UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission file Number 000-21749
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 95-4257380
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3501 Lakewood Boulevard
Long Beach, California 90808
(Address of principal executive offices)
(562) 938-8618
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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 [ ]
As of November 11, 1997, the issuer had outstanding 6,900,000 shares of Class A
Common Stock, 2,000,000 shares of Class B Common Stock, 4,000,000 shares of
Class E-1 Common Stock and 4,000,000 shares of Class E-2 Common stock.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Balance Sheet
(unaudited)
<TABLE>
December 31, 1996 September 30, 1997
-------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $24,222,000 $ 6,922,000
Marketable securities 2,026,000 4,912,000
Certificate of deposit 12,000 1,012,000
Prepaid expenses and other current
assets 155,000 445,000
--------------------------------------
Total current assets 26,415,000 13,291,000
Long-term Assets:
Restricted cash 8,500,000
Property and equipment, net 1,686,000 2,092,000
Other assets 689,000
--------------------------------------
Total long-term assets $ 1,686,000 11,281,000
======================================
Total assets $28,101,000 $24,572,000
======================================
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Balance Sheet (continued)
(unaudited)
<TABLE>
December 31, 1996 September 30, 1997
--------------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 145,000 $ 111,000
Accrued liabilities 158,000 443,000
--------------------------------------
Total current liabilities 303,000 554,000
Long-term liabilities:
Bonds payable 170,000
Deferred revenue 370,000
--------------------------------------
Total long-term liabilities 540,000
--------------------------------------
Total liabilities 303,000 1,094,000
--------------------------------------
Stockholders' equity:
Preferred stock, par value $.0001 per share;
5,000,000 shares authorized; no shares
issued and outstanding
Class A Common Stock, par value $.0001
per share; 60,000,000 shares authorized;
6,900,000 shares issued and outstanding 1,000 1,000
Class B Common Stock, par value $.0001 per share;
10,000,000 shares authorized; 2,000,000 shares
issued and outstanding
Class E-1 Common Stock, par value $.0001
per share; 4,000,000 shares authorized;
4,000,000 shares issued and outstanding
Class E-2 Common Stock, par value $.0001
per share; 4,000,000 shares authorized,
4,000,000 shares issued and outstanding
Warrants to purchase common stock:
Public Warrants 473,000 473,000
Class A Warrants 11,290,000 11,290,000
Class B Warrants 4,632,000 4,632,000
Additional paid-in capital (note 5) 35,730,000 35,652,000
Deficit accumulated during the development stage (24,328,000) (28,570,000)
--------------------------------------
Total stockholders' equity 27,798,000 23,478,000
--------------------------------------
Total liabilities and stockholders' equity $28,101,000 $24,572,000
======================================
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Statement of Operations
(unaudited)
<TABLE>
Period from
January 26, 1990
Three Months Ended Nine Months Ended (inception) to
September 30, September 30, September 30,
-----------------------------------------------------------------------------------------
1996 1997 1996 1997 1997
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Other income $ $ $ 7,000 $ 7,000 $ 717,000
Investment income 3,000 243,000 4,000 884,000 1,054,000
-----------------------------------------------------------------------------------------
3,000 243,000 11,000 891,000 1,771,000
Costs and expenses:
Research and development costs 1,781,000 3,013,000 16,649,000
Preoperating costs 282,000
General and administrative expenses 249,000 827,000 1,418,000 2,014,000 9,404,000
Loss on disposal of assets 106,000 463,000
Interest expense 134,000 319,000 1,840,000
In-process research and development
acquired 761,000
-----------------------------------------------------------------------------------------
383,000 2,608,000 1,737,000 5,133,000 29,399,000
-----------------------------------------------------------------------------------------
Loss before extraordinary item (380,000) (2,365,000) (1,726,000) (4,242,000) (27,628,000)
Extraordinary loss on retirement of Bridge
Notes (942,000)
-----------------------------------------------------------------------------------------
Net loss $ (380,000) $(2,365,000) $(1,726,000) $(4,242,000) $(28,570,000)
-----------------------------------------------------------------------------------------
Net loss per share $(.11) $(.27) $(.51) $(.48)
-----------------------------------------------------------------------------------------
Weighted average number of shares
outstanding 3,400,000 8,900,000 3,400,000 8,900,000
-----------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Statement of Stockholders' Equity
<TABLE>
Common Stock
Preferred Stock Class A Class B Class B-1 Class B-2
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock issued 418,094 $-- 836,189 $-- 836,189 $--
Common stock issued in
exchange for in-process
research and development 201,494 -- 402,988 -- 402,988 --
Imputed interest on
advances from stockholder
Net loss from inception to
December 31, 1994
-------------------------------------------------------------------------------------------------------
Balance at December 31,
1994 619,588 -- 1,239,177 -- 1,239,177 --
Imputed interest on
advances from stockholder
Net loss
-------------------------------------------------------------------------------------------------------
Balance at December 31,
1995 619,588 -- 1,239,177 -- 1,239,177 --
Conversion of stockholder
advances 598,011 -- 1,196,021 -- 1,196,021 --
Conversion of officer loans 187,118 -- 374,236 -- 374,236 --
Stock issued in consideration
for services in 1994, 1995
and 1996 595,283 -- 1,190,566 -- 1,190,566 --
Imputed interest on advances
from stockholder
Net proceeds from initial
public offering of Units 6,000,000 $1,000
Net proceeds from exercise
of overallotment option 900,000 --
Warrants issued in
connection with issuance of
Bridge Notes
Net loss
------------------------------------------------------------------------------------------------------
Balance at December 31,
1996 6,900,000 $1,000 2,000,000 -- 4,000,000 -- 4,000,000 --
Adjustment to proceeds from
initial public offering and
exercise of overallotment
option
Net loss
------------------------------------------------------------------------------------------------------
Balance at September 30,
1997 (unaudited) 6,900,000 $1,000 2,000,000 -- 4,000,000 -- 4,000,000 --
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
Advanced Aerodynamics & Structure, Inc.
(A Development Stage Enterprise)
Statement of Stockholder's Equity (continued)
<TABLE>
Deficit
Bridge Warrants Accumulated
Warrants to Additional During the
Purchase Paid-in Development
Common Stock Class A Class B Capital Stage Total
<S> <C> <C> <C> <C> <C>
Common stock issued $7,500,000 $7,500,000
Common stock issued in
exchange for in-process
research and development 361,000 361,000
Imputed interest on
advances from stockholder 776,000 776,000
Net loss from inception to
December 31, 1994 $(19,252,000) $(19,252,000)
-------------------------------------------------------------------------------------------
Balance at December 31,
1994 8,637,000 (19,252,000) (10,615,000)
Imputed interest on
advances from stockholder 23,000 23,000
Net loss (1,688,000) (1,688,000)
-------------------------------------------------------------------------------------------
Balance at December 31,
1995 8,660,000 (20,940,000) (12,280,000)
Conversion of stockholder
advances 10,728,000 10,728,000
Conversion of officer loans 336,000 336,000
Stock issued in consideration
for services in 1994, 1995
and 1996 1,507,000 1,507,000
Imputed interest on advances
from stockholder 11,000 11,000
Net proceeds from initial
public offering of Units $9,583,000 $4,166,000 12,566,000 26,316,000
Net proceeds from exercise
of overallotment option 1,707,000 466,000 1,922,000 4,095,000
Warrants issued in
connection with issuance of
Bridge Notes $473,000 473,000
Net loss (3,388,000) (3,388,000)
-------------------------------------------------------------------------------------------
Balance at December 31,
1996 $473,000 $11,290,000 $4,632,000 $35,730,000 $(24,328,000) $27,798,000
Adjustment to proceeds from
initial public offering and
exercise of overallotment
option (78,000) (78,000)
Net loss (4,242,000) (4,242,000)
--------------------------------------------------------------------------------------------
Balance at September 30,
1997 (unaudited) $473,000 $11,290,000 $4,632,000 $35,652,000 $28,570,000) $23,478,000
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Statement of Cash Flows
(unaudited)
<TABLE>
Period from
January 26, 1990
Nine Months Ended (inception) to
September 30, September 30,
-----------------------------------------------------------------------
1996 1997 1997
-----------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,726,000) $(4,242,000) $(28,570,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Noncash stock compensation expense 590,000 -- 1,207,000
Noncash interest expense 105,000 336,000
Cost of in-process research and development
acquired 761,000
Imputed interest on advances from stockholder 11,000 810,000
Extraordinary loss on retirement of Bridge Notes 942,000
Depreciation and amortization 245,000 272,000 2,086,000
Loss on disposal of assets 106,000 463,000
Changes in assets and liabilities:
Decrease (increase) in prepaid expenses and
other current assets (290,000) (445,000)
Increase in other assets (689,000) (689,000)
Increase (decrease) in accounts payable 121,000 (34,000) 111,000
Increase (decrease) in accrued liabilities (389,000) 285,000 343,000
Increase in interest payable (177,000)
Increase in deferred revenue 370,000 370,000
Increase in receivable from officer (115,000)
-----------------------------------------------------------------------
Net cash used in operating activities (1,335,000) (4,222,000) (22,275,000)
-----------------------------------------------------------------------
Cash flows from investing activities:
Purchased restricted cash (8,500,000) (8,500,000)
Proceeds from insurance claims upon loss of aircraft 30,000
Proceeds from disposal of assets 3,000 3,000
Capital expenditures (787,000) (4,634,000)
Purchase of certificate of deposit (1,000) (1,000,000) (1,012,000)
Purchase of marketable securities (1,499,000) (6,212,000) (8,238,000)
Proceeds from sale of marketable securities 3,326,000 3,326,000
-----------------------------------------------------------------------
Net cash used in investing activities (1,500,000) (13,170,000) (19,025,000)
------------------------------------------------------------------------
Cash flows from financing activities:
Advances from stockholder 10,728,000
Proceeds from issuance of common stock prior to
initial public offering 7,500,000
</TABLE>
6
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Statement of Cash Flows (continued)
(unaudited)
<TABLE>
Period from
January 26, 1990
Nine Months Ended (inception) to
September 30, September 30
------------------------------------------------------------------------
1996 1997 1997
------------------------------------------------------------------------
<S> <C> <C> <C>
Net proceeds from initial public offering and
exercise of over-allotment option (78,000) 30,333,000
Net proceeds from bridge financing 6,195,000
Repayment of bridge financing (7,000,000)
Repayment of obligation under capital leases (15,000) (40,000)
Proceeds from loan from officer 402,000 336,000
Repayment of loan from officer (226,000)
Repayment of bank note (900,000)
Repayment of loan from SIDA Corporation (110,000)
Repayment of other short-term loans (565,000)
Proceeds from bridge financing, net of issuance costs 6,195,000
Increase in deferred offering costs (586,000)
Proceeds from bonds 170,000 170,000
------------------------------------------------------------------------
Net cash provided by financing activities 4,195,000 92,000 48,222,000
------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,360,000 (17,300,000) 6,922,000
Cash and cash equivalents at beginning of period -- 24,222,000 --
------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,360,000 $ 6,922,000 $ 6,922,000
========================================================================
Supplemental cash flow information:
Cash paid for interest $ 694,000
Supplemental disclosure of noncash investing and
financing activities:
Stockholder advances converted to common stock $10,728,000 $10,728,000
Loan from officer converted to common stock $ 336,000 $ 336,000
Common stock issued for noncash consideration
and compensation $ 1,507,000 $ 1,507,000
Liabilities assumed from ASI $ 400,000
Common stock issued for in-process research and
development acquired $ 361,000
Equipment acquired under capital leases $ 40,000
Deposit surrendered as payment for rents due $ 80,000
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
1. General
In the opinion of the Company's management, the accompanying unaudited
financial statements include all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the financial
position of the Company at September 30, 1997 and the results of operations
and cash flows for the nine months ended September 30, 1997 and 1996.
Although the Company believes that the disclosures in these financial
statements are adequate to make the information presented not misleading,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. Results of
operations for interim periods are not necessarily indicative of results of
operations to be expected for any other interim period or the full year.
The financial information in this quarterly report should be read in
conjunction with the audited December 31, 1996 financial statements and
notes thereto included in the Company's annual report filed on Form 10-KSB.
The Company is a development stage enterprise. On December 3, 1996, the
Company successfully completed an initial public offering to finance the
continued development, manufacture and marketing of its product to achieve
commercial viability. The net proceeds of the offering were and will be
used to amend its Federal Aviation Administration ("FAA") Type Certificate
for technical revisions to its product, to obtain a FAA Production
Certificate for its product, to repay borrowings under a bridge loan, to
expand the Company's sales and marketing efforts, to establish a new
manufacturing facility, and to acquire production materials and additional
tooling and equipment.
2. Net Loss Per Share
The Company's net loss per share was computed based on the weighted average
number of shares of common stock outstanding during the three and nine
month periods ended September 30, 1996 and 1997 and excludes all
outstanding shares of Class E-1 and Class E-2 Common Stock because the
conditions for the lapse of restrictions on such shares have not been
satisfied.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, certain common stock equivalents issued by the Company have been
included as outstanding in net loss per share computations for the three
and nine month periods ended September 30, 1996. Common stock equivalents
were not included in the net loss per share computation for the three and
nine month periods ended September 30, 1997 as their effect on net loss per
share is antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share."
SFAS No. 128 establishes standards for computing and presenting earnings
per share ("EPS") and supersedes APB Opinion No. 15, "Earnings per Share."
It replaces the presentation of primary EPS with a presentation of basic
EPS. It also requires dual presentation of basic and diluted EPS on the
8
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. SFAS No. 128 will become effective for the Company
for the year ending December 31, 1997. The impact of the adoption of SFAS
No. 128 on the Company's financial statements is not expected to be
material.
3. Stock Option Plan
On March 4, 1997, options to purchase 210,000 shares of Class A Common
Stock were granted, at an exercise price of $5 per share, by the Company's
Board of Directors to certain employees, officers, consultants and agents
of the Company. On May 27, 1997, options to purchase 100,000 shares of
Class A Common Stock were granted to the President, at an exercise price of
$5.00 per share.
4. Industrial Development Bonds
On August 5, 1997, the Company entered into a loan agreement with the
California Economic Development Financing Authority for the issuance of
$8,500,000 in variable rate demand industrial development bonds ("IDBs").
The Company will use the proceeds from the IDBs to finance the construction
and installation of a 200,000 square foot manufacturing facility and
related manufacturing equipment.
The Company was required to provide cash collateral to a bank in the amount
of $8,500,000 for an irrevocable direct-pay letter of credit for the
payments of principal and interest. The letter of credit, unless extended
or terminated by the Company or the bank, will expire on August 5, 2002.
5. Land Lease for Manufacturing and Headquarters Facility
On October 17, 1997 the Company entered into a Lease Agreement (the
"Lease") with the City of Long Beach (the "Landlord"), whereby the Company
leased from the Landlord approximately 10 acres of land located on the Long
Beach Airport. The purpose of the Lease is to effectuate the construction
of an approximately 200,000 square foot manufacturing and headquarters
facility. The Lease also contains options to lease other airport
properties. The monthly rent under the Lease is $4,500, which monthly rent
escalates to approximately $15,600 after five (5) years.
The Lease term commences on November 15, 1997 (subject to extension by the
Landlord) but not until all "Conditions to Commencement of Term" have been
met. The lease term is 30 years with an option to renew for an additional
10 years.
6. Contract to Construct a Manufacturing and Headquarters Facility
On October 29, 1997, the Company entered into an agreement with Commercial
Developments International/West (Design/Builder) whereby Design/Builder
shall design and build an approximately 200,000 square foot manufacturing
and headquarters facility. The contract sum for this project is "Cost plus
Fixed Fees" with a Guaranteed Maximum Price of $6,300,000. Any savings
realized upon completion and acceptance of the project will be shared by
the Design/Builder and the Company. The Company believes that the project
will be completed in the second quarter of 1998.
9
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Item 2. Plan of Operations
Certain statements contained in this report, including statements
concerning the Company's future cash and financing requirements, the Company's
ability to obtain market acceptance of its aircraft, the Company's ability to
obtain regulatory approval for its aircraft, and the competitive market for
sales of small business aircraft and other statements contained herein regarding
matters that are not historical facts, are forward looking statements; actual
results may differ materially from those set forth in the forward looking
statements, which statements involve risks and uncertainties, including without
limitation those risks and uncertainties set forth in the Company's Registration
Statement on Form SB-2 (No. 333-12273) under the heading "Risk Factors."
The Company is a development stage enterprise organized to design, develop,
manufacture and market propjet and jet aircraft intended primarily for business
use. Since its inception, the Company has been engaged principally in research
and development of its proposed aircraft. In March 1990, the Company made
application to the FAA for a Type Certificate for the JETCRUZER 450, which
Certificate was ultimately granted in June 1994. As a result, the Company has
not generated any operating revenues to date and has incurred losses from such
activities. The Company believes it will continue to experience losses until
such time as it commences the sale of aircraft on a commercial scale.
Prior to commencing commercial sales of the JETCRUZER 500, the Company will
need to, among other things, complete the development of the aircraft, obtain
the requisite regulatory approvals, establish an appropriate manufacturing
facility, hire additional engineering and manufacturing personnel and expand its
sales and marketing efforts. The Company estimates that the cost to complete
development of the JETCRUZER 500 and obtain an amendment of its FAA Type
Certificate will be approximately $8,000,000. This amount includes the cost of
equipment and tooling (estimated at approximately $1,500,000), static and flight
testing of the aircraft (estimated at approximately $2,500,000) and the
employment of the necessary personnel to build and test the aircraft (estimated
at approximately $4,000,000).
The Company expects to receive progress payments during the construction of
aircraft and final payments upon the delivery of aircraft. However, the Company
believes it will continue to experience losses until such time as it commences
the sale of aircraft on a commercial scale.
Through the end of the third quarter of 1998, the Company intends to focus
its efforts in the following areas: (i) the completion of the development of the
JETCRUZER 500, including, among other things, adding a larger engine, completing
the pressurization, environmental systems, and de-icing capabilities of the
aircraft, obtaining autopilot certification, and lengthening the aircraft's
fuselage; (ii) obtaining an amendment to the Company's Type Certificate to
include the JETCRUZER 500, including the manufacture of FAA conformed models of
the JETCRUZER 500 and static and flight testing; (iii) building a manufacturing
facility capable of producing the JETCRUZER 500 on a commercial scale, including
establishing a production line in such facility, acquiring production inventory
and additional equipment, and tooling and computer hardware and software
systems; (iv) obtaining a production certificate from the FAA and commencing
commercial production of the JETCRUZER 500; (v) expanding the Company's sales
and marketing staff and increasing its marketing efforts with respect to the
JETCRUZER 500; and (vi) increasing the Company's engineering, manufacturing and
administrative staff in anticipation of increased development and production
activities. The Company believes that the net proceeds from the December 1996
IPO will be sufficient to finance its plan of operations through approximately
the third quarter of 1998, based upon the current status of its business
operations, its current plans and current economic and industry conditions. If
the Company's estimates prove to be incorrect, however, then during such period
the Company may have to seek additional sources of financing, reduce operating
costs and/or curtail growth plans.
Liquidity and Capital Resources
At September 30, 1997, the Company had working capital of $12,737,000 and
stockholders' equity of $24,572,000. Since its inception in January 1990, the
Company has experienced continuing negative cash flow from operations, which,
prior to its recent IPO, resulted in the Company's inability to pay certain
existing liabilities in a timely manner. The Company has financed its operations
through private funding of equity and debt and its December 1996 IPO.
10
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
The Company expects its cash requirements to increase in the future due to
higher expenses associated with product development, the scale-up of production
(including capital investment in production equipment), intensification of a
sales and marketing program, the hiring of personnel and other anticipated
operating activities. The Company also expects to continue to incur losses until
such time, if ever, as it obtains regulatory approval for the JETCRUZER 500 and
related production processes and market acceptance for its proposed aircraft at
selling prices and volumes which provide adequate gross profit to cover
operating costs and generate positive cash flow. The Company's working capital
requirements will depend upon numerous factors, including the level of resources
devoted by the Company to the scale-up of manufacturing and the establishment of
sales and marketing capabilities and the progress of the Company's research and
development program for the JETCRUZER 500 and other proposed aircraft.
The Company expects that the net proceeds of the December 1996 IPO will
enable it to meet its liquidity and capital requirements at least through the
third quarter of 1998, by which time the Company expects to have received a type
certificate and a production certificate for the JETCRUZER 500 and commenced
commercial production and sale of the JETCRUZER 500. Such proceeds are being,
and will be used primarily for amendment of the Type Certificate, the purchase
of equipment and tooling, the establishment of a manufacturing facility, and
sales and marketing. The Company's capital requirements are subject to numerous
contingencies associated with development stage companies. Specifically if
delays are encountered in amending the current Type Certificate, the time and
cost of obtaining such certification may be substantial, may render it
impossible for the Company to complete such new or amended certification and may
therefore have a material and adverse effect on the Company's operations.
Further, if the Company has not completed the development of the JETCRUZER 500
or received the required regulatory approvals and successfully commenced
commercial sales of its aircraft by the third quarter of 1998, the Company may
require additional funding to fully implement its proposed business plan. The
Company has no commitments from any third parties for any future funding, and
there can be no assurance that the Company will be able to obtain financing in
the future from bank borrowings, debt or equity financing or other sources on
terms acceptable to the Company or at all. In the event necessary financing were
not obtained, the Company would be materially and adversely affected and might
have to cease or substantially reduce operations.
The Company had no other material capital commitments at September 30, 1997
other than as discussed in this report. The Company intends to hire a number of
additional employees and to establish a larger manufacturing facility, both of
which will require substantial capital resources. The Company anticipates that
it will hire approximately 10 employees over the next six months and 150
employees over the next 21 months, including engineers and manufacturing
technicians necessary to produce its aircraft.
11
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Charge to Income in the Event of Conversion of Performance Shares
In the event the Company attains certain earnings thresholds or the
Company's Class A Common Stock meets certain minimum bid price levels, the Class
E Common Stock will be converted into Class B Common Stock. In the event any
such converted Class E Common Stock is held by officers, directors, employees or
consultants, the maximum compensation expense recorded for financial reporting
purposes will be an amount equal to the fair value of the shares converted at
the time of such conversion which value cannot be predicted at this time.
Therefore, in the event the Company attains such earnings thresholds or stock
price levels, the Company will recognize a substantial charge to earnings during
the period in which such conversion occurs, which would have the effect of
increasing the Company's loss or reducing or eliminating its earnings, if any,
at that time. In the event the Company does not attain these earnings thresholds
or minimum bid price levels, and no conversion occurs, no compensation expense
will be recorded for financial reporting purposes.
Financing of Manufacturing and Headquarters Facility
On August 5, 1997, the Company entered into agreements with the California
Economic Development Financing Authority (the "Authority"), The Sumitomo Bank,
Limited (the "Bank") and Rauscher Pierce Refnes, Inc. (the "Underwriter")
whereby the Authority issued $8,500,000 in industrial development bonds ("IDBs")
to the Authority and loaned the proceeds to the Company. The Bank provided a
letter of credit to support the payment of principal and interest on the IDB.
The Company will use the loan proceeds from the IDBs for the acquisition,
construction and equipping of an approximately 200,000 square foot manufacturing
and headquarters facility located in the City of Long Beach, California.
The Company was required to provide cash collateral to the Bank in the
amount of $8,500,000 for a stand-by letter of credit in favor of the holders of
the IDBs, which stand-by letter of credit will expire on August 5, 2002, if not
terminated earlier by the Company or the Bank.
Item 5. Other Information
Land Lease for Manufacturing and Headquarters Facility
On October 17, 1997 the Company entered into a Lease Agreement (the
"Lease") with the City of Long Beach (the "Landlord"), whereby the Company
leased from the Landlord approximately 10 acres of land located on the Long
Beach Airport. The purpose of the Lease is to effectuate the construction of an
approximately 200,000 square foot manufacturing and headquarters facility. The
Lease also contains options to lease other airport properties. The monthly rent
under the Lease is $4,500, which monthly rent escalates to approximately $15,600
after five (5) years.
The Lease term commences on November 15, 1997 (subject to extension by the
Landlord) but not until all "Conditions to Commencement of Term" have been met.
The lease term is 30 years with an option to renew for an additional 10 years.
Contract to Construct a Manufacturing and Headquarters Facility
On October 29, 1997, the Company entered into an agreement with Commercial
Developments International/West (Design/Builder) whereby Design/Builder shall
design and build an approximately 200,000 square foot manufacturing and
headquarters facility. The contract sum for this project is "Cost plus Fixed
Fees" with a Guaranteed Maximum Price of $6,300,000. Any savings realized upon
completion and acceptance of the project will be shared by the Design/Builder
and the Company. The Company believes that the project will be completed in the
second quarter of 1998.
12
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ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits:
Exhibit No. Description
- -------------------------------------------------------------------------------
* 3.1 Certificate of Incorporation
** 3.2 Bylaws
* 3.3 Amendment to Certificate of Incorporation
* 4.1 Specimen Certificate of Class A Common Stock
* 4.2 Warrant Agreement (including form of Class A and
Class B Warrant Certificates
* 4.3 Form of Underwriter's Unit Purchase Option
* 10.1 Form of Indemnification Agreement
** 10.2 Amended 1996 Stock Option Plan
* 10.3 Employment Agreement dated as of May 1, 1996 between
the Company and Dr. Carl L. Chen
* 10.4 Agreement of Merger dated July 16, 1996 between
Advanced Aerodynamics and Structures, Inc.,
California corporation, and Advanced Aerodynamics
& Structures, Inc., a Delaware corporation
** 10.5 Lease dated December 19, 1996 between Olen
Properties Corp., a Florida corporation, and the Company
*** 10.6 Standard Sublease dated June 27, 1997 with Budget
Rent-a-Car of Southern California
*** 10.7 Standard Sublease dated July 16, 1997 with Budget
Rent-a-Car of Southern California
*** 10.8 Standard Industrial/Commercial Multi-Tenant Lease-Gross
dated March 12, 1997 with the Golgolab Family Trust
10.9 Loan Agreement dated as of August 1, 1997 between the
Company and the California Economic Development Authoroity
10.10 Indenture of Trust dated as of August 1, 1997 between
the California Economic Development Authority and
First Trust of California, National Association
****10.11 Official Statement dated August 5, 1997
10.12 Letter of Credit issued by The Sumitomo Bank, Limited
10.13 Reimbursement Agreement dated as of August 1, 1997
between the Company and The Sumitomo Bank, Limited
10.14 Purchase Contract dated August 1, 1997 by and among
Rauscher Pierce Refnes, Inc., the California Economic
Development Authority and the Treasurer of the State
of California, and approved by the Company
10.15 Remarketing Agreement dated as of August 1,1997
between the Company and Rauscher Pierce Refnes, Inc.
10.16 Blanket Letters of Representations of the California
Economic Development Authority and First Trust of
California, National Association
10.17 Tax Regulatory Agreement dated as of August 1, 1997
by and among the California Economic Development
Authority, the Company and First Trust of California,
National Association
10.18 Custody, Pledge and Security Agreement dated as of August 1,
1997 between the Company and The Sumitomo Bank, Limited
10.19 Investment Agreement dated August 5, 1997 by and
between the Company and The Sumitomo Bank, Limited
10.20 Specimen Direct Obligation Note between the Company
and The Sumitomo Bank, Limited
****10.21 Lease Agreement dated October 17, 1997 between the
Company and the City of Long Beach
****10.22 Construction Agreement dated October 29,1997 between the
Company and Commercial Developments International/West
11.1 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
* Incorporated by reference to the Company's Registration Statement on Form
SB-2 (333-12273) declared effective by the Securities and Exchange Commission on
December 3, 1996.
** Incorporated by reference to the Company's Report on Form 10-KSB filed
with the Securities and Exchange Commission on March 31, 1997.
*** Incorporated by reference by the Company's Post-Effective Amendment No. 1
to Form SB-2 Registration Statement filed with the Securities and Exchange
Commission on August 5, 1997.
**** Filed by paper pursuant to the Company's request for a temporary
hardship exemption relating to this report.
Reports on Form 8-K:
During the quarter ended September 30, 1997, the Company filed one
report on Form 8-K dated October 30, 1997 and incorporated by reference. The
Form 8-K was filed due to a change in the Company's independent accountant.
13
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ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: November 14, 1997 ADVANCED AERODYNAMICS & STRUCTURES, INC.
By: /s/ Carl L. Chen
------------------------------------
Carl L. Chen, President
By: /s/ Dave Turner
------------------------------------
Dave Turner, Chief Financial Officer
14
LOAN AGREEMENT
By and Between
CALIFORNIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY
and
ADVANCED AERODYNAMICS AND STRUCTURES, INC.
Dated as of August 1, 1997
All right, title and interest of the CALIFORNIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY (the "Authority") in this Loan Agreement has been assigned
(except for amounts payable under Sections 4.2(b), 7.3, 9.2 and 9.3 hereof, its
right to receive notices, opinions and other documents required to be delivered
to the Authority hereunder and its rights to consent to certain actions) to
First Trust of California, National Association, as trustee (the "Trustee")
pursuant to the Indenture of Trust, dated as of August 1, 1997, between the
Authority and the Trustee, and is subject to such assignment.
<PAGE>
TABLE OF CONTENTS
PARTIES................................................................. 1
PREAMBLES............................................................... 1
ARTICLE I
DEFINITIONS
Section 1.1. Definition of Terms...................................2
Section 1.2. Number and Gender.....................................2
Section 1.3. Articles, Sections, Etc...............................2
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations of the Authority......................2
Section 2.2. Representations of the Borrower.......................3
Section 2.3. Bondholders to Benefit................................5
ARTICLE III
CONSTRUCTION OF THE PROJECT;
ISSUANCE OF THE BONDS
Section 3.1. Construction of the Project...........................5
Section 3.2. Disbursements from the Project Fund and Costs of
Issuance Fund.....................................6
Section 3.3. Establishment of Completion Date; Obligation of
Borrower to Complete..............................6
Section 3.4. Investment of Moneys in Funds.........................7
ARTICLE IV
LOAN OF PROCEEDS; REPAYMENT PROVISIONS
Section 4.1. Loan of Bond Proceeds; Issuance of Bonds..............7
Section 4.2. Loan Repayments and Other Amounts Payable.............7
Section 4.3. Purchase of Bonds.....................................9
Section 4.4. Unconditional Obligations.............................9
Section 4.5. Assignment of Authority's Rights......................10
Section 4.6. Amounts Remaining in Funds............................10
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ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
Section 5.1. Right of Access to the Project.......................10
Section 5.2. The Borrower's Maintenance of its Existence..........10
Section 5.3. Records and Financial Statements of Borrower;
Employment Practices.............................11
Section 5.4. Insurance............................................12
Section 5.5. Maintenance and Repair; Taxes; Utility and Other
Charges.........................................12
Section 5.6. Qualification in California..........................12
Section 5.7. Alternate Credit Facility............................12
Section 5.8. Letter of Credit.....................................13
Section 5.9. Covenants of the Authority and the Borrower..........14
Section 5.10. Capital Expenditures.................................16
Section 5.11. Special Arbitrage Certifications.....................18
Section 5.12. Covenant to Enter into Agreement or Contract to
Provide Ongoing Disclosure.......................19
ARTICLE VI
DAMAGE, DESTRUCTION AND CONDEMNATION;
USE OF PROCEEDS
Section 6.1. Obligation to Continue Payments......................19
Section 6.2. Application of Net Proceeds..........................19
Section 6.3. Insufficiency of Net Proceeds........................20
Section 6.4. Damage to or Condemnation of Other Property..........20
ARTICLE VII
LOAN DEFAULT EVENTS AND REMEDIES
Section 7.1. Loan Default Events..................................20
Section 7.2. Remedies on Default..................................21
Section 7.3. Agreement to pay Attorneys' Fees and Expenses........23
Section 7.4. No Remedy Exclusive..................................23
Section 7.5. Waivers..............................................23
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ARTICLE VIII
PREPAYMENT
Section 8.1. Redemption of Bonds with Prepayment Moneys...........23
Section 8.2. Options to Prepay Loan...............................24
Section 8.3. Mandatory Prepayment.................................24
Section 8.4. Amount of Prepayment.................................25
Section 8.5. Notice of Prepayment.................................26
ARTICLE IX
NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION
Section 9.1. Non-Liability of Authority...........................26
Section 9.2. Expenses.............................................26
Section 9.3. Indemnification......................................27
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices..............................................27
Section 10.2. Severability.........................................28
Section 10.3. Execution of Counterparts............................29
Section 10.4. Amendments, Changes and Modifications................29
Section 10.5. Governing Law........................................29
Section 10.6. Authorized Representative of the Borrower............29
Section 10.7. Term of the Agreement................................29
Section 10.8. Binding Effect.......................................29
Section 10.9. References to Bank...................................29
Section 10.10. Brokerage Confirmations..............................30
Exhibit A - The Project A-1
iii
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of August 1, 1997, between the CALIFORNIA
ECONOMIC DEVELOPMENT FINANCING AUTHORITY, a body public and corporate, and a
public instrumentality of the State of California (the "Authority"), and
ADVANCED AERODYNAMICS AND STRUCTURES, INC., a corporation duly organized and
validly existing under the laws of the State of California (the "Borrower").
W I T N E S S E T H:
WHEREAS, the Authority was established for the purpose of promoting and
encouraging commerce and industry, and generally to foster economic development
in the State of California (the "State") and is authorized to issue tax-exempt
revenue bonds to provide financing for private activity economic development
projects pursuant to the provisions of Section 15710 et seq. of the California
Government Code (constituting Part 10.2 of Division 3 of Title 2 of the
Government Code of the State of California, as now in effect and as it may from
time to time hereafter be amended or supplemented) (the "Act"); and
WHEREAS, in furtherance of the purposes of the Authority set forth above,
the Authority proposes to finance the acquisition, construction, rehabilitation,
equipping, installation, improvement, and furnishing of the industrial
facilities described in Exhibit A hereto (the "Project") to be owned and
operated by the Borrower; and
WHEREAS, pursuant to and in accordance with the provisions of the Act, the
Authority has authorized and undertaken the issuance of its California Economic
Development Financing Authority Variable Rate Demand Industrial Development
Revenue Bonds, Series 1997 (Advanced Aerodynamics and Structures, Inc. Project)
(the "Bonds") in the aggregate principal amount of Eight Million Five Hundred
Thousand Dollars ($8,500,000) to provide funds to pay a portion of the cost of
the Project and a portion of the costs of issuance of the Bonds; and
WHEREAS, the Authority proposes to loan the proceeds of the Bonds to the
Borrower, and the Borrower desires to borrow the proceeds of the Bonds upon the
terms and conditions set forth herein; and
WHEREAS, for and in consideration of such loan, the Borrower agrees, inter
alia, to make loan payments sufficient to pay on the dates specified in Section
4.2 hereof, the principal of, premium, if any, and interest on, the Bonds; and
WHEREAS, the Authority and the Borrower each has duly authorized the
execution and delivery of this Agreement;
NOW, THEREFORE, for and in consideration of the premises and the material
covenants hereinafter contained, the parties hereto hereby formally covenant,
agree and bind themselves as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1. Definition of Terms. Unless otherwise defined herein or the
context otherwise requires, the terms used in this Agreement shall have the
meanings specified in Section 1.01 of the Indenture of Trust, dated as of August
1, 1997 (the "Indenture"), by and between the Authority and First Trust of
California, National Association, as trustee (the "Trustee"), as originally
executed or as it may from time to time be supplemented or amended as provided
therein.
Section 1.2. Number and Gender. The singular form of any word used herein,
including the terms defined in Section 1.01 of the Indenture, shall include the
plural, and vice versa. The use herein of a word of any gender shall include all
genders.
Section 1.3. Articles, Sections, Etc. Unless otherwise specified,
references to Articles, Sections and other subdivisions in this Agreement are to
the designated Articles, Sections and other subdivisions of this Agreement as
amended from time to time. The words "hereof," "herein," "hereunder" and words
of similar import refer to this Agreement as a whole. The headings or titles of
the several Articles and Sections, and the table of contents included herein,
shall be solely for convenience of reference and shall not affect the meaning,
construction or effect of the provisions hereof.
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations of the Authority. The Authority makes the
following representations as the basis for its undertakings herein contained:
(a) The Authority is a body public and corporate, and a public
instrumentality of the State. Under the provisions of the Act, the Authority has
the power to enter into the transactions contemplated by this Agreement and the
Indenture and to carry out its obligations hereunder. By proper action, the
Authority has been duly authorized to execute, deliver and duly perform its
obligations under this Agreement and the Indenture.
(b) To finance the Costs of the Project and certain Costs of Issuance, the
Authority will issue the Bonds, which will mature, bear interest and be subject
to redemption as set forth in the Indenture.
(c) The Bonds will be issued under and secured by the Indenture, pursuant
to which the Authority's interest in this Agreement (except certain rights of
the Authority to payment for expenses and indemnification) will be pledged and
assigned to the Trustee as security for payment of the principal of, premium, if
any, and interest on the Bonds
2
<PAGE>
and to the Bank, on a basis subordinate thereto, as security for the payment of
the obligations of the Borrower under the Reimbursement Agreement.
(d) The Authority has not pledged and will not pledge its interest in this
Agreement for any purpose other than to secure the Bonds under the Indenture and
the obligations of the Borrower under the Reimbursement Agreement.
(e) The Authority is not in default under any of the provisions of the laws
of the State which default would affect its existence or its powers referred to
in subsection (a) of this Section 2.1.
(f) The Authority has found and determined and hereby finds and determines
that (i) the Loan to be made hereunder with the proceeds of the Bonds will
promote the purposes of the Act by providing funds to finance the Construction
of the Project; (ii) said Loan is in the public interest, serves the public
purposes and meets the requirements of the Act; and (iii) the portion of such
Loan allocable to the Costs of the Project does not exceed the total cost
thereof as determined by the Borrower and approved by the Authority.
(g) No member, officer or other official of the Authority has any financial
interest whatsoever in the Borrower or in the transactions contemplated by this
Agreement and the Indenture.
(h) Neither the execution and delivery of this Agreement, the Indenture,
the Purchase Contract or the Tax Regulatory Agreement, the consummation of the
transactions contemplated hereby or thereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement, the Indenture, the
Purchase Contract or the Tax Regulatory Agreement, conflict with or result in a
breach of any of the terms, conditions or provisions of any restriction or any
agreement or instrument to which the Authority is now a party or by which it is
bound or constitute a default under any of the foregoing or result in the
creation or imposition of any prohibited lien, charge or encumbrance of any
nature whatsoever upon any of the property or assets of the Authority under the
terms of any instrument or agreement.
Section 2.2. Representations of the Borrower. The Borrower makes the
following representations as the basis for its undertakings herein contained:
(a) The Borrower is a Delaware corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware and is in
good standing and duly qualified to transact business in the State, is not in
violation of any provision of any of the Borrower's Organization Documents, has
full power and authority to enter into this Agreement, and has duly authorized
the execution and delivery of this Agreement by proper action.
(b) The execution, delivery and performance by the Borrower of this
Agreement, the Reimbursement Agreement, the Remarketing Agreement, the Tax
3
<PAGE>
Regulatory Agreement and all other documents contemplated hereby to be executed
by the Borrower are within the Borrower's power and have been duly authorized by
all necessary action, and neither the execution and delivery of this Agreement,
the Reimbursement Agreement, the Remarketing Agreement or the Tax Regulatory
Agreement or the consummation of the transactions contemplated hereby and
thereby, nor the fulfillment of or compliance with the terms and conditions
hereof and thereof, conflicts with or results in a breach of any of the terms,
conditions or provisions of any of the Borrower's Organization Documents, or of
any law, statute, rule, regulation, order, judgment, award, injunction, or
decree or of any agreement or instrument to which the Borrower is now a party or
by which it is bound or affected, or constitutes a default (or would constitute
a default with due notice or the passage of time or both) under any of the
foregoing, or results in or requires the creation or imposition of any
prohibited lien, charge or encumbrance whatsoever upon any of the property or
assets of the Borrower under the terms of any instrument or agreement to which
the Borrower is now a party or by which it is bound.
(c) The estimated Costs of the Project are as set forth in the Tax
Regulatory Agreement and have been determined in accordance with sound
engineering, construction, and accounting principles. All the information and
representations in the Tax Regulatory Agreement are true and correct as of the
date thereof.
(d) The Project consists and will consist of those facilities described in
Exhibit A and the Borrower shall not make any changes to the Project or to the
operation thereof which would affect the qualification of the Project under the
Act or would cause interest on the Bonds not to be Tax-exempt. The Borrower
intends to own and operate the Project. The Borrower covenants and agrees to
operate or cause the operation of the Project as a facility described by the Act
until the principal of, the premium, if any, and the interest on the Bonds shall
have been paid.
(e) The Borrower has and will have title to the Project (including a
leasehold interest in the land on which the Project is located) sufficient to
carry out the purposes of this Agreement.
(f) At the time of submission of an application to the Authority for
financial assistance in connection with the Project and on the dates on which
action was taken on such application, permanent financing for the Project had
not otherwise been obtained or arranged.
(g) To the best knowledge of the Borrower, no member, officer or other
official of the Authority has any financial interest whatsoever in the Borrower
or in the transactions contemplated by this Agreement.
(h) All certificates, approvals, permits and authorizations with respect to
the Construction of the Project of the State, the City of Long Beach,
California, the federal government and other applicable local governmental
agencies have been obtained, or if not yet obtained, are reasonably expected to
be obtained in due course. The Project will be consistent with any existing
local or regional comprehensive plan.
4
<PAGE>
(i) No event has occurred and no condition exists which would
constitute a Loan Default Event or which, with the passing of time or
with the giving of notice or both, would constitute a Loan Default
Event.
(j) There is no litigation or proceeding pending or, to the
knowledge of the Borrower, threatened, against the Borrower which could
adversely affect the validity of this Agreement, the Reimbursement
Agreement, the Remarketing Agreement or the Tax Regulatory Agreement or
the ability of the Borrower to comply with the terms of its obligations
under this Agreement, the Reimbursement Agreement, the Remarketing
Agreement or the Tax Regulatory Agreement.
(k) No consent, authorization or approval, except such
consents authorizations or approvals as have been obtained prior to the
execution and delivery of this Agreement, from any governmental, public
or quasi-public body or authority of the United States or of the State
or any department or subdivision of any thereof, is necessary for the
due execution and delivery by the Borrower of this Agreement.
Section 2.3. Bondholders to Benefit. The Borrower agrees that this
Agreement is executed in part to induce the purchase by others of the Bonds.
Accordingly, all covenants and agreements on the part of the Borrower set forth
in this Agreement are hereby declared to be for the benefit of the Bondholders
from time to time of such Bonds; provided, however, that such covenants and
agreements shall create no rights in any parties other than the Authority, the
Borrower, the Remarketing Agent, the Bank, the Trustee, the Tender Agent and
such Bondholders.
ARTICLE III
CONSTRUCTION OF THE PROJECT;
ISSUANCE OF THE BONDS
Section 3.1. Construction of the Project. The Borrower agrees that,
utilizing the proceeds of the Bonds loaned pursuant to Section 4.1 hereof and
such other funds as may be necessary, it has or will Construct, or has or will
cause the Construction of, the Project, and has or will acquire, rehabilitate,
equip, construct and install all other facilities and real and personal property
necessary for the operation of the Project as described in the Borrower's
application to the Authority for assistance in financing the Project,
substantially in accordance with the plans and specifications prepared therefor
by the Borrower, including any and all supplements, amendments, additions or
deletions thereto or therefrom, it being understood that the approval of the
Authority shall not be required for changes in such plans and specifications
which do not alter the purpose or description of the Project as set forth in
Exhibit A hereto. The Borrower further agrees to proceed with due diligence to
complete the Project within three years from the date hereof.
In the event that the Borrower desires to modify the Project in a manner
which alters the purpose or description of the Project as set forth in Exhibit A
hereto, such
5
<PAGE>
modification shall be undertaken only upon an amendment to Exhibit A which shall
accurately set forth the description and purpose of the Project as so modified
and which amendment to Exhibit A shall become effective upon receipt by the
Authority and the Trustee of:
(i) a certificate of the Authorized Representative of
the Borrower describing in detail the proposed changes and stating that
they will not have the effect of disqualifying the Project as a
facility that may be financed pursuant to the Act nor reduce the
employment benefits described in the Borrower's application to the
Authority for assistance in financing the Project;
(ii) an opinion of Bond Counsel that the proposed
changes to the Project will not have the effect of disqualifying the
Project as a facility that may be financed pursuant to the Act or cause
interest on the Bonds to not be Tax-exempt;
(iii) a copy of the proposed form of amended or
supplemented Exhibit A hereto; and
(iv) the written approval of the Bank and the
Trustee.
Section 3.2. Disbursements from the Project Fund and Costs of Issuance
Fund. The Borrower will authorize and direct the Trustee, upon compliance with
Section 3.03 of the Indenture, to disburse the moneys in the Project Fund to or
on behalf of the Borrower only for payment of Costs of the Project. Each of the
payments from the Project Fund referred to in this Section shall be made upon
receipt by the Trustee of a written Requisition in the form prescribed by
Section 3.03 of the Indenture, signed by the Authorized Representative of the
Borrower accompanied by the written approval of the Bank.
Moneys in the Costs of Issuance Fund shall be disbursed by the Trustee as
provided in Section 3.03(E) of the Indenture to pay Costs of Issuance.
Section 3.3. Establishment of Completion Date; Obligation of Borrower to
Complete. As soon as the Construction of the Project is completed, an Authorized
Representative of the Borrower, on behalf of the Borrower, shall evidence the
completion date by providing a certificate to the Trustee, with a copy to the
Authority, stating the Costs of the Project and further stating that (i)
Construction of the Project has been completed substantially in accordance with
the plans and specifications therefor, and all labor, services, materials and
supplies used in Construction have been paid for or stating the amount required
to be retained in the Project Fund to fully provide for any disputed amounts,
and (ii) all other equipment and facilities for the operation of the Project
have been acquired, constructed and installed in accordance with the plans and
specifications therefor and all costs and expenses incurred in connection
therewith have been paid or provided for. Notwithstanding the foregoing, such
certificate may state that it is given without prejudice to any rights of the
Borrower against third parties.
At the time such certificate is delivered to the Trustee, moneys remaining
in the Project Fund, less an amount representing a reasonable retainage
determined by the Borrower,
6
<PAGE>
including any earnings resulting from the investment of such moneys, shall be
used as provided in Section 3.03(D) of the Indenture.
In the event the moneys in the Project Fund available for payment of the
Costs of the Project should be insufficient to pay the Costs of the Project in
full, the Borrower agrees to pay directly, or to deposit in the Project Fund
moneys sufficient to pay, any costs of completing the Construction of the
Project in excess of the moneys available for such purpose in the Project Fund,
or otherwise cause the Construction of the Project to be completed. The
Authority makes no express or implied warranty that the moneys deposited in the
Project Fund and available for payment of the Costs of the Project under the
provisions of this Agreement will be sufficient to pay all the amounts which may
be incurred in connection with the Construction of the Project. The Borrower
agrees that if, after exhaustion of the moneys in the Project Fund, the Borrower
should pay, or deposit moneys in the Project Fund for the payment of, any
portion of the Costs of the Project pursuant to the provisions of this Section,
it shall not be entitled to any reimbursement therefor from the Authority, the
Trustee or the Holders of any of the Bonds, nor shall it be entitled to any
diminution of the amounts payable under Section 4.2.
Section 3.4. Investment of Moneys in Funds. Any moneys in any fund held by
the Trustee shall, at the written request of an Authorized Representative of the
Borrower, but subject to the restrictions on investments contained in the
Indenture, the Tax Regulatory Agreement and applicable law in connection with
the Tax-exempt status of interest on the Bonds, be invested or reinvested by the
Trustee as provided in the Indenture. Such investments shall be held by the
Trustee and shall be deemed at all times a part of the fund from which such
investments were made, and the interest accruing thereon, and any profit or loss
realized therefrom, shall be credited or charged as provided in Section 5.05 of
the Indenture.
ARTICLE IV
LOAN OF PROCEEDS; REPAYMENT PROVISIONS
Section 4.1. Loan of Bond Proceeds; Issuance of Bonds. The Authority
covenants and agrees, upon the terms and conditions in this Agreement, to loan
the proceeds of the sale of the Bonds to the Borrower for the purpose of
financing the Costs of the Project and the Costs of Issuance to the extent
permitted by the Indenture. Pursuant to said covenant and agreement, the
Authority will issue the Bonds upon the terms and conditions contained in this
Agreement and the Indenture and will cause the Bond proceeds to be applied as
provided in Article III of the Indenture. Except as provided in Section 3.02 of
the Indenture, such proceeds shall be disbursed to or on behalf of the Borrower
as provided in Section 3.2 hereof. The Borrower hereby approves the Indenture,
the assignment thereunder to the Trustee of the right, title and interest of the
Authority (with certain exceptions) in this Agreement, and the issuance
thereunder by the Authority of the Bonds.
Section 4.2. Loan Repayments and Other Amounts Payable. (a) On or before
each Bond Payment Date, until the principal of, premium, if any, and interest on
the Bonds shall have been fully paid or provision for such payment shall have
been made as provided in
7
<PAGE>
the Indenture, the Borrower covenants and agrees to pay to the Trustee as a Loan
Repayment on the Loan made to the Borrower from Bond proceeds pursuant to
Section 4.1, a sum equal to the amount payable on such Bond Payment Date as
principal of, and premium, if any, and interest on the Bonds as provided in the
Indenture.
The Loan Repayments made pursuant to this subsection (a) shall at all times
be sufficient to pay the total amount of interest and principal (whether at
maturity or upon redemption or acceleration) and premium, if any, becoming due
and payable on the Bonds on each Bond Payment Date; provided that any amount
held by the Trustee in the Revenue Fund on the due date for a Loan Repayment
pursuant to the immediately preceding paragraph shall be credited against the
Loan Repayment due on such date to the extent available for such purpose under
the terms of the Indenture; and provided further that, subject to the provisions
of this paragraph, if at any time the amounts held by the Trustee in the Revenue
Fund are sufficient to pay all of the principal of and interest and premium, if
any, on the Bonds as such payments become due, the Borrower shall be relieved of
any obligation to make any further Loan Repayments under the provisions of this
Section. Notwithstanding the foregoing, if on any date the amount held by the
Trustee in the Revenue Fund is insufficient to make any required payments of
principal of (whether at maturity or upon redemption or acceleration) and
interest and premium, if any, on the Bonds as such payments become due, the
Borrower, immediately upon receipt of notice of such deficiency from the
Trustee, shall forthwith pay such deficiency as a Loan Repayment hereunder.
The obligation of the Borrower to make any payment under this subsection
(a) shall be deemed to have been satisfied to the extent of any corresponding
payment made by the Bank to the Trustee as a result of a drawing under the
Letter of Credit. To the extent the Trustee receives a Loan Repayment from the
Borrower pursuant to this subsection (a) after any payment obligation hereunder
has been satisfied by a drawing under the Letter of Credit, the Trustee shall
use such Loan Repayment to reimburse the Bank for such drawing.
(b) The Borrower covenants and agrees to pay until the principal of,
premium, if any, and interest on the Bonds shall have been fully paid or
provision for such payment shall have been made as provided in the Indenture,
(i) the Trustee's reasonable annual fee for its ordinary services rendered as
trustee, and its reasonable ordinary expenses incurred under the Indenture, as
and when the same become due, (ii) the Trustee's reasonable fees, charges and
expenses, as Bond Registrar, Tender Agent and Paying Agent, and the reasonable
fees of any other paying agent for the Bonds as provided in the Indenture, as
and when the same become due, (iii) the cost of providing any Bonds required to
be provided pursuant to the Indenture, (iv) the reasonable fees of any rating
agency then rating the Bonds required to maintain the rating on the Bonds, (v)
the reasonable fees of the Remarketing Agent, and (vi) other necessary and
ordinary administrative fees and expenses of the Authority. The Borrower
covenants and agrees to make all payments for the expenses identified in (i)
through (vi) above. In addition, the Borrower agrees to pay such extraordinary
expenses incurred by the Trustee, the Tender Agent, the Remarketing Agent and
the Authority under the Indenture as and when the same become due. The duties of
the Borrower under this subsection (b) shall survive the termination of this
Agreement and the termination and discharge of the Indenture.
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(c) The Borrower also agrees to pay the fees of the Bank pursuant to the
Reimbursement Agreement.
(d) In the event the Borrower should fail to make any of the payments
required by subsections (a)-(c) of this Section, such payments shall continue as
obligations of the Borrower until such amounts shall have been fully paid.
Except as provided in the next sentence, the Borrower agrees to pay such
amounts, together with interest thereon, from the date such payments were due
until paid, to the extent permitted by law, at the rate of ten percent (10%) per
annum. With respect to amounts due the Bank, the Borrower agrees to pay such
amounts together with interest thereon at the rates and times established
pursuant to the Reimbursement Agreement. Interest on overdue payments required
under subsection (a) above shall be paid to Bondholders as provided in Section
2.02(B)(2) of the Indenture.
Section 4.3. Purchase of Bonds. The Borrower hereby recognizes and agrees
that the Indenture provides for the creation of an account or accounts to
facilitate the purchase of Bonds by the Tender Agent on the Mandatory Tender
Date and upon the optional tender of Bonds in accordance with Section 4.06 of
the Indenture, and the Borrower agrees to provide or cause to be provided the
Letter of Credit for the payment of amounts necessary to purchase such Bonds.
Section 4.4. Unconditional Obligations. The obligations of the Borrower to
make the payments required by Section 4.2 hereof and to provide or cause to be
provided the Letter of Credit pursuant to Section 4.3 hereof, and to perform and
observe the other agreements on its part contained herein, shall be absolute and
unconditional, irrespective of any defense or any rights of set-off, recoupment
or counterclaim it might otherwise have against the Authority, and during the
term of this Agreement, the Borrower shall pay absolutely all payments to be
made on account of the Loan made to the Borrower from Bond proceeds pursuant to
Section 4.1 hereof, as prescribed in Section 4.2 hereof, the obligation to
provide or cause to be provided the Letter of Credit pursuant to Section 4.3
hereof, and all other payments required hereunder, free of any deductions and
without abatement, diminution or set-off. Until such time as the principal of,
premium, if any, and interest on the Bonds shall have been fully paid, or
provision for the payment thereof shall have been made as required by the
Indenture, the Borrower (i) will not suspend or discontinue any payments
required to be made by the Borrower pursuant to this Agreement, including,
without limitation, the payments provided for in Section 4.2 and the obligation
to provide or cause to be provided the Letter of Credit pursuant to Section 4.3;
(ii) will perform and observe all of its other covenants contained in this
Agreement; and (iii) except as provided in Article VIII hereof, will not
terminate this Agreement for any cause, including, without limitation, failure
to complete the Project, the occurrence of any act or circumstances that may
constitute failure of consideration, destruction of or damage to the Project,
commercial frustration of purpose, any change in the tax or other laws of the
United States of America or of the State, or any political subdivision of either
of these, or any failure of the Authority or the Trustee to perform and observe
any covenant, whether express or implied, or any duty, liability or obligation
arising out of or connected with this Agreement or the Indenture.
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Section 4.5. Assignment of Authority's Rights. As security for the payment
of the Bonds, the Authority will assign to the Trustee the Authority's rights,
title and interest under this Agreement, including the right to receive payments
hereunder (except the right of the Authority to receive certain payments, if
any, with respect to expenses and indemnification under Sections 4.2(b), 7.3,
9.2 and 9.3 hereof, the Authority's right to receive notices, opinions and other
documents required to be delivered to the Authority hereunder and the
Authority's rights to consent to certain actions taken hereunder), and the
Authority hereby directs the Borrower to make the payments required hereunder
(except such payments for expenses and indemnification) directly to the Trustee
as more fully set forth in this Agreement. The Borrower hereby assents to such
assignment, agrees to make such payments directly to the Trustee and agrees that
the provisions of Section 4.4 shall apply to its obligation to make such
payments.
Section 4.6. Amounts Remaining in Funds. It is agreed by the parties hereto
that after: (i) payment in full of the principal of, and premium, if any, and
interest on, the Bonds, or after provision for such payment shall have been made
as provided in the Indenture, (ii) payment, or provision for payment
satisfactory to the Trustee and paying agents, of the fees, charges and expenses
of the Trustee and paying agents in accordance with the Indenture, (iii)
payment, or provision for payment satisfactory to the affected parties, of all
other amounts required to be paid under this Agreement and the Indenture by the
Borrower and (iv) payment to the Bank of any amounts owed to the Bank by the
Borrower under the Reimbursement Agreement, any amounts remaining in any fund
held by the Trustee under the Indenture shall be paid in accordance with the
requirements of Section 10.04 of the Indenture.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
Section 5.1. Right of Access to the Project. The Borrower agrees that
during the term of this Agreement, the Authority, the Trustee and the duly
authorized agents of either of them shall have the right, after reasonable
notice to the Borrower, at all reasonable times during normal business hours to
enter upon the site of the Project to examine and inspect the Project. The
rights of access hereby reserved to the Trustee, and their respective agents,
may be exercised only after the Person seeking such access shall have executed
such confidentiality or secrecy agreements, if any, as may be requested by the
Borrower and which are in the form required of all visitors to the Project site.
Nothing contained in this Section or in any other provision of this Agreement
shall be construed to entitle the Authority or the Trustee to any information or
inspection involving the confidential knowledge, expertise or know-how of the
Borrower.
Section 5.2. The Borrower's Maintenance of its Existence. The Borrower
covenants and agrees that it will maintain its existence and will not dissolve,
sell, or otherwise dispose of all or substantially all of its assets, nor
consolidate with or merge into another entity or permit one or more other
entities to consolidate with or merge into it. Notwithstanding the foregoing,
the Borrower may, without violating the covenants contained in this Section,
consolidate with or merge into another entity, or permit one or more other
entities to consolidate
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with or merge into it, or sell or otherwise transfer to another entity all or
substantially all of its assets as an entirety and thereafter dissolve, if:
(a) The surviving, resulting or transferee entity, as the case may be:
(i) assumes in writing, if such entity is not the
Borrower, all of the obligations of the Borrower under this
Agreement;
(ii) is not, after such transaction, otherwise in
default under any provisions of this Agreement;
(b) The Trustee and the Authority shall have received an opinion of Bond
Counsel to the effect that such merger, consolidation, sale or other transfer
will not cause interest on the Bonds not to be Tax-exempt; and
(c) The written consent of the Bank has been received by the Trustee,
together with an acknowledgment that the Letter of Credit will remain in effect.
If a merger, consolidation, sale or other transfer is effected, as provided
in this Section, the provisions of this Section shall continue in full force and
effect and no further merger, consolidation, sale or transfer shall be effected
except in accordance with the provisions of this Section.
Section 5.3. Records and Financial Statements of Borrower; Employment
Practices.
(a) The Borrower covenants and agrees at all times to keep, or cause to be
kept, proper books of record and account, prepared in accordance with generally
accepted accounting principles, in which complete and accurate entries shall be
made of all transactions of or in relation to the business, properties and
operations of the Borrower. Such books of record and account shall be available
for inspection by the Authority or the Trustee, and the duly authorized agents
of either of them, at reasonable hours and under reasonable circumstances.
(b) Upon the receipt of the written request of the Authority or the
Trustee, the Borrower further covenants and agrees to furnish the requesting
party, within one hundred twenty (120) days after the end of each Fiscal Year,
with copies of its complete financial statements together with a Certificate of
an Authorized Representative of the Borrower stating that no event which
constitutes a Loan Default Event or which with the giving of notice or the
passage of time or both would constitute a Loan Default Event has occurred and
is continuing as of the end of such Fiscal Year, or specifying the nature of
such event and the actions taken and proposed to be taken by the Borrower to
cure such default.
(c) The Borrower shall, within sixty (60) days of the receipt of a written
request from the Authority or the Trustee, furnish a written report to the
requesting party, as of
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the end of the Borrower's prior Fiscal Year, stating the status of the Project,
the outstanding and unpaid balance of the Bonds, the number of full-time and
part-time employees of the Borrower employed at the Project during such prior
Fiscal Year, and supplying such current information as the Authority shall
reasonably request regarding other matters covered in the Borrower's application
for industrial revenue bond financing.
Section 5.4. Insurance. The Borrower agrees to insure the Project or cause
the Project to be insured during the term of this Agreement for such amounts and
for such occurrences as are customary for similar facilities within the State,
or as may be required by the Bank, by means of policies issued by reputable
insurance companies qualified to do business in the State. Upon the written
request of the Authority or the Trustee, the Borrower shall deliver to the
requesting party, within sixty (60) days of the receipt of such request,
memorandum copies of the insurance policies or certificates of insurance which
memorandum copies of insurance policies or certificates of insurance shall
evidence that all insurance required to be in effect under this Section is then
currently in full force and effect. The Trustee and the Authority are not
responsible for the adequacy or sufficiency of the coverage evidenced by such
policies or certificates.
Section 5.5. Maintenance and Repair; Taxes; Utility and Other Charges. The
Borrower agrees to maintain the Project, or cause the Project to be maintained,
during the term of this Agreement (i) in a safe condition and (ii) in good
repair and in good operating condition, ordinary wear and tear excepted, making
from time to time all necessary repairs thereto and renewals and replacements
thereof.
The Borrower agrees to pay or cause to be paid during the term of this
Agreement all taxes, governmental charges of any kind lawfully assessed or
levied upon the Project or any part thereof, including any taxes levied against
the Project which, if not paid, will become a charge on the Project, all utility
and other charges incurred in the operation, maintenance, use, occupancy and
upkeep of the Project and all assessments and charges lawfully made by any
governmental body for public improvements that may be secured by a lien on the
Project; provided that with respect to special assessments or other governmental
charges that may lawfully be paid in installments over a period of years, the
Borrower shall be obligated to pay only such installments as are required to be
paid during the term of this Agreement. The Borrower may, at the Borrower's
expense and in the Borrower's name, in good faith, contest any such taxes,
assessments and other charges and, in the event of any such contest, may permit
the taxes, assessments or other charges so contested to remain unpaid during
that period of such contest and any appeal therefrom unless by such nonpayment
the Project or any part thereof will be subject to loss or forfeiture.
Section 5.6. Qualification in California. The Borrower agrees that
throughout the term of this Agreement it, or any successor permitted by Section
5.2, will be qualified to do business in the State.
Section 5.7. Alternate Credit Facility. If the Borrower exercises its
option to convert the interest rate borne by the Bonds from the Weekly Interest
Rate to the Fixed Interest
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Rate pursuant to the terms and provisions of the Indenture, the Borrower may
cause to be delivered to the Trustee an Alternate Credit Facility, effective as
of the Fixed Rate Date, in lieu of keeping the Letter of Credit in place as
required by Section 5.8.
Such Alternate Credit Facility must meet the following conditions:
(a) the Alternate Credit Facility must be approved by the Authority or any
successors;
(b) the terms of the Alternate Credit Facility must provide an
unconditional obligation of the issuer of the Alternate Credit Facility to pay
all amounts with respect to the principal of, premium, if any, and interest on
the Bonds when the same shall become due; and
(c) the term of the Alternate Credit Facility must extend to the final
maturity of the Bonds.
On or prior to the date of the delivery of an Alternate Credit Facility to
the Trustee, the Borrower shall cause to be furnished to the Authority and the
Trustee (i) an opinion of Bond Counsel stating that the delivery of such
Alternate Credit Facility to the Trustee is authorized under this Agreement and
complies with the terms hereof and will not cause interest on the Bonds not to
be Tax-exempt, (ii) such opinions regarding the validity of the Alternate Credit
Facility as the Authority, the Trustee and any rating agency then rating the
Bonds may reasonably require, and (iii) written evidence from Moody's, if the
Bonds are then rated by Moody's, and S&P, if the Bonds are then rated by S&P, to
the effect that such rating agency has reviewed the proposed Alternate Credit
Facility and that the substitution of the proposed Alternate Credit Facility for
the Letter of Credit will not, by itself, result in a reduction of its long term
rating of the Bonds below "A" if the bonds are rated by S&P or below "A2" if the
Bonds are rated by Moody's.
Section 5.8. Letter of Credit. The Borrower shall at all times throughout
the term of this Agreement (but subject to Section 5.7) maintain or cause to be
maintained the Letter of Credit with respect to the Bonds. The Letter of Credit
shall be an obligation of the Bank to pay to the Trustee, against presentation
of sight drafts and certificates required by the Bank, up to (x) an amount equal
to the aggregate principal amount of the Bonds then Outstanding as necessary to
pay the principal of such Bonds, whether at maturity, redemption, acceleration
or otherwise or upon the purchase of such Bonds upon the optional tender of the
Bonds pursuant to Section 4.06 of the Indenture and on the Mandatory Tender
Date, and (y) an amount equal to 45 days (or such other number of days as may be
required to obtain a rating on the Bonds if the Bonds are then rated) of
interest on the Bonds calculated at an interest rate of twelve percent (12%) per
annum on the basis of a 365- or 366-day year, as applicable, for the number of
days actually elapsed while the Bonds bear interest at the Weekly Interest Rate
and an amount equal to 210 days (or such other number of days as may be required
to obtain a rating on the Bonds if the Bonds are then rated) of interest on the
Bonds calculated at the actual interest rate or rates on the Bonds on the basis
of a 360-day year of twelve 30-day months while the Bonds bear interest at the
Fixed Interest Rate to pay interest on the Bonds when due.
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On any Interest Payment Date, the Borrower may, at its option, but with the
written approval of the Authority, which written approval shall not be
unreasonably withheld, provide or cause to be provided to the Trustee an
Alternate Letter of Credit and the Borrower shall, in any event, cause to be
delivered to the Trustee an extension of the Expiration Date of the Letter of
Credit or an Alternate Letter of Credit at least (i) twenty-three (23) days
before the Expiration Date of the then-existing Letter of Credit while the Bonds
bear interest at the Weekly Interest Rate, or (ii) forty-five (45) days before
the Expiration Date of the then existing Letter of Credit while the Bonds bear
interest at the Fixed Interest Rate. At least thirty (30) days prior to the
Letter of Credit Substitution Date, the Borrower shall provide the Authority,
the Trustee, the Bank, the Tender Agent and the Remarketing Agent with a written
notice of its intention to provide an Alternate Letter of Credit pursuant to
this Section 5.8. Such notice shall include the proposed Letter of Credit
Substitution Date, which shall be an Interest Payment Date, and identify the
provider of the Alternate Letter of Credit. An Alternate Letter of Credit shall
be an irrevocable letter of credit or other irrevocable credit facility
delivered to the Trustee on or prior to 8:00 a.m. (California time) on the
Letter of Credit Substitution Date, issued by a commercial bank or other
financial institution, the terms of which shall in all material respects be the
same as the Letter of Credit. On or prior to the date of the delivery of an
Alternate Letter of Credit to the Trustee, the Borrower shall cause to be
furnished to the Authority and the Trustee (i) an opinion of Bond Counsel
stating that the delivery of such Alternate Letter of Credit to the Trustee is
authorized pursuant to this Agreement, complies with the terms hereof and will
not cause the interest on the Bonds not to be Tax-exempt, (ii) such opinions
regarding the validity of the Alternate Letter of Credit as the Authority, the
Trustee and any rating agency then rating the Bonds may reasonably require, and
(iii) written evidence from Moody's, if the Bonds are then rated by Moody's, and
S&P, if the Bonds are then rated by S&P, to the effect that such rating agency
has reviewed the proposed Alternate Letter of Credit and that the substitution
of the proposed Alternate Letter of Credit will not, by itself, result in a
reduction of its long-term rating of the Bonds below "A".
It is understood and agreed that with proper notification to the Trustee
and the Borrower, the Bank can declare that a default has occurred under the
Reimbursement Agreement with the Borrower and such default will cause a
mandatory redemption of Bonds pursuant to Section 4.01(7) of the Indenture.
Section 5.9. Covenants of the Authority and the Borrower. It is the
intention of the parties hereto that interest on the Bonds shall be and remain
Tax-exempt so long as the Bonds are Outstanding, and to that end the
representations, covenants, and agreements of the Authority and the Borrower in
this Section and in Sections 5.10 and 5.11 are for the benefit of the Trustee
and each and every Holder of the Bonds. The Authority and the Borrower each
(unless otherwise indicated below) represents, warrants and agrees as follows:
(a) The Project consists, and at all times shall consist, of land or
property which is subject to the allowance for depreciation provided in Section
167 of the Code, and substantially all (95% or more) of the proceeds of the
Bonds including proceeds of investment thereof, shall be used to pay the Costs
of the Project which are chargeable to the capital account of the Borrower, and
which were paid not earlier than 60 days before April 30, 1997.
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(b) No portion of the proceeds of the Bonds shall be used to provide for a
private or commercial golf course, country club, massage parlor, tennis club,
skating facility (including roller skating, skate board and ice skating),
racquet sports facility (including any handball or racquetball court), hot tub
facility, suntan facility, race track, automobile sales or service facility,
retail food or beverage facility, entertainment facility, airplane, gambling
establishment, health club, liquor store, skybox or luxury box.
(c) Less than 25% of the net proceeds of the Bonds (after Costs of
Issuance) shall be used to purchase land or interests in land. The Borrower
covenants to spend sufficient sums from the Project Fund on Costs of the Project
to assure compliance with this covenant.
(d) No proceeds of the Bonds shall be used to acquire any personal property
or facilities unless the first use of such property or facilities shall be
pursuant to such acquisition, except that if the Project consists of acquisition
of a building, the Borrower shall, within two years after the Date of Delivery
or the date of acquisition of such building, whichever is earlier, expend an
amount, from proceeds of the Bonds or otherwise, equal to 15% of the cost of
acquiring such building financed with proceeds of the Bonds on rehabilitation
costs of such building as required by Section 147(d) of the Code.
(e) During the three-year period following the date the Project is placed
in service, the Borrower shall not allow any other Person to become a
"test-period beneficiary" of the Bonds who is a beneficiary of industrial
development bonds in an amount which would cause the issuance of the Bonds to
exceed such Person's aggregate per-taxpayer limit under Section 144(a)(10) of
the Code.
(f) The Borrower shall not enter into any agreement which would result in
the payment of principal or interest on the Bonds being "federally guaranteed"
within the meaning of Section 149(b) of the Code.
(g) There is no outstanding issue of industrial development bonds which was
used to finance any facilities which, in relation to the Project, would
constitute (i) a single building, (ii) an enclosed shopping mall, or (iii) a
strip of offices, stores or warehouses using substantial common facilities.
(h) Subject to the provisions of the final paragraph of Section 5.10, no
actions shall be taken, or omitted to be taken, by the Borrower which would have
the effect, directly or indirectly, of causing interest on any of the Bonds to
not be Tax-exempt.
(i) No changes shall be made in the Project or the use of the Project which
shall in any way impair the Tax-exempt status of interest on the Bonds.
(j) The Borrower shall not make any use of the proceeds of the Bonds and
shall not direct or knowingly permit the Trustee to invest any proceeds from the
issuance of the Bonds or any acquired obligation in any manner which would cause
the Bonds to
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become "arbitrage bonds" within the meaning of Section 148 of the Code and any
Regulations thereunder, and the Borrower shall comply with the requirements of
said Section of the Code and said Regulations, as the same may be amended from
time to time, so long as any Bonds remain Outstanding.
(k) The Borrower shall use due diligence to cause the Project to be
operated in accordance with all applicable laws, rulings, regulations and
ordinances.
(l) The Borrower shall comply with all conditions imposed by the Authority
and any State or local agency in its approval of the Project.
(m) The Borrower shall fully and faithfully perform all the duties and
obligations which the Authority has covenanted and agreed in the Indenture to
cause Borrower to perform and any duties and obligations which Borrower is
required in the Indenture to perform. The foregoing shall not apply to any duty
or undertaking of the Authority which by its nature cannot be delegated or
assigned.
(n) The Borrower acknowledges, approves and accepts the rights, duties and
obligations imposed on the Borrower pursuant to the Remarketing Agreement.
(o) The Borrower shall faithfully perform at all times any and all
covenants, undertakings, stipulations and provisions to be observed or performed
by the Borrower contained in the Indenture, in the Bonds, and in all proceedings
of the Authority pertaining thereto, or otherwise required of the Borrower to be
observed or performed, whether express or implied.
(p) The Borrower shall comply with the covenants and obligations of the
Borrower contained in the Reimbursement Agreement.
(q) The Borrower covenants that it shall use less than twenty-five percent
(25%) of the net proceeds of the Bonds (after deducting Costs of Issuance) to
provide facilities which are directly related and ancillary to the manufacturing
facility being financed with the proceeds of the Bonds, in accordance with
Section 144(a)(12)(C) of the Code.
(r) The Borrower and the Authority shall not become a Holder of the Bonds,
and none of the Borrower, any Related Party or the Authority shall directly or
indirectly purchase Bonds from the Remarketing Agent.
Notwithstanding any other provision of this Agreement or the Indenture,
including in particular Article X of the Indenture, the obligations of the
Borrower and the Authority to comply with the covenants set forth in this
Section and Section 5.10 shall survive the defeasance or payment in full of the
Bonds.
Section 5.10. Capital Expenditures. For the purpose of this Section and
Section 5.09 the following terms shall have the following meanings:
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"Facilities" shall mean those facilities described in Section 144(a)(1) of
the Code and Regulations thereunder, including Section 1.103-10(b)(2)(ii)(e) and
Section 1.103-10(d)(2) of the Regulations, and shall include those facilities
any Principal User of which is the Borrower or a related person, as defined in
Section 144(a)(3) of the Code, located in the Project Location, and any
contiguous or integrated facility treated as being located in the Project
Location by reason of the fact that such facility is located on both sides of a
border between the Project Location and one or more other political
jurisdictions.
"Principal User" means any principal user of the Project as defined in
Proposed Treasury Regulations Section 1.103-10(h).
"Project Location" shall mean the area within the City of Long Beach,
California.
"Regulations" shall mean those regulations, whether now or hereafter
adopted, prepared by the United States Department of the Treasury with respect
to Section 103 or Part IV of subchapter B of chapter 1 of the Code.
"Section 144 Capital Expenditures" shall mean those expenditures required
to be taken into account with respect to the Bonds pursuant to Section 144(a)(1)
and (4) of the Code and Regulations thereunder, including Section
1.103-10(b)(2)(ii) and (iii) of the Regulations, including any expenditure with
respect to Facilities, no matter by whom made (regardless of how paid, whether
in cash, notes or stock in a taxable or nontaxable transaction), paid or
incurred during the six-year period beginning 3 years before the date of
issuance and delivery of the Bonds, which may, under any rule or election under
the Code, be treated as a capital expenditure (whether or not such expenditure
is so treated), and which is not paid or reimbursed out of the original
principal proceeds (exclusive of investment income) of the Bonds, but not
including excluded expenditures pursuant to Section 144(a)(4)(C) of the Code and
Regulations thereunder, including Section 1.103-10(b)(2)(iv) and (v) of the
Regulations. Such term shall also include research and development costs
properly allocable to the Project no matter where paid or incurred, unless
specifically excluded by Section 144(a)(4)(C).
The Borrower represents and warrants that substantially all of the proceeds
of the Bonds are to be used with respect to the Project to be located in the
Project Location; that there are no other outstanding obligations issued
subsequent to September 30, 1968, of any state, territory or possession of the
United States of America, or any political subdivision of the foregoing or of
the District of Columbia, the proceeds of which have been or are to be used
primarily with respect to Facilities; and that the sum of the principal amount
of the Bonds plus the amount of Section 144 Capital Expenditures for the
three-year period ending on the date of issuance and delivery of the Bonds does
not exceed $10,000,000.
The Authority covenants and agrees that it has not taken and shall not take
any action which will cause interest on the Bonds to not be Tax-exempt.
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The Authority hereby elects to have the provisions of Section 144(a)(4)(A)
of the Code apply to the Bonds. The Borrower covenants that it shall furnish to
the Authority prior to the issuance and delivery of the Bonds whatever
information is necessary for the Authority to make such election.
The Borrower further covenants that it shall take, and shall cause any
other Principal User to take, such further actions as are required of a
Principal User of property financed by an issue of obligations which are subject
to the $10,000,000 limitation of Section 144(a)(4)(A) of the Code, which actions
are set forth in Section 144(a)(4)(A) of the Code and in the Regulations,
including Section 1.103-10(b) of the Regulations.
The Borrower further covenants and agrees, so long as any of the Bonds are
Outstanding under the Indenture, that the aggregate principal of Bonds being
issued plus the aggregate amount of Section 144 Capital Expenditures made or to
be made with respect to Facilities during the six-year period beginning three
years before the date of issuance and delivery of the Bonds shall not exceed
$10,000,000 (or any such larger amount as may be hereafter permitted by law).
Notwithstanding anything in Section 5.9(h) or this Section 5.10 to the
contrary, neither the Borrower nor the Authority shall have violated the
covenants contained in Section 5.9(h) or this Section 5.10 if the interest on
any of the Bonds becomes taxable to a Person solely because such Person is a
"substantial user" of the Project or a "related person" within the meaning of
Section 147(a) of the Code; and none of the covenants and agreements herein
contained shall require either the Borrower or the Authority to enter an
appearance or intervene in any administrative, legislative or judicial
proceeding in connection with any changes in applicable laws, rules or
regulations or in connection with any decisions of any court or administrative
agency or other governmental body affecting the taxation of interest on the
Bonds.
Section 5.11. Special Arbitrage Certifications. (a) The Authority hereby
certifies to the Borrower (i) that it has not been notified of any listing or
proposed listing of it by the Internal Revenue Service as a bond issuer whose
arbitrage certifications may not be relied upon and (ii) that issuance of the
Bonds will not violate any provisions of Section 103 of the Code or, Section 148
of the Code, or the Regulations issued under such Sections of the Code, such
that the interest on the Bonds is not Tax-exempt.
(b) The Borrower and the Authority agree to comply with the Tax Regulatory
Agreement, as such Tax Regulatory Agreement shall be amended from time to time
in order that interest on the Bonds remains Tax-exempt. The Borrower further
agrees to cause any other Principal User (as defined in Section 5.10 hereof) of
the Project to comply with the terms of this Loan Agreement and the Tax
Regulatory Agreement to the extent necessary to insure that interest on the
Bonds remains Tax-exempt.
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Section 5.12. Covenant to Enter into Agreement or Contract to Provide
Ongoing Disclosure. The Borrower and the Authority hereby agree that the initial
offering and sale of the Bonds is exempt from the requirements of Paragraph
(b)(5)(i) of the Securities and Exchange Commission Rule 15c2-12 under the
Securities Exchange Act of 1934, as amended (17 CFR Part 240, ss. 240.15c2-12)
(the "Rule"). The Borrower hereby covenants and agrees that if as a result of
the conversion of the interest rate borne by the Bonds from the Weekly Interest
Rate to the Fixed Interest Rate or as a result of any amendment or supplement to
the Indenture or this Agreement, the Bonds cease to be exempt under the Rule,
the Borrower will enter into an agreement or contract, constituting an
undertaking, to provide ongoing disclosure as may be necessary to comply with
the Rule as then in effect. The covenant and agreement contained in this Section
5.12 is for the benefit of the Bondholders, any Participating Underwriter and
the Beneficial Owners (as defined in the Indenture) as required by the Rule. It
is the Borrower's express intention that this Section 5.12 be assigned pursuant
to and in accordance with Section 6.09 of the Indenture to the Trustee for the
benefit of the Bondholders, any Participating Underwriter and the Beneficial
Owners and that each Bondholder, Participating Underwriter and Beneficial Owner
be a beneficiary of this Section 5.12 with the right to enforce this Section
5.12 against the Borrower. Notwithstanding any other provision of this
Agreement, failure of the Borrower to comply with the provisions of this Section
5.12 shall not be considered a Loan Default Event; provided, however, the
Trustee may (and, at the request of any Participating Underwriter or the Holders
of at least 25% aggregate principal amount in Outstanding Bonds, shall) or any
Beneficial Owner may take such actions as may be necessary and appropriate,
including seeking specific performance by court order, to cause the Borrower to
comply with its obligations under this Section 5.12.
ARTICLE VI
DAMAGE, DESTRUCTION AND CONDEMNATION;
USE OF PROCEEDS
Section 6.1. Obligation to Continue Payments. If prior to full payment of
the Bonds (or provision for payment thereof in accordance with the provisions of
the Indenture) (i) the Project or any portion thereof is destroyed (in whole or
in part) or is damaged by fire or other casualty, or (ii) title to, or the
temporary use of, the Project or any portion thereof shall be taken under the
exercise of the power of eminent domain by any governmental body or by any
Person acting under governmental authority, the Borrower shall nevertheless be
obligated to continue to pay the amounts specified in Article IV hereof, to the
extent not prepaid in accordance with Article VIII hereof.
Section 6.2. Application of Net Proceeds. The Borrower shall be entitled to
the Net Proceeds, if any, of any insurance or condemnation awards resulting from
the damage, destruction or condemnation of the Project or any portion thereof
for application as provided in this Section. All Net Proceeds shall be deposited
by the Borrower in an escrow account with the Trustee and shall be applied in
one or more of the following ways at the election of the Borrower, with the
consent of the Bank, by written notice to the Authority and the Trustee.
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(a) The prompt repair, restoration, relocation, modification or improvement
of the damaged, destroyed or condemned portion of the Project to enable such
portion of the Project to accomplish at least the same function as such portion
of the Project was designed to accomplish prior to such damage or destruction or
exercise of such power of eminent domain. If the Borrower elects to proceed as
provided in this subsection (a), it shall give the Authority and the Trustee
written notice thereof, and evidence of the Bank's consent, within 90 days of
the deposit of the Net Proceeds with the Trustee. Any balance of the Net
Proceeds remaining after such work has been completed shall be deposited in the
Revenue Fund to be applied, with the written consent of the Bank, to the payment
of principal of and premium, if any, and interest on the Bonds, or, if the Bonds
have been fully paid (or provision for payment thereof has been made in
accordance with the provisions of the Indenture), any balance remaining in the
Revenue Fund shall be paid in accordance with the requirements of Section 10.04
of the Indenture.
(b) The prepayment of all or a portion of the Loan in accordance with
Article VIII hereof and redemption of Bonds. If the Borrower fails to give the
notice and evidence of the Bank's consent required by Section 6.2(a) above
within 90 days of the deposit of the Net Proceeds with the Trustee, the Borrower
shall be deemed to have elected to apply the Net Proceeds to the prepayment of
all or a portion of the Loan as provided in this subsection (b) in accordance
with Section 8.2(a) hereof, the Bank shall be deemed to have consented to such
application, and the Authority and the Trustee shall be deemed to have received
written notice thereof for purposes of this Section 6.2.
Section 6.3. Insufficiency of Net Proceeds. If the Project or a portion
thereof is to be repaired, restored, relocated, modified or improved pursuant to
Section 6.2(a) hereof, and if the Net Proceeds are insufficient to pay in full
the cost of such repair, restoration, relocation, modification or improvement,
the Borrower will nonetheless complete the work or cause the work to be
completed and will pay or cause to be paid any cost thereof in excess of the
amount of the Net Proceeds held in escrow.
Section 6.4. Damage to or Condemnation of Other Property. The Borrower
shall be entitled to the Net Proceeds of any insurance or condemnation award or
portion thereof made for damages to or takings of its property not included in
the Project.
ARTICLE VII
LOAN DEFAULT EVENTS AND REMEDIES
Section 7.1. Loan Default Events. Any one of the following which occurs and
continues shall constitute a Loan Default Event:
(a) failure of the Borrower to pay any Loan Repayment when and as the same
shall become due and payable pursuant to Section 4.2(a);
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(b) failure of the Borrower to pay any amounts payable hereunder, other
than Loan Repayments, when and as the same shall become due, which failure
continues for a period of 30 days after written notice delivered to the Borrower
and the Bank, which notice shall specify such failure and request that it be
remedied, given by the Authority or the Trustee, unless the Authority and the
Trustee shall agree in writing to an extension of such time;
(c) failure of the Borrower to observe and perform any covenant, condition
or agreement on its part required to be observed or performed by this Agreement,
other than a covenant described in subsection (a) or subsection (b) above, which
failure continues for a period of 30 days after written notice delivered to the
Borrower and the Bank, which notice shall specify such failure and request that
it be remedied, given by the Authority or the Trustee, unless the Authority and
the Trustee, with the written approval of the Bank, shall agree in writing to an
extension of such time; provided, however, that if the failure stated in the
notice cannot be corrected within such period, the Authority and the Trustee
will not unreasonably withhold their consent to an extension of such time if
corrective action is instituted within such period and diligently pursued until
the default is corrected; or
(d) existence of an Event of Default under and as defined in Sections
7.01(A)-(D) of the Indenture.
The provisions of subsection (c) of this Section are subject to the
limitation that the Borrower shall not be deemed in default if and so long as
the Borrower is unable to carry out its agreements hereunder by reason of
strikes, lockouts or other industrial disturbances; acts of public enemies;
orders of any kind of the government of the United States or of the State or any
of their departments, agencies, or officials, or any civil or military
authority; insurrections, riots, epidemics, landslides; lightning; earthquake;
fire; hurricanes; storms; floods; washouts; droughts; arrests; restraint of
government and people; civil disturbances; explosions; breakage or accident to
machinery, transmission pipes or canals; partial or entire failure of utilities;
or any other cause or event (whether similar or dissimilar to the foregoing) not
reasonably within the control of the Borrower; it being agreed that the
settlement of strikes, lockouts and other industrial disturbances shall be
entirely within the discretion of the Borrower, and the Borrower shall not be
required to make settlement of strikes, lockouts and other industrial
disturbances by acceding to the demands of the opposing party or parties when
such course is, in the judgment of the Borrower, unfavorable to the Borrower.
This limitation shall not apply to any default under subsections (a), (b), or
(d) of this Section. Notwithstanding any other provision of this Agreement to
the contrary, so long as the Bank is not in default under the Letter of Credit,
the Trustee shall not without the prior written consent or direction of the Bank
exercise any remedies under this Agreement in the case of any Loan Default Event
described in subsections (a), (b), or (c) above.
Section 7.2. Remedies on Default. Subject to the last sentence of Section
7.1 above, whenever any Loan Default Event shall have occurred and shall be
continuing,
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(a) The Trustee, by written notice to the Borrower and the Bank, shall
declare all unpaid amounts payable under Section 4.2(a) of this Agreement to be
due and payable immediately, provided that concurrently with or prior to such
notice the unpaid principal amount of the Bonds shall have been declared to be
due and payable under the Indenture. Upon any such declaration such amount shall
become and shall be immediately due and payable in the amount set forth in
Section 7.01 of the Indenture.
(b) The Trustee shall have access to and may inspect, examine and make
copies of the books and records and any and all accounts, data and federal
income tax and other tax returns of the Borrower.
(c) The Authority or the Trustee may take whatever action at law or in
equity as may be necessary or desirable to collect the payments and other
amounts then due and thereafter to become due or to enforce performance and
observance of any obligation, agreement or covenant of the Borrower under this
Agreement.
In case the Trustee or the Authority shall have proceeded to enforce its
rights under this Agreement and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Trustee
or the Authority, then, and in every such case, the Borrower, the Trustee and
the Authority shall be restored respectively to their several positions and
rights hereunder, and all rights, remedies and powers of the Borrower, the
Trustee and the Authority shall continue as though no such action had been
taken.
The Borrower covenants that, in case a Loan Default Event shall occur and
all unpaid amounts payable under Section 4.2(a) hereof shall have been declared
due and payable immediately pursuant to Section 7.2(a) hereof, then, upon demand
of the Trustee, the Borrower will pay to the Trustee the whole amount that then
shall have become due and payable under said Section, with interest on the
amount then overdue at the rate of ten percent (10%) per annum until such amount
has been paid or, if ten percent is greater than the rate then permitted by law,
at the greatest rate then permitted.
In case the Borrower shall fail forthwith to pay such amounts upon such
demand, the Trustee shall be entitled and empowered to institute any action or
proceeding at law or in equity for the collection of the sums so due and unpaid,
and may prosecute any such action or proceeding to judgment or final decree, and
may enforce any such judgment or final decree against the Borrower and collect
in the manner provided by law the moneys adjudged or decreed to be payable.
In case proceedings shall be pending for the bankruptcy or for the
reorganization of the Borrower under the federal bankruptcy laws or any other
applicable law, or in case a receiver or trustee shall have been appointed for
the property of the Borrower or in the case of any other similar judicial
proceedings relative to the Borrower, or the creditors or property of the
Borrower, then the Trustee shall be entitled and empowered, by intervention in
such proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Agreement and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the
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claims of the Trustee allowed in such judicial proceedings relative to the
Borrower, its creditors or its property, and to collect and receive any moneys
or other property payable or deliverable on any such claims, and to distribute
such amounts as provided in the Indenture after the deduction of its reasonable
charges and expenses. Any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized to make such payments to the Trustee, and to
pay to the Trustee any amount due it for reasonable compensation and expenses,
including reasonable expenses and fees of counsel incurred by it up to the date
of such distribution.
Section 7.3. Agreement to pay Attorneys' Fees and Expenses. In the event
the Borrower should default under any of the provisions of this Agreement,
whether or not such default constitutes a Loan Default Event hereunder, and the
Authority or the Trustee should employ attorneys or incur other expenses for the
collection of the payments due under this Agreement or the enforcement of
performance or observance of any obligation or agreement on the part of the
Borrower herein contained, the Borrower agrees to pay to the Authority or the
Trustee the reasonable fees and expenses of such attorneys and such other
reasonable expenses so incurred by the Authority or the Trustee.
Section 7.4. No Remedy Exclusive. 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 other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. To entitle the Authority or the Trustee to exercise any
remedy reserved to it in this Article, it shall not be necessary to give any
notice, other than such notice as may be herein expressly required. Such rights
and remedies as are given the Authority hereunder shall also extend to the
Trustee, and the Trustee and the Holders of the Bonds shall be deemed third
party beneficiaries of all covenants and agreements herein contained.
Section 7.5. Waivers. No delay or omission of the Authority or the Trustee
to exercise any right or power arising upon the occurrence of any default shall
impair any such right or power or shall be construed to be a waiver of any such
default or an acquiescence therein; and every power and remedy given by this
Agreement to the Authority or the Trustee may be exercised from time to time and
as often as may be deemed expedient. In the event any agreement or covenant
contained in this Agreement should be breached by the Borrower and thereafter
waived by the Authority or the Trustee, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
ARTICLE VIII
PREPAYMENT
Section 8.1. Redemption of Bonds with Prepayment Moneys. By virtue of the
assignment of the rights of the Authority under this Agreement to the Trustee as
is provided in
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Section 4.5, the Borrower agrees to and shall pay directly to the Trustee any
amount permitted or required to be paid by it under this Article VIII. The
Indenture provides that the Trustee shall use the moneys so paid to it by the
Borrower, pursuant to the written instructions of the Borrower, to redeem the
Bonds on the date set for such redemption pursuant to Section 8.5.
Section 8.2. Options to Prepay Loan. The Borrower shall have the option to
prepay the Loan by paying to the Trustee the amount set forth in Section 8.4,
for deposit in the Revenue Fund, to be applied to the redemption of Bonds as set
forth below on the earliest date such Bonds are subject to redemption pursuant
to the Indenture and as to which notice of redemption can be given in accordance
with the Indenture, at the redemption prices set forth below, under the
following circumstances:
(a) The Borrower may prepay such amounts in whole, and cause all of the
Outstanding Bonds to be redeemed at the redemption price set forth in Section
4.01(5) of the Indenture, if any of the following shall have occurred:
(i) The Project shall have been damaged or destroyed, in whole or in
part, by fire or other casualty and the Authority and the Trustee receive a
Certificate of the Authorized Representative of the Borrower to the effect that:
(1) it is not practicable or desirable to rebuild, repair or restore the Project
within a period of six consecutive months following such damage or destruction,
(2) the Borrower is or will be thereby prevented from carrying on its normal
operations at the Project for a period of at least six consecutive months, or
(3) the cost of restoration of the Project would substantially exceed the Net
Proceeds of insurance carried thereon; or
(ii) Title to, or the temporary use of, all or substantially all of
the Project shall have been taken by any governmental authority, or any Person
acting under governmental authority, exercising the power of eminent domain and
the Authority and the Trustee receive a Certificate of the Authorized
Representative of the Borrower to the effect that: (1) the Borrower is thereby
prevented from carrying on its normal operations at the Project for a period of
at least six consecutive months or (2) the Project is unsuitable for use by the
Borrower;
(b) The Borrower may prepay all or any part of the Loan from any available
funds and cause all or any part of the Outstanding Bonds to be redeemed at the
redemption prices set forth in Section 4.01(2) or 4.01(6) of the Indenture, as
applicable, but subject to any additional requirements of the Reimbursement
Agreement.
Section 8.3. Mandatory Prepayment. (a) The Borrower shall have and hereby
accepts the obligation to prepay in full the Loan by paying to the Trustee the
amount set forth in Section 8.4 for deposit to the Revenue Fund to be used to
redeem all the Outstanding Bonds on the earliest date such Bonds are subject to
redemption pursuant to the Indenture and as to which notice of the redemption
can be given in accordance with the Indenture, at the redemption prices set
forth in Section 4.01(5) of the Indenture with respect to subsection (i) below,
Section
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4.01(3) of the Indenture with respect to subsections (ii) and (iii) below, and
in the Indenture Sections noted with respect to subsection (iv) below:
(i) if and when as a result of any changes in the
Constitution of the United States of America or the California
Constitution or as a result of any legislative, judicial or
administrative action, this Agreement shall have become void
or unenforceable or impossible of performance in accordance
with the intention and purposes of the parties hereto, or
shall have been declared unlawful.
(ii) if, due to the untruth or inaccuracy of any
representation or warranty made by the Borrower herein or in
connection with the offer and sale of the Bonds, or the breach
of any covenant or warranty of the Borrower contained in this
Agreement, interest on the Bonds, or any of them, is
determined not to be Tax-exempt to the Holders thereof (other
than a Holder who is a "substantial user" of the Project or a
"related person" within the meaning of Section 147(a) of the
Code) by a final administrative determination of the Internal
Revenue Service or final judicial decision of a court of
competent jurisdiction in a proceeding of which the Borrower
received notice and was afforded an opportunity to participate
in to the full extent permitted by law. A determination or
decision will be considered final for this purpose when all
periods for administrative and judicial review have expired.
(iii) if either: (a) the Borrower or any other
Principal User of the Project files a notice with the
Authority and the Trustee to the effect that the capital
expenditure limitation of Section 144(a)(4) of the Code has
been exceeded, or will be exceeded, within a period of 60
days; or (b) there is a final determination (as defined in
subsection (ii) above) by the Internal Revenue Service or a
court of competent jurisdiction that such capital expenditures
limitation has been exceeded.
(iv) if mandatory redemption is required by any of
Sections 4.01(4), (7), or (8) of the Indenture.
The amount payable by the Borrower in the event of a prepayment required by this
Section shall be determined as set forth in Section 8.4 hereof and shall be
deposited in the Revenue Fund upon demand by the Authority or the Trustee.
(b) The Borrower shall prepay all or any part of the Loan from Net Proceeds
under the circumstances described in Section 6.2(b) hereof, and cause all or any
part of the Outstanding Bonds to be redeemed at the redemption price set forth
in Section 4.01(5) of the Indenture.
Section 8.4. Amount of Prepayment. In the case of a prepayment in full of
the Loan by the Borrower under this Agreement pursuant to Section 8.2 or 8.3,
the amount to be paid shall be a sum sufficient, together with other funds
deposited with the Trustee and available for such purpose, to pay (1) the
redemption price specified in the applicable subsections of Section 8.2 or 8.3,
for all Outstanding Bonds, plus all interest accrued and to accrue to the
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redemption date, (2) all reasonable and necessary fees and expenses of the
Authority, the Trustee and any paying agent allowable pursuant to this Agreement
and the Indenture accrued and to accrue through final payment of the Bonds and
(3) all other liabilities of the Borrower accrued and to accrue under this
Agreement.
In the case of partial prepayment of the Loan by the Borrower under this
Agreement pursuant to Section 8.2 or 8.3, the amount to be paid shall be a sum
sufficient, together with other funds deposited with the Trustee and available
for such purpose, to pay the redemption price specified in the applicable
subsections of Section 8.2 or 8.3, for the Bonds to be redeemed, plus all
interest accrued and to accrue to the redemption date, and to pay expenses of
redemption of such Bonds. All partial prepayments of the Loan made by the
Borrower under this Agreement shall be applied in inverse order of the due dates
thereof, or as otherwise provided in the Indenture.
Section 8.5. Notice of Prepayment. The Borrower shall give written notice
to the Authority, the Bank and the Trustee (1) while the Bonds bear interest at
the Weekly Interest Rate, not less than twenty (20) days prior to the date of
any prepayment of a Loan Repayment and (2) while the Bonds bear interest at the
Fixed Interest Rate, not less than forty (40) days prior to the date of any
prepayment of a Loan Repayment, in each case specifying the date upon which any
prepayment will be made, the basis for such prepayment and the amount of such
repayment. If the Borrower fails to give such notice of a prepayment of Loan
Repayments, the Indenture provides that the Trustee shall hold such prepayment
in the Redemption Fund.
ARTICLE IX
NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION
Section 9.1. Non-Liability of Authority. The Authority shall not be
obligated to pay the principal of, or premium, if any, or interest on the Bonds,
except from Revenues. The Borrower hereby acknowledges that the Authority's sole
source of moneys to repay the Bonds will be provided by the payments made by the
Borrower pursuant to this Agreement, together with other Revenues, including
investment income on certain funds and accounts held by the Trustee under the
Indenture, and hereby agrees that if the payments to be made hereunder shall
ever prove insufficient to pay all principal of, and premium, if any, and
interest on the Bonds as the same shall become due (whether by maturity,
redemption, acceleration or otherwise), then upon notice from the Trustee, the
Borrower shall pay such amounts as are required from time to time to prevent any
deficiency or default in the payment of such principal, premium or interest,
including, but not limited to, any deficiency caused by acts, omissions,
nonfeasance or malfeasance on the part of the Trustee, the Borrower, the
Authority or any third party.
Section 9.2. Expenses. The Borrower covenants and agrees to pay, and to
indemnify the Authority and the Trustee against, all costs and charges,
including reasonable fees and disbursements of attorneys, accountants,
consultants and other experts, incurred in good faith in connection with this
Agreement, the Bonds or the Indenture.
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Section 9.3. Indemnification. The Borrower releases the Authority, the
State, the Treasurer of the State and the Trustee from, and covenants and agrees
that none of the Authority, the State or the Trustee shall be liable for, and
covenants and agrees to indemnify and hold harmless the Authority, the State,
the Treasurer of the State and the Trustee and their officers, employees and
agents from and against, any and all losses, claims, damages, liabilities or
expenses, of every conceivable kind, character and nature whatsoever arising out
of, resulting from, or in any way connected with (1) the Project, or the
conditions, occupancy, use, possession, conduct or management of, or work done
in or about, or from the planning, design, acquisition, installation or
construction of, the Project or any part thereof; (2) the issuance of any Bonds
or any certifications or representations made in connection therewith by the
Borrower and the carrying out of any of the transactions contemplated by the
Bonds, the Indenture, or this Agreement; (3) the Trustee's acceptance or
administration of the trusts under the Indenture, or the exercise or performance
of any of its powers or duties under the Indenture; or (4) any untrue statement
or alleged untrue statement of any material fact or omission or alleged omission
to state a material fact necessary to make the statements made, in light of the
circumstances under which they were made, not misleading, in the official
statement utilized by any underwriter in connection with the sale or offering of
any Bonds; provided that in each case such indemnity shall not be required for
damages that result from the willful misconduct or negligence on the part of the
party seeking such indemnity. The indemnity required by this Section shall be
only to the extent that any loss sustained by the Authority or the Trustee
exceeds the Net Proceeds the Authority or the Trustee receives from any
insurance carried by the Borrower with respect to the loss sustained. The
Borrower further covenants and agrees to pay or to reimburse the Authority, the
State, the Treasurer of the State and the Trustee and their officers, employees
and agents for any and all costs, reasonable attorneys fees, liabilities or
expenses incurred in connection with investigating, defending against or
otherwise in connection with any such losses, claims, damages, liabilities,
expenses or actions, except to the extent that the same arise out of the willful
misconduct or negligence of the party claiming such payment or reimbursement.
The provisions of this Section shall survive the payment and retirement of the
Bonds and the termination of this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices. All notices, certificates, or other communications
given hereunder shall be deemed sufficiently given on (i) the day such notices,
certificates or other communications are received when sent by personal
delivery, including tested telex or facsimile communication, or (ii) the third
day following the day on which the same have been mailed by first class, postage
prepaid, addressed to the Authority, the Borrower, the Trustee, the Tender Agent
or the Bank, as the case may be, at the address set forth for such party below.
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, the Tender Agent, Borrower's counsel and the Bank. The
Authority, the Borrower, the Trustee, the Tender Agent and the Bank may, by
notice given hereunder, designate any different addresses to which subsequent
notices, certificates, or other communications shall be sent.
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If to the Authority:
California Economic Development Financing Authority
c/o California Trade and Commerce Agency
801 K Street, Suite 1700
Sacramento, California 95814
Attention: Chair
(916) 324-1299 Fax: (916) 322-7214
If to the Borrower:
Advanced Aerodynamics and Structures, Inc.
3501 Lakewood Boulevard
Long Beach, California 90808
Attention: President
(562) 938-8618 Fax: (562) 938-8620
If to the Trustee or Tender Agent:
First Trust of California, National Association
One California Street, 4th Floor
San Francisco, California 94111
Attention: Municipal Trusts and Agency
(415) 273-4500 Fax: (415) 273-4590
If to the Bank:
The Sumitomo Bank, Ltd.
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Structured Finance & Financial Institutions Group
(213) 955-0800 Fax: (213) 623-6832
If to the Remarketing Agent
Rauscher Pierce Refsnes, Inc.
2711 North Haskell Avenue, Suite 2400
Dallas, Texas 75204
Attention: Fixed Income Banking
(214) 989-1000 Fax: (214) 989-1842
Section 10.2. Severability. If any provision of this Agreement shall be
held or deemed to be, or shall in fact be, illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative, or unenforceable to
any extent whatever.
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Section 10.3. Execution of Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument; provided, however, that for purposes
of perfecting a security interest in this Agreement by the Trustee and the Bank
under Article 9 of the California Uniform Commercial Code, only the counterpart
delivered, pledged, and assigned to the Trustee shall be deemed the original.
Section 10.4. Amendments, Changes and Modifications. Except as otherwise
provided in this Agreement or the Indenture, subsequent to the initial issuance
of Bonds and prior to their payment in full, or provision for such payment
having been made as provided in the Indenture, this Agreement may not be
effectively amended, changed, modified, altered or terminated without the
written consent of the Trustee and the Bank.
Section 10.5. Governing Law. This Agreement shall be governed exclusively
by and construed in accordance with the applicable laws of the State as a
contract executed and delivered within the State to be fully performed within
the State.
Section 10.6. Authorized Representative of the Borrower. Whenever under the
provisions of this Agreement the approval of the Borrower is required or the
Authority or the Trustee is required to take some action at the request of the
Borrower, such approval or such request shall be given on behalf of the Borrower
by the Authorized Representative of the Borrower, and the Authority and the
Trustee shall be authorized to act on any such approval or request and neither
party hereto shall have any complaint against the other or against the Trustee
as a result of any such action taken.
Section 10.7. Term of the Agreement. This Agreement shall be in full force
and effect from the date hereof and shall continue in effect as long as any of
the Bonds remain Outstanding or the Letter of Credit remains in effect,
whichever is later. All representations and certifications by the Borrower as to
all matters affecting the Tax-exempt status of interest on the Bonds and all
indemnifications by the Borrower to the Authority, the State or the Trustee
shall survive the termination of this Agreement.
Section 10.8. Binding Effect. This Agreement shall inure to the benefit of
and shall be binding upon the Authority, the Borrower and their respective
successors and assigns; subject, however, to the limitations contained in
Section 5.2 hereof.
Section 10.9. References to Bank. Notwithstanding any provisions contained
herein to the contrary, the Bank shall be entitled to take all actions and
exercise all rights hereunder for its own account so long as the Bank has not
wrongfully dishonored any drawings under the Letter of Credit and the Bank is
not in liquidation, bankruptcy or receivership proceedings. After the expiration
or termination of the Letter of Credit and after all obligations owed to the
Bank pursuant to the Reimbursement Agreement have been paid in full or
discharged, all references to the Bank contained herein shall be null and void
and of no further force and effect.
29
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Section 10.10. Brokerage Confirmations. The Borrower acknowledges that to
the extent regulations of the Comptroller of the Currency or other applicable
regulatory entity grant the Borrower the right to receive brokerage
confirmations of security transactions under the Indenture, the Borrower
specifically waives receipt of such confirmations to the extent permitted by
law. The Trustee is required under the Indenture to furnish the Borrower with
periodic cash transaction statements which include detail for all securities
transactions made by the Trustee on behalf of the Borrower thereunder.
[End of the Loan Agreement]
30
<PAGE>
IN WITNESS WHEREOF, the California Economic Development Financing Authority
has caused this Agreement to be executed in its name and the Borrower has caused
this Agreement to be executed in its name, all as of the date first above
written.
CALIFORNIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY
By:___________________________________________
Chair
ATTEST
By:__________________________________
Secretary
APPROVED AS TO FORM
By:__________________________________
Counsel
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By:_______________________________________
Authorized Signatory
<PAGE>
EXHIBIT A
THE PROJECT
The Project consists of the (1) construction of a 200,000 square foot
manufacturing facility on a parcel of leased land located at 3205 Lakewood
Boulevard, Long Beach, California (the "Project Site"); and (2) acquisition and
installation of certain manufacturing equipment at the Project Site.
A-1
CALIFORNIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY
and
FIRST TRUST OF CALIFORNIA, NATIONAL ASSOCIATION, AS TRUSTEE
INDENTURE OF TRUST
Dated as of August 1, 1997
$8,500,000
CALIFORNIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY
VARIABLE RATE DEMAND INDUSTRIAL
DEVELOPMENT REVENUE BONDS, SERIES 1997
(ADVANCED AERODYNAMICS AND STRUCTURES, INC. PROJECT)
<PAGE>
TABLE OF CONTENTS
Page
PARTIES......................................................................1
PREAMBLES....................................................................1
ARTICLE I
DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
SECTION 1.01. Definitions...................................................2
SECTION 1.02. Content of Certificates and Opinions..........................15
SECTION 1.03. Interpretation................................................15
ARTICLE II
THE BONDS
SECTION 2.01. Authorization of Bonds........................................16
SECTION 2.02. Terms of the Bonds............................................16
SECTION 2.03. Conversion of Bonds...........................................17
SECTION 2.04. Execution of Bonds............................................19
SECTION 2.05. Transfer of Bonds.............................................19
SECTION 2.06. Exchange of Bonds.............................................20
SECTION 2.07. Bond Register.................................................20
SECTION 2.08. Temporary Bonds...............................................20
SECTION 2.09. Bonds Mutilated, Lost, Destroyed or Stolen....................20
SECTION 2.10. Special Obligations...........................................21
SECTION 2.11. Book-Entry Only System........................................21
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
SECTION 3.01. Issuance of the Bonds.........................................23
SECTION 3.02. Application of Proceeds of the Bonds..........................23
SECTION 3.03. Establishment and Application of Project Fund and Costs of
Issuance Fund.................................................23
SECTION 3.04. Validity of Bonds.............................................25
ARTICLE IV
REDEMPTION AND PURCHASE OF BONDS
SECTION 4.01. Terms of Redemption...........................................25
SECTION 4.02. Selection of Bonds for Redemption.............................26
SECTION 4.03. Notice of Redemption..........................................27
SECTION 4.04. Partial Redemption of Bonds...................................27
SECTION 4.05. Effect of Redemption..........................................27
SECTION 4.06. Purchase of Bonds by Tender Agent.............................28
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SECTION 4.07. Mandatory Tender of Bonds.....................................28
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS;
PAYMENT OF PRINCIPAL AND INTEREST
SECTION 5.01. Pledge and Assignment; Revenue Fund...........................29
SECTION 5.02. Allocation of Revenues........................................30
SECTION 5.03. Priority of Moneys in Revenue Fund; Letter of Credit Account..30
SECTION 5.04. Letter of Credit..............................................32
SECTION 5.05. Investment of Moneys..........................................32
SECTION 5.06. Additional Duties of Trustee..................................33
SECTION 5.07. Establishment of Rebate Fund..................................33
ARTICLE VI
PARTICULAR COVENANTS
SECTION 6.01. Punctual Payment..............................................34
SECTION 6.02. Extension of Payment of Bonds.................................34
SECTION 6.03. Against Encumbrances..........................................34
SECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment...........35
SECTION 6.05. Accounting Records and Reports................................35
SECTION 6.06. Arbitrage Covenants...........................................35
SECTION 6.07. Other Covenants...............................................35
SECTION 6.08. Further Assurances............................................36
SECTION 6.09. Covenant to Enter into Agreement or Contract to Provide
Ongoing Disclosure............................................36
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS
SECTION 7.01. Events of Default; Acceleration; Waiver of Default............36
SECTION 7.02. Institution of Legal Proceedings by Trustee...................38
SECTION 7.03. Application of Revenues and Other Funds After Default.........38
SECTION 7.04. Trustee to Represent Bondholders..............................39
SECTION 7.05. Bondholders' Direction of Proceedings.........................39
SECTION 7.06. Limitation on Bondholders' Right to Sue.......................39
SECTION 7.07. Absolute Obligation of Authority..............................40
SECTION 7.08. Termination of Proceedings....................................40
SECTION 7.09. Remedies Not Exclusive........................................40
SECTION 7.10. No Waiver of Default..........................................40
SECTION 7.11. Consent To Defaults...........................................40
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ARTICLE VIII
THE TRUSTEE, THE REMARKETING
AGENT AND THE TENDER AGENT
SECTION 8.01. Duties, Immunities and Liabilities of Trustee.................41
SECTION 8.02. Merger or Consolidation.......................................42
SECTION 8.03. Liability of Trustee..........................................42
SECTION 8.04. Right of Trustee to Rely on Documents.........................43
SECTION 8.05. Preservation and Inspection of Documents......................44
SECTION 8.06. Compensation and Indemnification..............................44
SECTION 8.07. Notice to Rating Agency.......................................44
SECTION 8.08. Qualifications of Remarketing Agent...........................44
SECTION 8.09. Remarketing of Bonds..........................................45
SECTION 8.10. Creation of Purchase Fund; Purchase of Bonds Delivered to
Tender Agent..................................................46
SECTION 8.11. Delivery of Bonds.............................................47
SECTION 8.12. Delivery of Proceeds of Remarketing...........................48
SECTION 8.13. No Purchases or Sales After Default...........................48
SECTION 8.14. Qualifications of Tender Agent................................48
SECTION 8.15. Paying Agent..................................................48
SECTION 8.16. Several Capacities............................................49
ARTICLE IX
MODIFICATION OR AMENDMENT OF THE INDENTURE
SECTION 9.01. Amendments Permitted..........................................49
SECTION 9.02. Effect of Supplemental Indenture..............................50
SECTION 9.03. Endorsement of Bonds; Preparation of New Bonds................50
SECTION 9.04. Amendment of Particular Bonds.................................50
ARTICLE X
DEFEASANCE
SECTION 10.01. Discharge of Indenture.......................................51
SECTION 10.02. Discharge of Liability on Bonds..............................51
SECTION 10.03. Deposit of Money or Securities with Trustee..................52
SECTION 10.04. Payments After Discharge of Indenture........................52
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Liability of Authority Limited to Revenues...................53
SECTION 11.02. Successor Is Deemed Included in All References to
Predecessor..................................................53
SECTION 11.03. Limitation of Rights to Parties and Bondholders..............53
SECTION 11.04. Waiver of Notice.............................................53
SECTION 11.05. Destruction of Bonds.........................................53
SECTION 11.06. Severability of Invalid Provisions...........................53
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SECTION 11.07. Governing Law................................................54
SECTION 11.08. Notices......................................................54
SECTION 11.09. Evidence of Rights of Bondholders............................55
SECTION 11.10. Disqualified Bonds...........................................56
SECTION 11.11. Money Held for Particular Bonds..............................56
SECTION 11.12. Funds and Accounts...........................................57
SECTION 11.13. Waiver of Personal Liability.................................57
SECTION 11.14. Execution in Several Counterparts............................57
SECTION 11.15. Actions Due on Saturdays, Sundays and Holidays...............57
SECTION 11.16. References to Bank...........................................57
EXHIBIT A - Form of Bond
iv
<PAGE>
INDENTURE OF TRUST
THIS INDENTURE OF TRUST, dated as of August 1, 1997, between the CALIFORNIA
ECONOMIC DEVELOPMENT FINANCING AUTHORITY (the "Authority"), a body public and
corporate, and a public instrumentality of the State of California (the
"State"), duly organized and validly existing under the laws of the State,
particularly Part 10.2 of Division 3 of Title 2 of the California Government
Code (commencing with Section 15710) (the "Act"), and FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION, a national banking association organized and existing
under and by virtue of the laws of the United States of America (the "Trustee"),
W I T N E S S E T H:
WHEREAS, the Authority was established for the purpose of promoting and
encouraging commerce and industry, and generally to foster economic development
in the State, and is empowered under the provisions of the Act (capitalized
terms used herein shall have the meanings given such terms in Section 1.01
hereof) to issue its bonds and to enter into loan agreements for the purpose of
financing private activity economic development projects; and
WHEREAS, in furtherance of the purposes of the Act, the Authority proposes
to finance the Costs of the Project more particularly described in Exhibit A to
the Agreement, to be owned by the Borrower; and
WHEREAS, pursuant to and in accordance with the Act, the Authority has
authorized and undertaken to issue its Bonds pursuant to this Indenture in order
to provide funds to finance the Costs of the Project; and
WHEREAS, the Authority has undertaken to finance the Costs of the Project
by loaning the proceeds derived from the sale of the Bonds to the Borrower
pursuant to the Agreement, under which the Borrower is required to make Loan
Repayments sufficient to pay when due the principal of, premium, if any, and
interest on the Bonds and to pay certain other expenses; and
WHEREAS, it has been determined that the estimated amount necessary to
finance the Costs of the Project, including a portion of the necessary expenses
incidental to the issuance of the Bonds, will require the issuance, sale and
delivery of the Bonds in the aggregate principal amount of $8,500,000; and
WHEREAS, in order to provide for the authentication and delivery of the
Bonds, to establish and declare the terms and conditions upon which the Bonds
are to be issued and secured, and to secure the payment of the principal and
purchase price thereof and interest thereon, the Authority has authorized the
execution and delivery of this Indenture; and
WHEREAS, in order to further secure the payments of principal and purchase
price of and interest on the Bonds, the Borrower has obtained an irrevocable
direct-pay letter of credit from the Bank; and
WHEREAS, all acts and proceedings required by law or necessary to make the
Bonds, when executed by the Authority and authenticated and delivered by the
Bond Registrar, the valid, binding and legal special obligations of the
Authority, and to constitute this Indenture a valid and binding
<PAGE>
agreement for the uses and purposes herein set forth in accordance with its
terms, have been done and taken, and the execution and delivery of this
Indenture has been in all respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the
payment of the principal and purchase price of and premium, if any, and interest
on all Bonds at any time issued and Outstanding under this Indenture, according
to their tenor, and, on a basis subordinate thereto, to secure the Borrower's
obligations to the Bank under the Reimbursement Agreement, and to secure the
performance and observance of all the covenants and conditions therein and
herein set forth, and to declare the terms and conditions upon and subject to
which the Bonds are to be issued and received, and in consideration of the
premises and of the mutual covenants herein contained and of the purchase and
acceptance of the Bonds by the Holders thereof, and for other valuable
consideration, the receipt whereof is hereby acknowledged, the Authority does
hereby covenant and agree with the Trustee, for the benefit of the respective
Holders from time to time of the Bonds, as follows:
ARTICLE I
DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
SECTION 1.01. Definitions. Unless the context otherwise requires, the terms
defined in this Article shall, for all purposes of this Indenture and for the
purpose of any certificate, opinion or other document herein mentioned, have the
meanings herein specified. Such definitions are equally applicable to both the
singular and plural forms of any of the terms defined. Unless otherwise defined
in this Indenture, all terms defined in the Act and used herein shall have the
meanings assigned to such terms in the Act.
Accountant
"Accountant" means any firm of independent certified public accountants
selected by the Borrower and reasonably acceptable to the Trustee and the Bank.
Act
"Act" means Part 10.2 of Division 3 of Title 2 of the California Government
Code (commencing with Section 15710), as now in effect and as it may from time
to time hereafter be amended or supplemented.
Act of Bankruptcy
"Act of Bankruptcy" means the entry of an order or decree, by a court
having jurisdiction in the matter, for relief against the Borrower or the
Authority in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Borrower or the Authority or of any substantial part of the
property of either the Borrower or the Authority, or ordering the winding up or
liquidation of the affairs of either the Borrower or the Authority; or the
institution or commencement by or against the Borrower or the Authority of a
voluntary or involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by it to the entry
of an order for relief against it in any involuntary case under any such law, or
to the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Borrower or the Authority or of
any substantial part of the property of either the Borrower or the
2
<PAGE>
Authority, or the making by either the Borrower or the Authority of an
assignment for the benefit of creditors, or the failure of it generally to pay
its debts as they become due, or the admission by it in writing of such failure,
or the taking of any action by the Borrower or the Authority in furtherance of
any such action, or if a receiver of the business or of the property or assets
of the Borrower or the Authority shall be appointed by any court, except a
receiver appointed at the instance or request of the Authority.
Additional Payments
"Additional Payments" means the payments required to be made by the
Borrower pursuant to Sections 4.2(b), (c) and (d) of the Agreement.
Agreement
"Agreement" means that certain loan agreement by and between the Authority
and the Borrower, dated as of August 1, 1997, as originally executed and as it
may from time to time be supplemented, modified or amended in accordance with
the terms thereof and of this Indenture.
Alternate Credit Facility
"Alternate Credit Facility" means bond insurance or other similar credit
enhancement facility meeting the requirements of Section 5.7 of the Agreement.
Alternate Fixed Rate
"Alternate Fixed Rate" shall have the meaning ascribed to such term in
Section 2.03.
Alternate Letter of Credit
"Alternate Letter of Credit" means an alternate irrevocable letter of
credit or similar credit facility issued by a commercial bank or savings
institution, the terms of which, other than the expiration date, shall in all
material respects be the same as those of the initial Letter of Credit,
delivered to the Trustee pursuant to Section 5.8 of the Agreement.
Alternate Weekly Rate
"Alternate Weekly Rate" shall have the meaning ascribed to such term in
Section 2.02.
Authority
"Authority" means the California Economic Development Financing Authority.
Authorized Denominations
"Authorized Denomination" means (i) prior to the Fixed Rate Date, $100,000
or any multiple of $5,000 in excess of $100,000 and (ii) after the Fixed Rate
Date, $5,000 or integral multiples thereof.
3
<PAGE>
Authorized Representative
"Authorized Representative" means with respect to the Borrower, the person
or persons at the time designated to act on behalf of the Borrower by a written
certificate signed by the Borrower, furnished to the Trustee and the Authority,
containing the specimen signature of each such person.
Available Moneys
"Available Moneys" means moneys which are (a) continuously on deposit with
the Trustee in trust for a period of 91 days for the benefit of the Bondholders
in a separate and segregated account in which only Available Moneys are held and
(b) proceeds of (i) the Bonds received contemporaneously with the issuance and
sale of the Bonds, (ii) a drawing under the Letter of Credit, (iii) any other
moneys for which the Trustee has received a written opinion of nationally
recognized counsel experienced in bankruptcy matters and acceptable to the
Trustee to the effect that payment of such moneys to the Bondholders would not
constitute an avoidable preference under Section 547 of the United States
Bankruptcy Code in the event the Authority, the Borrower or any Related Party
were to become a debtor under the United States Bankruptcy Code, which opinion
is acceptable to each rating agency then rating the Bonds, or (iv) moneys
derived from the investment of funds qualifying as Available Moneys under the
foregoing clauses.
Bank
"Bank" means The Sumitomo Bank, Limited, acting through its Los Angeles
Branch, or any other commercial bank or other financial institution issuing a
Letter of Credit then in effect and party to a Reimbursement Agreement.
Beneficial Owners
"Beneficial Owner" means any person which has or shares the power, directly
or indirectly, to make investment decisions concerning ownership of any bonds
(including persons holding Bonds through nominees, depositories or other
intermediaries).
Bond
"Bond" or "Bonds" means any Bond or all of the Bonds, as the case may be,
of the Authority authorized and issued by the Authority, authenticated by the
Bond Registrar and delivered hereunder.
Bond Counsel
"Bond Counsel" means any attorney at law or firm of attorneys of nationally
recognized standing in matters pertaining to the exclusion of interest from
gross income for federal income tax purposes on bonds issued by states and
political subdivisions, and duly admitted to practice law before the highest
court of any state of the United States of America, but shall not include
counsel for the Borrower.
Bond Payment Date
"Bond Payment Date" means any date on which any principal of, or premium or
interest on, any Outstanding Bond shall be due and payable whether at maturity
or on a scheduled Interest
4
<PAGE>
Payment Date or upon redemption, in each case in accordance with the terms of
the Bonds and this Indenture.
Bond Registrar
"Bond Registrar" shall mean the Bond Registrar specified in Section 2.07.
Borrower
"Borrower" means Advanced Aerodynamics and Structures, Inc., a corporation
duly organized and validly existing under the laws of the State of Delaware, or
any entity which is the surviving, resulting or transferee entity in any merger,
consolidation or transfer of assets permitted under Section 5.2 of the
Agreement.
Business Day
"Business Day" means a day which is not a Saturday, Sunday or legal holiday
on which banking institutions in the State or the State of New York or in any
state in which the principal office of the Bank, the Tender Agent or the Trustee
or the office of the Bank designated for presentations under the Letter of
Credit is located are closed or a day on which the New York Stock Exchange is
closed.
Certificate, Statement, Request, Requisition or Order of the Authority or the
Borrower
"Certificate," "Statement," "Request," "Requisition" and "Order" of the
Authority or the Borrower means, respectively, a written certificate, statement,
request, requisition or order signed in the name of the Authority by the Chair
of the Authority or such other person as may be designated in a resolution as
authorized to sign for the Authority, or in the name of the Borrower by an
Authorized Representative of the Borrower. Any such instrument and supporting
opinions or representations, if any, may, but need not, be combined in a single
instrument with any other instrument, opinion or representation, and the two or
more so combined shall be read and construed as a single instrument. If and to
the extent required by Section 1.02, each such instrument shall include the
statements provided for in Section 1.02.
Code
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any regulations from time to time promulgated or deemed in effect
thereunder.
Component Issues
"Component Issues" means five or more issues of securities, the interest on
which is Tax-exempt, selected by the Remarketing Agent in accordance with
Section 2.03(B)(1).
Construction
"Construction" means, with respect to the Project, the acquisition,
construction, installation, rehabilitation, expansion, improvement, equipping,
furnishing, or other activities with respect to the Project described in the
Borrower's application for financing assistance from the Authority.
5
<PAGE>
Costs of Issuance
"Costs of Issuance" means all items of expense directly or indirectly
payable by or reimbursable to the Authority or the Borrower and related to the
authorization, issuance, sale and delivery of the Bonds, including but not
limited to costs of preparation and reproduction of documents, printing
expenses, application, filing and recording fees, initial fees and charges of
the Trustee and Tender Agent, legal fees and charges, including the fees and
charges of Bond Counsel, fees and disbursements of consultants and
professionals, rating agency fees, fees and charges for preparation, execution
and safekeeping of the Bonds and any other cost, charge or fee in connection
with the original issuance of the Bonds which constitutes a "cost of issuance"
within the meaning of Section 147(g) of the Code.
Costs of Issuance Fund
"Costs of Issuance Fund" means the fund of that name established pursuant
to Section 3.03(E).
Costs of the Project
"Costs of the Project" means and shall be deemed to include all of the
costs of the Construction of the Project, to the extent permitted by the Act,
whether incurred prior to or after the date of the Agreement, including, but not
limited to the following (but not including any Costs of Issuance):
(1) the cost of construction, improvement, repair and reconstruction;
(2) the cost of acquisition, including rights in land and other property,
both real and personal and improved and unimproved, and franchises, and disposal
rights;
(3) the cost of demolishing, removing, or relocating any buildings or
structures on lands so acquired, including the cost of acquiring any lands to
which such buildings or structures may be moved or relocated;
(4) the cost of machinery, equipment and furnishings, of engineering and
architectural surveys and plans, and specifications and of transportation and
storage until the Project is operational;
(5) the cost of agents or consultants, including, without limitation,
legal, financial, engineering, accounting, and auditing, necessary or incident
to the Project and of the determination as to the feasibility or practicability
of undertaking the Project;
(6) the cost of financing interest on the Bonds and fees of the Bank
allocable to the period prior to and during Construction of the Project and
reserves for principal and interest and for extensions, enlargements, additions,
repairs, replacements, renovations, and improvements to the Project; and
(7) the cost of financing the Project, and the reimbursement to any
governmental entity or agency, or any Person, of expenditures made by or on
behalf of such entity agency or Person in connection with the Project; provided,
that the Borrower shall at its own expense insure, repair, and maintain the
Project, pay such taxes with respect to the Borrower's interest in the property
relating to the Project, and pay such assessments and other public charges on
the Project or shall cause the same to be provided by others to the satisfaction
of the Authority.
6
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Date of Delivery
"Date of Delivery" means August 5, 1997.
Determination of Taxability
"Determination of Taxability" means the occurrence or existence of any of
the conditions or events more fully described in Section 8.3(a)(ii) or Section
8.3(a)(iii) of the Agreement.
DTC
"DTC" means The Depository Trust Company, New York, New York, or any
successor securities depository.
Event of Default
"Event of Default" means any of the events specified in Section 7.01.
Expiration Date
"Expiration Date" means the stated date upon which the Letter of Credit or
Alternate Letter of Credit shall expire in accordance with its terms.
Fiscal Year
"Fiscal Year" means the fifty two (or fifty three) week period ending on
the last Saturday of December of each year, or any other twelve month period
selected and designated as the fiscal year of the Borrower.
Fixed Interest Rate
"Fixed Interest Rate" means the interest rate borne by the Bonds from and
after the Fixed Rate Date and determined in accordance with Section 2.03.
Fixed Rate Date
"Fixed Rate Date" means the date on which the Bonds begin to bear interest
at the Fixed Interest Rate, which shall be an Interest Payment Date.
Fixed Rate Index
"Fixed Rate Index" means the interest index determined by the Remarketing
Agent pursuant to Section 2.03(B)(1).
Government Obligations
"Government Obligations" means and includes any of the following
securities, if and to the extent the same are non-callable and not subject to
redemption at the option of the issuer, at the time legal for investment: direct
obligations of, or obligations the full and timely payment of principal of and
interest on which are unconditionally guaranteed by, the United States of
America, including obligations
7
<PAGE>
issued or held in book-entry form on the books of the Department of the Treasury
of the United States of America and including a receipt, certificate or any
other evidence of a direct ownership interest of future payments in an
obligation of, or unconditionally guaranteed by, the United States of America,
or in specified portions thereof held by a custodian in safekeeping for the
holders of such receipt, certificate or any other evidence of ownership (which
may consist of specified portions of interest thereon) which is rated or
assessed in the highest rating category of Moody's and S&P to the extent each
such rating agency is then rating the Bonds, but excluding any share or interest
in any unitary investment trust or mutual fund unless such unitary investment
trust or mutual fund is rated or assessed in the highest rating category of
Moody's and S&P to the extent each such rating agency is then rating the Bonds.
Holder or Bondholder
"Holder" or "Bondholder," whenever used herein with respect to a Bond,
means the Person in whose name such Bond is registered.
Indenture
"Indenture" means this Indenture, as originally executed or as it may from
time to time be supplemented, modified, or amended by any Supplemental
Indenture.
Information Services
"Information Services" means Financial Information, Inc.'s "Daily Called
Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302,
Attention: Editor; Kenny Information Service's "Called Bond Service," 65
Broadway, 16th Floor, New York, New York 10006; Moody's Investors Service,
525077 Center Drive, Suite 150, Charlotte, North Carolina 28217, Attention:
Called Bond Department; and Standard and Poor's "Called Bond Record," 25
Broadway, 3rd Floor, New York, New York 10004; or, in accordance with
then-current guidelines of the Securities and Exchange Commission, to such other
addresses and/or such other services providing information with respect to
called bonds, or no such services, as the Authority may designate in a
certificate of the Authority delivered to the Trustee.
Interest Account
"Interest Account" means the account of that name in the Revenue Fund
established pursuant to Section 5.02.
Interest Payment Date
"Interest Payment Date" means (i) on and prior to the Fixed Rate Date:
September 2, 1997 and the first Business Day of each calendar month thereafter,
and (ii) after the Fixed Rate Date: August 1 and February 1 of each year
commencing on the August 1 or February 1 next succeeding the Fixed Rate Date.
Interest Period
"Interest Period" means the period from and including the date of the first
authentication and delivery of the Bonds to and including September 1, 1997,
and, thereafter, the period from and including an Interest Payment Date to and
including the day next preceding the immediately succeeding Interest Payment
Date.
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Investment Securities
"Investment Securities" means (A) obligations described in Section 103 of
the Code, the interest on which is Tax-exempt, including certificates or units
of or in any entity that (i) is treated as a "grantor trust" under Subchapter J,
Part I, Subpart E of the Code in which the certificate holders or unit holders
are treated as the owners of all assets owned by such trust and (ii) invests
solely in obligations described in Section 103 of the Code, the interest on
which is Tax-exempt; and (B) stock of a "qualified regulated investment company"
as such term is defined in Section (a)(2) of Notice 87-22 of the Internal
Revenue Service, including qualified temporary investments relating to
Tax-exempt obligations pursuant to paragraph (a) (5) of Notice 87-22 but shall
not include securities issued by the Authority or the Borrower. At the time of
investment, Investment Securities shall be legal investments under the laws of
the State for the moneys proposed to be invested therein.
Letter of Credit
"Letter of Credit" means (i) that certain Letter of Credit issued by the
Bank pursuant to the Reimbursement Agreement, as the same may be amended or
modified in accordance with its terms, naming the Trustee as beneficiary and
delivered on the date of issuance and delivery of the Bonds, (ii) in the event
of delivery of an Alternate Letter of Credit, such Alternate Letter of Credit,
or (iii) in the event of delivery of an Alternate Credit Facility, such
Alternate Credit Facility.
Letter of Credit Account
"Letter of Credit Account" means the account of that name established in
the Revenue Fund pursuant to Section 5.03.
Letter of Credit Substitution
"Letter of Credit Substitution" means the substitution of an alternate
Letter of Credit for the then existing Letter of Credit pursuant to Section 5.8
of the Agreement.
Letter of Credit Substitution Date
"Letter of Credit Substitution Date" means the date an Alternate Letter of
Credit is delivered to the Trustee pursuant to Section 5.8 of the Agreement.
Liquidity Account
"Liquidity Account" means the account of that name established in the
Purchase Fund pursuant to Section 8.10.
Loan
"Loan" means the loan of the proceeds of the Bonds made by the Authority to
the Borrower pursuant to the Agreement.
Loan Default Event
"Loan Default Event" means any one or more of the events specified in
Section 7.1 of the Agreement.
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Loan Repayments
"Loan Repayments" means the payments required to be made by the Borrower
pursuant to Section 4.2(a) of the Agreement.
Mandatory Tender Date
"Mandatory Tender Date" shall mean the (i) Fixed Rate Date and (ii) any
Letter of Credit Substitution Date, pursuant to which the Bonds are required to
be tendered for purchase in accordance with Section 4.07 hereof.
Moody's
"Moody's" means Moody's Investors Service, a corporation organized and
existing under the laws of the State of Delaware, its successors and their
assigns, or, if such corporation shall be dissolved or liquidated or shall no
longer perform the functions of a securities rating agency, any other nationally
recognized securities rating agency designated by the Authority, with the
approval of the Borrower, which is requested to provide a rating on the Bonds.
Net Proceeds
"Net Proceeds" means the proceeds from insurance or from actual or
threatened condemnation or eminent domain action with respect to the Project,
less any costs reasonably expended by the Borrower to receive such proceeds.
Non-Tendered Bonds
"Non-Tendered Bonds" shall have the meaning ascribed to such term in
Section 4.07.
Opinion of Counsel
"Opinion of Counsel" means a written opinion of counsel (who may be counsel
for the Authority) selected by the Borrower and the Authority. If and to the
extent required by the provisions of Section 1.02, each Opinion of Counsel shall
include the statements provided for in Section 1.02.
Organization Documents
"Organization Documents" mean the Borrower's Certificate of Incorporation
and Bylaws, as amended from time to time.
Outstanding
"Outstanding," when used as of any particular time with reference to Bonds,
means (subject to the provisions of Section 11.10) all Bonds theretofore, or
thereupon being, authenticated and delivered by the Bond Registrar under this
Indenture except (1) Bonds theretofore cancelled by the Bond Registrar or
surrendered to the Bond Registrar for cancellation; (2) Bonds with respect to
which liability of the Authority shall have been discharged in accordance with
Section 10.02, including Bonds (or portions of Bonds) referred to in Section
11.10; (3) Bonds for the transfer or exchange of or in lieu of or in
substitution for which other Bonds shall have been authenticated and delivered
by the Bond Registrar pursuant to this Indenture and (4) Bonds which have been
deemed purchased pursuant to Section 4.07.
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Participating Underwriter
"Participating Underwriter" means any broker, dealer or municipal
securities dealer acting as an underwriter in a primary offering of municipal
securities subject to Securities and Exchange Commission Rule 15c2-12 under the
Securities Exchange Act of 1934, as amended.
Paying Agent
"Paying Agent" means, the Trustee, and any other paying agent for the Bonds
appointed pursuant to the provisions of this Indenture.
Permitted Investments
"Permitted Investments" means Treasury Funds, Government Obligations and
Investment Securities, which are rated "AA" by S&P or "Aa3" by Moody's;
provided, however, that such rating requirement may be waived by the Bank in its
sole discretion.
Person
"Person" means an individual, corporation, firm, association, partnership,
trust, or other legal entity or group of entities, including a governmental
entity or any agency or political subdivision thereof.
Pledge and Security Agreement
"Pledge and Security Agreement" means that certain Custody, Pledge and
Security Agreement, dated as of August 1, 1997, by and among the Borrower, the
Bank and the Tender Agent, as custodian, as the same may be amended and
supplemented from time to time.
Pledged Bonds
"Pledged Bonds" means Bonds tendered pursuant to Section 4.06 or subject to
mandatory tender pursuant to Section 4.07 and purchased from funds described in
Section 8.10(B)(ii).
Principal Account
"Principal Account" means the account of that name in the Revenue Fund
established pursuant to Section 5.02.
Project
"Project" means (i) all land, buildings, structures, fixtures
and improvements and (ii) all tangible personal property purchased with proceeds
of the Bonds by the Borrower, whether now existing or hereafter acquired,
constructed or installed as more fully described in Exhibit A to the Agreement.
Project Fund
"Project Fund" means the fund of that name established pursuant to Section
3.03.
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Purchase Date
"Purchase Date" means (i) the date specified in each notice given by a
Bondholder pursuant to Section 4.06 on which the Bonds being tendered by such
Bondholder shall be purchased by the Tender Agent and (ii) the Mandatory Tender
Date.
Purchase Fund
"Purchase Fund" means the fund of that name established pursuant to Section
8.10.
Rebate Fund
"Rebate Fund" means the fund of that name created pursuant to Section 5.07.
Record Date
"Record Date" means, prior to the Fixed Rate Date, the Business Day
preceding each Interest Payment Date, and after the Fixed Rate Date, the
fifteenth (15th) day of the calendar month preceding each Interest Payment Date.
Redemption Account
"Redemption Account" means the account of that name established in the
Revenue Fund pursuant to Section 5.02.
Reimbursement Agreement
"Reimbursement Agreement" means the Reimbursement Agreement, dated as of
August 1, 1997, between the Borrower and the Bank (as from time to time amended
or supplemented), or any other similar agreement entered into by the Borrower
and the Bank in connection with the issuance of any Alternate Letter of Credit
or Alternate Credit Facility.
Related Party
"Related Party" means any general partner, member, affiliate or guarantor
of the Borrower.
Remarketing Account
"Remarketing Account" means the account of that name established in the
Purchase Fund pursuant to Section 8.10.
Remarketing Agent
"Remarketing Agent" means the remarketing agent or agents appointed in
accordance with Section 8.08 hereof. The Remarketing Agent shall be initially
Rauscher Pierce Refsnes, Inc. "Principal Office" of the Remarketing Agent shall
mean the office thereof designated in writing to the Authority, the Trustee, the
Tender Agent, the Bank and the Borrower.
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Remarketing Agreement
"Remarketing Agreement" means the Remarketing Agreement, dated as of August
1, 1997, between the Borrower the Remarketing Agent, as such agreement may from
time to time be amended and supplemented, to remarket the Bonds delivered or
deemed to be delivered for purchase by the Holders thereof, and any other
similar agreement entered into with any successor Remarketing Agent, subject to
approval by the Authority. No such amendment or supplement or similar agreement
shall alter the rights or obligations of the Holders of Bonds to deliver their
Bonds for purchase as provided herein.
Revenue Fund
"Revenue Fund" means the fund of that name established pursuant to Section
5.01.
Revenues
"Revenues" means all amounts received by the Authority or the Trustee for
the account of the Authority pursuant or with respect to the Agreement or the
Letter of Credit, including, without limiting the generality of the foregoing,
Loan Repayments (including both timely and delinquent payments, and any late
charges, paid from whatever source), prepayments, insurance proceeds,
condemnation proceeds, and all interest, profits or other income derived from
the investment of amounts in any fund or account established pursuant to this
Indenture, but not including any moneys paid for deposit into the Rebate Fund.
S&P
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., a corporation organized and existing under the laws
of the State of New York, its successors and their assigns, or, if such
corporation shall be dissolved or liquidated or shall no longer perform the
functions of a securities rating agency, any other nationally recognized
securities rating agency designated by the Authority, with the approval of the
Borrower which is requested to provide a rating on the Bonds.
Securities Depositaries
"Securities Depositaries" means the following registered securities
depositaries: (i) The Depository Trust Company, 711 Stewart Avenue, Garden City,
New York 11530, Fax-(516) 227-4039 or 4190; and (ii) Philadelphia Depository
Trust Company, Reorganization Division, 1900 Market Street, Philadelphia,
Pennsylvania 19103, Attention: Bond Department, Fax-(215) 496-5058; or, in
accordance with then-current guidelines of the Securities and Exchange
Commission, to such other addresses and/or such other securities depositories,
or no such depositories, as the Authority or the Securities and Exchange
Commission may designate in a certificate of the Authority delivered to the
Trustee.
Special Record Date
"Special Record Date" means the date established by the Trustee pursuant to
Section 2.02(B)(2) as a record date for the payment of defaulted interest on the
Bonds.
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State
"State" means the State of California.
Supplemental Indenture
"Supplemental Indenture" means any indenture hereafter duly authorized and
entered into between the Authority and the Trustee, supplementing, modifying or
amending this Indenture; but only if and to the extent that such Supplemental
Indenture is specifically authorized hereunder.
Tax Regulatory Agreement
"Tax Regulatory Agreement" means the Tax Regulatory Agreement, dated as of
August 1, 1997, among the Authority, the Borrower and the Trustee, as such Tax
Regulatory Agreement shall be amended from time to time.
Tax-exempt
"Tax-exempt" means, with respect to interest on any obligations of a state
or local government, including the Bonds, that such interest is excluded from
gross income for federal income tax purposes (other than in the case of a Holder
of any Bonds who is a substantial user of the Project or a "related person"
within the meaning of Section 147(a) of the Code) but such interest may be
includable as an item of tax preference or otherwise includable directly or
indirectly for purposes of calculating tax liabilities, including any
alternative minimum tax or environmental tax, under the Code.
Tender Agent
"Tender Agent" means First Trust of California, National Association, a
national banking association organized and existing under and by virtue of the
laws of the United States of America having a principal corporate trust office
at 101 California Street, Suite 1150, San Francisco, California 94111, or any
successor appointed pursuant to Section 8.14.
Treasury Funds
"Treasury Funds" means (i) any investment portfolio consisting of direct
obligations of the United States Treasury Department and repurchase agreements
in respect of those obligations, including any such investment portfolio
maintained by the Trustee or the Bank, (ii) any investment or security permitted
pursuant to Section 53601 of the California Government Code, including any
investment or security portfolio consisting of any one or more of such
investments or securities and (iii) any other investment or security permitted
by law and approved by the Bank.
Trustee
"Trustee" means First Trust of California, National Association, a national
banking association organized and existing under and by virtue of the laws of
the United States of America having a principal corporate trust office in San
Francisco, California, or its successor as Trustee hereunder as provided in
Section 8.01.
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Weekly Interest Rate
"Weekly Interest Rate" means the interest rate on the Bonds determined
pursuant to Section 2.02(C).
SECTION 1.02. Content of Certificates and Opinions. Every certificate or
opinion provided for in this Indenture with respect to compliance with any
provision hereof shall include (1) a statement that the Person making or giving
such certificate or opinion has read such provision and the definitions herein
relating thereto; (2) a brief statement as to the nature and scope of the
examination or investigation upon which the certificate or opinion is based; (3)
a statement that, in the opinion of such Person, he has made or caused to be
made such examination or investigation as is necessary to enable him to express
an informed opinion with respect to the subject matter referred to in the
instrument to which his signature is affixed; (4) a statement of the assumptions
upon which such certificate or opinion is based, and that such assumptions are
reasonable; and (5) a statement as to whether, in the opinion of such Person,
such provision has been complied with.
Any such certificate or opinion made or given by an officer of the
Authority or an officer or an Authorized Representative of the Borrower may be
based, insofar as it relates to legal, accounting or primary matter of the
business of either of them, upon a certificate or opinion of or representation
by counsel, an Accountant or a management consultant, unless such officer knows,
or in the exercise of reasonable care should have known, that the certificate,
opinion or representation with respect to the matters upon which such
certificate or statement may be based, as aforesaid, is erroneous. Any such
certificate or opinion made or given by counsel, an Accountant or a management
consultant may be based, insofar as it relates to factual matters (with respect
to which information is in the possession of the Authority or the Borrower, as
the case may be) upon a certificate or opinion of or representation by an
officer of the Authority or the Borrower, unless such counsel, Accountant or
management consultant knows, or in the exercise of reasonable care should have
known, that the certificate or opinion or representation with respect to the
matters upon which such Person's certificate or opinion or representation may be
based, as aforesaid, is erroneous. The same officer of the Authority or the
Borrower, or the same counsel or Accountant or management consultant, as the
case may be, need not certify to all of the matters required to be certified
under any provision of this Indenture, but different officers, counsel,
Accountants or management consultants may certify to different matters,
respectively.
SECTION 1.03. Interpretation. (A) Unless the context otherwise indicates,
defined terms shall include all variations thereof and words expressed in the
singular shall include the plural and vice versa and the use of the neuter,
masculine, or feminine gender is for convenience only and shall be deemed to
mean and include the neuter, masculine or feminine gender, as appropriate.
(B) Headings of articles and sections herein and the table of contents
hereof are solely for convenience of reference, do not constitute a part hereof
and shall not affect the meaning, construction or effect hereof.
(C) Unless otherwise indicated, all references herein to "Articles,"
"Sections" and other subdivisions are to the corresponding Articles, Sections or
subdivisions of this Indenture; the words "herein," "hereof," "hereby,"
"hereunder" and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or subdivision hereof.
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ARTICLE II
THE BONDS
SECTION 2.01. Authorization of Bonds. There shall be issued under and
secured by this Indenture a single series of Bonds to be designated as
"California Economic Development Financing Authority Variable Rate Demand
Industrial Development Revenue Bonds, Series 1997 (Advanced Aerodynamics and
Structures, Inc. Project)" in the original principal amount of $8,500,000, to be
dated as of the Date of Delivery, and to mature fully (subject to prior
redemption at the prices and dates and upon the terms and conditions hereinafter
set forth) on August 1, 2027.
SECTION 2.02. Terms of the Bonds. (A) The Bonds shall be issued as fully
registered Bonds without coupons in the Authorized Denominations. The Bonds
shall be in substantially the form set forth in Exhibit A hereto.
(B)(1) Each Bond shall bear interest at the rates determined pursuant to
Section 2.02(C) and 2.03(B) from and including the Interest Payment Date next
preceding the date of registration thereof (unless such Bond is registered after
a Record Date and on or before the next succeeding Interest Payment Date or on
an Interest Payment Date, in which event it shall bear interest from and
including such Interest Payment Date, or unless such Bond is registered on or
prior to September 1, 1997, in which event it shall bear interest from and
including the Date of Delivery), payable on each Interest Payment Date. The
interest so payable on any Interest Payment Date will be paid on the Interest
Payment Date to the Persons in whose name the Bonds are registered at the close
of business of the Bond Registrar on the Record Date for such Interest Payment
Date; except as provided below.
(2) Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder as of the Record Date for such
payment of interest, and shall be paid to the Person in whose name the Bond is
registered at the close of business on a Special Record Date for the payment of
such defaulted interest, to be fixed by the Trustee, notice thereof being given
to the Holders not less than ten (10) days prior to such Special Record Date.
(3) Interest shall be paid in lawful money of the United States by check or
draft mailed to each Holder at the address shown on the registration books
maintained by the Bond Registrar pursuant to Section 2.07; provided, however,
interest may also be paid by wire transfer to an address in the continental
United States in the case of a Holder of at least $1,000,000 aggregate principal
amount of Bonds upon written request of the Holder thereof 15 days prior to the
applicable Record Date to the Bond Registrar in a form satisfactory to the Bond
Registrar.
(C)(1) The Bonds shall bear interest until payment of the principal thereof
and interest thereon shall have been made or provided for in accordance with the
provisions hereof, whether at maturity, upon redemption or otherwise. Prior to
the Fixed Rate Date, interest shall be computed on the basis of a year of 365 or
366 days, as appropriate, for the actual number of days elapsed.
The Bonds shall bear interest for each day from and including the Date of
Delivery until the Fixed Rate Date or final maturity date, whichever is earlier,
at the Weekly Interest Rate; provided that appropriate adjustments may be made
for the initial period following the Date of Delivery. The Weekly Interest Rate
shall be the rate determined by the Remarketing Agent (on the basis of the
examination of Tax-exempt obligations comparable to the Bonds known by the
Remarketing Agent to have been priced or traded under then prevailing market
conditions) to be the minimum interest rate which, if borne by the Bonds, would
enable the Remarketing Agent to sell the Bonds on the date such
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rate becomes effective at a price equal to the principal amount thereof, plus
accrued interest, if any, but in no event exceeding twelve percent (12%) per
annum. The Weekly Interest Rate shall be determined by the Remarketing Agent as
of the close of business on Tuesday in each calendar week until the earlier of
the Fixed Rate Date or payment in full of the Bonds; provided that, if Tuesday
in any calendar week shall not be a Business Day, then such determination shall
be made on the next preceding Business Day; and provided further that
appropriate adjustments may be made for the initial period following the Date of
Delivery. The Weekly Interest Rate shall be effective from Wednesday in the week
of determination thereof to and including the following Tuesday irrespective of
when the rate was determined by the Remarketing Agent; provided that appropriate
adjustments may be made for the initial period following the Date of Delivery.
The Weekly Interest Rate shall be communicated by telephonic notice, promptly
confirmed in writing, by the Remarketing Agent to the Trustee on the Business
Day next following the day on which the Weekly Interest Rate is determined. The
Remarketing Agent shall also give written notice to the Tender Agent, the Bank
and the Borrower of the Weekly Interest Rate at the time it gives the aforesaid
written confirmation thereof to the Trustee. If for any reason the Remarketing
Agent does not determine the Weekly Interest Rate in any week, the Weekly
Interest Rate for the first such week in which the Remarketing Agent does not
determine the Weekly Interest Rate shall remain at the last Weekly Interest Rate
announced by the Remarketing Agent and the Weekly Interest Rate thereafter shall
be 90% of the "Alternate Weekly Rate" (as defined below).
(2) If on any date on which the Weekly Interest Rate is determined, the
Weekly Interest Rate determined in accordance with paragraph (1) of this
paragraph (C) is held by a court to be invalid or unenforceable, then the Weekly
Interest Rate shall be 90% of the Alternate Weekly Rate. The "Alternate Weekly
Rate" shall be the A-1/P-1 30-day commercial paper rate as determined by the
Remarketing Agent.
(3) Each determination of the Weekly Interest Rate by the Remarketing Agent
shall be conclusive and binding on the Holders, the Trustee and the Authority.
The Trustee shall calculate the amount of interest due on each Interest
Payment Date with respect to the then-concluding Interest Period by the close of
business on the date one (1) Business Day prior to the end of such Interest
Period, and shall notify the Borrower and the Bank of such amount. The Trustee
shall inform any Bondholder who requests the same of the Weekly Interest Rate in
effect from time to time.
(4) Anything herein to the contrary notwithstanding, in no event shall the
interest rate borne by the Bonds exceed twelve percent (12%) per annum or, if
lower, the maximum rate of interest which may be charged or collected pursuant
to applicable provisions of federal or state law.
(D) The principal of the Bonds shall be payable in lawful money of the
United States of America on August 1, 2027 at the principal corporate trust
office of the Trustee in San Francisco, California or at such other office as
the Trustee may designate. Except as provided in Section 2.09, no payment of
principal shall be made on any Bond unless and until such Bond is tendered to
the Trustee for cancellation, as the case may be.
(E) The Bonds shall be subject to redemption and purchase as provided in
Article IV.
SECTION 2.03. Conversion of Bonds. (A) On any Interest Payment Date, the
interest rate on the Bonds may be converted to a fixed annual rate of interest
upon receipt by the Authority, the Trustee, the Tender Agent, the Bank and the
Remarketing Agent not less than 45 days in advance of the proposed Fixed Rate
Date of (i) notice from the Borrower electing to have the interest rate on the
Bonds
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converted to a fixed rate of interest and the effective date of such conversion,
(ii) an opinion of Bond Counsel (which shall be confirmed on the Fixed Rate
Date) to the effect that conversion to a Fixed Interest Rate is permitted by the
Indenture and the Act, that conversion to the Fixed Interest Rate in accordance
with the provisions of the Indenture will not cause interest on the Bonds to not
be Tax-exempt and that, to the extent required, the Borrower has complied with
the Disclosure Requirements as provided in Section 5.12 of the Agreement, (iii)
receipt by the Trustee of a commitment from the Bank evidencing that the Letter
of Credit has been increased to provide for the interest, principal and premium
requirements on the Bonds on and after the Fixed Rate Date or an Alternate
Credit Facility pursuant to the terms of Section 5.7 of the Agreement or an
Alternate Letter of Credit pursuant to the terms of Section 5.8 of the
Agreement, (iv) the written consent of the Bank to such conversion and (v)
receipt by the Trustee of written evidence from the rating agency then rating
the Bonds of its rating on the Bonds.
(B)(1) After the Fixed Rate Date, interest on the Bonds shall be computed
on the basis of a year of 360 days and 12 months of 30 days each. The interest
rate on all Bonds from the Fixed Rate Date until the maturity or prior
redemption or acceleration thereof shall be a rate per annum equal to the Fixed
Interest Rate, which shall be determined on or prior to, but not more than 15
days prior to, the Business Day immediately preceding the Fixed Rate Date. The
Remarketing Agent shall specify the Fixed Interest Rate to be borne by the Bonds
on and after the Fixed Rate Date. The Fixed Interest Rate shall be the rate, but
not exceeding the rate, which at the time of determination thereof in the
judgment of the Remarketing Agent, having due regard for prevailing financial
market conditions, would be necessary to remarket the Bonds at a price equal to
100% of the principal amount thereof on the Fixed Rate Date. If on the date of
determination by the Remarketing Agent of the Fixed Interest Rate, the Fixed
Interest Rate so determined is held by a court to be invalid or unenforceable,
then the Fixed Interest Rate shall be a rate determined by the Remarketing
Agent, not less than 90% or more than 130% of the "Alternate Fixed Rate," which
in the judgment of the Remarketing Agent, having due regard for prevailing
market conditions, would be the minimum rate at which Holders of the Bonds would
be able to sell the Bonds at a price equal to the principal amount thereof on
the Fixed Rate Date. The Alternate Fixed Rate shall be determined by the
Remarketing Agent and shall be a rate per annum based upon yield evaluations at
par of Tax-exempt securities having a remaining term equal, as nearly as
practicable, to the time remaining until the maturity of the Bonds of not less
than five Component Issues selected by the Remarketing Agent each of which would
be rated by either Moody's or S&P in a long-term debt rating category which is
the same as, or is immediately proximate to, the long-term debt rating category
which will be assigned to the Bonds after the Fixed Rate Date. Anything to the
contrary herein notwithstanding, the Fixed Interest Rate shall not exceed twelve
percent (12%) per annum. If, after the Fixed Rate Date, the Bonds shall fail to
be converted to a Fixed Interest Rate, the Bonds will continue to earn interest
at the Weekly Interest Rate as provided in this Indenture and the Holders shall
be notified thereof by the Trustee.
(2) Following an election of the Borrower to convert the interest rate on
the Bonds to the Fixed Interest Rate as provided in this Section 2.03, the
Holders of all of the Outstanding Bonds shall be required to tender their Bonds
for purchase on the Mandatory Tender Date.
(3) At least thirty (30) days prior to the Fixed Rate Date, the Trustee
shall give an irrevocable notice to the Bondholders of conversion of the Weekly
Interest Rate borne by the Bonds to the Fixed Interest Rate on the Fixed Rate
Date. If a Bondholder delivers a written request to the Trustee at least 45 days
prior to the Fixed Rate Date setting forth the appropriate telex or telecopier
number and other necessary information to enable the Trustee to deliver such
notice by telegram, telex, telecopier or other telecommunication device capable
of creating a written notice such notice shall be delivered in the manner
requested. Such notice shall (i) specify the proposed Fixed Rate Date, (ii)
require the Holders of all of the Outstanding Bonds to tender their Bonds for
purchase on the Mandatory Tender Date
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pursuant to Section 4.07, and (iii) state that all Outstanding Bonds not
purchased on or before the Mandatory Tender Date will be deemed to be purchased
on the Mandatory Tender Date at a price equal to the principal amount thereof,
plus unpaid interest, if any, accrued to such date.
(4) Any Bond purchased by the Tender Agent pursuant to the provisions of
Section 4.06 hereof from the date notice of the proposed Fixed Rate Date is
given to Bondholders through the Fixed Rate Date shall be remarketed at the
Weekly Interest Rate for a period of time up to and including the Fixed Rate
Date; provided, however, that all Bonds remarketed from the date notice of the
proposed Fixed Rate Date is given to Bondholders through the Fixed Rate Date
shall be tendered by the Holders thereof for purchase on the Mandatory Tender
Date.
(5) The determination of the Fixed Interest Rate by the Remarketing Agent
shall be conclusive and binding on the Authority, the Trustee, the Borrower and
the Holders of the Bonds.
SECTION 2.04. Execution of Bonds. The Bonds shall be executed in the name
and on behalf of the Authority with the manual or facsimile signature of the
Chair of the Authority or the Chair's designee and attested by the manual or
facsimile signature of its Secretary. The Bonds shall then be delivered to the
Bond Registrar for authentication by it. In case any of the officers who shall
have signed or attested any of the Bonds shall cease to be such officer or
officers of the Authority before the Bonds so signed or attested shall have been
authenticated or delivered by the Bond Registrar or issued by the Authority,
such Bonds may nevertheless be authenticated, delivered and issued and, upon
such authentication, delivery and issue, shall be as binding upon the Authority
as though those who signed and attested the same had continued to be such
officers of the Authority, and also any Bonds may be signed and attested on
behalf of the Authority by such persons as at the actual date of execution of
such Bonds shall be the proper officers of the Authority although at the nominal
date of such Bonds any such person shall not have been such officer of the
Authority.
Only such of the Bonds as shall bear thereon a certificate of
authentication substantially in the form set forth in Exhibit A, with the manual
signature of the Bond Registrar, shall be valid or obligatory for any purpose or
entitled to the benefits of this Indenture, and such certificate of the Bond
Registrar shall be conclusive evidence that the Bonds so authenticated have been
duly executed, authenticated and delivered hereunder and are entitled to the
benefits of this Indenture.
SECTION 2.05. Transfer of Bonds. Any Bond may, in accordance with its
terms, be transferred, upon the books required to be kept pursuant to the
provisions of Section 2.07, by the person in whose name it is registered, in
person or by his duly authorized attorney, upon surrender of such registered
Bond for cancellation, accompanied by delivery of a written instrument of
transfer, duly executed in a form approved by the Bond Registrar. Transfer of a
Bond shall not be permitted by the Bond Registrar: (i) if the Bond Registrar has
received notice from the Holder of such Bond that such Bond will be delivered to
the Tender Agent for purchase on or before the next succeeding Interest Payment
Date or (ii) if the Bond Registrar receives such written instrument of transfer
after the Record Date prior to the next succeeding Interest Payment Date.
Whenever any Bond or Bonds shall be surrendered for transfer, the Authority
shall execute and the Bond Registrar shall authenticate and deliver a new Bond
or Bonds for a like aggregate principal amount in an Authorized Denomination.
The Bond Registrar shall require the Bondholder requesting such transfer to pay
any tax or other governmental charge required to be paid with respect to such
transfer, and may in addition require the payment of a reasonable sum to cover
expenses incurred by the Authority and the Bond Registrar in connection with
such transfer.
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Notwithstanding the foregoing, prior to the Fixed Rate Date, no Bonds held
by or for the account of the Bank or the Borrower shall be transferred upon the
books required to be kept pursuant to Section 2.07 hereof unless the Trustee has
received positive affirmation that the Bank has received all reimbursements then
due under the Reimbursement Agreement and the Trustee has notified the Tender
Agent in writing of such reimbursement, so that the amount that may be drawn
under the Letter of Credit shall have been, or shall concurrently with such
transfer be, reinstated (automatically or otherwise), in the amount of the draw
on the Letter of Credit used to purchase such Bonds proposed to be transferred.
SECTION 2.06. Exchange of Bonds. Bonds may be exchanged at the principal
corporate trust office of the Trustee in San Francisco, California, or at such
other office as the Trustee may designate, for a like aggregate principal amount
of Bonds of other Authorized Denominations. The Bond Registrar shall require the
Bondholder requesting such exchange to deliver such Bonds to be exchanged and to
pay any tax or other governmental charge required to be paid with respect to
such exchange, and may in addition require the payment of a reasonable sum to
cover expenses incurred by the Authority or the Bond Registrar in connection
with such exchange. Thereupon, the Bonds delivered to the Bond Registrar for
exchange shall be cancelled by the Bond Registrar.
SECTION 2.07. Bond Register. The Trustee is hereby designated and appointed
as the bond registrar (the "Bond Registrar"). The Bond Registrar will keep or
cause to be kept at its corporate trust office in San Francisco, California, or
at such other office as the Bond Registrar may designate, sufficient books for
the registration and transfer of the Bonds, and shall keep or cause to be kept
within the State a copy of such books, which shall at all times be open to
inspection during regular business hours by the Authority; and, upon
presentation for such purpose, the Bond Registrar shall, under such reasonable
regulations as it may prescribe, register or transfer or cause to be registered
or transferred, on such books, Bonds as hereinbefore provided.
SECTION 2.08. Temporary Bonds. The Bonds may be issued in temporary form
exchangeable for definitive Bonds when ready for delivery. Any temporary Bond
may be printed, lithographed or typewritten, shall be in an Authorized
Denomination, shall be in fully registered form without coupons and may contain
such reference to any of the provisions of this Indenture as may be appropriate
and in a form acceptable to the Paying Agent. Every temporary Bond shall be
executed by the Authority and be authenticated by the Bond Registrar upon the
same conditions and in substantially the same manner as the definitive Bonds. If
the Authority issues temporary Bonds it will execute and deliver definitive
Bonds as promptly thereafter as practicable, and thereupon the temporary Bonds
may be surrendered, for cancellation, in exchange therefor at the principal
corporate trust office of the Bond Registrar and the Bond Registrar shall
authenticate and deliver in exchange for such temporary Bonds an equal aggregate
principal amount of definitive Bonds in Authorized Denominations. Until so
exchanged, the temporary Bonds shall be entitled to the same benefits under this
Indenture as definitive Bonds authenticated and delivered hereunder.
SECTION 2.09. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall
become mutilated, the Authority, at the expense of the Holder of said Bond,
shall execute, and the Bond Registrar shall thereupon authenticate and deliver,
a new Bond of like tenor in exchange and substitution for the Bond so mutilated,
but only upon surrender to the Bond Registrar of the Bond so mutilated. Every
mutilated Bond so surrendered to the Bond Registrar shall be cancelled by it and
delivered to, or upon the order of, the Authority. If any Bond shall be lost,
destroyed or stolen, evidence of such loss, destruction or theft may be
submitted to the Bond Registrar and, if such evidence be satisfactory to it and
indemnity satisfactory to the Bond Registrar shall be given, the Authority, at
the expense of the Holder, shall execute, and the Bond Registrar shall thereupon
authenticate and deliver, a new Bond of like tenor in lieu of and in
substitution for the Bond so lost, destroyed or stolen (or if any such Bond
shall have
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matured or shall be about to mature, instead of issuing a substitute Bond, the
Bond Registrar may pay the same without surrender thereof upon such maturity
date). The Bond Registrar may require payment by the Holder of a sum not
exceeding the actual cost of preparing each new Bond issued under this Section
and of the expenses which may be incurred by the Authority and the Bond
Registrar in the premises. Any Bond issued under the provisions of this Section
in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an
original additional contractual obligation on the part of the Authority whether
or not the Bond so alleged to be lost, destroyed or stolen be at any time
enforceable by anyone, and shall be entitled to the benefits of this Indenture
with all other Bonds secured by this Indenture.
SECTION 2.10. Special Obligations. The Bonds, together with the interest
and premium (if any) thereon and the purchase price thereof, shall not be deemed
to constitute a debt or liability of the State or any political subdivision or
agency of the State or a pledge of the faith and credit of the State or any
political subdivision or agency of the State, but shall be payable solely from
the funds provided therefor pursuant to this Indenture. The Bonds are only a
special obligation of the Authority as provided by the Act and the Authority
shall under no circumstances be obligated to pay the Bonds or respective Costs
of the Project except from Revenues and other funds pledged therefor.
Neither the faith and credit nor the taxing power of the State or any
political subdivision or agency of the State is pledged to the payment of the
principal of, premium, if any, purchase price of or interest on the Bonds nor is
the State or any political subdivision or agency of the State in any manner
obligated to make any appropriation for such payment. The Authority has no
taxing power.
SECTION 2.11. Book-Entry Only System. (A) Except as otherwise provided in
subsections (B) and (C) of this Section 2.11, the Bonds initially authenticated
and delivered hereunder shall be registered in the name of Cede & Co., as
nominee of DTC or such other nominee as DTC shall request. Payments of interest
on, principal of and any premium on the Bonds shall be made to the account of
Cede & Co. on each Bond Payment Date at the address indicated for Cede & Co. in
the registration books maintained by the Bond Registrar by transfer of
immediately available funds. DTC has represented to the Authority that it will
maintain a book-entry system in recording ownership interests of its
participants (the "Direct Participants") and the ownership interests of a
purchaser of a beneficial interest in the Bonds (a "Beneficial Owner") will be
recorded through book entries on the records of the Direct Participants.
(B) The Bonds shall be initially issued in the form of a separate single
authenticated fully registered Bond in the amount of each separate stated
maturity. With respect to Bonds so registered in the name of Cede & Co., the
Authority, the Trustee and the Tender Agent shall have no responsibility or
obligation to any Direct Participant or to any Beneficial Owner of such Bonds.
Without limiting the immediately preceding sentence, the Authority, the Trustee
and the Tender Agent shall have no responsibility or obligation with respect to
(i) the accuracy of the records of DTC, Cede & Co. or any Direct Participant
with respect to any beneficial ownership interest in the Bonds, (ii) the
delivery to any Direct Participant, Beneficial Owner or other person, other than
DTC, of any notice with respect to the Bonds, including any notice of
redemption, (iii) the payment to any Direct Participant, Beneficial Owner or
other person, other than DTC, of any amount with respect to the principal or
redemption price of, or interest on, the Bonds or (iv) any consent given or
other action taken by DTC as Holder of the Bonds. The Authority, the Trustee and
the Tender Agent may treat DTC as, and deem DTC to be, the absolute Holder of
each Bond for all purposes whatsoever including (but not limited to) (i) payment
of the principal or redemption price of, and interest on, each such Bond, (ii)
giving notices of conversion or redemption and other matters with respect to
such Bonds and (iii) registering transfers with respect to such Bonds. The
Trustee shall pay the principal or redemption price of, and interest on, all
Bonds only
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to or upon the order of DTC, and all such payments shall be valid and effective
to fully satisfy and discharge the Authority's obligations with respect to such
principal or redemption price, and interest, to the extent of the sum or sums so
paid. No person other than DTC shall receive a Bond evidencing the obligation of
the Authority to make payments of principal or redemption price of, and interest
on, the Bonds pursuant to this Indenture. Upon delivery by DTC to the Trustee of
written notice to the effect that DTC has determined to substitute a new nominee
in place of Cede & Co., and subject to the transfer provisions hereof, the word
"Cede & Co." in this Indenture shall refer to such new nominee of DTC.
(C) (1) DTC may determine to discontinue providing its services with
respect to the Bonds at any time by giving reasonable written notice to the
Authority, the Trustee and the Tender Agent and discharging its responsibilities
with respect thereto under applicable law.
(2) The Authority, in its sole discretion and without the consent of any
other person, may terminate, upon provision of notice to the Trustee and Tender
Agent, the services of DTC with respect to the Bonds if the Authority determines
that the continuation of the system of book-entry only transfers through DTC (or
a successor securities depository) is not in the best interests of the
Beneficial Owners of the Bonds or is burdensome to the Authority, and shall
terminate the services of DTC with respect to the Bonds upon receipt by the
Authority, the Trustee and the Tender Agent of written notice from DTC to the
effect that DTC has received written notice from Direct Participants having
interests, as shown in the records of DTC, in an aggregate principal amount of
not less than fifty percent (50%) of the aggregate principal amount of the then
Outstanding Bonds to the effect, that: (i) DTC is unable to discharge its
responsibilities with respect to such Bonds, or (ii) a continuation of the
requirement that all of the Outstanding Bonds be registered in the registration
books kept by the Trustee in the name of Cede & Co., as nominee of DTC, is not
in the best interest of the Beneficial Owners of such Bonds.
(D) Upon the termination of the services of DTC with respect to the Bonds
pursuant to subsection (C)(2)(ii) hereof, or upon the discontinuance or
termination of the services of DTC with respect to the Bonds pursuant to
subsection (C)(1) or subsection (C)(2)(i) hereof after which no substitute
securities depository willing to undertake the functions of DTC hereunder can be
found or which, in the opinion of the Authority, is willing and able to
undertake such functions upon reasonable and customary terms, the Bonds shall no
longer be restricted to being registered in the registration books kept by the
Bond Registrar in the name of Cede & Co. as nominee of DTC. In such event, the
Authority shall issue and the Trustee shall transfer and exchange Bond
certificates as requested by DTC or Direct Participants of like principal
amount, series and maturity, in Authorized Denominations to the identifiable
Beneficial Owners in replacement of such Beneficial Owners' beneficial interests
in the Bonds.
(E) Notwithstanding any other provision of this Indenture to the contrary,
so long as any Bond is registered in the name of Cede & Co., as nominee of DTC,
all payments with respect to the principal or redemption price of, and interest
on, such Bond and all notices with respect to such Bond shall be made and given,
respectively, to DTC.
(F) In connection with any notice or other communication to be provided to
Bondholders pursuant to this Indenture by the Authority, the Tender Agent or the
Trustee with respect to any consent or other action to be taken by Bondholders,
the Authority, the Tender Agent or the Trustee, as the case may be, shall
establish a record date for such consent or other action and give DTC notice of
such record date not less than fifteen (15) calendar days in advance of such
record date to the extent possible.
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(G) Notwithstanding any provision herein to the contrary, the Authority and
the Trustee may agree to allow DTC, or its nominee, Cede & Co., to make a
notation on any Bond redeemed in part to reflect, for informational purposes
only, the principal amount and date of any such redemption.
(H) Notwithstanding any provision herein to the contrary, so long as the
Bonds are subject to a system of book-entry only transfers pursuant to this
Section, any requirement for the delivery of Bonds to the Tender Agent in
connection with a mandatory tender pursuant to Section 4.07 shall be deemed
satisfied upon the transfer, on the registration books of DTC, of the beneficial
ownership interests in such Bonds tendered for purchase to the account of the
Tender Agent, or a Direct Participant acting on behalf of the Tender Agent.
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
SECTION 3.01. Issuance of the Bonds. At any time after the execution of
this Indenture, the Authority may execute and the Bond Registrar shall
authenticate and, upon Request of the Authority, deliver Bonds in the aggregate
principal amount set forth in Section 2.01.
SECTION 3.02. Application of Proceeds of the Bonds. The proceeds received
from the sale of the Bonds shall be deposited in trust with the Trustee, who
shall forthwith set aside such proceeds as follows:
(A) The Trustee shall set aside the sum of $170,000 in the Costs of
Issuance Fund, together with any additional money supplied by the Borrower to
pay the Costs of Issuance, which Costs of Issuance Fund the Trustee shall
establish and maintain as further provided in Section 3.03(E) hereof.
(B) The Trustee shall set aside the remainder of said proceeds, $8,330,000,
in the Project Fund.
SECTION 3.03. Establishment and Application of Project Fund and Costs of
Issuance Fund. (A) The Trustee shall establish, maintain and hold in trust a
separate fund designated as the "Project Fund." The moneys in the Project Fund
shall be used and withdrawn by the Trustee to pay the Costs of the Project.
(B) Subject to paragraph (C) of this Section 3.03, before any payment from
the Project Fund shall be made to pay any Costs of the Project, the Borrower
shall file or cause to be filed with the Trustee a Requisition of the Borrower
stating (i) the item number of such payment; (ii) the name of the Person to whom
each such payment is due, which may be the Borrower in the case of reimbursement
for any Costs of the Project theretofore paid by the Borrower; (iii) the
respective amounts to be paid; (iv) the purpose by general classification for
which each obligation to be paid was incurred; (v) that obligations in the
stated amounts are presently due and payable and that each item thereof is a
proper charge against the Project Fund and has not been previously paid from
said fund or from the proceeds of the Bonds; and (vi) that there has not been
filed with or served upon the Borrower notice of any lien, or attachment upon,
or claim affecting the right to receive payment of, any of the amounts payable
to any of the persons named in such Requisition, which has not been released or
will not be released simultaneously with the payment of such obligation, other
than materialmen's or mechanics' liens accruing by mere operation of law.
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Upon receipt of each Requisition, the Trustee shall pay the amount set
forth in such Requisition as directed by the terms thereof out of the Project
Fund. The Trustee may, upon satisfaction by the Borrower of the conditions set
forth in this Section 3.03(B), pay each Requisition without the written approval
of the Bank unless the Trustee has received written notice from the Bank that
the payment of any subsequent Requisition requires the Bank's written approval.
The Trustee shall not make any such payment if it has theretofore received
notice of any lien, right to lien or attachment upon, or claim affecting the
right to receive payment of, any of the moneys to be so paid, which has not been
released or will not be released simultaneously with such payment.
(C) In the event the Borrower elects to invest any moneys on deposit in the
Project Fund in Permitted Investments other than Investment Securities pursuant
to Section 5.05 of this Indenture, the Trustee shall, prior to the payment of
any Requisition which would result in the amount remaining on deposit in the
Project Fund being less than 2% of the principal amount of the Bonds set forth
in Section 2.01, notify the Borrower that a rebate calculation is required to
determine the Rebate Requirement (as defined in the Tax Regulatory Agreement) in
accordance with Section 5.07 of this Indenture. In addition, the payment of such
Requisition by the Trustee shall be subject to prior compliance with the
provisions of Section 5.07 of this Indenture and the Tax Regulatory Agreement.
(D) Subject to paragraph (C) of this Section 3.03, upon the receipt of the
Certificate of the Borrower required by Section 3.3 of the Agreement,
accompanied by the written approval of the Bank, or at such time that there are
no Outstanding Bonds, the Trustee shall transfer any remaining balance in the
Project Fund, less the amount of any such retention, to a separate account
within the Redemption Account, which the Trustee shall establish and hold in
trust, and which shall be entitled the "Surplus Account." The moneys in the
Surplus Account shall be used and applied (unless some other application of such
moneys would not, in the opinion of Bond Counsel, adversely affect the
Tax-exempt status of interest on the Bonds) to pay principal only in connection
with the call and redemption of Bonds to the maximum degree permissible in
accordance with Section 4.01 hereof, and at the earliest possible dates at which
Bonds can be redeemed without payment of premium pursuant to this Indenture or
to reimburse the Bank for any draws theretofore made by the Trustee under the
Letter of Credit, but not yet reimbursed, the proceeds of which were used to
accomplish such redemption; provided, however, that the principal of Pledged
Bonds shall be paid from moneys in the Surplus Account prior to the payment of
principal of any other outstanding Bonds. Any moneys in the Surplus Account not
used to call and redeem Bonds or to reimburse the Bank as herein provided shall
be used and applied to pay the principal of the Bonds as such principal becomes
due and payable, in annual amounts which bear the same ratio to the annual
principal due on the Bonds that the amount deposited in the Surplus Account
bears to the original face amount of the Bonds (unless in the opinion of Bond
Counsel another use would not adversely affect the Tax-exempt status of interest
on the Bonds). Notwithstanding Section 5.05, the moneys in the Surplus Account
shall be invested at a yield no higher than the yield on the Outstanding Bonds
(unless in the opinion of Bond Counsel investment at a higher yield would not
adversely affect the Tax-exempt status of interest on the Bonds), and all such
investment income shall be deposited in the Surplus Account and expended or
reinvested as provided above.
(E) The Trustee shall establish, maintain and hold in trust a separate fund
designated as the "Costs of Issuance Fund." The moneys in the Costs of Issuance
Fund shall be held by the Trustee in trust and applied to the payment of Costs
of Issuance, upon a requisition or letter filed with the Trustee by an
Authorized Representative of the Borrower or a designee of an Authorized
Representative of the Borrower. Any money remaining in the Costs of Issuance
Fund on February 1, 1998 shall be either transferred to the Project Fund or
returned to the Borrower, at the direction of the Borrower.
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SECTION 3.04. Validity of Bonds. The validity of the authorization and
issuance of the Bonds is not dependent on and shall not be affected in any way
by any proceedings taken by the Authority or the Trustee with respect to or in
connection with the Agreement. The recital contained in the Bonds that the same
are issued pursuant to the Act and the Constitution and laws of the State shall
be conclusive evidence of their validity and of compliance with the provisions
of law in their issuance.
ARTICLE IV
REDEMPTION AND PURCHASE OF BONDS
SECTION 4.01. Terms of Redemption. The Bonds are subject to redemption by
the Authority if and to the extent the Borrower is entitled to make and makes,
or is required to make, a payment or prepayment pursuant to Articles IV or VIII
of the Agreement. All such prepayments by the Borrower shall be deposited in the
Redemption Account. The Authority shall not call the Bonds for optional
redemption, and the Trustee shall not give notice of any such redemption, unless
the Borrower has so directed in accordance with the Agreement and has made or
caused to be made all required installments of the Borrower's obligations under
the Agreement; provided that the Authority may require such payment under
Section 8.3 of the Agreement without the Borrower's direction.
The Bonds shall be subject to redemption by the Authority upon the
following terms in increments of $5,000, provided that in the event of
redemption of less than all of the Bonds, the amount which remains Outstanding
shall be in Authorized Denominations:
(1) Sinking Fund Redemption. The Bonds are not subject to sinking fund
redemption.
(2) Prior to the Fixed Rate Date. On or prior to the Fixed Rate Date, the
Bonds are subject to optional redemption on any Interest Payment Date, in whole
or in part, to the extent of prepayments of amounts due under the Agreement made
at the option of the Borrower pursuant to Section 8.2(b) of the Agreement with
the written approval of the Bank, at a redemption price of 100% of the principal
amount of the Bonds to be redeemed, plus interest accrued thereon to the
redemption date.
(3) Taxability. In the event of a prepayment pursuant to Section 8.3(a)(ii)
or Section 8.3(a)(iii) of the Agreement as a result of a Determination of
Taxability, Bonds Outstanding on the date of the occurrence of such
Determination of Taxability shall be redeemed in whole at any time within 60
days after such occurrence, at a redemption price of 100% of the principal
amount thereof plus interest accrued thereon to the redemption date. No
redemption of Bonds shall be made pursuant to any of the other provisions of
this Section 4.01 following a Determination of Taxability. IF THE LIEN OF THIS
INDENTURE IS DISCHARGED PRIOR TO THE OCCURRENCE OF A DETERMINATION OF
TAXABILITY, THEN THE BONDS SHALL NOT BE REDEEMED AS DESCRIBED IN THIS SUBSECTION
4.01(3).
(4) Letter of Credit. The Bonds shall be redeemed in whole, at a redemption
price equal to 100% of the principal amount thereof, plus interest accrued
thereon to the redemption date, on a redemption date not less than fifteen (15)
days preceding the Expiration Date of the Letter of Credit selected by the
Trustee if no Alternate Letter of Credit has been delivered to the Trustee in
accordance with Section 5.8 of the Agreement.
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(5) Extraordinary Events. To the extent of a prepayment by the Borrower
pursuant to Sections 8.2(a), 8.3(a)(i) or 8.3(b) of the Agreement, the Bonds are
subject to redemption prior to their stated maturity as a whole or in part, on
any date, at a redemption price equal to 100% of the principal amount thereof,
plus interest accrued thereon to the redemption date.
(6) Optional Redemption After the Fixed Rate Date. After the Fixed Rate
Date, the Bonds are subject to redemption to the extent of prepayments of
amounts due under the Agreement made at the option of the Borrower pursuant to
Section 8.2(b) of the Agreement, with the consent of the Bank, in whole or in
part, on any Interest Payment Date during the applicable periods specified
below, at the applicable redemption price stated below, plus interest accrued
thereon to the redemption date:
Number of Years
From Fixed Rate Date First Optional Redemption
to Final Maturity Redemption Date Price
greater than 9 years 7 years from 102%,
conversion declining
1% annually
to 100%
6-9 years 6 years from 101%,
conversion declining
1% annually
to 100%
less than 6 years no optional
redemption
Notwithstanding the optional redemption schedule set forth above, on or prior to
the Fixed Rate Date, the Remarketing Agent may provide an alternate optional
redemption schedule if it obtains an opinion of Bond Counsel that such alternate
schedule will not cause interest on the Bonds not to be Tax-exempt.
(7) Mandatory Redemption for Reimbursement Agreement Default. The Bonds
shall be redeemed in whole, at a redemption price equal to 100% of the principal
amount thereof, plus interest accrued thereon to the redemption date, within
five (5) calendar days (and before the following Saturday if the fifth calendar
day is a Saturday) from the date the Trustee receives written notice from the
Bank that an event of default has taken place under the Reimbursement Agreement
and directing the Trustee to redeem the Bonds.
(8) Mandatory Redemption from Excess Funds. The Bonds are subject to
redemption in part on any Interest Payment Date at a redemption price equal to
100% of the principal amount thereof, plus accrued interest to the redemption
date, on the next succeeding Interest Payment Date to the extent of amounts
remaining in the Project Fund upon completion of the Project which are deposited
in the Surplus Account and directed to be used to redeem Bonds as provided in
Section 3.03(D).
SECTION 4.02. Selection of Bonds for Redemption. Whenever provision is made
in this Indenture for the redemption of less than all of the Bonds, the Trustee
shall select the Bonds to be
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redeemed from all Bonds or such given portion thereof not previously called for
redemption by lot in any manner which the Trustee in its sole discretion shall
deem appropriate and fair, to be credited against the principal of the Bonds to
be redeemed; provided, however, that in connection with an optional redemption
of the Bonds, Pledged Bonds shall be the first Bonds selected for redemption;
and provided further, that the Bonds Outstanding after giving effect to any
redemption shall be in Authorized Denominations. Upon selection of Bonds for
redemption on or prior to the Fixed Rate Date, the Trustee will immediately
notify the Tender Agent of the Bonds selected for redemption.
SECTION 4.03. Notice of Redemption. (A) The Trustee shall mail notice of
redemption (1) prior to the Fixed Rate Date, not less than fifteen days before
such redemption date, (except in the case of redemptions pursuant to Section
4.01(4) in which case not less than five days or in the case of redemptions
pursuant to Section 4.01(7), in which case notice shall be given as soon as
practicable), and (2) after the Fixed Rate Date, not less than thirty days
before such redemption date (except in the case of redemptions pursuant to
Section 4.01(4), in which case not less than five days or in the case of
redemptions pursuant to Section 4.01(7), in which case notice shall be given as
soon as practicable) to the respective Holders of any Bonds designated for
redemption at their addresses on the registration books maintained by the Bond
Registrar. Each notice of redemption shall state the redemption date, the place
or places of redemption, if less than all of the Bonds are to be redeemed, the
distinctive numbers of the Bonds to be redeemed, and in the case of Bonds to be
redeemed in part only, the respective portions of the principal amount thereof
to be redeemed. Each such notice shall also state that on said date there will
become due and payable on each of said Bonds the principal thereof or of said
specified portion of the principal thereof in the case of a Bond to be redeemed
in part only, and that from and after such redemption date interest thereon
shall cease to accrue, and shall require that such Bonds be then surrendered.
(B) Notice of redemption of Bonds shall be given by the Trustee, at the
expense of the Authority, for and on behalf of the Authority.
(C) In the case of redemption pursuant to Section 4.01 in connection with
refunding obligations to be issued for such purpose, notice of such redemption
may be cancelled if such refunding obligations are not issued on or prior to the
date fixed for such redemption.
(D) Receipt of such notice shall not be a condition precedent to such
redemption and failure so to mail any such notice to a Holder shall not affect
the validity of the proceedings for the redemption of Bonds of any Holder.
(E) The Trustee shall, at the same time the notice in subsection (A) above
is mailed, also send a copy of the notice by certified mail or by overnight
delivery to each Securities Depository and to an Information Service. Failure to
provide notice to the Tender Agent, the Remarketing Agent, a Securities
Depository or to an Information Service shall not affect the validity of
proceedings for the redemption of Bonds.
SECTION 4.04. Partial Redemption of Bonds. Upon surrender of any Bond
redeemed in part only, the Authority shall execute and the Bond Registrar shall
authenticate and deliver to the registered owner thereof, at the expense of the
Authority, a new Bond or Bonds of Authorized Denominations equal in aggregate
principal amount to the unredeemed portion of the Bond surrendered.
SECTION 4.05. Effect of Redemption. Notice of redemption having been duly
given as aforesaid, and Available Moneys for payment of the redemption price of
the Bonds, together with interest accrued to the date fixed for redemption,
being held by the Trustee, the Bonds (or portions
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thereof) so called for redemption shall become due and payable on the redemption
date designated in such notice, interest on the Bonds (or portions thereof) so
called for redemption shall cease to accrue, said Bonds (or portions thereof)
shall cease to be entitled to any benefit or security under this Indenture, and
the Holders of said Bonds shall have no rights in respect thereof except to
receive payment of said principal, premium, if any, and interest accrued to the
date fixed for redemption.
All Bonds redeemed pursuant to the provisions of this Article shall be
cancelled upon surrender thereof by the Trustee and delivered to or upon the
order of the Authority.
SECTION 4.06. Purchase of Bonds by Tender Agent. Prior to the Fixed Rate
Date, the Bonds may be delivered by the Holders thereof to the Tender Agent at
its principal corporate trust office in San Francisco, California, or such other
place as the Tender Agent may designate in writing to Bondholders, the
Authority, the Trustee, the Bank, the Borrower and the Remarketing Agent. Any
Bond so delivered shall be purchased by the Tender Agent on demand of the Holder
thereof on the close of any Business Day at a purchase price equal to the
principal amount thereof plus accrued interest to but not including the date of
purchase (unless such date is an Interest Payment Date, in which case the
purchase price will be the principal amount of such Bond); provided that the
Tender Agent will be under no obligation to use its own funds to purchase such
Bonds and provided further that sufficient funds in the Purchase Fund are
immediately available for purchase of the Bonds and upon:
(A) delivery to the Tender Agent of an irrevocable written notice by 4:00
p.m., California time, (if not received by 4:00 p.m., California time, on a
Business Day it shall be deemed received on the next succeeding Business Day)
which states (A) the name and address of the Holder, (B) the number or numbers
of the Bond or Bonds to be purchased, (C) the aggregate principal amount of the
Bond or Bonds to be purchased, and (D) the date on which the Bond is or Bonds
are to be purchased, which date shall be a Business Day not prior to the seventh
(7th) calendar day next succeeding the date of delivery of such notice; and
(B) delivery to the Tender Agent at or prior to 10:00 a.m., California
time, on the Purchase Date specified in the aforesaid notice, of the Bond or
Bonds to be tendered; provided, however, that any Bond for which a notice of the
exercise of the purchase option has been given as provided in subsection (A)
above and which is not so delivered shall be deemed delivered on the date of
purchase and shall be purchased in accordance with the Indenture.
All Bonds, or portions thereof, purchased pursuant to this Section 4.06
shall be purchased in an amount equal to an Authorized Denomination. The Trustee
shall upon request of the Tender Agent calculate the purchase price of any Bonds
purchased pursuant to this Section 4.06 and shall notify the Tender Agent of
such amount prior to the Purchase Date.
SECTION 4.07. Mandatory Tender of Bonds. On each Mandatory Tender Date, the
Bonds shall be subject to mandatory tender for purchase on such Mandatory Tender
Date at a purchase price equal to the principal amount thereof, plus accrued
interest, if any. The Holders of all of the Outstanding Bonds shall be required
to tender their Bonds for purchase by the Tender Agent on the Mandatory Tender
Date. All Bonds which on the Mandatory Tender Date have not been tendered for
purchase ("Non-Tendered Bonds"), shall be deemed purchased by the Tender Agent
on the Mandatory Tender Date at a price of the principal amount thereof plus
unpaid interest accrued, if any, to such date. Replacement Bonds for the
Non-Tendered Bonds may be remarketed and delivered to new Holders as instructed
by the Borrower or the Remarketing Agent. The Tender Agent shall hold in trust
for the Holders of the Non-Tendered Bonds the purchase price thereof, and after
the Mandatory Tender Date such owners will
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no longer be entitled to any of the benefits of this Indenture except for the
payment of such purchase price.
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS;
PAYMENT OF PRINCIPAL AND INTEREST
SECTION 5.01. Pledge and Assignment; Revenue Fund. (A) Subject only to the
provisions of this Indenture permitting the application thereof for the purposes
and on the terms and conditions set forth herein, all of the Revenues and any
other amounts (including proceeds of the sale of Bonds) held in any fund or
account established pursuant to this Indenture (except to the extent provided in
Sections 5.05, 7.03 and 8.06 and excepting the Rebate Fund created by Section
5.07) are hereby pledged by the Authority to secure the payment of the principal
and purchase price of and interest on the Bonds in accordance with their terms
and the provisions of this Indenture and thereafter, on a basis subordinate
thereto, to secure the Borrower's obligations to the Bank under the
Reimbursement Agreement. Said pledge shall constitute a lien on and security
interest in such assets and shall attach, be perfected and be valid and binding
from and after delivery by the Trustee of the Bonds, without any physical
delivery thereof or further act.
(B) The Authority hereby transfers in trust, and assigns to the Trustee,
for the benefit of the Holders of the Bonds, and the Bank, to the extent of its
interest therein, all of the Revenues and other assets pledged in subsection (A)
of this Section and all of the right, title and interest of the Authority in the
Agreement (except for the right to receive any Additional Payments to the extent
payable to the Authority, any rights of the Authority to indemnification and
rights of inspection and consent). The Trustee shall be entitled to and shall
collect and receive all of the Revenues, and any Revenues collected or received
by the Authority shall be deemed to be held, and to have been collected or
received, by the Authority as the agent of the Trustee and shall forthwith be
paid by the Authority to the Trustee. The Trustee also shall be entitled to and
shall take all steps, actions and proceedings reasonably necessary in its
judgment to enforce, either jointly with the Authority or separately, all of the
rights of the Authority and all of the obligations of the Borrower under the
Agreement.
The Trustee agrees that, so long as the Trustee holds any Revenues or any
other amounts (including proceeds of the sale of the Bonds) in any fund or
account established pursuant to this Indenture which are pledged by the
Authority or the Borrower to secure the payment of the principal of and interest
on the Bonds and the Borrower's reimbursement obligations under the
Reimbursement Agreement, the Trustee shall hold the same as the collateral agent
and bailee of the Bank but only to the extent of amounts paid by the Bank under
the Letter of Credit for which the Bank has not received reimbursement from the
Borrower for purposes of perfecting the lien and security interest of the Bank
therein. Upon receipt of written notice from the Bank that the Borrower has
failed to reimburse the Bank for a draw under the Letter of Credit as required
by the Reimbursement Agreement, the Trustee shall either cause all accounts and
investments which are the subject of the preceding sentence to be titled in such
a manner to reflect that the Bank has an interest therein as described in the
preceding sentence or ensure that each Person with whom the Trustee places or
through whom the Trustee invests any moneys which are the subject of the
preceding sentence is advised of the Bank's interest therein as described in the
preceding sentence and instructed to mark its records to reflect such interest.
The Trustee shall not pledge, hypothecate, transfer or release all or any
portion of the Revenues to any persons (including, without limitation, the
Borrower) other than Holders of the Bonds in payment thereof or in any manner
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not in accordance with this Indenture or the Reimbursement Agreement without the
written consent of the Authority and the Bank, except as otherwise required by a
court of law.
(C) All Revenues shall be promptly deposited by the Trustee upon receipt
thereof in a special fund designated as the Revenue Fund which the Trustee shall
establish, maintain and hold in trust; except as otherwise provided in Section
5.02, all moneys received by the Trustee and required to be deposited in the
Project Fund shall be promptly deposited in the Project Fund and all moneys
received by the Trustee and required to be deposited in the Redemption Account
shall be promptly deposited in the Redemption Account, which the Trustee shall
establish, maintain and hold in trust. All Revenues deposited with the Trustee
shall be held, disbursed, allocated and applied by the Trustee only as provided
in this Indenture. All moneys held by the Tender Agent for the payment of the
principal or purchase price of, premium, if any, and interest on the Bonds,
shall be held by the Tender Agent in trust for the payment of such Bonds.
SECTION 5.02. Allocation of Revenues. Loan Repayments received by the
Trustee from the Borrower pursuant to Section 4.2(a) of the Agreement shall be
deposited by the Trustee into the following respective accounts (each of which
the Trustee shall establish and maintain within the Revenue Fund), in the
following amounts, in the following order of priority, and the requirements of
each such account (including the making up of any deficiencies in any such
account resulting from lack of Revenues sufficient to make any earlier required
deposit) at the time of deposit shall be satisfied before any transfer is made
to any account subsequent in priority, and provided, that no moneys representing
drawings under the Letter of Credit shall be transferred into the Interest
Account, the Principal Account or the Redemption Account of the Revenue Fund:
First: to the Interest Account, the amount paid by the Borrower and
designated as or attributable to interest on the Bonds in the most recent Loan
Repayment, so that the aggregate of such amounts will, on the next Interest
Payment Date, equal the amount of interest due on the Bonds on such Interest
Payment Date.
Second: to the Principal Account, the amount paid by the Borrower and
designated as or attributable to principal of the Bonds in the most recent Loan
Repayment, so that the aggregate of such amounts will, on the next succeeding
principal payment date, equal the amount of principal due (whether at maturity
or by acceleration) on such principal payment date.
Third: to the Redemption Account, the aggregate amount of principal and
premium, if any, next coming due by redemption permitted (as directed in writing
by the Borrower) or required under Article IV hereof, or any portion thereof
paid by the Borrower.
SECTION 5.03. Priority of Moneys in Revenue Fund; Letter of Credit Account.
(A) Funds for the payment of the principal or redemption price of and interest
on the Bonds shall be derived from the following sources in the order of
priority indicated in each of the accounts in the Revenue Fund; provided
however, that amounts in the respective accounts within the Revenue Fund shall
be used to pay the principal or redemption price of and interest on the Bonds
held by Holders other than the Bank or the Borrower prior to the payment of the
principal and interest on the Bonds held by the Bank or the Borrower, and
provided further, that if principal or redemption price (or any portion thereof)
of and interest on the Bonds is paid with moneys described in subparagraph (i)
of this Section 5.03(A), any other moneys on deposit in the respective accounts
in the Revenue Fund shall be applied to immediately reimburse the Bank by wire
transfer in the amount of any such drawings:
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(i) moneys paid into the Letter of Credit Account of the Revenue Fund
representing the proceeds of drawings by the Trustee under the Letter of Credit;
(ii) moneys paid into the Interest Account, if any, representing
accrued interest received at the initial sale of the Bonds and proceeds from the
investment thereof which shall be applied to the payment of interest on the
Bonds;
(iii) moneys paid into the Revenue Fund pursuant to Section 10.01(B)
and proceeds from the investment thereof, which constitute Available Moneys;
(iv) moneys deposited into the Redemption Account pursuant to Section
3.03(D) and proceeds from the investment thereof;
(v) any other moneys (not derived from drawings under the Letter of
Credit) paid into the Revenue Fund and proceeds from the investment thereof,
which constitute Available Moneys; and
(vi) any other moneys paid into the Revenue Fund and proceeds from the
investment thereof, which are not Available Moneys.
The Trustee shall create within the Revenue Fund a separate account called
the "Letter of Credit Account," and all moneys drawn under the Letter of Credit
shall be deposited and disbursed either in the Letter of Credit Account or the
Liquidity Account established pursuant to Section 8.10. None of the Borrower,
any Related Party, the Trustee or the Authority shall have any legal, equitable
or beneficial right, title or interest in the Letter of Credit Account or the
Liquidity Account. The Letter of Credit Account and the Liquidity Account shall
be established and maintained by the Trustee and the Tender Agent, respectively,
and held in trust apart from all other moneys and securities held under this
Indenture or otherwise, and over which the Trustee and the Tender Agent,
respectively, shall have the exclusive and sole right of withdrawal for the
exclusive benefit of the Holders of the Bonds with respect to which each drawing
is made.
(B) The Trustee shall draw moneys under the Letter of Credit in accordance
with the terms thereof in amounts necessary to make full and timely payments of
principal of, premium, if any, and interest on the Bonds, other than Bonds owned
by or for the account of the Borrower or the Bank when due, whether at maturity,
redemption, acceleration, an Interest Payment Date or otherwise. In addition,
the Trustee shall draw moneys under the Letter of Credit in accordance with the
terms thereof to the extent necessary to make full and timely payments required
to be made pursuant to, and in accordance with, Article VIII hereof to pay the
purchase price of tendered Bonds. The Trustee shall notify the Borrower of any
proposed drawing on the Letter of Credit (other than with respect to scheduled
payments of principal and interest), as and when it notifies the Bank.
(C) If on the Fixed Rate Date there shall have been delivered to the
Trustee an Alternate Credit Facility pursuant to Section 5.7 of the Agreement or
if at any time there shall have been delivered to the Trustee an Alternate
Letter of Credit pursuant to Section 5.8 of the Agreement, then the Trustee
shall accept such Alternate Credit Facility or Alternate Letter of Credit, as
applicable, and promptly surrender the previously held Letter of Credit to the
issuing Bank for cancellation, and shall promptly take all actions requested by
the issuing Bank to convey to such Bank or otherwise relinquish all of its
right, title and interest in any security held jointly by the issuing Bank and
the Trustee. If at any time there shall cease to be any Bonds Outstanding
hereunder, the Trustee shall promptly surrender
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the Letter of Credit to the Bank for cancellation. The Trustee shall comply with
the procedures set forth in the Letter of Credit relating to the surrender
thereof.
SECTION 5.04. Letter of Credit. Subject to the provisions of Section
5.03(C), the Trustee shall hold and maintain the Letter of Credit for the
benefit of the Bondholders until the Letter of Credit expires in accordance with
its terms. The Trustee shall diligently observe all terms, covenants and
conditions of the Letter of Credit, including payment when due of any draws on
the Letter of Credit, and the provisions relating to the payment of draws on,
and reinstatement of amounts that may be drawn under, the Letter of Credit, and
will not consent to, agree to or permit any amendment or modification of the
Letter of Credit which would adversely affect the rights or security of the
Holders of the Bonds. If at any time during the term of the Letter of Credit,
any successor Trustee shall be appointed and qualified under this Indenture, the
resigning or removed Trustee shall request that the Bank transfer the Letter of
Credit to the successor Trustee in accordance with the procedures for transfer
specified in the Letter of Credit. If the resigning or removed Trustee fails to
make this request, the successor Trustee shall do so before accepting
appointment. The Trustee shall send notice to the Bank and the Borrower of the
expiration of the Letter of Credit at least two months prior to the date of such
expiration.
At least thirty (30) days prior to the Letter of Credit Substitution Date,
the Trustee shall send a written notice to the Bondholders relating to the
Borrower's election pursuant to Section 5.8 of the Agreement to deliver an
Alternate Letter of Credit to the Trustee. Such notice shall (i) specify the
proposed Letter of Credit Substitution Date, (ii) require the Holders of all of
the Outstanding Bonds to tender their Bonds for purchase on the Mandatory Tender
Date pursuant to Section 4.07, and (iii) state that all Outstanding Bonds not
purchased on or before the Mandatory Tender Date will be deemed to be purchased
on the Mandatory Tender Date at a price equal to the principal amount thereof,
plus unpaid interest, if any, accrued to such date.
SECTION 5.05. Investment of Moneys. Subject to the following sentence, all
moneys in any of the funds or accounts established pursuant to this Indenture
shall be invested by the Trustee as directed in writing by an Authorized
Representative of the Borrower, in Permitted Investments maturing not later than
the date on which it is estimated that such moneys will be required for the
purposes specified in this Indenture; provided, however, that: (i) moneys on
deposit in the Letter of Credit Account and the Purchase Fund and any moneys
held pursuant to Section 4.07 shall be held uninvested; (ii) any moneys held in
trust for the payment or redemption of Bonds pursuant to Article X shall be
invested as provided in Section 10.03; (iii) moneys held in the Rebate Fund
shall be invested in direct obligations of the United States or bonds or other
obligations guaranteed by the United States government or for which the full
faith and credit of the United States is pledged for the payment of principal
and interest thereof, or in money market funds the investment of which is
limited to such obligations, in each case rated in the highest rating category
applicable to such investments which mature not later than the date on which it
is estimated that such moneys will be required; and (iv) moneys described in
clause (ii), (iii), or (iv) of Section 5.03(A) shall be invested in Permitted
Investments rated A-l or Prime 1 or higher by S&P and Moody's which mature not
later than the date on which such moneys will be required to pay the Bonds or
the interest thereon. Immediately upon the giving by the Trustee of the notice
provided for in paragraph (C) of Section 3.03 of this Indenture, all moneys in
any of the funds or accounts established pursuant to this Indenture, subject to
the limitations set forth in (i) through (iv) of the first sentence above, shall
be invested by the Trustee in Permitted Investments maturing not later than the
date on which it is estimated that such moneys will be required for the purposes
specified in this Indenture.
Permitted Investments may be purchased at such prices as the Trustee may in
its discretion determine or as may be directed by the Borrower or its agent. All
Permitted Investments shall be acquired as directed by the Borrower subject to
the limitations set forth in Section 6.06, the limitations
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as to maturities in this Section set forth, and such additional limitations or
requirements consistent with the foregoing as may be established by Request of
the Borrower. Notwithstanding any other provision herein, in the absence of
written investment instructions from the Borrower directing the Trustee by noon
of the Business Day preceding the day when investments are to be made, the
Trustee is directed to invest available funds not described in clauses (i),
(ii), or (iii) of the first paragraph of this Section in Investment Securities.
The Trustee shall not be liable for any consequences resulting from any
investments made pursuant to the preceding sentence except for its own
negligence or wilful misconduct.
All interest, profits and other income received from the investment of
moneys in any fund established pursuant to this Indenture, (1) prior to delivery
to the Trustee of the Certificate of the Borrower with respect to completion of
the Project (as provided in Section 3.03(D)) shall be deposited when received in
the Project Fund, and (2) after the delivery of such Certificate shall be
deposited in the Revenue Fund; except that any such interest, profits and other
income received from the investment of: (i) any moneys held in trust for the
payment or redemption of Bonds pursuant to Article X shall be applied as
provided in Article X; and (ii) any moneys held in the Rebate Fund shall be
deposited in such fund. Notwithstanding anything to the contrary contained in
this paragraph, an amount of interest received with respect to any Permitted
Investment equal to the amount of accrued interest, if any, paid as part of the
purchase price of such Permitted Investment shall be credited to the fund from
which such accrued interest was paid.
For the purpose of determining the amount in any fund, all Permitted
Investments credited to such fund shall be valued at the market value of such
Permitted Investments.
The Trustee may act as principal or agent in the making or disposing of any
investment. The Trustee may sell at the best price obtainable in the Trustee's
sole discretion, or present for redemption, any Permitted Investment so
purchased whenever it shall be necessary to provide moneys to meet any required
payment, transfer, withdrawal or disbursement from the fund to which such
Permitted Investment is credited, and the Trustee shall not be liable or
responsible for any loss resulting from such investment except for its own
negligence or wilful misconduct. For investment purposes only, the Trustee may
commingle moneys held in the Interest Account and Principal Account of the
Revenue Fund.
SECTION 5.06. Additional Duties of Trustee. While the Bonds bear interest
at the Weekly Interest Rate, on or prior to the Business Day preceding each
Interest Payment Date, the Trustee shall send to the Borrower an invoice for the
interest accrued on the Bonds for the current Interest Period which is to be
paid pursuant to Section 4.2 of the Agreement. While the Bonds bear interest at
the Fixed Interest Rate, thirty (30) days prior to each Interest Payment Date,
the Trustee shall send to the Borrower an invoice for the interest due on the
Bonds on the next succeeding Interest Payment Date which is to be paid pursuant
to Section 4.2 of the Agreement. The Trustee shall send a copy of any such
invoice sent to the Borrower to the Bank. If full payment of any such invoice is
not received by the date the Borrower is required to make such payment pursuant
to Section 4.2 of the Agreement, the Trustee shall immediately notify in writing
the Bank, the Borrower and the Authority of such nonpayment or underpayment by
the Borrower. The Trustee shall immediately give the Bank written notice upon
the failure of the Borrower to make any principal payment pursuant to Section
4.2 of the Agreement.
SECTION 5.07. Establishment of Rebate Fund. (A) The Trustee shall establish
and maintain a fund separate from any other fund established and maintained
hereunder designated as the "Rebate Fund." There shall be deposited in the
Rebate Fund such amounts as are required to be deposited therein pursuant to the
written instructions of the Borrower. All money at any time deposited in the
Rebate Fund shall be held by the Trustee in trust, to the extent required to
satisfy the Rebate
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Requirement (as defined in the Tax Regulatory Agreement), for payment to the
federal government of the United States of America and neither the Authority,
the Bondholders, the Trustee, the Tender Agent, or the Bank shall have any
rights in or claim to such moneys. All amounts deposited into or on deposit in
the Rebate Fund shall be governed by this Section 5.07 and Sections 3.4 and 5.11
of the Agreement and by the Tax Regulatory Agreement (which is incorporated
herein by reference). The Trustee shall be deemed conclusively to have complied
with said Sections if it follows the written direction of the Borrower, and
shall have no liability or responsibility to enforce compliance by the Borrower
with the terms of the Tax Regulatory Agreement or said Sections.
(B) Upon receipt of the instructions required to be delivered to the
Trustee pursuant to the Tax Regulatory Agreement, the Trustee shall remit part
or all of the balance in the Rebate Fund to the United States government, as so
directed. In addition, if the instructions delivered to the Trustee pursuant to
the Tax Regulatory Agreement so direct, the Trustee shall deposit moneys into or
transfer moneys out of the Rebate Fund from or into such accounts or funds
excluding the Purchase Fund and the Letter of Credit Account, Available Moneys
and moneys being aged to become Available Moneys, as the instructions direct.
(C) Notwithstanding any provision of this Section 5.07, if the Authority or
the Borrower shall provide to the Trustee an opinion of Bond Counsel that any
specified action required under this Section is no longer required or that some
further or different action is required to maintain the exclusion from gross
income for federal income tax purposes of interest with respect to the Bonds,
the Trustee and the Authority may conclusively rely on such opinion in complying
with the requirements of this Section, and the covenants hereunder shall be
deemed to be modified to that extent.
ARTICLE VI
PARTICULAR COVENANTS
SECTION 6.01. Punctual Payment. The Authority shall punctually pay or cause
to be paid the principal, premium, if any, and interest to become due in respect
of all the Bonds, in strict conformity with the terms of the Bonds and of this
Indenture, according to the true intent and meaning thereof, but only out of
Revenues and other assets pledged for such payment as provided in this
Indenture.
SECTION 6.02. Extension of Payment of Bonds. The Authority shall not
directly or indirectly extend or assent to the extension of the maturity of any
of the Bonds or the time of payment of any claims for interest by the purchase
or funding of such Bonds or claims for interest or by any other arrangement and
in case the maturity of any of the Bonds or the time of payment of any such
claims for interest shall be extended, such Bonds or claims for interest shall
not be entitled, in case of any default hereunder, to the benefits of this
Indenture, except subject to the prior payment in full of the principal of all
of the Bonds then outstanding and of all claims for interest thereon which shall
not have been so extended. Nothing in this Section shall be deemed to limit the
right of the Authority to issue bonds for the purpose of refunding any
Outstanding Bonds, and such issuance shall not be deemed to constitute an
extension of maturity of Bonds.
SECTION 6.03. Against Encumbrances. The Authority shall not create, or
permit the creation of, any pledge, lien, charge or other encumbrance upon the
Revenues and other assets pledged or assigned under this Indenture while any of
the Bonds are Outstanding, except the pledge and assignment created by this
Indenture. Subject to this limitation, the Authority expressly reserves the
right
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to enter into one or more other indentures for any of its corporate purposes,
including other programs under the Act, and reserves the right to issue other
obligations for such purposes.
SECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment. The
Authority is duly authorized pursuant to law to issue the Bonds and to enter
into this Indenture and to pledge and assign the Revenues and other assets
purported to be pledged and assigned, respectively, under this Indenture in the
manner and to the extent provided in this Indenture. The Bonds and the
provisions of this Indenture are and will be the legal, valid and binding
limited obligations of the Authority in accordance with their terms, and the
Authority shall at all times, to the extent permitted by law, defend, preserve
and protect said pledge and assignment of Revenues and other assets and all the
rights of the Bondholders under this Indenture against all claims and demands of
all persons whomsoever.
SECTION 6.05. Accounting Records and Reports. The Trustee shall keep or
cause to be kept proper books of record and account in which complete and
correct entries shall be made of all transactions relating to the receipt,
investment, disbursement, allocation and application of the Revenues and the
proceeds of the Bonds received by the Trustee with respect to all funds and
accounts held hereunder. Such records shall specify the account or fund to which
each investment (or portion thereof) held by the Trustee is to be allocated and
shall set forth, in the case of each Investment Security, (a) its purchase
price, (b) identifying information, including par amount, coupon rate, and
payment dates, (c) the amount received at maturity or its sale price, as the
case may be, (d) the amounts and dates of any payments made with respect
thereto, and (e) the dates of acquisition and disposition or maturity.
Such records shall be open to inspection by any Holder and the Bank at any
reasonable time during regular business hours on reasonable notice.
SECTION 6.06. Arbitrage Covenants. The Authority has in the Agreement
caused the Borrower to covenant that the Borrower shall not make any use of the
proceeds of the Bonds or of any moneys on deposit to the credit of the Project
Fund, the Revenue Fund or the Rebate Fund which may be deemed to be proceeds of
the Bonds pursuant to Section 148 of the Code and the applicable Treasury
Regulations thereunder which would cause any Bond to be an "arbitrage bond"
within the meaning of said Section and said regulations and that the Borrower
will comply with the requirements of said Section and said regulations, as the
same may be amended from time to time, so long as any Bonds remain Outstanding.
SECTION 6.07. Other Covenants. (A) The Trustee shall promptly collect all
amounts due from the Borrower pursuant to the Agreement, shall perform all
duties imposed upon it pursuant to the Agreement and shall diligently enforce,
and take all steps, actions and proceedings reasonably necessary for the
enforcement of all of the rights of the Authority and all of the obligations of
the Borrower.
(B) The Authority shall not amend, modify or terminate any of the terms of
the Agreement, or consent to any such amendment, modification or termination,
without the written consent of the Trustee and the Bank. The Trustee shall give
such written consent only if (1) in the opinion of the Trustee, in reliance upon
the advice of counsel, such amendment, modification or termination will not
materially adversely affect the interests of the Bondholders or result in any
material impairment of the security hereby given for the payment of the Bonds,
or (2) the Authority first obtains the written consent of the Holders of a
majority in principal amount of the Bonds then Outstanding to such amendment,
modification or termination, provided that no such amendment, modification or
termination shall reduce the amount of Loan Repayments to be made to the
Authority or the Trustee by the Borrower pursuant to the Agreement, or extend
the time for making such payments, without the written consent
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of all of the Holders of the Bonds then Outstanding. The Trustee shall be
entitled to rely upon an opinion of counsel with respect to the effect of any
amendments hereto or to the Agreement.
SECTION 6.08. Further Assurances. The Authority shall make, execute and
deliver any and all such further indentures, instruments and assurances as may
be reasonably necessary or proper to carry out the intention or to facilitate
the performance of this Indenture and for the better assuring and confirming
unto the Holders of the Bonds of the rights and benefits provided in this
Indenture.
SECTION 6.09. Covenant to Enter into Agreement or Contract to Provide
Ongoing Disclosure. The Borrower has covenanted and agreed with the Authority in
Section 5.12 of the Agreement to enter into an agreement or contract,
constituting an undertaking (the "Undertaking"), to provide ongoing disclosure
for the benefit of the Bondholders as required by Paragraph (b)(5)(i) of the
Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange
Act of 1934, as amended (17 CFR Part 240 Section 240.15c2-12) (the "Disclosure
Requirements"), to the extent the Bonds or the remarketing thereof are at any
time not exempt from the Disclosure Requirements. The Undertaking is hereby
assigned by the Authority to the Trustee for the benefit of the Bondholders, any
Participating Underwriter and any Beneficial Owner. Such assignment is a present
absolute assignment and not an assignment of a security interest. Section 5.12
of the Agreement shall be enforceable by any Bondholder, Participating
Underwriter or Beneficial Owner. However, neither the Authority nor the Trustee
shall have any duty to enforce such Section 5.12. The Authority shall have no
liability to the Bondholders, Participating Underwriters, Beneficial Owners or
any other person with respect to the actions by the Borrower relating to the
Disclosure Requirements. Notwithstanding any other provision of this Indenture,
failure of the Borrower to comply with Section 5.12 of the Agreement shall not
be considered an Event of Default; provided, however, the Trustee may (and, at
the request of any Participating Underwriter or the Holders of at least 25%
aggregate principal amount in Outstanding Bonds, shall) or any Beneficial Owner
may take such action as may be necessary and appropriate, including seeking
mandate or specific performance by court order, to cause the Borrower to comply
with its obligations under Section 5.12 of the Agreement.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS
SECTION 7.01. Events of Default; Acceleration; Waiver of Default. Each of
the following events shall constitute an "Event of Default" hereunder:
(A) default in the due and punctual payment of the principal of, or premium
(if any) on, any Bond when and as the same shall become due and payable, whether
at maturity as therein expressed, by proceedings for redemption, by declaration
or otherwise;
(B) default in the due and punctual payment of any installment of interest
on any Bond, when and as such interest installment shall become due and payable
and the continuation of such failure for a period of five days after the due
date for such payment;
(C) failure to pay the purchase price of any Bond tendered in accordance
with the provisions of Section 4.06, and the continuation of such failure for a
period of five days after such purchase price has become due and payable;
(D) failure by the Authority to perform or observe any of the other
covenants, agreements or conditions on its part in this Indenture or in the
Bonds contained, and the
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continuation of such failure for a period of sixty (60) days after written
notice thereof, specifying such default and requiring the same to be remedied,
shall have been given to the Authority, the Bank and the Borrower by the
Trustee, or to the Authority, the Bank, the Borrower and the Trustee by the
Holders of not less than twenty-five percent (25%) in aggregate principal amount
of the Bonds at the time Outstanding; or
(E) the occurrence and continuance of a Loan Default Event described in
Section 7.1(a), (b) or (c) of the Agreement.
No default specified in (D) above shall constitute an Event of Default
unless the Authority and the Borrower shall have failed to correct such default
within the applicable period; provided, however, that if the default shall be
such that it cannot be corrected within such period, it shall not constitute an
Event of Default if corrective action is instituted by the Authority or the
Borrower within the applicable period and diligently pursued. With regard to any
alleged default concerning which notice is given to the Borrower under the
provisions of this Section, the Authority hereby grants the Borrower full
authority for account of the Authority to perform any covenant or obligation the
non-performance of which is alleged in said notice to constitute a default in
the name and stead of the Authority with full power to do any and all things and
acts to the same extent that the Authority could do and perform any such things
and acts and with power of substitution.
During the continuance of an Event of Default, unless the principal of all
the Bonds shall have already become due and payable, the Trustee may, and upon
the written request of the Holders of not less than twenty-five percent (25%) in
aggregate principal amount of the Bonds at the time Outstanding, or upon the
occurrence of an Event of Default described in (A), (B) or (C) above, the
Trustee shall, by notice in writing to the Authority, the Tender Agent, the
Remarketing Agent, the Borrower and the Bank, declare the principal of all the
Bonds then Outstanding, and the interest accrued thereon, to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Bonds
contained to the contrary notwithstanding. Upon any such declaration the Trustee
shall immediately draw upon any then existing Letter of Credit in accordance
with the terms thereof and apply the amount so drawn to pay the principal of and
interest on the Bonds so declared to be due and payable. Interest on the Bonds
shall cease to accrue upon the declaration of acceleration. The Trustee shall
notify the Bondholders of the date of acceleration and the cessation of accrual
of interest on the Bonds in the same manner as for a notice of redemption.
The preceding paragraph, however, is subject to the condition that if, at
any time after the principal of the Bonds shall have been so declared due and
payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, and before the
Letter of Credit has been drawn upon in accordance with its terms and honored,
there shall have been deposited with the Trustee a sum sufficient to pay all the
principal of the Bonds matured prior to such declaration and all matured
installments of interest (if any) upon all the Bonds, with interest on such
overdue installments of principal as provided in the Agreement, and the
reasonable expenses of the Trustee, and any and all other defaults known to the
Trustee (other than in the payment of principal of and interest on the Bonds due
and payable solely by reason of such declaration) shall have been made good or
cured to the satisfaction of the Trustee or provision deemed by the Trustee to
be adequate shall have been made therefor, then, and in every such case, the
Holders of at least a majority in aggregate principal amount of the Bonds then
Outstanding, by written notice to the Authority and to the Trustee, may, on
behalf of the Holders of all the Bonds, rescind and annul such declaration and
its consequences and waive such default; but no such rescission and annulment
shall extend to or shall affect any subsequent default, or shall impair or
exhaust any right or power as a consequence thereof.
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SECTION 7.02. Institution of Legal Proceedings by Trustee. If one or more
Events of Default shall happen and be continuing, the Trustee in its discretion
may, and upon the written request of the Holders of a majority in principal
amount of the Bonds then Outstanding and upon being indemnified to its
satisfaction therefor shall, proceed to protect or enforce its rights or the
rights of the holders of Bonds under the Act or under this Indenture or the
Agreement by a suit in equity or action at law, either for the specific
performance of any covenant or agreement contained herein or therein, or in aid
of the execution of any power herein or therein granted, or by mandamus or other
appropriate proceeding for the enforcement of any other legal or equitable
remedy as the Trustee shall deem most effectual in support of any of its rights
or duties hereunder.
SECTION 7.03. Application of Revenues and Other Funds After Default. If an
Event of Default shall occur and be continuing, all Revenues and any other funds
then held or thereafter received by the Trustee under any of the provisions of
this Indenture (subject to Sections 5.05, 5.07 and 11.11) shall be applied by
the Trustee as follows and in the following order:
(1) To the payment of any expenses necessary in the opinion of the
Trustee to protect the interests of the Holders of the Bonds and payment of
reasonable fees and expenses of the Trustee (including reasonable fees and
disbursements of its counsel) incurred in and about the performance of its
powers and duties under this Indenture; provided, however, that moneys in the
Letter of Credit Account of the Revenue Fund and the Purchase Fund shall not be
used for the payment of any such expenses;
(2) To the payment of the principal of and interest then due on the
Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the
payment if only partially paid, or surrender thereof if fully paid) subject to
the provisions of this Indenture (including Section 6.02), as follows:
(i) Unless the principal of all of the Bonds shall have become or
have been declared due and payable,
First: To the payment to the persons entitled thereto of all
installments of interest then due in the order of the maturity of such
installments, and, if the amount available shall not be sufficient to pay
in full any installment or installments maturing on the same date, then to
the payment thereof ratably, according to the amounts due thereon, to the
persons entitled thereto, without any discrimination or preference; and
Second: To the payment to the persons entitled thereto of
the unpaid principal of any Bonds which shall have become due, whether at
maturity or by call for redemption, with interest on the overdue principal
at the rate borne by the respective Bonds, and, if the amount available
shall not be sufficient to pay in full all the Bonds, together with such
interest, then to the payment thereof ratably, according to the amounts of
principal due on such date to the persons entitled thereto, without any
discrimination or preference.
(ii) If the principal of all of the Bonds shall have become or
have been declared due and payable, to the payment of the principal and interest
then due and unpaid upon the Bonds, with interest on the overdue principal at
the rate borne by the Bonds, and, if the amount available shall not be
sufficient to pay in full the whole amount so due and unpaid, then to the
payment thereof ratably, without preference or priority of principal
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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,
according to the amounts due respectively for principal and interest, to the
persons entitled thereto without any discrimination or preference; provided,
however, that neither moneys derived from drawings under the Letter of Credit,
Available Moneys, moneys being aged to become Available Moneys, nor the proceeds
from remarketing of the Bonds shall be used to pay any of the items listed in
clause (1) of this Section, provided, further, that moneys held in the Purchase
Fund shall only be used to pay the purchase price of the Bonds.
SECTION 7.04. Trustee to Represent Bondholders. The Trustee is hereby
irrevocably appointed (and the successive respective Holders of the Bonds, by
taking and holding the same, shall be conclusively deemed to have so appointed
the Trustee) as trustee and true and lawful attorney-in-fact of the Holders of
the Bonds for the purpose of exercising and prosecuting on their behalf such
rights and remedies as may be available to such Holders under the provisions of
the Bonds, this Indenture, the Agreement, the Act and applicable provisions of
any other law. Upon the occurrence and continuance of an Event of Default or
other occasion giving rise to a right in the Trustee to represent the
Bondholders, the Trustee in its discretion may, and upon the written request of
the Holders of not less than twenty-five percent (25%) in aggregate principal
amount of the Bonds then Outstanding, and upon being indemnified to its
satisfaction therefor (except any actions required to be taken by Section 7.03
hereof, in which event no indemnification shall be required), shall, proceed to
protect or enforce its rights or the rights of such Holders by such appropriate
action, suit, mandamus or other proceedings as it shall deem most effectual to
protect and enforce any such right, at law or in equity, either for the specific
performance of any covenant or agreement contained herein, or in aid of the
execution of any power herein granted, or for the enforcement of any other
appropriate legal or equitable right or remedy vested in the Trustee or in such
Holders under this Indenture, the Agreement, the Act or any other law; and upon
instituting such proceeding, the Trustee shall be entitled, as a matter of
right, to the appointment of a receiver of the Revenues and other assets pledged
under this Indenture, pending such proceedings. All rights of action under this
Indenture or the Bonds or otherwise may be prosecuted and enforced by the
Trustee without the possession of any of the Bonds or the production thereof in
any proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in the name of the Trustee for the
benefit and protection of all the Holders of such Bonds, subject to the
provisions of this Indenture (including Section 6.02).
SECTION 7.05. Bondholders' Direction of Proceedings. Anything in this
Indenture to the contrary notwithstanding, the Holders of a majority in
aggregate principal amount of the Bonds then Outstanding shall have the right,
by an instrument or concurrent instruments in writing executed and delivered to
the Trustee, to direct the method of conducting all remedial proceedings taken
by the Trustee hereunder, provided that such direction shall not be otherwise
than in accordance with law and the provisions of this Indenture, and that the
Trustee shall have the right to decline to follow any such direction which in
the opinion of the Trustee would be unjustly prejudicial to Bondholders not
parties to such direction or for which it has not been provided adequate
indemnity to its satisfaction.
SECTION 7.06. Limitation on Bondholders' Right to Sue. No Holder of any
Bond shall have the right to institute any suit, action or proceeding at law or
in equity, for the protection or enforcement of any right or remedy under this
Indenture, the Agreement, the Act or any other applicable law with respect to
such Bond, unless (1) such Holder shall have given to the Trustee written notice
of the occurrence of an Event of Default; (2) the Holders of not less than
twenty-five percent (25%) in aggregate principal amount of the Bonds then
Outstanding shall have made written request upon the Trustee to exercise the
powers hereinbefore granted or to institute such suit, action or proceeding in
its
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own name; (3) such Holder or said Holders shall have tendered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request; and (4) the Trustee shall have refused or
omitted to comply with such request for a period of sixty (60) days after such
written request shall have been received by, and said tender of indemnity shall
have been made to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission are
hereby declared, in every case, to be conditions precedent to the exercise by
any Holder of Bonds of any remedy hereunder or under law; it being understood
and intended that no one or more Holders of Bonds shall have any right in any
manner whatever by his or their action to affect, disturb or prejudice the
security of this Indenture or the rights of any other Holders of Bonds, or to
enforce any right under this Indenture, the Agreement, the Act or other
applicable law with respect to the Bonds, except in the manner herein provided,
and that all proceedings at law or in equity to enforce any such right shall be
instituted, had and maintained in the manner herein provided and for the benefit
and protection of all Holders of the Outstanding Bonds, subject to the
provisions of this Indenture (including Section 6.02).
SECTION 7.07. Absolute Obligation of Authority. Nothing in Section 7.06 or
in any other provision of this Indenture, or in the Bonds, contained shall
affect or impair the obligation of the Authority, which is absolute and
unconditional, to pay the principal of and interest on the Bonds to the
respective Holders of the Bonds at their respective dates of maturity, or upon
acceleration or call for redemption, as herein provided, but only out of the
Revenues and other assets herein pledged therefor, or affect or impair the right
of such Holders, which is also absolute and unconditional, to enforce such
payment by virtue of the contract embodied in the Bonds.
SECTION 7.08. Termination of Proceedings. In case any proceedings taken by
the Trustee or any one or more Bondholders on account of any Event of Default
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Trustee or the Bondholders, then in every such case
the Authority, the Bank, the Trustee and the Bondholders, subject to any
determination in such proceedings, shall be restored to their former positions
and rights hereunder, severally and respectively, and all rights, remedies,
powers and duties of the Authority, the Bank, the Trustee and the Bondholders
shall continue as though no such proceedings had been taken. The Trustee shall
deliver copies of all proceedings taken by the Trustee under this Indenture to
the Tender Agent.
SECTION 7.09. Remedies Not Exclusive. No remedy herein conferred upon or
reserved to the Trustee, the Bank or to the Holders of the Bonds is intended to
be exclusive of any other remedy or remedies, and each and every such remedy, to
the extent permitted by law, shall be cumulative and in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise.
SECTION 7.10. No Waiver of Default. In the event any agreement or covenant
contained in this Indenture should be breached by the Authority and thereafter
waived by the Trustee or the Holders of the Bonds, such waiver shall be limited
to the particular breach so waived and shall not be deemed to waive any other
breach hereunder. No delay or omission of the Trustee or of any Holder of the
Bonds to exercise any right or power arising upon the occurrence of any default
shall impair any such right or power or shall be construed to be a waiver of any
such default or an acquiescence therein; and every power and remedy given by
this Indenture to the Trustee or to the Holders of the Bonds may be exercised
from time to time and as often as may be deemed expedient.
SECTION 7.11. Consent To Defaults. Notwithstanding any other provisions of
this Article VII, so long as the Letter of Credit is in full force and effect
and the Bank has not wrongfully
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dishonored and is not continuing wrongfully to dishonor drawings under the
Letter of Credit and all payments of principal or purchase price and interest on
the Bonds have been timely made, no Event of Default shall be declared (except
in a case resulting from the failure of the Borrower to pay the Trustee's fees),
nor any remedies exercised with respect to any such Events of Default by the
Trustee or by the Bondholders and no Event of Default under Section 7.01 shall
be waived by the Trustee or the Bondholders to the extent they may otherwise be
permitted hereunder, without, in any case, the prior written consent of the
Bank. Unless an Alternate Credit Facility has been provided pursuant to Section
5.7 of the Agreement, no Event of Default can be waived, in any circumstance,
unless the Letter of Credit has been fully reinstated and is in full force and
effect as evidenced in writing by the Bank to the Trustee.
ARTICLE VIII
THE TRUSTEE, THE REMARKETING
AGENT AND THE TENDER AGENT
SECTION 8.01. Duties, Immunities and Liabilities of Trustee. (A) The
Trustee shall, prior to an Event of Default, and after the curing of all Events
of Default which may have occurred, perform such duties and only such duties as
are specifically set forth in this Indenture. The Trustee shall, during the
existence of any Event of Default (which has not been cured), exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of
care and skill in its exercise, as a prudent person would exercise or use under
the circumstances in the conduct of his own affairs.
(B) The Trustee may at any time and for any reason be removed by an
instrument or concurrent instruments in writing appointing a successor Trustee
filed with the Trustee so removed and executed by the Holders of a majority in
aggregate principal amount of the Bonds Outstanding. The Trustee may be removed
by an instrument in writing, consented to by the Bank which may be executed by
the Authority, appointing a successor Trustee filed with the Trustee so removed
upon the occurrence of any of the following events: (i) the Trustee shall become
incapable of acting; (ii) the Trustee shall be adjudged bankrupt; (iii) the
Trustee shall become insolvent; (iv) a receiver is appointed for the Trustee or
its property; (v) any public officer shall take control or charge of the Trustee
or of the property or affairs for the purposes of rehabilitation, conservation
or liquidation; or (vi) the Trustee shall cease to be eligible in accordance
with Subsection (E) of this Section; provided that the Authority may not remove
the Trustee during the occurrence and continuance of an Event of Default.
Notwithstanding the foregoing, the Trustee may not be removed until a successor
Trustee has been appointed and has assumed the duties and responsibilities of
successor Trustee under this Indenture.
(C) The Trustee may at any time resign by giving written notice of such
resignation to the Authority and the Bank and by giving the Bondholders notice
of such resignation by mail at the addresses shown on the registration books
maintained by the Bond Registrar. Upon receiving such notice of resignation, the
Authority shall promptly appoint, with the consent of the Bank, a successor
Trustee by an instrument in writing. The Trustee shall not be relieved of its
duties until such successor Trustee has accepted its appointment.
(D) Any removal or resignation of the Trustee and appointment of a
successor Trustee shall become effective only upon acceptance of appointment by
the successor Trustee. If no successor Trustee shall have been appointed and
have accepted appointment within forty-five (45) days of giving notice of
removal or notice of resignation as aforesaid, the resigning Trustee or any
Bondholder (on behalf of himself and all other Bondholders) may petition any
court of competent jurisdiction for the
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appointment of a successor Trustee, and such court may thereupon, after such
notice (if any) as it may deem proper, appoint such successor Trustee. Any
successor Trustee appointed under this Indenture, shall signify its acceptance
of such appointment by executing and delivering to the Authority and to its
predecessor Trustee a written acceptance thereof and a written instrument by the
successor Trustee indemnifying the predecessor Trustee for all costs or claims
arising after the acceptance of appointment hereunder relating to such successor
Trustee's performance of its duties under this Indenture, and thereupon and
after the payment by the Authority of all unpaid fees and expenses (including
legal fees and expenses) of the predecessor Trustee such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
moneys, estates, properties, rights, powers, trusts, duties and obligations of
such predecessor Trustee, with like effect as if originally named Trustee
herein; but, nevertheless at the Request of the Authority or the request of the
successor Trustee, such predecessor Trustee shall execute and deliver any and
all instruments of conveyance or further assurance and do such other things as
may reasonably be required for more fully and certainly vesting in and
confirming to such successor Trustee all the right, title and interest of such
predecessor Trustee in and to any property held by it under this Indenture and
shall pay over, transfer, assign and deliver to the successor Trustee any money
or other property subject to the trusts and conditions herein set forth. Upon
request of the successor Trustee, the Authority shall execute and deliver any
and all instruments as may be reasonably required for more fully and certainly
vesting in and confirming to such successor Trustee all such moneys, estates,
properties, rights, powers, trusts, duties and obligations. Upon acceptance of
appointment by a successor Trustee as provided in this subsection, the Authority
shall mail a notice of the succession of such Trustee to the trusts hereunder to
each rating agency which is then rating the Bonds, to the Bondholders at the
addresses shown on the registration books maintained by the Bond Registrar, and
to the Bank. If the Authority fails to mail such notice within fifteen (15) days
after acceptance of appointment by the successor Trustee, the successor Trustee
shall cause such notice to be mailed at the expense of the Authority.
(E) Any Trustee appointed under the provisions of this Section in
succession to the Trustee shall be a trust company or bank having the powers of
a trust company, having a combined capital and surplus of at least fifty million
dollars ($50,000,000), and subject to supervision or examination by federal or
state authority. If such bank or trust company publishes a report of condition
at least annually, pursuant to law or to the requirements of any supervising or
examining authority above referred to, then for the purpose of this subsection
the combined capital and surplus of such bank or trust company shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this subsection (E), the Trustee
shall resign immediately in the manner and with the effect specified in this
Section.
SECTION 8.02. Merger or Consolidation. Any company into which the Trustee
may be merged or converted or with which it may be consolidated or any company
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 eligible under subsection (E) of Section 8.01 shall be the successor to such
Trustee without the execution or filing of any paper or any further act,
anything herein to the contrary notwithstanding.
SECTION 8.03. Liability of Trustee. (A) The recitals of facts herein and in
the Bonds contained shall be taken as statements of the Authority, and the
Trustee shall assume no responsibility for the correctness of the same, or make
any representations as to the validity or sufficiency of this Indenture or of
the Bonds. In addition, the Trustee shall assume no responsibility with respect
to this Indenture or Bonds other than in connection with the duties or
obligations assigned to or imposed upon the Trustee herein or in the Bonds. The
Trustee shall, however, be responsible for its representations
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contained in its certificate of authentication on the Bonds. The Trustee shall
not be liable in connection with the performance of its duties hereunder, except
for its own negligence or willful misconduct. The Trustee may become the owner
of Bonds with the same rights it would have if it were not Trustee and, to the
extent permitted by law, may act as depositary for and permit any of its
officers or directors to act as a member of, or in any other capacity with
respect to, any committee formed to protect the rights of Bondholders, whether
or not such committee shall represent the Holders of a majority in principal
amount of the Bonds then Outstanding.
The Trustee may execute any of the trusts or powers set forth herein and
perform the duties required of it hereunder by or through attorneys, agents, or
receivers, and shall be entitled to the advice of counsel concerning all matters
of trusts and its duties herein, and the Trustee shall not be answerable for the
default or misconduct of any such attorney, agent or receiver selected by it
with reasonable care.
(B) The Trustee shall not be liable for any error of judgment made in good
faith by a responsible officer, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts.
(C) The Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders of not less than a majority in aggregate principal amount of the Bonds
at the time Outstanding relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee under this Indenture.
(D) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Bondholders pursuant to the provisions of this Indenture unless such
Bondholders shall have offered to the Trustee satisfactory security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby.
(E) The Trustee shall not be liable for any action taken by it in good
faith and believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture except for its own negligence or
wilful misconduct.
(F) The Trustee shall not be deemed to have knowledge of any default or
Event of Default hereunder unless and until it shall have actual knowledge
thereof, or shall have received written notice thereof, at its principal
corporate trust office. Except as otherwise expressly provided herein, the
Trustee shall not be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or of
any of the documents executed in connection with the Bonds, or as to the
existence of a default or Event of Default thereunder. The Trustee shall not be
responsible for the validity or effectiveness of any collateral given to or held
by it.
(G) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of its rights or powers. The
Trustee shall, however, in any case make drawings under the Letter of Credit,
pay principal of or interest on the Bonds as it becomes due, and accelerate the
Bonds as required by this Indenture, notwithstanding anything to the contrary
herein.
SECTION 8.04. Right of Trustee to Rely on Documents. The Trustee shall be
protected in acting upon any notice, resolution, request, consent, order,
certificate, report, opinion, bond or other paper or document believed by it to
be genuine and to have been signed or presented by the
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proper party or parties. The Trustee may consult with counsel, who may be
counsel of or to the Authority, with regard to legal questions, and the opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken or suffered by it hereunder in good faith and in
accordance therewith.
The Trustee shall not be bound to recognize any person as the Holder of a
Bond unless and until such Bond is submitted for inspection, if required, and
his title thereto is satisfactorily established, if disputed.
Whenever in the administration of the trusts imposed upon it by this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
Certificate of the Authority, and such Certificate shall be full warrant to the
Trustee for any action taken or suffered in good faith under the provisions of
this Indenture in reliance upon such Certificate, but in its discretion the
Trustee may, in lieu thereof, accept other evidence of such matter or may
require such additional evidence as it may deem reasonable.
SECTION 8.05. Preservation and Inspection of Documents. All documents
received by the Trustee under the provisions of this Indenture shall be retained
in its possession and shall be subject at all reasonable times to the inspection
of the Authority and any Bondholder, and their agents and representatives duly
authorized in writing, at reasonable hours and under reasonable conditions.
SECTION 8.06. Compensation and Indemnification. The Authority shall pay
(solely from Additional Payments) to the Trustee and the Tender Agent from time
to time reasonable compensation for all services rendered under this Indenture,
and also all reasonable expenses, charges, legal and consulting fees and other
disbursements and those of its attorneys, agents and employees, incurred in and
about the performance of its powers and duties under this Indenture, and the
Trustee and the Tender Agent each shall have a lien therefor on any and all
funds (except moneys on deposit in the Purchase Fund, the Rebate Fund and the
Letter of Credit Account, Available Moneys, moneys being aged to become
Available Moneys and funds held for the payment of Bonds or the interest thereon
which is past due or for which notice of redemption has been mailed) at any time
held by it under this Indenture which lien shall be prior and superior to the
lien of the Holders of the Bonds.
SECTION 8.07. Notice to Rating Agency. The Authority and the Trustee shall
give written notice to each rating agency then rating the Bonds of each of the
following: (i) a successor Trustee is appointed hereunder; (ii) this Indenture,
the Agreement, the Remarketing Agreement, the Letter of Credit or the
Reimbursement Agreement is amended or supplemented in any manner; (iii) the
Bonds are converted to a Fixed Interest Rate pursuant to Section 2.03 or
defeased pursuant to Section 10.01 or accelerated pursuant to Section 7.01 or
redeemed in whole pursuant to Section 4.01; or (iv) the expiration,
substitution, termination or extension of the Letter of Credit.
SECTION 8.08. Qualifications of Remarketing Agent. The Remarketing Agent
shall be a member of the National Association of Securities Dealers, Inc. or be
a banking corporation or trust company, having a capitalization of at least
$15,000,000 and shall be authorized by law to perform all the duties imposed
upon it by this Indenture. The Remarketing Agent may at any time resign and be
discharged of the duties and obligations created by this Indenture by giving at
least 45 days' notice to the Authority, the Borrower, the Bank, the Tender
Agent, the Trustee, S&P and Moody's, to the extent each rating agency is then
rating the Bonds. The Remarketing Agent may be removed at any time, at the
request of the Borrower and the Authority, by an instrument, signed by the
Borrower and the Authority
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and filed with the Remarketing Agent, the Bank, the Tender Agent and the
Trustee. The Borrower and the Authority, with the consent of the Bank, shall
appoint a successor Remarketing Agent.
The Remarketing Agent shall designate to the Trustee its principal office
and signify its acceptance of the duties and obligations imposed on it hereunder
by a written instrument of acceptance delivered to the Authority and the Trustee
and the Tender Agent under which the Remarketing Agent will agree to perform the
obligations of the Remarketing Agent set forth in Section 8.09 hereof.
If the Letter of Credit is terminated for any reason, or an Event of
Default under this Indenture occurs, the Remarketing Agent shall have the right
to resign immediately. The initial Remarketing Agent appointed hereunder is
Rauscher Pierce Refsnes, Inc.
SECTION 8.09. Remarketing of Bonds. (A) The Tender Agent shall immediately
provide the Remarketing Agent, the Bank and the Trustee with telephonic notice,
promptly confirmed by written notice by 12:00 noon, California time, on the next
succeeding Business Day, of the receipt by the Tender Agent of a tender notice
from any Bondholder pursuant to Section 4.06 or the receipt by the Tender Agent
of a notice from the Borrower of its election to substitute an Alternate Letter
of Credit for the then existing Letter of Credit pursuant to Section 5.8 of the
Agreement and providing the Remarketing Agent, the Bank and the Trustee with the
information contained in such notices. Upon receipt of such telephonic notice,
the Remarketing Agent shall offer for sale and use its best efforts to sell the
Bonds described in such notice, any such sale to be made at a price equal to the
principal amount thereof plus accrued interest.
(B) The Remarketing Agent shall (i) by 4:00 p.m., California time, on the
Business Day prior to the Purchase Date, give telegraphic or telephonic notice,
promptly confirmed by a written notice, to the Trustee, the Tender Agent, the
Borrower and the Bank (A) directing the Tender Agent to make available for pick
up by 11:00 a.m., California time, on the Purchase Date, at the principal
corporate trust office of the Tender Agent (or at such other office as the
Tender Agent shall designate) any Bonds for which the Remarketing Agent has
arranged sales pursuant to this Section 8.09 and (B) stating the principal
amount of Bonds sold pursuant to subsection (A) of this Section 8.09, and (ii)
deliver or cause to be delivered to the Tender Agent at or prior to 8:00 a.m.,
California time, on the Purchase Date the principal of and interest accrued to
such Purchase Date on the Bond or Bonds to be so purchased that have been
remarketed by the Remarketing Agent, in immediately available funds. Upon
receipt of amounts for the purchase of Bonds from the Remarketing Agent, the
Tender Agent shall immediately give telephonic notice to the Trustee, the
Borrower and the Bank, promptly confirmed in writing of (i) the proceeds
received from the Remarketing Agent to be applied to the purchase of the Bonds
tendered for purchase, and (ii) the amount that must be drawn under the Letter
of Credit for Bonds which have been tendered as to which the Tender Agent has
not received the principal of and interest accrued thereon to the Purchase Date
from the Remarketing Agent. None of the moneys so provided to the Tender Agent
for purchase of Bonds may be derived directly or indirectly from the Borrower,
any Related Party or the Authority and therefore the Bonds may not be remarketed
to any such entity or person. The notice by the Remarketing Agent shall specify
the names, addresses, and taxpayer identification numbers of the purchasers of,
and the principal amount and denominations of, such Bonds, if any, for which it
has found purchasers as of such date and the principal amount of such Bonds, if
any, for which it has not found purchasers as of such date. The Tender Agent
shall make available for pick up new Bonds properly executed, registered in the
name(s) and issued in Authorized Denominations as may be specified in the notice
by the Remarketing Agent to the Tender Agent by 11:00 a.m., California time, on
the Purchase Date. The Remarketing Agent and the Tender Agent shall hold all
moneys available for the purchase of Bonds in trust solely for the benefit of
the person or entity which shall have so delivered such moneys until Bonds
purchased with such moneys shall have been delivered to or for
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the account of such person or entity, and such moneys shall not be commingled
with any other moneys. Under no circumstances shall the Tender Agent be
obligated to expend any of its own funds in connection with this Indenture.
(C) On the date Bonds are to be purchased pursuant to Section 8.10, the
Trustee shall, prior to 8:30 a.m., California time, draw on the Letter of Credit
in accordance with the provisions thereof to the extent of the purchase price of
the Bonds for which the Tender Agent has not received proceeds from the
remarketing of such Bonds as evidenced by the notice from the Tender Agent to
the Trustee and shall immediately transfer or direct the proceeds of such draw
to the Tender Agent to pay the purchase price of such Bonds on the Purchase
Date; provided however, that no drawings shall be made under the Letter of
Credit to purchase Bonds held by or for the account of the Borrower or the Bank.
SECTION 8.10. Creation of Purchase Fund; Purchase of Bonds Delivered to
Tender Agent. (A) There is hereby created and established with the Tender Agent,
in a trust capacity, a separate fund to be designated as the "Purchase Fund" and
there shall be created within the Purchase Fund (i) a separate account called
the "Remarketing Account" into which all moneys representing the proceeds of
remarketing pursuant to Section 8.09 (which moneys shall be in a form
immediately available on the Purchase Date) shall be deposited and (ii) a
separate account called the "Liquidity Account" into which the proceeds of
drawings by the Trustee under the Letter of Credit shall be deposited. None of
the Borrower, any Related Party, the Trustee nor the Authority shall have any
legal, equitable or beneficial right, title or interest in the moneys held by
the Remarketing Agent or by the Tender Agent in the Purchase Fund, or the
Remarketing Account or Liquidity Account therein. The Purchase Fund and each
such Account shall be established and maintained by the Tender Agent and held in
trust apart from all other moneys and securities held under this Indenture or
otherwise, and over which the Tender Agent shall have the exclusive and sole
right of withdrawal for the exclusive benefit of the persons tendering or
purchasing Bonds with respect to which amounts were deposited into the Purchase
Fund and the Accounts created therein.
On each day on which Bonds have been tendered for purchase or are deemed to
have been tendered for purchase pursuant to this Indenture, after paying or
making provision for the payment of the purchase price of such Bonds as in this
Indenture provided, the Tender Agent shall promptly remit to the Bank any
moneys, but not exceeding the amount drawn on the Letter of Credit for such
purchase, on deposit in the Liquidity Account not used to purchase Bonds.
(B) Funds for the purchase of Bonds at the principal amount thereof plus
unpaid interest accrued to the Purchase Date, if any, shall be paid out of the
Purchase Fund in the order of priority indicated:
(i) from the Remarketing Account, proceeds from the remarketing of
Bonds pursuant to Section 8.09 hereof; and
(ii) from the Liquidity Account, moneys representing proceeds of a
drawing by the Trustee under the Letter of Credit.
(C) In the event that Bonds are not purchased pursuant to this Section, the
Trustee shall pay the principal amount of Bonds tendered pursuant to Section
4.06 or Bonds subject to mandatory tender pursuant to Section 4.07 with moneys
on deposit in the Revenue Fund pursuant to Section 5.02 hereof and cancel such
Bonds.
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(D) The Tender Agent shall:
(i) hold all Bonds delivered to it pursuant to Sections 4.06, 4.07 or
8.11 in trust solely for the benefit of the respective Holders which shall have
so delivered such Bonds until moneys representing the purchase price for such
Bonds shall have been delivered to or for the account of or to the order of such
Holders; and
(ii) hold all moneys delivered to it under this Section 8.10 for the
purchase of Bonds in trust solely for the benefit of the person or entity which
shall have so delivered such moneys until the Bonds purchased with such moneys
shall have been delivered to or for the account of such person or entity;
(iii) only make such payments called for under this Indenture from
immediately available funds transferred to the Tender Agent for payment pursuant
to this Indenture which funds are on deposit in an appropriate account
maintained by the Tender Agent;
(iv) under no circumstances be obligated to expend any of its own
funds in connection with this Indenture;
(v) in acting with regard to the purchase of Bonds under this
Indenture be acting as a conduit and shall not be purchasing Bonds for its own
account, and in the absence of written notice from the Authority or the Trustee,
shall be entitled to assume that any Bond tendered to it, or deemed tendered to
it for purchase, is entitled under this Indenture to be so purchased; and
(vi) notify the Remarketing Agent by telephone, telegram or other form
of electronic communication of the contents of, and promptly deliver to the
Borrower, the Trustee, the Remarketing Agent and the Bank a copy of, each notice
delivered to it in accordance with Section 4.06 and, immediately upon the
delivery to it of Bonds in accordance with said Section 4.06, give telegraphic
or telephonic notice to the Borrower, the Trustee and the Bank specifying the
principal amount of the Bonds so delivered.
SECTION 8.11. Delivery of Bonds.
(A) Bonds purchased by the Tender Agent with the moneys described in
subsection (B)(i) of Section 8.10 shall be made available by the Tender Agent to
the new purchasers.
(B) (i) Bonds paid with the moneys described in subsection (C) of Section
8.10 shall be cancelled.
(ii) Bonds paid by the Tender Agent with moneys described in
subsection (B)(ii) of Section 8.10 shall be held by the Tender Agent as Pledged
Bonds pursuant to the Pledge and Security Agreement for the account of the
Borrower in which Bank shall have a security interest.
(C) Bonds which have been delivered to the Tender Agent and which
thereafter have been sold shall be delivered to such new owners as the
Remarketing Agent or the Bank may designate to the Tender Agent, but only upon
(i) written confirmation to the Trustee by the Bank that the stated amount of
the Letter of Credit has been reinstated with respect to the principal of the
Bonds being so re-registered and delivered, together with the portion of the
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Letter of Credit used to pay accrued interest for the purchase of such Bonds and
(ii) written confirmation to the Tender Agent by the Trustee that the stated
amount of the Letter of Credit has been reinstated with respect to the principal
of the Bonds being so re-registered and delivered, together with the portion of
the Letter of Credit used to pay accrued interest for the purchase of such
Bonds.
The Authority shall cooperate with the Trustee, the Tender Agent, and the
Borrower to cause the necessary arrangements to be made and to be thereafter
continued whereby funds from the sources specified herein will be made available
for the purchase of Bonds presented at the principal office of the Tender Agent
and whereby Bonds executed by the Authority and authenticated by the Tender
Agent, shall be made available to the extent necessary for delivery pursuant to
this Section 8.11.
SECTION 8.12. Delivery of Proceeds of Remarketing. The proceeds of the
remarketing by the Remarketing Agent of any Bonds delivered to the Tender Agent,
or delivered to the Remarketing Agent by the Bank or any other Bondholder, shall
be turned over to the Bank or such other Bondholder, as the case may be.
SECTION 8.13. No Purchases or Sales After Default. Anything in this
Indenture to the contrary notwithstanding, there shall be no purchases or sales
of Bonds pursuant to this Article VIII if there shall have occurred and be
continuing an Event of Default described in clauses (A)-(C) of Section 7.01.
Anything in this Indenture to the contrary notwithstanding, there shall be no
remarketing of Bonds pursuant to this Article VIII if there shall have occurred
and be continuing any Event of Default described in Section 7.01 or if any event
shall have occurred which with notice or the lapse of time would constitute such
an Event of Default.
SECTION 8.14. Qualifications of Tender Agent. The Tender Agent shall be a
bank or trust company or another institution which has a rating on its long-term
debt from Moody's of at least "Baa3" and a short term rating of at least "P-3"
authorized to perform all duties imposed upon it by this Indenture and the
Remarketing Agreement. The Tender Agent may at any time resign and be discharged
of the duties and obligations created by this Indenture by giving at least sixty
(60) days' notice to the Authority, the Borrower, the Remarketing Agent and the
Trustee. With the consent of the Bank, the Tender Agent may be removed at any
time by the Authority, by an instrument, signed by the Authority, filed with the
Tender Agent, the Remarketing Agent and the Trustee.
The initial Tender Agent appointed under this Indenture is First Trust of
California, National Association. The Authority, with the consent of the Bank,
shall appoint a successor Tender Agent. In the event the Authority fails to
appoint a successor Tender Agent prior to the effective date of the removal or
resignation of the current Tender Agent, the existing Tender Agent shall remain
in place until a successor Tender Agent is appointed. If a successor Tender
Agent is not appointed within thirty (30) days as provided herein the Trustee
shall be appointed as the successor Tender Agent. The Authority shall appoint a
Tender Agent in New York, New York, to the extent necessary for the proper
marketing of the Bonds.
SECTION 8.15. Paying Agent. The Authority, with the written approval of the
Bank, may appoint and at all times have a Paying Agent in such cities as the
Authority deems desirable, for the payment of the principal of, and the interest
(and premium, if any) on, the Bonds. The Authority hereby appoints the Trustee
as paying agent in San Francisco, California. The Trustee shall not be
responsible for the failure of the Bank or any other party to make funds
available to the Trustee.
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SECTION 8.16. Several Capacities. Anything in this Indenture to the
contrary notwithstanding, the same entity may serve hereunder as the Trustee,
Tender Agent, Remarketing Agent and Paying Agent and in any other combination of
such capacities, to the extent permitted by law.
ARTICLE IX
MODIFICATION OR AMENDMENT OF THE INDENTURE
SECTION 9.01. Amendments Permitted. (A) This Indenture and the rights and
obligations of the Authority and of the Holders of the Bonds and of the Trustee
may be modified or amended from time to time and at any time by an indenture or
indentures supplemental thereto, which the Authority and the Trustee may enter
into when the written consent of the Holders of a majority in aggregate
principal amount of all Bonds then Outstanding, the Borrower and the Bank shall
have been filed with the Trustee. No such modification or amendment shall (1)
extend the fixed maturity of any Bond, or reduce the amount of principal
thereof, or extend the time of payment, or change the method of computing the
rate of interest thereon, or extend the time of payment of interest thereon,
without the consent of the Holder of each Bond so affected, or (2) reduce the
aforesaid percentage of Bonds the consent of the Holders of which is required to
effect any such modification or amendment, or permit the creation of any lien on
the Revenues and other assets pledged under this Indenture prior to or on a
parity with the lien created by this Indenture, or deprive the Holders of the
Bonds of the lien created by this Indenture on such Revenues and other assets
(except as expressly provided in this Indenture), without the consent of the
Holders of all of the Bonds then Outstanding, or (3) adversely affect the
interests of the Tender Agent without its prior written consent. It shall not be
necessary for the consent of the Bondholders to approve the particular form of
any Supplemental Indenture, but it shall be sufficient if such consent shall
approve the substance thereof. Promptly after the execution by the Authority and
the Trustee of any Supplemental Indenture pursuant to this subsection (A), the
Trustee shall mail a copy of the Supplemental Indenture to the Tender Agent and
mail a notice, setting forth in general terms the substance of such Supplemental
Indenture, to each rating agency then rating the Bonds and the Holders of the
Bonds at the address shown on the registration books of the Trustee. Any failure
to give such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such Supplemental Indenture.
(B) This Indenture and the rights and obligations of the Authority, of the
Trustee and of the Holders of the Bonds may also be modified or amended from
time to time and at any time by an indenture or indentures supplemental hereto,
which the Authority and the Trustee may enter into without the consent of any
Bondholders but with the written consent of the Borrower and the Bank, but only
to the extent permitted by law including, without limitation, for any one or
more of the following purposes:
(1) to add to the covenants and agreements of the Authority contained
in this Indenture other covenants and agreements thereafter to be observed, to
pledge or assign additional security for the Bonds, or to surrender any right or
power herein reserved to or conferred upon the Authority;
(2) to make such provisions for the purpose of curing any ambiguity,
inconsistency or omission, or of curing or correcting any defective provision,
contained in this Indenture, or in regard to matters or questions arising under
this Indenture, as the Authority may deem necessary or desirable which do not
adversely affect the rights of the Bondholders hereunder;
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(3) to modify, amend or supplement this Indenture in such manner as to
permit the qualification hereof under the Trust Indenture Act of 1939, as
amended, or any similar federal statute hereafter in effect, and to add such
other terms, conditions and provisions as may be permitted by said act or
similar federal statute;
(4) to make such provisions for the purpose of conforming to the terms
and provisions of any Alternate Letter of Credit or Alternate Credit Facility or
to obtain a rating on the Bonds which do not adversely affect the rights of the
Bondholders hereunder; and
(5) to modify, amend or supplement this Indenture in any other respect
which does not adversely affect the rights of the Bondholders hereunder. The
Trustee shall give notice of any such modification or amendment to each rating
agency then rating the Bonds.
(C) The Trustee may in its discretion, but shall not be obligated to, enter
into any such Supplemental Indenture authorized by subsections (A) or (B) of
this Section which materially adversely affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
SECTION 9.02. Effect of Supplemental Indenture. Upon the execution of any
Supplemental Indenture pursuant to this Article, 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 Outstanding shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modification and amendment,
and all the terms and conditions of any such Supplemental Indenture shall be
deemed to be part of the terms and conditions of this Indenture for any and all
purposes.
SECTION 9.03. Endorsement of Bonds; Preparation of New Bonds. Bonds
delivered after the execution of any Supplemental Indenture pursuant to this
Article may, and if the Authority so determines shall, bear a notation by
endorsement or otherwise in form approved by the Authority as to any
modification or amendment provided for in such Supplemental Indenture, and, in
that case, upon demand of the Holder of any Bond Outstanding at the time of such
execution and presentation of his Bond for the purpose at the office of the Bond
Registrar or at such additional offices as the Bond Registrar may select and
designate for that purpose, a suitable notation shall be made on such Bond. If
the Supplemental Indenture shall so provide, new Bonds so modified as to
conform, in the opinion of the Authority, to any modification or amendment
contained in such Supplemental Indenture, shall be prepared and executed by the
Authority and authenticated by the Bond Registrar, and upon demand of the
Holders of any Bonds then Outstanding shall be exchanged at the principal office
of the Bond Registrar, without cost to any Bondholder, for Bonds then
Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate
principal amounts of the same Series and maturity.
SECTION 9.04. Amendment of Particular Bonds. The provisions of this Article
shall not prevent any Bondholder from accepting any amendment as to the
particular Bonds held by such Bondholder, provided that due notation thereof is
made on such Bonds.
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ARTICLE X
DEFEASANCE
SECTION 10.01. Discharge of Indenture. The Bonds may be paid by the
Authority in any of the following ways, provided that the Authority also pays or
causes to be paid any other sums payable hereunder by the Authority:
(A) by paying or causing to be paid with Available Moneys the principal of,
interest and premium, if any, on the Bonds, as and when the same become due and
payable;
(B) by depositing with the Trustee, in trust, at or before maturity, money
or securities in the necessary amount (as provided in Section 10.03) to pay or
redeem with Available Moneys all Bonds then Outstanding; or
(C) by delivering to the Trustee, for cancellation by it, the Bonds then
Outstanding.
If the Bonds are paid by the Authority pursuant to this Section 10.01(B)
prior to the Fixed Rate Date, the Authority and the Borrower shall provide to
the Trustee written evidence from Moody's, if the Bonds are then rated by
Moody's, and S&P, if the Bonds are then rated by S&P, to the effect that such
payment will not result in a withdrawal of its rating on the Bonds or a
reduction from the rating which then exists as to the Bonds. If the Authority
shall also pay or cause to be paid all other sums payable hereunder by the
Authority, then and in that case, at the election of the Authority (evidenced by
a Certificate of the Authority, filed with the Trustee, signifying the intention
of the Authority to discharge all such indebtedness and this Indenture), and
notwithstanding that any Bonds shall not have been surrendered for payment, this
Indenture and the pledge of Revenues and other assets made under this Indenture
and all covenants, agreements and other obligations of the Authority under this
Indenture shall cease, terminate, become void and be completely discharged and
satisfied except only as provided in Section 10.02. In such event, upon Request
of the Authority, the Trustee shall cause an accounting for such period or
periods as may be requested by the Authority to be prepared and filed with the
Authority and shall execute and deliver to the Authority all such instruments as
may be necessary or desirable to evidence such discharge and satisfaction, and
the Trustee shall pay over, transfer, assign or deliver all moneys or securities
or other property held by it pursuant to this Indenture which are not required
for the payment of obligations to be paid from Additional Payments or for the
payment or redemption of Bonds not theretofore surrendered for such payment or
redemption in the following order (1) first, to the Bank to the extent of any
amounts due to the Bank pursuant to the Reimbursement Agreement, and (2)
otherwise, to the Borrower, provided that moneys in the Letter of Credit
Account, the Liquidity Account and the Remarketing Account shall be returned to
the Bank.
SECTION 10.02. Discharge of Liability on Bonds. Upon the deposit with the
Trustee, in trust, at or before maturity, of money or securities in the
necessary amount (as provided in Section 10.03) to pay or redeem all Outstanding
Bonds (whether upon or prior to the maturity or the redemption date of such
Bonds), provided that, if any of such Bonds are to be redeemed prior to
maturity, notice of such redemption shall have been given as provided in Article
IV or provision satisfactory to the Trustee shall have been made for the giving
of such notice, then all liability of the Authority in respect of such Bonds
shall cease, terminate and be completely discharged, except only that the
Holders thereof shall thereafter be entitled to payment of the principal or
redemption price, as applicable, of and interest on such Bonds by the Authority,
and the Authority shall remain liable for such payment, but only out of such
money or securities deposited with the Trustee as aforesaid for their payment,
provided further, however, that the provisions of Section 10.04 shall apply in
all events. In the event any of said Bonds are not to
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be redeemed within the next succeeding sixty (60) days, the Authority shall have
given the Trustee in form satisfactory to it irrevocable instructions for it to
mail, as soon as practicable in the same manner as a notice of redemption is
mailed pursuant to Article IV hereof, a notice to the Holders of such Bonds and
to the Securities Depositories and an Information Service that the deposit
required above has been made with the Trustee and that said Bonds are deemed to
have been paid in accordance with this Section 10.02 and stating such maturity
or redemption dates upon which moneys are to be available for the payment of the
principal or redemption price, as applicable, of said Bonds.
SECTION 10.03. Deposit of Money or Securities with Trustee. Whenever in
this Indenture it is provided or permitted that there be deposited with or held
in trust by the Trustee money or securities in the necessary amount to pay or
redeem any Bonds, the money or securities so to be deposited or held may include
money or securities held by the Trustee in the funds and accounts established
pursuant to this Indenture (exclusive of the Project Fund, the Purchase Fund,
the Letter of Credit Account and the Rebate Fund) and shall be--
(A) Available Moneys in an amount equal to the principal amount of such
Bonds, all unpaid interest thereon to maturity, and the purchase price of such
Bonds except that, in the case of Bonds which are to be redeemed prior to
maturity and in respect of which notice of such redemption shall have been given
as in Article IV provided or provision satisfactory to the Trustee shall have
been made for the giving of such notice, the amount to be deposited or held
shall be the redemption price of such Bonds and all unpaid interest thereon to
the redemption date; or
(B) Government Obligations purchased with Available Moneys which when due
will provide money sufficient to pay the principal or redemption price, as
applicable, of, all unpaid interest to maturity, or to the redemption date, as
the case may be, on the Bonds to be paid or redeemed, as such principal and
interest become due, and the purchase price of such Bonds; provided that, in the
case of Bonds which are to be redeemed prior to the maturity thereof, notice of
such redemption shall have been given as provided in Article IV or provision
satisfactory to the Trustee shall have been made for the giving of such notice;
and provided further that investment securities purchased pursuant to this
paragraph shall not be subject to redemption prior to their maturity other than
at the option of the holder thereof unless the moneys to be available from the
redemption of such securities on the earliest date on which such securities are
subject to redemption, other than at the option of the holder thereof, shall be
at least equal to the amount of money expected to be derived in connection with
such securities in determining that the provisions of this paragraph have been
satisfied;
provided, in each case, that the Trustee shall have been irrevocably instructed
(by the terms of this Indenture or by Request of the Authority) to apply such
money to the payment of such principal or redemption price, as applicable, and
interest with respect to such Bonds.
SECTION 10.04. Payments After Discharge of Indenture. When there are no
longer any Bonds Outstanding, and all fees, charges and expenses of the Trustee,
the Tender Agent and any Paying Agents have been paid or provided for, and all
expenses of the Authority relating to the Project and this Indenture have been
paid or provided for, and all other amounts payable hereunder and under the
Agreement have been paid, and this Indenture has been discharged and satisfied,
and subject to the escheat laws of the State, the Trustee shall pay any moneys
remaining in any fund established and held hereunder (other than moneys held in
the Rebate Fund which shall continue to be applied as provided in Section 5.07)
in the following order (1) first, to the Bank to the extent of any amounts due
to the Bank pursuant to the Reimbursement Agreement, and (2) otherwise to the
Borrower, provided that moneys in
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the Letter of Credit Account, the Liquidity Account and the Remarketing Account
shall be returned to the Bank.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Liability of Authority Limited to Revenues. Notwithstanding
anything in this Indenture or in the Bonds contained, the Authority shall not be
required to advance any moneys derived from any source other than the Revenues
and other assets pledged under this Indenture for any of the purposes in this
Indenture mentioned, whether for the payment of the principal of or interest on
the Bonds or for any other purpose of this Indenture. Nevertheless, the
Authority may, but shall not be required to, advance for any of the purposes
hereof any funds of the Authority which may be made available to it for such
purposes.
SECTION 11.02. Successor Is Deemed Included in All References to
Predecessor. Whenever in this Indenture either the Authority or the Trustee is
named or referred to, such reference shall be deemed to include the successors
or assigns thereof, and all the covenants and agreements in this Indenture
contained by or on behalf of the Authority or the Trustee shall bind and inure
to the benefit of the respective successors and assigns thereof whether so
expressed or not.
SECTION 11.03. Limitation of Rights to Parties and Bondholders. Nothing in
this Indenture or in the Bonds expressed or implied is intended or shall be
construed to give to any Person other than the Authority, the Trustee, the Bank,
the Borrower and the Holders of the Bonds, any legal or equitable right, remedy
or claim under or in respect of this Indenture or any covenant, condition or
provision therein or herein contained; and all such covenants, conditions and
provisions are and shall be held to be for the sole and exclusive benefit of the
Authority, the Trustee, the Bank, the Borrower and the Holders of the Bonds.
SECTION 11.04. Waiver of Notice. Whenever in this Indenture the giving of
notice by mail or otherwise is required, the giving of such notice may be waived
in writing by the person entitled to receive such notice and in any such case
the giving or receipt of such notice shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
SECTION 11.05. Destruction of Bonds. Whenever in this Indenture provision
is made for the cancellation by the Trustee and the delivery to the Authority of
any Bonds, the Trustee may, upon Request of the Authority, in lieu of such
cancellation and delivery, destroy such Bonds (in the presence of an officer of
the Authority, if the Authority shall so require), and deliver a certificate of
such destruction to the Authority.
SECTION 11.06. Severability of Invalid Provisions. If any one or more of
the provisions contained in this Indenture or in the Bonds shall for any reason
be held to be invalid, illegal or unenforceable in any respect, then such
provision or provisions shall be deemed severable from the remaining provisions
contained in this Indenture and such invalidity, illegality or unenforceability
shall not affect any other provision of this Indenture, and this Indenture shall
be construed as if such invalid or illegal or unenforceable provision had never
been contained herein. The Authority hereby declares that it would have entered
into this Indenture and each and every other Section, paragraph, sentence,
clause or phrase hereof and authorized the issuance of the Bonds pursuant
thereto irrespective of the fact
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that any one or more Sections, paragraphs, sentences, clauses or phrases of this
Indenture may be held illegal, invalid or unenforceable.
SECTION 11.07. Governing Law. This Indenture shall be governed exclusively
by and construed in accordance with the applicable laws of the State for
contracts executed and delivered, and to be completely performed, in the State
without giving effect to conflicts of law provisions.
SECTION 11.08. Notices. If a Bondholder delivers a written request to the
Trustee setting forth the appropriate telex or telecopier number and other
necessary information to enable the Trustee to deliver notices by telex,
telegram, telecopier or other telecommunication device notices shall be
delivered to such Bondholder in the manner requested unless otherwise provided
herein and confirmed in writing as soon as practicable. In all other events,
notices shall be delivered to each Bondholder by first-class mail, postage
prepaid, at the address set forth for such Bondholder on the registration books
required to be maintained by the Bond Registrar pursuant to Section 2.07 hereof.
Any notice to or demand upon the Trustee may be served or presented, and such
demand may be made, at the principal corporate trust office of the Trustee in
San Francisco, California, which at the date of adoption of this Indenture is
located at the address set forth below or at such other address as may have been
filed in writing by the Trustee with the Authority. Any notice to or demand upon
the Authority, the Borrower, the Remarketing Agent, the Tender Agent or the Bank
shall be deemed to have been sufficiently given or served for all purposes by
being delivered or sent by telex or by being deposited, postage prepaid, in a
post office letter box, addressed, as the case may be, as set forth below or at
such other addresses as may have been filed in writing with the Trustee.
If to the Authority:
California Economic Development Financing Authority
c/o California Trade and Commerce Agency
801 K Street, Suite 1700
Sacramento, California 95814
Attention: Chair
(916) 323-8022 Fax: (916) 322-7214
If to the Borrower:
Advanced Aerodynamics and Structures, Inc.
3501 Lakewood Boulevard
Long Beach, California 90808
Attention: President
(562) 938-8618 Fax: (562) 938-8620
If to the Trustee:
First Trust of California, National Association
One California Street
4th Floor
San Francisco, California 94111
Attention: Municipal Trusts and Agency
(415) 273-4500 Fax: (415) 273-4590
54
<PAGE>
If to the Tender Agent:
First Trust of California, National Association
One California Street
4th Floor
San Francisco, California 94111
Attention: Municipal Trusts and Agency
(415) 273-4500 Fax: (415) 273-4590
If to the Bank:
The Sumitomo Bank, Limited
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Structured Finance & Financial Institutions Group
(213) 955-0800 Fax: (213) 623-6832
If to the Remarketing Agent:
Rauscher Pierce Refsnes, Inc.
2711 North Haskell Avenue, Suite 2400
Dallas, Texas 75204
Attention: Fixed Income Banking
(214) 989-1000 Fax: (214) 989-1842
If to DTC:
Notices required to be given under this Indenture to DTC by
facsimile transmission shall be sent to DTC's Call
Notification Department at (516) 227- 4039 or (516)
227-4190. Notices to DTC by mail or any other means shall be
sent to:
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530
Attention: Call Notification Department
Muni Reorganization Manager
SECTION 11.09. Evidence of Rights of Bondholders. Any request, consent or
other instrument required or permitted by this Indenture to be signed and
executed by Bondholders may be in any number of concurrent instruments of
substantially similar tenor and shall be signed or executed by such Bondholders
in person or by an agent or agents duly appointed in writing. Proof of the
execution of any such request, consent or other instrument or of a writing
appointing any such agent, or of the holding by any person of Bonds transferable
by delivery, shall be sufficient for any purpose of this Indenture and shall be
conclusive in favor of the Trustee and of the Authority if made in the manner
provided in this Section.
The fact and date of the execution by any person of any such request,
consent or other instrument or writing may be proved by the certificate of any
notary public or other officer of any jurisdiction, authorized by the laws
thereof to take acknowledgments of deeds, certifying that the person
55
<PAGE>
signing such request, consent or other instrument acknowledged to such notary
public or other officer the execution thereof, or by an affidavit of a witness
of such execution duly sworn to before such notary public or other officer.
The ownership of registered Bonds shall be proved by the bond registration
books held by the Bond Registrar.
Any request, consent, or other instrument or writing of the Holder of any
Bond shall bind every future Holder of the same Bond and the Holder of every
Bond issued in exchange therefor or in lieu thereof, in respect of anything done
or suffered to be done by the Trustee or the Authority in accordance therewith
or reliance thereon.
SECTION 11.10. Disqualified Bonds. In determining whether the Holders of
the requisite aggregate principal amount of Bonds have concurred in any demand,
request, direction, consent or waiver under this Indenture, Bonds which are
owned or held by or for the account of the Authority or the Borrower, or by any
other obligor on the Bonds, or by any person directly or indirectly controlling
or controlled by, or under direct or indirect common control with, the Authority
or the Borrower or any other obligor on the Bonds, shall be disregarded and
deemed not to be Outstanding for the purpose of any such determination. Bonds so
owned which have been pledged in good faith may be regarded as Outstanding for
the purposes of this Section if the pledgee shall establish to the satisfaction
of the Trustee the pledgee's right to vote such Bonds and that the pledgee is
not a person directly or indirectly controlling or controlled by, or under
direct or indirect common control with, the Authority or the Borrower or any
other obligor on the Bonds. In case of a dispute as to such right, any decision
by the Trustee taken upon the advice of counsel shall be full protection to the
Trustee.
SECTION 11.11. Money Held for Particular Bonds.
(A) The money held by the Trustee for the payment of the interest,
principal, or premium due on any date with respect to particular Bonds (or
portions of Bonds in the case of Bonds redeemed in part only) shall, on and
after such date and pending such payment, be set aside on its books and held in
trust by it for the Holders of the Bonds entitled thereto, (subject, however, to
the provisions of Section 10.04) for a period of two years but without any
liability for interest thereon.
(B) Upon the expiration of the period specified in subsection (A) above,
except as provided in subsection (C) below, funds held by the Trustee pursuant
to this Indenture shall be paid, subject to any prior payments pursuant to the
provisions of Section 10.04, to the Borrower, and funds held by the Tender Agent
shall be paid to the Trustee and thereafter paid, subject to the provisions of
Section 10.04, to the Borrower, upon direction of an Authorized Representative
of the Borrower, and thereafter Bondholders shall be entitled to look only to
the Borrower for payment, and then only to the extent of the amount so deposited
with the Borrower, and all liability of the Authority or the Trustee with
respect to such money shall thereupon cease, and the Borrower shall not be
liable for any interest thereon and shall not be regarded as a trustee of such
money.
(C) Any moneys held by the Trustee or the Tender Agent, as the case may be,
in the Letter of Credit Account or the Liquidity Account for the payment of the
principal, premium, or purchase price of any Bonds not so applied to the payment
of the Bonds within two years after the date on which the same shall have become
due shall be transferred to the Bank. Upon the expiration of the period
specified in subsection (A) above, any moneys held by the Tender Agent
representing the proceeds of the remarketing of the Bonds but which were not so
applied to the payment of Bonds shall be transferred to the Bank. All such
moneys shall be subject to escheat to the State in accordance with the laws
thereof.
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Bondholders shall be entitled to look only to the Bank for payment from such
moneys, and all liability of the Authority, the Trustee or the Tender Agent with
respect to such money shall thereupon cease, and the Trustee, the Tender Agent,
the Authority, the Bank, or the Borrower shall not be liable for any interest
thereon and such parties shall not be regarded as a trustee of such money.
SECTION 11.12. Funds and Accounts. Any fund or account required by this
Indenture to be established and maintained by the Trustee may be established and
maintained in the accounting records of the Trustee, either as a fund or an
account, and may, for the purposes of such records, any audits thereof and any
reports or statements with respect thereto, be treated either as a fund or as an
account; but all such records with respect to all such funds and accounts shall
at all times be maintained in accordance with generally accepted corporate trust
industry standards, to the extent practicable, and with due regard for the
requirements of Section 6.05 and for the protection of the security of the Bonds
and the rights of every Holder thereof and the Bank's interest created herein.
SECTION 11.13. Waiver of Personal Liability. No member, officer, agent or
employee of the Authority shall be individually or personally liable for the
payment of the principal of or premium or interest on the Bonds or be subject to
any personal liability or accountability by reason of the issuance thereof; but
nothing herein contained shall relieve any such member, officer, agent or
employee from the performance of any official duty provided by law or by this
Indenture.
SECTION 11.14. Execution in Several Counterparts. This Indenture may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original; and all such counterparts, or as many
of them as the Authority and the Trustee shall preserve undestroyed, shall
together constitute but one and the same instrument.
SECTION 11.15. Actions Due on Saturdays, Sundays and Holidays. If any date
on which a payment, notice or other action required by this Indenture falls on
other than a Business Day, then that action or payment need not be taken or made
on such date, but may be taken or made on the next succeeding Business Day with
the same force and effect as if made on such date.
SECTION 11.16. References to Bank. Notwithstanding any provisions contained
herein to the contrary, the Bank shall be entitled to take all actions and
exercise all rights hereunder for its own account so long as the Bank has not
wrongfully dishonored any drawings under the Letter of Credit and the Bank is
not in liquidation, bankruptcy or receivership proceedings. After the expiration
or termination of the Letter of Credit and after all obligations owed to the
Bank pursuant to the Reimbursement Agreement have been paid in full or
discharged, all references to the Bank contained herein (other than in Section
10.04) shall be null and void and of no further force and effect.
[End of the Indenture of Trust]
57
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IN WITNESS WHEREOF, the CALIFORNIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY
has caused this Indenture to be signed in its name by the Chair of the Authority
and attested by its Secretary and FIRST TRUST OF CALIFORNIA, NATIONAL
ASSOCIATION, in token of its acceptance of the trusts created hereunder, has
caused this Indenture to be signed in its corporate name by its officers
thereunto duly authorized, all as of the day and year first above written.
CALIFORNIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY
By
Chair
Attest
By
Secretary
APPROVED AS TO FORM
By
Counsel
FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION,
as Trustee
By
Authorized Officer
Attest
By
Assistant Secretary
<PAGE>
EXHIBIT A
FORM OF BOND
NEITHER THE STATE OF CALIFORNIA NOR ANY POLITICAL SUBDIVISION OR AGENCY OF
THE STATE OF CALIFORNIA SHALL BE OBLIGATED TO PAY THIS BOND OR THE INTEREST
HEREON. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF
CALIFORNIA OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF IS PLEDGED TO THE
PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, PURCHASE PRICE OF, OR
INTEREST ON, THIS BOND. NEITHER THE STATE OF CALIFORNIA NOR ANY POLITICAL
SUBDIVISION OR AGENCY OF THE STATE OF CALIFORNIA IS IN ANY MANNER OBLIGATED
TO MAKE ANY APPROPRIATION FOR SUCH PAYMENTS. THE AUTHORITY HAS NO TAXING
POWER. THIS BOND, TOGETHER WITH THE INTEREST AND PREMIUM (IF ANY) HEREON
AND THE PURCHASE PRICE HEREOF, SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR
LIABILITY OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION OR AGENCY
OF THE STATE OF CALIFORNIA.
No. R-1 $8,500,000
CALIFORNIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY
VARIABLE RATE DEMAND
INDUSTRIAL DEVELOPMENT REVENUE BOND, SERIES 1997
(ADVANCED AERODYNAMICS AND STRUCTURES, INC. PROJECT)
MATURITY DATE ORIGINAL ISSUE DATE CUSIP
August 1, 2027 August 5, 1997 13066P AM0
Registered Owner: CEDE & CO.
Principal Sum: EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS
The CALIFORNIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY (the "Authority"),
a body public and corporate, and a public instrumentality of the State of
California (the "State"), duly organized and existing under the laws of the
State, particularly Part 10.2 of Division 3 of Title 2 of the California
Government Code (commencing with Section 15710 of the California Government
Code), as amended (the "Act"), for value received, hereby promises to pay to the
registered owner specified above, or registered assigns, on the maturity date
set forth above (subject to any right of prior redemption hereinafter
mentioned), the principal sum set forth above, in lawful money of the United
States of America, and to pay interest thereon in like lawful money from and
including the Interest Payment Date (as defined herein) next preceding the date
of registration of this Bond (unless this Bond is registered after a Record Date
(as hereinafter defined) and on or before the next succeeding Interest Payment
Date or on an Interest Payment Date, in which event it shall bear interest from
and including
A-1
<PAGE>
such Interest Payment Date, or unless this Bond is registered on or prior to
September 1, 1997, in which event it shall bear interest from and including the
date of initial issuance and delivery (the "Date of Delivery")), until payment
of such principal sum shall be discharged as provided in the Indenture (as
hereinafter defined), at the rates per annum determined as set forth below. The
interest on this Bond will be payable on September 2, 1997, and thereafter on
the first Business Day of each month on or prior to the date on which this Bond
is converted to bear a fixed rate of interest as provided in the Indenture (the
"Fixed Rate Date"), and thereafter on August 1 and February 1 in each year (each
such date being referred to herein as an "Interest Payment Date"). The principal
(or redemption price) hereof is payable upon presentation hereof at the
principal corporate trust office of First Trust of California, National
Association (together with any successor as trustee under the Indenture, the
"Trustee"), in San Francisco, California, or at such other office as the Trustee
may designate. Interest hereon is payable by check or draft mailed, except as
provided in the Indenture, to the person whose name appears on the bond
registration books of the Trustee as the registered owner hereof as of the close
of business on the Record Date, in each case, at such person's address as it
appears on such registration books. The term "Record Date" means, prior to the
Fixed Rate Date, the Business Day preceding any Interest Payment Date, and after
the Fixed Rate Date, the fifteenth (15th) day of the calendar month preceding
any Interest Payment Date.
The Authority, First Trust of California, National Association, as tender
agent (the "Tender Agent"), the Trustee, any paying agent, and any agent of the
Authority, the Tender Agent or the Trustee may treat the person in whose name
this Bond is registered as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes, and the Authority, the Tender
Agent, the Trustee, any paying agent or any such agent shall not be affected by
notice to the contrary.
This Bond, together with the interest and premium (if any) hereon shall not
be deemed to constitute a debt or liability of the State or any political
subdivision or agency of the State or a pledge of the faith and credit of the
State or any political subdivision or agency of the State, but shall be payable
solely from the funds provided therefor pursuant to the Indenture. This Bond is
only a special, limited obligation of the Authority as provided by the Act and
the Authority shall under no circumstances be obligated to pay the principal of,
premium, if any, purchase price of, or interest on this Bond, or other costs
incident hereto except from the revenues and funds pledged therefor pursuant to
the Indenture. Neither the State nor any political subdivision or agency of the
State is in any manner obligated to make any appropriation for such payments.
The Authority has no taxing power.
No member or officer of the Authority, nor any person executing this Bond
shall in any event be subject to any personal liability or accountability by
reason of the issuance of this Bond.
This Bond is one of a duly authorized issue of bonds of the Authority
designated as captioned above (the "Bonds") pursuant to the provisions of the
Act, and pursuant to an indenture of trust, dated as of August 1, 1997, between
the Authority and the Trustee (the "Indenture"). The Bonds are issued for the
purpose of making a loan to Advanced Aerodynamics and Structures, Inc., a
corporation duly organized and existing under the laws of the State of Delaware
(the "Borrower"), to assist in the financing of a Project (as such term is
defined in the Indenture) owned by the Borrower, pursuant to a loan agreement,
dated as of August 1, 1997, between the Authority and the Borrower (the
"Agreement"), for the purposes and on the terms and conditions set forth
therein. The payment of principal of and interest on the Bonds is secured by an
irrevocable Letter of Credit issued by The Sumitomo Bank, Limited, acting
through its Los Angeles Branch, (the "Letter of Credit" and the "Bank",
A-2
<PAGE>
respectively). Such Letter of Credit may be renewed or substituted by a letter
of credit of another financial institution or an alternate credit facility as
provided in the Agreement and the Indenture.
Reference is hereby made to the Indenture (a copy of which is on file at
said office of the Trustee) and all indentures supplemental thereto and to the
Act for a description of the rights thereunder of the registered owners of the
Bonds, of the nature and extent of the security, of the rights, duties and
immunities of the Trustee and the Tender Agent and of the rights and obligations
of the Authority thereunder, to all the provisions of which Indenture the
registered owner of this Bond, by acceptance hereof, assents and agrees.
The Bonds and the interest thereon are payable solely from Revenues (as
defined in the Indenture) and are secured by a pledge of said Revenues and of
amounts held in the funds (except as provided in the Indenture) and accounts
established pursuant to the Indenture (including proceeds of the sale of the
Bonds), subject only to the provisions of the Indenture permitting the
application thereof for the purposes and on the terms and conditions set forth
in the Indenture. The Bonds are further secured by an assignment of the right,
title and interest of the Authority in the Agreement (to the extent and as more
particularly described in the Indenture) and by the Letter of Credit.
The Bonds shall bear interest from and including the Date of Delivery of
the Bonds to and including a date specified in the Indenture at the rate
specified in the Indenture. Thereafter, prior to the Fixed Rate Date or final
maturity date, whichever is earlier, the Bonds shall bear interest, calculated
on the basis of a year of 365 or 366 days, as appropriate, at a rate per annum
equal to the Weekly Interest Rate (as hereinafter defined). Each period from and
including the Date of Delivery to and including September 1, 1997 and,
thereafter, the period from and including an Interest Payment Date to and
including the day next preceding the immediately succeeding Interest Payment
Date is herein called an "Interest Period."
The Weekly Interest Rate shall be the rate determined by Rauscher Pierce
Refsnes, Inc. (together with any successor as Remarketing Agent under the
Indenture, the "Remarketing Agent"), on the basis of the examination of
Tax-exempt (as defined in the Indenture) obligations comparable to the Bonds
known by the Remarketing Agent to have been priced or traded under then
prevailing market conditions, to be the minimum interest rate which, if borne by
the Bonds, would enable the Remarketing Agent to sell the Bonds on the date such
interest rate becomes effective at a price equal to the principal amount thereof
plus accrued interest, if any, but in no event exceeding twelve percent (12%);
provided, however, that if for any reason a Weekly Interest Rate so determined
shall be held to be invalid or unenforceable by a court of law, the Weekly
Interest Rate shall be the rate established in accordance with the Indenture.
The Remarketing Agent shall determine the Weekly Interest Rate as of the
close of business on Tuesday in each calendar week until the earlier of the
Fixed Rate Date, or payment in full of the Bonds; provided that if Tuesday in
any calendar week shall not be a Business Day then such determination shall be
made on the next preceding Business Day, and communicate by telephonic notice
such rate to the Trustee (with prompt confirmation in writing). The Weekly
Interest Rate so determined shall become effective Wednesday in the week of
determination thereof, to and including the following Tuesday irrespective of
when the rate was determined by the Remarketing Agent. If the Remarketing Agent
shall fail to determine a new Weekly Interest Rate in any week, the previously
effective Weekly Interest Rate shall remain in effect for the next succeeding
week and shall thereafter be determined in accordance with the Indenture.
A-3
<PAGE>
Each determination of the Weekly Interest Rate by the Remarketing Agent
shall be conclusive and binding on the owners of the Bonds.
Anything herein to the contrary notwithstanding, in no event may the
interest rate borne by the Bonds exceed twelve percent (12%) per annum or, if
lower, the maximum rate of interest which may be charged or collected pursuant
to applicable provisions of federal or state law.
On any Interest Payment Date, the interest rate on the Bonds may be
converted to a fixed annual rate of interest (the "Fixed Interest Rate") upon
receipt by the Authority, the Trustee, the Tender Agent, the Bank and the
Remarketing Agent not less than 45 days in advance of the date on which the
Bonds begin to bear interest at the Fixed Interest Rate (the "Fixed Rate Date")
of (i) notice from the Borrower electing to have the interest rate on the Bonds
converted to a Fixed Interest Rate, (ii) an opinion of Bond Counsel to the
effect that conversion to a Fixed Interest Rate is permitted by the Indenture
and the Act and that conversion to the Fixed Interest Rate in accordance with
the provisions of the Indenture will not cause interest on the Bonds to not be
Tax-exempt and (iii) satisfaction of certain other conditions set forth in the
Indenture.
After the Fixed Rate Date, interest on the Bonds shall be computed on the
basis of a year of 360 days and 12 months of 30 days each. The interest rate on
all Bonds from the Fixed Rate Date until the maturity or prior redemption or
acceleration thereof shall be a rate per annum equal to the Fixed Interest Rate,
which shall be determined as follows on or prior to, but not more than 15 days
prior to, the Business Day immediately preceding the Fixed Rate Date. The
Remarketing Agent shall specify the Fixed Interest Rate to be borne by the Bonds
on and after the Fixed Rate Date.
The Fixed Interest Rate shall be the rate, but not exceeding the rate,
which at the time of determination thereof in the judgment of the Remarketing
Agent, having due regard for prevailing financial market conditions, would be
necessary to remarket the Bonds at a price equal to 100% of the principal amount
thereof on the Fixed Rate Date. If on the date of determination by the
Remarketing Agent of the Fixed Interest Rate, the Fixed Interest Rate so
determined is held by a court to be invalid or unenforceable, then the Fixed
Interest Rate shall be a rate determined by the Remarketing Agent, not less than
90% or more than 130% of the "Alternate Fixed Rate," which in the judgment of
the Remarketing Agent, having due regard for prevailing market conditions, would
be the minimum rate at which owners of the Bonds would be able to sell the Bonds
at a price equal to the principal amount thereof on the Fixed Rate Date. The
Alternate Fixed Rate shall be determined by the Remarketing Agent and shall be a
rate per annum based upon yield evaluations at par of Tax-exempt securities
having a remaining term equal, as nearly as practicable, to the time remaining
until the maturity of the Bonds of not less than five Component Issues (as
defined in the Indenture) selected by the Remarketing Agent each of which would
be rated by either Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group in a long-term debt rating category which is the same as, or is
immediately proximate to, the long-term debt rating category which will be
assigned to the Bonds after the Fixed Rate Date. Anything to the contrary herein
notwithstanding, the Fixed Interest Rate shall not exceed twelve percent (12%)
per annum. If, after the Fixed Rate Date the Bonds shall fail to be converted to
a Fixed Interest Rate, the Bonds will continue to earn interest at the Weekly
Interest Rate as provided in the Indenture and the registered owners shall be
notified thereof.
At least thirty (30) days prior to the Fixed Rate Date, the Trustee shall
give an irrevocable notice to the registered owners of conversion of the Weekly
Interest Rate borne by the Bonds to the Fixed Interest Rate. Such notice shall
(i) specify the proposed Fixed Rate Date, (ii) require owners of all of the
Outstanding Bonds to tender their Bonds for purchase on the Fixed Rate Date and
(iii) state
A-4
<PAGE>
that all Outstanding Bonds not purchased on or before the Fixed Rate Date
pursuant to the Indenture will be deemed to be purchased on the Fixed Rate Date
at a price equal to the principal amount thereof, plus unpaid interest, if any,
accrued to such date.
Any Bond purchased by the Tender Agent from the date notice of the proposed
Fixed Rate Date is given to registered owners through the Fixed Rate Date shall
be remarketed at the Weekly Interest Rate for a period up to and including the
Fixed Rate Date; provided, however, that all Bonds remarketed from the date
notice of the proposed Fixed Rate Date is given to an owner through the Fixed
Rate Date shall be tendered by the owner thereof on the Fixed Rate Date pursuant
to the provisions of the Indenture.
The Bonds are also subject to mandatory tender for purchase on the date an
alternate letter of credit is substituted for the Letter of Credit (the "Letter
of Credit Substitution Date"). The Fixed Rate Date and the Letter of Credit
Substitution Date are also referred to as the "Mandatory Tender Date."
All Bonds which on the Mandatory Tender Date have not been tendered for
purchase ("Non-Tendered Bonds"), shall be deemed purchased by the Tender Agent
on the Mandatory Tender Date at a price of the principal amount thereof plus
unpaid interest, if any, accrued to such date. Replacement bonds for the
Non-Tendered Bonds may be remarketed and delivered to new owners as instructed
by the Borrower or the Remarketing Agent. The Tender Agent shall hold in escrow
for the owners of the Non-Tendered Bonds the purchase price thereof, and after
the Mandatory Tender Date such owners will no longer be entitled to any of the
benefits of the Indenture except for the payment of such purchase price.
The Indenture provides that prior to the Fixed Rate Date, the Bonds may be
delivered by the owners thereof to the Tender Agent at its principal corporate
trust office in San Francisco, California or at such other place as the Tender
Agent may designate in writing to the owners. Any Bond so delivered or notice
with respect to which is received shall be purchased by the Tender Agent on
demand of the owner thereof on the close of any Business Day at a purchase price
equal to the principal amount thereof plus accrued interest to but not including
the date of purchase (unless such date is an Interest Payment Date, in which
case the purchase price will be the principal amount of such Bond) upon:
(A) delivery to the Tender Agent of an irrevocable written notice by 4:00
p.m., California time, which states (i) the name and address of the registered
owner, (ii) the number or numbers of the Bond or Bonds to be purchased, (iii)
the aggregate principal amount of the Bond or Bonds to be purchased, and (iv)
the date on which the Bond is or Bonds are to be purchased, which date shall be
a Business Day not prior to the seventh (7th) calendar day next succeeding the
date of delivery of such notice; and
(B) delivery to the Tender Agent at or prior to 10:00 a.m., California
time, on the Purchase Date specified in the aforesaid notice, of the Bond or
Bonds to be tendered; provided, however, that any Bond for which a notice of the
exercise of the purchase option has been given as provided in subsection (A)
above and which is not so delivered shall be deemed delivered on the date of
purchase and shall be purchased in accordance with the Indenture.
The Bonds are subject to redemption by the Authority upon the following terms in
increments of $5,000, provided that in the event of redemption of less than all
of the Bonds, the amount which remains outstanding shall be in Authorized
Denominations (as defined in the Indenture):
A-5
<PAGE>
(i) The Bonds are not subject to sinking fund redemption.
(ii) On or prior to the Fixed Rate Date, the Bonds are subject to
redemption on any Interest Payment Date, in whole or in part, to the extent of
prepayments of amounts due under the Agreement made at the option of the
Borrower, with the written approval of the Bank, at a redemption price of 100%
of the principal amount of the Bonds redeemed, plus interest accrued thereon to
the redemption date.
(iii) The Bonds Outstanding on the date of the occurrence of a
Determination of Taxability (as defined in the Indenture) shall be redeemed in
whole, at a price of 100% of the principal amount thereof plus interest accrued
thereon to the redemption date, at any time within 60 days after such
occurrence. IF THE LIEN OF THE INDENTURE IS DISCHARGED PRIOR TO THE OCCURRENCE
OF A DETERMINATION OF TAXABILITY THE BONDS SHALL NOT BE REDEEMED AS DESCRIBED
HEREIN.
(iv) The Bonds shall be redeemed in whole, at a redemption price equal
to 100% of the principal amount thereof plus interest accrued thereon to the
redemption date, on a redemption date not less than fifteen (15) days preceding
the expiration date of the Letter of Credit selected by the Trustee if no
Alternate Letter of Credit has been delivered to the Trustee in accordance with
the Agreement.
(v) The Bonds are subject to redemption in whole or in part, on any
date, at a redemption price equal to 100% of the principal amount of Bonds
redeemed, plus interest accrued thereon to the redemption date, to the extent of
prepayments of amounts due under the Agreement made at the option of the
Borrower following the occurrence of damage to, or the destruction of, the
Project, the taking thereof under the power of eminent domain or the Agreement
is void unenforceable, impossible of performance or unlawful.
(vi) After the Fixed Rate Date, the Bonds are subject to redemption to
the extent of prepayments of amounts due under the Agreement made at the option
of the Borrower, with the consent of the Bank, in whole or in part, on any
Interest Payment Date during the applicable periods specified below, at the
applicable redemption price stated below, plus interest accrued thereon to the
redemption date:
Number of Years From
Fixed Rate Date to First Optional Redemption
Final Maturity Redemption Date Price
greater than 9 years 7 years from 102%,
conversion declining
1% annually
to 100%
6-9 years 6 years from 101%,
conversion declining
1% annually
to 100%
less than 6 years no optional
redemption
A-6
<PAGE>
Notwithstanding the optional redemption schedule set forth above, on or prior to
the Fixed Rate Date, the Remarketing Agent may provide an alternate optional
redemption schedule if it obtains an opinion of Bond Counsel that such alternate
schedule will not cause interest on the Bonds not to be Tax-exempt.
(vii) The Bonds shall be redeemed in whole, at a redemption price
equal to 100% of the principal amount thereof, plus interest accrued thereon to
the redemption date, within five (5) calendar days (and before the following
Saturday if the fifth calendar day is a Saturday) from the date the Trustee
receives written notice from the Bank that an event of default has taken place
under the Reimbursement Agreement and directing the Trustee to redeem the Bonds.
(viii) The Bonds are subject to redemption, in part on any Interest
Payment Date, at a redemption price equal to 100% of the principal amount
thereof, plus accrued interest to the redemption date, to the extent of amounts
remaining in the Project Fund upon completion of the Project which are deposited
in the Surplus Account (as such terms are defined in the Indenture) as provided
in the Indenture.
If an Event of Default (as defined in the Indenture) shall occur, the
principal of all Bonds may be declared due and payable upon the conditions, in
the manner and with the effect provided in the Indenture. The Indenture provides
that in certain events such declaration and its consequences may be rescinded.
The Bonds are issuable as fully registered Bonds without coupons in
denominations of $100,000 or any multiple of $5,000 in excess of $100,000,
provided that after the Fixed Rate Date the Bonds will be issued in
denominations of $5,000 or any integral multiple thereof. This Bond is
transferable by the registered owner hereof, in person or by his attorney duly
authorized in writing, but only in the manner, subject to the limitations and
upon payment of the charges, if any, provided in the Indenture, and upon
surrender and cancellation of this Bond. Upon such transfer a new registered
Bond or Bonds, of authorized denomination or denominations, for the same
aggregate principal amount, will be issued to the transferee in exchange
therefor.
The Indenture and the rights and obligations of the Authority and of the
owners of the Bonds and of the Trustee or Tender Agent may be modified or
amended from time to time and at any time (and in certain cases without the
consent of the owners) in the manner, to the extent, and upon the terms provided
in the Indenture; provided that no such modification or amendment shall (i)
extend the fixed maturity of this Bond, or reduce the amount of principal
hereof, or extend the time of payment or change the method of computing the rate
of interest hereon, or extend the time of payment of interest hereon, without
the consent of the owner hereof, (ii) reduce the percentage of Bonds the consent
of the owners of which is required to effect any such modification or amendment,
or permit the creation of any lien on the Revenues and other assets pledged as
security for the Bonds prior to or on a parity with the lien created by the
Indenture, or deprive the owners of the Bonds of the lien created by the
Indenture on such Revenues and other assets (except as expressly provided in the
Indenture), without the consent of the owners of all Bonds then outstanding, or
(iii) adversely affect the interests of the Tender Agent without its prior
written consent. The Trustee shall not be required to consent to any such
amendment which materially adversely affects its rights, duties and immunities
under the Indenture or otherwise, all as more fully set forth in the Indenture.
If moneys or securities shall have been set aside and held for the payment
or redemption of Bonds and the interest installments therefor to the maturity or
redemption date thereof in accordance
A-7
<PAGE>
with the Indenture, such Bonds shall be deemed to be paid within the meaning
provided in the Indenture and the pledge of Revenues and other assets made under
the Indenture and all covenants, agreements and other obligations of the
Authority under the Indenture shall cease, terminate, become void and be
completely discharged and satisfied.
It is hereby certified and recited that any and all conditions, things and
acts required to exist, to have happened and to have been 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 the Act, and by the Constitution and
laws of the State, and that the amount of this Bond, together with all other
indebtedness of the Authority, does not exceed any limit prescribed by the Act,
or by the Constitution and laws of the State, and is not in excess of the amount
of Bonds permitted to be issued under the Indenture.
This Bond shall not be entitled to any benefit under the Indenture, or
become valid or obligatory for any purpose, until the certificate of
authentication and registration hereon endorsed shall have been signed by the
Trustee.
A-8
<PAGE>
IN WITNESS WHEREOF, the California Economic Development Financing Authority
has caused this Bond to be executed in its name and on its behalf by the manual
or facsimile signature of the Chair of the Authority and attested by the manual
or facsimile signature of its Secretary, all as of the date set forth above.
CALIFORNIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY
By
Chair
Attest:
Secretary
A-9
<PAGE>
CERTIFICATE OF AUTHENTICATION AND REGISTRATION
This is one of the Bonds described in the within-mentioned Indenture, which
has been registered on August 5, 1997.
FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION,
as Trustee
By
Authorized Signatory
A-10
<PAGE>
ASSIGNMENT
For value received the undersigned do(es) hereby sell, assign and transfer
unto (Insert name, address, zip code and Social Security, taxpayer or other
identification numbers of Assignee) the within-mentioned registered Bond and
hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same
on the books of the Bond Registrar with full power of substitution in the
premises.
Dated:
Notice: The signature on this Assignment
must correspond with the name of the
Registered Owner as it appears upon the
face of the within Bond in every
particular without alteration or
enlargement or any change whatsoever.
Signature guaranteed:
(NOTE: Signature must be guaranteed by
an Eligible Guarantor Institution
A-11
IRREVOCABLE LETTER OF CREDIT
Letter of Credit No. G/LA-400557 August 5, 1997
First Trust of California, National Association
not individually but solely as Trustee
One California Street, Fourth Floor
San Francisco, California 94111
Attention: Corporate Trust Department
Ladies and Gentlemen:
We hereby issue in your favor, not individually, but solely as Trustee
(the "Trustee") under the Indenture of Trust dated as of August 1, 1997 (the
"Indenture") between the California Economic Development Financing Authority
(the "Issuer") and you, this irrevocable direct pay letter of credit (this
"Letter of Credit") in an amount not exceeding $8,625,754 (the "Stated Amount"),
of which an amount not exceeding $8,500,000 may be drawn upon with respect to
the payment of principal of the Issuer's $8,500,000 Variable Rate Demand
Industrial Development Revenue Bonds, Series 1997 (Advanced Aerodynamics and
Structures, Inc. Project) (the "Bonds") and an amount not exceeding $125,754 may
be drawn upon with respect to the payment of up to forty-five (45) days' accrued
interest (at the rate of 12% per annum based on a 365-day year) on the Bonds,
for payment of your draft, drawn at sight on The Sumitomo Bank, Limited, acting
through its Los Angeles Branch (the "Bank"), 777 South Figueroa Street, Suite
2600, Los Angeles, California 90017 (or such other address in the United States
of America as may be designated to you in writing from time to time by the Bank)
accompanied by your signed certificate (with the blanks filled in
appropriately):
1. if the drawing is being made with respect to the payment or
provision for payment of interest on the Bonds, whether for regularly scheduled
interest payments pursuant to Section 2.02 of the Indenture or for accrued
interest on Bonds subject to optional or mandatory redemption pursuant to
Article IV of the Indenture or upon the acceleration of the Bonds pursuant to
Section 7.01 of the Indenture, your certificate in the form attached as Annex I;
2. if the drawing is being made with respect to the payment of
principal upon an optional or mandatory redemption of Bonds pursuant to Article
IV of the Indenture or upon the maturity of the Bonds pursuant to Section 2.02
of the Indenture or upon the acceleration of the Bonds pursuant to Section 7.01
of the Indenture, your certificate in the form attached as Annex II;
1
<PAGE>
3. if the drawing is made with respect to the payment of the accrued
interest and the principal portion of the purchase price of Bonds tendered or
deemed to have been tendered pursuant to Section 4.06 or Section 4.07 of the
Indenture, your certificate in the form attached as Annex III (any such draft
accompanied by such signed certificate is herein referred to as a "Purchase
Price Draft").
More than one demand for payment may be made under this Letter of
Credit. A demand for payment with respect to the payment of interest on or
principal of the Bonds shall not exceed that portion of the Stated Amount
allocated to interest or principal, respectively, as the same is reduced or
reinstated from time to time as provided below.
The expiration date of this Letter of Credit (the "Expiration Date")
shall be the earliest of: (i) our close of business on August 5, 2002 (the
"Stated Expiration Date"), unless the Stated Expiration Date has been extended
and the Stated Amount adjusted (if appropriate) by an instrument substantially
in the form of Attachment C hereto (which forms an integral part of this Letter
of Credit); (ii) ten (10) days after you receive notice from the Bank of an
Event of Default under (and as defined in) the Reimbursement Agreement dated as.
of August 1, 1997 between Advanced Aerodynamics and Structures, Inc. (the
"Company") and the Bank (the "Reimbursement Agreement") and a direction to cause
a redemption of all outstanding Bonds under the terms of the Indenture; (iii)
the date on which the Bank, receives notice from you that all Bonds have been
paid in full or such payment has been provided for in accordance with the terms
of the Indenture; (iv) the date on which the Bonds become secured by an
Alternate Letter of Credit (as defined in the Indenture) in accordance with the
terms of the Indenture; and (v) the date on which the interest rate on the Bonds
is converted to a fixed rate of interest in accordance with the terms of the
Indenture. You shall surrender this Letter of Credit to the Bank on the
Expiration Date of this Letter of Credit.
A draft and completed signed certificate (other than a Purchase Price
Draft) presented prior to 9:00 a.m., Los Angeles, California time, on any day
except Saturday, Sunday or any day on which banking institutions located, in the
Cities of New York, New York or Los Angeles, California or the city in which the
principal office of the Trustee or the Remarketing Agent (as defined in the
Indenture) is located (initially, San Francisco, California) are required or
authorized by law to close or a day on which the New York Stock Exchange is
closed (a "Business Day") shall be honored and the amount of the draft paid in
immediately available funds by 1:00 p.m., Los Angeles, California time) on the
same Business Day, provided that such draft and signed certificate presented
conform to the terms and conditions of this Letter of Credit. A draft and
completed signed certificate (other than a Purchase Price Draft) presented after
9:00 a.m., Los Angeles, California time on any Business Day shall be honored and
the amount of the draft paid in immediately available funds by 11:00 a.m. Los
Angeles, California time, on the following Business Day, provided that such
draft and signed certificate presented conform to the terms and conditions of
this Letter of Credit. A Purchase Price Draft presented prior to 9:00 a.m., Los
Angeles, California time, on any Business Day shall be honored and the amount of
the draft paid in immediately available funds by 1:00 p.m. Los Angeles,
California time on the same Business Day, provided that such Purchase Price
Draft presented conforms to the terms and conditions of this Letter of Credit. A
Purchase Price Draft presented after
2
<PAGE>
9:00 a.m., Los Angeles, California time on any Business Day shall be honored and
the amount of the draft paid in immediately available funds by 11:00 a.m., Los
Angeles, California time on the following Business Day, provided that such draft
and signed certificate presented conform to the terms and conditions of this
Letter of Credit. Payment under this Letter of Credit shall be made in
accordance with the payment instructions set forth in the completed certificate
accompanying each draft. All payments made by the Bank under this Letter of
Credit shall be made from the Bank's own funds without any requirement that the
Trustee, the holders of the Bonds or the Bank make any prior claims against the
Company and not out of any funds of the Company, the Issuer or any entity
related to either of them. By the time set forth above on the Business Day such
payment is due the Bank shall enter such payment instructions on the Federal
Reserve wire or, in the event such payment instructions specify an account
maintained with the Bank, credit such account with immediately available funds.
Any draft or certificate may be presented in person to the Bank or may
be sent to the Bank by telecopier or other electronic communication, promptly
confirmed by telephone at (213) 955- 0800, Attention: Manager - Structured
Finance and Financial Institutions Group, to telecopy number (213) 623-6832 (or
such other telecopy or telephone number as may be designated to you in writing
from time to time by the Bank). Any such draft or certificate presented by
telecopy or other electronic communication shall be mailed or delivered to the
Bank on the same day to our office specified in the first paragraph of this
Letter of Credit.
This Letter of Credit is successively transferable only to a successor
paying agent upon receipt by the Bank of prior written notice of such transfer
in accordance with Attachment A (which forms an integral part of this Letter of
Credit), acknowledged by a purported officer of the Trustee and the transferee,
addressed to the Bank and certifying that the transferee is a successor trustee
under the Indenture.
Each payment of a draft with respect to the payment of interest on or
principal of the Bonds honored by the Bank shall. pro Tanto, reduce that portion
of the Stated Amount available under this Letter of Credit. subject to
reinstatement as provided below. Following the honoring of a drawing hereunder
to pay regularly scheduled principal of the Bonds or principal of the Bonds upon
an optional or mandatory redemption of the Bonds, that portion of the Stated
Amount available under this Letter of Credit to pay interest shall also be
reduced to an amount equal to forty-five (45) days' accrued interest (at the
rate of interest of 12% per annum based on a 365-day year) on the principal
amount of the remaining outstanding Bonds (other than Pledged Bonds (as defined
in the Reimbursement Agreement)). In addition, the Stated Amount of this Letter
of Credit shall also be reduced by the amount stated in a written notice of
reduction executed by a purported officer of the Trustee substantially in the
form of Attachment B (which forms an integral part of this Letter of Credit). A
reduction of the Stated Amount through the use of such a written notice of
reduction shall be effective as of the actual date of receipt by the Bank of
such notice at its above-stated address.
3
<PAGE>
The Stated Amount shall be reinstated as follows:
(a) Following the honoring of a drawing under this Letter of Credit for
the payment of the purchase price of Bonds tendered, or deemed to have been
tendered, to the Trustee or the Tender Agent (as defined in the Indenture)
pursuant to Section 4.06 or Section 4.07 of the Indenture, the Stated Amount
shall be reinstated automatically and immediately upon and to the extent that
you have received payment in immediately available funds of the principal of and
accrued interest on the Pledged Bonds in connection with the remarketing thereof
and are holding such payment for the Bank's sole benefit and account; in such
case, (i) the principal portion of this Letter of Credit shall be reinstated in
an amount equal to the principal amount of the remarketed Bonds and (ii) the
interest portion shall be reinstated to an amount equal to forty-five (45) days'
accrued interest on the Bonds outstanding (other than Pledged Bonds), calculated
at the rate of 12% per annum based on a 365-day year. In connection therewith,
you shall wire transfer such payment to the Bank immediately after receipt
thereof and you shall send to the Bank your telecopy (promptly followed by mail
delivery) notifying the Bank of such payment.
(b) Immediately following the honoring of a drawing hereunder to make a
regularly scheduled interest payment on the Bonds (that is, other than interest
in connection with an optional redemption or mandatory redemption of the Bonds
in whole or in part or an acceleration or optional or mandatory tender of the
Bonds) in an amount set forth in the certificate in the form of Annex I
submitted in conjunction with such drawing, the Bank's obligation hereunder with
respect to the payment of interest on the Bonds will be automatically reinstated
by the amount of such drawing.
(c) The principal and interest portions of the Stated Amount shall
otherwise be reinstated as the Bank may from time to time notify you in writing.
The Sumitomo Bank, Limited acknowledges and agrees, notwithstanding any
terms or provisions of this Letter of Credit or the Reimbursement Agreement to
the contrary, that this Letter of Credit is in all respects an obligation of The
Sumitomo Bank, Limited, binding and enforceable against its properties, assets
and revenues wherever located.
This Letter of Credit shall be governed by the laws of the State of
California including without limitation, Article 5 of the Uniform Commercial
Code as in effect in the State of California, as supplemented by the provisions
(to the extent such provisions are consistent with this Letter of Credit) of the
Uniform Customs and Practice for Documentary Credits (1993 Revision)
International Chamber of Commerce, Publication No. 500 (the "Uniform Customs").
4
<PAGE>
We undertake that your draft and certificate drawn and presented on or
before the time of expiration of this Letter of Credit in conformity with the
terms of this Letter of Credit will be duly honored.
Very truly yours,
THE SUMITOMO BANK, LIMITED
By:____________________________________
__________________, Los Angeles Branch
5
<PAGE>
ANNEX I (INTEREST DRAW) to
Transferable Irrevocable Direct Pay Letter of Credit
Issued by The Sumitomo Bank, Limited, acting through its Los Angeles Branch
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transferable Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) (the "Letter of
Credit"). Terms defined in the Letter of Credit and not otherwise defined herein
shall have the same meanings herein as therein.
1. As the Trustee pursuant to the Indenture, in trust for the owners of
the Bonds, we hereby make demand for payment under the Letter of Credit to pay
or provide for the payment of unpaid interest on such Bonds in connection with
either a regularly scheduled interest payment, an optional redemption, a
mandatory redemption or acceleration of the Bonds. Such Bonds have been duly
authenticated under and in accordance with the Indenture.
2. Interest on the Bonds is now or will under the terms of the
Indenture become due and payable on or prior to the regularly scheduled interest
payment date, maturity date or redemption date of the Bonds and the aggregate
amount required to pay or to provide for the payment of the. same is
$________________ and payment of such amount is hereby demanded.
3. The amount demanded does not exceed the amount available today to be
drawn under the Letter of Credit in respect of the payment of interest on the
Bonds.
4. Upon receipt of the amount demanded under this Letter of Credit, we
will apply the same directly to the payment when due of interest owing on
account of the Bonds.
6
<PAGE>
5. (Please wire the amount demanded hereunder to account no. __________
at _______________ in __________ [Please credit account no. _____ maintained
with you.]
Dated as of __________ 19__.
First Trust of California, National
Association, not in its individual or
corporate capacity, but solely as
Trustee under the Indenture.
By:_____________________________________
Title:__________________________________
7
<PAGE>
ANNEX II (PRINCIPAL DRAW) to
Transferable Irrevocable Direct Pay Letter of Credit Issued by The Sumitomo
Bank, Limited, acting through its Los Angeles Branch
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transferable Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) (the "Letter of
Credit"). Terms defined in the Letter of Credit and not otherwise defined herein
shall have the same meanings herein as therein.
1. As the Trustee pursuant to the Indenture, in trust for the owners of
the Bonds, we hereby make demand for payment under the Letter of Credit to pay
all or a portion of the unpaid principal amount of such Bonds which have been
duly authenticated under and in accordance with the Indenture in connection with
either an optional redemption, a mandatory redemption or upon maturity or
acceleration of the Bonds.
2. Principal on the Bonds is now or will under the terms of the
Indenture become due and payable on or prior to the maturity date or redemption
date of the Bonds; the drawing in the amount of $____________ is being made to
pay the principal portion of each such Bond and payment of such amount is hereby
demanded.
3. The amount demanded does not exceed the amount available on the date
hereof to be drawn under the Letter of Credit in respect of the payment of
principal on the Bonds.
4. Upon receipt of the amount demanded under this Letter of Credit, we
will apply the same directly to the payment of the principal owing on account of
the Bonds.
5. The Stated Amount of the Letter of Credit shall be permanently
reduced by the amount of the draw hereunder.
8
<PAGE>
6. [Please wire the amount demanded hereunder to account no. __________
at _______________ in __________ [Please credit account no._______ maintained
with you.]
Dated as of __________, 19__.
First Trust of California, National
Association, not in its individual or
corporate capacity, but solely as
Trustee under the Indenture.
By:
Title:
9
<PAGE>
ANNEX III (PURCHASE PRICE DRAW) to
Transferable Irrevocable Direct Pay Letter of Credit Issued by The Sumitomo
Bank, Limited, acting through its Los Angeles Branch
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transferable Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) (the "Letter of
Credit"). Terms defined in the Letter of Credit and not otherwise defined herein
shall have the same meanings herein as therein.
1. As the Trustee pursuant to the Indenture, we hereby make demand for
payment under the Letter of Credit to pay a part or all of the interest portion
and the principal portion of the purchase price to be paid in respect of Bonds
which have been duly authenticated under and in accordance with the Indenture
and which have been tendered or were deemed to have been tendered pursuant to
Section 4.06 or Section 4.07 of the Indenture and for which remarketing proceeds
have not been received.
2. The drawing in the aggregate amount of $ _______________ is being
made to pay the purchase price of Bonds which have been tendered or were deemed
to have been tendered. Such aggregate amount equals the sum of the amounts set
forth in paragraphs 3 and 5 below.
3. The portion of the drawing equal to $ _______________ is being made
to pay a part or all of the interest portion of the purchase price of such Bonds
which have been tendered or were deemed to have been tendered and for which
remarketing proceeds have not been received corresponding to the accrued
interest thereon, and payment of such amount is hereby demanded.
4. Upon receipt of the amount set forth under paragraph 3 above, we
will apply the same directly to the payment of a part or all of the interest
portion of the amount to be paid in respect of the Bonds.
5. The portion of the drawing equal to $ _______________ is being made
to pay the principal portion of the purchase price of such Bonds which have been
tendered or were deemed to have been tendered and for which remarketing proceeds
have not been received, and payment of such amount is hereby demanded.
10
<PAGE>
6. Upon receipt of the amount set forth under paragraph 5 above, we
will apply the same directly to the payment of the principal portion of the
purchase price to be paid in respect of the Bonds.
7. The amount set forth under paragraph 3 above does not exceed the
amount available on the date hereof to be drawn under the Letter of Credit in
respect of the payment of interest on the Bonds and the amount set forth under
paragraph 5 above does not exceed the amount available on the date hereof to be
drawn under the Letter of Credit in respect of the payment of principal on the
Bonds.
8. [Please wire the amount demanded hereunder to account no. __________
at _______________ in __________.] [Please credit account no. __________
maintained with you.]
Dated as of _______________ 19__.
First Trust of California, National
Association, not in its individual or
corporate capacity, but solely as
Trustee under the Indenture.
By:
Title:
11
<PAGE>
ATTACHMENT A TO TRANSFERABLE IRREVOCABLE
DIRECT PAY LETTER OF CREDIT
(Transfer Certificate)
____________________ 19__
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transfer-able Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) (the "Letter of
Credit").
The undersigned is the Trustee referred to in the Letter of Credit and
we hereby give you notice that __________ is the successor Trustee (the
"Successor Trustee") under the Indenture referred to in the Letter of Credit,
and that the Successor Trustee shall succeed to all the rights and obligations
of the Trustee under the Letter of Credit.
Upon payment to you of a $2,000 transfer fee by Advanced Aerodynamics
and Structures, Inc., your consent to the transfer of the Letter of Credit with
the date thereof to be confirmed by a
12
<PAGE>
Notary Public in Japan (or otherwise officially established) pursuant to the
laws of Japan and receipt by us of your acknowledgment and acknowledgment by the
Successor Trustee of this notice, the Letter of Credit shall be deemed to have
been transferred to the Successor Trustee.
Very truly yours,
First Trust of California, National
Association
By:
Title:
Agreed and Accepted: Acknowledged:
The Sumitomo Bank, Limited, [Name of Successor Trustee]
acting through Its
Los Angeles Branch
By:_________________________________ By:
Title:______________________________ Title:
Date:_______________________________ Date:
13
<PAGE>
ATTACHMENT B TO TRANSFERABLE IRREVOCABLE
DIRECT PAY LETTER OF CREDIT
(Reduction Certificate)
____________________ 19__
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transferable Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) by
_______________ Dollars ($ __________). This reduction in Stated Amount shall go
to reduce that portion of the Stated Amount allocated to (principal, interest)1/
relating to the Bonds and shall be effective as of the actual date of receipt of
this instrument by The Sumitomo Bank, Limited. Accordingly, the Stated Amount of
the Letter of Credit after giving effect to such reduction shall be
____________________ Dollars ($ _______________). It is acknowledged that the
amount of such reduction shall no longer be available for payment of drafts
under the Letter of Credit. All terms used in this instrument which are defined
in the Letter of Credit shall have the same meaning in this instrument as in the
Letter of Credit.
First Trust of California, National
Association, not in its individual or
corporate capacity, but solely as
Trustee under the Indenture referred to
in the Letter of Credit.
By:
Title:
- --------
1/ Complete as appropriate.
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<PAGE>
ATTACHMENT C TO TRANSFERABLE IRREVOCABLE
DIRECT PAY LETTER OF CREDIT
(Notice of Extension)
____________________ 19__
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transferable Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8.500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project), in the
original Stated Amount of $8,625,754 (the "Letter of Credit"). We hereby notify
you that, in accordance with the terms of the Letter of Credit and that certain
Reimbursement Agreement dated as of August 1, 1997, between Advanced
Aerodynamics and Structures, Inc. and us, the Stated Expiration Date (as defined
in the Letter of Credit) of the Letter of Credit has been extended to
_______________.
The portions of the Stated Amount of the Letter of Credit available to
pay principal and interest on the Bonds are $ _______________ and $
_______________, respectively, and the Stated Amount is $ _______________.
This letter should be attached to the Letter of Credit and made a part
thereof.
THE SUMITOMO BANK, LIMITED
LOS ANGELES BRANCH
By:
Its:
15
REIMBURSEMENT AGREEMENT
Between
ADVANCED AERODYNAMICS AND STRUCTURES, INC.
And
THE SUMITOMO BANK, LIMITED
(LOS ANGELES BRANCH)
-------------------
Dated as of August 1, 1997
Relating to
$8,500,000
California Economic Development Financing Authority
Variable Rate Demand Industrial
Development Revenue Bonds, Series 1997
(Advanced Aerodynamics and Structures, Inc. Project)
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TABLE OF CONTENTS
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REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT dated as of August 1, 1997 is entered into
between ADVANCED AERODYNAMICS AND STRUCTURES, INC., a corporation organized
under the laws of the State of Delaware, and THE SUMITOMO BANK, LIMITED, a
banking corporation organized under the laws of Japan, acting through its Los
Angeles Branch, which branch is authorized to do business in California by the
Department of Financial Institutions.
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following words and terms used in this
Reimbursement Agreement shall have the following meanings:
"Authorized Officer" means, with respect to the Issuer, its Chair, its
Secretary or any other officer or employee of the issuer authorized by
resolution of the Issuer to perform the act or sign the document in question,
and, with respect to the Company, any person so designated to act on behalf of
the Company by resolution of the Company.
"Bank Rate" means LIBOR less 0.15% per annum.
"Bank Reimbursement Obligations" means all indebtedness and other
obligations of the Company to Sumitomo arising under or in relation to this
Reimbursement Agreement or any other Related Document.
"Bond" or "Bonds" means the $8,500,000 Variable Rate Demand Industrial
Development Revenue Bonds, Series 1997 (Advanced Aerodynamics and Structures,
Inc. Project) dated August 5, 1997, authorized and issued pursuant to the
Indenture.
"Bond Documents" means the Bonds, the Resolutions, the Indenture, the Loan
Agreement, the Remarketing Agreement, any and all other documents related to the
issuance of the Bonds, and all amendments and supplements to those documents.
"Business Day" means any day other than (a) a Saturday, Sunday or any day
on which banking institutions located in the Cities of New York, New York or Los
Angeles, California or the city in which the principal office of the Trustee or
the Remarketing Agent (initially, San Francisco, California) are located are
required or authorized by law to close or (b) a day on which the New York Stock
Exchange or DTC is closed.
"Closing Date" means August 5, 1997, or any other Business Day agreed to by
Sumitomo and the Company on which the Letter of Credit is issued.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Advanced Aerodynamics and Structures, Inc., a corporation
organized under the laws of the State of Delaware.
"Conversion Date" means the date on which the interest rate on the Bonds is
converted to a Fixed Interest Rate pursuant to, and as defined in, the
Indenture.
"Corporate Base Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York, in New York, New York, or its
successor, from time to time as its corporate base rate.
"Credit Amount" means the Stated Amount outstanding from time to time less
the principal amount of any Loans outstanding. For purposes of determining the
Credit Amount the Stated Amount shall not be deemed to have been reduced
pursuant to the terms of the Letter of Credit other than as a result of a
permanent reduction of the Stated Amount.
"Credit Documents" means this Reimbursement Agreement, the Note, the Letter
of Credit, the Investment Agreement and the Pledge Agreement.
"DTC" means The Depository Trust Company, New York, New York, or its
nominee, or its successors and assigns, or any other depository performing
similar functions under the Indenture.
"Default Rate" means the Corporate Base Rate plus two percent (2%).
"Determination of Taxability" has the meaning given to that term in the
Indenture.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" has the meaning set forth in Section 5.1 hereof.
"Expiration Date" means the earliest to occur of (i) the close of
Sumitomo's business on the Stated Expiration Date; (ii) the date which is ten
(10) days following the Trustee's receipt of written notice from Sumitomo of the
occurrence of an Event of Default and a direction to cause an acceleration of
all outstanding Bonds pursuant to the Indenture; (iii) the date on which
Sumitomo receives notice from the Trustee that all Bonds have been paid in full
or such payment has been provided for in accordance with the terms of the
Indenture; (iv) the date on which the Bonds become secured by an Alternate
Letter of Credit in accordance with the terms of the Indenture; (v) the date on
which the interest rate on the Bonds is converted to a Fixed Interest Rate in
accordance with the terms of the Indenture; and (vi) the date on which Sumitomo
honors a drawing following a mandatory tender of the Bonds pursuant to Section
4.07 of the Indenture.
"GAAP" means generally accepted accounting principles in effect from time
to time.
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"Governmental Requirement" means any law, statute, code, ordinance, order,
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other direction or requirement (including, without
limitation, any of the foregoing which relate to environmental standards or
controls, energy regulations and occupational, safety and health standards or
controls) of any federal, state, county, municipal or other government,
department, commission, board, court, agency or any other instrumentality of any
of them, which exercises jurisdiction over the Company or any of its Property
(including, without limitation, the Project).
"Indebtedness" means and includes, as of any date as of which the amount
thereof is to be determined, (i) all items (other than capital items such as
surplus and fund balances, as well as reserves for taxes in respect of income
deferred to the future and other deferred credits and reserves) which in
accordance with generally accepted accounting principles (including, without
limitation, capitalized leases) would be included in determining total
liabilities on the balance sheet of a Person as of such date, (ii) all
obligations which are secured by any Lien existing on Property owned by such
Person, whether or not the obligations secured thereby shall have been assumed
by any other Person, (iii) all obligations of such Person to purchase any
materials, supplies or other Property, or to obtain the services of any other
Person, if the relevant contract or other related document requires that payment
for such materials, supplies or other Property, or for such services, shall be
made regardless of whether or not delivery of such materials, supplies or other
Property is ever made or tendered or such services are ever performed or
tendered, and (iv) all guarantees by such Person for the payment of Indebtedness
of others of the character described in (i) through (iii) above.
"Indenture" means the Indenture of Trust dated as of August 1, 1997 between
the Issuer and the Trustee, and all amendments and supplements to that Trust
Indenture.
"Interest Payment Date" has the meaning given to that term in the
Indenture.
"Investment Agreement" means the Investment Agreement dated August 5, 1997
between the Company and Sumitomo, substantially in the form attached as Exhibit
B, and all amendments and supplements thereto.
"Issuer" means the California Economic Development Financing Authority, a
body public and corporate and a public instrumentality of the State.
"Letter of Credit" means the Transferable Irrevocable Direct Pay Letter of
Credit, substantially in the form attached as Exhibit A, to be issued by
Sumitomo on the Closing Date, including any extension of that letter or any
letter of credit issued by Sumitomo in replacement for that letter.
"LIBOR" means with respect to any Reset Date (as hereinafter defined) the
arithmetic mean of the rates at which deposits in U.S. Dollars are offered by
four major banks In the London interbank market selected by the Bank, at
approximately 11:00 a.m., London time, on the day that is two
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Business Days preceding the Reset Date to prime banks in the London interbank
market for a period of one (1) week commencing on the Reset Date.
"Lien" means (i) any interest in Property (whether real, personal or mixed)
which secures an obligation owed to a Person other than the owner of such
Property, including, without limitation, any such interest arising from a
mortgage, charge, pledge, security agreement, conditional sale or trust receipt,
or arising from a lease, consignment or bailment given for security purposes,
(ii) any encumbrance or charge upon such Property which does not secure such an
obligation, and (iii) any exception to or defect in the title to or ownership
interest in such Property.
"Loan" means a loan made to the Company pursuant to Section 2.5 of this
Reimbursement Agreement.
"Loan Agreement" means the Loan Agreement dated as of August 1, 1997
between the Issuer and the Company, and all amendments and supplements to that
Loan Agreement.
"Non-tendered Bonds" means Bonds which were required to be tendered under
Section 4.07 of the Indenture following notice of mandatory tender thereunder
and which are deemed to have been properly tendered to the extent that the
Trustee has sufficient moneys for the payment of the purchase price of such
Bonds.
"Note" means the Direct Obligation Note, substantially in the form attached
as Exhibit C, being issued by the Company to Sumitomo on the Closing Date.
"Official Statement" means the Official Statement of the Issuer dated
August 4, 1997 relating to the Bonds.
"Outstanding Bonds" or "Bonds Outstanding" when used in connection with the
Bonds shall have the same meaning as in the Indenture.
"Person" means an individual, a corporation, a partnership, an association,
a joint stock company, a joint venture, a trust, an unincorporated organization,
or a government or any agency or political subdivision thereof.
"Pledge Agreement" means the Custody, Pledge and Security Agreement dated
as of August 1, 1997 among the Trustee as custodian, the Company and Sumitomo,
substantially in the form attached as Exhibit D, and all amendments and
supplements thereto.
"Pledged Bond" means any Bond during the period from and including the date
of its purchase with amounts realized under the Letter of Credit to but
excluding the date on which such Bond is purchased by any Person other than
Sumitomo or the Company.
"Pledged Collateral" has the meaning set forth in Section 2.8 hereof
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"Potential Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
"Project" means the construction and installation of a manufacturing
facility by the Company, financed with the proceeds of the Bonds.
"Property" means any and all rights, titles and interests of any Person in
and to any and all property, whether real or personal, tangible or intangible,
wherever situated.
"Rebate Consultant" means a firm of nationally recognized independent
certified accountants, as consultants appointed by the Company, to make the
calculations and determinations required by Section 147(f) of the Code.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System from time to time in effect and includes any successor or other
regulation or official interpretation of the Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Reimbursement Agreement" means this Reimbursement Agreement dated as of
August 1, 1997 between the Company and Sumitomo, and all amendments and
supplements to this Reimbursement Agreement.
"Related Documents" means the Credit Documents, the Bond Documents and any
other agreement or instrument relating thereto.
"Remarketing Agent" means Rauscher Pierce Refsnes, Inc., as remarketing
agent for the Bonds, and any successor variable rate remarketing agent appointed
in accordance with the terms hereof and of the Indenture.
"Remarketing Agreement" means that certain Remarketing Agreement dated as
of August 1, 1997, among the Remarketing Agent, the Issuer and the Company, and
any similar agreement with respect to any successor remarketing agent.
"Reset Day" means Wednesday of each week (or, if such Wednesday is not a
Business Day, the next Business Day).
"Resolutions" means the resolutions of the Issuer adopted on April 30, 1997
and June 20, 1997, authorizing the issuance of the Bonds, and approving the
Letter of Credit.
"Section" means a numbered section of this Reimbursement Agreement unless
another document is specifically referenced.
"State" means the State of California.
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"Stated Amount" has the meaning given to that term in the Letter of Credit.
"Stated Expiration Date" means August 5, 2002, or such later date to which
the Stated Expiration Date may be extended from time to time pursuant to Section
2.9 hereof.
"Sumitomo" means The Sumitomo Bank, Limited, a banking corporation
organized under the laws of Japan, acting through its Los Angeles Branch, which
branch is authorized to do business in California by the Department of Financial
Institutions.
"Taxes" has the meaning set forth in Section 2.10 hereof.
"Trust Estate" means the Revenues and other assets granted by the issuer to
the Trustee pursuant to Section 5.01 of the Indenture for the benefit of the
holders of the Bonds and Sumitomo.
"Trustee" means the trustee at the time serving as such under the
Indenture, currently First Trust of California, National Association.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms. All times used in this Reimbursement
Agreement shall refer to Los Angeles, California time unless otherwise stated.
Section 1.2 Terms Defined in Indenture. Terms not otherwise defined in this
Reimbursement Agreement shall have the meanings given to them in the Indenture.
ARTICLE II
TERMS
Section 2.1 Issuance of Letter of Credit. Subject to the satisfaction of
the terms and conditions of this Reimbursement Agreement, Sumitomo agrees to
issue the Letter of Credit on the Closing Date. The Letter of Credit shall be
issued by Sumitomo in the initial Stated Amount of $8,625,754 which represents
$8,500,000 in principal amount of the Bonds and forty-five (45) days of interest
on the Bonds at an interest rate of 12% per annum calculated on the basis of a
year of 365 days).
Section 2.2 Letter of Credit Fees.
(a) The Company agrees to pay Sumitomo on or before the Closing Date a
nonrefundable facility fee of $8,626 (0.10% of the initial Stated Amount). The
Bank acknowledges receipt of such fee.
(b) For a term commencing on the Closing Date and ending on the
Expiration Date, the Company agrees to pay Sumitomo a support fee (calculated on
the basis of a year
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of 360 days for actual days elapsed) equal to twenty-five one hundredths percent
(0.25%) per annum of the average daily Credit Amount payable at the office of
Sumitomo in Los Angeles, California (or such other office of Sumitomo located in
the United States of America as Sumitomo may designate to the Company in writing
from time to time), quarterly in arrears on November 1, 1997 and thereafter on
each February 1, May 1, August 1 and November 1. Notwithstanding any other terms
or provisions herein contained, such support fee shall be prorated (i) to the
date on which the Letter of Credit is cancelled, in the event a substitute
credit facility is issued and the Letter of Credit is surrendered by the Trustee
for cancellation, or (ii) to the Expiration Date, as appropriate.
Section 2.3 Drawing and Transfer Fees. The Company agrees to pay Sumitomo-
$100 each time there is a draw on the Letter of Credit, regardless of the amount
of such drawing. In addition, the Company agrees to pay Sumitomo $2,000 upon the
transfer of the Letter of Credit to a successor Trustee under the Indenture.
Section 2.4 Reimbursement for Certain Draws. The Company agrees to
immediately reimburse Sumitomo or cause Sumitomo to be immediately reimbursed
for the amount of any draft drawn under the Letter of Credit on the date of such
drawing either (i) for payment of interest on the Bonds whether for regularly
scheduled interest payments on an Interest Payment Date or at maturity or for
accrued interest on Bonds subject to optional redemption or mandatory redemption
or acceleration pursuant to the Indenture; (ii) for payment of principal on the
Bonds whether at maturity or pursuant to an optional redemption or a mandatory
redemption or an acceleration pursuant to the Indenture; or (iii) for payment of
the purchase price of Bonds tendered or deemed tendered pursuant to Section 4.06
or Section 4.07 of the Indenture. Each amount for which the Company has agreed
to reimburse Sumitomo pursuant to this Section 2.4 shall bear interest from the
date on which Sumitomo honors a drawing under the Letter of Credit in such
amount until paid at a rate per annum (calculated on the basis of a year of 360
days for actual days elapsed) equal to the Default Rate, which rate of interest
shall change when and as such Default Rate changes.
Section 2.5 Loan.
(a) Subject to the satisfaction of the ten-ns and conditions in
Section 7.2 of this Reimbursement Agreement, Sumitomo agrees to make a Loan to
the Company on each purchase date to purchase Bonds delivered to the Trustee
pursuant to Section 4.06 or Section 4.07 of the Indenture and Non-Tendered Bonds
which have not been remarketed, in a principal amount equal to the amount drawn
under the Letter of Credit (other than amounts to be reimbursed to Sumitomo
pursuant to Section 2.4); provided, however, that if the terms and conditions
set forth in Section 7.2 are not satisfied, the Company agrees to immediately
reimburse Sumitomo or cause Sumitomo to be immediately reimbursed for the amount
drawn under the Letter of Credit to purchase such Bonds. The Loans shall be
evidenced by and payable pursuant to the Note.
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(b) The principal amount of each Loan shall be due and payable on the
.earliest of (i) the Expiration Date, (ii) the date on which any Pledged Bonds
purchased with finds disbursed under the Letter of Credit in connection with
such Loan are redeemed or cancelled pursuant to the Indenture, (iii) the date on
which any Pledged Bonds purchased with funds disbursed under the Letter of
Credit are remarketed pursuant to the Indenture, (iv) the date on which the
Letter of Credit is replaced by an Alternate Credit Enhancement in accordance
with the terms of the Indenture and Section 4.10 hereof, and (v) the date which
is 30 days immediately succeeding the date of such Loan. Each Loan shall bear
interest, payable monthly in arrears, on its outstanding principal balance at a
rate per annum (calculated on the basis of a year of 360 days for actual days
elapsed) equal to the Bank Rate from the date of such Loan until the maturity
(whether by acceleration or otherwise) of such Loan. Amounts owing on each Loan
which are not paid on the maturity date shall bear interest, payable on demand,
until paid at the Default Rate. Each Loan may be prepaid by the Company, in
whole or in part, at any time upon two (2) Business Days' written notice from
the Company to Sumitomo, by payment of the principal amount to be so prepaid and
accrued interest on such amount to the date of prepayment. Sumitomo shall record
all Loans and all payments made on account of the principal due on the Loan on
the loan schedule attached to the Note. Sumitomo's endorsements on such loan
schedule shall be conclusive absent manifest error. The failure to make any such
notation shall not, however, impair the Company's obligations hereunder and the
failure to make a notation with respect to any prepayment shall not prejudice
any assertion by the Company that a prepayment has been made.
(c) The Company and Sumitomo agree that in the event Pledged Bonds
held by the Trustee as Custodian under the Pledge Agreement are remarketed by
the Remarketing Agent, the amount received from the remarketing shall be paid to
Sumitomo in full or partial payment of the outstanding balance of any Loan.
Section 2.6 Additional Amounts. If the implementation of or any change in
any law or regulation or in the interpretation by any court or administrative or
governmental authority charged with their administration shall either (i)
impose, modify or deem applicable any reserve, special deposit, capital adequacy
or similar requirement not existing on the date of this Reimbursement Agreement
against letters of credit issued by Sumitomo, or any assets held by, deposits
with or for the account of, or loans or commitments by, an office of Sumitomo in
connection with payments by Sumitomo under the Letter of Credit (including
without limitation a request or requirement which affects the manner in which
Sumitomo allocates capital resources to its commitments, including its
obligations hereunder); or (ii) impose on Sumitomo any other condition not
existing on the date of this Reimbursement Agreement regarding this
Reimbursement Agreement or the Letter of Credit, and the result of any event
referred to in clause (i) or (ii) above shall be to (x) increase the cost to
Sumitomo of issuing or maintaining the Letter of Credit (which increase in cost
shall be the result of Sumitomo's reasonable allocation of the aggregate of such
cost increases resulting from such events), or (y) reduce any amounts payable by
the Company hereunder, or (z) reduce the rate of return on Sumitomo's capital as
a consequence of its obligations hereunder or its issuance and maintenance of
the Letter of Credit to a level below that which Sumitomo could have achieved
but for such
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circumstances, then the Company shall immediately pay to Sumitomo, from time to
time as specified by Sumitomo, additional amounts which shall be sufficient to
compensate Sumitomo for such increased cost or reduction in payment or in rate
of return, together with interest at the Corporate Base Rate on each such amount
from the date demanded until paid in full. Each demand by Sumitomo hereunder
shall be accompanied by a certificate setting forth in reasonable detail such
increased cost or reduction in payment or in rate of return as a result of any
event mentioned in clause (i) or (ii) above and shall, absent manifest error, be
conclusive. In determining such amounts, Sumitomo may use any reasonable
commonly accepted averaging and attribution methods.
Section 2.7 Reimbursement Unconditional. The Company's obligation to
reimburse Sumitomo for payments under the Letter of Credit made by Sumitomo
shall be absolute and unconditional under any and all circumstances, including
without limitation the following: (i) the existence of any claim, set-off,
counterclaim or defense to payment which the Company may have against Sumitomo,
the Issuer, the Trustee or any other Person, including without limitation any
failure to receive any of the proceeds from the sale of the Bonds to which it is
entitled, misapplication by the Trustee of such proceeds or the proceeds of any
draw under the Letter of Credit, or (ii) the lack of legality, validity,
regularity or enforceability of the Related Documents, (iii) any amendment or
waiver of or consent to departure from any or all of the Related Documents, (iv)
any statement or any other document presented under the Letter of Credit proving
to be forged, fraudulent, invalid or insufficient or any statement therein being
untrue or inaccurate, (v) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
Section 2.8 Security for Bank Reimbursement Obligations. To secure the due
payment and performance of all Bank Reimbursement Obligations, (i) the Company
has caused the Credit Documents to be executed and delivered to Sumitomo, (ii)
pursuant to the Indenture, the Issuer has granted to the Trustee for the benefit
of Sumitomo all of its rights, title and interest in and to the Trust Estate,
subject only to the security interest therein granted by the Issuer to the
Trustee for the benefit of the holders of the Bonds, and (iii) the Company
hereby pledges and assigns to Sumitomo, and grants to Sumitomo a security
interest in and to, the investment Agreement and all moneys and investments held
thereunder. The interests, rights and amounts pledged to Sumitomo as described
in this Section 2.8 are hereinafter referred to as the "Pledged Collateral". The
Company shall execute and deliver to Sumitomo, at any time at the request of
Sumitomo, all such financing statements and other instruments and documents as
Sumitomo may reasonably request, in a form satisfactory to Sumitomo, to perfect
and maintain perfected any security interest granted by the Company to Sumitomo
in the Pledged Collateral.
Section 2.9 Extension of Term. The initial term of the Letter of Credit
shall be extended by two years at the written request of the Company delivered
to Sumitomo on or before August 5, 2000 ff Sumitomo, in its sole discretion,
notifies the Issuer, the Company and the Trustee in writing within three (3)
months of its receipt of such request that the Letter of Credit will be so
extended. Thereafter, the Letter of Credit shall be extended by two years at the
written request of the Company delivered on or before August 5 in every second
succeeding year if Sumitomo, in its sole discretion, gives notice to such effect
within three (3) months of its receipt of such request. In the event of such
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an extension or extensions, Sumitomo shall extend the term of the Letter of
Credit by delivering to the Trustee, on or prior to the fifteenth (15th)
Business Day next preceding the related Expiration Date, a certificate
substantially in the form of Attachment C to the Letter of Credit. Any such
extension shall be at the sole discretion of Sumitomo and Sumitomo reserves the
right to renegotiate any provision hereof in connection with any such extension.
Section 2.10 Taxes on Payments. All payments made by the Company under this
Reimbursement Agreement shall be made free and clear of, and without deduction
or withholding for or on account of, any present and future income, stamp or
other taxes, levies, imposts, deductions, charges, or withholdings imposed,
assessed, levied or collected by any country or any political subdivision or
taxing authority thereof or therein, but excluding taxes imposed on net income
of Sumitomo by the country under the laws of which Sumitomo is organized or
managed and controlled or any political subdivision or taxing authority thereof
or therein or the country in which Sumitomo's office issuing the Letter of
Credit may be located or any taxing authority of such country or the state or
any political subdivision or taxing authority of the state in which such office
is located (all such non-excluded taxes, levies, imposts, deduction, charges or
withholdings being hereinafter called "Taxes"). If any Taxes are required to be
withheld from any amounts payable to Sumitomo hereunder, the amounts so payable
to Sumitomo shall be increased to the extent necessary to yield to Sumitomo
(after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Reimbursement
Agreement. Whenever any Tax is paid by the Company, as promptly as possible
thereafter, the Company shall send to Sumitomo a certified copy of any original
official receipt received by the Company showing payment thereof. If the Company
fails to pay any Taxes when due to the appropriate taxing authority, the Company
shall indemnify Sumitomo for any incremental taxes, interest or penalties that
may become payable by Sumitomo as a result of any such failure.
Section 2.11 Making of Payments. All payments to Sumitomo shall be made in
immediately available funds at the Los Angeles office (or such other office of
Sumitomo located in the United States of America as Sumitomo may designate to
the Company in writing from time to time), not later than 1:00 p.m. on the date
due; and funds received after that hour shall be deemed to have been received by
Sumitomo on the next following Business Day. If any such payment falls due on a
day which is not a Business Day, then such due date shall be extended to the
next following Business Day, and appropriate additional interest or fees shall
accrue and be payable for the period of such extension.
Section 2.12 Project Fund Requisitions. The Company and Sumitomo understand
and agree that Sumitomo shall not approve any Requisition pursuant to Section
3.03 of the Indenture at any time that the aggregate amount held by Sumitomo
pursuant to the Investment Agreement is less than the aggregate principal amount
of Bonds Outstanding.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
In order to induce Sumitomo to enter into and perform this Reimbursement
Agreement, including, without limitation, to issue and maintain the Letter of
Credit, the Company hereby represents and warrants to Sumitomo as follows:
Section 3.1 Organization and Authorization. The Company is duly and validly
organized and existing under the laws of the State of Delaware, is qualified to
do business in all jurisdictions (including the State) in which the ownership of
property or the nature of its business requires such qualification under
applicable law or where failure to so qualify would have an adverse effect on
its business or properties, and has all requisite power and authority to conduct
its business as now conducted and as proposed to be conducted.
Section 3.2 Power and Authority. The Company has full power and authority
to execute, deliver and perform this Reimbursement Agreement and the Related
Documents to which it is a party, and has the full power and authority to
execute, deliver and perform all other agreements and instruments executed and
delivered or to be executed and delivered by it pursuant to or in connection
with this Reimbursement Agreement, the Bonds and the Related Documents.
Section 3.3 Bank Reimbursement Obligations Legal, Valid and Binding. This
Reimbursement Agreement and the Related Documents to which the Company is a
party have been duly and validly authorized, executed and delivered by it, and
constitute its legal, valid and binding obligations enforceable against it in
accordance with their respective terms, except insofar as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights and remedies
generally, and by general principles of equity, whether applied by a court of
law or equity.
Section 3.4 No Legal Bar. The Company is not in default under any of the
provisions of its certificate of Incorporation or by-laws (other than any
defaults which will be cured on the Closing Date following the issuance of the
Bonds), or any laws of the State of Delaware, the State, and all other
jurisdictions which would affect its existence or its powers referred to in
Section 3.1. The execution, delivery and performance by the Company of this
Reimbursement Agreement -and the Related Documents to which it is a party, and
all other agreements and instruments relating to the foregoing to be executed
and delivered by it In connection herewith and therewith, (i) do not and will
not violate any provision of its certificate of incorporation or by-laws, or any
Governmental Requirement, and (ii) do not and will not violate any provision of,
constitute a default under, or result in the creation or imposition of any Lien
on any assets of the Company (other than the Project) pursuant to the provisions
of, any mortgage, indenture, contract, agreement or other undertaking to which
it as a party or which purports to be binding on it or on any of its assets.
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Section 3.5 Consents. The Company has obtained or will obtain all consents,
permits, licenses and approvals of, and has made all registrations and
declarations with, and taken all other actions with respect to, governmental
authorities required under law to authorize its execution and delivery of this
Reimbursement Agreement and the Related Documents to which it is a party and all
other agreements to be delivered in connection with any thereof, and all such
consents, permits, licenses, approvals, registrations, declarations and actions
remain in fun force and effect.
Section 3.6 Litigation. There is no action, suit, investigation or
proceeding pending or, to the best of its knowledge after due inquiry,
threatened against or affecting the Company or the Project, the result of which
could have a material adverse effect on the financial condition, business or
operations of the Company or impair its ability to perform or observe any of its
duties, liabilities or obligations under this Reimbursement Agreement or any of
the Related Documents to which it is a party.
Section 3.7 Related Documents. As of the Closing Date, after giving effect
to the issuance of the Bonds, the representations and warranties of the Company
set forth in the Related Documents to which it is a party are true and accurate
and are deemed to be repeated herein for the benefit of Sumitomo as if fully set
forth in this Reimbursement Agreement.
Section 3.8 Official Statement. Neither information furnished by the
Company contained in the Official Statement, nor any certificate or written
statement or any other data furnished by it to Sumitomo in connection with the
negotiation of this Reimbursement Agreement or the transactions contemplated
hereby, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading; there is no fact known to it which materially adversely affects or
in the future may materially adversely affect its business, property, assets, or
financial condition which has not been set forth in this Reimbursement
Agreement, the Related Documents, the Official Statement or in the other
documents, certificates and statements furnished to Sumitomo by it prior to the
date hereof in connection with the transactions contemplated hereby.
Section 3.9 Collateral.
(a) Pledged Bonds. The Company has, and on the date of delivery to
Sumitomo of any Pledged Bonds will have, full power, authority and legal right
to cause the Pledged Bonds to be transferred, delivered and registered pursuant
to the terms of this Reimbursement Agreement, the Pledge Agreement, and the
Indenture. The Company covenants and agrees that it will defend Sumitomo's
right, title and interest in and to the Pledged Bonds and the proceeds thereof
against the claims and demands of all Persons whomsoever.
(b) Pledged Collateral. The provisions of the Indenture and this
Reimbursement Agreement are effective to create in favor of Sumitomo a legal,
valid and enforceable pledge of, and a fully perfected security interest in and
lien on all of the Pledged Collateral, including, without limitation, the
Investment Agreement. The Company covenants and agrees that it
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will defend Sumitomo's right, title and interest in and to the Pledged
Collateral, including but not limited to the Investment Agreement, and the
proceeds thereof against the claims and demands of all Persons whomsoever.
Section 3.10 Balance Sheet. The balance sheet of the Company as at December
31, 1996 and the related statements of income and fund balances of the Company
for the calendar year ended December 31, 1996 (copies of which have been
furnished to Sumitomo) fairly present the financial condition of the Company as
of such date and the results of the operations of the Company for the period
ended on such date; and since such date, there has been no material adverse
change in the financial condition, results of operations or prospects of the
Company except as disclosed to Sumitomo by the Company in writing prior to the
Closing Date.
Section 3.11 Existence of Debt and Liens.
(a) Debt. The Company does not have any outstanding Indebtedness,
except as permitted pursuant to Section 4.2(c).
(b) Lines. There are no Liens (including liens or retained security
titles of conditional vendors) of any nature whatsoever securing the payment of
Indebtedness on any properties of the Company, except as permitted by Section
4.2(b).
Section 3.12 Material Conflicts. Each of the material contracts, leases and
other agreements (including, without limitation, each contract, lease or
agreement covered by or to be covered by any Related Document) to which the
Company is a party is in full force and effect, and as of the Closing Date,
after giving effect to the issuance of the Bonds, the Company is not in default
under any thereof, nor is the Company aware of any default or any event which,
with the giving of notice or lapse of time or both, would constitute a default
under any of such documents.
Section 3.13 ERISA. The Company does not maintain or participate in any
plan which is subject to ERISA.
Section 3.14 Compliance with Land Use Ordinances and Agreements. The
Project is or will be in material compliance with all local ordinances and
agreements affecting the Project, including applicable zoning, land use and
planned unit development ordinances and agreements.
ARTICLE IV
COVENANTS
Section 4.1 Company's Affirmative Covenants. The Company covenants and
agrees with Sumitomo that it will do the following so long as any amounts may be
drawn under the Letter of Credit, and thereafter so long as any amounts remain
outstanding or Bank Reimbursement
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Obligations remain unfulfilled under this Reimbursement Agreement, unless
Sumitomo shall otherwise consent in writing-
(a) Notice of Defaults and Bankruptcy. The Company shall forthwith
notify Sumitomo, the Remarketing Agent, and the Trustee, in writing, of the
occurrence of any Event of Default or any event which, with the giving of notice
or lapse of time or both, would constitute an Event of Default, or any default
under the Related Documents or any filing by it or any of its affiliates of a
petition in bankruptcy under the United States Bankruptcy Code, 11 U.S.C. ss.
101, et seq., or any successor or similar provisions now or hereafter in effect
and applicable to it or such affiliates.
(b) Financial and Other information. The Company shall furnish to
Sumitomo, as soon as available and in any event within 90 days after the close
of its fiscal year, (i) a balance sheet of the Company as of the end of each
fiscal year, (ii) the related statements of changes in fund balances, and (iii)
the related statements of revenues, expenditures and the changes for such
calendar year, all of which shall be certified by an Authorized Representative
of the Company and prepared on a consistent basis. In addition, the Company
shall furnish to Sumitomo on each April 15, July 15, October 15 and January 15,
a financial summary of the operations of the Project for the preceding calendar
quarter and from time to time, as Sumitomo may reasonably request, such other
financial information concerning the Company and the Project in order to enable
Sumitomo to determine whether the covenants, terms and provisions of this
Reimbursement Agreement, the Related Documents and all other indebtedness of the
Company have been complied with by the Company, and for that purpose all
pertinent books, documents and vouchers relating to the Company's business
affairs and properties shall at all times during regular business hours be open
to the inspection of such accountants or other agents (who may make copies of
all or any part thereof at their own cost and expense) as shall from time to
time reasonably be designated by Sumitomo. Without limiting the foregoing, the
Company will permit Sumitomo and its designated agents to visit and inspect any
of the properties of the Company and to discuss the affairs, finances and
accounts of the Company with its officers and employees and any accounting firm
performing services for the Company, all at such times and as often as Sumitomo
may reasonably request.
(c) Compliance with Credit and Bond Documents. The Company shall
observe and comply with all of its obligations arising in connection with the
Credit Documents and the Bond Documents to which it is a party and its
certificate of incorporation and by-laws, and all Governmental Requirements, and
all of its covenants and agreements contained in the Credit Documents and the
Bond Documents to which it is a party are hereby reaffirmed and adopted by it
for the benefit of Sumitomo and are incorporated by reference herein as now
written and agreed upon. If the Company does not observe or comply with an
obligation arising in connection with this Reimbursement Agreement or the other
Credit Documents or the Bond Documents to which it is a party, Sumitomo may
inform the Company of such non- observance or non-compliance and request that
the Company immediately observe or comply with such obligation; and if the
Company does not so observe or comply to Sumitomo's
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satisfaction within three (3) Business Days after such request, then Sumitomo
may, but shall not be required to, perform or satisfy such obligation and
request that the Company reimburse Sumitomo in accordance with Section 8.5
hereof.
(d) Insurance. The Company shall from and after the Closing Date
continuously maintain at all times insurance with respect to the Project
satisfactory in all respects to Sumitomo. Sumitomo agrees that the insurance
currently in force with respect to the Project is satisfactory. Any public
liability insurance policy shall name the Trustee and Sumitomo as additional
insureds. All insurance policies shall contain a provision that they shall not
expire, be canceled or materially modified by the insurer except upon at least
thirty (30) days' prior written notice to the Company, the Trustee and Sumitomo.
On the Closing Date, the Company shall provide to the Trustee and Sumitomo a
certificate or certificates of insurance establishing that the required
insurance is in full force and effect, and shall, upon request of Sumitomo or
the Trustee, furnish copies to the requesting party of the original insurance
policies required by this Section 4.1(d).
(e) Licenses and Permits. The Company shall take all necessary and
appropriate action to ensure the continuance in force of all consents, licenses,
permits, orders, decrees, approvals, authorizations, registrations and filings
obtained or made by it in connection with this Reimbursement Agreement, the
Project or the Related Documents or necessary to authorize the execution,
delivery and performance of this Reimbursement Agreement by it, or of the
Related Documents to which it is a party and all other agreements to be
delivered in connection with any thereof.
(f) Further Assurances. The Company shall execute and deliver to
Sumitomo all such documents and instruments, and do all such acts and things, as
may reasonably be necessary or required by Sumitomo to enable Sumitomo to
exercise and enforce its rights under this Reimbursement Agreement and to
realize thereon, and record and Me and rerecord and re-file all such documents
and Instruments, at such time or times, in such manner and at such place or
places, all as may be necessary or required by Sumitomo to validate, preserve
and protect the position of Sumitomo under this Reimbursement Agreement.
(g) Compliance Certificates. As soon as available and in no event
later than ninety (90) days after the close of each of its fiscal years, the
Company will furnish to Sumitomo certificates of compliance signed by an
Authorized Representative of the Company (i) stating that a review of the
activities of the Company has been made under its supervision with a view to
determining whether the Company has fulfilled all of its obligations under this
Reimbursement Agreement and the Related Documents; and (ii) stating that the
Company has fulfilled its obligations under such documents and that all
representations made herein continue to be true and correct (or specifying the
nature of any change), or if any Event of Default or Potential Default shall
have occurred specifying such Event of Default or Potential Default and the
nature and status thereof.
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(h) Payment of Taxes. The Company shall pay or cause to be paid to the
public officers charged with the collection thereof promptly as the same become
due, all taxes, including but not limited to income, profits or property taxes,
which may now or hereafter be imposed by the United States of America, any state
or municipality or any political subdivision or subdivisions thereof, and all
assessments for public improvements or other assessments, levies, license fees,
charges for publicly supplied water or sewer services, excises, franchises,
imposts and charges, general and special, ordinary and extraordinary (including
interest, penalties and all costs resulting from delayed payment of any of the
foregoing) of whatever name, nature and kind and whether or not now within the
contemplation of the parties hereto which are now or may hereafter be levied,
assessed, charged or imposed upon the Company or which are or may become a lien
upon this Reimbursement Agreement, the Related Documents, the Project, the use
or occupation thereof or upon the owner or occupants in respect of or upon the
basis of the rent or the estate thereby created (in connection with the
Project), or upon any franchises, businesses, transactions, income, earnings and
receipts (gross, net or otherwise) of the Company in connection with the
Project, for payment or collection of which the Company is liable or accountable
under any lawful authority whatever by reason of ownership, occupancy or
operation of the Project, or its earnings, profits or receipts from, or its
leasing of, the Project; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any tax,
assessment, lien or other matter hereunder so long as the validity thereof is
being contested in good faith and by appropriate legal proceedings and neither
the Project nor any rent or income therefrom or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost. The Company will,
upon request, provide Sumitomo or the Trustee with copies of any tax returns of
the Company and receipts for payment of taxes.
(i) Maintenance of Existence. The Company shall (i) preserve and
maintain its corporate existence, rights and privileges in the state of its
incorporation and (ii) qualify and remain qualified as a foreign corporation in
each jurisdiction in which the ownership of property or the nature of its
business requires such qualification under applicable law.
(j) Remarketing Agent. The Company shall at all times engage or cause
to be engaged a Remarketing Agent to serve as such under the terms of the
Indenture.
(k) Rebate Consultant. The Company shall engage a Rebate Consultant
acceptable to Sumitomo in the event it or the Internal Revenue Service
determines that the Bonds are subject to the provisions of Section 147(f) of the
Code.
Section 4.2 Company's Negative Covenants. The Company covenants and agrees
with Sumitomo that so long as any amounts may be drawn under the Letter of
Credit and - thereafter so long as any amounts remain outstanding or Bank
Reimbursement Obligations remain unfulfilled under this Reimbursement Agreement,
the Company will not, directly or indirectly, unless Sumitomo shall otherwise
consent in writing:
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(a) Related Documents. Agree to amend, extend, modify, waive, revise
or otherwise alter or terminate any term of the Related Documents.
(b) Liens, etc. Create or suffer to exist any Lien or any other type
of preferential arrangement, upon or with respect to any of its Properties,
whether now owned or hereafter acquired, or assign any right to receive income,
in each case to secure any Indebtedness, other than (i) as created by the
Related Documents, (ii) imposed by law on any property of the Company such as
landlords', carriers', warehousemen's, mechanics' and other similar liens
arising in the ordinary course of its business, not to exceed $25,000 in the
aggregate, (iii) purchase money liens or purchase money security interests upon
or in any equipment owned or held by the Company on the date hereof or owned or
held by the Company hereafter in the ordinary course of its business as
conducted on the date hereof to secure the purchase price of such equipment or
to secure indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, (iv) Liens existing on such equipment at the time
of its acquisition, (v) encumbrances on equipment leased, as lessee, by the
Company pursuant to a lease permitted by this Reimbursement Agreement and the
Related Documents, or (vi) any Liens disclosed on the financial statements
referred to in Section 3. 1 0 hereof.
(c) Debt. Create or suffer to exist any Indebtedness other than (i)
any Indebtedness incurred under this Reimbursement Agreement or any of the
Related Documents, (ii) Indebtedness secured by Liens permitted pursuant to
Section 4.2(b) hereof, (iii) short-term Indebtedness on customary trade terms in
connection with the provision to the Company of goods and services in the
ordinary course of its business as conducted on the date hereof, or (iv)
Indebtedness disclosed on the financial statements refer-red to in Section 3.10
hereof.
(d) Change in Business. Make any material change in the nature of its
business as conducted on the date hereof.
(e) Consolidations, etc. Liquidate, consolidate or merge with or into
any other Person, or convey, transfer, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all of its
assets, property or interest (whether now owned or hereafter acquired), or
acquire all or substantially all of the assets of any Person, or engage in any
other similar or unusual action.
(f) Sales, etc. of Assets. Sell, assign, encumber, mortgage, pledge,
lease, transfer or otherwise dispose of any of its assets or properties or
interests therein (including, without limitation, all or any part of the
Project), other than as permitted pursuant to Section 4.2(b) hereof.
(g) Investments in Other Persons. Make any loan or advance to any
Person or purchase or otherwise acquire any capital stock, obligations or other
securities of, make any capital contribution to, or otherwise invest in, any
Person; provided, however, that nothing
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in this subsection shall prevent the Company from purchasing readily marketable
direct obligations of the United States of America solely in connection with
routine cash management operations.
(h) Official Statement. Refer to Sumitomo in any offering document
(other than the Official Statement) or make any changes in reference to Sumitomo
in any revision of the Official Statement, without Sumitomo's prior written
consent thereto.
(i) Purchase of Stocks. Extend credit to others for the purpose of to
purchasing" or "carrying" any "margin stock" (as defined in Regulation U) or use
any of the proceeds of the Bonds to (i) "purchase" or "carry" any "margin stock"
or (ii) acquire any security in any transaction which is subject to Section
13(d) or made unlawful pursuant to Section 14 of the Securities Exchange Act of
1934.
(j) Optional Redemption of Bonds. Permit an optional redemption of
Bonds under the Indenture without the prior written consent of Sumitomo. If the
Company has deposited with Sumitomo or the Trustee an amount equal to the
principal amount of Bonds to be redeemed pursuant to the Indenture, Sumitomo
shall consent to such optional redemption to the extent of such amounts.
(k) Remarketing Agent. Remove or replace the Remarketing Agent without
the prior written consent of Sumitomo.
ARTICLE V
DEFAULT
Section 5.1 Events of Default. The occurrence of one or more of the
following events shall constitute an Event of Default:
(a) The occurrence of any "Event of Default" or "Default" under, and
as defined in, any Credit Document (other than this Reimbursement Agreement) or
any Bond Document, in each case after giving effect to any applicable grace
periods.
(b) Default in the payment of any Bank Reimbursement Obligation
required to be paid or reimbursed under this Reimbursement Agreement or any
other Credit Document when and as the same is due and payable hereunder or
thereunder.
(c) Any representation or warranty made by the Company under or in
connection with this Reimbursement Agreement or the other Related Documents or
in any certificate, agreement, instrument or statement contemplated by or made
or delivered pursuant to or in connection herewith or therewith shall prove to
have been false or misleading in any material respect.
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(d) The breach by the Company (other than a breach that constitutes an
Event of Default under Section 5.1 clauses (a) through (c) above) of any of the
covenants, terms and provisions contained in Section 4.1(i) or (j) or Section
4.2 hereof.
(e) The breach by the Company (other than a breach that constitutes an
Event of Default under Section 5.1 clauses (a) through (d) above) of any other
covenants, terms and provisions of this Reimbursement Agreement which is not
remedied within 30 days after written notice to the Company by Sumitomo, unless
Sumitomo shall consent to any extension of time for such observance or
performance.
(f) The Company shall (i) be adjudicated as bankrupt, or an order for
relief shall be entered against it under the federal bankruptcy law which
remains unstayed or is not dismissed within sixty (60) days after the entry of
such adjudication or order; (ii) make an assignment for the benefit of
creditors; (iii) apply for, seek, consent to, or acquiesce in, the appointment
of a receiver, custodian, trustee, examiner, liquidator or similar official for
it or any substantial part of its property; (iv) institute any proceeding
seeking an order for relief under the federal bankruptcy law or seeking to
adjudicate it as bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any federal or state law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it; (v)
take any action to authorize or effect any of the foregoing actions set forth in
this Section 5.1(f); or (vi) fail to contest in good faith any appointment or
proceeding described in Section 5.1(g).
(g) Without the application, approval or consent of the Company, a
receiver, custodian, trustee, examiner, liquidator or similar official shall be
appointed for the Company or any substantial part of its Property, or a
proceeding described in Section 5.1(f) shall be instituted against the Company
and such appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of sixty (60) consecutive days.
(h) Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of all or any substantial
portion of the Property of the Company which is material to the operation of the
Company unless the proceeds are used to replace such Property.
(i) The occurrence of a Determination of Taxability.
(j) Any material provision of this Reimbursement Agreement or any of
the other Related Documents shall cease to be valid and binding, or the Company
or any governmental authority shall contest any such provision, or the Company,
or any agent or trustee on behalf of the Company, shall deny that it has any or
further liability under this Reimbursement Agreement or any of the Related
Documents.
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(k) Any governmental body, authority or agency shall require any
amendment to this Reimbursement Agreement or any of the other Related Documents,
or any modification to any of the parties hereto or thereto, which amendment or
modification, in the opinion of Sumitomo, may materially adversely affect any
right or remedy of Sumitomo hereunder or thereunder, or any statute or any rule
or regulation of any governmental body, authority or agency shall render
ineffective or shall materially adversely affect any right or remedy of Sumitomo
hereunder or thereunder, or any such requirement, statute, rule or regulation
shall cause the termination of or otherwise materially affect any duty,
liability or obligation, of the Company to Sumitomo hereunder or under the
Related Documents.
(l) A default shall occur and be continuing beyond any applicable cure
period under any agreement (other than the Related Documents) between the
Company and Sumitomo or under any obligation owed by the Company to Sumitomo.
(m) Any material provision of this Reimbursement Agreement or any of
the other Related Documents shall cease to be valid and binding as respects any
party other than Sumitomo; or any party or any agent or trustee on behalf of
such party, shall deny that it has any further liability under this
Reimbursement Agreement, or any material provision of any of the other Related
Documents to which it is a party.
Section 5.2 Remedies. Upon the occurrence of any Event of Default Sumitomo
may exercise any one or more of the following rights and remedies in addition to
any other remedies herein or by law provided:
(a) declare the principal of and interest on the Bank Reimbursement
Obligations owing hereunder immediately due and payable, notwithstanding the
provisions of Section 2.5;
(b) give notice of the occurrence of an Event of Default to the
Trustee, which notice shall provide that the Letter of Credit shall expire ten
(10) days after receipt of such notice by the Trustee and instruct the Trustee
to cause a redemption of the Bonds pursuant to Section 4.01(7) of the Indenture;
(c) direct the Trustee to exercise its rights under the Indenture and
the Loan Agreement;
(d) exercise Sumitomo's rights under the Related Documents, including
taking sole possession and ownership or control of the Investment Agreement and
all moneys and investments held thereunder; or
(e) pursue any other action available at law or in equity.
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ARTICLE VI
WAIVER, AMENDMENTS AND REMEDIES
Section 6.1 Waiver and Amendments. No delays or omissions of Sumitomo to
exercise any right under the Credit Documents shall impair such right or be
construed to be a waiver of or an acquiescence in any Event of Default, and any
single or partial exercise of any such right shall not preclude other or further
exercise of that right or the exercise of any other right, and no waiver,
amendment or other variation of the terms, conditions or provisions of this
Reimbursement Agreement shall be valid unless in writing signed by Sumitomo, and
then only to the extent specifically set forth in such writing.
Section 6.2 Remedies Cumulative. All remedies contained in the Credit
Documents or by law afforded shall be cumulative and all shall be available to
Sumitomo until the Letter of Credit has expired or been terminated and the Bank
Reimbursement Obligations have been indefeasibly paid in full.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions Precedent to Issuance of Letter of Credit. As
conditions precedent to the obligation of Sumitomo to issue the Letter of
Credit, (a) the Company shall provide or cause to be provided to Sumitomo on the
Closing Date, in form and substance satisfactory to Sumitomo and its counsel:
(i) a written opinion of Luce, Forward, Hamilton & Scripps LLP,
counsel to the Company, dated the Closing Date, substantially in the form
attached as Exhibit E;
(ii) the written opinion of Kutak Rock, bond counsel, dated the
Closing Date, in form and substance satisfactory to Sumitomo's counsel;
(iii) a written opinion of counsel to the issuer, dated the Closing
Date, with respect to the due organization of the Issuer, the power of the
Issuer to enter into the transactions contemplated by the Bond Documents, the
due adoption of all proceedings of the Issuer and the due authorization,
execution, delivery and enforceability of the Bond Documents to which the Issuer
is a party, in form and substance satisfactory to Sumitomo's counsel;
(iv) a certificate of good standing of the Company and a certified
copy of its Certificate of Incorporation, both certified on or within sixty (60)
days prior to the date of execution of this Reimbursement Agreement by the
Secretary of State of
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Delaware and a certificate of an Authorized Officer of the Company stating that
no changes have been made in the Certificate of Incorporation or good standing
of the Company since such date;
(v) a certificate of good standing of the Company, certified on or
within sixty (60) days prior to the date of execution of this Reimbursement
Agreement by the Secretary of the State of California and a certificate of an
Authorized Officer or the Company stating that no changes have been made in the
good standing of the Company since such date;
(vi) copies, certified on the date of execution hereof by an
Authorized Officer of the Company, of its by-laws and resolutions authorizing
the execution of the Related Documents to which the Company is a party, upon
which Sumitomo shall be entitled to rely until informed of any change in writing
by the Company;
(vii) an incumbency certificate, executed by an Authorized Officer of
the Company, which shall identify by name and title and bear the signatures of
the Authorized Officers of the Company authorized to sign this Reimbursement
Agreement and those Related Documents to which the Company is a party and to
effect the transactions under them, upon which Sumitomo shall be entitled to
rely until informed of any change in writing by the Company;
(viii) copies, certified on the date of execution hereof by an
Authorized Officer of the Issuer, of the resolutions of the Issuer authorizing
the issuance of the Bonds and any other resolutions of the Issuer authorizing
the execution of those Bond Documents to which the Issuer is a party, upon which
Sumitomo shall be entitled to rely until informed of any change in writing by
the Issuer;
(ix) an incumbency certificate, executed by an Authorized Officer of
the Issuer, which shall identify by name and title and bear the signatures of
the Authorized Officers of the Issuer authorized to sign those Bond Documents to
which the Issuer is a party and to effect the transactions under them, upon
which Sumitomo shall be entitled to rely until informed of any change in writing
by the Issuer;
(x) a certificate signed by an Authorized Officer of the Company,
dated the Closing Date and stating that:
(a) the representations and warranties contained in Article III
of this Reimbursement Agreement are correct on and as of the Closing Date as
though made on such date; and
(b) no Event of Default has occurred and is continuing, or would
result from the issuance of the Letter of Credit or the execution and delivery
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of this Reimbursement Agreement or any Bond Document or Credit Document to which
the Company is a party, and no event has occurred and is continuing which
constitutes a Potential Default;
(xi) true and correct copies of all governmental approvals
necessary for the Issuer to enter into the Bond Documents to which the Issuer is
a party;
(xii) evidence that the Remarketing Agent has acknowledged and
accepted in writing its appointment as Remarketing Agent under the Indenture and
its duties and obligations thereunder;
(xiii) the receipt of the facility fee payable pursuant to
Section 2.2(a) hereof and all reasonable costs (including the fees and
disbursements of Sumitomo's special and Japanese counsel) associated with the
transactions contemplated by this Reimbursement Agreement in lawful money of the
United States of America in freely transferable and immediately available funds;
(xiv) true and correct copies of the Bond Documents and all other
documents furnished in connection with the issuance and delivery of the Bonds;
(xv) the Credit Documents (other than the Letter of Credit)
executed and delivered on behalf of the parties thereto;
(xvi) evidence satisfactory to Sumitomo and its special counsel
that the insurance policies required by Section 4. 1 (d) hereof are in fun force
and effect on the Closing Date;
(xvii) evidence of filing or simultaneous filing of completed
Uniform Commercial Code financing statements from the Company in such forms and
in such places as Sumitomo shall require; and
(xviii) the receipt of such other documents, certificates and
opinions as Sumitomo or its special counsel may reasonably request;
(a) no law, regulation, ruling or other action of any government,
foreign or domestic, or any political subdivision or authority therein or
thereof shall be in effect or shall have occurred, the effect of which would be
to prevent Sumitomo from fulfilling its obligations under this Reimbursement
Agreement; and
(b) all legal requirements provided herein incident to the execution,
delivery and performance of this Reimbursement Agreement and the Related
Documents and the transactions contemplated hereby and thereby, shall be
reasonably satisfactory to Sumitomo and its counsel.
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Section 7.2 Conditions Precedent to Loans. Following any payment by
Sumitomo under the Letter of Credit pursuant to a drawing for the payment of
Bonds tendered pursuant to Section 4.06 or Section 4.07 of the Indenture or
Non-Tendered Bonds which have not been remarketed, a loan with respect to such
drawing shall be made available to the Company only if on the date on which
Sumitomo honors such drawing the following statements shall be true:
(a) the representations and warranties of the Company contained in
Article III of this Reimbursement Agreement and the other Related Documents are
true and correct on and as of the date of such payment as though made on and as
of such date; and
(b) no event has occurred and is continuing, or would result from such
payment, which constitutes a Potential Default or an Event of Default.
Unless the Company shall have previously advised Sumitomo in writing or
Sumitomo has actual knowledge that one or more of the above statements is no
longer true, the Company shall be deemed to have represented and warranted on
the date of such payment that the above statements are true and correct.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Survival of Certain Representations and Obligations. The
respective agreements, representations and other statements of the Company and
Sumitomo and their respective partners, officials or officers set forth in or
made pursuant to this Reimbursement Agreement will survive the issuance and
delivery of the Bonds.
Section 8.2 Governing Law. The obligations of the Company and Sumitomo
under this Reimbursement Agreement shall be governed by and construed in
accordance with the laws of the State.
Section 8.3 Headings. Section headings in this Reimbursement Agreement are
for convenience of reference only and shall not govern, or be used in, the
interpretation of any of the provisions of this Reimbursement Agreement.
Section 8.4 Benefit of Agreement: Successors. The terms and provisions of
the Credit Documents shall be binding upon and inure to the benefit of the
Company and Sumitomo and their respective successors and assigns, except that
the Company shall not have the right to assign its rights or delegate its duties
under any of the Credit Documents, or any interest in them, without the prior
written consent of Sumitomo.
Section 8.5 Costs, Expenses. The Company agrees to pay on demand all
reasonable costs and expenses (including out-of-pocket expenses) in connection
with the preparation, execution,
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delivery and administration of the Credit Documents and any other documents
which may be delivered in connection with the Credit Documents, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for Sumitomo with respect thereto and with respect to advising Sumitomo as to
its rights and responsibilities under the Credit Documents and the Bond
Documents and all costs and expenses in connection with the enforcement of the
Credit Documents and the Bond Documents and such other documents which may be
delivered in connection herewith and therewith and agrees to save Sumitomo
harmless from and against any and all liabilities with respect to or resulting
from any delay by the Company in paying or omission to pay such fees and
expenses.
Section 8.6 Entire Agreement. The Related Documents embody the entire
agreement and understanding between the Company and Sumitomo and supersede all
prior agreements between the Company and Sumitomo relating to the subject matter
of this Reimbursement Agreement.
Section 8.7 Termination. This Reimbursement Agreement shall terminate upon
the later to occur of the Expiration Date or the date of the indefeasible
payment in full of all of the Bank Reimbursement Obligations.
Section 8.8 Execution in Counterparts. This Reimbursement Agreement may be
executed in multiple counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
Section 8.9 Set-Off. In addition to, and without limitation of, any rights
of Sumitomo under applicable law, if any Event of Default or Potential Default
occurs, any indebtedness from Sumitomo to the Company (including the Investment
Agreement but excluding any trust accounts and other security and cash held in
an agency capacity pursuant to a written agreement with respect to such agency
or trust capacity between Sumitomo and the Company) may be set-off and applied
toward payment of the Bank Reimbursement Obligations, whether or not the Bank
Reimbursement Obligations, or any part of them, shall then be due.
Section 8.10 Severability. If any provision of this Reimbursement Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision of
this Reimbursement Agreement.
Section 8.11 Notices. Unless otherwise provided for in this Reimbursement
Agreement, any notice required or permitted to be given under this Reimbursement
Agreement may be given by certified or registered mail, return receipt
requested, or by telex or telecopy, charges prepaid, or by commercial overnight
delivery service, prepaid, addressed:
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To the Company as follows:
Advanced Aerodynamics and Structures, Inc.
3501 Lakewood Boulevard
Long Beach, California 90808
Attention: Carl L. Chen, Ph.D.
Telecopy: (562) 938-8620
Telephone: (562) 938-8618
To Sumitomo as follows:
The Sumitomo Bank, Limited
Los Angeles Branch
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance
and Financial Institutions Group
Telecopy: (213) 623-6832
Telephone: (213) 955-0800
To the Trustee as follows:
First Trust of California, National Association
One California Street, Fourth Floor
San Francisco, California 94111
Attention: Corporate Trust Department
Telecopy: (415) 273-4590
Telephone: (415) 273-4576
Any notice sent by mail shall be deemed given three (3) days after it is
deposited in the mails. Any notice sent by telex or telecopy shall be deemed
given when confirmed by telex answerback or sent, respectively. Any notice sent
by commercial overnight delivery service shall be deemed given one (1) Business
Day after it is deposited for delivery. Each party may change the address for
service of notice upon it by a notice in writing to the other.
ARTICLE IX
WAIVER OF LIABILITY
Sumitomo shall not be responsible for: (a) the use which may be made of the
Letter of Credit or for any acts or omissions of the users of the Letter of
Credit; (b) the validity, sufficiency, accuracy or genuineness of documents
presented under or in connection with the Letter of Credit, even if such
documents should in fact prove to be in any or all respects invalid, fraudulent
or forged; (c) payment
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by Sumitomo to the Trustee or any transferee of the Letter of Credit against
presentation of documents which do not comply with the terms of the Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) delivery of any messages by mail,
cable, telegraph or otherwise, whether or not they may be in cipher; except only
that the Company may have a claim against Sumitomo and Sumitomo may be liable to
the Company to the extent, but only to the extent of any direct as opposed to
consequential damages suffered by the Company which the Company proves were
caused by (i) Sumitomo's willful misconduct or gross negligence in determining
whether documents presented under the Letter of Credit comply with the terms
thereof or (ii) Sumitomo's failure to pay under the Letter of Credit after the
presentation to it by the Trustee of a draft and certificate strictly complying
with the terms and conditions of the Letter of Credit. The happening of any one
or more of the contingencies referred to in the preceding clauses of this
Article IX shall not affect, impair or prevent the vesting of any of Sumitomo's
rights or powers hereunder, or the Company's obligation to make reimbursement.
In furtherance and extension and not in limitation of the specific provisions
set forth above, the Company agrees that any action taken by Sumitomo under or
in connection with the Letter of Credit or the related drafts or documents, if
taken in good faith, shall be binding on the Company and shall not put Sumitomo
under any resulting liability to the Company and the Company thereby makes like
agreement as to any inaction or omission unless in breach of good faith. The
Company acknowledges that the Letter of Credit shall be transferable and it is
understood and agreed that Sumitomo is under no duty to determine the proper
identity of any one appearing in the draft or documents as transferee, nor shall
Sumitomo be charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers, and payment by
Sumitomo to any purported transferee as reasonably determined by Sumitomo
pursuant to the terms of the Letter of Credit is hereby authorized and approved,
and the Company further agrees to hold Sumitomo harmless and indemnified against
any liability or claim in connection with or arising out of the foregoing.
ARTICLE X
INDEMNIFICATION
The Company hereby indemnifies and holds harmless Sumitomo and its
officers, directors, employees and attorneys from and against any and all
claims, damages, losses, liabilities and reasonable costs or expenses which
Sumitomo may incur (or which may be claimed against Sumitomo by any entity or
entities whatsoever) by reason of or in connection with: (i) the issuance, sale
or resale of the Bonds; (ii) any provision, misstatement or omission of a
material fact contained in (or not contained in, as the case may be) any
document pursuant to which the Bonds are offered for sale or are sold (or
resold), except any provision, misstatement or omission contained in or not
contained under the caption "The Bank" in the Official Statement; (iii) the
execution and delivery or transfer of, or payment or failure to pay under, the
Letter of Credit, except for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by the gross negligence
or willful misconduct of Sumitomo in determining whether a statement or draft
presented under the Letter of Credit complied with the terms of the Letter of
Credit or Sumitomo's willful failure to pay under the Letter of Credit after the
proper presentation of a certificate or draft strictly complying with
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the terms and conditions of the Letter of Credit; and (iv) any other action
taken by Sumitomo in connection with the transactions contemplated by the
Related Documents, except for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by the gross negligence
or willful misconduct of Sumitomo.
The Company agrees that its obligations, covenants and liabilities
hereunder shall survive the execution of each of the Credit Documents, and
continue in full force and effect and shall not be terminated, discharged,
released, in whole or in part, affected or impaired by any act of Sumitomo or
any event or condition. The Company agrees that its liability hereunder shall
not be discharged by: (i) the renewal or extension of time for the payment of
the Bank Reimbursement Obligations under any of the Credit Documents or any
other agreement relating to the Bank Reimbursement Obligations, whether made
with or without the knowledge or consent of the Company; (ii) any transfer,
waiver, compromise, settlement, modification, surrender, or release of any of
the Bank Reimbursement Obligations; (iii) the existence of any defenses to
enforcement of any of the Credit Documents; (iv) any failure, omission, delay or
inadequacy, whether entire or partial, of Sumitomo to exercise any right, power
or remedy regarding the Bank Reimbursement Obligations or to enforce or realize
upon (or to make any guarantor a party to the enforcement or realization upon)
any of Sumitomo's security for the Bank Reimbursement Obligations; (v) the
existence of any set-off, claim, reduction, or diminution of the Bank
Reimbursement Obligations, or any defense of any kind or nature, which the
Company may have against the Company or which any party has against Sumitomo;
(vi) the application of payments received from any source to the payment of any
obligation other than the Bank Reimbursement Obligations, even though Sumitomo
might lawfully have elected to apply such payments to any part or all of the
Bank Reimbursement Obligations; (vii) the addition, deletion or release of any
and all other borrowers, endorsers, guarantors, obligors and other persons
liable for the payment of the Bank Reimbursement Obligations and the acceptance
of any and all other security for the payment of the Bank Reimbursement
Obligations; (viii) any change in the manner, place or terms of payment of any
of the Bank Reimbursement Obligations; and (ix) any act or failure to act in any
manner referred to herein which may deprive the Company of its right to
subrogation against the Company to recover full indemnity for any payments made
pursuant hereto; all whether or not the Company shall have had notice or
knowledge of any act or omission referred to in the foregoing clauses (i)
through (ix) of this Paragraph. The Company intends that it shall remain liable
hereunder as a principal even if all of the Bank Reimbursement Obligations shall
have been paid in full, notwithstanding any fact, act, event or occurrence which
might otherwise operate as a legal or equitable discharge of a surety or
guarantor.
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IN WITNESS WHEREOF, the parties hereto have caused this Reimbursement
Agreement to be duly executed and delivered by their respective officers
hereunto duly authorized as of the date first above written.
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By:
President
ATTEST:
By:
Secretary
(SEAL)
THE SUMITOMO BANK, LIMITED
By:
, Los Angeles Branch
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IN WITNESS WHEREOF, the parties hereto have caused this Reimbursement
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By:
President
ATTEST:
By:
Secretary
(SEAL)
THE SUMITOMO BANK, LIMITED
By:
Joint General Manager, Los Angeles
Branch
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EXHIBIT A
Form of Letter of Credit
IRREVOCABLE LETTER OF CREDIT
Letter of Credit No. G/LA-400557 August 5, 1997
First Trust of California, National Association
not individually but solely as Trustee
One California Street, Fourth Floor
San Francisco, California 94111
Attention: Corporate Trust Department
Ladies and Gentlemen:
We hereby issue in your favor, not individually, but solely as Trustee (the
"Trustee") under the Indenture of Trust dated as of August 1, 1997 (the
"Indenture") between the California Economic Development Financing Authority
(the "Issuer") and you, this irrevocable direct pay letter of credit (this
"Letter of Credit") in an amount not exceeding $8,625,754 (the "Stated Amount"),
of which an amount not exceeding $8,500,000 may be drawn upon with respect to
the payment of principal of the Issuer's $8,500,000 Variable Rate Demand
Industrial Development Revenue Bonds, Series 1997 (Advanced Aerodynamics and
Structures, Inc. Project) (the "Bonds") and an amount not exceeding $125,754 may
be drawn upon with respect to the payment of up to forty-five (45) days' accrued
interest (at the rate of 12% per annum based on a 365-day year) on the Bonds,
for payment of your draft, drawn at sight on The Sumitomo Bank, Limited, acting
through its Los Angeles Branch (the "Bank"), 777 South Figueroa Street, Suite
2600, Los Angeles, California 90017 (or such other address in the United States
of America as may be designated to you in waiting from time to time by the Bank)
accompanied by your signed certificate (with the blanks filled in
appropriately):
1. if the drawing is being made with respect to the payment or provision
for payment of interest on the Bonds, whether for regularly scheduled interest
payments pursuant to Section 2.02 of the Indenture or for accrued interest on
Bonds subject to optional or mandatory redemption pursuant to Article IV of the
Indenture or upon the acceleration of the Bonds pursuant to Section 7.01 of the
Indenture, your certificate in the form attached as Annex I;
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2. if the drawing is being made with respect to the payment of principal
upon an optional or mandatory redemption of Bonds pursuant to Article IV of the
Indenture or upon the maturity of the Bonds pursuant to Section 2.02 of the
Indenture or upon the acceleration of the Bonds pursuant to Section 7.01 of the
Indenture, your certificate in the form attached as Annex II;
3. If the drawing is made with respect to the payment of the accrued
interest and the principal portion of the purchase price of Bonds tendered or
deemed to have been tendered pursuant to Section 4.06 or Section 4.07 of the
Indenture, your certificate in the form attached as Annex III (any such draft
accompanied by such signed certificate is herein referred to as a "Purchase
Price Draft").
More than one demand for payment may be made under this Letter of Credit. A
demand for payment with respect to the payment of interest on or principal of
the Bonds shall not exceed that portion of the Stated Amount allocated to
interest or principal, respectively, as the same is reduced or reinstated from
time to time as provided below.
The expiration date of this Letter of Credit (the "Expiration Date") shall
be the earliest of: (i) our close of business on August 5, 2002 (the "Stated
Expiration Date"), unless the Stated Expiration Date has been extended and the
Stated Amount adjusted (if appropriate) by an instrument substantially in the
form of Attachment C hereto (which forms an integral part of this Letter of
Credit); (ii) ten (10) days after you receive notice from the Bank of an Event
of Default under (and as defined in) the Reimbursement Agreement dated as of
August 1, 1997 between Advanced Aerodynamics and Structures, Inc. (the
"Company") and the Bank (the "Reimbursement Agreement") and a direction to cause
a redemption of all outstanding Bonds under the terms of the Indenture; (iii)
the date on which the Bank receives notice from you that all Bonds have been
paid in full or such payment has been provided for in accordance with the terms
of the Indenture; (iv) the date on which the Bonds become secured by an
Alternate Letter of Credit (as defined in the Indenture) in accordance with the
terms of the Indenture; and (v) the date on which the interest rate on the Bonds
is converted to a fixed rate of interest in accordance with the terms of the
Indenture. You shall surrender this Letter of Credit to the Bank on the
Expiration Date of this Letter of Credit.
A draft and completed signed certificate (other than a Purchase Price
Draft) presented prior to 9:00 a.m., Los Angeles, California time, on any day
except Saturday, Sunday or any day on which banking institutions located in the
Cities of New York, New York or Los Angeles, California or the city in which the
principal office of the Trustee or the Remarketing Agent (as defined in the
Indenture) is located (initially, San Francisco, California) are required or
authorized by law to close or a day on which the New York Stock Exchange is
closed (a "Business Day") shall be honored and the amount of the draft paid in
immediately available funds by 1:00 p.m., Los Angeles, California time) on the
same Business Day, provided that such draft and signed certificate presented
conform to the terms and conditions of this Letter of Credit. A draft and
completed signed certificate (other than a Purchase Price Draft) presented after
9:00 a.m., Los Angeles, California time on any Business Day shall be honored and
the amount of the draft paid in immediately available funds by 11:00 a.m. Los
Angeles, California time, on the following Business Day, provided that such
draft and signed
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certificate presented conform to the terms and conditions of this Letter of
Credit. A Purchase Price Draft presented prior to 9:00 a.m., Los Angeles,
California time, on any Business Day shall be honored and the amount of the
draft paid in immediately available funds by 1:00 p.m., Los Angeles, California
time on the same Business Day, provided that such Purchase Price Draft presented
conforms to the terms and conditions of this Letter of Credit. A Purchase Price
Draft presented after 9:00 a.m., Los Angeles, California time on any Business
Day shall be honored and the amount of the draft paid in immediately available
funds by 11:00 a.m., Los Angeles, California time on the following Business Day,
provided that such draft and signed certificate presented conform to the terms
and conditions of this Letter of Credit. Payment under this Letter of Credit
shall be made in accordance with the payment instructions set forth in the
completed certificate accompanying each draft. All payments made by the Bank
under this Letter of Credit shall be made from the Bank's own funds without any
requirement that the Trustee, the holders of the Bonds or the Bank make any
prior claims against the Company and not out of any funds of the Company, the
Issuer or any entity related to either of them. By the time set forth above on
the Business Day such payment is due the Bank shall enter such payment
instructions on the Federal Reserve wire or, in the event such payment
instructions specify an account maintained with the Bank, credit such account
with immediately available funds.
Any draft or certificate may be presented in person to the Bank or may be
sent to the Bank by telecopier or other electronic communication, promptly
confined by telephone at (213) 955-0800, Attention: Manager - Structured Finance
and Financial Institutions Group, to telecopy number (213) 623-6832 (or such
other telecopy or telephone number as may be designated to you in writing from
time to time by the Bank). Any such draft or certificate presented by telecopy
or other electronic communication shall be mailed or delivered to the Bank on
the same day to our office specified in the first paragraph of this Letter of
Credit.
This Letter of Credit is successively transferable only to a successor
paying agent upon receipt by the Bank of prior written notice of such transfer
in accordance with Attachment A (which forms an integral part of this Letter of
Credit), acknowledged by a purported officer of the Trustee and the transferee,
addressed to the Bank and certifying that the transferee is a successor trustee
under the Indenture.
Each payment of a draft with respect to the payment of interest on or
principal of the Bonds honored by the Bank shall, pro tanto, reduce that portion
of the Stated Amount available under this Letter of Credit, subject to
reinstatement as provided below. Following the honoring of a drawing hereunder
to pay regularly scheduled principal of the Bonds or principal of the Bonds upon
an optional or mandatory redemption of the Bonds, that portion of the Stated
Amount available under this Letter of Credit to pay interest shall also be
reduced to an amount equal to forty-five (45) days' accrued interest (at the
rate of interest of 12% per annum based on a 365-day year) on the principal
amount of the remaining outstanding Bonds (other than Pledged Bonds (as defined
in the Reimbursement Agreement)). In addition, the Stated Amount of this Letter
of Credit shall also be reduced by the amount stated in a written notice of
reduction executed by a purported officer of the Trustee substantially in the
form of Attachment B (which forms an integral part of this Letter of
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Credit). A reduction of the Stated Amount through the use of such a written
notice of reduction shall be effective as of the actual date of receipt by the
Bank of such notice at its above-stated address.
The Stated Amount shall be reinstated as follows:
(a) Following the honoring of a drawing under this Letter of Credit for the
payment of the purchase price of Bonds tendered, or deemed to have been
tendered, to the Trustee or the Tender Agent (as defined in the Indenture)
pursuant to Section 4.06 or Section 4.07 of the Indenture, the Stated Amount
shall be reinstated automatically and immediately upon and to the extent that
you have received payment in immediately available funds of the principal of and
accrued interest on the Pledged Bonds in connection with the remarketing thereof
and are holding such payment for the Bank's sole benefit and account; in such
case, (i) the principal portion of this Letter of Credit shall be reinstated in
an amount equal to the principal amount of the remarketed Bonds and (ii) the
interest portion shall be reinstated to an amount equal to forty-five (45) days'
accrued interest on the Bonds outstanding (other than Pledged Bonds), calculated
at the rate of 12% per annum based on a 365-day year. In connection therewith,
you shall wire transfer such payment to the Bank immediately after receipt
thereof and you shall send to the Bank your telecopy (promptly followed by mail
delivery) notifying the Bank of such payment.
(b) Inunediately following the honoring of a drawing hereunder to make a
regularly scheduled interest payment on the Bonds (that is, other than interest
in connection with an optional redemption or mandatory redemption of the Bonds
in whole or in part or an acceleration or optional or mandatory tender of the
Bonds) in an amount set forth in the certificate in the form of Annex I
submitted in conjunction with such drawing, the Bank's obligation hereunder with
respect to the payment of interest on the Bonds will be automatically reinstated
by the amount of such drawing.
(c) The principal and interest portions of the Stated Amount shall
otherwise be reinstated as the Bank may from time to time notify you in writing.
The Sumitomo Bank, Limited acknowledges and agrees, notwithstanding any
terms or provisions of this Letter of Credit or the Reimbursement Agreement to
the contrary, that this Letter of Credit is in all respects an obligation of The
Sumitomo Bank, Limited, binding and enforceable against its properties, assets
and revenues wherever located.
This Letter of Credit shall be governed by the laws of the State of
California including without limitation, Article 5 of the Uniform Commercial
Code as in effect in the State of California, as supplemented by the provisions
(to the extent such provisions are consistent with this Letter of Credit) of the
Uniform Customs and Practice for Documentary Credits (1993 Revision)
International Chamber of Commerce, Publication No. 500 (the "Uniform Customs").
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We undertake that your draft and certificate drawn and presented on or
before the time of expiration of this Letter of Credit in conformity with the
terms of this Letter of Credit will be duly honored.
Very truly yours,
THE SUMITOMO BANK, LIMITED
By:
, Los Angeles Branch
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ANNEX I (INTEREST DRAW) to
Transferable Irrevocable Direct Pay Letter of Credit Issued by The Sumitomo
Bank, Limited, acting through its Los Angeles Branch
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transferable Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) (the "Letter of
Credit"). Terms defined in the Letter of Credit and not otherwise defined herein
shall have the same meanings herein as therein.
1. As the Trustee pursuant to the Indenture, in trust for the owners of the
Bonds, we hereby make demand for payment under the Letter of Credit to pay or
provide for the payment of unpaid interest on such Bonds in connection with
either a regularly scheduled interest payment, an optional redemption, a
mandatory redemption or acceleration of the Bonds. Such Bonds have been duly
authenticated under and in accordance with the Indenture.
2. Interest on the Bonds is now or will under the terms of the Indenture
become due and payable on or prior to the regularly scheduled interest payment
date, maturity date or redemption date of the Bonds and the aggregate amount
required to pay or to provide for the payment of the same is
$____________________ and payment of such amount is hereby demanded.
3. The amount demanded does not exceed the amount available today to be
drawn under the Letter of Credit in respect of the payment of interest on the
Bonds.
4. Upon receipt of the amount demanded under this Letter of Credit, we will
apply the same directly to the payment when due of interest owing on account of
the Bonds.
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5. [Please wire the amount demanded hereunder to account no. _____________
at _____________ in _______.] [Please credit account no. _______ maintained with
you.]
Dated as of ______________, 19__.
First Trust of California, National
Association, not in its individual or
corporate capacity, but solely as
Trustee under the Indenture.
By:
Title:
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ANNEX II (PRINCIPAL DRAW) to
Transferable Irrevocable Direct Pay Letter of Credit Issued by The Sumitomo
Bank, Limited, acting through its Los Angeles Branch
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transferable Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) (the "Letter of
Credit"). Terms defined in the Letter of Credit and not otherwise defined herein
shall have the same meanings herein as therein.
1. As the Trustee pursuant to the Indenture, in trust for the owners of the
Bonds, we hereby make demand for payment under the Letter of Credit to pay all
or a portion of the unpaid principal amount of such Bonds which have been duly
authenticated under and in accordance with the Indenture in connection with
either an optional redemption, a mandatory redemption or upon maturity or
acceleration of the Bonds.
2. Principal on the Bonds is now or will under the terms of the Indenture
become due and payable on or prior to the maturity date or redemption date of
the Bonds; the drawing in the amount of $_________ is being made to pay the
principal portion of each such Bond and payment of such amount is hereby
demanded.
3. The amount demanded does not exceed the amount available on the date
hereof to be drawn under the Letter of Credit in respect of the payment of
principal on the Bonds.
4. Upon receipt of the amount demanded under this Letter of Credit, we will
apply the same directly to the payment of the principal owing on account of the
Bonds.
5. The Stated Amount of the Letter of Credit shall be permanently reduced
by the amount of the draw hereunder.
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6. [Please wire the amount demanded hereunder to account no. _________ at
________________ in _____.] [Please credit account no. _______ maintained with
you.]
Dated as of ______________, 19__.
First Trust of California, National
Association, not in its individual or
corporate capacity, but solely as
Trustee under the Indenture.
By:
Title:
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ANNEX III (PURCHASE PRICE DRAW) to
Transferable Irrevocable Direct Pay Letter of Credit Issued by The Sumitomo
Bank, Limited, acting through its Los Angeles Branch
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transferable Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) (the "Letter of
Credit"). Terms defined in the Letter of Credit and not otherwise defined herein
shall have the same meanings herein as therein.
1. As the Trustee pursuant to the Indenture, we hereby make demand for
payment under the Letter of Credit to pay a part or all of the interest portion
and the principal portion of the purchase price to be paid in respect of Bonds
which have been duly authenticated under and in accordance with the Indenture
and which have been tendered or were deemed to have been tendered pursuant to
Section 4.06 or Section 4.07 of the Indenture and for which remarketing proceeds
have not been received.
2. The drawing in the aggregate amount of $ is being made to pay the
purchase price of Bonds which have been tendered or were deemed to have been
tendered. Such aggregate amount equals the sum of the amounts set forth in
paragraphs 3 and 5 below.
3. The portion of the drawing equal to $ is being made to pay a part or all
of the interest portion of the purchase price of such Bonds which have been
tendered or were deemed to have been tendered and for which remarketing proceeds
have not been received corresponding to the accrued interest thereon, and
payment of such amount is hereby demanded.
4. Upon receipt of the amount set forth under paragraph 3 above, we will
apply the same directly to the payment of a part or all of the interest portion
of the amount to be paid in respect of the Bonds.
5. The portion of the drawing equal to $ is being made to pay the principal
portion of the purchase price of such Bonds which have been tendered or were
deemed to have been tendered and for which remarketing proceeds have not been
received, and payment of such amount is hereby demanded.
A-10
<PAGE>
6. Upon receipt of the amount set forth under paragraph 5 above, we will
apply the same directly to the payment of the principal portion of the purchase
price to be paid in respect of the Bonds.
7. The amount set forth under paragraph 3 above does not exceed the amount
available on the date hereof to be drawn under the Letter of Credit in respect
of the payment of interest on the Bonds and the amount set forth under paragraph
5 above does not exceed the amount available on the date hereof to be drawn
under the Letter of Credit in respect of the payment of principal on the Bonds.
8. [Please wire the amount demanded hereunder to account no. ____________
at _______________ in __________.] [Please credit account no. __________
maintained with you.]
Dated as of ____________, 19__.
First Trust of California, National
Association, not in its individual or
corporate capacity, but solely as
Trustee under the Indenture.
By:
Title:
A-11
<PAGE>
ATTACHMENT A TO TRANSFERABLE IRREVOCABLE
DIRECT PAY LETTER OF CREDIT
(Transfer Certificate)
_________,19__
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transferable Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) (the "Letter of
Credit").
The undersigned is the Trustee referred to in the Letter of Credit and we
hereby give you notice that _________________ is the successor Trustee (the
"Successor Trustee") under the Indenture referred to in the Letter of Credit,
and that the Successor Trustee shall succeed to all the rights and obligations
of the Trustee under the Letter of Credit.
Upon payment to you of a $2,000 transfer fee by Advanced Aerodynamics and
Structures, Inc., your consent to the transfer of the Letter of Credit with the
date thereof to be confirmed by a Notary Public in Japan (or otherwise
officially established) pursuant to the laws of Japan and receipt by us of your
acknowledgment and acknowledgment by the Successor Trustee of this notice, the
Letter of Credit shall be deemed to have been transferred to the Successor
Trustee.
Very truly yours,
First Trust of California, National
Association
By:
Title:
Agreed and Accepted: Acknowledged:
The Sumitomo Bank, Limited, [Name of Successor Trustee]
acting through its
Los Angeles Branch
By: By:
Title: Title:
Date: Date:
A-12
<PAGE>
ATTACHMENT B TO TRANSFERABLE IRREVOCABLE
DIRECT PAY LETTER OF CREDIT
(Reduction Certificate)
_______________, 19__
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transferable Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) by
___________________ Dollars ($___________). This reduction in Stated Amount
shall go to reduce that portion of the Stated Amount allocated to (principal,
interest)* relating to the Bonds and shall be effective as of the actual date of
receipt of this instrument by The Sumitomo Bank, Limited. Accordingly, the
Stated Amount of the Letter of Credit after giving effect to such reduction
shall be _________________ Dollars ($___________). It is acknowledged that the
amount of such reduction shall no longer be available for payment of drafts
under the Letter of Credit. All terms used in this instrument which are defined
in the Letter of Credit shall have the same meaning in this instrument as in the
Letter of Credit.
First Trust of California, National
Association, not in its individual or
corporate capacity, but solely as
Trustee under the Indenture referred to
in the Letter of Credit.
By:
Title:
- ------------------
*Complete as appropriate.
A-13
<PAGE>
ATTACHMENT C TO TRANSFERABLE IRREVOCABLE
DIRECT PAY LETTER OF CREDIT
(Notice of Extension)
____________, 19__
The Sumitomo Bank, Limited (Los Angeles Branch)
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance and
Financial Institutions Group
Gentlemen:
We refer to Transferable Irrevocable Direct Pay Letter of Credit No.
G/LA-400557 issued in support of the $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1997 (Advanced Aerodynamics and Structures, Inc. Project), in the
original Stated Amount of $8,625,754 (the "Letter of Credit"). We hereby notify
you that, in accordance with the terms of the Letter of Credit and that certain
Reimbursement Agreement dated as of August 1, 1997, between Advanced
Aerodynamics and Structures, Inc. and us, the Stated Expiration Date (as defined
in the Letter of Credit) of the Letter of Credit has been extended to
______________.
The portions of the Stated Amount of the Letter of Credit available to pay
principal and interest on the Bonds are $______________ and $_______________,
respectively, and the Stated Amount is $______________.
This letter should be attached to the Letter of Credit and made a part
thereof.
THE SUMITOMO BANK, LIMITED LOS
ANGELES BRANCH
By:
Its:
A-14
<PAGE>
EXHIBIT B
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this "Investment Agreement"), dated August 5,
1997 is by and between ADVANCED AERODYNAMICS AND STRUCTURES, INC. ("the
Company"), and THE SUMITOMO BANK, LIMITED (the "Bank"), acting by and through
its Los Angeles Branch.
WITNESSETH:
WHEREAS, the California Economic Development Financing Authority (the
"Issuer") has issued its Variable Rate Demand Industrial Development Revenue
Bonds, Series, 1997 (Advanced Aerodynamics and Structures, Inc. Project) (the
"Bonds") in the aggregate principal amount of $8,500,000 pursuant to an
Indenture of Trust dated as of August 1, 1997 (the "Indenture") between the
Issuer and First Trust of California, National Association (the "Trustee"); and
WHEREAS, the Bank has agreed to issue its Irrevocable Letter of Credit No.
G/LA-400557 dated August 5, 1997 (the "Letter of Credit") to secure payment of
principal of, interest on and purchase price of, the Bonds pursuant to a
Reimbursement Agreement dated as of August 1, 1997 (the "Reimbursement
Agreement") between the Bank and the Company; and
WHEREAS, to induce the Bank to issue the Letter of Credit and secure the
obligations of the Company to the Bank under the Reimbursement Agreement, the
Company has agreed to deposit certain moneys with the Bank pursuant to this
Investment Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties intending to be legally bound
hereby agree as follows:
Section 1. Invested Funds. The Company hereby establishes this Investment
Agreement with the Bank and agrees that, pursuant to the terms of this
Investment Agreement, the Company shall invest with the Bank the aggregate
amount of $8,500,000 (the "Invested Funds"). The Company agrees to cause the
Invested Funds to be delivered to the Bank on August 5, 1997 for investment
pursuant to the terms of this Investment Agreement. The Company hereby
acknowledges that the Invested Funds and any interest accrued thereon under this
Investment Agreement are not insured by the Federal Deposit Insurance
Corporation.
Section 2. Investments with the Bank. Investments hereunder shall be made
by wire transfer in immediately available funds to Sumitomo Bank of California,
San Francisco, California, ABA #121002042 for the account of the Bank, account
number 051-014969-86, reference: AASI.
Section 3. Term of Agreement. This Investment Agreement will terminate with
respect to the Invested Funds on the earlier of August 5, 2002 or the Expiration
Date of the Letter of Credit (the "Maturity Date") unless extended at the
request of the Company with the approval of the Bank.
<PAGE>
Prior to the Maturity Date, the Bank shall have absolute and unconditional
custody and control over the Invested Funds. Subject to the terms of the
Reimbursement Agreement, the Invested Funds shall be due and payable by the Bank
to the Company in immediately available funds to the account specified by the
Company to the Bank on the Maturity Date. Provided no Event of Default has
occurred and is continuing under the Reimbursement Agreement, Invested Funds
shall be due and payable by the Bank to the Company in immediately available
funds to the account specified by the Company to the Bank within three days
following (i) an optional redemption of Bonds pursuant to Article IV of the
Indenture in the amount of the Bonds so redeemed or (ii) receipt of a request by
the Company, which request shall include an acknowledgment by the Company that
the Bank shall not approve any Requisition pursuant to Section 3.03 of the
Indenture at any time that the aggregate amount held by the Bank pursuant to
this Investment Agreement is less than the aggregate principal amount of Bonds
Outstanding and that an amount of Bond proceeds at least equal to the amount of
Invested Funds paid to the Company has been invested with the Bank.
Section 4. Interest. Interest shall accrue on the daily outstanding balance
of the Invested Funds from and including August 5, 1997 to and including the
Maturity Date at LIBOR (as hereinafter defined) less 0.15% per annum (calculated
on the basis of a 360-day year for actual number of days elapsed). As used
herein, "LIBOR" means with respect to any Reset Date (as hereinafter defined)
the arithmetic mean of the rates at which deposits in U.S. Dollars are offered
by four major banks in the London interbank market selected by the Bank, at
approximately 11:00 a.m., London time, on the day that is two Business Days
preceding the Reset Date to prime banks in the London interbank market for a
period of one (1) month commencing on the Reset Date. "Reset Date" means the
first business day of each calendar week.
Provided no Event of Default has occurred and is continuing under the
Reimbursement Agreement, interest shall be credited to the account specified by
the Company on the first Business Day of each month, on the Maturity Date or on
any earlier date on which Invested Funds are paid to the Company hereunder.
Interest in an amount equal to one-quarter of the total interest accruing
hereunder through August 5, 1999 shall be added to and become part of the
Invested Funds on such date. The balance shall be paid to or for the account of
the Company on such date to the account specified in or pursuant to Section 3
hereof or as otherwise directed by the Company.
Section 5. Representations and Warranties. (a) The Company represents and
warrants to the Bank that: (i) this Investment Agreement constitutes a valid and
binding obligation of the Company; and (ii) the execution, delivery and
performance of this Investment Agreement by the Company will not result in a
breach or violation of or cause a default under any provision of any law,
regulation, order, license, decree, judgment, indenture, contract or agreement
binding upon the Company.
(b) The Bank represents and warrants to the Company that: (i) this
Investment Agreement constitutes a valid and binding obligation of the Bank; and
(ii) the execution, delivery and performance of this Investment Agreement by the
Bank will not result in a breach or violation of or
B-2
<PAGE>
cause a default under any provision of any law, regulation, order, license,
decree, judgment, indenture, contract or agreement binding upon the Bank.
Section 6. Role of the Bank. It is expressly understood and agreed that in
performing its obligations hereunder, the Bank is not acting as a fiduciary,
agent or other representative for the registered owners of the Bonds or anyone
else, and that neither the Bank nor any of its directors, officers, employees,
or agents shall be liable or responsible for: (i) the payment to the registered
owners of any amounts owing on or with respect to the Bonds; or (ii) any acts or
omissions of the Issuer or the Trustee under or with respect to the validity or
enforceability of the Bonds or the Indenture.
Section 7. No Implied Rights. Nothing expressed or implied herein is
intended or shall be construed to confer upon any person, firm or corporation
other than the parties hereto any right, remedy or claim by reason of this
Investment Agreement or any term hereof, and all terms contained herein shall be
for the sole and exclusive benefit of the parties hereto and their successors.
Section 8. Notices. All notices given pursuant to this Investment Agreement
shall be given telephonically, with verification sent by first-class mail,
postage prepaid, or by telex or telecopier, or overnight commercial courier sent
that Business Day to the addresses fisted below, or to such other addresses or
to the attention of such other person as such party shall have designated for
such purpose in a written notice to the other:
To the Company as follows:
Advanced Aerodynamics and Structures, Inc.
3501 Lakewood Boulevard
Long Beach, California 90808
Attention: Carl L. Chen, Ph.D.
Telecopy: (562) 938-8620
Telephone: (562) 938-8618
To Sumitomo as follows:
The Sumitomo Bank, Limited
Los Angeles Branch
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance
and Financial Institutions Group
Telecopy: (213) 623-6832
Telephone: (213) 955-0800
B-3
<PAGE>
To the Trustee as follows:
First Trust of California, National Association
One California Street, Fourth Floor
San Francisco, California 94111
Attention: Corporate Trust Department
Telecopy: (415) 273-4590
Telephone: (415) 273-4576
However, the failure by either party to provide written confirmation on the same
Business Day of any telephonic notice given hereunder will not result in a
breach of this Investment Agreement.
Section 9. Successors and Assigns. This Investment Agreement and all
obligations and rights arising hereunder shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, transferees and
assigns. This Investment Agreement may not be assigned by any party without the
prior written consent of the other party.
Section 10. Amendments and Waivers. This Investment Agreement may not be
modified, amended or supplemented, and no term or provision hereof may be
waived, except in writing signed by the parties hereto.
Section 11. Governing Law. The obligations of the Company and the Bank
under this Investment Agreement shall be governed by and construed in accordance
with the laws of the State of California.
Section 12. Counterparts. This Investment Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same instrument.
B-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be executed as of the date written above.
THE SUMITOMO BANK, LIMITED
By:
_______________, Los Angeles Branch
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By:
President
ATTEST:
By:
Secretary
(SEAL)
B-5
<PAGE>
EXHIBIT C
DIRECT OBLIGATION NOTE
FOR VALUE RECEIVED, the undersigned, ADVANCED AERODYNAMICS AND STRUCTURES,
INC. (the "Company"), hereby promises to pay to THE SUMITOMO BANK, LIMITED
("Sumitomo"), a banking corporation organized under the laws of Japan, acting
through its Los Angeles Branch, on or before August 5, 2002, the lesser of (i)
the principal sum of Eight Million Six Hundred Twenty-Five Thousand Seven
Hundred Fifty-Four Dollars ($8,625,754), together with all other amounts due and
owing under the Reimbursement Agreement dated as of August 1, 1997 (as amended
from time to time, the "Reimbursement Agreement") between the Company and
Sumitomo, or (ii) the aggregate outstanding amount of all loans made to the
Company by Sumitomo pursuant to the Reimbursement Agreement, together with all
other amounts due and owing under the Reimbursement Agreement, in immediately
available funds at the principal corporate office of Sumitomo's Los Angeles
Branch in Los Angeles, California (or such other office of Sumitomo located in
the United States of America as Sumitomo may designate to the Company in writing
from time to time), on the dates and at the times specified in the Reimbursement
Agreement and to pay interest on the outstanding balance of such amounts at the
times specified in the Reimbursement Agreement at a rate per annum (except as
otherwise specified in the Reimbursement Agreement) equal to (x) LIBOR less
0.15% per annum and (y) with respect to any amounts not paid when due, a rate
per annum equal to the sum of the corporate base rate publicly announced by
Morgan Guaranty Trust Company of New York in New York, New York (or its
successor), from time to time as its prevailing corporate base rate, which rate
shall change when and as said corporate base rate changes, plus two percent
(2.0%). Sumitomo is authorized to record all loans and all payments made on
account of the principal due on the loans on the Loan Schedule attached hereto.
Such Loan Schedule, and any continuations thereof, are hereby incorporated by
reference herein and made a part hereof, and Sumitomo's endorsements thereon
shall be conclusive absent manifest error. The failure to make any such notation
shall not, however, affect the Company's obligations under this Note. As used
herein, "LIBOR" means with respect to any Reset Date (as hereinafter defined)
the arithmetic mean of the rates at which deposits in U.S. Dollars are offered
by four major banks in the London interbank market selected by the Bank, at
approximately 11:00 a.m., London time, on the day that is two Business Days
preceding the Reset Date to prime banks in the London interbank market for a
period of one (1) week commencing on the Reset Date. "Reset Date" means
Wednesday of each week (or, if such Wednesday is not a Business Day, the next
Business Day).
This obligation is issued under, and is subject to all of the terms of, the
Reimbursement Agreement. Terms defined in the Reimbursement Agreement and not
otherwise defined herein shall have the same meanings herein as therein.
Notwithstanding the due date of this Note each and every amount payable
shall be accelerated to the extent that: (x) funds are available from the
Trustee from sources available under the Indenture, (y) funds are available from
the Remarketing Agent from the remarketing proceeds of the Bonds, or (z) funds
are available from any Alternate Letter of Credit (as defined in the Indenture).
<PAGE>
The Company hereby waives presentment for payment, demand, protest, notice
of protest, notice of dishonor and all defenses on the ground of extension of
time of payment for the payment hereof which may be given (other than in
writing) by Sumitomo to the Company.
This Note shall be governed by and construed in accordance with the laws of
the State of California.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
Dated: August 5, 1997
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By:
President
ATTEST:
By:
Secretary
C-2
<PAGE>
LOAN SCHEDULE
Principal Principal Notation
Date Amount Paid Balance Made By
C-3
<PAGE>
EXHIBIT D
CUSTODY, PLEDGE AND SECURITY AGREEMENT
CUSTODY, PLEDGE AND SECURITY AGREEMENT dated as of August 1, 1997 is
entered into among ADVANCED AERODYNAMICS AND STRUCTURES, INC., a limited
partnership organized under the laws of the State of Delaware (the "Company"),
THE SUMITOMO BANK, LIMITED, a banking corporation organized under the laws of
Japan, acting through its Los Angeles Branch ("Sumitomo"), and FIRST TRUST OF
CALIFORNIA, NATIONAL ASSOCIATION, as custodian (the "Custodian"), pursuant to
the Reimbursement Agreement dated as of August 1, 1997 between the Company and
Sumitomo (hereinafter, as the same may from time to time be amended or
supplemented, called the "Reimbursement Agreement"):
RECITALS
1. On August 5, 1997, the California Economic Development Financing
Authority (the "Issuer") issued its Variable Rate Demand Industrial Development
Revenue Bonds, Series l 997 (Advanced Aerodynamics and Structures, Inc. Project)
(the "Bonds") pursuant to an Indenture of Trust dated as of August 1, 1997 (as
amended or supplemented from time to time, the "Indenture") between the Issuer
and First Trust of California, National Association, as trustee (together with
any successor trustee under the Indenture, the "Trustee").
2. The Indenture requires that the Bonds be purchased from the owners
thereof on the dates on which the Bonds are subject to optional or mandatory
tender pursuant to Sections 4.06 and 4.07 of the Indenture (any such date is
referred to herein as the "Tender Date") under the circumstances set forth in
the Indenture.
3. The Company has agreed to enter into the Reimbursement Agreement and
thereby cause Sumitomo to issue its transferable irrevocable direct pay letter
of credit (the "Letter of Credit") which may be drawn upon, inter alia, to pay
the purchase price of Bonds which are subject to optional or mandatory tender on
such Tender Dates.
4. Bonds tendered or deemed to have been tendered pursuant to the Indenture
which are purchased by a draw on the Letter of Credit will be registered in the
name of Sumitomo or its nominee pursuant to this Pledge Agreement unless
Sumitomo directs otherwise.
5. It is a condition precedent to Sumitomo's delivery of the Letter of
Credit that the Company enter into this Custody, Pledge and Security Agreement
(as amended or supplemented from time to time, this "Pledge Agreement") with
Sumitomo and the Custodian.
6. First Trust of California, National Association has been appointed as
the Trustee under the Indenture and has also agreed to act as a custodian under
this Pledge Agreement.
D-1
<PAGE>
NOW, THEREFORE, in consideration of the premises and in order to induce
SUMITOMO to enter into the Reimbursement Agreement and issue the Letter of
Credit thereunder and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Reimbursement Agreement or the Indenture shall have such defined meanings when
used herein.
2. Pledge. The Company hereby pledges, assigns, hypothecates, transfers and
delivers to Sumitomo all its right, title and interest in and to all Bonds, as
the same may be from time to time delivered to the Trustee by the owners
thereof, that may be purchased with funds drawn under the Letter of Credit (the
"Pledged Bonds"), and hereby grants to Sumitomo a first lien on, and security
interest in, all rights, title and interest of the Company in and to the Pledged
Bonds, the interest thereon and all proceeds thereof, as collateral security for
the prompt and complete payment when due of all amounts due to Sumitomo under
the Reimbursement Agreement and the performance of all other obligations of the
Company under the Reimbursement Agreement and the other Credit Documents (all of
the foregoing being hereinafter called the "Obligations").
3. Custody and Registration of Bonds: Fees of Custodian.
(a) Sumitomo hereby designates and appoints the Custodian as its agent
and bailee to perfect Sumitomo's pledge, assignment and security interest in the
Pledged Bonds and to serve in accordance with the terms and conditions of this
Pledge Agreement as custodial agent of Sumitomo for the Pledged Bonds, the
interest thereon and all proceeds thereof. Upon any drawing under the Letter of
Credit for the purchase price of the Bonds, the Trustee shall deliver such
Pledged Bonds to the Custodian, and the Custodian hereby accepts such
appointment and agrees to perform as custodial agent for Sumitomo and to hold
Pledged Bonds on behalf of Sumitomo in accordance with the provisions of this
Pledge Agreement. Upon receipt of such Bonds, the Custodian shall notify the
Remarketing Agent and the Company (by telecopier or other electronic
communication) that Bonds equal to the portion of the purchase price
attributable to principal are being held by the Custodian for Sumitomo pursuant
to this Pledge Agreement.
(b) Unless otherwise directed by Sumitomo (but subject to the
provisions of Section 11 hereof), the Custodian shall cause either (A) any
Pledged Bonds which have not been remarketed in accordance with the Remarketing
Agreement to be registered by the Trustee in the name of Sumitomo or its nominee
or (B) if DTC is the registered owner of all Bonds, any Pledged Bonds which have
not been remarketed in accordance with the Remarketing Agreement to be
registered in the name of DTC with Sumitomo's or its nominee's beneficial
ownership interest of such Pledged Bonds recorded by DTC on its books. The
Company hereby agrees that it will execute and deliver such documents and take
such steps as Sumitomo may reasonably request in order to perfect and maintain
perfected Sumitomo's security interest in the Collateral.
D-2
<PAGE>
(c) The Company irrevocably constitutes and appoints the Custodian as
its attorney to cause the transfer of any Pledged Bonds on the books kept for
the registration thereof and authorizes the Custodian to deliver Pledged Bonds
to the Trustee for reregistration, if appropriate, and delivery in accordance
with the terms of this Pledge Agreement.
(d) The fees of the Custodian, if any, in connection with this Pledge
Agreement shall be for the account of the Company.
4. Payments on the Bonds; Voting Rights.
(a) If, while this Pledge Agreement is in effect, the Company shall
become entitled to receive or shall receive any payment, including, without
limitation, any payment of principal, premium, interest or proceeds of sale, in
respect of the Pledged Bonds, such payment shall be subject to this Pledge
Agreement. Any such payment shall be made directly to Sumitomo, and, in the
event any such payment is received by the Company, the Company agrees to accept
the same as Sumitomo's agent, to hold the same in trust on behalf of Sumitomo
and to deliver the same forthwith to Sumitomo. All sums of money so paid in
respect of the Pledged Bonds which are received by the Company and paid to
Sumitomo and all such amounts which shall be paid directly to Sumitomo by the
Trustee shall be credited against the Obligations of the Company owed to
Sumitomo. If the payments are in excess of the amounts owed to Sumitomo,
Sumitomo shall return the excess to the Company.
(b) During such time as Bonds are pledged to Sumitomo under the terms
of this Pledge Agreement, Sumitomo shall be entitled to exercise all of the
rights of an owner of Bonds with respect to voting, consenting and directing the
Trustee as if Sumitomo were the owner of such Bonds, and the Company hereby
grants and assigns to Sumitomo all such rights.
5. Collateral. The Pledged Bonds, all income therefrom and proceeds thereof
are herein collectively sometimes called the "Collateral."
6. Release of the Bonds.
(a) Simultaneously with the receipt by the Custodian of the proceeds
of sale of any Pledged Bonds which are remarketed in accordance with the
Indenture and the Remarketing Agreement for a purchase price of not less than
the principal amount thereof, Pledged Bonds in a principal amount equal to the
purchase price shall be released from the lien of this Pledge Agreement and
delivered at the direction of the Remarketing Agent. The Custodian agrees that
the proceeds of such sale will be disbursed in accordance with the provisions of
Section 8.11 of the Indenture.
D-3
<PAGE>
(b) Upon receipt by the Custodian of written notice from Sumitomo,
which notice may be sent by telecopy if immediately confirmed in writing, that
Sumitomo has received payment or prepayment in full of all amounts owing under
the Reimbursement Agreement, all such Pledged Bonds and any other Collateral
pledged to Sumitomo then subject to the lien of this Pledge Agreement shall be
released herefrom and registered in the name of and delivered to the Company or
its order.
7. Exculpatory Provisions. Neither the Custodian nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates shall be liable
for any action lawfully taken or omitted to be taken by it or such person under
or in connection with this Pledge Agreement (except for its or each person's own
gross negligence or willful misconduct), including any failure to collect or
realize upon the Obligations or any Collateral, security or guaranty therefor or
any part thereof. The Company hereby indemnifies the Custodian from and against
any and all claims, losses, damages, liabilities and expenses which may be
imposed on, incurred by or asserted against the Custodian in any way related to
or arising out of the subject matter of this Pledge Agreement (except for such
claims, losses, damages, liabilities and expenses which arise out of the
Custodian's gross negligence or willful misconduct). The Custodian undertakes to
perform only such duties as are expressly set forth herein. The Custodian may
rely and shall be protected in acting or refraining from acting upon any written
notice, instruction or request furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by an Authorized Bank
Representative; "Authorized Bank Representative" means any one of the persons at
the time designated to act on behalf of Sumitomo by written certificate
furnished to the Custodian, which certificate shall be substantially in the form
set forth in Attachment A attached hereto and by reference made a part hereof,
and may be changed from time to time by Sumitomo furnishing a new certificate to
the Custodian. The Custodian may consult with counsel of its own choice and
shall have full and complete authorization and protection for any action taken
or suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. Notwithstanding any provision to the contrary contained herein,
the Custodian shall not be responsible for any act or failure to act absent its
gross negligence or willful misconduct.
8. Resignation or Removal of Custodian. The Custodian may resign and be
discharged from its duties and obligations hereunder by giving at least thirty
(30) days' prior written notice of such resignation to Sumitomo, specifying the
date on which such resignation is to take effect. Sumitomo, with the consent of
the Company (which consent shall not be unreasonably withheld and which shall
not be required if an Event of Default (as defined in Section 9 hereof) has
occurred and is continuing), may remove and discharge the Custodian from its
duties and obligations hereunder by giving at least five (5) Business Days'
prior written notice of such removal to the Custodian specifying the date on
which such removal is to take effect.
9. Event of Default. The term "Event of Default" as used in this Pledge
Agreement shall mean (a) an Event of Default under and as defined in the
Reimbursement Agreement or (b)(i) the failure by any of the parties hereto to
comply with the provisions of Sections 3 or 6 hereof, (ii) the failure by the
Company to perform or observe any covenant contained in Section 12 or 13 hereof,
or
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<PAGE>
(iii) any representation or warranty made by the Company pursuant to Section 12
hereof proving to have been incorrect in any material respect when made.
10. Rights of Sumitomo. Sumitomo shall not be liable for failure to collect
or realize upon the Obligations or any Collateral or any security or other
guarantee therefor, or any part thereof, or for any delay in so doing, nor shall
either party be under any obligation to take any action whatsoever with regard
thereto. If an Event of Default or event which with notice or lapse of time or
both would become an Event of Default has occurred and is continuing, Sumitomo
may thereafter, without notice, exercise all rights, privileges or options
pertaining to any Pledged Bonds pledged to Sumitomo as if Sumitomo were the
holder and absolute owner thereof, upon such terms and conditions as Sumitomo
may determine, all without liability except to account for Collateral or other
property actually received by it, but Sumitomo shall not have any duty to
exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.
11. Remedies. In the event any portion of the Obligations has been declared
due and payable, Sumitomo may, with the prior written approval of the Company,
forthwith collect, receive, appropriate and realize upon the Collateral pledged
to it, or any part thereof, and/or may forthwith sell, assign, give option or
options to purchase, contract to sell or otherwise dispose of and deliver said
Collateral pledged to it, or any part thereof, in one or more parcels at public
or private sale or sales, at any exchange, broker's board or at any of
Sumitomo's branches, agencies or offices, or elsewhere upon such terms and
conditions as Sumitomo and the Company may deem advisable and at such prices as
Sumitomo and the Company may deem best, for cash or on credit or for future
delivery without assumption of any credit risk, with the right to Sumitomo upon
any such sale or sales, public or private, to purchase the whole or any part of
said Collateral pledged to it and so sold, free of any right or equity of
redemption in the Company which right or equity is hereby expressly waived or
released. Sumitomo shall pay over the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any and all of the Collateral pledged to
it or in any way relating to the rights of Sumitomo hereunder, including
reasonable attorneys' fees and legal expenses, to the payment, in whole or in
part, of the Obligations in such order as Sumitomo may elect.
12. Representations, Warranties and Covenants of the Company. The Company
represents, warrants and covenants that:
(a) on the date of delivery to Sumitomo or to the Custodian for the
account of Sumitomo of any Pledged Bonds described herein, the Company shall
have taken no action which would create any right, title or interest in and to
the Pledged Bonds in favor of the Remarketing Agent or the Trustee;
(b) it has, and on the date of delivery to Sumitomo or to the
Custodian for the account of Sumitomo of any Pledged Bonds will have, full
power, authority and legal right
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<PAGE>
to pledge all of its right, title and interest in and to the Pledged Bonds
pursuant to this Pledge Agreement;
(c) this Pledge Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights and, to
the extent that such instruments require or may require, enforcement by a court
of equity, such principles of equity as the court having jurisdiction may
impose;
(d) no consent of any other party (including, without limitation, the
creditors of the Company) and no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority, domestic or foreign, is required
to be obtained by the Company in connection with the execution, delivery or
performance of this Pledge Agreement;
(e) the execution, delivery and performance of this Pledge Agreement
will not result in a material violation of any provision of any applicable law
or regulation or of any order, judgment, writ, award or decree directly binding
on the Company of any court, arbitrator or governmental authority, domestic or
foreign, or of the Company's organizational documents, or of any mortgage,
indenture, lease, contract, or other agreement, instrument or undertaking to
which the Company is a party or which, to the best knowledge of the Company,
purports to be binding upon the Company or upon any of its respective assets and
will not result in the creation or imposition of any lien, charge or encumbrance
on or security interest in any of the assets of the Company except as
contemplated by this Pledge Agreement; and
(f) the pledge, assignment and delivery of the Pledged Bonds pursuant
to this Pledge Agreement will create a valid first lien on and a first perfected
security interest in Sumitomo in all right, title or interest of the Company in
or to such Bonds, and the income and proceeds thereof, subject to no prior
pledge, lien, mortgage, hypothecation, security interest, charge, option or
encumbrance or to any agreement purporting to grant to any third party a
security interest in the property or assets of the Company which would include
the Pledged Bonds. The Company covenants and agrees that it will defend
Sumitomo's right, title and security interest in and to the Pledged Bonds and
the income and proceeds thereof against the claims and demands of all persons
whomsoever.
13. No Disposition, Etc. The Company agrees that it will not, without the
prior written consent of Sumitomo, sell, assign, transfer, exchange or otherwise
dispose of, or grant any option with respect to, the Collateral (except as
provided in Section 6 of this Pledge Agreement), nor will it create, incur or
permit to exist any pledge, lien, mortgage, hypothecation, security interest,
charge, option or any other encumbrance with respect to any of the Collateral,
or any interest therein, or any proceeds thereof, except for the lien and
security interest provided for by this Pledge Agreement.
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<PAGE>
14. Further Assurances. The Company agrees that at any time and from time
to tine, upon the written request of Sumitomo, the Company will execute and
deliver such further documents and do such further acts and perform all things
as Sumitomo may reasonably request in order to effect the purposes of this
Pledge Agreement.
15. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability m any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.
16. No Waiver; Cumulative Remedies. Sumitomo shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by Sumitomo,
and then only to the extent therein set forth. A waiver by Sumitomo of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Sumitomo would otherwise have on any further occasion. No
failure to exercise nor any delay in exercising by Sumitomo of any right, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
17. Waivers, Amendments: Applicable Law. None of the terms or provisions of
this Pledge Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Sumitomo, the Company and the Custodian.
This Pledge Agreement and all obligations of the Company hereunder shall be
binding upon the successors and assigns of the Company and shall, together with
the rights and remedies of Sumitomo, inure to the benefit of Sumitomo and its
respective successors and assigns. THE OBLIGATIONS OF THE PARTIES UNDER THIS
PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA.
18. Term. This Pledge Agreement shall remain in full force and effect for
so long as the Letter of Credit is in effect or any amount is owed to Sumitomo
under this Pledge Agreement, the Reimbursement Agreement or any other Credit
Documents, provided that in the event of the resignation or removal of the
Trustee under the Indenture, the Custodian shall resign or be removed under this
Pledge Agreement, and the successor Trustee appointed under the Indenture shall
be appointed as the successor custodian under this Pledge Agreement.
19. Notices. Unless otherwise provided for in this Pledge Agreement, any
notice required or permitted to be given under this Pledge Agreement may be
given by certified or registered mail, return receipt requested, or by telecopy,
charges prepaid, or by commercial overnight delivery service, prepaid,
addressed:
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If to the Company:
Advanced Aerodynamics and Structures, Inc.
3501 Lakewood Boulevard
Long Beach, California 90808
Attention: Carl L. Chen, Ph.D.
Telecopy: (562) 938-8620
Telephone: (562) 938-8618
If to the Custodian:
First Trust of California, National Association
One California Street, Fourth Floor
San Francisco, California 94111
Attention: Corporate Trust Department
Telecopy: (415) 273-4590
Telephone: (415) 273-4576
If to Sumitomo:
The Sumitomo Bank, Limited
Los Angeles Branch
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance
and Financial Institutions Group
Telecopy: (213) 623-6832
Telephone: (213) 955-0800
Any notice sent by mail shall be deemed given three (3) days after it is
deposited in the mails. Any notice sent by telecopy shall be deemed given when
sent. Any notice sent by commercial overnight delivery service shall be deemed
given one (1) Business Day after it is deposited for delivery. Notwithstanding
anything herein to the contrary, notices to release Bonds from Sumitomo to the
Custodian may be made by telecopy and each such notice shall be promptly
confirmed in writing as specified above.
20. Execution in Counterparts. This Pledge Agreement may be executed in
multiple 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>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their duly authorized officers as of the day
and year first above written.
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By:
President
ATTEST:
By:
Secretary
(SEAL)
THE SUMITOMO BANK, LIMITED
By:
_____________,. Los Angeles Branch
FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION, as Custodian
By:
Its:
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<PAGE>
ATTACHMENT A
TO
PLEDGE AGREEMENT
CERTIFICATE DESIGNATING AUTHORIZED BANK REPRESENTATIVES
The Sumitomo Bank, Limited, acting through its Los Angeles Branch
("Sumitomo"), hereby certifies to FIRST TRUST OF CALIFORNIA, NATIONAL
ASSOCIATION (the "Custodian"), as custodian agent for Sumitomo in accordance
with that certain Custody, Pledge and Security Agreement, dated as of August 1,
1997 among Advanced Aerodynamics and Structures, Inc., Sumitomo and the
Custodian, that the "Authorized Bank Representatives" for Sumitomo from the date
of this Certificate until the Custodian's receipt of a Certificate furnished in
replacement hereof shall be the following individuals so designated below:
Name Specimen Signature
IN WITNESS WHEREOF, Sumitomo has executed this Certificate as of this lst
day of August, 1997.
THE SUMITOMO BANK, LIMITED
By:
Title:
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<PAGE>
EXHIBIT E
[Letterhead of Luce, Forward, Hamilton and Scripps LLP]
August 5, 1997
The Sumitomo Bank, Limited
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
California Economic Development
Financing Authority
801 K Street, Suite 1700
Sacramento, California 95814
Re: $8,500,000 California Economic Development
Financing Authority Variable Rate Demand Industrial
Development Revenue Bonds, Series 1997
(Advanced Aerodynamics and Structures, Inc. Project)
Ladies and Gentlemen:
We have acted as counsel to Advanced Aerodynamics and Structures, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Borrower"), in connection with the issuance by the California Economic
Development Financing Authority (the "Issuer") of its $8,500,000 Variable Rate
Demand Industrial Development Revenue Bonds, Series 1997 (Advanced Aerodynamics
and Structures, Inc.) (the "Bonds").
We have examined the original, certified copies, or copies otherwise
identified to our satisfaction as being true copies of the following:
1 . The Certificate of Incorporation and By-Laws of Advanced Aerodynamics
and Structures, Inc.;
2. The Official Statement, dated August 4, 1997, relating to and describing
the Bonds;
3. The Indenture of Trust, dated as of August 1, 1997 (the "Indenture"),
between the Issuer and First Trust of California, National Association (the
"Trustee");
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<PAGE>
4. The Loan Agreement, dated as of August 1, 1997 (the "Loan Agreement"),
between the Issuer and the Borrower relating to the Project described therein
(the "Project");
5. The Reimbursement Agreement, dated as of August 1, 1997 (the
"Reimbursement Agreement"), between The Sumitomo Bank, Limited (the "Bank") and
the Borrower;
6. The Direct Obligation Note, dated August 5, 1997 (the "Note"), from the
Borrower to the Bank;
7. The Custody, Pledge and Security Agreement, dated as of August 1, 1997
(the "Pledge Agreement"), among the Borrower, the Bank and First Trust of
California, National Association, as custodian; and
8. The Investment Agreement dated August 5, 1997 (the "Investment
Agreement"), between the Borrower and the Bank
and such other documents, certificates, and records as we have deemed relevant
and necessary as the basis for the opinions set forth herein (collectively, the
"Documents"). The items referred to in numbers 4, 5, 6, 7 and 8 are referred to
as the "Borrower Documents". Relying on such examination and pertinent law and
subject to the limitations and qualifications hereinafter set forth, we are of
the opinion that:
1. The Borrower is a corporation duly organized under the laws of the State
of Delaware, is duly authorized to conduct its business in the State of
California, has power to enter into the Borrower Documents, and to use the
Project for the purpose set forth in the Loan Agreement and has duly authorized
the execution and delivery of the Borrower Documents and has reviewed and
approved the Indenture.
2. The execution and delivery of the Borrower Documents, the consummation
of the transactions contemplated thereby and by the other Borrower documents,
and the fulfillment of the terms and conditions thereof do not, and will not,
conflict with, or result in a breach of, any of the terms or conditions of the
Borrower's Certificate of Incorporation or By-Laws, any restriction or any
agreement or instrument to which the Borrower is now a party or by which it is
bound or to which any property of the Borrower is subject, and do not and will
not constitute a default under any of the foregoing, or be in violation of any
order, decree, statute, rule or regulation of any court or any state or federal
regulatory body having jurisdiction over the Borrower or its properties,
including the Project, and do not, and will not, result in the creation or
imposition of any lien, charge, or encumbrance of any nature upon any of the
property or assets of the Borrower contrary to the terms of any instrument or
agreement to which the Borrower is a party or by which it is bound.
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<PAGE>
3. The Borrower Documents have been duly authorized, executed and delivered
and are valid and legally binding obligations of the Borrower enforceable in
accordance with their terms.
4. There are no actions, suits or proceedings pending, or to the knowledge
of the Borrower, threatened against the Borrower or any property of the Borrower
in any court or before any federal, state, municipal, or other governmental
agency, which, if decided adversely to the Borrower, would have a material
adverse effect upon the Borrower or upon the business or properties of the
Borrower, and the Borrower is not in default with respect to any order of any
court or governmental agency.
5 . There are presently no actions, proceedings, or litigation before any
court or governmental agency nor to the best of our knowledge, after reasonable
investigation, are any threatened or pending against or affecting the Borrower,
in which an unfavorable decision, ruling, or finding would adversely affect the
validity or enforceability of the Borrower Documents, or the exclusion of
interest on the Bonds from federal income taxation.
6. We are unaware of any fact which materially adversely affects, or may
materially adversely affect, the ability of the Borrower to pay the Bank
Reimbursement Obligations, as defined in the Reimbursement Agreement.
7. No further approval, authorization, consent, or other order of any
public board or body (other than the authorization of the Issuer and compliance
with any applicable securities laws) is legally required for the transactions
contemplated by the Borrower Documents.
8. The financing evidenced and secured by the Borrower Documents is not
usurious.
9. Pursuant to the Reimbursement Agreement, the Borrower has granted to the
Bank a first lien perfected security interest in the Investment Agreement.
Our opinion is subject to principles of equity affecting enforcement and
remedies, bankruptcy, insolvency, reorganization, moratorium and similar
statutes affecting the rights of creditors and secured parties, and the
availability of the remedy of specific performance or injunctive relief or other
equitable relief subject to the discretion of the court before which any
proceeding may be brought.
Very truly yours,
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PURCHASE CONTRACT
$8,500,000
California Economic Development Financing Authority
Variable Rate Demand
Industrial Development Revenue Bonds, Series 1997
(Advanced Aerodynamics and Structures, Inc. Project)
August 4, 1997
California Economic Development Financing Authority
801 K Street, Suite 1700
Sacramento, California 91584
The Honorable Matt Fong
Treasurer of the State of California
915 Capitol Mall, Room 110
Sacramento, California 95814
Ladies and Gentlemen:
1. Rauscher Pierce Refsnes, Inc. (the "Underwriter") offers to enter
into this purchase contract (this "Purchase Contract") with the California
Economic Development Financing Authority (the "Authority") and the Treasurer of
the State of California, solely in his capacity as agent of sale for the
Authority (the "Treasurer"), which upon the Authority's and the Treasurer's
acceptance hereof will be binding upon the Authority, the Treasurer and the
Underwriter. This offer is made subject to the Authority's and Treasurer's
acceptance by execution of this Purchase Contract and approval by Advanced
Aerodynamics and Structures, Inc., a Delaware corporation (the "Borrower") and
their delivery of same to the Underwriter at or before 9:00 p.m., New York time,
today. Delivered to you herewith as Exhibit A, is the Letter of Representation,
dated the date hereof (the "Letter of Representation"), under which the Borrower
makes certain representations and undertakes certain obligations with respect to
this Purchase Contract.
2. Upon the terms and conditions and upon the basis of the
representations, warranties and covenants hereinafter set forth, the Underwriter
hereby agrees to purchase from the Authority and the Treasurer for offering to
the public, and the Authority and the Treasurer hereby agree to sell to the
Underwriter for such purpose, at an interest rate to be determined in accordance
with the terms of the Indenture (hereinafter defined), all (but not less than
all) of $8,500,000 aggregate principal amount of the Authority's Variable Rate
Demand Industrial Development Revenue Bonds, Series 1997 (Advanced Aerodynamics
and Structures, Inc. Project), dated as of the date of delivery thereof (the
"Bonds"). The purchase price of the Bonds shall be 100% of the principal amount
of the Bonds.
3. The Bonds shall be otherwise as described in, and shall be issued
and secured under the provisions of, the Indenture of Trust, dated as of August
1, 1997 (the "Indenture"), by and
<PAGE>
between the Authority and First Trust of California, National Association, as
trustee (the "Trustee"). The proceeds of sale of the Bonds will be loaned to the
Borrower pursuant to the Loan Agreement (as hereinafter defined) and will be
applied by the Borrower to defray the Borrower's cost of the acquisition,
construction, improving and equipping of a manufacturing facility (the
"Project"). The Project is further described in the Loan Agreement, dated as of
August 1, 1997 (the "Loan Agreement"), between the Authority and the Borrower.
The Bonds will be secured by an irrevocable direct pay letter of credit (the
"Letter of Credit") issued by The Sumitomo Bank, Limited, acting through its Los
Angeles Branch, (the "Bank"), pursuant to the Reimbursement Agreement, dated as
of August 1, 1997 (the "Reimbursement Agreement"), between the Bank and the
Borrower.
The Bonds are more fully described in the Official Statement relating
to the Bonds, dated August 4, 1997 (the "Official Statement").
4. The Underwriter agrees to make a bona fide public offering of all
the Bonds at par, plus interest accrued thereon, if any, to the date of
delivery. The Bonds may be offered and sold to certain dealers (including the
Underwriter and other dealers depositing such Bonds into investment trusts) at a
price or at prices lower than such public offering price.
5. As soon as practicable after the execution of this Purchase Contract
by the Authority, but no later than the Closing, the Authority shall deliver or
use its best efforts to cause to be delivered to the Underwriter manually
executed originals of the documents listed below in subparagraphs (a), (b), (d),
(e) and (g), a copy of the document listed below in subparagraph (c) and
certified copies of the documents listed below in subparagraph (f):
(a) the Indenture;
(b) the Reimbursement Agreement;
(c) the Letter of Credit, issued by the Bank in favor of the
Trustee in an amount equal to at least the principal amount of the
Bonds and 45 days' interest thereon calculated at the rate of 12% on
the basis of a 365/366 day year;
(d) the Loan Agreement;
(e) the Tax Regulatory Agreement, dated as of August 1, 1997
(the "Tax Regulatory Agreement"), among the Authority, the Borrower and
the Trustee;
(f) (i) the resolution of the Authority, adopted on April 30,
1997, expressing the Authority's intention to issue the Bonds and to
reimburse certain expenditures incurred by the Borrower from proceeds
of the Bonds, certified by the Secretary of the Authority, (ii) the
resolution of the Authority, adopted on June 20, 1997, authorizing the
issuance, sale and delivery of the Bonds and the execution and delivery
of the Indenture, the Loan Agreement, the Tax Regulatory Agreement and
this Purchase Contract, certified by the Secretary of the Authority,
and (iii) the resolution of the California Infrastructure and Economic
Development Bank (the "Infrastructure Bank"), adopted June 20, 1997,
2
<PAGE>
approving the issuance of the Bonds by the Authority, certified by the
Secretary of the Infrastructure Bank; and
(g) the Official Statement.
By execution of this Purchase Contract, the Authority consents to the
use by the Underwriter of all of the above documents and the information
contained therein in connection with the public offering of the Bonds.
6. The Authority represents and warrants to the Underwriter that:
(a) The Authority is a body public and corporate, and a public
instrumentality of the State of California (the "State"), organized and
existing under the laws of the State, specifically Section 15710 et
seq. of the California Government Code, as amended, with all necessary
power and authority to issue the Bonds and to enter into the Loan
Agreement for the purpose of promoting and encouraging commerce and
industry, and generally to foster economic development in the State; to
enter into the Indenture, the Tax Regulatory Agreement and this
Purchase Contract; to issue, sell and deliver the Bonds to the
Underwriter as provided herein; and to carry out and consummate all
other transactions contemplated by each of the aforesaid documents.
(b) The Authority has duly authorized, by all appropriate
action, and complied with all provisions of law with respect to, the
execution and delivery of the Indenture, the Loan Agreement, the Tax
Regulatory Agreement and this Purchase Contract and the issuance, sale,
execution and delivery of the Bonds.
(c) When delivered to and paid for by the Underwriter in
accordance with the terms of this Purchase Contract and the Indenture,
the Bonds will have been duly and validly authorized, executed,
authenticated, issued and delivered by the Authority and will
constitute legal, valid and binding limited obligations of the
Authority enforceable in accordance with their terms, subject to
applicable bankruptcy, insolvency or other laws affecting creditors'
rights and remedies, and will be entitled to the benefits of the
Indenture.
(d) The execution and delivery of the Bonds, the Indenture,
the Loan Agreement, the Tax Regulatory Agreement and this Purchase
Contract, and compliance with the provisions thereof, do not and will
not conflict with, or constitute on the part of the Authority a
violation of, breach of or default under any indenture, mortgage, deed
of trust, resolution, note agreement or other agreement or instrument
to which the Authority is a party or by which the Authority is bound,
or, to its knowledge, any constitutional provision or statute of the
State or of the United States of America, any order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Authority or any of its activities or properties; and all consents
of any governmental authority of the State or of the United States of
America required in connection with the issuance or sale of the Bonds
by the Authority have been obtained;
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<PAGE>
provided, however, that no representation is made concerning compliance
with the federal securities laws or the securities or "Blue Sky" laws
of the various states.
(e) There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, or before or by any court or
governmental agency or body pending or, to the best of its knowledge,
threatened against or affecting the Authority, nor to the best of its
knowledge is there any basis therefor, wherein an unfavorable decision,
ruling or finding would materially adversely affect the transactions
contemplated by this Purchase Contract, the Indenture, the Loan
Agreement or the Tax Regulatory Agreement, or which, in any way, would
adversely affect the validity or enforceability of the Bonds, the
Indenture, the Loan Agreement, the Tax Regulatory Agreement or this
Purchase Contract or any other agreement or instrument to which the
Authority is a party, used or contemplated for use in the consummation
of the transactions contemplated by this Purchase Contract, the
Indenture, the Loan Agreement or the Tax Regulatory Agreement.
(f) The Authority will not take or omit to take any action
which action or omission will in any way cause the proceeds from the
sale of the Bonds to be applied in a manner contrary to that provided
for in the Indenture.
(g) The Authority has reviewed the statements contained in the
Official Statement relating to the Authority under the caption "THE
AUTHORITY" and such statements, insofar as they are within the
knowledge of the Authority, are true and correct and fairly summarize
the matters encompassed thereby to the extent such matters are
described therein. If between the date of this Purchase Contract and
the date of the Closing (as hereinafter defined) any event shall occur
which, in the opinion of the Authority, might or would cause the
Official Statement as then supplemented or amended to contain, with
respect to statements contained in the Official Statement relating to
the Authority under the caption "THE AUTHORITY", any untrue statement
of a material fact or omit to state any material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, the Authority shall notify the
Underwriter, and if in the opinion of the Authority or the Underwriter
such event requires the preparation and publication of a supplement or
amendment to the Official Statement, the Authority, at the expense of
the Borrower, will supplement or amend the Official Statement in a form
and in a manner approved by the Underwriter.
7. At 11:00 A.M., New York time, on August 5, 1997, or at such other
time or on such earlier or later business day as shall have been mutually agreed
upon by the Authority, the Borrower and the Underwriter, the Authority will
deliver or cause to be delivered to the Underwriter the Bonds, in definitive
fully registered form, duly executed and authenticated, at a place in New York,
New York, to be mutually agreed upon by the Authority and the Underwriter. The
Authority will deliver or cause to be delivered to the Underwriter in Los
Angeles, California, at such time and on such date and at a place to be mutually
agreed upon by the Authority, the Borrower and the Underwriter, the closing
documents mentioned paragraph 7(b) hereof. The Underwriter will accept such
delivery and pay the purchase price of the Bonds as set forth in Paragraph 2
hereof, by a Federal Funds check or wire transfer to the order of "First Trust
of California, National Association, as Trustee" unless the Authority
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<PAGE>
shall otherwise direct. This payment and delivery is herein called the
"Closing." The Bonds will be delivered in authorized denominations as set forth
in the Indenture and registered in the name of CEDE & Co., as nominee of The
Depository Trust Company or in such other names as the Underwriter shall have
requested. The Bonds will be made available to the Underwriter for checking and
packaging by the Underwriter at least one business day before the Closing at a
place to be mutually agreed upon by the Authority and the Underwriter.
8. The Underwriter's obligations hereunder to purchase and pay for the
Bonds shall be subject to the performance by the Authority of the obligations to
be performed by it hereunder at or prior to the Closing, to the performance by
the Borrower of the obligations and agreements to be performed by the Borrower
at or prior to the Closing under the Letter of Representation and to the
accuracy in all material respects of the representations and warranties of the
Authority contained herein and of the Borrower contained in the Letter of
Representation, as of the date hereof and as of the Closing, and shall also be
subject to the following conditions:
(a) At the time of the Closing (i) the Indenture, the Letter
of Credit, the Loan Agreement, the Reimbursement Agreement, the Tax
Regulatory Agreement and the Letter of Representation shall be in full
force and effect, and shall not have been amended, modified or
supplemented except as may have been agreed to in writing by the
Underwriter; and (ii) the Authority shall perform or have performed all
of its obligations required under or specified in this Purchase
Contract to be performed at or prior to the Closing.
(b) The Bonds shall have been duly authorized, executed and
authenticated in accordance with the provisions of the Indenture.
(c) The Underwriter may terminate this Purchase Contract by
notification to the Authority if at any time subsequent to the date
hereof and at or prior to the Closing (i) legislation shall have been
enacted by the United States or shall have been reported out of
committee or being considered by any committee of the Congress of the
United States, or a decision shall have been rendered by a court of the
United States or the Tax Court of the United States, or a ruling shall
have been made or a regulation or a temporary regulation shall have
been proposed or made or any other release or announcement shall have
been made by the Treasury Department of the United States or the
Internal Revenue Service, with respect to federal taxation upon
revenues or other income or payments of the general character to be
derived by the State or upon interest received on obligations of the
general character of the Bonds, which in the reasonable opinion of the
Underwriter materially adversely affects the market for the Bonds; (ii)
there shall have occurred any new outbreak of hostilities or any
national or international calamity or crisis, the effect of such
outbreak, calamity or crisis being such as could cause a major
disruption in the debt markets and as, in the reasonable judgment of
the Underwriter, would make it impracticable for it to market the Bonds
or to enforce contracts for the sale of the Bonds; (iii) there shall be
in force a general suspension of trading on The New York Stock
Exchange, Inc., or minimum or maximum prices for trading shall have
been fixed and be in force, or maximum ranges for prices for securities
shall have been required and be in force on The New York Stock
Exchange,
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<PAGE>
Inc., whether by virtue of a determination by that exchange or by order
of the Securities and Exchange Commission or any other governmental
authority having jurisdiction; (iv) a general banking moratorium shall
have been declared by federal, New York, or California authorities
having jurisdiction and be in force; or (v) any event shall have
occurred or shall exist which makes untrue or incorrect, as of such
time, in any material respect, any material statement or information
contained in the Official Statement or which is not reflected in the
Official Statement, but should be reflected therein in order to make
such material statements and information contained therein not
misleading as of such time.
(d) At or prior to the Closing, the Underwriter shall receive
the following documents:
(1) The approving opinion of Kutak Rock ("Bond
Counsel"), relating to the Bonds, dated the date of the
Closing, in the form set forth as Appendix A to the Official
Statement, together with a letter of Bond Counsel, dated the
date of the Closing and addressed to the Underwriter stating
that the Underwriter may rely on such opinion.
(2) The supplemental opinion of Bond Counsel dated
the date of the Closing and addressed to the Underwriter, to
the effect that:
(i) this Purchase Contract has been duly
authorized, executed and delivered by the Authority
and, assuming due authorization, execution and
delivery by the Underwriter and approval by the
Borrower, is a valid and binding agreement of the
Authority, subject to laws relating to bankruptcy,
insolvency, reorganization or creditors' rights
generally and to the application of equitable
principles;
(ii) the statements contained in the
Official Statement in the sections thereof entitled:
"DESCRIPTION OF THE BONDS," "SECURITY FOR THE BONDS,"
"THE LOAN AGREEMENT," "THE INDENTURE" and "TAX
MATTERS" insofar as such statements purport to
summarize certain provisions of the Bonds, the Loan
Agreement or the Indenture, and Bond Counsel's
opinion concerning certain tax matters relating to
the Bonds are accurate in all material respects; and
(iii) the Bonds are not subject to the
registration requirements of the Securities Act of
1933, as amended, and the Indenture is exempt from
qualification as an indenture pursuant to the Trust
Indenture Act of 1939, as amended.
(3) The opinion of counsel to the Borrower, which may
be rendered by one or more firms acceptable to the Authority
and the Underwriter, dated the date of the closing and in form
and substance acceptable to the Authority and the Underwriter.
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<PAGE>
(4) A certificate dated the date of the Closing of
the Chair of the Authority, or the Chair's designee, to the
effect that as of such date, (a) no litigation is pending or,
to his knowledge, threatened in any court (i) challenging the
creation, organization or existence of the Authority, (ii)
seeking to restrain or enjoin the issuance or delivery of any
of the Bonds, or the collection of revenues or other moneys
pledged or to be pledged to pay the principal of and interest
on the Bonds, or in any way contesting or affecting the
validity of the Bonds or the Indenture or the collection of
revenues or other moneys or the pledge thereof, or contesting
the powers of the Authority to issue the Bonds or to enter
into the Indenture, (iii) in any way contesting or affecting
the validity of the Loan Agreement, the Tax Regulatory
Agreement or this Purchase Contract, or contesting the powers
of the Authority to enter into or to execute and deliver the
Loan Agreement, the Tax Regulatory Agreement or this Purchase
Contract, (b) the representations and warranties of the
Authority contained herein are true and correct in all
material respects on and as of the date of the Closing as if
made on the date of the Closing; and (c) to the best of his
knowledge, no event affecting the Authority has occurred since
the date of the Official Statement which has not been
disclosed therein or by supplement or amendment thereto and
which should be disclosed in the Official Statement for the
purpose for which it is to be used or which it is necessary to
disclose therein in order to make the statements and
information therein not misleading in any material respect.
(5) An opinion, dated the date of the Closing and
addressed to the Underwriter, the Authority, Bond Counsel and
Standard & Poor's Ratings Services ("Standard & Poor's") of
United States and Japanese counsel to the Bank in form and
substance acceptable to the Underwriter, the Authority, Bond
Counsel and Standard & Poor's.
(6) A certificate of an authorized officer of the
Bank, dated the date of the Closing, to the effect that the
information under the captions "THE BANK" and "THE LETTER OF
CREDIT AND THE REIMBURSEMENT AGREEMENT" in the Official
Statement does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the
statements made under such caption, in light of the
circumstances under which they were made, not misleading.
(7) A preference opinion, dated the date of the
Closing, of Bond Counsel, addressed to Standard & Poor's.
(8) A certificate of the Borrower, dated the date of
the Closing and signed by an authorized officer of the
Borrower, acting solely in his official capacity, to the
effect that (i) since the date hereof no material and adverse
change has occurred in the financial position or results of
operations of the Borrower; (ii) the Borrower has not, since
the date hereof, incurred any material liabilities other than
in the ordinary course of business or as set forth in or
contemplated by the Official Statement; (iii) no event
affecting the Borrower has
7
<PAGE>
occurred since the date of the Official Statement which should
be disclosed in the Official Statement for the purpose for
which it is to be used or which is necessary to be disclosed
therein in order to make the statements and information
therein in light of the circumstances under which they are
made not misleading as of the date of Closing; and (iv) the
representations and warranties included in the Letter of
Representation are true and correct in all material respects
as of the date of the Closing, and all obligations to be
performed by the Borrower under the Letter of Representation
on or prior to the date of the Closing have been performed.
(9) The Official Statement signed on behalf of the
Authority.
(10) Executed counterparts of the Indenture, the Loan
Agreement, the Remarketing Agreement, the Reimbursement
Agreement and the Tax Regulatory Agreement and specimens of
the Letter of Credit and the Bonds.
(11) Copies of the resolutions or other documents of
the Borrower authorizing the execution and delivery of the
Loan Agreement, the Reimbursement Agreement, the Remarketing
Agreement, the Letter of Representations and the Tax
Regulatory Agreement, certified by the Secretary or an
Assistant Secretary of the Borrower as having been duly
adopted and being in full force and effect.
(12) Copies of the resolutions of the Authority
authorizing the issuance of the Bonds, the use of the Official
Statement and authorizing or approving the execution and
delivery of the documents to which the Authority is a party,
certified by the Secretary of the Authority, as having been
duly adopted and being in full force and effect.
(13) A certificate of a duly authorized officer of
the Authority satisfactory to the Underwriter, dated the date
of Closing, stating that such officer is charged, either alone
or with others, with the responsibility for issuing the Bonds;
setting forth, in the manner permitted by the Treasury
Regulations and the Internal Revenue Code of 1986 (the
"Code"), the reasonable expectations of the Authority as of
such date as to the use of proceeds of the Bonds and of any
other funds of the Authority pledged or expected to be used to
pay principal or purchase price of, premium, if any, or
interest on the Bonds and the facts and estimates on which
such expectations are based; and stating that, to the best of
the knowledge and belief of the certifying officer, the
Authority's expectations are reasonable, which certification
may be made in reliance upon a similar certification, dated
the date of the Closing, furnished to such person for such
purpose by a duly authorized officer or attorneys-in-fact of
the Borrower satisfactory to the Underwriter.
(14) An opinion of counsel to the Authority, dated
the date of the Closing, addressed to the Underwriter, the
Trustee and Bond Counsel, in form and substance acceptable to
the Underwriter, the Trustee and Bond Counsel.
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<PAGE>
(15) The letter from Standard & Poor's indicating the
rating for the Bonds which is not lower than "A/A-1."
(16) Evidence satisfactory to the Underwriter that
the Bonds have been approved by the Governor of the State or
other appropriate official or governing body, after a public
hearing thereon held after reasonable public notice in
accordance with Section 147(f) of the Code.
(17) Evidence of the filing, as required by Section
149(e) of the Code, of Form 8038.
(18) A certified copy of the resolution of the
California Debt Limit Allocation Committee granting the
Authority a portion of the State's volume cap for the Bonds
equal to at least the amount of the Bonds purchased pursuant
to this Purchase Contract.
(19) Such additional certificates, instruments and
other documents as the Underwriter reasonably may deem
necessary to evidence the truth and accuracy as of the time of
the Closing of the representations of the Authority, the
Borrower and the Bank and the due performance or satisfaction
by the Authority, the Borrower and the Bank at or prior to
such time of all agreements then to be performed and all
conditions then to be satisfied by the Authority, the Borrower
and the Bank.
If the Authority shall be unable to satisfy the conditions contained in
this Purchase Contract, or if the obligations of the Underwriter shall be
terminated for any reason permitted by this Purchase Contract, this Purchase
Contract shall terminate and neither the Underwriter nor the Authority shall be
under further obligation hereunder, except as set forth in Paragraph 10.
9. The Authority covenants with the Underwriter to cooperate with it
and the Borrower in qualifying the Bonds for offer and sale under the securities
or "Blue Sky" laws of such States as the Underwriter may request; provided that
in no event shall the Authority be obligated to take any action which would
subject it to general service of process in any State where it is not now so
subject. It is understood that the Authority is not responsible for compliance
with or the consequences of failure to comply with applicable "Blue Sky" laws.
10. (a) The Underwriter shall be under no obligation to pay any
expenses incident to the performance of the Authority's obligations hereunder,
including but not limited to (i) the cost of printing and delivering and
preparation for printing or other reproduction of the Indenture, the Letter of
Credit, the Loan Agreement, the Reimbursement Agreement, this Purchase Contract,
the Letter of Representation, the Remarketing Agreement and the Official
Statement; (ii) the fees and disbursements of Bond Counsel, counsel to the
Authority and any experts or consultants retained by the Authority or the
Borrower; (iii) the fees and disbursements of the Bank and its counsel and (iv)
the fees of Standard & Poor's. The costs and expenses set forth in the
immediately preceding sentence shall be paid out of the proceeds of the Bonds,
or other
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<PAGE>
available funds of the Borrower in accordance with the Indenture or if the Bonds
are not delivered to the Underwriter by the Authority (unless such delivery be
prevented by the Underwriter's default hereunder, in which event the Underwriter
shall pay such costs and expenses as and for liquidated damages hereunder),
shall be paid by the Borrower pursuant to the Letter of Representation.
(b) The Underwriter shall pay (i) all advertising expenses in
connection with the public offering of the Bonds and (ii) all other expenses
incurred by it in connection with the public offering and distribution of the
Bonds.
11. Any notice or other communication to be given to the Authority
under this Purchase Contract may be given by delivering the same in writing at
its address set forth above, addressed Attention: Chair, and any such notice or
other communication to be given to the Underwriter may be given by delivering
the same to Rauscher Pierce Refsnes, Inc., 117 East Colorado Boulevard, Suite
210, Pasadena, California 91105. All notices or communications hereunder by any
party shall be given and served upon each other party.
12. This Purchase Contract shall constitute the entire agreement
between the Authority, the Treasurer and the Underwriter and is made solely for
the benefit of the Authority, the Borrower and the Underwriter (including the
successors or assigns of the Underwriter). No other person shall acquire or have
any rights hereunder or by virtue hereof. All representations, warranties and
agreements of the Authority in this Purchase Contract shall remain operative and
in full force and effect, regardless of (a) any investigation made by or on
behalf of the Underwriter, (b) the delivery of any payment for the Bonds
hereunder and (c) any termination of this Purchase Contract. The parties hereto
agree to cooperate prior and subsequent to the Closing to take such actions as
shall be necessary or desirable in connection with securing the rating of the
Bonds by Standard & Poor's.
13. This Purchase Contract may not be amended without the written
consent of the Authority, the Treasurer and the Borrower.
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<PAGE>
14. The validity, interpretation and performance of this Purchase
Contract shall be governed by the laws of the State of California.
RAUSCHER PIERCE REFSNES, INC.
By:______________________________________
Managing Director
CALIFORNIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY
By:______________________________________
Chair
Attest:
By:_________________________________
Secretary
OFFICE OF THE STATE TREASURER
By:_____________________________________
Deputy Treasurer
Agreed to and Approved by:
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By:_______________________________
Authorized Signatory
<PAGE>
EXHIBIT A
Letter of Representation
August 4, 1997
California Economic Development Financing Authority
801 K Street, Suite 1700
Sacramento, California 91584
The Honorable Matt Fong
Treasurer of the State of California
915 Capitol Mall, Room 110
Sacramento, California 95814
Rauscher Pierce Refsnes, Inc.
117 East Colorado Boulevard, Suite 210
Pasadena, California 91105
Ladies and Gentlemen:
Pursuant to a purchase contract dated the date hereof (the "Purchase
Contract"), with Rauscher Pierce Refsnes, Inc. (the "Underwriter"), which the
undersigned (the "Borrower") has approved, the California Economic Development
Financing Authority (the "Authority") and the Treasurer of the State of
California propose to sell $8,500,000 aggregate principal amount of the
Authority's Variable Rate Demand Industrial Development Revenue Bonds, Series
1997 (Advanced Aerodynamics and Structures, Inc. Project) (the "Bonds"). The
offering of the Bonds is described in an official statement, dated August 4,
1997 (the "Official Statement").
Certain revenues and other moneys received by the Authority pursuant or
with respect to the Loan Agreement, dated as of August 1, 1997 (the "Loan
Agreement"), between the Authority and the Borrower will be pledged to secure
the payment of the Bonds, including the interest thereon pursuant to an
Indenture of Trust, dated as of August 1, 1997 (the Indenture"), between the
Authority and First Trust of California, National Association, as trustee (the
"Trustee"), relating to the Bonds. In addition, the Bonds shall be payable from
funds drawn under an irrevocable direct pay letter of credit (the "Letter of
Credit") issued by The Sumitomo Bank, Ltd., acting through its Los Angeles
Branch, (the "Bank"), pursuant to a Reimbursement Agreement, dated as of August
1, 1997 (the "Reimbursement Agreement"), between the Borrower and the Bank.
In order to induce you to enter into the Purchase Contract and to make
the sale and purchase and reoffering of the Bonds therein contemplated, the
Borrower hereby represents, warrants and agrees with each of you as follows:
(1) The Borrower is a corporation, organized and validly
existing under the laws of the State of Delaware, has full legal right,
power and authority to enter into this
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Letter of Representation, the Loan Agreement, the Reimbursement
Agreement and the Remarketing Agreement, to approve the Purchase
Contract and to carry out and consummate all transactions contemplated
by this Letter of Representation, the Loan Agreement, the Reimbursement
Agreement, the Remarketing Agreement, the Tax Regulatory Agreement and
the Purchase Contract and by proper action has duly authorized the
execution and delivery of this Letter of Representation, the Loan
Agreement, the Reimbursement Agreement, the Tax Regulatory Agreement
and the Remarketing Agreement and the approval of the Purchase
Contract.
(2) The officer of the Borrower executing this Letter of
Representation, the Loan Agreement, the Reimbursement Agreement and the
Remarketing Agreement and approving the Purchase Contract is duly and
properly authorized to execute the same.
(3) The Purchase Contract has been duly approved by, and this
Letter of Representation, the Loan Agreement, the Reimbursement
Agreement, the Tax Regulatory Agreement and the Remarketing Agreement
have been duly authorized, executed and delivered by the Borrower. The
Loan Agreement, when assigned to the Trustee pursuant to the Indenture,
will constitute the legal, valid and binding obligation of the Borrower
to the Trustee enforceable against the Borrower in accordance with its
terms for the benefit of the owners of the Bonds; except as enforcement
of the Loan Agreement may be limited by bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance laws, laws affecting
the enforcement of creditors rights, the application of equitable
principles and judicial discretion, and by the covenant of good faith
and fair dealing which may be implied by law into contracts. This
Letter of Representation, the Reimbursement Agreement, the Remarketing
Agreement and the Tax Regulatory Agreement and any rights of the
Authority and obligations of the Borrower under the Loan Agreement not
so assigned to the Trustee will constitute the legal, valid and binding
agreements of the Borrower enforceable against the Borrower in
accordance with their respective terms; except as enforcement of each
of the above-named documents may be limited by bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance laws, laws affecting
the enforcement of creditors rights, the application of equitable
principles and judicial discretion, and by the covenant of good faith
and fair dealing which may be implied by law into contracts.
(4) The Borrower is not in any material way in breach of or
default under (i) any applicable law or administrative regulation of
the State of California or the United States or any applicable judgment
or decree or (ii) any material loan agreement, indenture, bond, note,
resolution, agreement or other instrument to which it is a party or is
otherwise subject, and no event has occurred and is continuing which,
with the passage of time or the giving of notice or both, would
constitute an event of default under any such instrument.
(5) The approval of the Purchase Contract and the Official
Statement; the execution and delivery of the Loan Agreement, the
Reimbursement Agreement, the Tax Regulatory Agreement, the Remarketing
Agreement and this Letter of Representation; the consummation of the
transactions herein and therein contemplated; and the fulfillment
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of or compliance with the terms and conditions hereof and thereof will
not conflict with or constitute a violation or breach of or default
(with due notice or the passage of time or both) under the Borrower's
Organization Documents (as defined in the Indenture), or any applicable
law or administrative rule or regulation, or any applicable court or
administrative decree or order, or, to the knowledge of the Borrower,
any indenture, mortgage, deed of trust, loan agreement, lease, contract
or other agreement or instrument to which it is a party or by which it
or its properties are otherwise subject or bound, or result in the
creation or imposition of any prohibited lien, charge or encumbrance of
any nature whatsoever upon any of the Borrower's assets, which
conflict, violation, breach, default, lien, charge or encumbrance might
have consequences that would materially and adversely affect the
consummation of the transactions contemplated by the Purchase Contract,
the Indenture, the Loan Agreement, the Reimbursement Agreement, the
Remarketing Agreement, the Tax Regulatory Agreement, this Letter of
Representation or the Official Statement or the financial condition,
assets, properties or operations of the Borrower.
(6) No consent or approval of any trustee or holder of any
indebtedness of the Borrower, and no consent, permission,
authorization, order or license of, or filing or registration with, any
governmental authority (except in connection with Blue Sky proceedings)
is necessary in connection with the execution and delivery of this
Letter of Representation, the Loan Agreement, the Reimbursement
Agreement, the Tax Regulatory Agreement or the Remarketing Agreement;
the approval of the Purchase Contract; or the consummation of any
transaction therein or herein contemplated on the part of the Borrower,
except as have been obtained or made and as are in full force and
effect or, as appropriate, will be in full force and effect at the
Closing. The Borrower makes no representation as to any approvals or
actions as may be required under any state Blue Sky or federal
securities laws.
(7) There is no action, suit, proceeding, inquiry or
investigation before or by any court or federal, state, municipal or
other government authority pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or its assets,
properties or operations which, if determined adversely to the Borrower
or the interests thereof, would have a material and adverse effect upon
the consummation of the transactions contemplated by or the validity of
the Purchase Contract, the Loan Agreement, the Reimbursement Agreement,
the Remarketing Agreement, the Tax Regulatory Agreement, this Letter of
Representation or the Official Statement or upon the financial
condition, assets, properties or operations of the Borrower, and the
Borrower is not in default with respect to any order or decree of any
court or any order, regulation or demand of any federal, state,
municipal or other governmental authority, which default would
materially and adversely affect the consummation of the transactions
contemplated by the Purchase Contract, the Loan Agreement, the
Reimbursement Agreement, the Remarketing Agreement, the Tax Regulatory
Agreement, this Letter of Representation, the Official Statement or the
financial condition, assets, properties or operations of the Borrower.
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(8) The Borrower has obtained or will obtain all variances
from applicable zoning ordinances and has obtained or will obtain in
due course all building permits and easements or licenses for the
acquisition, construction and equipping of the Project (as said term is
defined in the Indenture), to the extent and as such Project is
described in the Official Statement, and such variances, permits,
easements and licenses constitute all approvals required for the
Project; and the Project should not be subject to change by any
administrative or judicial body so as to materially affect such
acquisition and construction. The Project has complied with the
requirements of the California Environmental Quality Act.
(9) The Borrower hereby agrees to pay the expenses described
in Paragraph 10(a) of the Purchase Contract, and to pay any expenses
incurred in amending or supplementing the Official Statement pursuant
to the Purchase Contract.
(10) As of the date hereof, the Official Statement, as amended
or supplemented pursuant to the Purchase Contract or this Letter of
Representation, if applicable, does not and will not contain as of the
Closing any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(11) If between the date hereof and the date of the Closing
any event shall occur which might or would cause the Official
Statement, as then supplemented or amended, to contain an untrue
statement of a material fact or to omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, the Borrower shall notify the Authority and the
Underwriter and if in the opinion of the Borrower, the Authority or the
Underwriter such event requires the preparation and publication of a
supplement or amendment to the Official Statement, the Authority will
request the Borrower to cause the Official Statement to be amended or
supplemented in a form and in a manner approved by the Underwriter.
(12) After the Closing, the Borrower (a) will not participate
in the issuance of any amendment of or supplement to the Official
Statement to which, after being furnished with a copy, the Underwriter
or the Authority shall reasonably object in writing or which shall be
disapproved by counsel for the Underwriter or the Authority and (b) if
any event relating to or affecting the Authority or the Borrower or its
present or proposed facilities shall occur as a result of which it is
necessary, in the opinion of counsel for the Underwriter or the
Authority, to amend or supplement the Official Statement in order to
make the Official Statement not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser,
forthwith prepare and furnish to the Underwriter and the Authority (at
the expense of the Borrower) a reasonable number of copies of an
amendment of or supplement to the Official Statement (in form and
substance satisfactory to counsel for the Underwriter and counsel to
the Authority) which will amend or supplement the Official Statement so
that it will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time the
Official Statement is
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<PAGE>
delivered to purchaser, not misleading. For the purposes of this
subsection, the Authority and the Borrower will furnish such
information as the Underwriter may from time to time reasonably
request.
(13) The Borrower agrees to indemnify and hold harmless the
Authority and the Underwriter and each person, if any, who controls (as
such term is defined in Section 15 of the Securities Act of 1933, as
amended) the Authority and the Underwriter and their officers, agents,
employees, advisors and attorneys against any and all judgments,
losses, claims, damages, liabilities and expenses (i) arising out of
any statement or information in the Official Statement, relating to the
Borrower and the Project, that is or is alleged to be untrue or
incorrect in any material respect or the omission or alleged omission
therefrom of any statement or information that should be stated therein
or that is necessary to make the statements therein relating to the
Borrower and the Project not misleading in any material respect, and
(ii) to the extent of the aggregate amount paid in settlement of any
litigation commenced or threatened arising from a claim based upon any
such untrue statement or omission if such settlement is effected with
the written consent of the Borrower. In case any claim shall be made or
action brought against the Authority or the Underwriter or any
controlling person based upon the Official Statement for which
indemnity may be sought against the Borrower, as provided above, such
party shall promptly notify the Borrower in writing setting forth the
particulars of such claim or action and the Borrower shall assume the
defense thereof, including the retaining of counsel acceptable to such
party and the payment of all expenses. The Authority and the
Underwriter or any such controlling person shall have the right to
retain separate counsel in any such action and to participate in the
defense thereof but shall bear the fees and expenses of such counsel
unless (i) the Borrower shall have specifically authorized the
retaining of such counsel or (ii) the parties to such suit include such
Underwriter or controlling person or persons, and the Borrower and such
Underwriter or controlling person or persons have been advised by such
counsel that one or more legal defenses may be available to it or them
which may not be available to the Borrower, in which case the Borrower
shall not be entitled to assume the defense of such suit
notwithstanding its obligation to bear the fees and expenses of such
counsel.
(14) In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in Paragraph
(13) hereof is applicable but for any reason is held to be unavailable
from the Borrower, the Borrower and the Underwriter shall contribute to
the aggregate losses, claims, damages and liabilities (including any
investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or
any claims asserted, but after deducting any contribution received by
the Borrower from persons who control the Borrower within the meaning
of Section 20 of the Securities Exchange Act of 1934 and Section 15 of
the Securities Act of 1933, as amended (collectively, the "Securities
Acts"), to which the Borrower and the Underwriter may be subject in
such proportions that the Underwriter are responsible for that portion
represented by the percentage that the underwriting discount or fee
received by the Underwriter bears to the offering price of the Bonds
and the Borrower is responsible for the balance; provided, however,
that (i) in no case shall the Underwriter be responsible for any amount
in excess of the
A-5
<PAGE>
underwriting fee or discount applicable to the Bonds purchased by such
Underwriter pursuant to the Purchase Contract and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act of 1933, as amended) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Paragraph (14), each person, if
any, who controls the Underwriter within the meaning of the Securities
Acts, shall have the same rights to contribution as the Underwriter,
and each person, if any, who controls the Borrower within the meaning
of the Securities Acts shall have the same rights to contribution as
the Borrower, subject in each case to clauses (i) and (ii) of this
Paragraph (14). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding
against such party in respect of which a claim for contribution may be
made against another party or parties under this Paragraph (14), notify
such party or parties from whom contribution may be sought, but the
omission to so notify such party from whom contribution may be sought
shall not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have hereunder or
otherwise than under this Paragraph (14). No party shall be liable for
contribution with respect to any action or claims settled without its
consent.
The representations, warranties, agreements and indemnities herein
shall survive the Closing under the Purchase Contract and any investigation made
by or on behalf of the Authority and the Underwriter or any person who controls
the Authority or the Underwriter of any matters described in or related to the
transactions contemplated hereby and by the Purchase Contract, the Official
Statement, the Loan Agreement, the Remarketing Agreement and the Indenture.
A-6
<PAGE>
This Letter of Representation shall be binding upon the Borrower and
shall inure solely to the benefit of the Authority, the Underwriter and, to the
extent set forth herein, persons controlling the Authority and the Underwriter,
and their respective officers, employees, agents, advisors, attorneys and
personal representatives, successors and assigns, and no other person or firm
shall acquire or have any right under or by virtue of this Letter of
Representation.
Very truly yours,
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By:________________________________
Authorized Signatory
A-7
<PAGE>
PURCHASE CONTRACT
among
CALIFORNIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY
TREASURER OF THE STATE OF CALIFORNIA
and
RAUSCHER PIERCE REFSNES, INC.
Dated August 4, 1997
Relating to
$8,500,000
California Economic Development Financing Authority
Variable Rate Demand
Industrial Development Revenue Bonds, Series 1997
(Advanced Aerodynamics and Structures, Inc. Project)
REMARKETING AGREEMENT
THIS REMARKETING AGREEMENT (this "Remarketing Agreement"), dated and
effective as of August 1, 1997, by and between ADVANCED AERODYNAMICS AND
STRUCTURES, INC., a Delaware corporation (the "Borrower") and RAUSCHER PIERCE
REFSNES, INC. (the "Remarketing Agent").
W I T N E S S E T H:
WHEREAS, the California Economic Development Financing Authority (the
"Issuer") has issued its Variable Rate Demand Industrial Development Revenue
Bonds, Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) in the
aggregate principal amount of $8,500,000 (the "Bonds"), pursuant to that certain
Indenture of Trust, dated as of August 1, 1997 (the "Indenture"), by and between
the Issuer and First Trust of California, National Association, as trustee (the
"Trustee"); and
WHEREAS, to secure the payment of the principal of, interest on and
purchase price of the Bonds, The Sumitomo Bank, Limited, acting through its Los
Angeles Branch (the "Bank"), has issued its irrevocable direct pay letter of
credit (the "Letter of Credit") to the Trustee; and
WHEREAS, the Bonds are subject to purchase upon notice and delivery to the
Tender Agent (as such term is defined in the Indenture) as provided in the
Indenture; and
WHEREAS, the Remarketing Agent has been appointed (and the Remarketing
Agent by execution hereby accepts the appointment) as Remarketing Agent pursuant
to the Indenture; and
WHEREAS, the Borrower and the Remarketing Agent desire to make additional
provisions regarding the Remarketing Agent's role as Remarketing Agent for the
Bonds.
NOW, THEREFORE, for and in consideration of the covenants herein made, the
Borrower and the Remarketing Agent hereby agree as follows:
Section 1. Definitions. All capitalized terms used in this Remarketing
Agreement which are not otherwise defined herein shall have the meanings
ascribed to them in the Indenture.
Section 2. Duties. (a) In reliance upon the representations and agreements,
but subject to the terms and conditions contained in the Indenture and in this
Remarketing Agreement, the Remarketing Agent has been appointed, and the
Remarketing Agent hereby accepts such appointment, as exclusive remarketing
agent in connection with the offering and sale of the Bonds from time to time in
the secondary market subsequent to the initial offering, issuance and sale of
the Bonds.
<PAGE>
(b) It is understood and agreed that the Remarketing Agent's
responsibilities hereunder and under the Indenture will include (i) exercising
its best efforts in its sale of the Bonds (ii) effecting and processing such
purchases, (iii) billing and receiving payment of Bond purchases, (iv) causing
the proceeds from the secondary sale of the Bonds to be transferred to the
Tender Agent, (v) determining the Fixed Interest Rate and the Weekly Interest
Rates, and (vi) performing such other related functions as may be provided for
in the Indenture of the Remarketing Agent or reasonably requested by the
Borrower and agreed to by the Remarketing Agent.
(c) The obligations of the Remarketing Agent hereunder and under the
Indenture, with respect to the date on which the Bonds are to be remarketed
pursuant to this Remarketing Agreement, are also subject to the further
condition that on and prior to such date there shall not have been any change in
the ownership of the Project except as permitted pursuant to the Agreement and
the Indenture, the Indenture, the Agreement and the Letter of Credit shall be in
full force and effect and shall not have been amended, modified or supplemented
in any way which would materially and adversely affect the duties of the
Remarketing Agent, except as may have been agreed to in writing by the
Remarketing Agent, and there shall be in full force and effect such additional
resolutions, agreements, certificates (including such certificates as may be
required by regulations for the Internal Revenue Service in order to establish
or preserve the tax-exempt character of interest on the Bonds) and opinions,
which resolutions, agreements, certificates and opinions shall be reasonably
satisfactory in form and substance to the Trustee, to the Issuer, to the Bank
and to counsel for the Remarketing Agent.
The Remarketing Agent will perform the duties specified as Remarketing
Agent under the Indenture and this Remarketing Agreement. In acting as
Remarketing Agent, the Remarketing Agent will act as agent and not as principal
except as expressly provided in this Section.
The Remarketing Agent may, if it determines to do so in its sole
discretion, buy as principal any such Bonds but it will not in any event be
obligated to do so.
Section 3. Disclosure Statement. (a) If the Remarketing Agent reasonably
determines that it is necessary or desirable to amend or supplement the Official
Statement (as defined below) in connection with its offering of the Bonds, the
Remarketing Agent will notify the Borrower and the Borrower will provide, or
cause to be provided to, the Remarketing Agent an amendment or supplement to the
Official Statement satisfactory to the Remarketing Agent and its counsel with
respect to the Bonds. The Borrower will supply, or cause to be supplied to, the
Remarketing Agent with such number of copies of the amendment or supplement to
the Official Statement and documents related thereto as the Remarketing Agent
reasonably requests from time to time and will amend or supplement the Official
Statement (and/or the documents incorporated by reference in it) so that at all
times the Official Statement and any documents related thereto will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements in such documents, in the light of the
circumstances under which they were made, not misleading. In addition, the
Borrower will take all steps reasonably
2
<PAGE>
requested by the Remarketing Agent which the Remarketing Agent or its counsel
may consider necessary or desirable to register the sale of the Bonds by the
Remarketing Agent under any Federal or state securities law or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended and as then in
effect (the "Trust Indenture Act") to the extent required under any federal or
state securities law or the Trust Indenture Act for municipal obligations
similar in character to the Bonds, and will provide the Remarketing Agent such
officers' certificates, counsel opinions, accountants' letters and other
documents as may be customary in similar transactions. If the Borrower does not
perform its obligations under this Section, the Remarketing Agent may
immediately cease to remarket the Bonds and, in such event, shall resign as
Remarketing Agent as provided herein.
(b) The Issuer has previously prepared and delivered to the Remarketing
Agent a copy of the Official Statement, dated August 4, 1997 (the "Official
Statement"), including financial and other information in respect of the Issuer,
the Borrower and the Bank. The Issuer has authorized the use by the Remarketing
Agent of the Official Statement in connection with the remarketing of Bonds. For
purposes of this Remarketing Agreement, the Official Statement and any other
documents provided to the Remarketing Agent pursuant to paragraph (a) of this
Section shall be considered to be the Disclosure Statement (as defined in
Section 7 hereof).
Section 4. Representations, Warranties, Covenants and Agreements of the
Remarketing Agent. The Remarketing Agent, by its acceptance hereof, represents,
warrants, covenants and agrees with the Borrower as follows:
(a) It is a member of the National Association of Securities Dealers,
having a capitalization of at least $15,000,000, otherwise meets the
requirements for the Remarketing Agent set forth in the Indenture, is authorized
by law to perform all duties imposed upon it by the Indenture and this
Remarketing Agreement and has full power and authority to take all actions
required or permitted to be taken by the Remarketing Agent hereunder and under
the Indenture.
(b) The execution and delivery of this Remarketing Agreement and the
consummation of the transactions contemplated herein and in the Indenture will
not conflict with or constitute on the part of the Remarketing Agent a breach of
or default under its charter documents, its by-laws, or any statute, indenture,
mortgage, deed of trust, lease, note agreement or other agreement or instrument
to which the Remarketing Agent is a party or by which it or its properties are
bound, or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Remarketing Agent or any of its activities or
properties.
(c) This Remarketing Agreement has been duly authorized, executed and
delivered by the Remarketing Agent and this Remarketing Agreement is a valid and
binding obligation of the Remarketing Agent enforceable in accordance with its
terms.
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<PAGE>
(d) The Remarketing Agent will use its best efforts to remarket the Bonds
pursuant to this Remarketing Agreement and the Indenture.
Section 5. Representation, Warranties, Covenants and Agreements of the
Borrower. The representations, warranties and agreements of the Borrower set
forth in the Letter of Representation, dated August 4, 1997, from the Borrower
to Rauscher Pierce Refsnes, Inc., as the underwriter of the Bonds, the Issuer
and the Treasurer of the State of California attached to the Purchase Contract
are hereby incorporated herein as being made to the Remarketing Agent as of the
date hereof.
Section 6. Conditions to Remarketing Agent's Obligations. The obligations
of the Remarketing Agent under this Remarketing Agreement have been undertaken
in reliance on, and shall be subject to, the due performance by the Borrower of
its obligations and agreements to be performed hereunder and to the accuracy of
and compliance with the representations, warranties, covenants and agreements of
the Borrower contained herein, on and as of the date of delivery of this
Remarketing Agreement. The obligations of the Remarketing Agent on and as of
each date on which Bonds are to be offered and sold pursuant to this Remarketing
Agreement are also subject to the following further conditions:
(a) Each of the Indenture, the Agreement, the Letter of Credit, the
Reimbursement Agreement and all other documents and agreements referenced in the
Indenture or relating to the Bonds shall be in full force and effect and shall
not have been amended, modified or supplemented in any way which would
materially and adversely affect the Bonds, except as may have been agreed to in
writing by the Remarketing Agent, and there shall be in full force and effect
such additional resolutions, agreements, certificates and opinions, which
resolutions, agreements, certificates and opinions shall be satisfactory in form
and substance to the Remarketing Agent; and
(b) No Event of Default shall have occurred and be continuing and no event
shall have occurred and be continuing which, with the passage of time or the
giving of notice or both, would constitute such an Event of Default.
Section 7. Indemnification and Contribution. (a) To the extent permitted by
law, the Borrower will indemnify and hold harmless the Remarketing Agent, each
of its directors, officers and employees and each person who controls the
Remarketing Agent within the meaning of Section 15 of the Securities Act of
1933, as amended (herein called the "Securities Act" and any such person being
herein sometimes called an "Indemnified Party"), against any and all losses,
claims, damages or liabilities, joint or several, to which such Indemnified
Party may become subject under any statute or at law or in equity or otherwise,
and shall reimburse any such Indemnified Party for any legal or other expenses
incurred by it in connection with investigating any claims against it and
defending any actions, but only to the extent that such losses, claims, damages,
liabilities or actions arise out of or are based upon (i) an allegation or
determination that the Bonds or the obligations of the Bank under the Letter of
Credit should have been registered under the Securities Act or the Indenture
should have been qualified under the Trust Indenture Act, or (ii) any untrue
statement or alleged untrue statement of a material fact
4
<PAGE>
contained in any amendment or supplement to the Official Statement referred to
in Section 3 hereof (a "Disclosure Statement") or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but the
Borrower shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Borrower or the Issuer by the Remarketing Agent specifically
for use in connection with the preparation thereof, or if the person asserting
any such loss, claim, damage or liability purchased Bonds from the Remarketing
Agent, if delivery to such person of the Disclosure Statement or any amendment
or supplement to it would have been a valid defense to the action from which
such loss, claim, damage or liability arose and if the same was not delivered to
such person by or on behalf of the Remarketing Agent. This indemnity agreement
shall not be construed as a limitation on any other liability which the Borrower
may otherwise have to any Indemnified Party. The Remarketing Agent may, in its
sole discretion, pursue any rights it may have against any party other than the
Borrower to recover any losses, damages or liabilities covered by this Section
7(a); provided, however, that the Borrower's liability under this Section 7(a)
shall not be limited by the availability of such rights or the Remarketing
Agent's actions with respect to such rights.
(b) An Indemnified Party shall, promptly after the receipt of notice of the
commencement of any action against such Indemnified Party in respect of which
indemnification may be sought against the Borrower (the "Indemnifying Party"),
notify the Indemnifying Party in writing of the commencement thereof. In case
any such action shall be brought against an Indemnified Party and such
Indemnified Party shall notify the Indemnifying Party, the Indemnifying Party
may, or if so requested by such Indemnified Party shall, participate therein or
assume the defense thereof, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the Indemnifying Party to such
Indemnified Party of an election so as to assume the defense thereof, such
Indemnified Party shall reasonably cooperate in the defense thereof, including
without limitation, the settlement of outstanding claims, and the Indemnifying
Party will not be liable to such Indemnified Party under this Section 7 for any
legal or other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of investigation
incurred with the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld; provided, however, that unless and until the Indemnifying
Party assumes the defense of any such action at the request of such Indemnified
Party, the Indemnifying Party shall have the right to participate at its own
expense in the defense of any such action. If the Indemnifying Party shall not
have employed counsel to have charge of the defense of any such action or if any
Indemnified Party shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to those
available to the Indemnifying Party (in which case the Indemnifying Party shall
not have the right to direct the defense of such action on behalf of such
Indemnified Party), legal and other expenses incurred by such Indemnified Party
shall be borne by the Indemnifying Party. Any obligation under this Section of
an Indemnifying Party to reimburse an Indemnified Party for
5
<PAGE>
expenses includes the obligation to make advances to the Indemnified Party to
cover such expenses in reasonable amounts and at reasonable periodic intervals
not more often than monthly as requested by the Indemnified Party.
Notwithstanding the foregoing, the Indemnifying Party shall not be liable for
any settlement of any action or claim effected without its consent, which
consent shall not be unreasonably withheld.
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph (a) of this
Section 7 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Borrower on grounds of public policy or
otherwise, the Borrower and the Remarketing Agent shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
to which the Borrower and the Remarketing Agent may be subject (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Borrower on the one hand and the Remarketing Agent on the other from the
remarketing of the Bonds or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Borrower and the Remarketing Agent in connection with
the failure to register or qualify certain instruments as described in Section
7(a)(i) or in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant
considerations. The relative benefits received by the Borrower on the one hand
and the Remarketing Agent on the other shall be deemed to be in the same
proportion as the aggregate principal amount of the Bonds remarketed pursuant to
this Remarketing Agreement bear to the total remarketing fees received by the
Remarketing Agent. The relative fault of the Borrower on the one hand and of the
Remarketing Agent on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Borrower or by the Remarketing Agent and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, however, in the case of an allegation or
determination that the Bonds or the obligations of the Bank under the Letter of
Credit should have been registered under the Securities Act or the Indenture
should have been qualified under the Trust Indenture Act, the fault shall be
deemed to be entirely that of the Borrower. The amount paid or payable by a
party as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
(d) The Borrower and the Remarketing Agent agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7, the Remarketing
Agent shall not be required to contribute any amount in excess of the
remarketing fee applicable to the Bonds remarketed pursuant to this Remarketing
Agreement. No person guilty of
6
<PAGE>
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
(e) For purposes of this Section 7, each person who controls the
Remarketing Agent within the meaning of Section 15 of the Securities Act shall
have the same rights as the Remarketing Agent. Any party entitled to
contribution shall, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under paragraph (d),
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any other obligation it or
they may have hereunder or otherwise than under paragraph (d).
Section 8. Fees and Expenses. In consideration of the Remarketing Agent's
services under this Remarketing Agreement, the Borrower will pay the Remarketing
Agent an annual amount equal to an aggregate of 1/8 of 1.0% of the aggregate
principal amount of Bonds outstanding under the Indenture, payable quarterly in
arrears on February 1, May 1, August 1 and November 1, commencing on November 1,
1997 and computed on the basis of the actual number of days elapsed during such
calculation period and the aggregate principal amount of the Bonds outstanding
during such calculation period. The Borrower also will pay all expenses in
connection with the preparation of any Disclosure Statement, the registration of
the Bonds and any other documents relating to the Bonds required to comply with
any applicable securities laws or required to comply with the Trust Indenture
Act and will reimburse the Remarketing Agent for all of its reasonable direct
out-of-pocket expenses incurred by it as Remarketing Agent under this
Remarketing Agreement and the Indenture, including counsel fees and
disbursements.
Section 9. Dealing in Bonds by Paying Agent, Tender Agent, Bank and
Remarketing Agent. The Trustee, the Paying Agent, the Tender Agent, the Bank or
the Remarketing Agent, in their respective individual capacities, may in good
faith buy, sell, own, hold and deal in any of the Bonds, and may join in any
action which Bond owners may be entitled to take with like effect as if it did
not act in any capacity hereunder. The Trustee, the Paying Agent, the Tender
Agent, the Bank or the Remarketing Agent, in their respective individual
capacities, either as principal or agent, may also engage in or be interested in
any financial or other transaction with the Issuer, and may act as depositary,
trustee or agent for other obligations of the Issuer as freely as if it did not
act in any capacity hereunder.
Section 10. Intention of Parties. It is the intention of the parties hereto
that no purchase, sale or transfer of any Bonds, as herein and in the Indenture
provided, shall constitute or be construed to be extinguishment of any Bonds or
the indebtedness represented thereby or the reissuance of any Bonds.
Section 11. Fails. The Remarketing Agent will not be liable to the Issuer,
the Borrower, the Trustee, the Tender Agent or the Bank on account of the
failure of any person to whom the Remarketing Agent has sold a Bond to pay for
such Bond or to deliver any
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<PAGE>
document in respect of the sale. It is understood and agreed that the
Remarketing Agent shall not be obligated to advance its own funds to purchase,
or to effect the purchase of, any Bonds.
Section 12. Remarketing Agent's Performance. (a) The duties and obligations
of the Remarketing Agent as Remarketing Agent shall be determined solely by the
express provisions of this Remarketing Agreement and the Indenture, and the
Remarketing Agent shall not be responsible for the performance of any duties and
obligations other than as are specifically set forth in this Remarketing
Agreement and the Indenture, and no implied covenants or obligations shall be
read into this Remarketing Agreement or the Indenture against the Remarketing
Agent.
(b) The Remarketing Agent may conclusively rely upon any notice or document
given or furnished to the Remarketing Agent and conforming to the requirements
of this Remarketing Agreement or the Indenture and shall be protected in acting
upon any such notice or document reasonably believed by it to be genuine and to
have been given, signed or presented by the proper party or parties.
(c) The Remarketing Agent shall not be liable for any actions taken or
omitted to be taken pursuant to this Remarketing Agreement, except for its own
negligence or willful misconduct.
Section 13. Termination. (a) This Remarketing Agreement will terminate
automatically at such time as all of the Bonds have been paid or deemed paid
under the Indenture and upon the effective resignation or removal of the
Remarketing Agent as Remarketing Agent in accordance with the Indenture. The
Remarketing Agent will resign as Remarketing Agent under the Remarketing
Agreement if requested to do so by the Borrower and the Issuer in writing and
may resign at any time upon forty-five (45) days written notice delivered to the
Issuer, the Borrower, the Tender Agent, the Bank, the Trustee, Standard & Poor's
Ratings Services and Moody's Investors Service, to the extent each such rating
agency is then rating the Bonds.
(b) In addition to the provisions of paragraph (a) of this section, the
Remarketing Agent may terminate its obligations under this Remarketing Agreement
at any time by notifying the Borrower in writing or by telegram, telex or other
electronic communications of its election so to do, if:
(i) Legislation shall be favorably reported, recommended by committee
or enacted by the Congress or adopted by either House thereof or a decision by a
Court of the United States of America or the United States Tax Court shall be
rendered, or a ruling, regulation or official statement by or on behalf of the
Treasury Department of the United States of America, the Internal Revenue
Service or other governmental agency shall be made, with respect to federal
taxation of receipts, revenues or other income of the general character expected
to be derived by the Issuer or of interest received on bonds of the general
character of the Bonds or which would have the effect of changing directly or
indirectly the federal income tax consequences of interest on bonds of the
general
8
<PAGE>
character of the Bonds in the hands of the holders thereof, which, in the
opinion of the Remarketing Agent, materially adversely affects the market price
of the Bonds;
(ii) Legislation shall be introduced by committee, by amendment or
otherwise, in, or be enacted by, the House of Representatives or the Senate of
the Congress of the United States, or a decision by a court of the United States
shall be rendered, or a stop order, ruling, regulation or official statement by,
or on behalf of, the United States Securities and Exchange Commission or other
governmental agency having jurisdiction of the subject matter shall be made or
proposed, to the effect that the offering or sale of obligations of the general
character of the Bonds, as contemplated hereby, is or would be in violation of
any provision of the Securities Act, or the Securities Exchange Act of 1934, as
amended and as then in effect, or the Trust Indenture Act, or with the purpose
or effect of otherwise prohibiting the offering or sale of obligations of the
general character of the Bonds, or the Bonds, as contemplated hereby;
(iii) Any information shall have become known, which, in the
Remarketing Agent's reasonable opinion, makes untrue, incorrect or misleading in
any material respect any statement or information contained in the Disclosure
Statement, as the information contained therein has been supplemented or amended
by other information, as of the date furnished or supplemented to the
Remarketing Agent in accordance with Section 3 hereof, or causes the Disclosure
Statement, as so supplemented or amended, to contain an untrue, incorrect or
misleading statement of a material fact or to omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading;
(iv) Except as provided in clause (i) hereof, any legislation,
resolution, ordinance, rule or regulation shall be introduced in, or be enacted
by, any governmental body, department or agency of the United States or the
State of California shall be rendered which, in the Remarketing Agent's
reasonable opinion, materially adversely affects the marketability of the Bonds;
(v) Additional material restrictions not in force as of the date
hereof shall have been imposed upon trading in securities generally by any
governmental authority or by any national securities exchange;
(vi) Any governmental authority shall impose, as to the Bonds, or
obligations of the general character of the Bonds, any material restrictions not
now in force, or increase materially those now in force;
(vii) A general banking moratorium shall have been established by
federal, New York or California authorities;
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<PAGE>
(viii) Any rating of the Bonds shall have been downgraded or withdrawn
by a national rating service, which, in the Remarketing Agent's reasonable
opinion, materially adversely affects the marketability of the Bonds;
(ix) A war involving the United States shall have been declared, or
any existing conflict involving the armed forces of the United States shall have
escalated, or any other national emergency relating to the effective operation
of government or the financial community shall have occurred, which, in the
Remarketing Agent's reasonable opinion, materially adversely affects the
marketability of the Bonds;
(x) An event, including, without limitation, the bankruptcy or default
of any other issuer of or obligor on obligations of the general character of the
Bonds or on similar commercial paper, shall have occurred which, in the opinion
of the Remarketing Agent, makes the marketability of obligations of the general
character of the Bonds impossible over an extended period of time.
The provisions of Section 7 shall survive the termination of this Remarketing
Agreement and the payment or defeasance of the Bonds.
Section 14. Miscellaneous. (a) Except as otherwise provided, any notice or
other communication herein required or permitted to be given shall be in
writing, by facsimile transmission or by telephone with subsequent written
confirmation and may be personally served or sent by United States mail, first
class mail postage prepaid, and shall be deemed to have been given upon receipt
by the party notified. For the purposes hereof, the address of the parties
(until notice of a change thereof is delivered as provided in this Section 14(a)
shall be as follows:
Remarketing Agent: Rauscher Pierce Refsnes, Inc.
2711 North Haskell Avenue, Suite 2400
Dallas, Texas 75204
Attention: Fixed Income Banking
(214) 989-1834 Fax: (214) 989-1842
Issuer: California Economic Development
Financing Authority
801 K Street, Suite 1700
Sacramento, California 91584
Attention: Chair
(916) 323-8022 Fax: (916) 322-7214
10
<PAGE>
Bank: The Sumitomo Bank, Limited
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Structured Finance & Financial
Institutions Group
(213) 955-0800 Fax: (213) 623-6832
Borrower: Advanced Aerodynamics and Structures, Inc.
3501 Lakewood Boulevard
Long Beach, California 90808
Attention: President
(562) 938-8618 Fax: (562) 938-8620
Trustee: First Trust of California, National Association
One California Street, 4th Floor
San Francisco, California 94111
Attention: Municipal Trusts and Agency
(415) 273-4500 Fax: (415) 273-4590
Tender Agent: First Trust of California, National Association
One California Street, 4th Floor
San Francisco, California 94111
Attention: Municipal Trusts and Agency
(415) 273-4590 Fax: (415) 273-4590
The Remarketing Agent, the Issuer, the Borrower, the Trustee, the Bank and
the Tender Agent may, by notice given under this Remarketing Agreement,
designate other addresses to which notices or other communications shall be
directed.
(b) This Remarketing Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns. The terms
"successors" and "assigns" shall not include any purchaser of any of the Bonds
merely because of such purchase.
(c) All of the representations, warranties and covenants made in this
Remarketing Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any party hereto,
(ii) delivery of and any payment for any Bonds hereunder, or (iii) termination
or cancellation of this Remarketing Agreement.
(d) Section headings have been inserted in this Remarketing Agreement as a
matter of convenience of reference only, and it is agreed that such section
headings are not a part of this Remarketing Agreement and will not be used in
the interpretation of any provisions of this Remarketing Agreement.
11
<PAGE>
(e) If any provision of this Remarketing Agreement shall be held or deemed
to be or shall, in fact, be invalid, inoperative or unenforceable as applied in
any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions because it conflicts with any provisions of any constitution,
statute, rule or public policy, or any other reason, such circumstances shall
not have the effect of rendering the provisions in question invalid, inoperative
or unenforceable in any other case or circumstance, or of rendering any other
provisions of this Remarketing Agreement invalid, inoperative or unenforceable
to any extent whatsoever.
(f) This Remarketing Agreement may be executed in several counterparts,
each of which shall be regarded as an original and all of which shall constitute
one and the same document.
(g) The terms of this Remarketing Agreement shall not be waived, altered,
modified, amended or supplemented in any manner whatsoever except by written
instrument signed by all of the parties hereto.
(h) This Remarketing Agreement shall be governed by and construed in
accordance with the laws of the State of California.
12
<PAGE>
IN WITNESS WHEREOF, the Remarketing Agent and the Borrower have caused this
Remarketing Agreement to be signed in their names by the undersigned officers,
thereunto duly authorized, all as of the day and year first above written.
RAUSCHER PIERCE REFSNES, INC.
By ________________________________
Managing Director
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By ________________________________
Authorized Signatory
<PAGE>
REMARKETING AGREEMENT
by and between
RAUSCHER PIERCE REFSNES, INC.
and
ADVANCED AERODYNAMICS AND STRUCTURES, INC.
Dated as of August 1, 1997
Relating to
$8,500,000
California Economic Development Financing Authority
Variable Rate Demand
Industrial Development Revenue Bonds, Series 1997
(Advanced Aerodynamics and Structures, Inc. Project)
Blanket Issuer Letter of Representations
[To be Completed by Issuer]
California Economic Development Financing Authority
[Name of Issuer]
April 11, 1996
[Date]
Attention: Underwriting Department - Eligibility
The Depository Trust Company
55 Water Street, 50th Floor
New York, NY 10041-0099
Ladies and Gentlemen:
This letter sets forth our understanding with respect to all issues
(the "Securities") that Issuer shall request be made eligible for deposit, by
The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with DTC's Rules with respect to the Securities, Issuer
represents to DTC that Issuer will comply with the requirements stated in DTC's
Operational Arrangements, as they may be amended from time to time.
Note: Very truly yours,
Schedule A contains statements Califonria Economic Development Financing
that DTC believes accurately Authority
describe DTC, the method of -----------------------------------------
effecting book-entry transfers Issuer
of securities distributed
through DTC, and certain related By:______________________________________
matters. (Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY Loren Kaye, Chair
-----------------------------------------
(Typewrite Name & Title)
By:_____________________________ 801 "K" Street, Suite 1700
-----------------------------------------
(Street Address)
Sacramento, CA 95814
-----------------------------------------
(City) (State) (Zip)
916-324-9775
-----------------------------------------
<PAGE>
SCHEDULE A
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
(Prepared by DTC-bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities will
be issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully-registered Security certificate will be
issued for [each issue of] the Securities, [each] in the aggregate principal
amount of such issue, and will be deposited with DTC. [If, however, the
aggregate principal amount of [any] issue exceeds $200 million, one certificate,
will be issued with respect to each $200 million of principal amount, and an
additional certificate will be issued with respect to any remaining principal
amount of such issue.]
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interest in the Securities are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in Securities,
except in the event that use of the book-entry system for the Securities is
discontinued.
1
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4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Securities. DTC's records reflect only the
identity of the Direct Participants to whose accounts such Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may e in effect from time to time.
[ 6. Redemption notices shall be sent to Cede & Co. If less than all
of the Securities within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such
issue to be redeemed.]
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer
as soon as possible after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
8. Principal and interest payments on the Securities will be made to
DTC. DTC's practice is to credit Direct Participants' accounts on payable date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on payable date. Payments
by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Agent, or the Issuer,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to DTC is the responsibility of
the Issuer or the Agent, disbursement of such payments to Direct Participants
shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
[ 9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to the [Tender/Remarketing]
Agent, and shall effect delivery of such Securities by causing the Direct
Participant to transfer the Participant's interest in the Securities, on DTC's
records, to the [Tender/Remarketing] Agent. The requirement for physical
delivery of Securities in connection with a demand for purchase or a mandatory
purchase will be deemed satisfied when the ownership rights in the Securities
are transferred by Direct Participants on DTC's records.]
2
<PAGE>
10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to the
Issuer or the Agent. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to be
printed and delivered.
11. The issuer may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In that
event, Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Issuer believes to be reliable,
bu the Issuer takes no responsibility for the accuracy thereof.
3
<PAGE>
APPENDIX B - Variable Rate Demand Obligations (VRDOs)
This section is intended to advise issuers, agents and Participants (the parties
to the Book-Entry-Only (BEO issue) of additional operational requirements
necessary to process VRDOs through the depository.
1. In the event that certain Securities are not subject to a partial
redemption, DTC will exclude such Securities from its redemption
procedures if such exclusion is requested as follows. Such request
shall be in writing and shall contain (a) certification by Trustee or
Issuer that the principal amount of such Securities is not subject to
the partial redemption and certification by a custodian/DTC
Participant that the Participant's position on DTC's records includes
such Securities; and (b) certification by Trustee or Issuer that the
election to exclude such Securities from the partial redemption is
authorized under the Document. Such request shall be sent to DTC's
Call Notification Department in the manner indicated on page 11,
paragraph 4b, to assure that such request is in DTC's possession no
later than the close of business two business days before the
Publication Date of the partial redemption notice.
2. It is understood that for so long as optional tenders of the
Securities may be made daily following same-day or seven-day notice,
such tenders will be effected by means of DTC's Deliver Order
Procedures. DTC shall have no responsibility to distribute notices
regarding such option tenders, or to ascertain whether any such tender
has been made. Except as otherwise provided herein, and in accordance
with DTC's procedures for exercise of voting and consenting rights,
the parties hereto acknowledge that so long as Cede & Co. is the sole
record owner of the Securities it shall be entitled to all voting
rights applicable to the Securities and to receive the full amount of
all distributions payable with respect to the Securities. The parties
acknowledge that DTC shall treat any DTC Participant ("Participant")
having Securities credited to its DTC accounts as entitled to the full
benefits of ownership of such Securities even if the credits of
Securities to the DTC accounts of such Participant result from
failures to deliver Securities or improper deliveries of Securities by
an owner of Securities subject to tender for purchase. Without
limiting the generality of the preceding sentence, the parties
acknowledge that DTC shall treat any Participant have Securities
credited to its DTC accounts as entitled to receive distributions and
voting rights, if any, with respect to the Securities and to receive
certificates evidencing Securities if such certificates are to be
issued in accordance with paragraphs 4 & 5 of Appendix A. (The
treatment by DTC of the effects of the crediting by it of Securities
to the accounts of Participant described in the preceding two
sentences shall not affect the rights of the parties hereto against
any Participant.)
3. It is understood that for so long as optional tenders of the
Securities may be made less frequently than daily following same-day
or seven-day notice (e.g., during a monthly, quarterly, semi-annual,
or annual tender period) and Cede & Co., as nominee of DTC, or its
registered assigns, as the record owner of Securities, is entitled to
tender the Securities, such tenders will be effected by means of DTC's
Put Option Procedures. Under the Put Option
4
<PAGE>
Procedures, DTC will receive during the applicable tender period
instructions from its Participants to tender Securities for purchase.
The parties agree that such tenders for purchase may be made by DTC by
means of a book-entry credit of such Securities to the account of
Tender Agent, provided that such credit is made on or before the final
day of the applicable tender period. DTC agrees that, promptly after
the recording of any such book-entry credit, it will provide to Tender
Agent an Agent Put Daily Activity Report in accordance with the Put
Option Procedures, identifying the Securities and the aggregate
principal amount thereof as to which such tenders for purchase have
been made.
Trustee or Issuer shall send a notice to DTC regarding such optional tenders of
Securities by hand or by a secure means (e.g., legible telecopy, registered or
certified mail, overnight delivery) in a timely manner designed to ensure that
such notice is in DTC's possession no later than the close of business two
business days before the Publication Date. The Publication Date shall be not
less than 15 days prior to the start of the applicable tender period. Such
notice shall state whether any partial redemption of the Securities is scheduled
to occur during the applicable optional tender period.
If delivered by hand or sent by mail or overnight delivery, such notice shall be
sent to:
Supervisor, Put Bond Unit
Reorganization Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004-2695
If sent by telecopy, such notice shall be sent to (212) 709-1093 or (212)
709-1094. Trustee or Issuer shall confirm DTC's receipt of such telecopy by
telephoning (212) 709-1470.
For so long as the Securities are SDFS Securities, principal payments (plus
accrued interest, if any) as the result of optional tenders fro purchase
effected by means of DTC's Put Option Procedures shall be received by DTC on
each purchase date in same-day funds in the manner set forth in the SDFS Paying
Agent Operating Procedures.*/ Such payments shall be sent in time to be credited
to DTC's account at the FRBNY no later than 10:00 a.m. (Paying Agent's local
time) on the purchase date or as soon as possible thereafter following Paying
Agent's receipt of funds from Issuer. It is understood that: (a) until DTC
receives such payments in its FRBNY account, the optionally tendered Securities
will remain in Tender Agent's DTC account; and (b) unless DTC receives such
payments in its FRBNY account by 2:00 p.m. (Eastern Time), it may be unable to
distribute such payments to DTC Participants or release the Securities to the
Remarketing Agent that same day.
- --------
* Beginning on the day DTC converts its settlement systems to only
same-day funds these SDFS Paying Agent Operating Procedures will expire. At that
time, these principal payments shall not be paid to DTC according to the
instructions listed in the last paragraph of this section 3 by 2:30 p.m. ET.
5
<PAGE>
For so long as the Securities are NDFS Securities, principal payments (plus
accrued interest, if any) as the result of optional tenders for purchase
effected by means of DTC's Put Option Procedures shall be received by Cede &
Co., as nominee of DTC, or its registered assigns, on each purchase date in
next-day funds or the equivalent in accordance with existing arrangements
between Tender Agent and DTC. Such payments shall be made payable to the order
of Cede & Co. and shall be addressed to Supervisor, Put Bond Unit,
Reorganization Department, as indicated in paragraph 3 above.
4. In the event of a change or proposed change in the interest-rate mode
of the Securities from one variable-rate mode to any other
variable-rate mode, or to a fixed-rate mode, Trustee or Issuer shall
send a notice to DTC of such event specifying, as applicable: (a) the
name and number of the DTC Participant account to which mandatorily
tendered Securities are to be delivered by DTC on the purchase date
after DTC receives payment for such Securities; and (b) the first
interest payment date under the new mode. Such notice shall be sent to
DTC by a secure means (e.g., legible telecopy, registered or certified
mail, overnight delivery) in a timely manner designed to ensure that
such notice is in DTC's possession no later than the close of business
two business days before the Publication Date. The Publication Date
shall be not less that 15 days prior to the expiration date of the
period provided for security owner elections to retain Securities as
discussed in paragraph 6. If delivered by hand or sent by mail or
overnight delivery, such notice shall be sent to both:
Manager, VRDO Eligibility Section
Underwriting Department
The Depository Trust Company
55 Water Street; 50th Floor
New York, NY 10041-0099
and
Supervisor, Put Bond Unit
Reorganization Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
If sent by telecopy, such notice shall be sent to both:
DTC's Underwriting Department at
(212) 898-3726 or (212) 344-1531
and
DTC's Reorganization Department at
(212) 709-1093 or (212) 709-1094
Trustee or Issuer shall confirm DTC's receipt of such telecopy by telephoning
the Underwriting Department at (212) 898-3731 and the Reorganization Department
at (212) 709-1470.
All other notices regarding the interest rate on the Securities (before and
after any change in the interest-rate mode) shall be delivered to Manager, VRDO
Announcement, Dividend Department.
5. In the event of expiration or substitution of a facility supporting
the Securities (such as a letter of credit) or non reinstatement of
the amount available to pay interest on the Securities pursuant to
such a facility, Trustee or Issuer shall send a notice to DTC of such
event specifying, as applicable, the name and number of the DTC
Participant account to which mandatorily tendered Securities are to be
delivered by DTC on the purchase date after DTC receives payment for
such Securities. Such notice shall be sent to DTC by a secure means
6
<PAGE>
(e.g., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to ensure that such notice is in
DTC's possession no later than the close of business two business days
before the Publication Date or, as applicable, immediately after
Trustee receives notice that the Securities are subject to
acceleration. The Publication Date shall be not less than 15 days prior
to the expiration ate of the period provided for security owner
elections to retain Securities as discussed in paragraph 6. Such notice
shall be sent to Supervisor, Put Bond Unit, Reorganization Department.
6. Where the offering Document provides that the Securities are subject
to mandatory tender except with respect to security owner elections to
retain Securities, it is understood that DTC will use it Put Option
Procedures to process such elections. Under the Put Option Procedures,
DTC will receive instructions during the applicable election period
from Participants to retain Securities, DTC, on behalf of such
Participant, will notify Tender Agent of the aggregate principal
amount of Securities that will not be tendered and will be retained.
If the mandatorily tendered Securities are to be replaced with two or
more issues of Securities (the "Replacement Securities"), Tender Agent
shall be responsible for allocating specific Replacement Securities by
CUSIP number to the Participants that elected to retain Securities.
In cases in which prior to a mandatory tender, certain Securities are not
subject to such mandatory tender, if requested as follows, DTC will exclude such
Securities from its mandatory tender procedures. Such request shall be in
writing and shall contain: (a) certification by Trustee or Issuer that the
principal amount of such Securities is not subject to the mandatory tender and
certification by a custodian/Participant that the Participant's position on
DTC's records includes such Securities; and (b) certification by Trustee or
Issuer that the election to exclude such Securities from the mandatory tender is
authorized under the Document. Such request shall be sent to Supervisor, Put
Bond Unit, Reorganization Department, in the manner indicated in paragraph 4,
above, to ensure that such request is in DTC's possession no later than the
close of business two business days before the Publication Date of the mandatory
tender notice.
For so long as the Securities are SDFS Securities, principal payments (plus
accrued interest, in any) as the result of mandatory tenders for purchase
(including mandatory tenders upon change in the interest rate mode of the
Securities, or upon expiration, substitution, or nonreinstatement of a facility
supporting the Securities) shall be received by DTC on the purchase date in
same-day funds in the manner set forth in the SDFS Paying Agent Operating
Procedures and described on page 10, paragraph 1 in main body of OA.**/
- --------
** Beginning on the day DTC converts its settlement systems to only
same-day funds the SDFS Paying Agent Operating Procedures will expire. At that
time, these principal payments shall be paid to DTC according to the
instructions listed in the next paragraph of this section 6.
7
<PAGE>
For so long as the Securities are NDFS Securities, such principal payments shall
be received by DTC on the purchase date in next-day funds in the manner set
forth on page 10, paragraph 1 in main body of OA.
8
<PAGE>
Date: March 15, 1995
The Depository Trust Company
Mr. Vincent A. Mauro
Vice President
55 Water Street-19th Floor
New York, NY 10041
CA07295047
Dear Mr. Mauro:
Re: Operational Arrangements Letter of Representations
From time to time, this organization may be appointed as a trustee, paying
agent, transfer agent, or an agent in some other capacity for securities issues
that DTC will be requested to make eligible for its services. The undersigned
confirms that when this organization acts in one of these capacities for any
such issues, it hereby represents that, to the extent within its control, it
will comply with the requirements stated in the DTC Operational Arrangements
memorandum dated December 12, 1994, as they may be amended from time to time.
First Trust of California, National Association
-----------------------------------------------
(Name of Organization)
-----------------------------------------------
(Authorized Officer's Signature)
-----------------------------------------------
(Please Print Name)
-----------------------------------------------
(Title)
TAX REGULATORY AGREEMENT
Among
California Economic Development Financing Authority
First Trust of California, National Association,
as Trustee,
and
Advanced Aerodynamics and Structures, Inc.
-----------------------------------------------------
Dated as of August 1, 1997
-----------------------------------------------------
Executed as Part of the Proceedings for the
Authorization and Issuance of:
$8,500,000
California Economic Development Financing Authority
Variable Rate Demand
Industrial Development Revenue Bonds, Series 1997
(Advanced Aerodynamics and Structures, Inc. Project)
<PAGE>
-----------------------------------------------------
TABLE OF CONTENTS
-----------------------------------------------------
(This Table of Contents is for convenience of reference only and is not
part of the Tax Regulatory Agreement.)
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.....................................................1
Section 1.2. Reliance on Borrower's Information..............................12
ARTICLE II
CERTAIN REPRESENTATIONS
BY THE BORROWER
Section 2.1. Description of the Project and Description of the Facilities...12
Section 2.2. Capital Expenditures...........................................13
Section 2.3. Prior Issues and $40 Million Limit.............................14
Section 2.4. Federal Tax Return Information.................................14
Section 2.5. Composite Issues...............................................14
Section 2.6. Prohibited Uses................................................15
Section 2.7. No Composite Project...........................................15
Section 2.8. Acquisition of Existing Property...............................15
Section 2.9. Land Acquisition Limit and No Acquisition of Farmland..........16
Section 2.10. Representations by the Borrower for Purposes of IRS Form 8038..16
ARTICLE III
USE OF BOND PROCEEDS
Section 3.1. Anticipated Use of Proceeds.....................................17
Section 3.2. Certification as to Costs of the Project........................18
ARTICLE IV
ARBITRAGE
Section 4.1. Arbitrage Representations and Elections.........................18
Section 4.2. Arbitrage Compliance............................................20
Section 4.3. Calculation of Rebate Amount....................................20
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Section 4.4. Payment to United States........................................23
Section 4.5. Recordkeeping...................................................23
Section 4.6. Rebate Analyst..................................................24
ARTICLE V
COMPLIANCE WITH CODE.............................24
ARTICLE VI
TERM OF TAX REGULATORY AGREEMENT.......................26
ARTICLE VII
AMENDMENTS.................................26
ARTICLE VIII
EVENTS OF DEFAULT, REMEDIES
Section 8.1. Events of Default................................................26
Section 8.2. Remedies for an Event of Default................................26
EXHIBIT A-1-Sources and Uses of Funds......................................A-1-1
EXHIBIT A-2-Property Financed or Refinanced by the Bonds...................A-2-1
EXHIBIT B-1-Form of Dealer Certification of Bona Fide Bid Price of a
Certificate of Deposit..........................B-1-1
EXHIBIT B-2-Form of Dealer Certification for a Certificate of Deposit
for Which No Active Secondary Market Exists.....B-2-1
EXHIBIT B-3-Form of Provider Certification for a Certificate of Deposit....B-3-1
EXHIBIT B-4-Form of Provider Certification For an Investment Contract......B-4-1
EXHIBIT B-5-Form of Borrower's Certification for a
Certificate of Deposit Involving Three Bids.....B-5-1
EXHIBIT B-6-Form of Borrower's Certification for an
Investment Contract Involving Three Bids........B-6-1
EXHIBIT C-Useful Life Calculation............................................C-1
EXHIBIT D-Declaration of Official Intent.....................................D-1
ii
<PAGE>
TAX REGULATORY AGREEMENT
THIS TAX REGULATORY AGREEMENT (this "Tax Regulatory Agreement") is made
and dated as of August 1, 1997, by and among California Economic Development
Financing Authority and its successors or assigns (the "Issuer"), Advanced
Aerodynamics and Structures, Inc., a corporation duly organized and existing
under the laws of the State of California and its successors or assigns (the
"Borrower"), and First Trust of California, National Association, solely in its
capacity as trustee under the Indenture, as defined below (the "Trustee");
W I T N E S S E T H:
WHEREAS, the Issuer has authorized the issuance of $8,500,000 aggregate
principal amount of its Variable Rate Demand Industrial Development Revenue
Bonds, Series 1997 (Advanced Aerodynamics and Structures, Inc. Project) (the
"Bonds"), the proceeds of which are being loaned to the Borrower pursuant to a
Loan Agreement, dated as of August 1, 1997, between the Issuer and the Borrower
(the "Agreement"), to finance the construction and installation of a
manufacturing facility and the acquisition of certain manufacturing equipment,
as more fully set forth in the Agreement (the "Project") and to pay a portion of
the costs of issuance of the Bonds;
WHEREAS, the Borrower will use the Project in the manufacture of wire
bonding tools and accessories or for the manufacture of other tangible personal
property; and
WHEREAS, the Issuer has determined that the issuance, sale and
delivery of the Bonds is needed to finance the Project; and
WHEREAS, this Tax Regulatory Agreement has been entered into by the
Issuer, the Borrower and the Trustee to ensure compliance with the provisions of
the Internal Revenue Code of 1986, as amended, and the Regulations thereunder
(the "Code"); and
WHEREAS, to ensure that interest on the Bonds will be and remain
excludable from gross income under the Code, the restrictions listed in this Tax
Regulatory Agreement must be satisfied.
NOW THEREFORE, the Issuer, the Borrower and the Trustee hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The following words and phrases shall have
the following meanings. Any capitalized word or term used herein but not defined
herein shall have the same meaning given in the hereinafter defined Indenture.
<PAGE>
"Abusive Arbitrage Device" means any action which has the effect of (i)
enabling the Issuer or the Borrower to exploit the difference between taxable
and tax-exempt interest rates to obtain a material financial advantage; and (ii)
overburdening the tax-exempt bond market as defined in ss. 1.148-10 of the
Regulations.
"Accounting Method" means both the overall method used to account for
the Gross Proceeds of the Bonds (e.g., the cash method or a modified accrual
method) and the method used to account for or allocate any particular item
within that overall accounting method (e.g., accounting for Investments,
Expenditures, allocations to and from different sources and particular items of
the foregoing).
"Agreement" means Loan Agreement, dated as of August 1, 1997, between
the Issuer and the Borrower, and any amendments and supplements thereto.
"Average Economic Life" means the average reasonably expected economic
life of the Facilities as defined in ss. 147(b) of the Code.
"Average Maturity" means the average maturity of the Bonds as defined
in ss. 147(b) of the Code.
"Bond Counsel" means a law firm of nationally recognized bond counsel
who is requested to deliver its approving opinion with respect to the issuance
of and the exclusion from federal income taxation of interest on the Bonds.
"Bond Year" means the period commencing August 1 of each calendar year
and terminating on July 31 of the immediately succeeding calendar year during
the term of the Bonds, except that the first Bond Year shall commence on the
Date of Issuance and end on July 31, 1998 (unless a different period is required
by the Regulations or selected by the Borrower pursuant to the Regulations).
"Bond Yield" means the Yield of the Bonds calculated in accordance with
Section 1.148-4 of the Regulations.
"Borrower" means Advanced Aerodynamics and Structures, Inc., a
corporation duly organized and existing under the laws of the State of
California or any entity which is the surviving, resulting or transferee entity
in any merger, consolidation or transfer permitted under the Agreement.
"Capital Expenditure" means any cost of a type that is for the
acquisition, construction, reconstruction or improvement of land or property of
a character subject to the allowance for depreciation. For example, costs
incurred to acquire, construct, reconstruct or improve land, buildings and
equipment generally are Capital Expenditures. Whether an expenditure is a
capital expenditure is determined at the time the expenditure is paid with
respect to the property. Future changes in law do not affect whether an
expenditure is a capital expenditure.
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"Capital Project" means all Capital Expenditures that carry out the
governmental purpose of the Bonds. For example, a Capital Project may include
Capital Expenditures for one or more building improvements or equipment, plus
related capitalized interest paid or accrued prior to the in-service date for
the Capital Project.
"Class of Investments" means one of the following, each of which
represents a different Class of Investments:
(a) Each category of yield restricted Purpose Investment and Program
Investment, as defined in ss. 1.148-1(b), that is subject to a different
definition of materially higher Yield under ss. 1.148-2(d)(2);
(b) Yield restricted Nonpurpose Investments; and
(c) All other Nonpurpose Investments.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Account" means the interest bearing deposit account
established by the Borrower with the Bank pursuant to the Investment Agreement,
dated August 5, 1997, between the Bank and the Borrower to secure the Borrower's
obligations to the Bank under the Reimbursement Agreement.
"Computation Date" means an Installment Computation Date or the Final
Computation Date.
"Computation Date Credit" means on the last day of each Bond Year
during which there are Gross Proceeds subject to the rebate requirement of
Article IV hereof, and on the Final Computation Date, the amount of $1,000.
"Consistently Applied" means applied uniformly within a fiscal period
and between fiscal periods to account for Gross Proceeds of an issue and any
amounts that are in a commingled fund.
"Costs of Issuance" means all costs incurred in connection with the
issuance of the Bonds, other than fees paid to or on behalf of credit enhancers
as fees for "qualified guarantees" as defined in ss. 1.148-4(f) of the
Regulations or to the Issuer as a portion of its higher Yield permitted on the
Agreement under ss. 1.148-2(d)(2) of the Regulations. Examples of Costs of
Issuance include (but are not limited to):
(a) underwriter's spread (whether realized directly or derived
through purchase of the Bonds at a discount below the price at which a
substantial number of the Bonds are sold to the public) or placement
agent's fee;
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(b) counsel fees (including bond counsel, underwriter's
counsel, placement agent's counsel, issuer's counsel, borrower's
counsel, trustee's counsel, and any other specialized counsel fees
incurred in connection with the issuance of the Bonds);
(c) financial advisor fees incurred in connection with the
issuance of the Bonds;
(d) rating agency fees (except for any such fee that is paid
in connection with or as a part of the fee for credit enhancement of
the Bonds);
(e) trustee fees incurred in connection with the issuance of
the Bonds;
(f) accountant fees incurred in connection with the issuance
of the Bonds;
(g) printing costs (for the Bonds and of the preliminary and
final offering circulars or official statements);
(h) costs incurred in connection with the required public
approval process (e.g., publication costs for public notices generally
and costs of the public hearing); and
(i) Issuer fees to cover administrative costs and expenses
incurred in connection with the issuance of the Bonds.
"Current Outlay of Cash" means an outlay reasonably expected to occur
not later than 5 banking days after the date as of which the allocation of Gross
Proceeds to the Expenditure is made.
"Date of Issuance" means August 5, 1997.
"Discharged" means, with respect to any Bond, the date on which all
amounts due with respect to such Bond are actually and unconditionally due, if
cash is available at the place of payment, and no interest accrues with respect
to such Bond after such date.
"Economic Accrual Method" (also known as the constant interest method
or actuarial method) means the method of computing Yield that is based on the
compounding of interest at the end of each compounding period.
"Exempt Person" means any organization described in Section 501(c)(3)
of the Code or a state or a local governmental unit of a state.
"Expenditure" means a book or record entry which allocates Proceeds of
the Bonds in connection with a Current Outlay of Cash.
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"Facilities" means the Manufacturing Facility financed or refinanced
with the Proceeds of the Bonds and described in Exhibit A-2 hereto.
"Fair Market Value" means the price at which a willing buyer would
purchase an Investment from a willing seller in a bona fide, arm's-length
transaction. Fair Market Value generally is determined on the date on which a
contract to purchase or sell the Nonpurpose Investment becomes binding (i.e.,
the trade date rather than the settlement date). Except as otherwise provided in
this definition, an Investment that is not of a type traded on an established
securities market (within the meaning of ss. 1273 of the Code), is rebuttably
presumed to be acquired or disposed of for a price that is not equal to its Fair
Market Value. The Fair Market Value of a United States Treasury obligation that
is purchased directly from the United States Treasury is its purchase price. The
following guidelines shall apply for purposes of determining the Fair Market
Value of the obligations described below:
(a) Certificates of Deposit. The purchase of certificates of
deposit with fixed interest rates, fixed payment schedules and
substantial penalties for early withdrawal will be deemed to be an
Investment purchased at its Fair Market Value on the purchase date if
the Yield on the certificate of deposit is not less than:
(i) The Yield on reasonably comparable direct
obligations of the United States; and
(ii) The highest Yield that is published or posted by
the provider to be currently available from the provider on
reasonably comparable certificates of deposit offered to the
public.
(b) Guaranteed Investment Contracts. A Guaranteed Investment
Contract is a Nonpurpose Investment that has specifically negotiated
withdrawal or reinvestment provisions and a specifically negotiated
interest rate, and also includes any agreement to supply Investments on
two or more future dates (e,g,, a forward supply contract). The
purchase price of a Guaranteed Investment Contract is treated as its
Fair Market Value on the purchase date if:
(i) The Borrower makes a bona fide solicitation for
a specified Guaranteed Investment Contract and receives at
least three bona fide bids from providers that have no
material financial interest in the issue (e.g., as
underwriters or brokers);
(ii) The Borrower purchases the highest-Yielding
Guaranteed Investment Contract for which a qualifying bid is
made (determined net of broker's fees);
(iii) The Yield on the Guaranteed Investment Contract
(determined net of broker's fees) is not less than the Yield
then available from the provider on
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reasonably comparable Guaranteed Investment Contracts, if any,
offered to other persons from a source of funds other than
gross proceeds of tax-exempt bonds;
(iv) The determination of the terms of the Guaranteed
Investment Contract takes into account as a significant factor
the Borrower's reasonably expected drawdown schedule for the
amounts to be invested, exclusive of amounts deposited in debt
service funds and reasonably required reserve or replacement
funds;
(v) The terms of the Guaranteed Investment Contract,
including collateral security requirements, are reasonable;
and
(vi) The obligor on the Guaranteed Investment
Contract certifies the administrative costs that it is paying
(or expects to pay) to third parties in connection with the
Guaranteed Investment Contract.
"Final Computation Date" means the date the last Bond is Discharged.
"Future Value" means the Value of a Receipt or Payment at the end of
any interval as determined by using the Economic Accrual Method and equals the
Value of that Payment or Receipt when it is paid or received (or treated as paid
or received), plus interest assumed to be earned and compounded over the period
at a rate equal to the Yield on the Bonds, using the same compounding interval
and financial conventions used to compute the Yield on the Bonds.
"Gross Proceeds" means any Proceeds or Replacement Proceeds of the
Bonds.
"Indenture" means, the Indenture of Trust, dated as of August 1, 1997,
between the Issuer and the Trustee, and any amendments and supplements thereto.
"Installment Computation Date" means the last day of the fifth Bond
Year and each succeeding fifth Bond Year as stated in Section 4.1 hereof or the
last day of any Bond Year prior to the fifth Bond Year selected by the Borrower
as stated in Section 4.1 hereof.
"Investment" means any Purpose Investment or Nonpurpose Investment,
including any other tax-exempt bond.
"Investment Instructions" means the letter of instructions set forth as
an exhibit to the No Arbitrage Certificate of the Issuer dated the date of the
initial delivery of the Bonds.
"Investment Proceeds" means any amounts actually or constructively
received from investing Proceeds of the Bonds.
"Investment-Type Property" means any property, other than property
described in ss. 148(b)(2)(A), (B), (C) or (E) of the Code that is held
principally as a passive vehicle for the
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production of income. Except as otherwise provided, a prepayment for property or
services is Investment-Type Property if a principal purpose for prepaying is to
receive an Investment return from the time the prepayment is made until the time
payment otherwise would be made. A prepayment is not Investment-Type Property
if--
(a) The prepayment is made for a substantial business purpose
other than Investment return and the issuer has no commercially
reasonable alternative to the prepayment, or
(b) Prepayments on substantially the same terms are made by a
substantial percentage of persons who are similarly situated to the
issuer but who are not beneficiaries of tax-exempt financing.
"Issue Price" means, except as otherwise provided, issue price as
defined in ss.ss. 1273 and 1274 of the Code. Generally, the Issue Price of bonds
that are publicly offered is the first price at which a substantial amount of
the bonds is sold to the public. Ten percent is a substantial amount. The public
does not include bond houses, brokers or similar persons or organizations acting
in the capacity of underwriters or wholesalers. The Issue Price does not change
if part of the issue is later sold at a different price. The Issue Price of
bonds that are not substantially identical is determined separately. The Issue
Price of bonds for which a bona fide public offering is made is determined as of
the sale date based upon reasonable expectations regarding the initial public
offering price. If a bond is issued for property, the applicable Federal
tax-exempt rate is used in lieu of the Federal rate in determining the Issue
Price under ss. 1274 of the Code. The issue price of bonds may not exceed their
Fair Market Value as of the sale date.
With respect to the Bonds, the Issue Price is $8,500,000.
"Manufacturing Facility" means a Capital Project that is used in the
manufacturing or production of tangible personal property (including the
processing resulting in a change in the condition of such property) including
facilities that are directly related and ancillary to a Manufacturing Facility
if such directly related and ancillary facilities are located on the same site
as the Manufacturing Facility and not more than 25 percent of the proceeds of an
issue that finances the Manufacturing Facility are used to provide such directly
related and ancillary facilities.
"Net Sale Proceeds" means Sale Proceeds, less the portion of those Sale
Proceeds invested in a reasonably required reserve or replacement fund under ss.
148(d) of the Code and as part of a minor portion under ss. 148(e) of the Code.
"Nonpurpose Investment" means any security, obligation, annuity
contract or Investment type property as defined in ss. 148(b) of the Code,
including "specified private activity bonds" as defined in ss. 57(a)(5)(c) of
the Code, but excluding all other obligations the interest on which is
excludable from federal gross income. The term "Nonpurpose Investment" does not
include the Borrower's obligations to make payments to the Issuer pursuant to
the provisions of the Agreement.
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"Payments" means, for purposes of computing the Rebate Amount, (a)
amounts actually or constructively paid to acquire a Nonpurpose Investment (or
treated as paid to a commingled fund); (b) for a Nonpurpose Investment that is
allocated to an issue on a date after it is actually acquired (e.g., an
Investment that becomes allocable to Transferred Proceeds or to Replacement
Proceeds) or that becomes subject to the rebate requirement of the Code on a
date after it is actually acquired (e.g., an Investment allocated to a
reasonably required reserve or replacement fund for a construction issue at the
end of the two-year spending period), the Value of that Investment on that date;
(c) for a Nonpurpose Investment that was allocated to an issue at the end of the
preceding computation period, the Value of that Investment at the beginning of
the computation period; (d) on the last day of each Bond Year during which there
are amounts allocated to Gross Proceeds of an issue that are subject to the
rebate requirement of the Code, and on the final maturity date, a Computation
Date Credit; and (e) Yield Reduction Payments on Nonpurpose Investments made
pursuant to ss. 1.148-5(c) of the Regulations. For purposes of computing the
Yield on an Investment (including the Value of the Investment), Payment means
amounts to be actually or constructively paid to acquire the Investment;
provided, however, that payments made by a conduit borrower, such as the
Borrower, are not treated as paid until the conduit borrower ceases to receive
the benefit of earnings on those amounts. Payments on Investments, including
Guaranteed Investment Contracts, are adjusted for Qualified Administrative Costs
of acquiring a Nonpurpose Investment.
"Pre-Issuance Accrued Interest" means amounts representing interest
that accrued on an obligation for a period not greater than one year before the
Date of Issuance but only if those amounts are paid within one year after the
Date of Issuance.
"Principal User" means a person who is a principal owner, principal
lessee, a principal output purchaser or "other" principal user and any Related
Person to a Principal User. A principal owner is a person who at any time holds
more than a 10 percent ownership interest (by value) in a facility or, if no
person holds more than a 10 percent ownership interest, then the person (or
persons in the case of multiple equal owners) who holds the largest ownership
interest in the facility. A person is treated as holding an ownership interest
if such person is an owner for federal income tax purposes generally. A
principal lessee is a person who at any time leases more than 10 percent of the
facility (disregarding portions used by the lessee under a short-term lease).
The portion of a facility leased to a lessee is generally determined by
reference to its fair rental value. A short-term lease is one which has a term
of one year or less, taking into account all options to renew and reasonably
anticipated renewals. A principal output purchaser is any person who purchases
output of a facility, unless the total output purchased by such person during
each one-year period beginning with the date such facility is placed in service
is 10 percent or less of such facility's output during each such period. An
"other" principal user is a person who enjoys a use of a facility (other than a
short-term use) in a degree comparable to the enjoyment of a principal owner or
a principal lessee, taking into account all the relevant facts and
circumstances, such as the person's participation in control over use of such
facility or its remote or proximate geographic location.
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"Prior Issues" means any issue of tax-exempt obligations (whether or
not the issuer of each issue is the same) to which Section 103(b)(6) of the 1954
Code or Section 144(a) of the Code applies.
"Proceeds" means any Sale Proceeds, Investment Proceeds and Transferred
Proceeds of an issue. Proceeds do not include, however, amounts actually or
constructively received with respect to a Purpose Investment that are properly
allocable to the immaterially higher Yield under ss. 1.148-2(d) of the
Regulations or section 143(g) of the Code or to Qualified Administrative Costs
recoverable under ss. 1.148-5(e) of the Regulations.
"Project" has the meaning given to such term in the preambles hereto.
"Project Fund" means the Project Fund established pursuant to the
Indenture.
"Purchase Fund" means the Purchase Fund established pursuant to the
Indenture.
"Purpose Investment" means an Investment that is acquired to carry out
the governmental
purpose of an issue. The Agreement constitutes a Purpose Investment.
"Qualified Administrative Costs" means reasonable, direct
administrative costs, other than carrying costs, such as separately stated
brokerage or selling commissions, but not legal and accounting fees,
recordkeeping, custody and similar costs. General overhead costs and similar
indirect costs of the issuer such as employee salaries and office expenses and
costs associated with computing the Rebate Amount are not Qualified
Administrative Costs. In general, administrative costs are not reasonable unless
they are comparable to administrative costs that would be charged for the same
Investment or a reasonably comparable Investment if acquired with a source of
funds other than Gross Proceeds of tax-exempt bonds.
"Qualified Hedging Transaction" means a contract which meets the
requirements of ss. 1.148-4(h)(2) of the Regulations.
"Rebate Amount" means the excess of the Future Value of all Receipts on
Nonpurpose Investments over the Future Value of all the Payments on Nonpurpose
Investments. Future Value is computed as of the Computation Date. Rebate Amount
additionally includes any penalties and interest on underpayments reduced for
recoveries of overpayments.
"Rebate Analyst" shall mean the entity chosen by the Borrower and the
Issuer in accordance with Section 4.6 hereof to determine the amount of required
deposits to the Rebate Fund, if any.
"Rebate Fund" means the Rebate Fund established pursuant to the
Indenture.
"Receipts" means, for purposes of computing the Rebate Amount, (a)
amounts actually or constructively received from a Nonpurpose Investment
(including amounts treated as received
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from a commingled fund), such as earnings and return of principal; (b) for a
Nonpurpose Investment that ceases to be allocated to an issue before its
disposition or redemption date (e.g., an Investment that becomes allocable to
Transferred Proceeds of another issue or that ceases to be allocable to the
issue pursuant to the universal cap under ss. 1.148-6 of the Regulations) or
that ceases to be subject to the rebate requirement of the Code on a date
earlier than its disposition or redemption date (e.g., an Investment allocated
to a fund initially subject to the rebate requirement of the Code but that
subsequently qualifies as a bona fide debt service fund), the Value of that
Nonpurpose Investment on that date; and (c) for a Nonpurpose Investment that is
held at the end of a computation period, the Value of that Investment at the end
of that period. For purposes of computing Yield on an Investment, Receipts means
amounts to be actually or constructively received from the Investment, such as
earnings and return of principal (including the Value of an Investment).
Receipts on Investments, including Guaranteed Investment Contracts, are adjusted
(reduced) for Qualified Administrative Costs.
"Recomputation Event" means a transfer, waiver, modification or similar
transaction of any right that is part of the terms of the Bonds or a Qualified
Hedging Transaction is entered into, or terminated, in connection with the
Bonds.
"Regulation" or "Regulations" means the temporary, proposed or final
Income Tax Regulations promulgated by the Department of the Treasury and
applicable to the Bonds, including ss.ss. 1.148-0 through 1.148-11, ss. 1.149
and ss.ss. 1.150-1 and 1.150-2 as issued by the Internal Revenue Service on June
18, 1993 for bonds issued after July 1, 1993, including any amendments made
thereto.
"Related Person" means any person if (i) the relationship to such
person would result in a disallowance of loss under Sections 267 or 707(b) of
the Code or (ii) such person is a member of the same controlled group of
corporations (as defined in Section 1563(a) of the Code, except that "more than
50 percent" shall be substituted for "at least 80 percent" each place it appears
therein).
"Replacement Proceeds" means amounts which have a sufficiently direct
nexus to the Bonds or to the governmental purpose of the Bonds to conclude that
the amounts would have been used for that governmental purpose if the Proceeds
of the Bonds were not used or to be used for that governmental purpose, as more
fully defined in ss. 1.148-1(c) of the Regulations.
"Revenue Fund" means the Revenue Fund established pursuant to the
Indenture.
"Sale Proceeds" means any amounts actually or constructively received
from the sale of the Bonds, including amounts used to pay underwriters' discount
or compensation or placement agent's fee and accrued interest other than
Pre-Issuance Accrued Interest.
"SLGS" means United States Treasury Certificates of Indebtedness, Notes
and Bonds-State and Local Government Series.
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"Tax Regulatory Agreement" means this Tax Regulatory Agreement.
"Test-Period Beneficiary" means any person who is an owner or a
Principal User of facilities financed by an issue or issues of tax-exempt
obligations issued under the 1954 Code or the Code during the three-year period
beginning on the later of the date such facilities were placed in service or the
date of issuance for such issue or issues of tax-exempt obligations. For
purposes of determining whether a person is a Test-Period Beneficiary, all
persons who are Related Persons shall be treated as one person.
"Transferred Proceeds" means Proceeds of a refunding issue which become
transferred proceeds of a refunding issue and cease to be Proceeds of a prior
issue when Proceeds of the refunding issue discharge any of the outstanding
principal amount of the prior issue. The amount of Proceeds of the prior issue
that become transferred proceeds of the refunding issue is an amount equal to
the Proceeds of the prior issue on the date of that discharge multiplied by a
fraction:
(a) The numerator of which is the principal amount of the
prior issue discharged with Proceeds of the refunding issue on the date
of that discharge; and
(b) The denominator of which is the total outstanding
principal amount of the prior issue on the date immediately before the
date of that discharge.
"Universal Cap" means the Value of all outstanding Bonds.
"Value" means Value as determined under ss. 1.148-4(e) of the
Regulations for a Bond and Value determined under ss. 1.148-5(d) of the
Regulations for an Investment.
"Yield" means, for purposes of determining the Yield on the Bonds, the
Yield computed under the Economic Accrual Method using consistently applied
compounding intervals of not more than one year. A short first compounding
interval and a short last compounding interval may be used. Yield is expressed
as an annual percentage rate that is calculated to at least four decimal places
(e.g., 5.2525 percent). Other reasonable, standard financial conventions, such
as the 30 days per month/360 days per year convention, may be used in computing
Yield but must be consistently applied. The Yield on an issue that would be a
Purpose Investment (absent ss. 148(b)(3)(A) of the Code) is equal to the Yield
on the conduit financing issue that financed that Purpose Investment. The Yield
on a fixed yield issue is the discount rate that, when used in computing the
present Value as of the issue date of all unconditionally payable payments of
principal, interest and fees for qualified guarantees on the issue and amounts
reasonably expected to be paid as fees for qualified guarantees on the issue,
produces an amount equal to the present Value, using the same discount rate, of
the aggregate issue price of bonds of the issue as of the issue date. In the
case of obligations purchased or sold at a substantial discount or premium, the
Regulations prescribe certain special Yield calculation rules. For purposes of
determining the Yield on an Investment, the Yield computed under the Economic
Accrual Method, using the same compounding interval and financial conventions
used to compute the Yield on the Bonds.
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The Yield on an Investment allocated to the Bonds is the discount rate
that, when used in computing the present Value as of the date the Investment is
first allocated to the issue of all unconditionally payable receipts from the
Investment, produces an amount equal to the present Value of all unconditionally
payable payments for the Investment. The Yield on an Investment shall not be
adjusted by any hedging transaction entered into in connection with such
Investment unless the Issuer, the Trustee and the Borrower have received an
opinion of Bond Counsel that such an adjustment is permitted by the Regulations.
Yield shall be calculated separately for each Class of Investments.
"Yield Reduction Payment" means a payment to the United States with
respect to an Investment which is treated as a Payment for that Investment that
reduces the Yield on that Investment in accordance with ss. 1.148-5(c) of the
Regulations. Yield Reduction Payments include Rebate Amounts paid to the United
States.
"1954 Code" means the Internal Revenue Code of 1954, as amended, as in
effect on the effective date of the Code.
Section 1.2. Reliance on Borrower's Information. Bond Counsel and the
Issuer shall be permitted to rely upon the contents of any certification,
document or instructions provided pursuant to this Tax Regulatory Agreement and
shall not be responsible or liable in any way for the accuracy of their contents
or the failure of the Borrower to deliver any required information.
ARTICLE II
CERTAIN REPRESENTATIONS
BY THE BORROWER
Section 2.1. Description of the Project and Description of the
Facilities.
The Borrower hereby represents and warrants for the benefit of the
Issuer, the Trustee and the registered owners of the Bonds that:
(a) The description of the Project set forth in the preambles
hereto and the description of the Facilities set forth in Exhibit A-2
hereto are true and accurate.
(b) The Facilities constitute a Manufacturing Facility of
advanced propjet and jet aircraft or facilities directly related and
ancillary to such Manufacturing Facility.
(c) The portion of the Facilities which constitutes office
space serves solely the manufacturing portion of the Facilities, is on
the same site as the manufacturing portion of the Facilities and is
financed with not more than 25 percent of the net Proceeds of the
Bonds.
Section 2.2. Capital Expenditures.
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The Borrower hereby represents and warrants for the benefit of the
Issuer, the Trustee and the registered owners of the Bonds that:
(a) During the period beginning three years before the Date of
Issuance and ending on the Date of Issuance, the aggregate amount of
Capital Expenditures (including any expenditure that was or could have
been treated as a Capital Expenditure under any rule or election under
the Code) paid or incurred, excluding those to be paid or reimbursed
with Proceeds of the Bonds, with respect to (i) facilities located in
the incorporated municipality (or unincorporated county) in which the
Facilities are located and (ii) the Principal User of which was or is
the Borrower, any other Principal User of the Facilities or any Related
Person thereto, was $6,000.
(b) During the period beginning on the Date of Issuance and
ending on the date three years after the Date of Issuance, the
aggregate amount of Capital Expenditures (including any expenditure
that was or could have been treated as a Capital Expenditure under any
rule or election under the Code) expected to be incurred, excluding
those to be paid or reimbursed with Proceeds of the Bonds, with respect
to (i) facilities located in the incorporated municipality (or
unincorporated county) in which the Facilities are located and (ii) the
Principal User of which was or is the Borrower, any other Principal
User of the Facilities or any Related Person thereto, is anticipated to
be $800,000.
(c) The amount of capitalized interest to be paid on all
financings for the Facilities excluding that paid from Proceeds of the
Bonds is $0. The amount of Capitalized interest to be paid in
connection with the Facilities paid from Proceeds of the Bonds is
$184,000.
(d) The sum of (i) the Capital Expenditures described in
paragraph (a) above plus (ii) the actual Capital Expenditures to be
incurred as described in paragraphs (b) and (c) plus (iii) the
aggregate outstanding amount of all $1 million or $10 million exempt
small issues set forth in Section 2.3(a) below plus (iv) the greater of
the Issue Price or the par amount of the Bonds shall not exceed $10
million.
(e) The information contained in subsections (a), (b), (c) and
(d) above, which has been provided to the Issuer to enable the Issuer
to elect to qualify the Bonds for the $10,000,000 exemption afforded by
Section 144(a)(4) of the Code, is true, accurate and complete. The
Issuer hereby elects to issue the Bonds pursuant to the exemption
afforded by Section 144(a)(4) of the Code.
(f) The Facilities will not be sold, leased or the use
otherwise transferred to a person other than the Borrower, any other
Principal User of the Facilities or any Related Person thereto
identified as of the Date of Issuance during the three-year period
ending three years after the Date of Issuance, unless the Borrower has
received an approving opinion of Bond Counsel to the effect that such
sale, lease or transfer will not adversely affect the tax-exempt status
of the Bonds.
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Section 2.3. Prior Issues and $40 Million Limit.
The Borrower hereby represents and warrants for the benefit of the
Issuer, the Trustee and the registered owners of the Bonds that:
(a) The aggregate face amount of all Prior Issues outstanding
as of the Date of Issuance, the proceeds of which were or will be used
to any extent with respect to facilities located in the incorporated
municipality (or unincorporated county) in which the Facilities are
located and the Principal Users of such facilities are the Borrower,
any other Principal User of the Facilities or any Related Person
thereto, is $0.
(b) The aggregate face amount of all Prior Issues and all
exempt facility bonds, qualified redevelopment bonds and industrial
development bonds as defined in the 1954 Code or the Code outstanding
as of the Date of Issuance, the proceeds of which were used by or were
allocated to the Borrower, any other Principal User of the Facilities
or any Related Person thereto as a Test-Period Beneficiary is $0.
Section 2.4. Federal Tax Return Information. The Facilities have a SIC
Code Number of 3721. The Borrower files its federal income tax return at the
Internal Revenue Service Center in Fresno, California. The Borrower's federal
employer identification number of the Borrower is 95-4257380.
Section 2.5. Composite Issues.
The Borrower hereby represents and warrants for the benefit of the
Issuer, the Trustee and the registered owners of the Bonds that:
(a) During the period beginning 15 days prior to the sale date
of the Bonds and ending 15 days thereafter none of the Borrower, any
other Principal User of the Facilities or any Related Person thereto
sold, guaranteed, arranged, participated in, assisted with, borrowed
the proceeds of, or leased facilities financed by obligations issued
under Section 103 of the 1954 Code or Section 103 of the Code by any
state or local governmental unit or any constituted authority empowered
to issue obligations by or on behalf of any state or local governmental
unit.
(b) During the period commencing on the Date of Issuance and
ending 15 days thereafter, there will be no obligations sold or issued
under Section 103 of the 1954 Code or the Code that are guaranteed by
the Borrower, any other Principal User of the Facilities or any Related
Person or which are issued with the assistance or participation of, or
by arrangement with, the Borrower, any other Principal User of the
Facilities or any Related Person without the written opinion of Bond
Counsel to the effect that the issuance of such obligations will not
adversely affect their opinion as to the exclusion from gross income
for federal income tax purposes of interest with respect to the Bonds.
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(c) Other than the Borrower, any other Principal User of the
Facilities or any Related Person, no person (or Related Person to such
other person) has (i) guaranteed, arranged, participated in, assisted
with the issuance of, or paid any portion of the Costs of Issuance of
the Bonds or (ii) provided any property or any franchise, trademark or
trade name (within the meaning of Section 1253 of the Code) which is to
be used in connection with the Facilities.
Section 2.6. Prohibited Uses. The Borrower hereby represents and
warrants for the benefit of the Issuer, the Trustee and the registered owners of
the Bonds that no portion of the Proceeds of the Bonds is being used to provide
a facility, a purpose of which is retail food and beverage services, automobile
sales or service, or the provision of recreation or entertainment. No portion of
the proceeds of the Bonds is being used to provide any private or commercial
golf course, country club, health club, massage parlor, tennis club, skating
facility (including roller skating, skateboarding and ice skating), racquet
sports facility (including any handball, squash or racquetball court), hot tub
facility, suntan facility, racetrack, skybox or other luxury box, airplane,
store the principal business of which is the sale of alcoholic beverages for
consumption off premises, or facility used primarily for gambling. No portion of
the Proceeds of the Bonds is being used directly or indirectly to provide
residential real property for single- or multi-family units.
Section 2.7. No Composite Project. The Borrower hereby represents and
warrants for the benefit of the Issuer, the Trustee and the registered owners of
the Bonds that the Facilities are a stand-alone Manufacturing Facility
unconnected to any other facility and do not share any portion of substantial
common facilities with any other building (other than the Facilities), (b) an
enclosed shopping mall or (c) a strip of offices, stores or warehouses.
Section 2.8. Acquisition of Existing Property. The Borrower hereby
represents and warrants for the benefit of the Issuer, the Trustee and the
registered owners of the Bonds that no portion of the Proceeds of the Bonds will
be used to pay the cost of acquisition of real property (other than land or any
interest therein) the first use of which will not be pursuant to the acquisition
with the Proceeds of the Bonds.
Section 2.9. Land Acquisition Limit and No Acquisition of Farmland.
The Borrower hereby represents and warrants for the benefit of the
Issuer, the Trustee and the registered owners of the Bonds that:
(a) The amount of Proceeds of the Bonds expended for land will
not exceed $0, which is not greater than 25 percent of the Proceeds of
the Bonds.
(b) No portion of the Proceeds of the Bonds will be used
directly or indirectly for the acquisition of land or any interest
therein to be used for the purpose of farming.
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Section 2.10. Representations by the Borrower for Purposes of IRS Form
8038. Section 149(e) of the Code requires as a condition to qualification for
tax-exemption that the Issuer provide to the Secretary of the Treasury certain
information with respect to the Bonds and the application of the proceeds
derived therefrom. The following representations of the Borrower will be relied
upon by the Issuer and Bond Counsel in satisfying this information reporting
requirement. Accordingly, the Borrower hereby represents, covenants and warrants
to the best of their knowledge, for the benefit of the Issuer, Bond Counsel and
the registered owners of the Bonds, the truth and accuracy of (c) through (t)
below:
(a) Issuer's employer identification number.................68-0304653
(b) Number of 8038 reports previously filed by the Issuer this
calendar year....................................................5
(c) Issue price of the Bonds................................$8,500,000
(d) Proceeds used for Accrued Interest............................. $0
(e) Costs of Issuance (including Underwriter's
Discount).................................................$170,000
(f) Reasonably required Reserve Fund Deposits.......................$0
(g) Proceeds used for Credit Enhancement............................$0
(h) Proceeds used to refund prior issue............................ $0
(i) Nonrefunding Proceeds.................................. $8,330,000
(j) Date of final maturity of the Bonds.................August 1, 2027
(k) Interest Rate on the final maturity of
the Bonds..................................................... VR%
(l) Issue price of the final maturity of
the Bonds...............................................$8,500,000
(m) Issue price on the entire issue of the Bonds............$8,500,000
(n) Stated redemption price at maturity of the final maturity of
the Bonds...............................................$8,500,000
(o) Stated redemption price at maturity of the entire issue of
the Bonds...............................................$8,500,000
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(p) Weighted average maturity of the entire issue
of the Bonds......................................... 29.98 years
(q) Yield on the entire issue of the Bonds.........................VR%
(r) Net interest cost for the entire issue of
the Bonds.....................................................VR%
(s) The Standard Industrial Classification Code(s) for the
Facilities is ...............................................3721
(t) Type of Property financed by Nonrefunding Proceeds of the Bonds:
Land..........................................................$0
Buildings.............................................$7,164,000
Equipment with recovery period of more than 5 years...$1,166,000
Equipment with recovery period of 5 years or less.............$0
Other ........................................................$0
Total.............................................$8,330,000
ARTICLE III
USE OF BOND PROCEEDS
Section 3.1. Anticipated Use of Proceeds. The Borrower covenants,
represents and warrants for the benefit of the Issuer, the Trustee and the
registered owners of the Bonds that the Proceeds of the Bonds will be used in
the manner set forth in Exhibit A-2 hereto and that the Proceeds of the Bonds
will be invested in accordance with the Investment Instructions.
Section 3.2. Certification as to Costs of the Project. The Borrower
hereby certifies, with respect to the amounts shown in Exhibit A-1, that such
amounts consist only of costs which are directly related to and necessary for
the financing of the Project.
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ARTICLE IV
ARBITRAGE
Section 4.1. Arbitrage Representations and Elections. In connection
with the issuance of the Bonds, the Borrower hereby represents, certifies and
warrants as follows:
(a) The Borrower has entered into contracts with third parties
for the acquisition, construction and equipping of the Facilities
obligating an expenditure in excess of 5% of the Net Sale Proceeds of
the Bonds and the Borrower will proceed with due diligence in
completing the Facilities and in allocating the Net Sale Proceeds of
the Bonds to such Expenditures.
(b) The Borrower will use a reasonable, Consistently Applied
Accounting Method to account for Gross Proceeds, Investments and
Expenditures for the Bonds. The Borrower shall additionally use a
Consistently Applied Accounting Method for allocating Proceeds of the
Bonds to Expenditures, subject to the Current Outlay of Cash rule.
(c) The Borrower shall not commingle Proceeds of the Bonds
with any other funds.
(d) In connection with the Bonds, there has not been created
or established and the Borrower does not expect that there will be
created or established, any sinking fund, pledged fund or similar fund
(other than as specifically identified in the Indenture), including
without limitation any arrangement under which money, securities or
obligations are pledged directly or indirectly to secure the Bonds or
any contract securing the Bonds or any arrangement providing for
compensating or minimum balances to be maintained by the Borrower with
any owner or credit enhancer of the Bonds, except the Collateral
Account.
(e) The allocation of Net Proceeds of the Bonds to the
reimbursement portion of the costs of the Facilities will be made as of
and completed on the Date of Issuance. The declaration of official
intent required by ss. 1.150-2 of the Regulations with respect to Net
Proceeds of the Bonds used to reimburse the Borrower for certain
Capital Expenditures made in connection with the Facilities is attached
hereto as Exhibit D.
(f) The Borrower reasonably expects that 85% of the Net Sale
Proceeds of the Bonds will be used to complete the Facilities within
three years of the Date of Issuance and not more than 50% of the
Proceeds of the Bonds will be invested in Nonpurpose Investments having
a substantially guaranteed Yield for four years or more. The Borrower
reasonably expects that the Net Sale Proceeds of the Bonds deposited to
the Project Fund will be expended in accordance with the schedule
contained in the No
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Arbitrage Certificate executed and delivered by the Issuer in
connection with the issuance and delivery of the Bonds.
(g) All funds and accounts established pursuant to the
Indenture will be invested pursuant to the No Arbitrage Certificate
executed by the Issuer on the Date of Issuance and the Investment
Instructions delivered to the Issuer and the Borrower on the Date of
Issuance.
(h) The Borrower will not enter into and will not direct the
Trustee to engage in any Abusive Arbitrage Devises. If the Borrower
directs the Trustee to invest any of the Gross Proceeds in certificates
of deposit or pursuant to an investment contract or a certificate of
deposit, the Borrower will obtain and provide to the Trustee
certifications in the form attached hereto as Exhibit B.
(i) The Borrower hereby makes, and the Issuer hereby accepts,
the following elections and other choices pursuant to the Regulations
with respect to the Bonds:
(i) The Borrower elects the bond year stated in the
definition of the Bond Year.
(ii) The Borrower elects to avail itself of all
unrestricted yield investments granted in the Regulations for
temporary period, reasonably required reserve fund and minor
portion investments.
(iii) So long as the amount on deposit in the
Collateral Account exceeds a reasonably required reserve fund
for the Bonds pursuant to Section 148(d) of the Code, the
Borrower elects to treat the last day of the first Bond Year
(July 31, 1998) as the initial Installment Computation Date
and the Borrower elects to treat the last day of each
subsequent Bond Year as subsequent Installment Computation
Dates. Commencing with the Bond Year following the Bond Year
in which the amount on deposit in the Collateral Account does
not exceed a reasonably required reserve fund for the Bonds
pursuant to Section 148(d) of the Code, the Borrower elects to
treat the last day of the fifth Bond Year as the Installment
Computation Date and the Borrower elects to treat the last day
of each subsequent fifth Bond Year thereafter as subsequent
Installment Computation Dates. The Borrower elects to treat
the last day of the fifth Bond Year as the initial rebate
payment date and the last day of each fifth Bond Year
thereafter as subsequent rebate payment dates. The Borrower
may change or adjust such dates as permitted by the
Regulations.
(iv) With respect to the Universal Cap, the Borrower
as of the Date of Issuance does not expect that the operation
of the Universal Cap will result in a reduction or
reallocation of Gross Proceeds of the Bonds and that the
Borrower (A) does not expect to pledge funds (other than those
described in the Indenture)
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to the payment of the Bonds; (B) expects to expend Sale
Proceeds of the Bonds within the expected temporary periods;
and (C) does not expect to retire any of the Bonds earlier
than shown in the Yield computations for the Bonds pursuant to
this Article IV.
Section 4.2. Arbitrage Compliance. The Borrower and the Issuer
acknowledge that the continued exclusion of interest on the Bonds from gross
income of the recipients thereof for purposes of federal income taxation
depends, in part, upon compliance with the arbitrage limitations imposed by ss.
148 of the Code, including the rebate requirement described in Section 4.3
below. The Borrower and the Issuer hereby agree and covenant that they shall not
permit at any time or times any of the Proceeds of the Bonds or other funds of
the Borrower to be used, directly or indirectly, to acquire any asset or
obligation, the acquisition of which would cause the Bonds to be "arbitrage
bonds" for purposes of ss. 148 of the Code. The Borrower further agrees and
covenants that it shall, to the extent that any Proceeds of the Bonds are
invested in any Investment which is not Investment Securities, do and perform
all acts and things necessary in order to ensure that the requirements of ss.
148 of the Code and the Regulations are met. To the extent that Proceeds of the
Bonds are invested in any Investment which is not Investment Securities, the
Borrower shall retain, at its own expense, a Rebate Analyst to make such
determinations and calculations as may be necessary in order to ensure that the
Borrower takes the actions described in Sections 4.2 through 4.6 hereof with
respect to the Investment of Gross Proceeds on deposit in the funds and accounts
established under the Indenture. If the Borrower fails to retain such a Rebate
Analyst, the Issuer shall, upon being notified in writing of such failure, at
the Borrower's expense, retain such a Rebate Analyst. The Borrower shall direct
the Trustee to make the required transfers and dispositions described in
Sections 4.2, 4.3 and 4.4 hereof, and the Trustee may rely upon information
provided by the Borrower.
Section 4.3. Calculation of Rebate Amount.
(a)ss. 148(f) of the Code requires the payment to the United
States of the Rebate Amount. Except as provided below, the Revenue
Fund, the Project Fund, the Rebate Fund, the Collateral Account and all
other funds or accounts treated as containing Gross Proceeds, are
subject to this rebate requirement.
(b)In accordance with the requirements set out in the Code and
pursuant to the Indenture, the Issuer has created the Rebate Fund, to
be held by the Trustee, in its capacity as Trustee under the Indenture,
and used as provided in this Section.
(i) On or before 25 days following each Computation
Date, upon the Borrower's written direction, an amount shall
be deposited to the Rebate Fund by the Trustee from source or
sources stated in such direction so that the balance of the
Rebate Fund shall equal the aggregate Rebate Amount as of such
determination date.
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(ii) Amounts deposited in the Rebate Fund shall be
invested in accordance with the Investment Instructions by the
Trustee at the written direction of the Borrower.
(iii) All money at any time deposited in the Rebate
Fund shall be held by the Trustee, to the extent required by
this Tax Regulatory Agreement and the Indenture, for payment
to the United States of America of the Rebate Amount. All
amounts deposited into or on deposit in the Rebate Fund shall
be governed by this Tax Regulatory Agreement.
(iv) For purposes of crediting amounts to the Rebate
Fund or withdrawing amounts from the Rebate Fund, Nonpurpose
Investments shall be valued in the manner provided in this
Article.
(c) In order to meet the rebate requirement of ss. 148(f) of
the Code, the Borrower agrees and covenants to take, or cause to be
taken by the Trustee or the Rebate Analyst described in Section 4.6
hereof, as appropriate, the following actions:
(i) For each Investment of amounts held with respect
to the Bonds in (A) the Revenue Fund, (B) the Purchase Fund,
(C) the Project Fund and (D) the Rebate Fund, the Trustee
shall record the purchase date of such Investment, its
purchase price, accrued interest due on its purchase date,
its face amount, its coupon rate, its Yield, the frequency of
its interest payment, its disposition price, accrued interest
due on its disposition date and its disposition date. The
Rebate Analyst retained by the Borrower shall determine the
Fair Market Value for such Investments and the Yield thereon
as may be required by the Regulations. The Yield for an
Investment shall be calculated by using the method set forth
in the Regulations.
(ii) For each Computation Date specified in paragraph
(iii) below, the Rebate Analyst shall compute the Yield on
the Bonds as required by the Regulations based on the
definition of issue price contained in Section 148(h) of the
Code and the Regulations. The Bonds are a variable rate issue
and accordingly the yield on the Bonds cannot be determined
at this time. The Yield on the Bonds shall be calculated by
the Rebate Analyst at such time in order to comply with this
Tax Regulatory Agreement and the Regulations based on the
definitions of issue price contained in Section 148(h) of the
Code using payments or prepayments of the principal of,
premium, if any, and interest on the Bonds required by the
Regulations. For purposes of this Tax Regulatory Agreement
the initial offering price to the public (not including bond
houses and brokers, or similar persons or organizations
acting in the capacity of underwriters or wholesalers) at
which a substantial amount of the Bonds were sold is the
Issue Price. Any reasonable amounts paid for credit
enhancement have been and may
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generally be treated as interest on the Bonds for purposes of
Yield computation to the extent permitted by the Regulations.
(iii) Subject to the special rules set forth in
paragraphs (iv) and (v) below, the Rebate Analyst shall
determine the amount of earnings received on all Nonpurpose
Investments described in paragraph (i) above, for each
Computation Date. In addition, where Nonpurpose Investments
are retained by the Trustee after retirement of the Bonds,
any unrealized gains or losses as of the date of retirement
of the Bonds must be taken into account in calculating the
earnings on such Nonpurpose Investments to the extent
required by the Regulations.
(iv) In determining the Rebate Amount computed
pursuant to this Section, (A) all earnings on any bona fide
debt service fund (including the Revenue Fund and the
Purchase Fund) shall not be taken into account for any Bond
Year during which the gross earnings of such funds total less
than $100,000, (B) the Universal Cap applicable to the Bonds
pursuant to ss. 1.148- 6(b)(2) of the Regulations shall be
taken into account, (C) all of the Borrower's elections and
other choices set forth in Section 4.1 hereof shall be taken
into account and (D) all spending exceptions to rebate met by
the Borrower shall be taken into account.
(v) For each Computation Date specified in paragraph
(iii) above, the Rebate Analyst shall calculate for each
Investment described in paragraphs (i) and (iii) above, an
amount equal to the earnings which would have been received
on such Investment at an interest rate equal to the Yield on
the Bonds as described in paragraph (ii) above. The method of
calculation shall follow that set forth in the Regulations.
(vi) For each Computation Date, the Rebate Analyst
shall determine the amount of earnings received on all
Investments held in the Rebate Fund for the Computation Date.
The method of calculation shall follow that set forth in the
Regulations.
(vii) For each Computation Date, the Rebate Analyst
shall calculate the Rebate Amount, by any appropriate method
to be described in the Code and Regulations applicable or
which becomes applicable to the Bonds. The determination of
the Rebate Amount shall account for the amount (to be rounded
down to the nearest multiple of $100) equal to the sum of all
amounts determined in paragraph (iii), all amounts determined
in paragraphs (v) and (vi), and less any amount which has
previously been paid to the United States pursuant to Section
4.4 below. The Rebate Analyst shall notify the Trustee of the
Rebate Amount.
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(viii) If the Rebate Amount exceeds the amount on
deposit in the Rebate Fund, the Borrower shall immediately
pay such amount to the Trustee for deposit into the Rebate
Fund.
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Section 4.4. Payment to United States.
(a) Not later than sixty (60) days after the last day of each
fifth Bond Year (or such longer period as may be permitted by the
Regulations), the Trustee shall pay to the United States an amount
that, when added to the Future Value as of the most recent Computation
Date of previous rebate payments made for the Bonds, equals at least
ninety percent (90%) of the Rebate Amount required to be on deposit in
the Rebate Fund as of such payment date. No later than sixty (60) days
after the Final Computation Date the Trustee shall pay to the United
States an amount that, when added to the Future Value as of such
Computation Date of previous rebate payments made for the Bonds, equals
at least one hundred percent (100%) of the balance remaining in the
Rebate Fund.
(b) The Trustee shall mail each payment of an installment to
the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255.
Each payment shall be accompanied by Internal Revenue Form 8038-T, and,
if necessary, a statement summarizing the determination of the Rebate
Amount.
(c) If on any Computation Date, the aggregate amount earned on
Nonpurpose Investments in which the Gross Proceeds of the Bonds are
invested is less than the amount that would have been earned if the
obligations had been invested at a rate equal to the Yield on the Bonds
as determined in Section 4.3, such deficit may at the written request
of the Borrower be withdrawn from the Rebate Fund and paid to the
Borrower or as the Borrower shall direct. The Borrower may direct that
any overpayment of rebate may be recovered from any Rebate Amount
previously paid to the United States pursuant to ss. 1.148-3(i) of the
Regulations.
(d) The Borrower shall also pay any penalty or interest on
underpayments of Rebate Amount not paid in a timely manner pursuant to
this Tax Regulatory Agreement, the Code and the Regulations.
Section 4.5. Recordkeeping. In connection with the rebate requirement,
the Borrower and the Trustee shall maintain the following records:
(a) The Borrower and the Trustee shall record all amounts paid
to the United States pursuant to Section 4.4 hereof. The Trustee shall
furnish to the Issuer and the Borrower copies of any materials filed
with the Internal Revenue Service pertaining thereto and shall provide
the Issuer and the Borrower with all records in its possession that the
Issuer, the Borrower or the Rebate Analyst may request relating to the
calculation of any Rebate Amount.
(b) The Borrower and the Trustee shall retain records of the
rebate calculations until six years after the retirement of the last
obligation of the Bonds.
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Section 4.6. Rebate Analyst.
(a) To the extent required to comply with the provisions of
Section 4.2 hereof, the Borrower shall appoint a Rebate Analyst and any
successor Rebate Analyst for the Bonds reasonably acceptable to the
Issuer, subject to the conditions set forth in this Section. The Rebate
Analyst and each successor Rebate Analyst shall signify its acceptance
of the duties imposed upon it hereunder by a written instrument of
acceptance delivered to the Trustee, the Issuer and the Borrower under
which such Rebate Analyst will agree to discharge its duties pursuant
to this Tax Regulatory Agreement in a manner consistent with prudent
industry practice.
(b) The Rebate Analyst may at any time resign and be
discharged of the duties and obligations created by this Tax Regulatory
Agreement by giving notice to the Trustee, the Issuer and the Borrower.
The Rebate Analyst may be removed at any time by an instrument signed
by the Issuer and the Borrower and filed with the Issuer, the Borrower
and the Trustee. The Borrower and the Issuer shall, upon the
resignation or removal of the Rebate Analyst, appoint a successor
Rebate Analyst.
(c) Each successor Rebate Analyst appointed pursuant to this
Section shall be either a firm of independent accountants or Bond
Counsel or another entity experienced in calculating rebate payments
required by ss. 148(f) of the Code.
(d) In order to provide for the administration of the matters
pertaining to arbitrage rebate calculations set forth herein, and in
the Investment Instructions and No Arbitrage Certificate, the Trustee,
the Borrower and the Issuer may provide for the employment of the
Rebate Analyst on or prior to July 31, 2002. The Trustee and the Issuer
may rely conclusively upon and shall be fully protected from all
liability in relying upon the opinions, calculations, determinations,
directions and advice of the Rebate Analyst. The charges and fees for
such Rebate Analyst shall be paid by the Borrower upon presentation of
an invoice for services rendered in connection therewith.
ARTICLE V
COMPLIANCE WITH CODE
In order to ensure that interest on the Bonds is excludable from the
gross income of the recipients thereof for purposes of federal income taxation,
the Borrower hereby represents and covenants as follows:
(a) The Average Maturity of the Bonds does not exceed 120% of
the Average Economic Life of the Facilities within the meaning of ss.
147(b) of the Code as set forth in Exhibit C hereto.
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(b) The Bonds are not and shall not become directly or
indirectly "federally guaranteed." Unless otherwise excepted under ss.
149(b) of the Code, the Bonds will be considered "federally guaranteed"
if (i) the payment of principal and interest with respect to the Bonds
is guaranteed (in whole or in part) by the United States (or any agency
or instrumentality thereof), (ii) five (5) percent or more of the
Proceeds of the Bonds is (A) to be used in making loans, the payment of
principal or interest with respect to which are to be guaranteed (in
whole or in part) by the United States (or any agency or
instrumentality thereof) or (B) to be invested (directly or indirectly)
in federally insured deposits or accounts or (iii) the payment of
principal or interest on the Bonds is otherwise indirectly guaranteed
(in whole or in part) by the United States (or any agency or
instrumentality thereof).
(c) The Borrower will provide to the Issuer all information
necessary to enable the Issuer to complete and file Internal Revenue
Forms 8038 and 8038-T pursuant to ss. 149(e) of the Code.
(d) As required by ss. 147(f) of the Code, the Bonds and the
Project were the subject of a public hearing held on June 18, 1997,
which was preceded by reasonable public notice.
(e) The Borrower will comply with, and make all filings
required by, all effective rules, rulings or regulations promulgated by
the Department of the Treasury or IRS with respect to obligations
described in ss.ss. 103 and 144 of the Code, such as the Bonds.
(f) The Borrower agrees to rebate all amounts required to be
rebated to the United States of America pursuant to ss. 148(f) of the
Code. The Borrower agrees to provide any instructions to the Trustee
that are necessary to satisfy the requirements of ss. 148(f) of the
Code. The Borrower will not deposit or instruct the Trustee to deposit
amounts in the Rebate Fund in excess of the amounts reasonably expected
to be needed to make the payments to the United States as required by
ss. 148(f) of the Code.
(g) The Sale Proceeds of the Bonds and any Investment Proceeds
will be expended for the purposes set forth in the Agreement and in the
Indenture and no amount of such Proceeds of the Bonds in excess of 2%
of the Sale Proceeds of the Bonds will be expended to pay the costs of
issuing the Bonds within the meaning of ss. 147(g) of the Code.
(h) The Issuer shall not sell any other tax-exempt obligations
within 15 days of the sale date of the Bonds pursuant to the same plan
of financing with the Bonds and payable from substantially the same
source of funds, determined without regard to qualified guaranties from
unrelated parties and used to pay the Bonds.
(i) The Bonds were approved by the Governor of the State of
California following the public hearings referred to in (d) above.
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ARTICLE VI
TERM OF TAX REGULATORY AGREEMENT
This Tax Regulatory Agreement shall be effective from the Date of
Issuance through the date that the last Bond is redeemed, paid or deemed paid
pursuant to the terms of the Indenture, except that the requirements of Section
4.5 shall survive until six years after the retirement of the last obligations
of the Bonds.
ARTICLE VII
AMENDMENTS
Notwithstanding any other provision hereof, any provision of this Tax
Regulatory Agreement may be deleted or modified at any time at the option of the
Borrower, with the consent of the Issuer, if the Borrower has provided to the
Trustee and the Issuer an opinion, in form and substance satisfactory to the
Trustee and the Issuer, of Bond Counsel that such deletion or modification will
not adversely affect the exclusion of interest on the Bonds from the gross
income of the recipients thereof for purposes of federal income taxation.
ARTICLE VIII
EVENTS OF DEFAULT, REMEDIES
Section 8.1. Events of Default. The failure of any party to this Tax
Regulatory Agreement to perform any of its required duties under any provision
hereof shall constitute an Event of Default under this Tax Regulatory Agreement
and under the Indenture.
Section 8.2. Remedies for an Event of Default. Upon an occurrence of an
Event of Default under Section 8.1 hereof, the Issuer or the Trustee may in
their discretion, proceed to protect and enforce their rights and the rights of
the registered owners of the Bonds by pursuing any available remedy under the
Indenture or by pursuing any other available remedy, including, but not limited
to, a suit at law or in equity.
27
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Borrower and the Trustee have
caused this Tax Regulatory Agreement to be executed in their respective names
and by their proper officers thereunto duly authorized, all as of the day and
year first written above.
CALIFORNIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY
By___________________________________________
Chair
Attest:
By_____________________________________
Secretary
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By__________________________________________
Authorized Signatory
FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION, AS TRUSTEE
By__________________________________________
Authorized Officer
<PAGE>
EXHIBIT A-1
SOURCES AND USES OF FUNDS
1. Amount received from the sale of the Bonds (exclusive of accrued
interest) is as follows:
Face amount of the Bonds....................................$8,500,000
Less: Underwriters' discount..................................$-0-
Total amount received from the sale of the Bonds............$8,500,000
2. Proceeds of the Bonds totaling $8,330,000, representing 100% of the
Net Sale Proceeds of the Bonds after deduction of the amounts described in 3
below will be deposited to the Project Fund.
3. $170,000 of the Bond proceeds will be deposited in the Costs of
Issuance Fund to pay a portion of the Costs of Issuance of the Bonds.
Estimated Use of Substantially all
of the Proceeds of the
Bonds
(1) Issue price of Bonds........................................$8,500,000
(2) Substantially All Factor.......................................... .95
(3) Total.....................................$8,075,000
=========
(4) Amount paid for qualified Project Costs*
(including interest during construction, if any)........ $8,330,000
Note: All investment earnings, if any, on the Bond proceeds will be
used for qualified Project Costs (including interest during construction, if
any).
*Qualified Project Costs:
Building $7,164,000
Equipment 1,166,000
A-1
<PAGE>
EXHIBIT A-2
Property Financed or Refinanced by the Bonds
1. Construction and installation of a manufacturing facility consisting of
approximately 200,000 square feet - $7,164,000.
2. Acquisition and installation of manufacturing equipment - $1,166,000.
Total $8,330,000.
A-2
<PAGE>
EXHIBIT B-1
FORM OF DEALER CERTIFICATION OF BONA FIDE
BID PRICE OF A CERTIFICATE OF DEPOSIT
I, [Name], [Position] of [Entity Providing the Certification] (the
"Dealer") HEREBY CERTIFY that the Dealer maintains an active secondary market in
certificates of deposit of a type similar to that [sold/purchased] by the Dealer
on behalf of Advanced Aerodynamics and Structures, Inc., a Delaware corporation
(the "Borrower"), and that the price at which the certificate of deposit was
[sold to/purchased from] the Borrower is the bona fide bid price quoted by the
Dealer in an active secondary market maintained by the Dealer in such
certificates of deposit.
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
_______________, 19__.
By_________________________________________
Title:_____________________________________
B-1-1
<PAGE>
EXHIBIT B-2
FORM OF DEALER CERTIFICATION FOR A
CERTIFICATE OF DEPOSIT FOR WHICH
NO ACTIVE SECONDARY MARKET EXISTS
I, [Name], [Position], of [Entity Providing Certificate] (the "Dealer")
HEREBY CERTIFY that there is no active secondary market in certificates of
deposit of the type [sold/ purchased] on behalf of Advanced Aerodynamics and
Structures, Inc., a Delaware corporation [to/from] the Dealer (the "Certificate
of Deposit"); that the yield on the Certificate of Deposit is as high or higher
than the yield on comparable obligations traded on an active secondary market,
and as high or higher than the yield available on reasonably comparable direct
obligations offered by the United States Treasury; that the Dealer maintains an
active secondary market in comparable certificates of deposit, and that this
Certification is based on actual trades adjusted to reflect the size and term of
the Certificate of Deposit and the stability and reputation of the person
issuing it.
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day
_________ of 19__.
By__________________________________
Title:______________________________
B-2-1
<PAGE>
EXHIBIT B-3
FORM OF PROVIDER CERTIFICATION
FOR A CERTIFICATE OF DEPOSIT
I, [Name], [Position], of [Entity Providing the Certificate of Deposit]
(the "Provider") HEREBY CERTIFY that the yield on the Certificate of Deposit
entered into on [DATE] is not less than the highest yield that the Provider
publishes or posts for comparable certificates of deposit offered to the public
and that the yield on the Certificate of Deposit is not less than the yield
available on reasonably comparable direct obligations offered by the United
States Treasury.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of
_________________, 19__.
By_____________________________________
Title:_________________________________
B-3-1
<PAGE>
EXHIBIT B-4
FORM OF PROVIDER CERTIFICATION
FOR AN INVESTMENT CONTRACT
I, [Name], [Position], of [Entity Providing Investment Contract] (the
"Provider") HEREBY CERTIFY in connection with the Investment Contract between
[NAME] and the Provider dated as of [DATE] (the "Investment Contract") that the
yield on the Investment Contract is at least equal to the yield offered on
reasonably comparable Investment contracts offered to other persons, if any,
from a source of funds other than gross proceeds of an issue of tax-exempt bonds
and that the amount of administrative costs that are reasonably expected to be
paid by the Provider to third parties in connection with the Investment Contract
is $ . For purposes of this certification, administrative costs include all
brokerage or selling commissions paid by the Provider to third parties in
connection with the Investment Contract, legal or accounting fees, investment
advisory fees, recordkeeping, safekeeping, custody and other similar costs or
expenses.
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day
_____________ of 19__.
By_________________________________________
Title:_____________________________________
B-4-1
<PAGE>
EXHIBIT B-5
FORM OF BORROWER'S CERTIFICATION FOR A
CERTIFICATE OF DEPOSIT INVOLVING THREE BIDS
I, [[Name], [Position], of Advanced Aerodynamics and Structures, Inc.,
a Delaware corporation (the "Borrower"), HEREBY CERTIFY in connection with the
certificates of deposit of the type purchased by the Borrower that such purchase
was made pursuant to the Indenture of Trust, dated as of August 1, 1997, between
California Economic Development Financing Authority and the First Trust of
California, National Association after receipt of at least three bids and that
the certificates of deposit were purchased from the highest bidder in an
arm's-length transaction without regard to yield.
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
_______________, 19__.
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By
Title:
B-5-1
<PAGE>
EXHIBIT B-6
FORM OF BORROWER'S CERTIFICATION FOR AN
INVESTMENT CONTRACT INVOLVING THREE BIDS
I, [[Name], [Position], of Advanced Aerodynamics and Structures, Inc.,
a Delaware corporation (the "Borrower"), HEREBY CERTIFY in connection with the
Investment contract between the Borrower and [Entity Providing Investment
Contract] (the "Provider") dated as of
, (the "Investment Contract") that (i) at least three bids on
the Investment Contract were received from persons other than those with a
material financial advantage in the California Economic Development Financing
Authority Variable Rate Demand Industrial Development Revenue Bonds, Series 1997
(Advanced Aerodynamics and Structures, Inc. Project), (ii) the yield on the
Investment Contract purchased is at least equal to the yield offered under the
highest bid received from an uninterested party, (iii) the price of the
Investment Contract takes into account as a significant factor the Borrower's
expected drawdown for the funds to be invested (other than float funds or
reasonably required reserve or replacement funds) and (iv) any collateral
security requirements for the Investment Contract are reasonable.
IN WITNESS WHEREOF, I have hereunto set my hand this _______ day of
_________________, 19__.
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By
Title:
B-6-1
<PAGE>
EXHIBIT C
Useful Life of the Property Financed or Refinanced by the Bonds
Cost Useful Life*
Land $ 0 x n/a
Building 7,164,000 x 41 $293,724,000
Equipment 1,166,000 x 10 12,826,000
$8,330,000 $306,550,000
less: cost of land 0
$8,330,000
Average life of Project = $306,550,000 / 8,330,000 = 36.80 years.
Useful life of Project for purposes of Section 147 (b) of the Code =
36.80 years x 1.20 = 44.16 years
Average life of Bonds = 29.98 years
The information contained in this schedule, attached as an exhibit
hereto, setting forth the respective cost, economic life, ADR midpoint life, if
any, under Revenue Procedure 87-56, 1987-42 I.R.B. 4, and Revenue Procedure
83-35, 1983-2 C.B. 745, as supplemented and amended from time to time, and
guideline life, if any, under Revenue Procedure 62-21, 1962-2 C.B. 118, as
supplemented and amended from time to time, of each asset of the Facilities
financed with the Proceeds of the Bonds, is true, accurate and complete.
* Includes time from date of issuance until property is placed in service.
C-1
<PAGE>
EXHIBIT D
Declaration of Official Intent
[See Attached]
D-1
CUSTODY, PLEDGE AND SECURITY AGREEMENT
CUSTODY, PLEDGE AND SECURITY AGREEMENT dated as of August 1, 1997 is
entered into among ADVANCED AERODYNAMICS AND STRUCTURES, INC., a limited
partnership organized under the laws of the State of Delaware (the "Company'),
THE SUMITOMO BANK, LIMITED, a banking corporation organized under the laws of
Japan, acting through its Los Angeles Branch ("Sumitomo"), and FIRST TRUST OF
CALIFORNIA, NATIONAL ASSOCIATION, as custodian (the "Custodian"), pursuant to
the Reimbursement Agreement dated as of August 1, 1997 between the Company and
Sumitomo (hereinafter, as the same may from time to time be amended or
supplemented, called the "Reimbursement Agreement"):
RECITALS
1. On August 5, 1997, the California Economic Development Financing
Authority (the "Issuer") issued its Variable Rate Demand Industrial Development
Revenue Bonds, Series 1997 (Advanced Aerodynamics and Structures, Inc. Project)
(the "Bonds") pursuant to an Indenture of Trust dated as of August 1, 1997 (as
amended or supplemented from time to time, the "Indenture") between the Issuer
and First Trust of California, National Association, as trustee (together with
any successor trustee under the Indenture, the "Trustee").
2. The Indenture requires that the Bonds be purchased from the owners
thereof on the dates on which the Bonds are subject to optional or mandatory
tender pursuant to Sections 4.06 and 4.07 of the Indenture (any such date is
referred to herein as the "Tender Date") under the circumstances set forth in
the Indenture.
3. The Company has agreed to enter into the Reimbursement Agreement and
thereby cause Sumitomo to issue its transferable irrevocable direct pay letter
of credit (the "Letter of Credit") which may be drawn upon, inter alia, to pay
the purchase price of Bonds which are subject to optional or mandatory tender on
such Tender Dates.
4. Bonds tendered or deemed to have been tendered pursuant to the Indenture
which are purchased by a draw on the Letter of Credit will be registered in the
name of Sumitomo or its nominee pursuant to this Pledge Agreement unless
Sumitomo directs otherwise.
5. It is a condition precedent to Sumitomo's delivery of the Letter of
Credit that the Company enter into this Custody, Pledge and Security Agreement
(as amended or supplemented from time to time, this "Pledge Agreement") with
Sumitomo and the Custodian.
6. First Trust of California, National Association has been appointed as
the Trustee under the Indenture and has also agreed to act as a custodian under
this Pledge Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Sumitomo to
1
<PAGE>
enter into the Reimbursement Agreement and issue the Letter of Credit thereunder
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Reimbursement Agreement or the indenture shall have such defined meanings when
used herein.
2. Pledge. The Company hereby pledges, assigns, hypothecates, transfers and
delivers to Sumitomo all its right, title and interest in and to all Bonds, as
the same may be from time to time delivered to the Trustee by the owners
thereof, that may be purchased with funds drawn under the Letter of Credit (the
"Pledged Bonds"), and hereby grants to Sumitomo a first lien on, and security
interest in, all rights, title and interest of the Company in and to the Pledged
Bonds, the interest thereon and all proceeds thereof, as collateral security for
the prompt and complete payment when due of all amounts due to Sumitomo under
the Reimbursement Agreement and the performance of all other obligations of the
Company under the Reimbursement Agreement and the other Credit Documents (all of
the foregoing being hereinafter called the "Obligations").
3. Custody and Registration of Bonds: Fees of Custodian.
(a) Sumitomo hereby designates and appoints the Custodian as its agent
and bailee to perfect Sumitomo's pledge, assignment and security interest in the
Pledged Bonds and to serve in accordance with the terms and conditions of this
Pledge Agreement as custodial agent of Sumitomo for the Pledged Bonds, the
interest thereon and all proceeds thereof. Upon any drawing under the Letter of
Credit for the purchase price of the Bonds, the Trustee. shall deliver such
Pledged Bonds to the Custodian, and the Custodian hereby accepts such
appointment and agrees to perform as custodial agent for Sumitomo and to hold
Pledged Bonds on behalf of Sumitomo in accordance with the provisions of this
Pledge Agreement. Upon receipt of such Bonds, the Custodian shall notify the
Remarketing Agent and the Company (by telecopier or other electronic
communication) that Bonds equal to the portion of the purchase price
attributable to principal are being held by the Custodian for Sumitomo pursuant
to this Pledge Agreement.
(b) Unless otherwise directed by Sumitomo (but subject to the
provisions of Section 11 hereof), the Custodian shall cause either (A) any
Pledged Bonds which have not been remarketed in accordance with the Remarketing
Agreement to be registered by the Trustee in the name of Sumitomo or its nominee
or (B) if DTC is the registered owner of all Bonds, any Pledged Bonds which have
not been remarketed in accordance with the Remarketing Agreement to be
registered in the name of DTC with Sumitomo's or its nominee's beneficial
ownership interest of such Pledged Bonds recorded by DTC on its books. The
Company hereby agrees that it will execute and deliver such documents and take
such steps as Sumitomo may reasonably request in order to perfect and maintain
perfected Sumitomo's security interest in the Collateral.
2
<PAGE>
(c) The Company irrevocably constitutes and appoints the Custodian as
its attorney to cause the transfer of any Pledged Bonds on the books kept for
the registration thereof and authorizes the Custodian to deliver Pledged Bonds
to the Trustee for reregistration, if appropriate, and delivery in accordance
with the terms of this Pledge Agreement.
(d) The fees of the Custodian, if any, in connection with this Pledge
Agreement shall be for the account of the Company.
4. Payments on the Bonds: Voting Rights.
(a) If, while this Pledge Agreement is in effect, the Company shall
become entitled to receive or shall receive any payment, including, without
limitation, any payment of principal, premium, interest or proceeds of sale, in
respect of the Pledged Bonds, such payment shall be subject to this Pledge
Agreement. Any such payment shall be made directly to Sumitomo, and, in the
event any such payment is received by the Company, the Company agrees to accept
the same as Sumitomo's agent, to hold the same in trust on behalf of Sumitomo
and to deliver the same forthwith to Sumitomo. AU sums of money so paid in
respect of the Pledged Bonds which are received by the Company and paid to
Sumitomo and all such amounts which shall be paid directly to Sumitomo by the
Trustee shall be credited against the Obligations of the Company owed to
Sumitomo. If the payments are in excess of the amounts owed to Sumitomo,
Sumitomo shall return the excess to the Company.
(b) During such time as Bonds are pledged to Sumitomo under the terms
of this Pledge Agreement, Sumitomo shall be entitled to exercise all of the
rights of an owner of Bonds with respect to voting, consenting and directing the
Trustee as if Sumitomo were the owner of such Bonds, and the Company hereby
grants and assign to Sumitomo all such rights.
5. Collateral. The Pledged Bonds, all income therefrom and proceeds thereof
are herein collectively sometimes called the "Collateral."
6. Release of the Bonds.
(a) Simultaneously with the receipt by the Custodian of the proceeds
of sale of any Pledged Bonds which are remarketed in accordance with the
Indenture and the Remarketing Agreement for a purchase price of not less than
the principal amount thereof, Pledged Bonds in a principal amount equal to the
purchase price shall be released from the lien of this Pledge Agreement and
delivered at the direction of the Remarketing Agent. The Custodian agrees that
the proceeds of such sale will be disbursed in accordance with the provisions of
Section 8.11 of the Indenture.
3
<PAGE>
(b) Upon receipt by the Custodian of written notice from Sumitomo,
which notice may be sent by telecopy if immediately confirmed in wilting, that
Sumitomo has received payment or prepayment in full of all amounts owing under
the Reimbursement Agreement, all such Pledged Bonds and any other Collateral
pledged to Sumitomo then subject to the lien of this Pledge Agreement shall be
released herefrom and registered in the name of and delivered to the Company or
its order.
7. Exculpatory Provisions. Neither the Custodian nor any of its offlcers,
directors, employees, agents, attorneys-in-fact or affiliates shall be liable
for any action lawfully taken or omitted to be taken by it or such person under
or in connection with this Pledge Agreement (except for its or each person's own
gross negligence or willful misconduct), including any failure to correct or
realize upon the Obligations or any Collateral, security or guaranty therefor or
any part thereof The Company hereby indemnifies the Custodian from and against
any and all claims, losses, damages, liabilities and expenses which may be
imposed on, incurred by or asserted against the Custodian in any way related to
or arising out of the subject matter of this Pledge Agreement (except for such
claims, losses, damages, liabilities and expenses which arise out of the
Custodian's gross negligence or willful misconduct). The Custodian undertakes to
perform only such duties as are expressly set forth herein. The Custodian may
rely and shall be protected in acting or refraining from acting upon any written
notice, instruction or request furnished to it hereunder and believed by it to
be genuine- and to have been signed or presented by an Authorized Bank
Representative; "Authorized Bank Representative" means any one of the persons at
the time designated to act on behalf of Sumitomo by written certificate
furnished to the Custodian, which certificate shall be substantially in the form
set forth in Attachment A attached hereto and by reference made a part hereof,
and may be changed from time to time by Sumitomo furnishing a new certificate to
the Custodian. The Custodian may consult with counsel of its own choice and
shall have full and complete authorization and protection for any action taken
or suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. Notwithstanding any provision to the contrary contained herein,
the Custodian shall not be responsible for any act or failure to act absent its
gross negligence or willful misconduct.
8. Resignation or Removal of Custodian. The Custodian may resign and be
discharged from its duties and obligations hereunder by giving at least thirty
(30) days' prior written notice of such resignation to Sumitomo, specifying the
date on which such resignation is to take effect. Sumitomo, with the consent of
the Company (which consent shall not be unreasonably withheld and which shall
not be required if an Event of Default (as defined in Section 9 hereof) has
occurred and is continuing), may remove and discharge the Custodian from its
duties and obligations hereunder by giving at least five (5) Business Days'
prior written notice of such removal to the Custodian specifying the date on
which such removal is to take effect.
9. Event of Default. The term "Event of Default" as used in this Pledge
Agreement shall mean (a) an Event of Default under and as defined in the
Reimbursement Agreement or (b) (i) the failure by any of the parties hereto to
comply with the provisions of Sections 3 or 6 hereof, (ii) the failure by the
Company to perform or observe any covenant contained in Section 12 or 13 hereof,
4
<PAGE>
or (iii) any representation or warranty made by the Company pursuant to Section
12 hereof proving to have been incorrect in any material respect when made.
10. Rights of Sumitomo. Sumitomo shall not be liable for failure to collect
or realize upon the Obligations or any Collateral or any security or other
guarantee therefor, or any part thereof, or for any delay in so doing, nor shall
either party be under any obligation to take any action whatsoever with regard
thereto. If an Event of Default or event which with notice or lapse of time or
both would become an Event of Default has occurred and is continuing, Sumitomo
may thereafter, without notice, exercise all rights, privileges or options
pertaining to any Pledged Bonds pledged to Sumitomo as if Sumitomo were the
holder and absolute owner thereof, upon such terms and conditions as Sumitomo
may determine, all without liability except to account for Collateral or other
property actually received by it, but Sumitomo shall not have any duty to
exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.
11. Remedies. In the event any portion of the Obligations has been
declared due and payable, Sumitomo may, with the prior written approval of the
Company, forthwith collect, receive, appropriate and realize upon the Collateral
pledged to it, or any part thereof, and/or may forthwith sell, assign, give
option or options to purchase, contract to sell or otherwise dispose of and
deliver said Collateral pledged to it, or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange, broker's board or
at any of Sumitomo's branches, agencies or offices, or elsewhere upon such terms
and conditions as Sumitomo and the Company may deem advisable and at such prices
as Sumitomo and the Company may deem best, for cash or on credit or for future
delivery without assumption of any credit risk, with the right to Sumitomo upon
any such sale or sales, public or private, to purchase the whole or any part of
said Collateral pledged to it and so sold, free of any right or equity of
redemption in the Company which right or equity is hereby expressly waived or
released. Sumitomo shall pay over the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any and all of the Collateral pledged to
it or in any way relating to the rights of Sumitomo hereunder, including
reasonable attorneys' fees and legal expenses, to the payment, in whole or in
part, of the Obligations in such order as Sumitomo may elect.
12. Representations, Warranties and Covenants of the Company. The Company
represents, warrants and covenants that:
(a) on the date of delivery to Sumitomo or to the Custodian for the
account of Sumitomo of any Pledged Bonds described herein, the Company shall
have taken no action which would create any right, title or interest in and to
the Pledged Bonds in favor of the Remarketing Agent or the Trustee;
(b) it has, and on the date of delivery to Sumitomo or to the
Custodian for the account of Sumitomo of any Pledged Bonds will have, full
power, authority and legal right
5
<PAGE>
to pledge all of Its right, title and interest in and to the Pledged Bonds
pursuant to this Pledge Agreement;
(c) this Pledge Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights a.-,id,
to the extent that such instruments require or may require, enforcement by a
court of equity, such principles of equity as the court having jurisdiction may
impose;
(d) no consent of any other party (including, without limitation, the
creditors of the Company) and no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority, domestic or foreign, is required
to be obtained by the Company in connection with the execution, delivery or
performance of this Pledge Agreement;
(e) the execution, delivery and performance of this Pledge Agreement
will not result in a material violation of any provision of any applicable law
or regulation or of any order, judgment, writ, award or decree directly binding
on the Company of any court, arbitrator or governmental authority, domestic or
foreign, or of the Company's organizational documents, or of any mortgage,
indenture, lease, contract, or other agreement, instrument or undertaking to
which the Company is a party or which, to the best knowledge of the Company,
purports to be binding upon the Company or upon any of its respective assets and
will not result in the creation or imposition of any lien, charge or encumbrance
on or security interest in any of the assets of the Company except as
contemplated by this Pledge Agreement; and
(f) the pledge, assignment and delivery of the Pledged Bonds pursuant
to this Pledge Agreement will create a valid first lien on and a first perfected
security interest in Sumitomo in all right, title or interest of the Company in
or to such Bonds, and the income and proceeds thereof, subject to no prior
pledge, lien, mortgage, hypothecation, security interest, charge, option or
encumbrance or to any agreement purporting to grant to any third party a
security interest in the property or assets of the Company which would include
the Pledged Bonds. The Company covenants and agrees that it will defend
Sumitomo's right, title and security interest in and to the Pledged Bonds and
the income and proceeds thereof against the claims and demands of all persons
whomsoever.
13. No Disposition, Etc. The Company agrees that it will not, without the
prior written consent of Sumitomo, sell, assign, transfer, exchange or otherwise
dispose of, or grant any option with respect to, the Collateral (except as
provided in Section 6 of this Pledge Agreement), nor will it create, incur or
permit to exist any pledge, lien, mortgage, hypothecation, security interest,
charge, option or any other encumbrance with respect to any of the Collateral,
or any interest therein, or any proceeds thereof, except for the Hen and
security interest provided for by this Pledge Agreement.
6
<PAGE>
14. Further Assurances. The Company agrees that at any time and from time
to time, upon the written request of Sumitomo, the Company will execute and
deliver such further documents and do such @er acts and perform all things as
Sumitomo may reasonably request in order to effect the purposes of this Pledge
Agreement.
15. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. No Waiver: Cumulative Remedies. Sumitomo shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by Sumitomo,
and then only to the extent therein set forth. A waiver by Sumitomo of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Sumitomo would otherwise have on any further occasion. No
failure to exercise nor any delay in exercising by Sumitomo of any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
17. Waivers, Amendments: Applicable Law. None of the terms or provisions of
this Pledge Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Sumitomo, the Company and the Custodian.
This Pledge Agreement and all obligations of the Company hereunder shall be
binding upon the successors and assigns of the Company and shall, together with
the rights and remedies of Sumitomo, inure to the benefit of Sumitomo and its
respective successors and assigns. THE OBLIGATIONS OF THE PARTIES UNDER THIS
PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA.
18. Term. This Pledge Agreement shall remain in full force and effect for
so long as the Letter of Credit is in effect or any amount is owed to Sumitomo
under this Pledge Agreement, the Reimbursement Agreement or any other Credit
Documents, provided that in the event of the resignation or removal of the
Trustee under the Indenture, the Custodian shall resign or be removed under this
Pledge Agreement, and the successor Trustee appointed under the Indenture shall
be appointed as the successor custodian under this Pledge Agreement.
19. Notices. Unless otherwise provided for in this Pledge Agreement, any
notice required or permitted to be given under this Pledge Agreement may be
given by certified or registered mail, return receipt requested, or by,
telecopy, charges prepaid, or by commercial overnight delivery service, prepaid,
addressed:
7
<PAGE>
If to the Company:
Advanced Aerodynamics and Structures, Inc.
3501 Lakewood Boulevard
Long Beach, California 90808
Attention: Carl L. Chen, Ph.D.
Telecopy: (562) 938-8620
Telephone: (562) 938-8618
If to the Custodian:
First Trust of California, National Association
One California Street, Fourth Floor
San Francisco, California 94111
Attention: Corporate Trust Department
Telecopy: (415) 273-4590
Telephone: (415) 273-4576
If to Sumitomo:
The Sumitomo Bank, Limited
Los Angeles Branch
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance
and Financial Institutions Group
Telecopy: (213) 623-6832
Telephone: (213) 955-0800
Any notice sent by mail shall be deemed given three (3) days after it is
deposited in the mails. Any notice sent by telecopy shall be deemed given when
sent. Any notice sent by commercial overnight delivery service shall be deemed
given one (1) Business Day after it is deposited for delivery. Notwithstanding
anything herein to the contrary, notices to release Bonds from Sumitomo to the
Custodian may be made by telecopy and each such notice shall be promptly
confirmed in writing as specified above.
20. Execution in Counterparts. This Pledge Agreement may be executed in
multiple counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their duly authorized officers as of the day
and year first above written.
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By:
President
ATTEST:
By:
Secretary
(SEAL)
THE SUMITOMO BANK, LIMITED
By:
, Los Angeles Branch
FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION, as Custodian
By:
Its:
9
<PAGE>
ATTACHMENT A
TO
PLEDGE AGREEMENT
CERTIFICATE DESIGNATING AUTHORIZED BANK REPRESENTATIVES
The Sumitomo Bank, Limited, acting through its Los Angeles Branch
("Sumitomo"), hereby certifies to FIRST TRUST OF CALIFORNIA, NATIONAL
ASSOCIATION (the "Custodian"), as custodian agent for Sumitomo in accordance
with that certain Custody, Pledge and Security Agreement, dated as of August 1,
1997 among Advanced Aerodynamics and Structures, Inc., Sumitomo and the
Custodian, that the "Authorized Bank Representatives' for Sumitomo from the date
of this Certificate until the Custodian's receipt of a Certificate furnished in
replacement hereof shall be the following individuals so designated below:
Name Specimen Signature
IN WITNESS WHEREOF, Sumitomo has executed this Certificate as of this lst
day of August, 1997.
THE SUMITOMO BANK, LIMITED
By:
Title:
10
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this "Investment Agreement"), dated August
5, 1997 is by and between ADVANCED AERODYNAMICS AND STRUCTURES, INC. ("the
Company"), and THE SUMITOMO BANK, LIMITED (the "Bank"), acting by and through
its Los Angeles Branch.
WITNESSETH:
WHEREAS, the California Economic Development Financing Authority (the
"Issuer") has issued its Variable Rate Demand Industrial Development Revenue
Bonds, Series, 1997 (Advanced Aerodynamics and Structures, Inc. Project) (the
"Bonds") in the aggregate principal amount of $8,500,000 pursuant to an
Indenture of Trust dated as of August 1, 1997 (the "Indenture") between the
Issuer and First Trust of California, National Association (the "Trustee"); and
WHEREAS, the Bank has agreed to issue its Irrevocable Letter of Credit
No. G/LA-400557 dated August 5, 1997 (the "Letter of Credit") to secure payment
of principal of, interest on and purchase price of, the Bonds pursuant to a
Reimbursement Agreement dated as of August 1, 1997 (the "Reimbursement
Agreement") between the Bank and the Company; and
WHEREAS, to induce the Bank to issue the Letter of Credit and secure
the obligations of the Company to the Bank under the Reimbursement Agreement,
the Company has agreed to deposit certain moneys with the Bank pursuant to this
Investment Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties intending to be legally bound
hereby agree as follows:
Section 1. Invested Funds. The Company hereby establishes this
Investment Agreement with the Bank and agrees that, pursuant to the terms of
this Investment Agreement, the Company shall invest with the Bank the aggregate
amount of $8,500,000 (the "Invested Funds"). The Company agrees to cause the
Invested Funds to be delivered to the Bank on August 5, 1997 for investment
pursuant to the terms of this Investment Agreement. The Company hereby
acknowledges that the Invested Funds and any interest accrued thereon under this
Investment Agreement are not insured by the Federal Deposit Insurance
Corporation.
Section 2. Investments with the Bank. Investments hereunder shall be
made by wire transfer in immediately available funds to Sumitomo Bank of
California, San Francisco, California, ABA #121002042 for the account of the
Bank, account number 051-014969-86, reference: AASI.
Section 3. Term of Agreement. This Investment Agreement will terminate
with respect to the Invested Funds on the earlier of August 5, 2002 or the
Expiration Date of the Letter of Credit (the "Maturity Date") unless extended at
the request of the Company with the approval of the Bank. Prior to the Maturity
Date, the Bank shall have absolute and unconditional custody and control over
the invested Funds. Subject to the terms of the Reimbursement Agreement, the
Invested Funds shall
<PAGE>
be due and payable by the Bank to the Company in immediately available funds to
the account specified by the Company to the Bank on the Maturity Date. Provided
no Event of Default has occurred and is continuing under the Reimbursement
Agreement, Invested Funds shall be due and payable by the Bank to the Company in
immediately available funds to the account specified by the Company to the Bank
within seven days following (i) an optional redemption of Bonds pursuant to
Article IV of the Indenture in the amount of the Bonds so redeemed or (ii)
receipt of a request by the Company, which request shall be accompanied by a
certificate of the Company delivered to the Trustee and the Bank, acknowledging
that the Bank shall not approve any Requisition pursuant to Section 3.03 of the
Indenture at any time that the aggregate amount held by the Bank pursuant to
this Investment Agreement is less than the aggregate principal amount of Bonds
Outstanding and that an amount of Bond proceeds at least equal to the amount of
Invested Funds paid to the Company has been invested with the Bank.
Section 4. Interest. Interest shall accrue on the daily outstanding
balance of the Invested Funds from and including August 5, 1997 to and including
August 13, 1997 at 5.475% per annum (calculated on the basis of a 360-day year
for actual number of days elapsed) and thereafter to and including the Maturity
Date at LIBOR (as hereinafter defined) less 0. 15 % per annum (calculated on the
basis of a 3 60-day year for actual number of days elapsed). As used herein,
"LIBOR" means with respect to any Reset Date (as hereinafter defined) the
arithmetic mean of the rates shown on the LIBOR display on the Reuters monitor
screen as the London Interbank offered rates for deposits in Dollars quoted by
Barclays Bank International Limited, Bank of Tokyo, Bankers Trust Company and
National Westminster Bank, PLC, at approximately I 1:00 a.m., London time, on
the day that is two Business Days preceding the Reset Date for a period of one
(1) week commencing on the Reset Date. "Reset Date" means the first business day
of each calendar week.
Provided no Event of Default has occurred and is continuing under the
Reimbursement Agreement, interest shall be credited to the account specified by
the Company on the first Business Day of each month, on the Maturity Date or on
any earlier date on which Invested Funds are paid to the Company hereunder.
Interest in an amount equal to one-quarter of the total interest accruing
hereunder through August 5, 1999 shall be added to and become part of the
Invested Funds on such date. The balance shall be paid to or for the account of
the Company on such date to the account specified in or pursuant to Section 3
hereof or as otherwise directed by the Company.
Section 5. Representations and Warranties. (a) The Company represents
and warrants to the Bank that: (i) this Investment Agreement constitutes a valid
and binding obligation of the Company; and (ii) the execution, delivery and
performance of this Investment Agreement by the Company will not result in a
breach or violation of or cause a default under any provision of any law,
regulation, order, license, decree, judgment, indenture, contract or agreement
binding upon the Company.
(b) The Bank represents and warrants to the Company that: (i) this
Investment Agreement constitutes a valid and binding obligation of the Bank; and
(ii) the execution, delivery and performance of this Investment Agreement by the
Bank will not result in a breach or violation of or cause a default under any
provision of any law, regulation, order, ]license, decree, judgment, indenture,
contract or agreement binding upon the Bank.
<PAGE>
Section 6. Role of the Bank. It is expressly understood and agreed that
in performing its obligations hereunder, the Bank is not acting as a fiduciary,
agent or other representative for the registered owners of the Bonds or anyone
else, and that neither the Bank nor any of its directors, officers, employees,
or agents shall be liable or responsible for: (i) the payment to the registered
owners of any amounts owing on or with respect to the Bonds; or (ii) any acts or
omissions of the Issuer or the Trustee under or with respect to the validity or
enforceability of the Bonds or the Indenture.
Section 7. No Implied Rights. Nothing expressed or implied herein is
intended or shall be construed to confer upon any person, firm or corporation
other than the parties hereto any right, remedy or claim by reason of this
Investment Agreement or any term hereof, and all terms contained herein shall be
for the sole and exclusive benefit of the parties hereto and their successors.
Section 8. Notices. All notices given pursuant to this Investment
Agreement shall be given telephonically, with verification sent by first-class
mail, postage prepaid, or by telex or telecopier, or overnight commercial
courier sent that Business Day to the addresses listed below, or to such other
addresses or to the attention of such other person as such party shall have
designated for such purpose in a written notice to the other:
To the Company as follows:
Advanced Aerodynamics and Structures, Inc.
3501 Lakewood Boulevard
Long Beach, California 90808
Attention: Carl L. Chen, Ph.D.
Telecopy: (562) 938-8620
Telephone: (562) 938-8618
To Sumitomo as follows:
The Sumitomo Bank, Limited
Los Angeles Branch
777 South Figueroa Street, Suite 2600
Los Angeles, California 90017
Attention: Manager - Structured Finance
and Financial Institutions Group
Telecopy: (213) 623-6832
Telephone: (213) 955-0800
<PAGE>
To the Trustee as follows:
First Trust of California, National Association
One California Street, Fourth Floor
San Francisco, California 94111
Attention: Corporate Trust Department
Telecopy: (415) 273-4590
Telephone: (415) 273-4576
However, the failure by either party to provide written confirmation on the same
Business Day of any telephonic notice given hereunder will not result in a
breach of this Investment Agreement.
Section 9. Successors and Assigns. This Investment Agreement and all
obligations and rights arising hereunder shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, transferees and
assigns. This Investment Agreement may not be assigned by any party without the
prior written consent of the other party.
Section 10. Amendments and Waivers. This Investment Agreement may not
be modified, amended or supplemented, and no term or provision hereof may be
waived, except in writing signed by the parties hereto.
Section 11. Governing Law. The obligations of the Company and the Bank
under this Investment Agreement shall be governed by and construed in accordance
with the laws of the State of California.
Section 12. Counterparts. This Investment Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be executed as of the date written above.
THE SUMITOMO BANK, LIMITED
By:_____________________________________
, Los Angeles Branch
ADVANCED AERODYNAMICS AND STRUCTURES,
INC.
By:_____________________________________
President
ATTEST:
By:____________________________
Secretary
(SEAL)
DIRECT OBLIGATION NOTE
FOR VALUE RECEIVED, the undersigned, ADVANCED AERODYNAMICS AND
STRUCTURES, INC. (the "Company), hereby promises to pay to THE SUMITOMO BANK,
LIMITED ("Sumitomo"), a banking corporation organized under the laws of Japan,
acting through its Los Angeles Branch, on or before August 5, 2002, the lesser
of (i) the principal sum of Eight Million Six Hundred Twenty-Five Thousand Seven
Hundred Fifty-Four Dollars ($8,625,754), together with all other amounts due and
owing under the Reimbursement Agreement dated as of August 1, 1997 (as amended
from time to time, the "Reimbursement Agreement") between the company and
Sumitomo, or (ii) the aggregate outstanding amount of all loans made to the
Company by Sumitomo pursuant to the Reimbursement Agreement, together with all
other amounts due and owing under the Reimbursement Agreement, in immediately
available funds at the principal corporate office of Sumitomo's Los Angeles
Branch in Los Angeles, California (or such other office of Sumitomo located in
the United States of America as Sumitomo may designate to the Company in writing
from time to time), on the dates and at the times specified in the Reimbursement
Agreement and to pay interest on the outstanding balance of such amounts at the
times specified in the Reimbursement Agreement at a rate per annum (except as
otherwise specified in the Reimbursement Agreement) equal to (x) LIBOR less
0.15% per annum and (y) with respect to any amount not paid when due, a rate per
annum equal to the sum of the corporate base rate publicly announced by Morgan
Guaranty Trust Company of New York in New York, New York for its successor),
from time to time as its prevailing corporate base rated, which rate shall
change when and as said corporate base rate changes, plus two percent (2.0%).
Sumitomo is authorized to record all loans and all payments made on account of
the principal due on the loans on the Loan Schedule attached hereto. Such Loan
Schedule, and any continuations thereof, are hereby incorporated by reference
herein and made a party hereof, and Sumitomo's endorsements thereon shall be
conclusive absent manifest error. The failure to make any such notation shall
not, however, affect the Company's obligations under this Note. As used herein,
"LIBOR" means with respect to any Reset Date (as hereinafter defined) the
arithmetic mean of the rates at which deposits in U.S. Dollars are offered by
four major banks in the London interbank market selected by the Bank, at
approximately 11:00 a.m., London time, on the day that is two Business Days
preceding the Reset Date to prime banks in the London interbank market for a
period of one (1) week commencing on the Reset Date. "Reset Date" means
Wednesday of each week (or, if such Wednesday is not a Business Day, the next
Business Day).
1
<PAGE>
This obligation is issued under, and is subject to all of the terms of,
the Reimbursement Agreement. Terms defined in the Reimbursement Agreement and
not otherwise defined herein shall have the same meanings herein as therein.
Notwithstanding the due date of this Note each and every amount payable
shall be accelerated to the extent that: (x) funds are available from the
Trustee from sources available under the Indenture, (y) funds are available from
the Remarketing Agent from the remarketing proceeds of the Bonds, or (z) funds
are available from any Alternate Letter of Credit (as defined in the Indenture).
The Company hereby waives presentment for payment, demand, protest,
notice of protest, notice of dishonor and all defenses on the ground of
extension of time of payment for the payment hereof which may be given (other
than in writing) by Sumitomo to the Company.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
Dated: __________________
ADVANCED AERODYNAMICS AND
STRUCTURES, INC.
By:________________________________
President
ATTEST:
By:________________________
Secretary
2
<PAGE>
LOAN SCHEDULE
Principal Principal Notation
Date Amount Paid Balance Made By
=========== =========== =========== =========== ===========
=========== =========== =========== =========== ===========
=========== =========== =========== =========== ===========
=========== =========== =========== =========== ===========
=========== =========== =========== =========== ===========
=========== =========== =========== =========== ===========
=========== =========== =========== =========== ===========
=========== =========== =========== =========== ===========
=========== =========== =========== =========== ===========
=========== =========== =========== =========== ===========
3
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Statement Re: Computation of Per Share Earnings
<TABLE>
For the Three Months Ended For the Nine Months Ended
September 30 September 30
---------------------------------------------------------------------------------
1996 1997 1996 1997
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss $ (380,000) $(2,365,000) $(1,726,000) $(4,242,000)
---------------------------------------------------------------------------------
Weighted average number of Class B
Common Stock shares outstanding 2,000,000 2,000,000 2,000,000 2,000,000
Common Stock equivalents from the issuance
of Bridge Warrants computed using the
treasury stock method 1,400,000 1,400,000
Weighted average number of Class A
Common Stock shares outstanding 6,900,000 6,900,000
---------------------------------------------------------------------------------
3,400,000 8,900,000 3,400,000 8,900,000
=================================================================================
Net loss per share ($.11) ($.27) ($.51) ($.48)
=================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,922,000
<SECURITIES> 5,924,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,291,000
<PP&E> 3,737,000
<DEPRECIATION> (1,645,000)
<TOTAL-ASSETS> 24,572,000
<CURRENT-LIABILITIES> 554,000
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 23,477,000
<TOTAL-LIABILITY-AND-EQUITY> 24,572,000
<SALES> 0
<TOTAL-REVENUES> 891,000
<CGS> 0
<TOTAL-COSTS> 5,133,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,242,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,242,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,242,000)
<EPS-PRIMARY> (.48)
<EPS-DILUTED> (.48)
</TABLE>
