<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended JUNE 26, 1999
(x) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from ___________ to
_____________
Commission file number: 333-33085
ROLLER BEARING COMPANY OF AMERICA, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3426227
- ------------------------------- -------------------------------------
(State or other jurisdiction of (IRS Employer Indentification Number)
incorporation)
60 ROUND HILL ROAD, FAIRFIELD, CT 06430
- --------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number: 203-255-1511
Indicate by check mark the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
preceding twelve (12) months (or for 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 / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 6, 1999
Common stock, $.01 par value 100
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Part I Financial Information
Item 1. Consolidated Balance Sheets -
At June 26, 1999 (unaudited) and April 3, 1999 3
Consolidated Statements of
Operations - Three months ended
June 26, 1999 (unaudited) and April 3, 1999 4
Consolidated Statements of Cash
Flows - Three months ended June 26, 1999
(unaudited) and April 3, 1999 5
Notes to Consolidated Financial Statements 6 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
Part II Other Information 12
Signatures 13
Exhibit 10 14
Exhibit 27 15
</TABLE>
2
<PAGE>
Part I
Item 1. Financial Information
Roller Bearing Company of America, Inc.
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 26,
1999 April 3,
(Unaudited) 1999
----------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,372 $ 291
Accounts receivable, net 22,081 26,693
Inventories 53,614 44,939
Prepaid expenses and other current assets 2,149 2,098
--------- ---------
Total current assets 80,216 74,021
--------- ---------
--------- ---------
Property, plant and equipment, net of accumulated depreciation of
$35,165 at June 26, 1999 and $33,718 at April 3, 1999 55,010 49,309
Restricted marketable securities 5,214 5,118
Excess of cost over net assets acquired, net of accumulated amortization of
$4,421 at June 26, 1999 and $4,221 at April 3, 1999 27,353 27,553
Deferred financing costs, net of accumulated amortization of $1,961 at
June 26, 1999 and $1,735 at April 3, 1999 6,190 6,344
Other assets 2,475 2,474
--------- ---------
Total assets $ 176,458 $ 164,819
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 10,692 $ 11,214
Accrued expenses and other current liabilities 16,020 13,655
Current portion of long-term debt 14,000 10,500
Obligations under capital leases, current portion 996 1,208
--------- ---------
Total current liabilities 41,708 36,577
--------- ---------
--------- ---------
Long term debt 139,375 134,575
Capital lease obligations, less current portion 1,725 1,635
Other noncurrent liabilities 3,218 3,059
--------- ---------
Total liabilities 186,026 175,846
--------- ---------
--------- ---------
Stockholder's (deficit) equity:
Common stock - $.01 par value; 1,000 shares
authorized; issued and outstanding shares:
100 shares at June1999 and at March 1999 -- --
Additional paid-in capital (759) (759)
Stock Warrants 6,600 6,600
Retained earnings (deficit) (15,409) (16,868)
Total stockholder's (deficit) (9,568) (11,027)
--------- ---------
Total liabilities and stockholder's (deficit) $ 176,458 $ 164,819
--------- ---------
--------- ---------
</TABLE>
3
<PAGE>
Roller Bearing Company of America, Inc.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three months ended
---------------------
June 26, June 27,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,459 $ 1,143
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 2,254 2,052
Amortization of goodwill 200 200
Amortization of deferred financing costs 225 240
Changes in working capital, net of acquisition:
(Increase) decrease in accounts receivable 4,612 2,450
(Increase) decrease in inventories (2,361) (601)
(Increase) decrease in prepaid expenses & other current assets (49) (318)
(Increase) decrease in other non current assets (167) (1,882)
Increase (decrease) in accounts payable & accrued expenses (870) (4,082)
Increase (decrease) in other non-current liabilities 159 (159)
Net cash provided (used) by operating activities 5,462 (957)
-------- --------
Cash flows from investing activities:
Acquisition of subsidiaries (10,200) (11,088)
Purchase of property, plant & equipment, net (1,233) (2,787)
Sale of restricted marketable securities (4,800) --
Purchase of restricted marketable securities 4,800 425
Net cash used in investing activities (11,433) (13,450)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in revolving credit facility 3,500 6,500
Issuance of Industrial Revenue Bonds 4,800 --
Payments of bank term loan -- (250)
Principal payments on capital lease obligations (248) (309)
Net cash provided by financing activities 8,052 5,941
-------- --------
Net increase (decrease) in cash 2,081 (8,466)
-------- --------
Cash, at beginning of year 291 10,625
Cash, at end of period $ 2,372 $ 2,159
-------- --------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 6,122 $ 5,416
-------- --------
Income taxes $- $ 1,076
-------- --------
-------- --------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
------------------
June 26, June 27,
1999 1998
-------- --------
<S> <C> <C>
Net sales $42,971 $37,480
Cost of sales 31,226 26,679
Gross Margin 11,745 10,801
Operating expenses:
Selling, general and administrative 5,830 5,250
Other expense, net of other income 168 172
5,998 5,422
Operating income 5,747 5,379
Interest expense, net 3,388 3,443
Income before taxes and extraordinary charge 2,359 1,936
Income tax expense 900 793
Net income $ 1,459 $ 1,143
------- -------
------- -------
</TABLE>
5
<PAGE>
ROLLER BEARING COMPANY OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
The consolidated financial statements included herein have been prepared by
Roller Bearing Company of America, Inc. (the "Company"), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. The
fiscal year end balance sheet data was derived from the Company's audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. The interim financial statements furnished with
this report have been prepared on a consistent basis with the Company's audited
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended April 3, 1999 (the "Form 10-K"). These
statements reflect all adjustments, consisting only of items of a normal
recurring nature, which are, in the opinion of management, necessary for the
fair statement of the consolidated financial condition and consolidated results
of operations for the interim periods presented. These financial statements
should be read in conjunction with the Company's audited financial statements
and notes thereto included in the Form 10-K.
The results of operations for the three month period ended June 26, 1999 are not
necessarily indicative of the operating results for the full year.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, Industrial Tectonics Bearings Corporation
("ITB"), RBC Linear Precision Products ("LPP"), RBC Nice Bearings, Inc.
("Nice"), Bremen Bearings, Inc. ("Bremen"), Miller Bearings, Inc. ("Miller"),
Tyson Bearings, Inc. ("Tyson") and Roller Bearing Company FSC, Inc. ("FSC"). All
material intercompany balances and transactions have been eliminated.
All references to "Holdings" refer to Roller Bearing Holding Company, Inc., a
Delaware corporation, and the parent and sole stockholder of the Company.
1. ACQUISITION OF WHOLLY OWNED SUBSIDIARIES
On June 11, 1999, Tyson, a wholly-owned subsidiary of the Company, completed the
acquisition of certain selected assets of SKF USA, Inc.'s taper roller bearing
operations whose principal operations are located in Glasgow, Kentucky. The
aggregate purchase price for the acquisition, which was effective as of April 1,
1999, was $10.2 million plus the assumption of certain selected liabilities. The
acquisition was accounted for under the purchase method of accounting.
On June 3, 1998, Miller completed the acquisition of the assets of Miller
Bearing Company, Inc. ("MBC"), a manufacturer of pins, rollers and screw machine
products with facilities in Bremen, Indiana. The aggregate purchase price for
the acquisition, which was effective as of March 1, 1998, was approximately
$11,088. The acquisition was accounted for under the purchase method of
accounting, resulting in approximately $2,138 allocable to tangible assets and
$8,949 of excess of purchase price over net assets acquired allocable to
goodwill.
The results of operations of Miller and Tyson subsequent to the respective
effective dates of acquisition are included in the results of operations of the
Company. Therefore, the results of the Company for the three months ended June
26, 1999 include Miller and Tyson results for the entire three-month period.
6
<PAGE>
2. DEBT
On June 23, 1997, pursuant to a Redemption and Warrant Purchase Agreement dated
May 20, 1997, Holdings effected a recapitalization of its outstanding capital
stock (including the financing and other transactions consummated by Holdings,
the Company and its subsidiaries in connection therewith, the
"Recapitalization"). In connection with the financing of the Recapitalization,
the Company issued $110,000 aggregate principal amount of 9 5/8% Senior
Subordinated Notes due 2007 (the "Notes"). The Notes pay interest semiannually
and mature on June 15, 2007, but may be redeemed at the Company's option
beginning on June 15, 2002, or earlier under certain conditions specified in the
indenture pursuant to which the Notes were issued (the "Indenture"). The Notes
are unsecured and subordinated to all existing and future Senior Indebtedness
(as defined in the Indenture) of the Company. The Notes are fully and
unconditionally and irrevocably guaranteed, jointly and severally, on a senior
subordinated basis by each of the wholly owned subsidiaries of the Company.
The separate financial statements of the subsidiary guarantors have not been
presented because management has determined that they would not be material to
investors. However the summarized combined financial information of the
subsidiary guarantors are as follows:
<TABLE>
<CAPTION>
AS OF
JUNE 26, APRIL 3,
Balance Sheet Data: 1999 1999
<S> <C> <C>
Current assets $ 31,743 $ 27,475
Noncurrent assets 40,604 34,825
-------- --------
Total assets $ 72,347 $ 62,300
-------- --------
-------- --------
Current liabilities $ 50,150 $ 42,129
Noncurrent liabilities 4,362 4,207
-------- --------
Total liabilities $ 54,512 $ 46,336
-------- --------
Stockholder's equity $17,835 $15,964
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
JUNE 26, JUNE 27,
Operating Results 1999 1998
<S> <C> <C>
Net sales $ 23,171 $ 16,414
Gross margin $ 4,091 $ 3,816
Net income $ 1,553 $ 1,392
</TABLE>
Total current liabilities include intercompany liabilities of $59,031 and
$26,717 as of June 26, 1999 and April 3, 1999, respectively. Net income includes
a provision for income taxes of $1,080 and $968 in fiscal years 1999 and 1998,
respectively.
In addition, in connection with the Recapitalization, the Company entered
into bank credit facilities (the "Senior Credit Facilities") with a group of
lenders providing for $16,000 of term loans (the "Term Loans") and up to
$54,000 of revolving credit loans and letters of credit (the "Revolving
Credit Facility"). Approximately $18,600 of the Revolving Credit Facility is
being utilized to provide letters of credit to secure the Company's
obligations relating to certain Industrial Development Revenue Bonds. As of
June 26, 1999 the Company had the ability to borrow up to an additional
$24,400 under the Revolving Credit Facility.
7
<PAGE>
The balances payable under all borrowing facilities are as follows:
<TABLE>
<CAPTION>
JUNE 26, APRIL 3,
1999 1999
---------------------- -----------------
<S> <C> <C>
SENIOR SUBORDINATED NOTES PAYABLE $ 110,000 $ 110,000
CREDIT FACILITY
Term Loan, payable in quarterly installments of $250, commencing December 30,
1997, increasing annually thereafter to $1,375 from December 20, 2001 with final
payment due June 30, 2002; bears interest at variable rates, Payable monthly and
quarterly for prime and LIBOR-based elections,
respectively 13,875 13,875
Revolving Credit Facility borrowings outstanding 11,000 7,500
INDUSTRIAL DEVELOPMENT REVENUE BONDS
Series 1994 A due in annual installments of $180 beginning December 1, 2006,
graduating to $815 on December 1, 2014 with final payment due on December 1,
2017; bears interest at a variable rate, payable monthly
through December 2017 7,700 7,700
Series 1994 B bears interest at a variable rate, payable monthly
through December 2017 3,000 3,000
Series 1998 tax-exempt industrial development bonds; bears interest at variable
rates, payable monthly through December 2021
3,000 3,000
Series 1999 tax exempt industrial development bonds; bears
interest at variable rates, payable monthly through April, 2024 4,800 --
-------- --------
Total debt 153,375 145,075
Less: current portion 14,000 10,500
-------- --------
Long term debt $139,375 $134,575
-------- --------
-------- --------
</TABLE>
The debt agreements require that the Company meet certain financial covenants,
principally limiting the incurrence of additional indebtedness, the payment of
dividends, and certain other transactions.
8
<PAGE>
3. RECENTLY ISSUED PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is required
to be adopted in years beginning after June 15, 2000. Because of the Company's
minimal exposure to derivatives, management does not anticipate that the
adoption of the new statement will have a significant effect on earnings or the
financial position of the Company.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS)
Except for the historical information and current statements contained in this
Quarterly Report on Form 10-Q, certain matters discussed herein, including,
without limitation, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" are forward looking statements that involve risks and
uncertainties, including, without limitation, the effect of economic and market
conditions and competition, the cyclical nature of the Company's target markets,
particularly, the aerospace industry, the cost of raw materials and the
Company's ability to pass cost increases to its customers, the reliance of the
Company on certain customers, the ability of the Company to expand into new
markets, the ability of the Company to integrate acquisitions and other factors
discussed from time to time in the reports filed by the Company with the
Securities and Exchange Commission, which could cause actual results to differ
materially.
The following discussion addresses the financial condition of the Company as of
June 26, 1999 and the results of its operations for the three month period ended
June 26, 1999, compared to the comparable periods last year. The discussion
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations for the fiscal year ended April 3,
1999 included in the Form 10-K.
THREE MONTHS ENDED JUNE 26, 1999 COMPARED TO THREE MONTHS ENDED JUNE 27, 1998
Net sales for the three months ended June 26, 1999 were $43.0 million, an
increase of $5.5 million or 14.7% over the three months ended June 27, 1998. Net
sales included sales totaling $9.4 million from Tyson, acquired effective April,
1999. Net sales decreased $3.9 million or 10.5% without Tyson's sales. The
decrease in net sales is primarily attributed to a major customer falling behind
on contractually committed orders and the elimination of certain unprofitable
product lines.
Gross margin increased by $0.9 million or 8.7% to $11.7 million for the three
months ended June 26, 1999, as compared to the comparable period last year.
Gross margin as a percentage of net sales decreased 1.5%, from 28.8% for the
first quarter of fiscal 1998, to 27.3% in the first quarter of fiscal 1999 due
to the costs of integrating the product line of Tyson. First quarter margin as a
percentage of net sales increased 4.0% to 32.8% in the first quarter of this
year without Tyson. These increases are primarily the result of strategic
pricing increases, better operational performance, the elimination of certain
unprofitable lines and machine tool capital enhancements.
Selling, general and administrative ("SG&A") expenses increased by $0.6 million
or 11.0% to $5.8 million for the three month period ended June 26, 1999 as
compared to the comparable period last year. The increase was primarily due to
fixed infrastructure costs necessary to support the expanded business and key
additions to operating management as well as the additional expenses related to
Tyson. SG&A as a percentage of net sales decreased from 14.0% for the first
quarter of fiscal 1998 to 13.6% for the first quarter of fiscal 1999. The
decrease of 0.4% is primarily due to the Company's increased sales volume as a
result of the inclusion of Tyson's sales.
Operating income increased by $0.3 million or 6.8% to $5.7 million for the three
months ended June 26, 1999 as compared to $5.4 million for the corresponding
period in the prior year. The increase primarily resulted from higher gross
margin somewhat offset by higher operating expenses.
Income before taxes increased for the three month period ended June 26, 1999 to
$2.4 million from $1.9 million for the same period last year, as a result of
higher operating income and lower interest expense.
10
<PAGE>
Net income for the current quarter reflects a tax provision of $0.9 million
compared to $0.8 million for the first quarter of fiscal 1998. Net income
increased by $0.3 million to $1.5 million from $1.2 million for the
corresponding period last year.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 26, 1999 was $37.6 million compared to $37.4 million at
April 3, 1999, an increase of $0.2 million. For the three months ended June 26,
1999, the Company provided cash of $5.4 million from operating activities
compared to ($1.0) million for the comparable period last year. The increase of
$6.4 million is primarily the result of an increase in non-cash working capital
of $5.9 million, an increase in net income of $0.3 million, and all other of
$0.2 million.
Cash used for investing activities for the three months ended June 26, 1999 was
$11.4 million which included $10.2 million for the acquisition of Tyson, with
the remainder relating to capital expenditures of $1.2 million. Proceeds of $4.8
million from the issuance of industrial revenue bonds was placed in a trust
account, and $4.8 million from such trust account was remitted to the Company in
connection with qualifying equipment purchases.
The Company had net cash inflows from financing activities of $8.1 million
partially resulting from a draw down on its revolving credit facility of $3.5
million. Additionally, in April 1999, the Company issued $4.8 million in secured
industrial revenue bonds which are due in 2024, and which were used for
construction and purchase of building improvements, fixtures, machinery and
equipment in connection with a manufacturing facility of the Company. During the
three month period ended June 26, 1999, the Company used $0.2 million of funds
for capital lease obligations.
Principal and interest payments under the Senior Credit Facilities, interest
payments on the Notes, and the funding of acquisitions represent significant
liquidity requirements for the Company. With respect to the Term Loans, the
Company is required to make scheduled principal payments which commenced in
December 1997. The Term Loans bear interest at a floating rate based upon the
interest rate option elected by the Company. As a result of the indebtedness
incurred in connection with the Recapitalization, the Company's
post-Recapitalization interest expense will be higher and will have a greater
proportionate impact on net income in comparison to pre-Recapitalization
periods.
The Company believes that cash flows from operations and amounts available under
the Revolving Credit Facility will provide adequate funds for ongoing
operations, planned capital expenditures (including acquisitions) and debt
service payments for at least the next twelve months. The Company's ability to
borrow is limited by the terms of the Senior Credit Facilities and the Indenture
under which the Notes were issued.
YEAR 2000
The Company has made a comprehensive assessment of its computer operations,
including trading partner compliance and embedded chips, to identify systems
that could be affected by the change in the millennium. The Company has
developed a detailed Year 2000 compliance plan, which was substantially
completed by June 1999, utilizing both internal and external resources to ensure
Year 2000 compliance. The Company expects its Year 2000 conversion to be fully
completed by September 1999, but has also formulated contingency plans, which,
in the event the Company's plans are delayed, may be implemented to minimize the
risks of interruptions of the Company's business.
Costs related to this conversion to date are approximately $0.2 million, and
are not expected to exceed $0.3 million in total. However, there can be no
assurance that the systems of other companies on which the Company's system
relies will also be converted on a timely basis. A failure to convert by
another company could have an adverse effect on the Company's systems.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are various claims and legal proceedings against the Company relating to
its operations in the normal course of business, none of which the Company
believes is material. The Company currently maintains insurance coverage for
product liability claims. There can be no assurance that indemnification from
its customers and coverage under insurance policies will be adequate to cover
any future product liability claims against the Company.
ITEMS 2, 3, 4, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Loan Agreement, dated as of April 1, 1999, by and between California
Infrastructure and Economic Development Bank and Roller Bearing
Company of America, Inc.
10.2 Indenture Of Trust, dated as of April 1, 1999, between California
Infrastructure and Economic Development Bank and U.S. Bank Trust
National Association, as Trustee
10.3 Remarketing Agreement, dated as of April 1, 1999, by and between The
Chapman Company and Roller Bearing Company of America, Inc.
10.4 Tax Regulatory Agreement, dated as of April 1, 1999, by and among
California Infrastructure and Economic Development Bank, U.S. Bank
Trust National Association, as Trustee, and Roller Bearing Company of
America, Inc.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Current Report on Form 8-K, filed June 25, 1999.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the undersigned
thereunto duly authorized.
ROLLER BEARING COMPANY OF AMERICA, INC.
August 4, 1999 /s/ MICHAEL J. HARTNETT
----------------------------------------------
By: Michael J. Hartnett
President & Chief Executive Officer
Principal Executive Officer
August 4, 1999 /s/ ANTHONY S. CAVALIERI
----------------------------------------------
By: Anthony S. Cavalieri
Vice President & Chief Financial Officer
Principal Financial and Accounting Officer
13
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<S> <C>
*10.1 Loan Agreement, dated as of April 1, 1999, by and between California
Infrastructure and Economic Development Bank and Roller Bearing
Company of America, Inc.
*10.2 Indenture Of Trust, dated as of April 1, 1999, between California
Infrastructure and Economic Development Bank and U.S. Bank Trust
National Association, as Trustee
*10.3 Remarketing Agreement, dated as of April 1, 1999, by and between The
Chapman Company and Roller Bearing Company of America, Inc.
*10.4 Tax Regulatory Agreement, dated as of April 1, 1999, by and among
California Infrastructure and Economic Development Bank, U.S. Bank
Trust National Association, as Trustee, and Roller Bearing Company of
America, Inc.
*27 Financial Data Schedule
</TABLE>
- -----
* Filed herewith
14
<PAGE>
Exhibit 10.1
================================================================================
LOAN AGREEMENT
by and between
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
and
ROLLER BEARING COMPANY OF AMERICA, INC.
Dated as of April 1, 1999
All right, title and interest of the CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK (the "Issuer") in this Loan Agreement has been
assigned (except for amounts payable under Sections 4.02(b), 7.03, 9.02 and 9.03
hereof, its right to receive notices, opinions and other documents required to
be delivered to the Issuer hereunder and its rights to consent to certain
actions) to U.S. Bank Trust National Association, as trustee (the "Trustee")
pursuant to the Indenture of Trust, dated as of April 1, 1999, between the
Issuer and the Trustee, and is subject to such assignment.
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Article I
DEFINITIONS
Section 1.01. Definition of Terms...........................................................2
Section 1.02. Number and Gender.............................................................2
Section 1.03. Articles, Sections, Etc.......................................................2
Article II
REPRESENTATIONS
Section 2.01. Representations of the Issuer.................................................2
Section 2.02. Representations of the Borrower...............................................3
Section 2.03. Registered Owners to Benefit..................................................5
Article III
CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE BONDS
Section 3.01. Construction of the Project...................................................5
Section 3.02. Disbursements from the Project Fund and the Costs of Issuance Fund............6
Section 3.03. Establishment of Completion Date; Obligation of Borrower to Complete..........6
Section 3.04. Investment of Moneys in Funds.................................................7
Article IV
LOAN OF PROCEEDS; REPAYMENT PROVISIONS
Section 4.01. Loan of Bond Proceeds; Issuance of Bonds......................................7
Section 4.02. Loan Repayments and Other Amounts Payable.....................................7
Section 4.03. Purchase of Bonds.............................................................9
Section 4.04. Unconditional Obligations.....................................................9
Section 4.05. Assignment of Issuer's Rights................................................10
Section 4.06. Amounts Remaining in Funds...................................................10
<PAGE>
TABLE OF CONTENTS
(continued)
<CAPTION>
Page
<S> <C> <C>
Article V
SPECIAL COVENANTS AND AGREEMENTS
Section 5.01. Right of Access to the Project...............................................10
Section 5.02. The Borrower's Maintenance of its Existence..................................10
Section 5.03. Records and Financial Statements of Borrower; Employment Practices...........11
Section 5.04. Insurance....................................................................12
Section 5.05. Maintenance and Repair; Taxes; Utility and Other Charges.....................12
Section 5.06. Incorporation, Formation, Organization or Qualification in California........12
Section 5.07. Alternate Credit Facility....................................................13
Section 5.08. Letter of Credit.............................................................13
Section 5.09. Covenants of the Borrower....................................................14
Section 5.10. Capital Expenditures.........................................................17
Section 5.11. Special Arbitrage Certifications.............................................19
Section 5.12. Covenant to Enter into Agreement or Contract to Provide Ongoing Disclosure...19
Section 5.13. No Purchase of Bonds.........................................................19
Article VI
DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF PROCEEDS
Section 6.01. Obligation to Continue Payments..............................................20
Section 6.02. Application of Net Proceeds..................................................20
Section 6.03. Insufficiency of Net Proceeds................................................20
Section 6.04. Damage to or Condemnation of Other Property..................................20
Article VII
LOAN DEFAULT EVENTS AND REMEDIES
Section 7.01. Loan Default Events..........................................................21
Section 7.02. Remedies on Default..........................................................22
Section 7.03. Agreement to Pay Attorneys' Fees and Expenses................................23
Section 7.04. No Remedy Exclusive..........................................................23
Section 7.05. Waivers......................................................................23
ii
<PAGE>
TABLE OF CONTENTS
(continued)
<CAPTION>
Page
<S> <C> <C>
Article VIII
PREPAYMENT
Section 8.01. Redemption of Bonds with Prepayment Moneys...................................24
Section 8.02. Options to Prepay Loan.......................................................24
Section 8.03. Mandatory Prepayment.........................................................25
Section 8.04. Amount of Prepayment.........................................................26
Section 8.05. Notice of Prepayment.........................................................26
Article IX
NON-LIABILITY OF ISSUER; EXPENSES; INDEMNIFICATION
Section 9.01. Non-Liability of Issuer......................................................26
Section 9.02. Expenses.....................................................................27
Section 9.03. Indemnification..............................................................27
Article X
MISCELLANEOUS
Section 10.01. Notices......................................................................28
Section 10.02. Severability.................................................................29
Section 10.03. Execution of Counterparts....................................................29
Section 10.04. Amendments, Changes and Modifications........................................29
Section 10.05. Governing Law................................................................29
Section 10.06. Authorized Representative of the Borrower....................................29
Section 10.07. Term of the Agreement........................................................30
Section 10.08. Binding Effect...............................................................30
Section 10.09. References to Bank...........................................................30
Section 10.10. Brokerage Confirmations......................................................30
EXHIBIT A THE PROJECT
</TABLE>
iii
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of April 1, 1999, between the CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK, an entity within the Trade and
Commerce Agency of the State of California (the "Issuer"), and ROLLER BEARING
COMPANY OF AMERICA, INC., a corporation duly organized and validly existing
under the laws of the State of Delaware (the "Borrower").
W I T N E S S E T H:
WHEREAS, the Issuer was established for the purpose of financing
projects needed to implement economic development and job creation and growth
management strategies within 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
63000 ET SEQ. of the California Government Code (constituting Division 1 of
Title 6.7 of the Government Code of the State of California, as now in effect)
(the "Act"); and
WHEREAS, in furtherance of the purposes of the Issuer set forth above,
the Issuer proposes to finance the acquisition, construction, rehabilitation,
equipping, installation, improvement and/or furnishing of the manufacturing
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 Issuer has authorized and undertaken the issuance of its California
Infrastructure and Economic Development Bank Variable Rate Demand Industrial
Development Revenue Bonds, Series 1999 (Roller Bearing Company of America, Inc.
- - Santa Ana Project) (the "Bonds") in the aggregate principal amount of Four
Million Eight Hundred Thousand Dollars ($4,800,000) 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 Issuer 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 4.02 hereof, the principal of, premium, if any, and interest on, the
Bonds; and
WHEREAS, the Issuer 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:
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ARTICLE I
DEFINITIONS
SECTION 1.01. 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 April
1, 1999 (the "Indenture"), by and between the Issuer and U.S. Bank Trust
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 1.02. 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 1.03. 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 2.01. REPRESENTATIONS OF THE ISSUER. The Issuer makes the
following representations as the basis for its undertakings herein contained:
(a) The Issuer is an entity within the Trade and Commerce
Agency of the State. Under the provisions of the Act, the Issuer 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 Issuer 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 Issuer 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 Issuer's interest in this Agreement
(except certain rights of the Issuer 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 and to the Bank, on a basis subordinate thereto, as
security for the payment of the obligations of the Borrower under the
Credit Agreement.
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(d) The Issuer 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
Credit Agreement.
(e) The Issuer 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.
(f) The Issuer 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; and (ii) said Loan is in the
public interest, serves the public purposes and meets the requirements
of the Act.
(g) No member, officer or other official of the Issuer 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 Issuer 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 Issuer
under the terms of any instrument or agreement.
SECTION 2.02. REPRESENTATIONS OF THE BORROWER. The Borrower makes the
following representations as the basis for its undertakings herein contained:
(a) The Borrower is a corporation, duly organized, validly
existing and in good standing under the laws of the State and is duly
qualified to transact business in the State.
(b) The execution, delivery and performance by the Borrower of
this Agreement, the Credit Agreement, the Remarketing Agreement, the
Tax 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 corporate action, and neither the
execution and delivery of this Agreement, the Credit 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
material terms, conditions or provisions of any of the
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Borrower's Organization Documents, or of any law, statute, rule,
regulation, order, judgment, award, injunction, or decree or of any
material 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, except as would not have a material adverse effect
on the operations of the Borrower, taken as a whole.
(c) The estimated Costs of the Project to be paid with the
proceeds of the Bonds are as set forth in the Tax Regulatory Agreement
and have been determined in accordance with commercially reasonable
engineering, construction, and accounting principles. All the
information and representations in the Tax Regulatory Agreement are
true and correct in all material respects as of the date thereof.
(d) The Project consists and will consist of those facilities
and equipment 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
sufficient to carry out the purposes of this Agreement.
(f) At the time of submission of an application to the Issuer
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 knowledge of the Borrower, no member, officer or
other official of the Issuer 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 Santa Ana, 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.
(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.
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(j) There is no litigation or proceeding pending or, to the
knowledge of the Borrower, threatened against the Borrower which could
materially and adversely affect the validity of this Agreement, the
Credit 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 Credit 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 thereof, is necessary for the
due execution and delivery by the Borrower of this Agreement.
SECTION 2.03. REGISTERED OWNERS 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
Registered Owners from time to time of such Bonds; provided, however, that such
covenants and agreements shall create no rights in any parties other than the
Issuer and such Registered Owners.
ARTICLE III
CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE BONDS
SECTION 3.01. CONSTRUCTION OF THE PROJECT. The Borrower agrees that,
utilizing the proceeds of the Bonds loaned pursuant to Section 4.01 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 Issuer 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 Issuer 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 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
(without the written consent of the Registered Owners) upon receipt by the
Issuer and the Trustee of:
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(a) 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
Issuer for assistance in financing the Project;
(b) 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 not to be Tax-exempt;
(c) a copy of the proposed form of amended or supplemented
Exhibit A hereto; and
(d) the written approval of the Bank and the Trustee.
SECTION 3.02. DISBURSEMENTS FROM THE PROJECT FUND AND THE 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 3.03. ESTABLISHMENT OF COMPLETION DATE; OBLIGATION OF BORROWER
TO COMPLETE. Promptly upon the completion of the Construction of the Project,
the 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 Issuer and the Bank, stating the Costs of the Project and further
stating that (a) 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 (b) 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, including any earnings resulting from the
investment of such moneys, less an amount representing a reasonable retainage
determined by the Borrower, shall be used as provided in Section 3.03(d) of the
Indenture.
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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 Issuer
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
elect to pay, or to 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 Issuer, the
Trustee or the Registered Owners of any of the Bonds, nor shall it be entitled
to any diminution of the amounts payable under Section 4.02 hereof.
SECTION 3.04. INVESTMENT OF MONEYS IN FUNDS. Any moneys in any fund
held by the Trustee shall, at the written request of the Authorized
Representative of the Borrower, but subject to the restrictions on investments
contained in the Indenture and the Tax Regulatory Agreement 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 4.01. LOAN OF BOND PROCEEDS; ISSUANCE OF BONDS. The Issuer
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 Issuer
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. Subject to Section 3.02 of the Indenture, such
proceeds shall be disbursed to or on behalf of the Borrower as provided in
Section 3.02 hereof. The Borrower hereby approves the Indenture and the issuance
thereunder by the Issuer of the Bonds.
SECTION 4.02. 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
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 4.01 hereof, a sum equal to the amount payable on
such
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<PAGE>
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 promptly use such
Loan Repayment to reimburse the Bank for such drawing or if the Bank
has been reimbursed directly by the Borrower such funds shall be
returned to the Borrower.
(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 Issuer. 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 Issuer under the Indenture as and when the same become due. The
duties
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of the Borrower under this subsection (b) shall survive the termination
of this Agreement and the termination and discharge of the Indenture.
(c) The Borrower also agrees to pay the fees and expenses of
the Bank pursuant to the Credit Agreement.
(d) In the event the Borrower should fail to make any of the
payments required by subsections (a) through (c) of this Section, such
payments shall continue as obligations of the Borrower until such
amounts shall have been fully paid. The Borrower agrees to pay all such
amounts required by subsection (b) of this Section, together with
interest thereon, from the date such payments were due until paid, to
the extent permitted by law, at the rate of 10% per annum. Interest on
overdue payments required under subsection (a) above shall be paid to
Registered Owners as provided in Section 2.02(b)(ii) of the Indenture.
SECTION 4.03. 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 4.04. UNCONDITIONAL OBLIGATIONS. The obligations of the
Borrower to make the payments required by Section 4.02 hereof and to provide or
cause to be provided the Letter of Credit pursuant to Section 4.03 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 Issuer,
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 4.01 hereof, as prescribed in Section 4.02 hereof,
the obligation to provide or cause to be provided the Letter of Credit pursuant
to Section 4.03 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 (a) 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 4.02 hereof and the
obligation to provide or cause to be provided the Letter of Credit pursuant to
Section 4.03 hereof; (b) will perform and observe all of its other covenants
contained in this Agreement in all material respects; and (c) 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 Issuer 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 4.05. ASSIGNMENT OF ISSUER'S RIGHTS. As security for the
payment of the Bonds, the Issuer will assign to the Trustee the Issuer's rights,
title and interest under this Agreement, including the right to receive payments
hereunder (except the right of the Issuer to receive certain payments, if any,
with respect to expenses and indemnification under Sections 4.02(b), 7.03, 9.02
and 9.03 hereof, the Issuer's right to receive notices, opinions and other
documents required to be delivered to the Issuer hereunder and the Issuer's
rights to consent to certain actions taken hereunder), and the Issuer 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 4.04 hereof shall apply to its obligation to make such
payments.
SECTION 4.06. AMOUNTS REMAINING IN FUNDS. It is agreed by the parties
hereto that after: (a) payment in full of the principal of, premium, if any, and
interest on, the Bonds, or after provision for such payment shall have been made
as provided in the Indenture, (b) 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, (c) 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
(d) payment to the Bank of any amounts owed to the Bank by the Borrower under
the Credit Agreement with respect to the Letter of Credit, 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 5.01. RIGHT OF ACCESS TO THE PROJECT. The Borrower agrees that
during the term of this Agreement, the Issuer, the Trustee and the duly
authorized agents of any 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 Issuer, 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 reasonably
requested by the Borrower. Nothing contained in this Section or in any other
provision of this Agreement shall be construed to entitle the Issuer or the
Trustee to any information or inspection involving the confidential knowledge,
expertise or know-how of the Borrower.
SECTION 5.02. THE BORROWER'S MAINTENANCE OF ITS EXISTENCE. The Borrower
covenants and agrees that it will maintain its existence and will not dissolve,
nor will it sell or otherwise transfer the Project or all or substantially all
of its assets, nor will it 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
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consolidate with or merge into it, or sell or otherwise transfer to another
entity the Project or 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; and
(iii) is qualified to do business in the State;
(b) The Trustee and the Issuer 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 acknowledgment of the Bank has been received
by the Trustee, together with an acknowledgment that the Letter of
Credit will remain in effect after such merger, consolidation, sale or
other transfer is effected.
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 5.03. 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 Issuer 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 Issuer or
the Trustee, the Borrower further covenants and agrees to furnish the
requesting party, within 120 days after the end of each Fiscal Year,
with copies of its complete financial statements together with a
Certificate of the 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.
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(c) The Borrower shall, within 60 days of the receipt of a
written request from the Issuer or the Trustee, furnish a written
report to the requesting party, as of 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 Issuer shall
reasonably request regarding other matters covered in the Borrower's
application for industrial revenue bond financing.
SECTION 5.04. 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 pursuant to the Credit Agreement, by means of
policies issued by reputable insurance companies qualified to do business in the
State. Upon the written request of the Issuer or the Trustee, the Borrower shall
deliver to the requesting party, within 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 Issuer are not
responsible for the adequacy or sufficiency of the coverage evidenced by such
policies or certificates.
SECTION 5.05. 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 (a) in a safe condition and (b) 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 5.06. INCORPORATION, FORMATION, ORGANIZATION OR QUALIFICATION
IN CALIFORNIA. The Borrower agrees that throughout the term of this Agreement it
and any lessee of the Project, if any, will be incorporated, formed, organized
or qualified to do business in the State.
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SECTION 5.07. 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 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 5.08 hereof.
Such Alternate Credit Facility must meet the following conditions:
(a) the Alternate Credit Facility must be approved by the
Issuer or its successor;
(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 Issuer 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 other opinions regarding the validity of the Alternate
Credit Facility as the Issuer, 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 5.08. LETTER OF CREDIT. The Borrower shall at all times
throughout the term of this Agreement (but subject to Section 5.07 hereof)
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 (a) 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 (b) an amount equal to 50 days
(or such other number of days as may be required to obtain a rating on the
Bonds) of interest on the Bonds calculated at an interest rate of 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
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year of twelve 30-day months while the Bonds bear interest at the Fixed Interest
Rate to pay interest on the Bonds when due.
On any Business Day, the Borrower may, at its option, but with the
written approval of the Issuer, 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 (a) 23 days before the Expiration Date of
the then-existing Letter of Credit while the Bonds bear interest at the Weekly
Interest Rate, or (b) 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 30 days prior to the Letter of Credit Substitution Date, the Borrower
shall provide the Issuer, 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. 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 direct-pay 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 Issuer 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 Issuer,
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" if the
Bonds are rated by S&P or below "A2" if the Bonds are rated by Moody's.
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 Credit Agreement with the Borrower and such default will cause a mandatory
redemption of Bonds pursuant to Section 4.01(g) of the Indenture.
SECTION 5.09. COVENANTS OF 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 Issuer and the Borrower in this Section and in Sections
5.10 and 5.11 hereof are for the benefit of the Trustee and each and every
Registered Owner of the Bonds. The Borrower 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
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the capital account of the Borrower, and which were paid not earlier
than 60 days before February 20, 1996. The Borrower shall allocate the
proceeds of the Bonds to the Costs of the Project no later than 18
months after the later of the date the original expenditure is paid or
the date the Project is placed in service or abandoned, but in no event
more than three years after the original expenditure is paid.
(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) No agreement shall be entered into 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 hereof, no actions shall be taken, or omitted to be taken,
by the Borrower which would have the
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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) No use or investment of the proceeds of the Bonds or any
acquired obligation shall be made which would cause the Bonds to 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 by amendments applicable to the Bonds from time to
time, so long as any Bonds remain Outstanding.
(k) To use due diligence to cause the Project to be operated
in all material respects in accordance with all applicable laws,
rulings, regulations and ordinances.
(l) To comply in all material respects with all written
conditions imposed by the Issuer and any State or local agency in its
approval of the Project.
(m) To fully and faithfully perform all the duties and
obligations which the Issuer has covenanted and agreed in the Indenture
to cause the Borrower to perform and any duties and obligations which
the Borrower is required in the Indenture to perform. The foregoing
shall not apply to any duty or undertaking of the Issuer which by its
nature cannot be delegated or assigned.
(n) The rights, duties and obligations imposed on the Borrower
pursuant to the Remarketing Agreement are hereby acknowledged, approved
and accepted.
(o) To 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 Issuer pertaining thereto, or otherwise required of
the Borrower to be observed or performed, whether express or implied.
(p) To use less than 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.
(q) To not become a Registered Owner of the Bonds, and to not
directly or indirectly purchase Bonds from the Remarketing Agent or
permit any Related Party to directly or indirectly purchase Bonds from
the Remarketing Agent.
(r) To the extent Bond proceeds are used for construction
purposes, the Borrower shall certify that the contractors engaged to
construct the Project are properly licensed by the Contractors' State
License Board.
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(s) The Project shall be consistent with any existing local or
regional comprehensive plan.
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 Issuer to comply with the covenants set forth in this Section
and Section 5.10 hereof 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 hereof the following terms shall have the following meanings:
"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 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% ownership interest (by value) in a facility or, if no person
holds more than a 10% 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% 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% 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.
"PROJECT LOCATION" shall mean the area within the City of Santa Ana,
California.
"REGULATIONS" shall mean those regulations, whether now or hereafter
adopted, promulgated 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
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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 Issuer 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.
The Issuer 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 Issuer prior to the issuance and delivery of the Bonds whatever information
is necessary for the Issuer 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 5.09(h) hereof or in this Section
to the contrary, neither the Borrower nor the Issuer shall have violated the
covenants contained in Section 5.09(h) hereof or in this Section 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. The Issuer shall provide the Borrower with notice
and cooperate fully
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with the Borrower in any administrative, legislative or judicial proceeding in
connection with any actions, proceedings or 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 Issuer 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,
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 Issuer 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.
SECTION 5.12. COVENANT TO ENTER INTO AGREEMENT OR CONTRACT TO PROVIDE
ONGOING DISCLOSURE. 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 to
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") or 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 is for the benefit
of the Registered Owners, 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 be assigned pursuant to and in
accordance with Section 6.09 of the Indenture to the Trustee for the benefit of
the Registered Owners, any Participating Underwriter and the Beneficial Owners
and that each Registered Owner, Participating Underwriter and Beneficial Owner
be a beneficiary of this Section with the right to enforce this Section against
the Borrower. Notwithstanding any other provision of this Agreement, failure of
the Borrower to comply with the provisions of this Section shall not be
considered a Loan Default Event; provided, however, the Trustee may (and, at the
request of any Participating Underwriter or the Registered Owners 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.
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SECTION 5.13. NO PURCHASE OF BONDS. The Issuer covenants and agrees
that it shall not become a Registered Owner of the Bonds and shall not directly
or indirectly purchase Bonds from the Remarketing Agent.
ARTICLE VI
DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF PROCEEDS
SECTION 6.01. 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) (a) the Project or any portion thereof is destroyed (in whole
or in part) or is damaged by fire or other casualty, or (b) 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 6.02. APPLICATION OF NET PROCEEDS. Upon any damage, destruction
or condemnation of the Project or any portion thereof resulting in Net Proceeds
in excess of $250,000, subject to the provisions of the Credit Agreement, the
Borrower may elect, in its discretion and with the written consent of the Bank,
by written notice to the Issuer and the Trustee:
(a) to apply the Net Proceeds of any insurance or condemnation
awards to 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 Issuer and the Trustee
written notice thereof, and evidence of the Bank's written consent,
within 90 days of the deposit of the Net Proceeds with the Bank. 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; or
(b) to prepay all of the Loan in accordance with Article VIII
hereof by directing the Trustee to draw on the Letter of Credit to
effect a mandatory redemption of all outstanding Bonds under Section
4.01 of the Indenture.
SECTION 6.03. INSUFFICIENCY OF NET PROCEEDS. If the Project or a
portion thereof is to be repaired, restored, relocated, modified or improved
pursuant to Section 6.02(a) hereof, and if the Net Proceeds are insufficient to
pay in full the cost of such repair, restoration, relocation,
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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 6.04. DAMAGE TO OR CONDEMNATION OF OTHER PROPERTY. Subject to
the terms and provisions of the Credit Agreement, 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 7.01. 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 4.02(a)
hereof;
(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 Issuer or the Trustee, unless the Issuer and the Trustee shall
agree in writing to an extension of such time;
(c) failure of the Borrower to observe and perform in any
material respect 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 or the
failure of the Borrower to strictly comply with the covenants,
conditions or agreements contained in Sections 5.09(a) through (k),
5.09(p) through (s), 5.10, 5.11 and 5.12 hereof, 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 Issuer or the Trustee, unless
the Issuer 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 Issuer 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) through (e) 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
21
<PAGE>
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 7.02. REMEDIES ON DEFAULT. Subject to the last sentence of
Section 7.01 above, whenever any Loan Default Event shall have occurred and
shall be continuing,
(a) The Trustee, by written notice to the Borrower and the
Bank, shall declare all unpaid amounts payable under Section 4.02(a)
hereof 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 Issuer 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 Issuer 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 Issuer, then, and in every such case, the Borrower, the Trustee and the
Issuer shall be restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Borrower, the Trustee and
the Issuer 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 4.02(a) hereof shall have been
declared due and payable immediately pursuant to Section 7.02(a) hereof, then,
upon demand of the Trustee, the Borrower
22
<PAGE>
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 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 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 7.03. 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
Issuer 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 Issuer or the
Trustee the reasonable fees and expenses of such attorneys and such other
reasonable expenses so incurred by the Issuer or the Trustee.
SECTION 7.04. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Issuer or the Trustee is intended to be exclusive of any other
available remedy or remedies, and 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 Issuer 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
23
<PAGE>
remedies as are given the Issuer hereunder shall also extend to the Trustee, and
the Trustee and the Registered Owners of the Bonds shall be deemed third party
beneficiaries of all covenants and agreements herein contained.
SECTION 7.05. WAIVERS. No delay or omission of the Issuer 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 Issuer 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 Issuer 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 8.01. REDEMPTION OF BONDS WITH PREPAYMENT MONEYS. By virtue of
the assignment of the rights of the Issuer under this Agreement to the Trustee
as is provided in Section 4.05 hereof, 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 8.05 hereof.
SECTION 8.02. 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 8.04 hereof, 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(e) 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 Issuer
and the Trustee receive a Certificate of the Authorized
Representative of the Borrower to the effect that: (A) 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, (B) 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 (C) the cost of restoration of the Project would
substantially exceed the Net Proceeds of insurance carried
thereon; or
24
<PAGE>
(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 Issuer and the Trustee receive a Certificate of the
Authorized Representative of the Borrower to the effect that:
(A) the Borrower is thereby prevented from carrying on its
normal operations at the Project for a period of at least six
consecutive months or (B) the Project is unsuitable for use by
the Borrower;
(b) with the prior written consent of the Bank, 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(b) or 4.01(f) of the
Indenture, as applicable.
SECTION 8.03. 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 8.04 hereof 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(e) of the Indenture with
respect to subsection (i) below, Section 4.01(c) 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 Registered Owners
thereof (other than a Registered Owner 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 Issuer
and the Trustee to the effect that the capital
25
<PAGE>
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; and
(iv) if mandatory redemption is required by any of
Sections 4.01(d), (g), or (h) of the Indenture.
(b) If the Borrower elects not to apply any Net Proceeds in
excess of $250,000 under the circumstances described in Section 6.02
hereof, the Borrower shall prepay all of the Loan and cause all of the
Outstanding Bonds to be redeemed at the redemption price set forth in
Section 4.01(e) of the Indenture.
SECTION 8.04. AMOUNT OF PREPAYMENT. In the case of a prepayment in full
of the Loan by the Borrower under this Agreement pursuant to Section 8.02 or
8.03 hereof, 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
(a) the redemption price specified in the applicable subsections of Section 8.02
or 8.03 hereof, for all Outstanding Bonds, plus all interest accrued and to
accrue to the redemption date, (b) all reasonable and necessary fees and
expenses of the Issuer, 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 (c) 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 8.02 or 8.03 hereof, 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 8.02 or 8.03 hereof, 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 8.05. NOTICE OF PREPAYMENT. The Borrower shall give written
notice to the Issuer, the Bank and the Trustee (a) while the Bonds bear interest
at the Weekly Interest Rate, not less than 20 days prior to the date of any
prepayment of a Loan Repayment and (b) while the Bonds bear interest at the
Fixed Interest Rate, not less than 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 prepayment.
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.
26
<PAGE>
ARTICLE IX
NON-LIABILITY OF ISSUER; EXPENSES; INDEMNIFICATION
SECTION 9.01. NON-LIABILITY OF ISSUER. The Issuer shall not be
obligated to pay the principal of, premium, if any, or interest on the Bonds,
except from Revenues. The Borrower hereby acknowledges that the Issuer'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 Issuer
or any third party.
SECTION 9.02. EXPENSES. The Borrower covenants and agrees to pay, and
to indemnify the Issuer and the Trustee against, all reasonable 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.
SECTION 9.03. INDEMNIFICATION. The Borrower releases the Issuer, the
State, the Treasurer of the State and the Trustee from, and covenants and agrees
that none of the Issuer, the State, the Treasurer of the State or the Trustee
shall be liable for, and covenants and agrees to indemnify and hold harmless the
Issuer, 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
(a) 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;
(b) 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; (c)
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 (d) 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 Issuer or the Trustee exceeds the Net Proceeds the Issuer 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 Issuer, the State, the Treasurer of the State and the Trustee and
their officers, employees and agents for any
27
<PAGE>
and all costs, reasonable attorneys fees, liabilities or reasonable 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 10.01. NOTICES. All notices, certificates, or other
communications given hereunder shall be deemed sufficiently given on (a) the day
such notices, certificates or other communications are received when sent by
personal delivery, including tested telex or facsimile communication, or (b) the
third day following the day on which the same have been mailed by first class,
postage prepaid, addressed to the Issuer, 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 Issuer or the Borrower to the other shall also be
given to the Trustee, the Tender Agent, Borrower's counsel and the Bank. The
Issuer, 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.
If to the Issuer: California Infrastructure and Economic
Development Bank
801 K Street, Suite 1700
Sacramento, California 95814
Attention: Bond Manager
Phone: (916) 322-8520
Fax: (916) 322-7214
If to the Borrower: Roller Bearing Company of America, Inc.
60 Round Hill Road
Fairfield, Connecticut 06430
Attention: Michael S. Gostomski
Phone: (203) 255-1511
Fax: (203) 255-3862
If to the Trustee U.S. Bank Trust National Association
or Tender Agent: One California Street, 4th Floor
San Francisco, California 94111
Attention: Corporate Trust Department
Phone: (415) 273-4500
Fax: (415) 273-4590
28
<PAGE>
If to the Bank: First Union National Bank
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
Attention: Robert A. Brown
Phone: (215) 973-1259
Fax: (215) 786-2877
Credit Suisse First Boston
11 Madison Avenue, 13th Floor
New York, New York 10010
Attention: Mark Callahan
Phone: (212) 325-9940
Fax: (212) 325-8304
If to the Remarketing The Chapman Company
Agent: 115 Sansome Street, Suite 520
San Francisco, California 94104
Attention: Director of Public Finance
Phone: (415) 392-5505
Fax: (415) 392-5276
SECTION 10.02. 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.
SECTION 10.03. 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 10.04. 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 10.05. 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 10.06. AUTHORIZED REPRESENTATIVE OF THE BORROWER. Whenever
under the provisions of this Agreement the approval of the Borrower is required
or the Issuer or the Trustee
29
<PAGE>
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 Issuer 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 10.07. 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 Issuer, the State, the Treasurer of the
State or the Trustee shall survive the termination of this Agreement.
SECTION 10.08. BINDING EFFECT. This Agreement shall inure to the
benefit of and shall be binding upon the Issuer, the Borrower and their
respective successors and assigns; subject, however, to the limitations
contained in Section 5.02 hereof.
SECTION 10.09. REFERENCES TO BANK. Notwithstanding any provisions
contained herein to the contrary, the Bank shall be entitled to take all actions
and exercise its rights hereunder in accordance with the Credit Agreement 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 Credit Agreement with
respect to the Letter of Credit 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.
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 Infrastructure and Economic
Development Bank 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 INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK
By
---------------------------------
Lon S. Hatamiya, Chair
ATTEST
By
---------------------------------
Blake Fowler, Secretary
ROLLER BEARING COMPANY OF AMERICA, INC.
By
---------------------------------
Michael S. Gostomski, Executive
Vice President
[Signature Page to Loan Agreement]
31
<PAGE>
EXHIBIT A
THE PROJECT
The Project consists of (a) the acquisition of real property and
improvements located at 3131 West Segerstrom Avenue, Santa Ana, California 92702
(the "Project Site"), (b) the rehabilitation of a manufacturing facility at the
Project Site, and (c) the acquisition and installation of manufacturing
equipment at the Project Site.
<PAGE>
Exhibit 10.2
================================================================================
INDENTURE OF TRUST
between
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
$4,800,000
California Infrastructure and Economic Development Bank
Variable Rate Demand Industrial
Development Revenue Bonds, Series 1999
(Roller Bearing Company of America, Inc.
- Santa Ana Project)
Dated as of April 1, 1999
================================================================================
<PAGE>
<TABLE>
Article I
DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS
<S> <C> <C>
Section 1.01. Definitions...................................................................2
Section 1.02. Content of Certificates and Opinions.........................................12
Section 1.03. Interpretation...............................................................13
Article II
THE BONDS
Section 2.01. Authorization of Bonds.......................................................13
Section 2.02. Terms of the Bonds...........................................................13
Section 2.03. Conversion of Bonds..........................................................16
Section 2.04. Execution of Bonds...........................................................17
Section 2.05. Transfer of Bonds............................................................18
Section 2.06. Exchange of Bonds............................................................18
Section 2.07. Bond Register................................................................19
Section 2.08. Temporary Bonds..............................................................19
Section 2.09. Bonds Mutilated, Lost, Destroyed or Stolen...................................19
Section 2.10. Special Obligations..........................................................20
Section 2.11. Book-Entry-Only System.......................................................20
Article III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01. Issuance of the Bonds........................................................22
Section 3.02. Application of Proceeds of the Bonds.........................................22
Section 3.03. Establishment and Application of Project Fund and Costs of Issuance Fund.....23
Section 3.04. Validity of Bonds............................................................24
Article IV
REDEMPTION AND PURCHASE OF BONDS
Section 4.01. Terms of Redemption..........................................................24
Section 4.02. Selection of Bonds for Redemption............................................26
Section 4.03. Notice of Redemption.........................................................27
Section 4.04. Partial Redemption of Bonds..................................................28
Section 4.05. Effect of Redemption.........................................................28
Section 4.06. Purchase of Bonds by Tender Agent............................................28
Section 4.07. Mandatory Tender of Bonds....................................................29
<PAGE>
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.................31
Section 5.04. Letter of Credit.............................................................32
Section 5.05. Investment of Moneys.........................................................33
Section 5.06. Additional Duties of Trustee.................................................34
Section 5.07. Establishment of Rebate Fund.................................................35
Article VI
PARTICULAR COVENANTS
Section 6.01. Punctual Payment.............................................................35
Section 6.02. Extension of Payment of Bonds................................................36
Section 6.03. Against Encumbrances.........................................................36
Section 6.04. Power to Issue Bonds and Make Pledge and Assignment..........................36
Section 6.05. Accounting Records and Reports...............................................36
Section 6.06. Arbitrage Covenants..........................................................37
Section 6.07. Other Covenants..............................................................37
Section 6.08. Further Assurances...........................................................37
Section 6.09. Covenant to Enter into Agreement or Contract to Provide Ongoing Disclosure...37
Article VII
EVENTS OF DEFAULT AND REMEDIES OF REGISTERED OWNERS
Section 7.01. Events of Default; Acceleration; Waiver of Default...........................38
Section 7.02. Institution of Legal Proceedings by Trustee..................................40
Section 7.03. Application of Revenues and Other Funds After Default........................40
Section 7.04. Trustee to Represent Registered Owners.......................................41
Section 7.05. Registered Owners' Direction of Proceedings..................................41
Section 7.06. Limitation on Registered Owners' Right to Sue................................42
Section 7.07. Absolute Obligation of Issuer................................................42
Section 7.08. Termination of Proceedings...................................................42
Section 7.09. Remedies Not Exclusive.......................................................43
Section 7.10. No Waiver of Default.........................................................43
Section 7.11. Consent To Defaults..........................................................43
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Article VIII
THE TRUSTEE, THE REMARKETING AGENT AND THE TENDER AGENT
Section 8.01. Duties, Immunities and Liabilities of Trustee................................43
Section 8.02. Merger or Consolidation......................................................45
Section 8.03. Liability of Trustee.........................................................45
Section 8.04. Right of Trustee to Rely on Documents........................................47
Section 8.05. Preservation and Inspection of Documents.....................................47
Section 8.06. Compensation and Indemnification.............................................47
Section 8.07. Notice to Rating Agency......................................................47
Section 8.08. Qualifications of Remarketing Agent..........................................48
Section 8.09. Remarketing of Bonds.........................................................48
Section 8.10. Creation of Purchase Fund; Purchase of Bonds Delivered to Tender Agent.......49
Section 8.11. Delivery of Bonds............................................................51
Section 8.12. Delivery of Proceeds of Remarketing..........................................52
Section 8.13. No Purchases or Sales After Default..........................................52
Section 8.14. Qualifications of Tender Agent...............................................52
Section 8.15. Paying Agent.................................................................52
Section 8.16. Several Capacities...........................................................53
Article IX
MODIFICATION OR AMENDMENT OF THE INDENTURE
Section 9.01. Amendments Permitted.........................................................53
Section 9.02. Effect of Supplemental Indenture.............................................54
Section 9.03. Endorsement of Bonds; Preparation of New Bonds...............................54
Section 9.04. Amendment of Particular Bonds................................................55
Article X
DEFEASANCE
Section 10.01. Discharge of Indenture.......................................................55
Section 10.02. Discharge of Liability on Bonds..............................................56
Section 10.03. Deposit of Money or Securities with Trustee..................................56
Section 10.04. Payments After Discharge of Indenture........................................57
Article XI
MISCELLANEOUS
Section 11.01. Liability of Issuer Limited to Revenues......................................57
Section 11.02. Successor Is Deemed Included in All References to Predecessor................57
Section 11.03. Limitation of Rights to Parties and Registered Owners........................57
Section 11.04. Waiver of Notice.............................................................58
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Section 11.05. Destruction of Bonds.........................................................58
Section 11.06. Severability of Invalid Provisions...........................................58
Section 11.07. Governing Law................................................................58
Section 11.08. Notices......................................................................58
Section 11.09. Evidence of Rights of Registered Owners......................................60
Section 11.10. Disqualified Bonds...........................................................60
Section 11.11. Money Held for Particular Bonds..............................................61
Section 11.12. Funds and Accounts...........................................................61
Section 11.13. Waiver of Personal Liability.................................................61
Section 11.14. Execution in Several Counterparts............................................62
Section 11.15. Actions Due on Saturdays, Sundays and Holidays...............................62
Section 11.16. References to Bank...........................................................62
EXHIBIT A FORM OF BOND
</TABLE>
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INDENTURE OF TRUST
THIS INDENTURE OF TRUST, dated as of April 1, 1999, between THE
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK (the "Issuer"), an
entity within the Trade and Commerce Agency of the State of California (the
"State"), duly organized and validly existing under the laws of the State,
particularly Division 1 of Title 6.7 of the California Government Code
(commencing with Section 63000) (the "Act"), and U.S. BANK TRUST 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 Issuer was established for the purpose of financing
projects needed to implement economic development and job creation and growth
management strategies within 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 Issuer proposes
to finance the Costs of the Project more particularly described in Exhibit A to
the Agreement, to be owned and operated by the Borrower; and
WHEREAS, pursuant to and in accordance with the Act, the Issuer 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 Issuer 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 a portion of 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
$4,800,000; 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 Issuer 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
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WHEREAS, all acts and proceedings required by law or necessary to make
the Bonds, when executed by the Issuer and authenticated and delivered by the
Bond Registrar, the valid, binding and legal special obligations of the Issuer,
and to constitute this Indenture a valid and binding 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 Credit 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 Registered Owners thereof, and for other valuable
consideration, the receipt whereof is hereby acknowledged, the Issuer does
hereby covenant and agree with the Trustee, for the benefit of the respective
Registered Owners 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" means any firm of independent certified public accountants
selected by the Borrower and reasonably acceptable to the Trustee and the Bank.
"ACT" means Division 1 of Title 6.7 of the California Government Code
(commencing with Section 63000), as amended.
"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 Issuer
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 Issuer or of any substantial part of the property of either the
Borrower or the Issuer, or ordering the winding up or liquidation of the affairs
of either the Borrower or the Issuer; or the institution or commencement by or
against the Borrower or the Issuer of a voluntary or involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, provided, however, that in the event of an involuntary case such
involuntary case or proceeding shall remain undismissed for a period of sixty
(60) days, or the consent by it to the entry of an order for relief against it
in any involuntary case under any such
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law, or to the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Borrower or the Issuer
or of any substantial part of the property of either the Borrower or the Issuer,
or the making by either the Borrower or the Issuer 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 Issuer in furtherance of any such action, or
if a receiver of the business or of the property or assets of the Borrower or
the Issuer shall be appointed by any court, except a receiver appointed at the
instance or request of the Issuer.
"ADDITIONAL PAYMENTS" means the payments required to be made by the
Borrower pursuant to Sections 4.02(b), (c) and (d) of the Agreement.
"AGREEMENT" means that certain loan agreement by and between the Issuer
and the Borrower, dated as of April 1, 1999, 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" means bond insurance or other similar
credit enhancement facility meeting the requirements of Section 5.07 of the
Agreement.
"ALTERNATE FIXED RATE" shall have the meaning ascribed to such term in
Section 2.03 hereof.
"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 5.08 of the Agreement.
"ALTERNATE WEEKLY RATE" shall have the meaning ascribed to such term in
Section 2.02 hereof.
"AUTHORIZED DENOMINATION" means (a) prior to the Fixed Rate Date,
$100,000 or any multiple of $5,000 in excess of $100,000 and (b) after the Fixed
Rate Date, $5,000 or integral multiples thereof.
"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
Issuer, containing the specimen signature of each such person.
"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
Registered Owners in a separate and segregated account in which only Available
Moneys are held and during and prior to which period no Act of Bankruptcy of the
Borrower or the Issuer occurs 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 Registered Owners would not constitute an avoidable preference under
Section 547 of the United States Bankruptcy Code in the event the
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Issuer, 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" means First Union National Bank, or any other commercial bank or
other financial institution issuing a Letter of Credit then in effect.
"BANK BONDS" means Bonds tendered pursuant to Section 4.06 hereof or
subject to mandatory tender pursuant to Section 4.07 hereof and purchased from
funds described in Section 8.10(b)(ii) hereof.
"BENEFICIAL OWNER" means generally any person which has or shares the
power, directly or indirectly, to make investment decisions concerning ownership
of any Bonds and with respect to Bonds held by DTC, those individuals,
partnerships, corporations or other entities for whom the Direct Participants
have caused DTC to hold Bonds.
"BOND" or "BONDS" means any Bond or all of the Bonds, as the case may
be, of the Issuer authorized and issued by the Issuer, authenticated by the Bond
Registrar and delivered hereunder.
"BOND COUNSEL" means any attorney at law experienced 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, approved by the Issuer, but shall not include counsel for the Borrower.
"BOND PAYMENT DATE" means any date on which any principal of, premium,
if any, or interest on, any Outstanding Bond shall be due and payable whether at
maturity or on a scheduled Interest Payment Date or upon redemption, in each
case in accordance with the terms of the Bonds and this Indenture.
"BOND REGISTRAR" shall mean the Bond Registrar specified in Section
2.07 hereof.
"BORROWER" means Roller Bearing Company of America, Inc., a corporation
duly organized and validly existing under the laws of the State of Delaware and
authorized to do business in the State, or any entity which is the surviving,
resulting or transferee entity in any merger, consolidation or transfer of
assets permitted under Section 5.02 of the Agreement.
"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" and "ORDER" of the
Issuer or the Borrower means, respectively, a written certificate, statement,
request, requisition or order signed in the name of the Issuer by the Chair of
the Issuer or such other person as may be
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designated as authorized to sign for the Issuer, 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 hereof, each such instrument shall
include the statements provided for in Section 1.02 hereof.
"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" 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)(i) hereof.
"CONSTRUCTION" means, with respect to the Project, the acquisition,
construction, installation, rehabilitation, expansion, improvement, equipping,
furnishing and/or other activities with respect to the Project described in the
Borrower's application for financing assistance from the Issuer.
"COSTS OF ISSUANCE" means all items of expense directly or indirectly
payable by or reimbursable to the Issuer 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" means the fund of that name established
pursuant to Section 3.03(e) hereof.
"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):
(a) the cost of construction, improvement, repair and
reconstruction;
(b) the cost of acquisition, including rights in land and
other property, both real and personal and improved and unimproved, and
franchises, and disposal rights;
(c) 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;
(d) 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
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(e) 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;
(f) 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
(g) 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
Issuer.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of June 23,
1997 and amended on April 15, 1998 and August 19, 1998, among the Borrower,
Credit Suisse First Boston, and the Lenders identified therein (including,
specifically, 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.
"DATE OF DELIVERY" means April 30, 1999.
"DETERMINATION OF TAXABILITY" means the occurrence or existence of any
of the conditions or events more fully described in Section 8.03(a)(ii) or
Section 8.03(a)(iii) of the Agreement.
"DIRECT PARTICIPANT" means those securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations for which
DTC, from time to time, holds the Bonds as securities depository.
"DISCLOSURE REQUIREMENTS" shall have the meaning ascribed to such term
in Section 6.09 hereof.
"DTC" means The Depository Trust Company, New York, New York, or any
successor securities depository.
"EVENT OF DEFAULT" means any of the events specified in Section 7.01
hereof.
"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" means the fiscal year of the Borrower ending on the
Saturday closest to March 31 of each year, or any other 12-month period selected
and designated as the fiscal year of the Borrower.
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"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
hereof.
"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.
"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 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.
"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" 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,
5250-77 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 Issuer may designate in a certificate
of the Issuer delivered to the Trustee.
"INTEREST ACCOUNT" means the account of that name in the Revenue Fund
established pursuant to Section 5.02 hereof.
"INTEREST PAYMENT DATE" means (a) on and prior to the Fixed Rate Date:
June 1, 1999 and the first Business Day of each calendar month thereafter, and
(b) after the Fixed Rate Date: April 1 and October 1 of each year commencing on
the April 1 or October 1 next succeeding the Fixed Rate Date.
"INTEREST PERIOD" means the period from and including the date of the
first authentication and delivery of the Bonds to and including May 31, 1999,
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" 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 Issuer 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.
"ISSUER" means the California Infrastructure and Economic Development
Bank, an entity within the Trade and Commerce Agency of the State.
"LETTER OF CREDIT" means (a) that certain Letter of Credit issued by
the Bank pursuant to the Credit 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, (b) in the event of
delivery of an Alternate Letter of Credit, such Alternate Letter of Credit, or
(c) in the event of delivery of an Alternate Credit Facility, such Alternate
Credit Facility.
"LETTER OF CREDIT ACCOUNT" means the account of that name established
in the Revenue Fund pursuant to Section 5.03 hereof.
"LETTER OF CREDIT SUBSTITUTION" means the substitution of an Alternate
Letter of Credit for the then existing Letter of Credit pursuant to Section 5.08
of the Agreement.
"LETTER OF CREDIT SUBSTITUTION DATE" means the date an Alternate Letter
of Credit is delivered to the Trustee pursuant to Section 5.08 of the Agreement.
"LIQUIDITY ACCOUNT" means the account of that name established in the
Purchase Fund pursuant to Section 8.10 hereof.
"LOAN" means the loan of the proceeds of the Bonds made by the Issuer
to the Borrower pursuant to the Agreement.
"LOAN DEFAULT EVENT" means any one or more of the events specified in
Section 7.01 of the Agreement.
"LOAN REPAYMENTS" means the payments required to be made by the
Borrower pursuant to Section 4.02(a) of the Agreement.
"MANDATORY TENDER DATE" shall mean the (a) Fixed Rate Date and (b) 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.
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"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, liquidated or replaced by
the Issuer and the Borrower as the rating agency for the Bonds, or shall no
longer perform the functions of a securities rating agency, any other nationally
recognized securities rating agency designated by the Issuer, with the approval
of the Borrower, which is requested to provide a rating on the Bonds.
"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" shall have the meaning ascribed to such term in
Section 4.07 hereof.
"OPINION OF BOND COUNSEL" means a written opinion of Bond Counsel. If
and to the extent required by the provisions of Section 1.02 hereof, each
Opinion of Bond Counsel shall include the statements provided for in Section
1.02 hereof.
"ORGANIZATION DOCUMENTS" mean the Borrower's articles or certificate of
incorporation and bylaws if the Borrower is a corporation, articles of
organization and operating agreement if the Borrower is a limited liability
company, partnership agreement if the Borrower is a partnership and trust
agreement or declaration of trust if the Borrower is a trust, as such
Organization Documents may be amended from time to time.
"OUTSTANDING," when used as of any particular time with reference to
Bonds, means (subject to the provisions of Section 11.10 hereof) all Bonds
theretofore, or thereupon being, authenticated and delivered by the Bond
Registrar under this Indenture except (a) Bonds theretofore cancelled by the
Bond Registrar or surrendered to the Bond Registrar for cancellation; (b) Bonds
with respect to which liability of the Issuer shall have been discharged in
accordance with Section 10.02 hereof, including Bonds (or portions of Bonds)
referred to in Section 11.10 hereof; (c) 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 (d) Bonds which have been deemed purchased pursuant to Section 4.07 hereof.
"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" means the Trustee and any other paying agent for the
Bonds appointed pursuant to the provisions of this Indenture.
"PERMITTED INVESTMENTS" means Treasury Funds, Government Obligations
and Investment Securities.
"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.
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"PRINCIPAL ACCOUNT" means the account of that name in the Revenue Fund
established pursuant to Section 5.02 hereof.
"PROJECT" means (a) all land, buildings, structures, fixtures and
improvements, and (b) 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" means the fund of that name established pursuant to
Section 3.03 hereof.
"PURCHASE DATE" means (a) the date specified in each notice given by a
Registered Owner pursuant to Section 4.06 hereof on which the Bonds being
tendered by such Registered Owner shall be purchased by the Tender Agent, and
(b) the Mandatory Tender Date.
"PURCHASE FUND" means the fund of that name established pursuant to
Section 8.10 hereof.
"REBATE FUND" means the fund of that name created pursuant to Section
5.07 hereof.
"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" means the account of that name established in the
Revenue Fund pursuant to Section 5.02 hereof.
"REGISTERED OWNER," whenever used herein with respect to a Bond, means
the Person in whose name such Bond is registered.
"RELATED PARTY" means any general partner, member, affiliate or
guarantor of the Borrower and any lessee of the Project.
"REMARKETING ACCOUNT" means the account of that name established in the
Purchase Fund pursuant to Section 8.10 hereof.
"REMARKETING AGENT" means the remarketing agent or agents appointed in
accordance with Section 8.08 hereof. The Remarketing Agent shall be initially
The Chapman Company. "Principal Office" of the Remarketing Agent shall mean the
office thereof designated in writing to the Issuer, the Trustee, the Tender
Agent, the Bank and the Borrower.
"REMARKETING AGREEMENT" means the Remarketing Agreement, dated as of
April 1, 1999, between the Borrower and 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 Registered Owners
thereof, and any other similar agreement entered into with any successor
Remarketing Agent, subject to approval by the Issuer. No such amendment or
supplement or similar agreement shall alter the rights or obligations of the
Registered Owners of Bonds to deliver their Bonds for purchase as provided
herein.
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"REVENUE FUND" means the fund of that name established pursuant to
Section 5.01 hereof.
"REVENUES" means all amounts received by the Issuer or the Trustee for
the account of the Issuer 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" 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, liquidated or replaced by the Issuer and the
Borrower as the rating agency for the Bonds, or shall no longer perform the
functions of a securities rating agency, any other nationally recognized
securities rating agency designated by the Issuer, with the approval of the
Borrower which is requested to provide a rating on the Bonds.
"SECURITIES DEPOSITORIES" means the following registered securities
depositories: (a) The Depository Trust Company, 711 Stewart Avenue, Garden City,
New York 11530, Fax-(516) 227-4039 or 4190; and (b) 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 Issuer or the Securities and Exchange Commission
may designate in a certificate of the Issuer delivered to the Trustee.
"SPECIAL RECORD DATE" means the date established by the Trustee
pursuant to Section 2.02(b)(ii) hereof as a record date for the payment of
defaulted interest on the Bonds.
"STATE" means the State of California.
"SUPPLEMENTAL INDENTURE" means any indenture hereafter duly authorized
and entered into between the Issuer 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" means the Tax Regulatory Agreement, dated as
of April 1, 1999, among the Issuer, the Borrower and the Trustee, as such Tax
Regulatory Agreement shall be amended from time to time.
"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
Registered Owner 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.
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"TENDER AGENT" means U.S. Bank Trust 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 San
Francisco, California, or any successor appointed pursuant to Section 8.14
hereof.
"TREASURY FUNDS" means (a) 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, (b) 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 (c) any other investment or security permitted by
law and approved by the Bank.
"TRUSTEE" means U.S. Bank Trust 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 hereof.
"WEEKLY INTEREST RATE" means the interest rate on the Bonds determined
pursuant to Section 2.02(c) hereof.
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 (a) a statement that the Person making or giving
such certificate or opinion has read such provision and the definitions herein
relating thereto; (b) a brief statement as to the nature and scope of the
examination or investigation upon which the certificate or opinion is based; (c)
a statement that, in the opinion of such Person, he or she has made or caused to
be made such examination or investigation as is necessary to enable him or her
to express an informed opinion with respect to the subject matter referred to in
the instrument to which his or her signature is affixed; (d) a statement of the
assumptions upon which such certificate or opinion is based, and that such
assumptions are reasonable; and (e) 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
Issuer or an officer or an Authorized Representative of the Borrower may be
based, insofar as it relates to legal, accounting or any business matter, 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 Issuer or the Borrower, as the case may
be) upon a certificate or opinion of or representation by an officer of the
Issuer 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 Issuer or the Borrower, or the
same counsel or Accountant or
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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.
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 Infrastructure and Economic Development Bank Variable Rate Demand
Industrial Development Revenue Bonds, Series 1999 (Roller Bearing Company of
America, Inc. - Santa Ana Project)" in the original principal amount of
$4,800,000, 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 April 1, 2024.
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) (i) Each Bond shall bear interest at the rates determined
pursuant to Section 2.02(c) and 2.03(b) hereof 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 May 31,
1999, in which event it shall bear interest from and including
the Date of Delivery), payable on each Interest Payment Date.
The interest so
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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.
(ii) Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the
Registered Owner 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
Registered Owners not less than ten (10) days prior to such
Special Record Date.
(iii) Interest shall be paid in lawful money of the
United States by check or draft mailed to each Registered
Owner at the address shown on the registration books
maintained by the Bond Registrar pursuant to Section 2.07
hereof; provided, however, interest may also be paid by wire
transfer to an address in the continental United States in the
case of a Registered Owner of at least $1,000,000 aggregate
principal amount of Bonds upon written request of the
Registered Owner thereof 15 days prior to the applicable
Record Date to the Bond Registrar in a form satisfactory to
the Bond Registrar.
(c) (i) 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 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
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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 the "Alternate Weekly Rate"
(as defined below).
(ii) If on any date on which the Weekly Interest Rate
is determined, the Weekly Interest Rate determined in
accordance with paragraph (i) of this paragraph (c) is held by
a court to be invalid or unenforceable, then the Weekly
Interest Rate shall be the Alternate Weekly Rate. The
"Alternate Weekly Rate" shall be the Bond Market Association
Seven-Day Municipal Swap Index Rate plus 25 basis points
(.25%) as determined by the Remarketing Agent.
(iii) Each determination of the Weekly Interest Rate
by the Remarketing Agent shall be conclusive and binding on
the Registered Owners, the Trustee and the Issuer.
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 Registered Owner who
requests the same of the Weekly Interest Rate in effect from
time to time.
(iv) 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 April 1, 2024 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 hereof, 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 hereof.
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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 Issuer, 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 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) 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, (B) an Alternate Credit
Facility pursuant to the terms of Section 5.07 of the Agreement, or (C)
an Alternate Letter of Credit pursuant to the terms of Section 5.08 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) (i) 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
Registered 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 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
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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
Registered Owners shall be notified thereof by the Trustee.
(ii) Following an election of the Borrower to convert
the interest rate on the Bonds to the Fixed Interest Rate as
provided in this Section, the Registered Owners of all of the
Outstanding Bonds shall be required to tender their Bonds for
purchase on the Mandatory Tender Date.
(iii) At least 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 on the Fixed Rate Date. If a
Registered Owner 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 (A)
specify the proposed Fixed Rate Date, (B) require the
Registered Owners of all of the Outstanding Bonds to tender
their Bonds for purchase on the Mandatory Tender Date pursuant
to Section 4.07 hereof, and (C) 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.
(iv) 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 Registered Owners
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 Registered Owners through the Fixed Rate Date shall be
tendered by the Registered Owners thereof for purchase on the
Mandatory Tender Date.
(v) The determination of the Fixed Interest Rate by
the Remarketing Agent shall be conclusive and binding on the
Issuer, the Trustee, the Borrower and the Registered Owners of
the Bonds.
SECTION 2.04. EXECUTION OF BONDS. The Bonds shall be executed in the
name and on behalf of the Issuer with the manual or facsimile signature of the
Chair of the Issuer 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 Issuer before the Bonds so signed or attested shall have been
authenticated or delivered by
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the Bond Registrar or issued by the Issuer, such Bonds may nevertheless be
authenticated, delivered and issued and, upon such authentication, delivery and
issue, shall be as binding upon the Issuer as though those who signed and
attested the same had continued to be such officers of the Issuer, and also any
Bonds may be signed and attested on behalf of the Issuer by such persons as at
the actual date of execution of such Bonds shall be the proper officers of the
Issuer although at the nominal date of such Bonds any such person shall not have
been such officer of the Issuer.
Only such of the Bonds as shall bear thereon a certificate of
authentication substantially in the form set forth in Exhibit A hereto, 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 hereof, 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: (a) if the Bond Registrar has
received notice from the Registered Owner 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 (b) 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
Issuer 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 Registered Owner 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 Issuer and the Bond Registrar
in connection with such transfer.
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 confirmation by the Bank 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 Registered Owner 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
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expenses incurred by the Issuer 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 Issuer; 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 Issuer and be authenticated by the Bond Registrar upon the same
conditions and in substantially the same manner as the definitive Bonds. If the
Issuer 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 Issuer, at the expense of the Registered Owner 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 Issuer. 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 Issuer,
at the expense of the Registered Owner, 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 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
Registered Owner 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
Issuer 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 Issuer whether or not the Bond so alleged to
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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 Issuer as provided by the Act and the
Issuer 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 Issuer has no taxing
power.
SECTION 2.11. BOOK-ENTRY-ONLY SYSTEM.
(a) Except as otherwise provided in subsections (b) and (c) of
this Section, 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
Issuer 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 Issuer, 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 Issuer, 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
Registered Owner of the Bonds. The Issuer, the Trustee and the Tender
Agent may treat DTC as, and deem DTC to be, the absolute Registered
Owner of each Bond for all purposes whatsoever including (but not
limited to) (A) payment of the principal or redemption price of, and
interest on, each such
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Bond, (B) giving notices of conversion or redemption and other matters
with respect to such Bonds and (C) registering transfers with respect
to such Bonds. The Trustee shall pay the principal or redemption price
of, and interest on, all Bonds only to or upon the order of DTC, and
all such payments shall be valid and effective to fully satisfy and
discharge the Issuer'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 Issuer 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) (i) DTC may determine to discontinue providing its
services with respect to the Bonds at any time by giving
reasonable written notice to the Issuer, the Trustee and the
Tender Agent and discharging its responsibilities with respect
thereto under applicable law.
(ii) The Issuer, 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 Issuer 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 Issuer, and shall terminate the services of
DTC with respect to the Bonds upon receipt by the Issuer, 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: (A) DTC is unable to
discharge its responsibilities with respect to such Bonds, or
(B) 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)(ii)(B) hereof, or upon the
discontinuance or termination of the services of DTC with respect to
the Bonds pursuant to subsection (c)(i) or subsection (c)(ii)(A) 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 Issuer, 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 Issuer 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.
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(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 Registered Owners pursuant to this Indenture by the Issuer,
the Tender Agent or the Trustee with respect to any consent or other
action to be taken by Registered Owners, the Issuer, 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 15 calendar days in advance of such record date to the
extent possible.
(g) Notwithstanding any provision herein to the contrary, the
Issuer 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 hereof 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 Issuer may execute and the Bond Registrar shall authenticate
and, upon Request of the Issuer, deliver Bonds in the aggregate principal amount
set forth in Section 2.01 hereof.
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 $96,000 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, $4,704,000, in the Project Fund.
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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, 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.
Upon receipt of each Requisition and written approval of the
Bank, the Trustee shall pay the amount set forth in such Requisition as
directed by the terms thereof out of the Project Fund. 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, other than materialmen's or mechanics' liens accruing by mere
operation of law.
(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 hereof, and the Borrower
has not otherwise satisfied any of the exceptions to the calculation of
rebate as provided in Section 4.02(a) of the Tax Regulatory Agreement,
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 hereof, 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 hereof. In addition, the
payment of such Requisition by the Trustee shall be subject to prior
compliance with the provisions of Section 5.07 hereof and the Tax
Regulatory Agreement.
(d) Subject to paragraph (c) of this Section, upon the receipt
of the Certificate of the Borrower required by Section 3.03 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
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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, 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 Bank 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 hereof, 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 April 29, 2000
shall be either transferred to the Project Fund or returned to the
Borrower, at the direction of the Borrower.
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 Issuer 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 Issuer 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 Issuer shall not call the
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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 Issuer may require such
payment under Section 8.03 of the Agreement without the Borrower's direction.
The Bonds shall be subject to redemption by the Issuer 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:
(a) SINKING FUND REDEMPTION. The Bonds are not subject to
mandatory sinking fund redemption.
(b) PRIOR TO THE FIXED RATE DATE. On or prior to the Fixed
Rate Date, the Bonds are subject to optional redemption on any Business
Day, 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 8.02(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.
(c) TAXABILITY. In the event of a prepayment pursuant to
Section 8.03(a)(ii) or Section 8.03(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 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(c).
(d) 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
selected by the Trustee not less than fifteen (15) days preceding the
Expiration Date of the Letter of Credit if no Alternate Letter of
Credit has been delivered to the Trustee in accordance with Section
5.08 of the Agreement.
(e) EXTRAORDINARY EVENTS. To the extent of a prepayment or a
required prepayment by the Borrower pursuant to Sections 8.02(a),
8.03(a)(i) or 8.03(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.
(f) 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 8.02(b) of the Agreement, with the
consent of the Bank, in whole or in part, on any Interest Payment
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Date during the applicable periods specified below, at the applicable
redemption price stated below, plus interest accrued thereon to the
redemption date:
<TABLE>
<CAPTION>
NUMBER OF YEARS
FROM FIXED RATE DATE FIRST OPTIONAL REDEMPTION
TO FINAL MATURITY REDEMPTION DATE PRICE
<S> <C> <C>
greater than 9 years 7 years from conversion 101%, declining .5%
annually to 100%
6-9 years 6 years from conversion 100.5%, declining .5%
annually to 100%
less than 6 years no optional redemption
</TABLE>
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.
(g) MANDATORY REDEMPTION FOR FAILURE TO REINSTATE THE LETTER
OF CREDIT OR CREDIT 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 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 the Bank will not reinstate the interest
portion of the Letter of Credit or that an event of default has taken
place under the Credit Agreement and directing the Trustee to redeem
the Bonds.
(h) 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) hereof.
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 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, Bank 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.
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SECTION 4.03. NOTICE OF REDEMPTION.
(a) The Trustee shall mail notice of redemption (i) prior to
the Fixed Rate Date, not less than 15 days before such redemption date,
(except in the case of redemptions pursuant to Section 4.01(d) hereof
in which case not less than five days, or in the case of redemptions
pursuant to Section 4.01(g) hereof, in which case notice shall be given
as soon as practicable), and (ii) 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(d) hereof, in which case not less
than five days, or in the case of redemptions pursuant to Section
4.01(g) hereof, in which case notice shall be given as soon as
practicable) to the respective Registered Owners of any Bonds
designated for redemption at their addresses on the registration books
maintained by the Bond Registrar and to the Issuer. 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 Issuer, for and on behalf of the Issuer.
(c) In the case of redemption pursuant to Section 4.01 hereof
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
Registered Owner shall not affect the validity of the proceedings for
the redemption of Bonds of any Registered Owner.
(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 Issuer shall execute and the Bond Registrar shall
authenticate and deliver to the registered owner thereof, at the expense of the
Issuer, a new Bond or Bonds of Authorized Denominations equal in aggregate
principal amount to the unredeemed portion of the Bond surrendered.
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<PAGE>
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 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
Registered Owners 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 Issuer.
SECTION 4.06. PURCHASE OF BONDS BY TENDER AGENT. Prior to the Fixed
Rate Date, the Bonds may be delivered by the Registered Owners 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
Registered Owners, the Issuer, 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 Registered 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); 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 (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 this Indenture.
All Bonds, or portions thereof, purchased pursuant to this Section
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 and shall notify the Tender Agent of such
amount prior to the Purchase Date.
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<PAGE>
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 Registered Owners 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 Registered
Owners as instructed by the Borrower or the Remarketing Agent. The Tender Agent
shall hold in trust for the Registered Owners of the Non-Tendered Bonds the
purchase price thereof, and after the Mandatory Tender Date such Registered
Owners will 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 hereof and excepting the
Rebate Fund created by Section 5.07 hereof) are hereby pledged by the
Issuer 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 Credit
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 Issuer hereby transfers in trust, and assigns to the
Trustee, for the benefit of the Registered Owners 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 Issuer in the Agreement (except for
the right to receive any Additional Payments to the extent payable to
the Issuer, any rights of the Issuer 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 Issuer shall be deemed to be held, and to have been
collected or received, by the Issuer as the agent of the Trustee and
shall forthwith be paid by the Issuer 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 Issuer or separately, all of the rights of the Issuer and all of
the obligations of the Borrower under the Agreement.
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<PAGE>
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 Issuer or the Borrower to secure the payment
of the principal of and interest on the Bonds and the Borrower's
reimbursement obligations under the Credit 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 Credit 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 Registered Owners of the Bonds in
payment thereof or in any manner not in accordance with this Indenture
or the Credit Agreement without the written consent of the Issuer 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 hereof, 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 4.02(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
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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 Registered Owners
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:
(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) hereof and proceeds from the investment
thereof, which constitute Available Moneys;
(iv) moneys deposited into the Redemption Account
pursuant to Section 3.03(d) hereof 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
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(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 hereof. None of the Borrower, any Related
Party, the Trustee or the Issuer 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
Registered Owners 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 5.07 of
the Agreement or if at any time there shall have been delivered to the
Trustee an Alternate Letter of Credit pursuant to Section 5.08 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 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) hereof, the Trustee shall hold and maintain the Letter of Credit for the
benefit of the Registered Owners 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,
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agree to or permit any amendment or modification of the Letter of Credit which
would adversely affect the rights or security of the Registered Owners 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 Issuer, 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 30 days prior to the Letter of Credit Substitution Date, the
Trustee shall send a written notice to the Registered Owners relating to the
Borrower's election pursuant to Section 5.08 of the Agreement to deliver an
Alternate Letter of Credit to the Trustee. Such notice shall (a) specify the
proposed Letter of Credit Substitution Date, (b) require the Registered Owners
of all of the Outstanding Bonds to tender their Bonds for purchase on the
Mandatory Tender Date pursuant to Section 4.07 hereof, and (c) 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: (a)
moneys on deposit in the Letter of Credit Account and the Purchase Fund and any
moneys held pursuant to Section 4.07 hereof shall be held uninvested; (b) any
moneys held in trust for the payment or redemption of Bonds pursuant to Article
X hereof shall be invested as provided in Section 10.03 hereof; (c) 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 (d) moneys
described in clause (ii), (iii), or (iv) of Section 5.03(a) hereof shall be
invested in Permitted Investments rated A-1 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
hereof, all moneys in any of the funds or accounts established pursuant to this
Indenture, subject to the limitations set forth in (a) through (d) 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 hereof, the limitations as
to maturities in this Section set forth, and such additional
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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
(a), (b) or (c) 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 willful misconduct.
All interest, profits and other income received from the investment of
moneys in any fund established pursuant to this Indenture, (i) 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) hereof) shall be deposited when
received in the Project Fund, and (ii) 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: (A) any moneys held in trust
for the payment or redemption of Bonds pursuant to Article X shall be applied as
provided in Article X hereof; and (B) 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 willful 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 4.02 of the Agreement. While the Bonds bear
interest at the Fixed Interest Rate, 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 4.02 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 4.02 of the Agreement, the Trustee shall immediately
notify in writing the Bank, the Borrower and the Issuer 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 4.02 of the Agreement.
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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 Requirement (as defined in the Tax
Regulatory Agreement), for payment to the federal government of the
United States of America and none of the Issuer, the Registered Owners,
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 and Sections 3.04 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, if the
Issuer 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
Issuer 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 Issuer 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 Issuer shall not
directly or indirectly extend or assent to the extension of the maturity of any
of the Bonds or the time of
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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 Issuer 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 Issuer 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 Issuer expressly reserves the right
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
Issuer 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 Issuer enforceable in accordance with their terms, and the Issuer 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
Registered Owners 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 Registered Owner, the
Borrower and the Bank at any reasonable time during regular business hours on
reasonable notice.
SECTION 6.06. ARBITRAGE COVENANTS. The Issuer 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
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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 Issuer and all of the
obligations of the Borrower.
(b) The Issuer 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 (i) 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 Registered Owners or result in any material
impairment of the security hereby given for the payment of the Bonds,
or (ii) the Issuer first obtains the written consent of the Registered
Owners 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 Issuer or the Trustee by the Borrower
pursuant to the Agreement, or extend the time for making such payments,
without the written consent of all of the Registered Owners of the
Bonds then Outstanding. The Trustee shall be entitled to rely upon an
Opinion of Bond Counsel with respect to the effect of any amendments
hereto or to the Agreement.
SECTION 6.08. FURTHER ASSURANCES. The Issuer 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 Registered Owners 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 Issuer 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 Registered Owners 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 Issuer to the Trustee for the benefit of the Registered
Owners, 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 Registered Owner,
Participating Underwriter or Beneficial Owner. However, neither the Issuer nor
the Trustee shall have any duty to enforce Section 5.12 of the Agreement. The
Issuer shall have no liability to the Registered Owners, Participating
Underwriters, Beneficial Owners or any other person with
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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 Registered Owners 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 REGISTERED OWNERS
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 hereof, 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 Issuer 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 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 Issuer, the Bank and the Borrower by the Trustee, or to the Issuer,
the Bank, the Borrower and the Trustee by the Registered Owners of not
less than twenty-five percent (25%) in aggregate principal amount of
the Bonds at the time Outstanding;
(e) the occurrence and continuance of an Event of Default
described in Section 8.01 of the Tax Regulatory Agreement; or
(f) the occurrence and continuance of a Loan Default Event
described in Section 7.01(a), (b) or (c) of the Agreement.
No default specified in (d) above shall constitute an Event of Default
unless the Issuer 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 Issuer or the
Borrower within the applicable period and diligently pursued. With regard to any
alleged default
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concerning which notice is given to the Borrower under the provisions of this
Section, the Issuer hereby grants the Borrower full authority for account of the
Issuer 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
Issuer with full power to do any and all things and acts to the same extent that
the Issuer 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 Registered Owners 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 Issuer, 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 Registered Owners 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
Registered Owners of at least a majority in aggregate principal amount of the
Bonds then Outstanding, by written notice to the Issuer and to the Trustee, may,
on behalf of the Registered Owners 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.
SECTION 7.02. INSTITUTION OF LEGAL PROCEEDINGS BY TRUSTEE. If one or
more Events of Default shall happen and be continuing, subject to the
satisfaction of the conditions of Section 7.11 hereof, the Trustee in its
discretion may, and upon the written request of the Registered Owners 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 Registered Owners 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
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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 hereof)
shall be applied by the Trustee as follows and in the following order:
(a) to the payment of any expenses necessary in the opinion of
the Trustee to protect the interests of the Registered Owners 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;
(b) 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 hereof), 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
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full the whole amount so due and unpaid, then to the payment
thereof ratably, without preference or priority of principal
over interest, or of interest over principal, or of any
installment of interest over any other installment of
interest, or of any Bond over any other Bond, 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 (a) 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 REGISTERED OWNERS. The Trustee is
hereby irrevocably appointed (and the successive respective Registered Owners 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
Registered Owners of the Bonds for the purpose of exercising and prosecuting on
their behalf such rights and remedies as may be available to such Registered
Owners 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 Registered Owners, the Trustee in its discretion may, and upon
the written request of the Registered Owners 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
Registered Owners 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 Registered Owners 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 Registered Owners of such Bonds, subject to the provisions
of this Indenture (including Section 6.02 hereof).
SECTION 7.05. REGISTERED OWNERS' DIRECTION OF PROCEEDINGS. Anything in
this Indenture to the contrary notwithstanding, the Registered Owners 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 Registered Owners not parties to such direction or for which it has not been
provided adequate indemnity to its satisfaction.
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SECTION 7.06. LIMITATION ON REGISTERED OWNERS' RIGHT TO SUE. No
Registered Owner 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 (a) such Registered Owner shall
have given to the Trustee written notice of the occurrence of an Event of
Default; (b) the Registered Owners of not less than 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 own name; (c) such Registered Owner or said
Registered Owners shall have tendered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance with
such request; and (d) the Trustee shall have refused or omitted to comply with
such request for a period of 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 Registered Owner of Bonds of any remedy hereunder or under law; it being
understood and intended that no one or more Registered Owners 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
Registered Owners 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 Registered Owners of
the Outstanding Bonds, subject to the provisions of this Indenture (including
Section 6.02 hereof).
SECTION 7.07. ABSOLUTE OBLIGATION OF ISSUER. Nothing in Section 7.06
hereof or in any other provision of this Indenture, or in the Bonds, contained
shall affect or impair the obligation of the Issuer, which is absolute and
unconditional, to pay the principal of and interest on the Bonds to the
respective Registered Owners 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 Registered Owners, 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 Registered Owners 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 Registered Owners, then in every
such case the Issuer, the Bank, the Trustee and the Registered Owners, 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 Issuer, the Bank, the Trustee and the
Registered Owners 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 Registered Owners of the Bonds is
intended to be exclusive of
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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 Issuer and/or the
Borrower and thereafter waived by the Trustee or the Registered Owners 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 Registered Owner 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 Registered Owners 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, so long as the Letter of Credit is in full force and effect and
the Bank has not wrongfully 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 Registered Owners and no
Event of Default under Section 7.01 hereof shall be waived by the Trustee or the
Registered Owners 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 5.07 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
Registered Owners of a majority in aggregate principal amount of the
Bonds Outstanding. The Trustee may also be removed by an instrument in
writing executed by the Issuer, consented to by the Bank, appointing
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a successor Trustee filed with the Trustee so removed; provided that
the Issuer 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 Issuer, the Borrower and the Bank and
by giving the Registered Owners 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 Issuer 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 45 days of
giving notice of removal or notice of resignation as aforesaid, the
resigning Trustee or any Registered Owner (on behalf of himself and all
other Registered Owners) may petition any court of competent
jurisdiction for the 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 Issuer 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 Issuer 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 Issuer 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 Issuer 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 Issuer 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 Registered Owners at the addresses shown
on the registration books maintained by the Bond Registrar, and to the
Bank. If the Issuer fails to mail such notice within 15 days after
acceptance of appointment by the successor
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Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Issuer.
(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 hereof 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 Issuer, 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 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 Registered 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
Registered Owners, whether or not such committee shall represent the
Registered Owners 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.
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(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 actions taken or omitted by the Trustee constitute willful
misconduct or 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 Registered Owners 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 Registered Owners pursuant to the
provisions of this Indenture unless such Registered Owners shall have
offered to the Trustee satisfactory security or indemnity against the
costs, expenses and liabilities which may be incurred therein or
thereby; provided, however, that the Trustee shall not be entitled to
any security or indemnity with respect to its obligation to draw under
the Letter of Credit to pay the principal or purchase price of or
interest on the Bonds.
(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 willful 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 or
purchase price 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 proper party or parties.
The Trustee may consult with counsel, who may be counsel of or to the Issuer,
with regard to legal questions, and the opinion of such counsel shall be full
and complete
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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
Registered Owner 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 Issuer, 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 Issuer and any Registered Owner, and their agents and representatives
duly authorized in writing, at reasonable hours and under reasonable conditions.
SECTION 8.06. COMPENSATION AND INDEMNIFICATION. The Issuer 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 Registered Owners of the Bonds.
SECTION 8.07. NOTICE TO RATING AGENCY. The Issuer and the Trustee shall
give written notice to each rating agency then rating the Bonds of each of the
following: (a) a successor Trustee is appointed hereunder; (b) this Indenture,
the Agreement, the Remarketing Agreement, the Letter of Credit or the Credit
Agreement is amended or supplemented in any manner; (c) the Bonds are converted
to a Fixed Interest Rate pursuant to Section 2.03 hereof or defeased pursuant to
Section 10.01 hereof or accelerated pursuant to Section 7.01 hereof or redeemed
in whole pursuant to Section 4.01 hereof; or (d) 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 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
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obligations created by this Indenture by giving at least 45 days' notice to the
Issuer, 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, by the Borrower, by an instrument, signed by the
Borrower and filed with the Remarketing Agent, the Bank, the Tender Agent and
the Trustee. The Borrower, 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 Issuer 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 The
Chapman Company.
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 Registered Owner pursuant to Section 4.06 hereof 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 5.08 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 use its best efforts to remarket
the Bonds described in such notice, any such remarketing 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 and (B) stating the principal amount of Bonds
sold pursuant to subsection (a) of this Section, 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 (A) the proceeds received from the Remarketing
Agent to be applied to the purchase of the Bonds tendered for purchase,
and (B) the amount that must be drawn under the Letter of Credit for
Bonds
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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 Issuer 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 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 hereof, 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 hereof (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 Issuer 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
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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 hereof or Bonds subject to mandatory tender
pursuant to Section 4.07 hereof with moneys on deposit in the Revenue
Fund pursuant to Section 5.02 hereof and cancel such Bonds.
(d) The Tender Agent shall:
(i) hold all Bonds delivered to it pursuant to
Sections 4.06, 4.07 or 8.11 hereof in trust solely for the
benefit of the respective Registered Owners 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 Registered Owners;
(ii) hold all moneys delivered to it under this
Section 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
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in the absence of written notice from the Issuer 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 hereof
and, immediately upon the delivery to it of Bonds in
accordance with Section 4.06 hereof, 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 hereof 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 hereof shall be cancelled.
(ii) Bonds paid by the Tender Agent with moneys
described in subsection (b)(ii) of Section 8.10 hereof shall
be held by the Tender Agent as Bank Bonds in which Bank shall
have a security interest or registered in the name of the Bank
on the registration books of DTC, with respect to book-entry
Bonds.
(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 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; provided, however, that if the Letter
of Credit provides for automatic reinstatement, no such confirmation
shall be required.
The Issuer 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 Issuer and authenticated by the Tender Agent,
shall be made available to the extent necessary for delivery pursuant to this
Section.
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
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Remarketing Agent by the Bank or any other Registered Owner, shall be turned
over to the Bank or such other Registered Owner, 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 if there shall have occurred and be continuing
an Event of Default described in clauses (a) through (c) of Section 7.01 hereof.
Anything in this Indenture to the contrary notwithstanding, there shall be no
remarketing of Bonds pursuant to this Article if there shall have occurred and
be continuing any Event of Default described in Section 7.01 hereof 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 60 days' notice to the Issuer, 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 Issuer, by an instrument, signed by the Issuer, filed with the
Tender Agent, the Remarketing Agent and the Trustee.
The initial Tender Agent appointed under this Indenture is U.S. Bank
Trust National Association. The Issuer, with the consent of the Bank, shall
appoint a successor Tender Agent and such successor Tender Agent shall evidence
its acceptance of such appointment by executing and delivering to the Issuer,
the Bank and the Borrower a written acceptance thereof. In the event the Issuer
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 30 days as provided herein the
Trustee shall be appointed as the successor Tender Agent.
SECTION 8.15. PAYING AGENT. The Issuer, with the written approval of
the Bank, may appoint and at all times have a Paying Agent in such cities as the
Issuer deems desirable, for the payment of the principal of, and the interest
(and premium, if any) on, the Bonds. The Issuer 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.
SECTION 8.16. SEVERAL CAPACITIES. Anything in this Indenture to the
contrary notwithstanding, the same entity may serve hereunder as the Trustee,
Tender Agent and Paying Agent and in any other combination of such capacities,
to the extent permitted by law.
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ARTICLE IX
MODIFICATION OR AMENDMENT OF THE INDENTURE
SECTION 9.01. AMENDMENTS PERMITTED.
(a) This Indenture and the rights and obligations of the
Issuer and of the Registered Owners 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 Issuer and the
Trustee may enter into when the written consent of the Registered
Owners 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 (i) 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 Registered Owner of each Bond so affected,
or (ii) reduce the aforesaid percentage of Bonds the consent of the
Registered 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 under this Indenture prior to or on a parity with
the lien created by this Indenture, or deprive the Registered Owners 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 Registered Owners of all of the Bonds then
Outstanding, or (iii) adversely affect the interests of the Tender
Agent without its prior written consent. It shall not be necessary for
the consent of the Registered Owners 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 Issuer 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 Registered Owners 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
Issuer, of the Trustee and of the Registered Owners 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 Issuer and the
Trustee may enter into without the consent of any Registered Owners 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:
(i) to add to the covenants and agreements of the
Issuer 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 Issuer;
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(ii) 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 Issuer may deem necessary or desirable
which do not adversely affect the rights of the Registered
Owners hereunder;
(iii) 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;
(iv) 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
Registered Owners hereunder; and
(v) to modify, amend or supplement this Indenture in
any other respect which does not adversely affect the rights
of the Registered Owners 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 Issuer, the Trustee
and all Registered Owners 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 Issuer so determines shall, bear a notation by
endorsement or otherwise in form approved by the Issuer as to any modification
or amendment provided for in such Supplemental Indenture, and, in that case,
upon demand of the Registered Owner 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 Issuer, to any modification or amendment
contained in such Supplemental Indenture, shall be prepared and executed by the
Issuer and authenticated by the Bond Registrar, and upon demand of the
Registered Owners of
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any Bonds then Outstanding shall be exchanged at the principal office of the
Bond Registrar, without cost to any Registered Owner, 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 Registered Owner from accepting any amendment as
to the particular Bonds held by such Registered Owner, provided that due
notation thereof is made on such Bonds.
ARTICLE X
DEFEASANCE
SECTION 10.01. DISCHARGE OF INDENTURE. The Bonds may be paid by the
Issuer in any of the following ways, provided that the Issuer also pays or
causes to be paid any other sums payable hereunder by the Issuer:
(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 hereof) 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 Issuer pursuant to this Section 10.01(b)
prior to the Fixed Rate Date, the Issuer 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 Issuer shall also pay or
cause to be paid all other sums payable hereunder by the Issuer, then and in
that case, at the election of the Issuer (evidenced by a Certificate of the
Issuer, filed with the Trustee, signifying the intention of the Issuer 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 Issuer under this Indenture shall cease,
terminate, become void and be completely discharged and satisfied except only as
provided in Section 10.02 hereof. In such event, upon Request of the Issuer, the
Trustee shall cause an accounting for such period or periods as may be requested
by the Issuer to be prepared and filed with the Issuer and shall execute and
deliver to the Issuer 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
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the following order (i) first, to the Bank to the extent of any amounts due to
the Bank pursuant to the Credit Agreement, and (ii) 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 hereof) 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 Issuer in respect of such Bonds shall
cease, terminate and be completely discharged, except only that the Registered
Owners thereof shall thereafter be entitled to payment of the principal or
redemption price, as applicable, of and interest on such Bonds by the Issuer,
and the Issuer 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 hereof shall
apply in all events. In the event any of said Bonds are not to be redeemed
within the next succeeding 60 days, the Issuer 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 Registered Owners 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 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 hereof 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
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as provided in Article IV hereof 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 Issuer)
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 Issuer relating to 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 hereof) in the
following order (a) first, to the Bank to the extent of any amounts due to the
Bank pursuant to the Credit Agreement with respect to the Letter of Credit, and
(b) 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.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. LIABILITY OF ISSUER LIMITED TO REVENUES. Notwithstanding
anything in this Indenture or in the Bonds contained, the Issuer 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.
SECTION 11.02. SUCCESSOR IS DEEMED INCLUDED IN ALL REFERENCES TO
PREDECESSOR. Whenever in this Indenture either the Issuer 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 Issuer 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 REGISTERED OWNERS.
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 Issuer, the Trustee, the
Bank, the Borrower and the Registered Owners 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,
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conditions and provisions are and shall be held to be for the sole and exclusive
benefit of the Issuer, the Trustee, the Bank, the Borrower and the Registered
Owners 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
Issuer of any Bonds, the Trustee may, upon Request of the Issuer, in lieu of
such cancellation and delivery, destroy such Bonds (in the presence of an
officer of the Issuer, if the Issuer shall so require), and deliver a
certificate of such destruction to the Issuer.
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 Issuer 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 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 Registered Owner 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 Registered Owner 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 Registered Owner by first-class mail,
postage prepaid, at the address set forth for such Registered Owner 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 Issuer. Any
notice to or demand upon the Issuer, 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.
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If to the Economic Development California Infrastructure and Economic
Bank: Development Bank
801 K Street, Suite 1700
Sacramento, California 95814
Attention: Bond Manager
(916) 322-8520 Fax: (916) 322-7214
If to the Borrower: Roller Bearing Company of America, Inc.
60 Round Hill Road
Fairfield, Connecticut 06430
Attention: Michael S. Gostomski
(203) 255-1511 Fax: (203) 255-3862
If to the Trustee: U.S. Bank Trust National Association
One California Street, 4th Floor
San Francisco, California 94111
Attention: Corporate Trust Department
(415) 273-4500 Fax: (415) 273-4590
If to the Tender Agent: U.S. Bank Trust 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: First Union National Bank
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
Attention: Robert A. Brown
(215) 973-1259 Fax: (215) 786-2877
Credit Suisse First Boston
11 Madison Avenue, 13th Floor
New York, New York 10010
Attention: Mark Callahan
(212) 325-9940 Fax: (212) 325-8304
If to the Remarketing Agent: The Chapman Company
115 Sansome Street, Suite 250
San Francisco, California 94104
Attention: Director of Public Finance
(415) 392-5505 Fax: (415) 392-5276
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-
59
<PAGE>
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, New York 11530
Attention: Call Notification Department
Muni Reorganization Manager
SECTION 11.09. EVIDENCE OF RIGHTS OF REGISTERED OWNERS. Any request,
consent or other instrument required or permitted by this Indenture to be signed
and executed by Registered Owners may be in any number of concurrent instruments
of substantially similar tenor and shall be signed or executed by such
Registered Owners 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 Issuer 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 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 Registered
Owner of any Bond shall bind every future Registered Owner of the same Bond and
the Registered Owner 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 Issuer in accordance therewith or reliance thereon.
SECTION 11.10. DISQUALIFIED BONDS. In determining whether the
Registered Owners 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 Issuer 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 Issuer 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 Issuer 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.
60
<PAGE>
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 Registered
Owners of the Bonds entitled thereto, (subject, however, to the
provisions of Section 10.04 hereof) 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 hereof, 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
hereof, to the Borrower, upon direction of an Authorized Representative
of the Borrower, and thereafter Registered Owners 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
Issuer 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. Registered Owners shall be entitled to look only to the
Bank for payment from such moneys, and all liability of the Issuer, the
Trustee or the Tender Agent with respect to such money shall thereupon
cease, and the Trustee, the Tender Agent, the Issuer, 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 hereof and for the protection of the security of
the Bonds and the rights of every Registered Owner thereof and the Bank's
interest created herein.
SECTION 11.13. WAIVER OF PERSONAL LIABILITY. No member, officer, agent
or employee of the Issuer shall be individually or personally liable for the
payment of the principal of or
61
<PAGE>
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 Issuer 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. Except
as otherwise provided in this Indenture, 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 its rights hereunder in accordance with the Credit Agreement 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 Credit Agreement with
respect to the Letter of Credit have been paid in full or discharged, all
references to the Bank contained herein (other than in Section 10.04 hereof)
shall be null and void and of no further force and effect.
62
<PAGE>
IN WITNESS WHEREOF, the CALIFORNIA INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT BANK has caused this Indenture to be signed in its name by the Chair
of the Issuer and attested by its Secretary and U.S. BANK TRUST 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 INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK
By
------------------------------------
Lon S. Hatamiya, Chair
Attest:
By
------------------------------------
Blake Fowler, Secretary
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By
------------------------------------
Authorized Officer
Attest:
By
------------------------------------
Assistant Secretary
[Signature Page to Indenture of Trust]
63
<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 ISSUER 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 $4,800,000
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
VARIABLE RATE DEMAND
INDUSTRIAL DEVELOPMENT REVENUE BOND, SERIES 1999
(ROLLER BEARING COMPANY OF AMERICA, INC.
- SANTA ANA PROJECT)
MATURITY DATE ORIGINAL ISSUE DATE CUSIP
April 1, 2024 April 30, 1999 _____________
Registered Owner: CEDE & CO.
Principal Sum: FOUR MILLION EIGHT HUNDRED THOUSAND DOLLARS
The CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK (the
"Issuer"), an entity with the Trade and Commerce Agency of the State of
California (the "State"), duly organized and existing under the laws of the
State, particularly Division 1 of Title 6.7 of the California Government Code
(commencing with Section 63000 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
<PAGE>
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 such Interest Payment Date, or unless this bond
is registered on or prior to May 31, 1999, 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 June 1, 1999, 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 April 1 and October 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 U.S. Bank Trust 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 Issuer, U.S. Bank Trust National Association, as tender agent (the
"Tender Agent"), the Trustee, any paying agent, and any agent of the Issuer, the
Tender Agent or the Trustee may treat the person in whose name this bond is
registered as the absolute owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, and the Issuer, 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 Issuer as provided by the Act and the
Issuer 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 Issuer has no taxing power.
No member or officer of the Issuer, 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 Issuer
designated as captioned above (the "Bonds") pursuant to the provisions of the
Act, and pursuant to an Indenture of Trust, dated as of April 1, 1999, between
the Issuer and the Trustee (the "Indenture"). The Bonds are issued for the
purpose of making a loan to Roller Bearing Company of America, Inc., a
corporation duly organized and existing under the laws of the State of Delaware
and qualified to
A-2
<PAGE>
do business in the State of California (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 April 1, 1999, between the
Issuer 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 First Union
National Bank (the "Letter of Credit" and the "Bank," 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 Issuer 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 Issuer 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 May 31, 1999 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 The Chapman
Company (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
A-3
<PAGE>
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.
Each determination of the Weekly Interest Rate by the Remarketing Agent
shall be conclusive and binding on the registered 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 Issuer, 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 (a) notice from the Borrower electing to have the interest rate on the Bonds
converted to a Fixed Interest Rate, (b) 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 (c) 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 registered 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
A-4
<PAGE>
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 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 of the Bonds shall be notified thereof.
At least 30 days prior to the Fixed Rate Date, the Trustee shall give
an irrevocable notice to the registered owners of the Bonds of conversion of the
Weekly Interest Rate borne by the Bonds to the Fixed Interest Rate. Such notice
shall (a) specify the proposed Fixed Rate Date, (b) require registered owners of
all of the Outstanding Bonds to tender their Bonds for purchase on the Fixed
Rate Date and (c) state 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 of the Bonds 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 a
registered owner of the Bonds through the Fixed Rate Date shall be tendered by
the registered 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 registered 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 registered owners of
the Bonds. Any Bond so delivered or notice with respect to which is received
shall be purchased by the Tender Agent on demand of the registered owner thereof
on the close of any Business Day at a purchase price equal to the principal
amount thereof plus
A-5
<PAGE>
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 of the Bond, (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 Issuer 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):
(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 Business Day, 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.
A-6
<PAGE>
(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
or required 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:
<TABLE>
<CAPTION>
NUMBER OF YEARS
FROM FIXED RATE DATE FIRST OPTIONAL REDEMPTION
TO FINAL MATURITY REDEMPTION DATE PRICE
<S> <C> <C>
greater than 9 years 7 years from conversion 101%, declining .5%
annually to 100%
6-9 years 6 years from conversion 100.5%, declining .5%
annually to 100%
less than 6 years no optional redemption
</TABLE>
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 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 the Bank
will not reinstate the interest portion of the Letter of
Credit or that an event of default has taken place under the
Credit 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.
A-7
<PAGE>
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 Issuer and of the
registered 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 registered owners of the Bonds) in the manner, to the
extent, and upon the terms provided in the Indenture; provided that no such
modification or amendment shall (a) 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 Registered Owner hereof,
(b) reduce the percentage of Bonds the consent of the registered 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
registered 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 registered owners of all Bonds then outstanding, or
(c) 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 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 Issuer 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 Issuer, 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.
A-8
<PAGE>
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-9
<PAGE>
IN WITNESS WHEREOF, the California Infrastructure and Economic
Development Bank 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 Issuer and
attested by the manual or facsimile signature of its Secretary, all as of the
date set forth above.
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK
By
---------------------------------
Chair
Attest:
By
---------------------------------
Secretary
A-10
<PAGE>
CERTIFICATE OF AUTHENTICATION AND REGISTRATION
This is one of the Bonds described in the within-mentioned Indenture,
which has been registered on April 30, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By
-----------------------------------
Authorized Signatory
A-11
<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-12
<PAGE>
Exhibit 10.3
================================================================================
REMARKETING AGREEMENT
by and between
THE CHAPMAN COMPANY
and
ROLLER BEARING COMPANY OF AMERICA, INC.
$4,800,000
California Infrastructure and Economic Development Bank
Variable Rate Demand
Industrial Development Revenue Bonds,
Series 1999
(Roller Bearing Company of America, Inc. - Santa Ana Project)
Dated as of April 1, 1999
================================================================================
<PAGE>
REMARKETING AGREEMENT
THIS REMARKETING AGREEMENT (this "Remarketing Agreement"), dated as of
April 1, 1999, by and between ROLLER BEARING COMPANY OF AMERICA, INC., a
California corporation (the "Borrower") and THE CHAPMAN COMPANY (the
"Remarketing Agent").
W I T N E S S E T H:
WHEREAS, the California Infrastructure and Economic Development Bank
(the "Issuer") has issued its Variable Rate Demand Industrial Development
Revenue Bonds, Series 1999 (Roller Bearing Company of America, Inc. - Santa Ana
Project) in the aggregate principal amount of $4,800,000 (the "Bonds"), pursuant
to that certain Indenture of Trust, dated as of April 1, 1999 (the "Indenture"),
by and between the Issuer and U.S. Bank Trust National Association, as trustee
(the "Trustee"); and
WHEREAS, to secure the payment of the principal of, interest on and
purchase price of the Bonds, First Union National Bank (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.
(b) It is understood and agreed that the Remarketing Agent's
responsibilities hereunder and under the Indenture shall include (i)
exercising its best efforts in its sale of
<PAGE>
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 any date on which the Bonds are to
be remarketed pursuant to this Remarketing Agreement, are also subject
to the further conditions that (i) subject to the notice requirement
contained in Section 13(a) hereof relating the rights of the
Remarketing Agent to resign as Remarketing Agent hereunder, 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, and (ii) 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 shall 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.
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) or to use a new disclosure statement ("Disclosure
Statement") 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 or a new Disclosure Statement
reasonably 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 such number of copies of the amendment or
supplement to the Official Statement or the new Disclosure Statement
and documents related thereto as the Remarketing Agent may reasonably
request from time to time and will amend or supplement the Official
Statement or the Disclosure Statement so that at all times the Official
Statement or the Disclosure 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
2
<PAGE>
will take all steps reasonably 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"), 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 April 29,
1999 (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.
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, Inc. and 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 bylaws, 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.
(d) The Remarketing Agent shall use its best efforts to
remarket the Bonds pursuant to this Remarketing Agreement and the
Indenture.
SECTION 5. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
BORROWER. The representations, warranties and agreements of the Borrower set
forth in the Letter of Representation, dated April 29, 1999, from the Borrower
to The Chapman Company, as the underwriter of the Bonds, the Issuer and the
Treasurer of the State of California attached to
3
<PAGE>
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 Credit 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 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 as to the
Borrower or the Project contained in the Official Statement or any
Disclosure Statement or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material fact as to
the Borrower or the Project 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
4
<PAGE>
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 Official Statement or 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 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.
5
<PAGE>
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph
(a) of this Section 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 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 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
6
<PAGE>
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) above.
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 January 1, April 1, July 1 and October 1, commencing on
July 1, 1999 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 amendment or supplement to
the Official Statement or the Disclosure Statement, the registration of the
Bonds and any other documents relating to the Bonds required to comply with
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 THE TRUSTEE, THE PAYING AGENT, THE
TENDER AGENT, THE BANK, AND THE REMARKETING AGENT. The Trustee, the Paying
Agent, the Tender Agent, the Bank, or the Remarketing Agent, in its individual
capacity, 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 its individual
capacity, 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 document in respect of the sale, except to the
extent of its willful misconduct or negligence. 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.
7
<PAGE>
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 upon forty-five (45) days' written
notice to 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
8
<PAGE>
indirectly the federal income tax consequences of interest on
bonds of the general 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 Official Statement or a
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 Official
Statement or 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;
9
<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) All notices, certificates, or other communications given
hereunder shall be deemed sufficiently given on (a) the day such
notices, certificates or other communications are received when sent by
personal delivery, including tested telex or facsimile communication,
or (b) the third day following the day on which the same have been
mailed by first class, postage prepaid, addressed to the Issuer, 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 Issuer or the Borrower to the other shall also be given to
the Trustee, the Tender Agent, Borrower's counsel and the Bank. The
Issuer, 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.
If to the Remarketing Agent: The Chapman Company
115 Sansome Street, Suite 520
San Francisco, California 94104
Attention: Director of Public Finance
Phone: (415) 392-5505
Fax: (415) 392-5216
10
<PAGE>
If to the Issuer: California Infrastructure and Economic
Development Bank
801 K Street, Suite 1700
Sacramento, California 95814
Attention: Bond Manager
Phone: (916) 322-8520
Fax: (916) 322-7214
If to the Borrower: Roller Bearing Company of America, Inc.
60 Round Hill Road
Fairfield, Connecticut 06430
Attention: Michael S. Gostomski
Phone: (203) 255-1511
Fax: (203) 255-3862
If to the Trustee U.S. Bank Trust National Association
or Tender Agent: One California Street, 4th Floor
San Francisco, California 94111
Attention: Corporate Trust Department
Phone: (415) 273-4500
Fax: (415) 273-4590
If to the Bank: First Union National Bank
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
Attention: Robert A. Brown
Phone: (215) 973-1259
Fax: (215) 786-2877
Credit Suisse First Boston
11 Madison Avenue, 13th Floor
New York, New York 10010
Attention: Mark Callahan
Phone: (212) 325-9940
Fax: (212) 325-8304
(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.
11
<PAGE>
(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.
(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.
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<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.
THE CHAPMAN COMPANY
By
---------------------------------------
Managing Director
ROLLER BEARING COMPANY OF AMERICA, INC.
By
---------------------------------------
Michael S. Gostomski, Executive Vice
President
[Signature Page to Remarketing Agreement]
<PAGE>
Exhibit 10.4
================================================================================
TAX REGULATORY AGREEMENT
by and among
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee,
and
ROLLER BEARING COMPANY OF AMERICA, INC.
DATED AS OF APRIL 1, 1999
EXECUTED AS PART OF THE PROCEEDINGS FOR THE
AUTHORIZATION AND ISSUANCE OF:
$4,800,000
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
VARIABLE RATE DEMAND
INDUSTRIAL DEVELOPMENT REVENUE BONDS, SERIES 1999
(ROLLER BEARING COMPANY OF AMERICA, INC. - SANTA ANA PROJECT)
================================================================================
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and is not part of
the Tax Regulatory Agreement.)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Article I
DEFINITIONS
Section 1.01. Definitions.......................................................1
Section 1.02. Reliance on Borrower's Information...............................11
Article II
CERTAIN REPRESENTATIONS BY THE BORROWER
Section 2.01. Description of the Project and Description of the Facilities.....11
Section 2.02. Capital Expenditures.............................................12
Section 2.03. Prior Issues and $40 Million Limit...............................13
Section 2.04. Federal Tax Return Information...................................13
Section 2.05. Composite Issues.................................................13
Section 2.06. Prohibited Uses..................................................14
Section 2.07. No Composite Project.............................................14
Section 2.08. Acquisition of Existing Property.................................14
Section 2.09. Land Acquisition Limit and No Acquisition of Farmland............14
Section 2.10. Representations by the Borrower for Purposes of IRS Form 8038....15
Article III
USE OF BOND PROCEEDS
Section 3.01. Anticipated Use of Proceeds......................................16
Section 3.02. Certification as to Costs of the Project.........................16
Article IV
ARBITRAGE
Section 4.01. Arbitrage Representations and Elections..........................16
Section 4.02. Arbitrage Compliance.............................................18
Section 4.03. Calculation of Rebate Amount.....................................19
<PAGE>
Section 4.04. Payment to United States.........................................21
Section 4.05. Recordkeeping....................................................22
Section 4.06. Rebate Analyst...................................................22
Article V
COMPLIANCE WITH CODE...............................................................23
Article VI
TERM OF TAX REGULATORY AGREEMENT...................................................24
Article VII
AMENDMENTS.........................................................................24
Article VIII
EVENTS OF DEFAULT, REMEDIES
Section 8.01. Events of Default................................................25
Section 8.02. Remedies for an Event of Default.................................25
EXHIBIT A-1 SOURCES AND USES OF FUNDS
EXHIBIT A-2 PROPERTY FINANCED OR REFINANCED BY THE BONDS
EXHIBIT B-1 FORM OF PROVIDER CERTIFICATION FOR A CERTIFICATE OF DEPOSIT
EXHIBIT B-2 FORM OF PROVIDER CERTIFICATION FOR AN INVESTMENT CONTRACT
EXHIBIT B-3 FORM OF BORROWER'S CERTIFICATION FOR A CERTIFICATE OF DEPOSIT INVOLVING THREE BIDS
EXHIBIT C USEFUL LIFE CALCULATION
EXHIBIT D DECLARATION OF OFFICIAL INTENT
</TABLE>
ii
<PAGE>
TAX REGULATORY AGREEMENT
THIS TAX REGULATORY AGREEMENT (this "Tax Regulatory Agreement") is made
and dated as of April 1, 1999, by and among CALIFORNIA INFRASTRUCTURE AND
DEVELOPMENT BANK and its successors or assigns (the "Issuer"), ROLLER BEARING
COMPANY OF AMERICA, INC., a corporation duly organized and existing under the
laws of the State of Delaware and its successors or assigns (the "Borrower"),
and U.S. BANK TRUST 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 $4,800,000 aggregate
principal amount of its Variable Rate Demand Industrial Development Revenue
Bonds, Series 1999 (Roller Bearing Company of America, Inc. (Santa Ana Facility)
Project) (the "Bonds"), the proceeds of which are being loaned to the Borrower
pursuant to a Loan Agreement, dated as of April 1, 1999, between the Issuer and
the Borrower (the "Agreement"), to finance the acquisition and rehabilitation of
a manufacturing facility and the acquisition and installation 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 roller
bearings and precision components 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 Code (as hereinafter defined; 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 1.01. 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.
"ABUSIVE ARBITRAGE DEVICE" means any action which has the effect of (a)
enabling the Issuer or the Borrower to exploit the difference between taxable
and tax-exempt interest rates to
<PAGE>
obtain a material financial advantage; and (b) 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 the Loan Agreement, dated as of April 1, 1999,
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 April 1 of each calendar year
and terminating on March 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 March 31, 2000 (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 Roller Bearing Company of America, Inc., a corporation
duly organized and 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 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.
"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.
2
<PAGE>
"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.
"COMPUTATION DATE" means the Initial Computation Date, 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;
(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;
3
<PAGE>
(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.
"COSTS OF ISSUANCE FUND" means the Costs of Issuance Fund established
pursuant to the Indenture.
"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 April 30, 1999.
"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.
"EXPENDITURE" means a book or record entry which allocates Proceeds of
the Bonds in connection with a Current Outlay of Cash.
"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:
4
<PAGE>
(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 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
5
<PAGE>
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 April 1, 1999,
between the Issuer and the Trustee, and any amendments and supplements thereto.
"Initial Computation Date" means the date a rebate calculation is
required, if any, pursuant to Section 3.03(c) of the Indenture.
"INSTALLMENT COMPUTATION DATE" means the last day of the fifth Bond
Year and each succeeding fifth Bond Year as stated in Section 4.01 hereof or the
last day of any Bond Year prior to the fifth Bond Year selected by the Borrower.
"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
Issuance.
"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 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
6
<PAGE>
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 $4,800,000.
"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% of the net proceeds of an
issue that finances the Manufacturing Facility (after deducting costs of
issuance) 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, but
excluding all 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.
"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.
7
<PAGE>
"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% ownership interest (by value) in a facility or, if no person
holds more than a 10% 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% 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% 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.
"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.
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"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 4.06 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 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.
"RELATED PERSON" means any person if (a) the relationship to such
person would result in a disallowance of loss under Sections 267 or 707(b) of
the Code or (b) 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.
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<PAGE>
"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.
"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%). 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
10
<PAGE>
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, shall be
used to compute the Yield on the Bonds.
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 1.02. 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 2.01. 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
roller bearings and precision components or facilities directly related
and ancillary to such Manufacturing Facility.
(c) The portion of the Facilities which constitutes directly
related and ancillary facilities serves solely the manufacturing
portion of the Facilities, is on the same
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<PAGE>
site as the manufacturing portion of the Facilities and is financed
with not more than 25% of the net Proceeds of the Bonds. In addition,
with respect to the portion of the Facilities to be used for offices,
not more than a DE MINIMIS amount of the functions to be performed at
such offices is not directly related to day-to-day operations of the
Facilities (e.g., a salesman's office is not related to day-to-day
operations of the Facilities).
(d) The Facilities were placed in service no earlier than
March, 1998.
SECTION 2.02. CAPITAL EXPENDITURES. 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 $756,407.
(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 $1,500,000.
(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 $0.
(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 2.03(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.
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<PAGE>
(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.
SECTION 2.03. 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
$10,700,000.
SECTION 2.04. FEDERAL TAX RETURN INFORMATION. The Facilities have a SIC
Code Number of 2013. The Borrower files its federal income tax return at the
Internal Revenue Service Center in Andover, Maryland. The federal employer
identification number of the Borrower is 13-3426227.
SECTION 2.05. 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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<PAGE>
(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 2.06. 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 2.07. 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 2.08. 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 a portion of the Proceeds of the Bonds in
the amount of $1,986,000 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. The Owner
will meet the rehabilitation requirements of Section 147(d)(3) through the
rehabilitation and improvement of the Facilities within the two-year period
following the later of the Date of Issuance or the date the existing property is
acquired. An amount equal to $1,307,137 will be used to accomplish such
rehabilitation and improvement, which amount is greater than the 15% of the
amount of Bond proceeds used to acquire such existing property.
SECTION 2.09. 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 $364,000, which is not greater than 25% 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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<PAGE>
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 its 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:
<TABLE>
<S> <C> <C>
(a) Issuer's employer identification number.........................................68-0304653
(b) Number of 8038 reports previously filed by the Issuer this calendar year.................1
(c) Issue price of the Bonds........................................................$4,800,000
(d) Proceeds used for Accrued Interest......................................................$0
(e) Costs of Issuance (including Underwriter's Discount)...............................$96,000
(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...........................................................$4,704,000
(j) Date of final maturity of the Bonds..........................................April 1, 2024
(k) Interest Rate on the final maturity of the Bonds........................................VR
(l) Issue price of the final maturity of the Bonds..................................$4,800,000
(m) Issue price on the entire issue of the Bonds....................................$4,800,000
(n) Stated redemption price at maturity of the final maturity of the Bonds..........$4,800,000
(o) Stated redemption price at maturity of the entire issue of the Bonds............$4,800,000
(p) Weighted average maturity of the entire issue of the Bonds.....................24.92 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 .................3562
(t) Type of Property financed by Nonrefunding Proceeds of the Bonds:
15
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Land..............................................................................$364,000
Buildings.......................................................................$1,986,000
Equipment with recovery period of more than 5 years.............................$1,046,863
Equipment with recovery period of 5 years or less.......................................$0
Other ..........................................................................$1,307,137
Total..................................................................$4,704,000
==========
</TABLE>
ARTICLE III
USE OF BOND PROCEEDS
SECTION 3.01. 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 3.02. 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.
ARTICLE IV
ARBITRAGE
SECTION 4.01. 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.
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(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 registered owner or credit enhancer of the Bonds.
(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 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) The Borrower elects to treat the last day of
the fifth Bond Year (March 31, 2004) as the initial
Installment Computation Date and the initial rebate payment
date. The Borrower elects to treat the last day of each
subsequent fifth
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Bond Year as subsequent Installment Computation Dates and
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) 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 4.02. ARBITRAGE COMPLIANCE.
(a) 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 byss. 148 of the
Code, including the rebate requirement described in Section 4.03 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 ofss. 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 ofss. 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 an Investment Security, 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 4.02
through 4.06 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 4.02, 4.03 and 4.04 hereof, and the Trustee may rely upon
information provided by the Borrower.
(b) The Revenue Fund and the Purchase Fund will be used
primarily to achieve a proper matching of revenues and debt service on
the Bonds within each Bond Year. With respect to the Revenue Fund and
the Purchase Fund: (i) to the extent amounts are deposited therein, the
Revenue Fund and the Purchase Fund will be depleted at least once a
year except for a carryover amount not to exceed in the aggregate the
greater of one-twelfth of the principal and interest payments on the
Bonds for the immediately preceding Bond Year or the earnings on the
Revenue Fund and the Purchase Fund for the immediately preceding Bond
Year; (ii) any amounts contributed to the Revenue Fund and the Purchase
Fund will be spent within thirteen (13) months of the
18
<PAGE>
date of such contribution to pay debt service on the Bonds; and (iii)
any amount received from the investment or reinvestment of moneys held
in the Revenue Fund and the Purchase Fund will be spent within one year
of receipt thereof, all in accordance with the Indenture. To the extent
the provisions of this Section 4.2(b) are satisfied, amounts in the
Revenue Fund and the Purchase Fund will be invested without regard to
yield and no rebate calculations will need to be made with respect to
any moneys in the Revenue Fund or the Purchase Fund during any Bond
Year.
(c) In general, no rebate calculations will be required with
respect to Sale Proceeds or Investment Proceeds if (i) 100% of expected
Gross Proceeds actually are spent within six (6) months after the Date
of Issuance or (ii) at least 15% of expected Gross Proceeds actually
are spent within six (6) months after the Date of Issuance, at least
60% of expected Gross Proceeds actually are spent within twelve (12)
months after the Date of Issuance, and 100% of actual Gross Proceeds
actually are spent within eighteen (18) months after the Date of
Issuance. The requirement that 100% of actual Gross Proceeds be spent
within eighteen (18) months after the Date of Issuance will be met if
at least 95% of Gross Proceeds is spent within eighteen (18) months and
the remainder is held as a reasonable retainage and such remainder is
spent within thirty months after the Date of Issuance.
SECTION 4.03. 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 Costs of Issuance Fund, the Rebate Fund 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.
(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.
19
<PAGE>
(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 4.06
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, (D) the Costs of Issuance Fund and (E)
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 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
20
<PAGE>
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 4.01 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
4.04 below. The Rebate Analyst shall notify the Trustee of the
Rebate Amount.
(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.
SECTION 4.04. PAYMENT TO UNITED STATES.
(a) Not later than sixty (60) days after each Installment
Computation Date (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 such 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
21
<PAGE>
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 4.03 hereof, 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 4.05. 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 4.04 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.
SECTION 4.06. REBATE ANALYST
(a) To the extent required to comply with the provisions of
Section 4.02 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.
22
<PAGE>
(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 March 31, 2004. 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.
(b) The Bonds are not and shall not become directly or
indirectly "federally guaranteed." Unless otherwise excepted underss.
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) 5% 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 January 28, 1999,
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
23
<PAGE>
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 Treasurer of the State of
California following the public hearing referred to in (d) above.
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
4.05 hereof 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.
24
<PAGE>
ARTICLE VIII
EVENTS OF DEFAULT, REMEDIES
SECTION 8.01. 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 8.02. REMEDIES FOR AN EVENT OF DEFAULT. Upon an occurrence of
an Event of Default under Section 8.01 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.
25
<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 INFRASTRUCTURE AND
DEVELOPMENT BANK
Attest:
By
-----------------------------
Lon S. Hatamiya, Chair
By
-----------------------------
Blake Fowler, Secretary
ROLLER BEARING COMPANY OF AMERICA, INC.
By
-----------------------------
Authorized Signatory
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By
-----------------------------
Authorized Signatory
[Signature Page to Tax Regulatory Agreement]
<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:
<TABLE>
<S> <C>
Face amount of the Bonds....................................$4,800,000
Less: Underwriters' discount.......................................$0
Total amount received from the sale of the Bonds............$4,800,000
</TABLE>
2. Proceeds of the Bonds totaling $4,704,000, 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. $96,000 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........................................$4,800,000
(2) Substantially All Factor......................................... .95%
(3) Total.....................................$4,560,000
==========
(4) Amount paid for qualified Project Costs*
(including interest during construction, if any) $4,704,000
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:
Land $ 364,000
Building $1,986,000
Equipment $1,046,863
Improvements $1,307,137
A-1
<PAGE>
EXHIBIT A-2
PROPERTY FINANCED OR REFINANCED BY THE BONDS
1. Acquisition of the real property located at 3131 West Segerstrom
Avenue, Santa Ana, California 92702 $2,350,000.
2. Rehabilitation of manufacturing facility $1,307,137.
3. Acquisition and installation of manufacturing equipment $1,046,863.
A-2
<PAGE>
EXHIBIT B-1
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 ____________________________
Name __________________________
Title _________________________
B-1
<PAGE>
EXHIBIT B-2
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 ____________________________
Name __________________________
Title _________________________
B-2
<PAGE>
EXHIBIT B-3
FORM OF BORROWER'S CERTIFICATION FOR AN
INVESTMENT CONTRACT INVOLVING THREE BIDS
I, [[Name], [Position], of Roller Bearing Company of America, 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 Infrastructure and Economic Development Bank Variable Rate Demand
Industrial Development Revenue Bonds, Series 1999 (Roller Bearing Company of
America, Inc. - Santa Ana 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___ .
ROLLER BEARING COMPANY OF
AMERICA, INC.
By ____________________________
Name __________________________
Title _________________________
B-3
<PAGE>
EXHIBIT C
USEFUL LIFE OF THE PROPERTY FINANCED
OR REFINANCED BY THE BONDS
COST USEFUL LIFE*
Land $ 364,000 X n/a
Building 1,986,000 X 35 $69,510,000
Equipment 1,046,863 X 10 $10,468,630
Improvements $1,307,137 20 $26,142,740
---------- -----------
4,704,000 106,121,370
Less: cost of land 364,000
----------
$4,340,000
==========
Average life of Project = $106,121,370 / $4,340,000 = 24.45 years.
Useful life of Project for purposes of Section 147(b) of the Code =
24.45 years x 1.20 = 29.34 years
Average life of Bonds = 24.92 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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-01-2000
<PERIOD-START> APR-04-1999
<PERIOD-END> JUN-26-1999
<CASH> 2,372
<SECURITIES> 0
<RECEIVABLES> 22,250
<ALLOWANCES> 169
<INVENTORY> 53,614
<CURRENT-ASSETS> 80,216
<PP&E> 90,175
<DEPRECIATION> 35,165
<TOTAL-ASSETS> 176,458
<CURRENT-LIABILITIES> 42,585
<BONDS> 138,500
0
0
<COMMON> 0
<OTHER-SE> (9,570)
<TOTAL-LIABILITY-AND-EQUITY> 176,458
<SALES> 42,971
<TOTAL-REVENUES> 42,971
<CGS> 31,226
<TOTAL-COSTS> 37,056
<OTHER-EXPENSES> 168
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,388
<INCOME-PRETAX> 2,359
<INCOME-TAX> 900
<INCOME-CONTINUING> 1,459
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,459
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
