority") is empowered under
the State Commerce Act to issue its tax exempt revenue bonds for authorized
projects subject to a public hearing, as required by Section 147(f) of the
Internal Revenue Code of 1986, as amended. The project(s) to be financed with
the proceeds of the bonds will general consist of land, buildings and equipment,
and it is expected they will increase or maintain the tax base, employment and
economic diversity in the State of Connecticut.
The following loan(s) have been requested and a hearing is scheduled for
10:00 a.m. on Tuesday, November 18, 1997, at the Authority offices located at
999 West Street, Rocky Hill, CT 06067. The subject of the hearing will be the
nature and location of the proposed project and the issuance of bonds by the
Authority to provide financing. Interested persons are invited to attend and
will have an opportunity to make a statement regarding the project or the
financing. Written comments and general inquiries may be directed to the
Authority at the address above, attention Antone C. Botelho, III.
PROPOSED PROJECT(S)
<TABLE>
<CAPTION>
Name of Project Address Type of Project and Project Description Maximum Amount Assets to be
Borrower/Occupant of Financing Financed
<S> <C> <C> <C> <C>
Sonics & Materials, 55 Church Hill Road A loan to a manufacturer of ultrasonic bonding $4,400,000 Land, buildings,
Inc. Newtown, CT 06470 equipment and ultrasonic liquid processors for machinery &
the purchase of 7.5 acres of land with an equipment and
existing 62,000 sq. ft. building situated other costs
thereon, the construction of renovations including costs of
thereto and other site improvements thereon, issuance and
the acquisition and installation of new required reserves,
production machinery and equipment therein if any.
and other related project costs.
</TABLE>
- - --------------------------------------------------------------------------------
<PAGE>
Schedule C
APPROVAL OF APPLICABLE ELECTED REPRESENTATIVE
-58-
<PAGE>
CONNECTICUT DEVELOPMENT AUTHORITY
$4,000,000 INDUSTRIAL DEVELOPMENT BONDS
SONICS & MATERIALS, INC.
PROJECT - SERIES 1997
GOVERNOR'S APPROVAL
I, John G. Rowland, Governor of the State of Connecticut, (i) hereby
certify that I am chief elected officer of the State of Connecticut, and (ii)
pursuant to Section 147(f)(2) of the Internal Revenue Code of 1986, as amended
(the "Code"), and based upon the attached Certificate of the Executive Director
of the Connecticut Development Authority (the "Authority") which indicates the
Authority has determined that it is in compliance with said Section 147(f),
hereby approve the issuance of the above-titled bonds for the purpose of issuing
a loan to Sonics & Materials, Inc. (the "Borrower"), a corporation organized and
existing under the laws of the State of Delaware duly qualified to do business
as a foreign corporation in the State of Connecticut, for a facility described
in the notice of public hearing which is an exhibit to the attached Certificate
and other related project costs, and (iii) based upon such Certificate, hereby
certify that the private activity bond limitations in Section 146 of the Code
have been complied with.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of
November, 1997.
/s/ John G. Rowland
------------------------------
John G. Rowland
Governor
<PAGE>
CERTIFICATE OF EXECUTIVE DIRECTOR
CONCERNING PUBLIC NOTICE AND APPROVAL OF BONDS
OF THE
Connecticut Development Authority For
$4,000,000 Industrial Development Bonds
(Sonics & Materials, Inc.
Project) Series 1997
Borrower Project Type Location
- - -------- ------------ --------
Sonics & Materials, Inc. Manufacturing Newtown,
Connecticut
WHEREAS, Section 147(f) of the Internal Revenue Code of 1986, as amended
("Section 147(f)"), requires issues of bonds of the Connecticut Development
Authority (the "Authority") to be approved by an applicable elected
representative of the State of Connecticut (the "State"); and
WHEREAS, Section 149(e) ("Section 149(e)") of the Code requires the
Governor of the State, or his delegate, to certify that issues of bonds meet the
requirements of Section 146 ("Section 146") of the Code (relating to the cap on
private activity bonds); and
WHEREAS, the chief elected executive of the executive branch of the State
pursuant to Article Fourth, Section 5 of the Connecticut Constitution and
Chapter 31 of the Connecticut General Statutes is the Governor of the State; and
WHEREAS, I am Executive Director of the Authority, authorized pursuant a
resolution of the Members of the Board of Directors of the Authority adopted on
November 19, 1997, and am one of the officers of the Authority who is
responsible for the above captioned Project;
NOW THEREFORE, the Undersigned hereby certifies to the Governor of the
State as follows:
1. That the Authority published the attached Notice of Public Hearing on
November 4,1997 in the following newspapers:
The Hartford Courant.
The Danbury News-Times
2. That the Notice of Public Hearing was published at least 14 days prior
to the public hearing.
<PAGE>
3. That the public hearing was held on November 18, 1997.
4. That the duly authorized Board of Directors of the Authority adopted a
resolution on November 19, 1997 after a Notice of Regular Meeting was duly filed
with the Secretary of State in the manner provided by law;
5. That the foregoing complies with the provisions of said Section 147(f)
of the Code.
6. That the limit of the amount of private activity bonds as defined in
Section 146 which may be issued by the Authority from 1997 volume cap is
$52,387,840;
7. That as of the date hereof, $40,202,840 remains of the Authority's 1997
volume cap allocation; and
IN WITNESS WHEREOF, I have hereunto set my hand as Executive Director of
the Authority as of this _____ day of November, 1997.
/s/ Antonio Roberto
------------------------------
Antonio Roberto
Executive Director
2
<PAGE>
Schedule D-1
USE OF BOND PROCEEDS
1. Amount received on the sale of Bonds (exclusive of accrued interest): face
amount of the Bonds, $3,810,000, minus original issue discount $-0-, plus
premium $-0-, equals $3,810,000.
2. Amount of earnings estimated to accrue on investment of Bond proceeds
prior to disbursement for Project Costs, $37,746.
3. Amount of Issuance Costs of the Bonds to be paid from (1) and (2) above:
$47,768. Such cost equals 2% of the Issue Price of the Bonds or less and
therefore is not greater than the 2% limitation established by the Code.
4. From the sum of the amount received on the sale of the Bonds (Item 1:
$3,810,000) and earnings on investments (Item 2: $37,746), subtract any
reasonably required reserve fund of ($-0-): $3,847,746. This amount is
referred to in this Schedule A as "Net Proceeds".
5. The amount of Qualified Costs to be paid from the Net Proceeds of the
Bonds equals $3,654,738. The amount of Nonqualified Costs to be paid from
Net Proceeds of Bonds equals $193,008. The following breakdown of costs
includes labor and installment costs:
Use of Net Proceeds
-------------------
Qualified Nonqualified
Costs Costs
--------- ------------
LAND AND EXISTING BUILDINGS
Cost of acquiring land................$430,240 $-0-
Cost of acquiring building............$638,795 $-0-
Purchase price of option to acquire
Project Realty......................$-0- $-0-
Other (specify).......................$-0- $-0-
RENOVATION EXPENDITURES -
EXISTING BUILDING(S)
Architectural and engineering.........$-0- $-0-
Construction (Room Systems included)..$1,658,999 $15,000
Network Wiring........................$24,258 $-0-
Site Work & Sanitary Disposal.........$-0- $129,586
Contingency...........................$258,958 $-0-
Other (GA, legal, insurance,
clerk of works, reserve)..............$-0- $-0-
Subtotal $3,011,250 $144,586
-59-
<PAGE>
CONSTRUCTION COSTS - NEW BUILDINGS
Architectural and engineering.........$-0- $-0-
Construction contracts................$-0 $-0-
Site preparation......................$-0- $-0-
Materials.............................$-0- $-0-
Labor.................................$-0- $-0-
Utilities.............................$-0- $-0-
Paving and landscaping................$-0- $-0-
Other (builder's profit)..............$-0- $-0-
Subtotal $3,011,250 $144,586
MACHINERY AND EQUIPMENT -
Invoice Cost and Installation.........$500,000 $-0-
INTEREST ON BORROWINGS SPECIFICALLY
FOR THE PROJECT PRIOR TO BOND ISSUANCE
Attributable to Improvements
Construction (from 9/25/97 to
12/12/97............................$31,000 $-0-
Attributable to Equipment
Acquisition (from _____ to __________
__________)...........................$-0- $-0-
INTEREST ON BONDS
From 12/12, 1997 to 6/12,
1998..................................$112,488 $-0-
MISCELLANEOUS
Letter of Credit Fee..................$-0- $-0-
Real Property Taxes
during Construction...................$-0- $-0-
Contingency...........................$-0- $654
Issuance Costs........................$-0- $47,768
TOTAL.................................$3,654,738 $193,008
6. Amount of Qualified Costs from Item 5 ($3,654,738) is equal to 95% of the
amount of Net Proceeds from Item 4 ($3,847,746), and therefore is not less
than the 95% limitation established by the Code.
7. The cost of acquiring Land as shown in Item 5 ($430,240) is equal to 11.3%
of the Net Proceeds of the Bonds (excluding any investment earnings) as
shown in Item 4 ($3,810,000) and therefore is less than the 25% limitation
established by the Code.
-60-
<PAGE>
Schedule D-2
SUMMARY OF USE OF BOND PROCEEDS*
The following information on the Project must be furnished to the Internal
Revenue Service by the Authority on Form 8038.
1. Face amount of issue of Bonds................ $3,810,000
2. Costs of Issuance (including any
Underwriter's Discount)...................... $47,768
3. Reasonably Required Reserve Fund
deposits..................................... $-0-
4. Non-Refunding Proceeds (Amount on Line 1
Less Amounts on Lines 2 and 3)............... $3,762,232
5. Allocation of Non-Refunding Proceeds
a. Cost of 3-year ACRS property (or
portion thereof) financed by Bond Proceeds... $
b. Cost of 5-year ACRS property (or
portion thereof) financed by Bond Proceeds... $
c. Cost of 10-year ACRS property (or
portion thereof) financed by Bond Proceeds... $500,000
d. Cost of 19-year ACRS property (or
portion thereof) financed by Bond Proceeds... $-0-
e. Cost of Land (or portion thereof)
financed by Bond Proceeds.................... $430,240
f. Cost of other property (or portion
thereof) financed by Bond Proceeds........... $2,879,760
- - ----------
* Solely for purposes of completing the 8038 Schedule, the Company has
classified property financed with Non-Refunding Proceeds according to the ACRS
classes of property in effect through the end of 1986.
-61-
<PAGE>
g. Other use of Non-Refunding Proceeds....... $-0-
Total (Non-Refunding Proceeds)............... $3,810,000
6. Refunding Proceeds........................... $-0-
==========
-62-
<PAGE>
Schedule E
[RESERVED]
-63-
<PAGE>
Schedules F1-F5
Schedule F1
IDENTIFICATION OF ASSETS
1. Total cost of all assets eligible for financing under the Indenture
(whether or not such assets were actually financed with Bond Proceeds):
$3,847,746.
2. Face amount of Bonds: $3,810,000.
ABCD
Ratio of Total
Cost of Each Bond Proceeds
Asset (B) to Allocable to Each
Total Cost of Asset (C x Face
Total Cost All Assets Amount of Bonds
Asset* of Each Asset (from Item 1.) (from Item 2.)**
- - ------ ------------- -------------- ----------------
1. Land $430,240 .112 $426,720
2. Land Im- $148,854 .038 $144,780
provements
3. Building $638,795 .166 $632,460
4. Equipment $500,000 .13 $495,300
5. Renovation $1,942,215 .505 $1,924,050
6. Other $187,642 .048 $185,801
Total $3,847,746
----------
* Assets may be grouped by Class Life Asset Depreciation Range
(CLADR), as set forth in Rev. Proc. 83-35, if applicable.
The categories should be indicated by a brief description and
the CLADR reference number.
** In the absence of a special allocation of Bond Proceeds in the Financing
Documents to Particular assets, Bond Proceeds will be prorated among all
assets as set forth in this Schedule F1.
-64-
<PAGE>
Schedule F2
ECONOMIC LIFE
A B C
Asset Number(a) Economic Life(b) Basis of
(from F1) (in years) Determination(c)(d)(e)
- - --------------- ---------------- ----------------------
Land Improvements 20 (d)
Land N/A code sec 147(b)(3)(B)
Building & Renovations 45 (c)
Equipment 10(CLADR 35.0) (d)(e)
- - ----------
(a) The Land is not taken into account in the computation of Average Economic
Life and has been omitted from Column A because the cost of the Land
represents less than 25% of the Bond Proceeds.
(b) Economic Life is not to be determined based on ACRS lives.
(c) If real property -- based on Rev. Proc. 62-21 (1962-2 C.B.
418).
(d) If new property other than real property -- based on Class Life Asset
Depreciation Range ("CLADR") midpoint as set forth in Rev. Proc. 83-35
(specify CLADR class number).
(e) If used personal property -- based on an appraisal, a copy of which is
attached to this Schedule F2.
-65-
<PAGE>
Attachment to Schedule F2
AVERAGE ECONOMIC LIFE
APPRAISAL REPORT
(For Used Personal Property)
N/A
-66-
<PAGE>
Schedule F3
ADJUSTED ECONOMIC LIFE
A B C D E
Acquisition
Period in or Construc- Adjusted
Service tion Period Economic
Prior to following Life
Asset Economic Bond Issuance Bond Issuance (B-C
Number Life Date (years Date (years or
(from F1) (from F2) or Portions)* or portions)* B+D)
- - --------- --------- ------------- ------------- ----
Land N/A N/A N/A N/A
Land Improvements 20 -0- .5 20.5
Building 45 -0- -0- 45
Equipment 10 -0- .5 10.5
Building Renov. 45 -0- .5 45.5
* If inapplicable, indicate "N/A"
-67-
<PAGE>
Schedule F4
AVERAGE ECONOMIC LIFE
A B C D
Bond Proceeds Adjusted
Allocable to Economic
Asset Asset Life
Number (Col. D (Col. E of Weighted Life
(from F1) of F1) F3) (B x C)
- - --------- ------------- ---------- -------------
Land Improvements $ 144,780 20.5 $ 2,967,990
Building $ 632,460 45 $ 28,460,700
Equipment $ 495,300 10.5 $ 5,200,650
Building Renov $ 1,924,050 45.5 $ 87,544,275
Total B: $ 3,196,590 Total D: $124,173,615
----------- ------------
Average Economic Life = Total D = 38.8
------- ----
Total B
-68-
<PAGE>
Schedule F5
AVERAGE MATURITY OF THE BONDS
A B C
Weighted Maturity
Issue Price* Length of Term** (Col. A x Col. B)
- - ------------ ---------------- -----------------
[SEE ATTACHED]
Average Maturity*** = 10.511 yrs.
- - ----------
* Issue Price as defined in Treas. Reg. 1.148-8 is the Price paid by the
first purchaser in a private placement or by the general public in a
public offering, of each separate maturity of Bonds issued as part of the
issue, including [serial bonds] and mandatory or expected sinking fund
installments of term bonds. In the case of a single term bond being
amortized on a level debt, level principal or some other basis, Column A
sets forth the amount of Principal maturing in each year.
** Number of years or portions thereof -- carried to first decimal point from
date of issue to maturity date.
*** The Average Maturity of the Bonds cannot exceed 120 percent of the Average
Economic Life of the Project set forth in Schedule F4.
-69-
<PAGE>
Calculation of Weighted Average Maturity
(Monthly Payments)
Issue Date Maturity Principal Years Bond Years
- - --------------------------------------------------------------------------------
12-Dec-97 1-Jan-99 16,710.52 1.05 17,614.10
1-Feb-99 16,710.52 1.14 19,032.38
1-Mar-99 16,710.52 1.22 20,313.40
1-Apr-99 16,710.52 1.30 21,731.68
1-May-99 16,710.52 1.38 23,104.21
1-Jun-99 16,710.52 1.47 24,522.49
1-Jul-99 16,710.52 1.55 25,895.02
1-Aug-99 16,710.52 1.63 27,313.29
1-Sep-99 16,710.52 1.72 28,731.57
1-Oct-99 16,710.52 1.80 30,104.10
1-Nov-99 16,710.52 1.89 31,522.38
1-Dec-99 16,710.52 1.97 32,894.90
1-Jan-00 16,710.52 2.05 34,313.18
1-Feb-00 16,710.52 2.14 35,731.46
1-Mar-00 16,710.52 2.22 37,058.24
1-Apr-00 16,710.52 2.30 38,476.52
1-May-00 16,710.52 2.38 39,849.04
1-Jun-00 16,710.52 2.47 41,267.32
1-Jul-00 16,710.52 2.55 42,639.85
1-Aug-00 16,710.52 2.64 44,058.13
1-Sep-00 16,710.52 2.72 45,476.40
1-Oct-00 16,710.52 2.80 46,848.93
1-Nov-00 16,710.52 2.89 48,267.21
1-Dec-00 16,710.52 2.97 49,639.74
1-Jan-01 16,710.52 3.06 51,058.02
1-Feb-01 16,710.52 3.14 52,476.29
1-Mar-01 16,710.52 3.22 53,757.32
1-Apr-01 16,710.52 3.30 55,175.60
1-May-01 16,710.52 3.38 56,548.13
1-Jun-01 16,710.52 3.47 57,966.40
1-Jul-01 16,710.52 3.55 59,338.93
1-Aug-01 16,710.52 3.64 60,757.21
1-Sep-01 16,710.52 3.72 62,175.49
1-Oct-01 16,710.52 3.80 63,548.01
1-Nov-01 16,710.52 3.89 64,966.29
<PAGE>
1-Dec-01 16,710.52 3.97 66,338.82
1-Jan-02 16,710.52 4.05 67,757.10
1-Feb-02 16,710.52 4.14 69,175.38
1-Mar-02 16,710.52 4.22 70,456.40
1-Apr-02 16,710.52 4.30 71,874.68
1-May-02 16,710.52 4.38 73,247.21
1-Jun-02 16,710.52 4.47 74,665.49
1-Jul-02 16,710.52 4.55 76,038.01
1-Aug-02 16,710.52 4.64 77,456.29
1-Sep-02 16,710.52 4.72 78,874.57
1-Oct-02 16,710.52 4.80 80,247.10
1-Nov-02 16,710.52 4.89 81,665.37
1-Dec-02 16,710.52 4.97 83,037.90
1-Jan-03 16,710.52 5.05 84,456.18
1-Feb-03 16,710.52 5.14 85,874.46
1-Mar-03 16,710.52 5.22 87,155.48
1-Apr-03 16,710.52 5.30 88,573.76
1-May-03 16,710.52 5.38 89,946.29
1-Jun-03 16,710.52 5.47 91,364.57
1-Jul-03 16,710.52 5.55 92.737.10
1-Aug-03 16,710.52 5.63 94,155.37
1-Sep-03 16,710.52 5.72 95,573.65
1-Oct-03 16,710.52 5.80 96,946.18
1-Nov-03 16,710.52 5.89 98,364.46
1-Dec-03 16,710.52 5.97 99,736.98
1-Jan-04 16,710.52 6.05 101,155.26
1-Feb-04 16,710.52 6.14 102,573.54
1-Mar-04 16,710.52 6.22 103,900.32
1 Apr-04 16,710.52 6.30 105,318.60
1-May-04 16,710.52 6.38 106,691.12
1-Jun-04 16,710.52 6.47 108,109.40
1-Jul-04 16,710.52 6.55 109,481.93
1-Aug-04 16,710.52 6.64 110,900.21
1-Sep-04 16,710.52 6.72 112,318.48
1-Oct-04 16,710.52 6.80 113,691.01
1-Nov-04 16,710.52 6.89 115,109.29
1-Dec-04 16,710.52 6.97 116,481.82
1-Jan-05 16,710.52 7.06 117,900.10
1-Feb-05 16,710.52 7.14 119,318.37
1-Mar-05 16,710.52 7.22 120,599.40
1-Apr-05 16,710.52 7.30 122,017.68
1-May-05 16,710.52 7.38 123,390.21
<PAGE>
1-Jun-05 16,710.52 7.47 124,808.48
1-Jul-05 16,710.52 7.55 126,181.01
1-Aug-05 16,710.52 7.64 127,599.29
1-Sep-05 16,710.5t 7.72 129,017.57
1-Oct-05 16,710.52 7.80 130,390.09
1-Nov-05 16,710.52 7.89 131,808.37
1-Dec-05 16,710.52 7.97 133,180.90
1-Jan-06 16,710.52 8.05 134,599.18
1-Feb-06 16,710.52 8.14 136,017.46
1-Mar-06 16,710.52 8.22 137,298.48
1-Apr-06 16,710.52 8.30 138,716.76
1-May-06 16,710.52 8.38 140,089.29
1-Jun-06 16,710.52 8.47 141,507.57
1-Jul-06 16,710.52 8.55 142,880.09
1-Aug-06 16,710.52 8.64 144,298.37
1-Sep-06 16,710.52 8.72 145,716.65
1-Oct-06 16,710.52 8.80 147,089.18
1-Nov-06 16,710.52 8.89 148,507.45
1-Dec-06 16,710.52 8.97 149,879.98
1-Jan-07 16,710.52 9.05 151,298.26
1-Feb-07 16,710.52 9.14 152,716.54
1-Mar-07 16,710.52 9.22 153,997.56
1-Apr-07 16,710.52 9.30 155,415.84
1-May-07 16,710.52 9.38 156,788.37
1-Jun-07 16,710.52 9.47 158,206.65
1-Jul-07 16,710.52 9.55 159,579.18
1-Aug-07 16,710.52 9.63 160,997.45
1-Sep-07 16,710.52 9.72 162,415.73
1-Oct-07 16,710.52 9.80 163,788.26
1-Nov-07 16,710.52 9.89 165,206.54
1-Dec-07 16,710.52 9.97 166,579.06
1-Jan-08 16,710.52 10.05 167,997.34
1-Feb-08 16,710.52 10.14 169,415.62
1-Mar-08 16,710.52 10.22 170,742.40
1-Apr-08 16,710.52 10.30 172,160.68
1-May-08 16,710.52 10.38 173,533.20
1-Jun-08 16,710.52 10.47 174,951.48
1-Jul-08 16,710.52 10.55 176,324.01
1-Aug-08 16,710.52 10.64 177,742.29
1-Sep-08 16,710.52 10.72 179,160.56
1-Oct-08 16,710.52 10.80 180,533.09
1-Nov-08 16,710.52 10.89 181,951.37
<PAGE>
1-Dec-08 16,710.52 10.97 183,323.90
1-Jan-09 16,710.52 11.06 184,742.18
1-Feb-09 16,710.52 11.14 186,160.45
1-Mar-09 16,710.52 11.22 187,441.48
1-Apr-09 16,710.52 11.30 188,859.76
1-May-09 16,710.52 11.38 190,232.29
1-Jun-09 16,710.52 11.47 191,650.56
1-Jul-09 16,710.52 11.55 193,023.09
1-Aug-09 16,710.52 11.64 194,441.37
1-Sep-09 16,710.52 11.72 195,859.65
1-Oct-09 16,710.52 11.80 197,232.17
1-Nov-09 16,710.52 11.89 198,650.45
1-Dec-09 16,710.52 11.97 200,022.98
1-Jan-10 16,710.52 12.05 201,441.26
1-Feb-10 16,710.52 12.14 202,859.54
1-Mar-10 16,710.52 12.22 204,140.56
1-Apr-10 16,710.52 12.30 205,558.84
1-May-10 16,710.52 12.38 206,931.37
1-Jun-10 16,710.52 12.47 208,349.65
1-Jul-10 16,710.52 12.55 209,722.17
1-Aug-10 16,710.52 12.64 211,140.45
1-Sep-10 16,710.52 12.72 212,558.73
1-Oct-10 16,710.52 12.80 213,931.26
1-Nov-10 16,710.52 12.89 215,349.53
1-Dec-10 16,710.52 12.97 216,722.06
1-Jan-11 16,710.52 13.05 218,140.34
1-Feb-11 16,710.52 13.14 219,558.62
1-Mar-11 16,710.52 13.22 220,839.64
1-Apr-11 16,710.52 13.30 222,257.92
1-May-11 16,710.52 13.38 223,630.45
1-Jun-11 16,710.52 13.47 225,048.73
1-Jul-11 16,710.52 13.55 226,421.26
1-Aug-11 16,710.52 13.63 227,839.53
1-Sep-11 16,710.52 13.72 229,257.81
1-Oct-11 16,710.52 13.80 230,630.34
1-Nov-11 16,710.52 13.89 232,048.62
1-Dec-11 16,710.52 13.97 233,421.14
1-Jan-12 16,710.52 14.05 234,839.42
1-Feb-12 16,710.52 14.14 236,257.70
1-Mar-12 16,710.52 14.22 237,584.48
1-Apr-12 16,710.52 14.30 239,002.76
1-May-12 16,710.52 14.38 240,375.28
<PAGE>
1-Jun-12 16,710.52 14.47 241,793.56
1-Jul-12 16,710.52 14.55 243,166.09
1-Aug-12 16,710.52 14.64 244,584.37
1-Sep-12 16,710.52 14.72 246,002.64
1-Oct-12 16,710.52 14.80 247,375.17
1-Nov-12 16,710.52 14.89 248,793.45
1-Dec-12 16,710.52 14.97 250,165.98
1-Jan-13 16,710.52 15.06 251,584.26
1-Feb-13 16,710.52 15.14 253,002.53
1-Mar-13 16,710.52 15.22 254,283.56
1-Apr-13 16,710.52 15.30 255,701.84
1-May-13 16,710.52 15.38 257,074.37
1-Jun-13 16,710.52 15.47 258,492.64
1-Jul-13 16,710.52 15.55 259,865.17
1-Aug-13 16,710.52 15.64 261,283.45
1-Sep-13 16,710.52 15.72 262,701.73
1-Oct-13 16,710.52 15.80 264,074.25
1-Nov-13 16,710.52 15.89 265,492.53
1-Dec-13 16,710.52 15.97 266,865.06
1-Jan-14 16,710.52 16.05 268,283.34
1-Feb-14 16,710.52 16.14 269,701.62
1-Mar-14 16,710.52 16.22 270,982.64
1-Apr-14 16,710.52 16.30 272,400.92
1-May-14 16,710.52 16.38 273,773.45
1-Jun-14 16,710.52 16.47 275,191.73
1-Jul-14 16,710.52 16.55 276,564.25
1-Aug-14 16,710.52 16.64 277,982.53
1-Sep-14 16,710.52 16.72 279,400.81
1-Oct-14 16,710.52 16.80 280,773.34
1-Nov-14 16,710.52 16.89 282,191.61
1-Dec-14 16,710.52 16.97 283,564.14
1-Jan-15 16,710.52 17.05 284,982.42
1-Feb-15 16,710.52 17.14 286,400.70
1-Mar-15 16,710.52 17.22 287,681.72
1-Apr-15 16,710.52 17.30 289,100.00
1-May-15 16,710.52 17.38 290,472.53
1-Jun-15 16,710.52 17.47 291,890.81
1-Jul-15 16,710.52 17.55 293,263.34
1-Aug-15 16,710.52 17.63 294,681.61
1-Sep-15 16,710.52 17.72 296,099.89
1-Oct-15 16,710.52 17.80 297,472.42
1-Nov-15 16,710.52 17.89 298,890.70
<PAGE>
1-Dec-15 16,710.52 17.97 300,263.22
1-Jan-16 16,710.52 18.05 301,681.50
1-Feb-16 16,710.52 18.14 303,099.78
1-Mar-16 16,710.52 18.22 304,426.56
1-Apr-16 16,710.52 18.30 305,844.84
1-May-16 16,710.52 18.38 307,217.36
1-Jun-16 16,710.52 18.47 308,635.64
1-Jul-16 16,710.52 18.55 310,008.17
1-Aug-16 16,710.52 18.64 311,426.45
1-Sep-16 16,710.52 18.72 312,844.72
l-Oct-16 16,710.52 18.80 314,217.25
1-Nov-16 16,710.52 18.89 315,635.53
1-Dec-16 16,710.52 18.97 317,008.06
1-Jan-17 16,710.52 19.06 318,426.34
1-Feb-17 16,710.52 19.14 319,844.61
1-Mar-17 16,710.52 19.22 321,125.64
1-Apr-17 16,710.52 19.30 322,543.92
1-May-17 16,710.52 19.38 323,916.45
1-Jun-17 16,710.52 19.47 325,334.72
1-Jul-17 16,710.52 19.55 326,707.25
1-Aug-17 16,710.52 19.64 328,125.53
1-Sep-17 16,710.52 19.72 329,543.81
1-Oct-17 16,710.52 19.80 330,916.33
1-Nov-17 16,710.52 19.89 332,334.61
1-Dec-17 16,711.96 19.97 333,735.90
TOTAL 3,810,000.00 40,046,349.58
Weighted Average Maturity 10.511
<PAGE>
Schedule G
CERTIFICATE OF COMPLIANCE WITH
$40 MILLION TAX-EXEMPT PRIVATE ACTIVITY BOND LIMIT
PORTION OF
OUTSTANDING(1)
TAX-EXEMPT AMOUNT
PRIVATE SUBJECT
PORTION OF ACTIVITY TO $40
BONDS BONDS MILLION
NAME OF ALLOCABLE ALLOCABLE LIMIT
TEST-PERIOD TO TO (COL.2 &
BENEFICIARY BENEFICIARY BENEFICIARY COL.3)
- - ----------- ----------- ----------- ------
Sonics & Materials, Inc. 100% -0- $3,810,000
- - ----------
(1) Portion of bonds outstanding as of the Date of Issue of the Bonds.
-71-
<PAGE>
Schedule H
ISSUE PRICE LETTER
December 12, 1997
Connecticut Development Authority
Rocky Hill, Connecticut
Whitman Breed Abbott & Morgan LLP
Greenwich, Connecticut
Re: $3,810,000 Connecticut Development Authority
Industrial Development Revenue Bonds (Sonics &
Materials, Inc. Project) Series 1997 (the "Bonds")
Gentlemen:
This letter is furnished by Brown Brothers Harriman & Co., as the
purchaser of the Bonds, to provide the Connecticut Development Authority (the
"Authority") and Whitman Breed Abbott & Morgan LLP, as bond counsel in respect
of the Bonds, with certain information in connection with the issuance of the
Bonds. Unless otherwise defined, the capitalized terms used herein shall have
the same meaning as defined in the Tax Regulatory Agreement to which this letter
is attached.
We hereby certify that we have purchased the Bonds as an investment
for its own account, without a present intent to reoffer the Bonds (as
participations in the Bonds) to others.
No representation is made as to the legal sufficiency of this
certificate for any purpose. We assume no obligation to advise you of any
changes that come to our attention subsequent to the date hereof and that would
have caused us to alter in any respect the information set forth herein. We
understand that the foregoing information will be relied upon by the Authority
for the purposes of making certain of the representations contained in the Tax
Regulatory Agreement, and will be relied upon by counsel, Whitman Breed Abbott &
Morgan LLP, in rendering its opinion that interest on the Bonds is excludable
from gross income of the owners thereof for federal income tax purposes.
Brown Brothers Harriman & Co.
By: /s/ [ILLEGIBLE]
--------------------------------
-71-
<PAGE>
Schedule I
FORM OF CERTIFICATION IN
CONNECTION WITH AN INVESTMENT CONTRACT
I, [Name], [Position], of [Entity Providing Investment Contract]
(the "Provider"), HEREBY CERTIFY in connection with the investment contract
between [Name of Company] and the Provider dated as of ____________ (the
"Investment Contract") that (i) in determining the offering price of the
Investment contract, the Provider took into account as significant factors the
reasonably expected drawdown schedule for proceeds of the [Bonds] other than
float funds and reserve funds, (ii) the yield on the Investment Contract is not
less than the yield currently available from the Provider on reasonably
comparable investment contracts offered to investors of funds other than
proceeds of tax-exempt bonds and (iii) set forth below are the administrative
costs reasonably expected to be paid to third parties in connection with the
Investment Contract.
Date: By:
------------------------- ---------------------------------
Name:
Title:
-72-
<PAGE>
Schedule J
FORM OF CERTIFICATION OF POSTED YIELD
OF A CERTIFICATE OF DEPOSIT
I, [Name], [Position] of [Issuer of the Certificate of Deposit] (the
"Issuer"), HEREBY CERTIFY that the yield on the certificate of deposit purchased
by the [Trustee] is not less than the highest yield that is published or posted
by the Issuer as currently available from the Issuer on comparable certificates
of deposit offered to the public.
Date: By:
------------------------- ---------------------------------
Name:
Title:
-73-
Subsidiaries of the Registrant
Sonics has three wholly owned subsidiaries:
1. Tooltex, Inc., an Ohio corporation
2. Vibra-Surge Corporation, a Delaware corporation
3. Sonics Realty, Inc., a Delaware corporation
