CONNECTICUT DEVELOPMENT AUTHORITY
and
SONICS & MATERIALS, INC.
and
XXXXX BROTHERS XXXXXXXX TRUST COMPANY
AS TRUSTEE
================================================================================
TAX REGULATORY AGREEMENT
================================================================================
Dated as of December 12, 1997
Connecticut Development Authority
$3,810,000 Industrial Development Bonds
(Sonics & Materials, Inc. Project) Series 1997
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND INTERPRETATION..................... 2
Section 1.1. Definitions................................................. 2
Section 1.2. Interpretation.............................................. 12
Section 1.3. Covenant with Owners........................................ 13
ARTICLE II
THE PROJECT.............................. 14
Section 2.1. Description of the Project.................................. 14
Section 2.2. Project Representations..................................... 14
ARTICLE III
GENERAL REPRESENTATIONS AND COVENANTS OF THE AUTHORITY......... 16
Section 3.1. Authorization and Public Approval........................... 16
Section 3.2. Reporting Requirements; Volume Cap;
Election as to Issue Size................................ 16
Section 3.3. Issuance Costs.............................................. 17
ARTICLE IV
USE OF PROCEEDS OF THE BONDS...................... 18
Section 4.1. Company's Certification as to Project Costs................. 18
Section 4.2. Final Disbursement.......................................... 20
Section 4.3. Excess Proceeds Redemption.................................. 20
Section 4.4. Form 8038................................................... 21
Section 4.5. Issuance Costs of Bonds..................................... 21
Section 4.6. Sale of the Project......................................... 21
Section 4.7. Change in Use............................................... 21
ARTICLE V
AGGREGATE FACE AMOUNT......................... 23
Section 5.1. Prior Issues................................................ 23
Section 5.2. Capital Expenditures and Other Facilities................... 23
Section 5.3. Aggregate Face Amount....................................... 24
Section 5.4. Action Affecting Aggregate Face Amount...................... 24
Section 5.5. Aggregation of Projects with Respect to
Capital Expenditures..................................... 25
Section 5.6. Covenant.................................................... 25
Section 5.7. Violation of $10,000,000 Limit; Loss of
Interest Deduction....................................... 25
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TABLE OF CONTENTS (cont'd)
Page
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ARTICLE VI
AVERAGE ECONOMIC LIFE AND
AVERAGE MATURITY OF BONDS....................... 26
Section 6.1. Average Economic Life....................................... 26
Section 6.2. Average Maturity of the Bonds............................... 27
ARTICLE VII
COMPOSITE ISSUES AND FEDERAL GUARANTEES................ 28
Section 7.1. Composite Issues............................................ 28
Section 7.2. Federal Guarantees.......................................... 28
ARTICLE VIII
COVENANTS AGAINST ARBITRAGE BONDS................... 29
Section 8.1. Covenants Against Arbitrage Bonds........................... 29
Section 8.2. Responsibility for Rebate Compliance........................ 29
Section 8.3. Covenants Pertaining to Rebate Requirement.................. 29
Section 8.4. Non-Arbitrage Certifications of the Authority............... 41
Section 8.5. Universal Cap Limit on Allocation of
Nonpurpose Investments................................... 47
Section 8.6. Yield Reduction Payments.................................... 48
Section 8.7. Non-Arbitrage Certifications of the Company................. 48
ARTICLE IX
$40 MILLION LIMITATION ON PAB ACTIVITY................. 50
Section 9.1. Current Test-Period Beneficiaries of the Bonds.............. 50
Section 9.2. Current Compliance.......................................... 50
Section 9.3. Future Compliance........................................... 50
Section 9.4. Allocation Rules............................................ 51
ARTICLE X
COVENANTS AND AMENDMENTS........................ 52
Section 10.1. Compliance with Code....................................... 52
Section 10.2. Amendments................................................. 52
Section 10.3. Reliance................................................... 52
Section 10.4. Execution in Counterpart................................... 52
Section 10.5 Trustee Notice Requirements ............................... 53
Schedule A PUBLIC HEARING PROCEDURES
FOR FEDERAL TAX COMPLIANCE PURPOSES........................ 54
Schedule B RECORD OF PUBLIC HEARING................................... 57
Schedule C APPROVAL OF APPLICABLE ELECTED REPRESENTATIVE.............. 58
Schedule D-1 USE OF BOND PROCEEDS....................................... 59
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TABLE OF CONTENTS (cont'd)
Page
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Schedule D-2 SUMMARY OF USE OF BOND PROCEEDS............................ 61
Schedule E [RESERVED]................................................. 63
Schedule F1 IDENTIFICATION OF ASSETS................................... 64
Schedule F2 ECONOMIC LIFE.............................................. 65
Schedule F3 ADJUSTED ECONOMIC LIFE..................................... 67
Schedule F4 AVERAGE ECONOMIC LIFE...................................... 68
Schedule F5 AVERAGE MATURITY OF THE BONDS.............................. 69
Schedule G CERTIFICATE OF COMPLIANCE WITH
$40 MILLION TAX-EXEMPT PRIVATE
ACTIVITY BOND LIMIT........................................ 70
Schedule H ISSUE PRICE LETTER......................................... 71
Schedule I FORM OF CERTIFICATION IN CONNECTION
WITH AN INVESTMENT CONTRACT................................ 72
Schedule J FORM OF CERTIFICATION OF POSTED YIELD
OF A CERTIFICATE OF DEPOSIT................................ 73
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TAX REGULATORY AGREEMENT
THIS TAX REGULATORY AGREEMENT, dated as of December 12, 1997, is by and
among the CONNECTICUT DEVELOPMENT AUTHORITY, a body politic and corporate
constituting a public instrumentality and political subdivision of the State of
Connecticut (the "Authority"), Sonics & Materials, Inc., a corporation, duly
constituted and validly existing under the laws of the State of Delaware
("Company"), and Xxxxx Brothers Xxxxxxxx Trust Company, as trustee (the
"Trustee") under the Indenture of Trust dated as of December 1, 1997, which
parties agree as follows:
W I T N E S S E T H:
WHEREAS, pursuant to a bond resolution duly adopted and the Indenture, the
Authority is issuing the Connecticut Development Authority $3,810,000 Variable
Rate Demand Industrial Development Bonds (Sonics & Materials, Inc. Project)
Series 1997 ("Bonds") on the date hereof and, pursuant to a loan agreement with
the Company, is loaning the proceeds of the Bonds to the Company in order to
finance and refinance the acquisition, construction and equipping of the
Project;
WHEREAS, the acquisition, construction and equipping of the Project will
proceed with due diligence;
WHEREAS, in order to ensure that the requirements of the Internal Revenue
Code of 1986, as amended, are and will continue to be met, the Authority, the
Company, and the Trustee have determined to enter into this Tax Regulatory
Agreement in order to set forth certain representations, expectations,
conditions and covenants relating to the activities of the Authority, the
Company and the Trustee, the Bonds, the Project and the application of proceeds
of the Bonds and other related amounts and unexpended proceeds and other amounts
relating to the Bonds;
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the Authority, the Company, and
the Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. Except as otherwise provided in this section
1.1, capitalized terms used in this Agreement (including the recitals to this
Agreement) shall have the meaning given such terms in the Indenture, or if not
defined therein, in the Loan Agreement. The following words and terms as used in
this Tax Regulatory Agreement shall have the following meanings:
"Act" means Connecticut General Statutes, Section 32-1a et seq.
"Administrative Costs" includes reasonable, direct costs paid by or on
behalf of an issuer for brokerage or selling commissions (but not legal and
accounting fees), investment advisory fees, recordkeeping, safekeeping, custody,
and similar costs, but not general overhead and similar indirect costs (such as
employee salaries and office expenses) and rebate computation costs.
Administrative costs include a brokerage commission, but only to the extent that
the Present Value of the commission does not exceed the Present Value of annual
payments equal to .05 percent of the weighted average amount reasonably expected
to be invested each year of the term of the contract, for an investment contract
purchased with Gross Proceeds regardless of whether the brokerage commission is
paid or incurred on behalf of the Authority or the provider of the investment
contract. For this purpose, Present Value is computed using the taxable discount
rate used by the parties to compute the commission, or, if not readily
ascertainable, a reasonable taxable discount rate. Administrative costs are not
reasonable unless they are comparable to administrative costs that would be
charged for the same investment or a reasonable comparable investment if the
investment were made from a source of funds other than gross proceeds of
tax-exempt bonds. In the case of publicly offered regulated investment companies
(as defined in Code Section 67(c)(2)(B)) and Commingled Funds in which the
Issuer and related parties own less than a 10% interest, reasonable
administrative costs include indirect costs. For any semi-annual period, a
Commingled Fund satisfies the 10% requirement if, based on average amounts on
deposit, this requirement is satisfied for the prior semi-annual period and the
fund does not accept deposits that would cause to fail to meet this requirement.
"Aggregate Face Amount" means the aggregate face amount of the Bonds
determined in accordance with Section 144(a) of the Code.
"Annual Debt Service" means the scheduled amount of interest and
amortization of principal payable for any Bond Year with respect to the issue.
For purposes of determining the debt
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service on an issue, there shall not be taken into account amounts scheduled
with respect to any obligation (or portion thereof) that has been retired before
the beginning of the Bond Year.
"Applicable Elected Representative" means the Governor of the State of
Connecticut.
"Average Economic Life" means the average reasonably expected economic
life, within the meaning of Section 147(b) of the Code, of the assets financed
with the proceeds of the Bonds.
"Average Maturity" means the average maturity of the Bonds within the
meaning of Section 147(b) of the Code.
"Bona Fide Debt Service Fund" means "Bona Fide Debt Service Fund" as such
term is defined in Treas. Reg. ss. 1.148-1(b).
"Bond" or "Bonds" means the Authority's $3,810,000 Industrial Development
Bonds (Sonics & Materials, Inc. Project) Series 1997.
"Bond Counsel" means a firm of attorneys which is nationally recognized as
having experience in the field of municipal finance and which is satisfactory to
the Authority.
"Bond Proceeds" means the amount paid to the Authority by the initial
purchasers of the Bonds as the purchase price, including accrued interest as
defined in Treas. Reg. 1.148-1(b), if any.
"Bond Year" shall mean the period beginning on the date hereof (the date
of delivery of the Bonds) and ending on December 12, 1998; each subsequent
one-year period ending on the anniversary of the day so selected, during which
the Bonds are outstanding; and the period ending on the date the last
outstanding Bond is discharged and beginning the day after the end of the
previous Bond Year.
"Bond Yield" means the Yield on the Variable Yield Issue or the Fixed
Yield Issue, as computed below in Sections 8.3(g) and (h).
"Calculation Date" shall mean the last day of each Bond Year through the
Final Bond Year of the issue.
"Code" means the Internal Revenue Code of 1986 as amended, and the final,
temporary and proposed regulations of the Department of the Treasury promulgated
thereunder.
"Commingled Fund" means any fund or account (A) that contains both Gross
Proceeds of the Bonds and amounts in excess
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of $25,000 that are not such Gross Proceeds (e.g., revenues, proceeds of other
obligations) and (B) in which the Gross Proceeds and other amounts are invested
collectively without regard to the source of moneys in the fund or account. An
open-end regulated investment company as defined in Code Section 851 (i.e., a
regulated investment company that offers for sale or has outstanding any
redeemable security as defined in section 2(a)(32) of the Investment Company Act
of 1940) is not a Commingled Fund.
"Common Reserve Fund or Sinking Fund" means a Commingled Fund that serves
as a reserve or sinking fund for the Bonds and at least one other issue of
obligations.
"Computation Date" shall mean an Installment Computation Date or the Final
Computation Date.
"Computation Credit" shall mean with respect to the Bonds a credit equal
to $1,000 on the last day of each Bond Year during which there are amounts
allocable to Gross Proceeds that are subject to the Rebate Requirement and on
the final maturity date of the Bonds.
"Computation Period" means the period between Computation Dates.
"Conversion Date" means the date the Bonds first become a Fixed Yield
Issue.
"Date of Issue" means the date indicated on the cover hereof.
"De Minimis Amount" shall mean with respect to original issue discount or
premium on an obligation an amount that does not exceed 2% multiplied by the
obligations's stated redemption price at maturity.
"Established Securities Market" shall mean any of the following: a
national securities exchange registered under section 6 of the Securities
Exchange Act of 1934; an interdealer quotation system sponsored by a national
securities association registered under section 15A of the Securities Exchange
Act of 1934; the International Stock Exchange of the United Kingdom and the
Republic of Ireland, Limited, the Frankfurt, Luxembourg and Tokyo Stock
Exchanges and any other foreign exchange or board of trade designated by the
IRS; a board of trade designated as a contract market by the Commodities Futures
Trading Commission or on an interbank market; a system of general circulation (a
quotation medium) that provides a reasonable basis to determine fair market
value by disseminating either recent price quotations of certified brokers and
dealers (including those of a single, identified broker or dealer) or actual
prices of recent sales
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transactions; and dealers and brokers having readily available price quotations.
"Fair Market Value" means, when applied to an Investment, the fair market
value of such investment as determined by the Authority in accordance with
Section 8.3(e) hereof.
"Final Computation Date" shall mean the date that the last outstanding
Bond is discharged.
"Fixed Yield Bond" means any Bond during the period after the date on
which the interest rate and yield on the Bond is fixed and determinable through
its final maturity (i.e. any Bond from the date that it bears interest at a
Fixed Rate.
"Fixed Yield Investment" shall mean any Investment the yield on which is
fixed and determinable on the date of original issue.
"Fixed Yield Issue" means the Bonds as of the first date that all the
Bonds are Fixed Yield Bonds, or at the election of the Authority, on the first
Computation Date following the date on which all the Bonds are Fixed Yield
Bonds.
"Gross Proceeds" shall mean:
(i) the proceeds derived by the Authority from the sale of the Bonds;
(ii) amounts held in the Debt Service Fund;
(iii) other amounts pledged directly or indirectly as security for the
payment of debt service on the Bonds or for any credit enhancement provider,
including amounts, if any, pledged by the Company or any Related Person as
security for the Loan Agreement or credit enhancement agreement, but only if
there is reasonable assurance that such other amounts will be available to pay
debt service on the Bonds, or amounts due under such agreements in the event
financial difficulties are encountered;
(iv) all amounts received by or on behalf of the Authority under the Loan
Agreement with respect to the Bonds, other than amounts properly allocable to
administrative costs set forth in Treasury Regulations Section 1.148-5(e)
(which costs include the cost of issuing, carrying, or repaying the Bonds,
underwriter's discount, and the cost of purchasing, carrying and selling or
redeeming the Loan Agreement) and other than amounts within the allowed .125%
spread between the Bond Yield and the yield on the Loan Agreement;
(v) amounts treated as "replacement proceeds" of the Bonds, as defined in
Treasury Regulations Section 1.148-1(c), if any (i.e., amounts sufficiently
connected to the Project to conclude that such amounts would have been used for
the Project if the
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Bonds had not been issued). The mere availability or preliminary earmarking of
such amounts for the Project is not a sufficient connection. Amounts held under
an agreement to maintain the amounts at a particular level for the direct or
indirect benefit of the Bondholders or any guarantor of the Bonds are
replacement proceeds unless the Authority or Company can grant rights in the
amounts that are superior to the rights of the Holders or guarantor, or the
amounts are reasonably needed at a level that is tested no sooner than every six
months and may be spent subject to a requirement to replenish by the next
testing date; and
(vi) any amounts received as a result of investing the amounts described
in (i), (ii), (iii), (iv) and (v) above.
"Guaranteed Investment Contract" means an investment that has specifically
negotiated withdrawal or reinvestment provisions and a specifically negotiated
interest rate and also means any agreement to supply investments on two or more
future dates (i.e., forward supply contract).
"Hedge" means a contract entered into by the Authority or the Company
primarily to reduce the risk of interest rate changes with respect to the Bonds
(e.g., an interest rate swap, an interest rate cap, a future contract, a forward
contract, or an option.
"Indenture" means that certain Indenture of Trust, dated as of December 1,
1997, by and between the Authority and the Trustee relating to the Bonds.
"Inducement Resolution" means the resolution adopted by the Authority on
June 18, 1997 accepting the application of the Company for assistance in the
financing of the Project.
"Installment Computation Date" shall mean December 12, 2002, and the end
of each succeeding fifth Bond Year.
"Investment" shall mean any security or obligation, any annuity contract,
or any other investment-type property. An investment includes any property held
principally as a passive vehicle to provide income, e.g., a prepayment for
property or services where the principal purpose is to receive an investment
return over the time the prepayment otherwise would be made. A prepayment is not
an investment if it is made for a substantial non-investment purpose and there
is no commercially reasonable alternative to the prepayment or if it is made
substantially on the same terms as the terms permitted a substantial percentage
of similarly situated persons who are not beneficiaries of tax-exempt financing.
An investment includes a contract that would be a hedge (within the meaning of
Treas. Reg. ss.1.148-4(h)) except that it contains a significant investment
element. An interest rate cap contains a significant investment element if the
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payments for the cap are made more quickly than in level annual installments
over the term of the cap or the cap hedged a bond that is not a variable rate
debt instrument under Treas. Reg. ss.1.1275-5. A cap generally contains a
significant investment element if the cap rate is less than the on-market swap
rate on the date the cap is entered into. A Tax-Exempt Investment is not an
Investment.
"Investment Proceeds" means all income, gain or other increment derived
from the investment and reinvestment of proceeds derived from the sale of the
Bonds.
"Issuance Costs" shall have the meaning ascribed to such phrase in Section
147(g) of the Code which describes the same to mean in general all costs
incurred in connection with the borrowing, including, but not limited to,
underwriter's spread, discount or fees, counsel fees (including bond counsel,
underwriter's counsel, Authority's counsel, Company's counsel and specialized
counsel fees), initial fee of the Trustee, fees to the Authority, rating agency
fees, holder fees, accountant fees, printing costs and costs incurred in
connection with obtaining the required public approval for the issuance of the
Bonds.
"Issue Price of the Bonds" shall mean the issue price as defined in Code
Section 1273 and 1274 and generally is the first price at which a substantial
(i.e., 10%) amount of the Bonds is sold to the public (not including bond
houses, brokers, or a similar person or organizations acting in the capacity of
underwriters or wholesalers). The issue price of Bonds for which a bona fide
public offering is made is determined as of the date of sale based on reasonable
expectations regarding the initial public offering price.
"Loan Agreement" means the Loan Agreement, dated as of December 1, 1997,
between the Authority and the Company.
"Municipality" means the Town of Newtown, Connecticut.
"Net Proceeds" means Proceeds reduced by the amount of Proceeds deposited
in a debt service reserve fund.
"Net Sale Proceeds" means Sale Proceeds of the Bonds less the portion
thereof invested as a reasonably required reserve fund and as part of a "minor
portion" under Code Section 148(e).
"Nonpurpose Investment" means all Investment Property in which Gross
Proceeds are invested other than Tax-Exempt Investments and the Loan Agreement.
"Nonqualified Costs" means nonqualified costs as set forth in Schedule D-1
hereto.
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"Opinion of Counsel" means a written opinion of Counsel who may not
(except as otherwise expressly provided herein) be Counsel for the Company or
the Authority and who shall be acceptable to the Authority.
"Plain Par Bond" or "Plain Par Investment" means a Bond or an investment
(i) issued with not more than a De Minimis Amount of original issue discount or
premium (or in the case of investments only, if acquired after its issue date
not more than a De Minimis Amount of market discount), (ii) issued for a price
that does not include accrued interest other than Pre-Issuance Accrued Interest,
(iii) bears interest at either a single, fixed rate at all times or variable
interest calculated pursuant to an objective index (see section 1275 of the
Code), payable at least annually and (iv) its lowest redemption price is not
less than its outstanding principal. The Bonds are Plain Par Bonds.
"Pre-issuance Accrued Interest" means amounts representing interest that
accrued on an obligation for a period not greater than one year before its issue
date but only if paid within one year after the issue date.
"Present Value" shall mean an amount to be determined by using the formula
PV = FV divided by (1+i)^n, where PV equals the Present Value of the amount to
be received or paid, FV equals the amount to be received or paid, i equals the
discount rate (expressed as a decimal) divided by the number of compounding
intervals in a year and n equals the sum of the number of whole compounding
intervals beginning on the date as of which the present value is computed and
ending on the date the amount is to be received or paid, and a fraction, the
numerator of which is the length of any short compounding interval during such
period, and the denominator of which is the length of a whole compounding
interval.
"Present Value of a Bond" in the case of any bond shall mean the Present
Value as of a date of all unconditionally payable payments after such date of
interest on and principal of the bond and Qualified Guarantee payments assuming
its retirement on its final maturity date and using the Yield of such Bond as
the discount rate. The Present Value of a bond subject to the same mandatory
sinking fund installment payment schedule as other Bonds (e.g., term bonds
subject to mandatory sinking fund installment payments) shall be computed in the
same manner, except that the composite Yield of all such Bonds is treated as the
Yield of each such Bond and each mandatory sinking fund installment payment date
is treated as a final maturity date. The Present Value of a Variable Yield Bond
shall be computed using the initial interest rate on the bond as set by the
interest rate setting mechanism to determine the interest payments. If such
substantially identical Bonds have original issue discount not in excess of 1/4%
times the product of the stated redemption price and the number of years to the
weighted average maturity of the
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bonds, the bonds must be treated as redeemed at its outstanding principal amount
plus accrued unpaid interest.
"Present Value of the Investment" shall mean the Present Value as of a
date of all unconditionally payable receipts to be received from and payments to
be paid for the investment after that date, using the Yield on the investment as
the discount rate. All yield restricted investments (other than the Loan
Agreement) may be treated as a single investment with a single yield, whether or
not held concurrently. All yield restricted investments allocable to a refunding
issue that are held in one or more Refunding Escrows are treated as a single
investment with a single yield, whether or not held concurrently.
"Principal User" means any principal user of the Project within the
meaning of Section 144(a)(2)(B) of the Code and Prop. Treas. Reg. ss.
1.103-10(h)(1) including without limitation any person who is the owner, lessee
or user of more than 10% of the Project measured either by occupiable space or
fair rental value under any formal or informal agreement or, under the
particular facts and circumstances, anyone who is a principal customer of the
Project, or anyone who is a Related Person to any of the foregoing. The term
"principal customer" means any person who purchases output of the Project under
a contract if the percentage of output taken or to be taken by such person
multiplied by a fraction the numerator of which is the term of such contract and
the denominator of which is the economic life of the Project, exceeds 10%, and
if such person has an extraordinary degree of control over the use and
operations of the Project, or a part thereof. In the case of a person who
purchases output of an electric or thermal energy, gas, water or other similar
facility, such person is a principal customer if the total output purchased by
such person during any one-year period beginning with the date the facility is
placed in service is more than 10 percent of the facility's output during each
such period. Co-owners or co-lessees who are shareholders in a corporation or
who are collectively treated as a partnership subject to subchapter K under
section 761(a) of the Code are not treated as Principal Users merely by reason
of their ownership of corporate or partnership interests.
"Proceeds" means Sale Proceeds and Investment Proceeds.
"Project" means, collectively, the financing and refinancing with the
proceeds of the Bonds of (i) the acquisition of approximately 7.5 acres of land,
(ii) renovations to an approximately 62,500 square feet building located on the
land, and (iii) the acquisition and installation therein of machinery and
equipment related thereto, all to be used for manufacturing purposes.
"Qualified Costs" means qualified costs as set forth in Schedule D-1
annexed hereto.
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"Qualified Guarantee" means a qualified guarantee within the meaning of
Treas. Reg. Section 1.148-4(f). The Credit Facility issued by Fleet National
Bank is a Qualified Guarantee.
"Rebate Agent" has the meaning given such term in Section 8.3 hereof.
"Rebatable Arbitrage means the difference between the future value of all
the receipts with respect to Nonpurpose Investments, and the future value of all
the payments with respect to Nonpurpose Investments computed as of any date of
calculation based upon the Bond Yield.
"Related Person" means with respect to any Principal User, a person or
entity which is a Related Person as defined in Section 144(a)(3) of the Code by
reference to Sections 267, 707(b) and 1563(a) of the Code, except that "more
than 50 percent" is substituted for "at least 80 percent" in Section 1563(a).
With respect to Substantial Users, the term shall also have the meaning as
defined in Section 147(a)(2) of the Code.
"Sale Proceeds" means any amounts actually or constructively received from
the sale of the Bonds, including amounts used to pay underwriters' discount (if
any) or compensation and accrued interest other than Pre-Issuance Accrued
Interest.
"Stated Redemption Price" means the redemption price of an obligation
under the terms of that obligation, including any call premium.
"Substantial User" means any person constituting a "substantial user"
within the meaning of Section 147(a) of the Code.
"Successor Person" means (i) the transferee (or two or more transferees
who are Related Persons) of substantially all of the properties of a Test-Period
Beneficiary or (ii) a corporation acquiring the assets of a Test-Period
Beneficiary in a transaction described in Code Section 381(a), regardless of
whether the transferor remains in existence after the transfer.
"Tax-Exempt Investment" means an obligation the interest on which is
excluded from gross income pursuant to Section 103 of the Code and which is not
a specified private activity bond as defined in Section 57(a)(5)(C) of the Code
(hereafter "AMT bond"). For this purpose, an obligation the interest on which is
excluded from gross income pursuant to Section 103 of the Code shall include an
interest in a regulated investment company to the extent that at least 95% of
the income to the holder of the interest is interest that is excludable from
gross income under Section 103(a) of the Code.
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"Tax-Exempt Private Activity Bond" means any bond (other than the Bonds)
issued as part of an issue described in Section 141(e)(1)(A), (D) or (F) of the
Code or Section 103(b)(2) of the 1954 Code, as in effect on the day before
enactment of the Tax Reform Act of 1986, provided that interest on such bond is
excludable from gross income for federal income tax purposes.
"Test-Period Beneficiary" means any Person who was, is or will be (i) a
Principal User of the facilities financed by the particular bond issue in
question at any time during the three-year period beginning on the later of the
date the facilities are or were placed in service or the date of original
issuance of such bond issue; (ii) a Related Person to such Principal User at any
time during such three year period; or (iii) a Successor Person to either of the
foregoing.
"Universal Cap" shall mean as of any required date of computation, the
value of all Bonds then outstanding. The value of a Bond shall equal the Present
Value of the Bond but using the Yield on the issue of which such Bonds is a
part, or if the Bonds are Plain Par Bonds, the outstanding principal amount of
Bonds shall be their value.
"Value of a Bond" means in the case of a Plain Par Bond, its outstanding
principal amount plus accrued, unpaid interest and in the case of any other Bond
is its Present Value.
"Value of an Investment" shall mean the following:
A. In the case of an Investment acquired directly with Gross Proceeds
which is:
(i) a Plain Par Investment, the outstanding principal thereof plus
accrued interest;
(ii) a Fixed Rate Investment, its Present Value;
However, at the option of the Authority, any Investment may be valued at its
Fair Market Value. In the case of transferred proceeds, the method of valuing
investments for the refunding bonds must be consistent with the valuing method
for the refunded bonds.
B. In the case of an Investment allocated or reallocated to Bonds (other
than as a result of the application of the transferred proceeds rules, Universal
Cap rule, or the commingled fund rules), its Fair Market Value. Nonpurpose
Investments in a refunding escrow (including transferred proceeds) are treated
as a single investment for valuing and yield purposes. Yield restricted
Investments must be valued at Present Value.
"Variable Yield Bond" means any Bond other than a Fixed Yield Bond.
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"Variable Yield Investment" means any obligation the interest rate on
which, under the terms of the obligation, is adjusted periodically according to
a prescribed formula such that the Yield over the term of the obligation cannot
be determined on the date of original issuance.
"Variable Yield Issue" means the Bonds during any period that they are not
a Fixed Yield Issue.
"Weighted Average Rate of Interest" of an obligation for any period means
the total interest paid or deemed paid during such period divided by the product
of (i) the principal amount of such obligation, and (ii) the amount of time from
the beginning of such period that the obligation is outstanding (expressed in
percentage of years). Weighted Average Rate of Interest for two or more
obligations for any period means the total interest paid during such period
divided by the sum of the products described above.
"Yield" except as otherwise modified herein, means that discount rate
which when used in computing (by the economic accrual method using a 360 day
year semi-annual compounding and other reasonable standard financial accounting
conventions, consistently applied) the Present Value of all unconditionally
payable receipts on an obligation produces an amount equal to the Present Value
of all unconditionally payable payments to acquire the obligation.
"Yield-to-Maturity" shall mean, with respect to a Bond, the Yield which
when used in computing the Present Value of payments of principal of and
interest on a Bond, assuming its retirement on its final maturity date, produces
an amount equal to the initial offering price of the Bond to the public (not
including bond houses or brokers or other persons or organizations acting in the
capacity of underwriters or wholesalers). In the case of Bonds subject to the
same mandatory Sinking Fund Installment payment schedule, the composite
Yield-to-Maturity of such Bonds is determined by assuming the Bonds are retired
in accordance with such schedule and by treating the mandatory Sinking Fund
Installment payment dates as final maturity dates.
"Yield Reduction Payments" means the payments described in Section 8.7.
Section 1.2. Interpretation. In this Tax Regulatory Agreement:
(a) Unless the context requires otherwise, words of the masculine gender
mean and include correlative words of the feminine and neuter genders and words
importing the singular number mean and include the plural number and vice versa.
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(b) Words importing persons include firms, associations, partnerships,
trusts, corporations and other legal entities, including public bodies, as well
as natural persons.
(c) This Tax Regulatory Agreement shall be governed by and construed in
accordance with the applicable laws of the State of Connecticut.
(d) The Table of Contents and the Headings of the several Sections in this
Tax Regulatory Agreement have been prepared for convenience of reference only
and shall not control, affect the meaning or be construed as an interpretation
of any provision of this Tax Regulatory Agreement.
(e) If any provision of this Tax Regulatory Agreement shall be ruled
invalid by any court of competent jurisdiction, the invalidity of such provision
shall not affect any of the remaining provisions hereof.
(f) This Tax Regulatory Agreement shall survive the purchase and sale of
the Bonds, the obligations of the Company to make payments required by Article
VIII hereof, and all indemnities shall survive any termination or expiration of
this Tax Regulatory Agreement and the payment of the Bonds.
Section 1.3. Covenant with Owners. The Authority and the Company agree
that this Tax Regulatory Agreement is executed in part to induce the beneficial
owners to purchase the Bonds. Accordingly, all covenants, agreements,
representations and warranties by the Authority and the Company herein are
declared to be for the benefit of the beneficial owners. Unless the Trustee is
expressly referenced in connection with a particular covenant or representation
under this Agreement, the covenants and representations contained in this
Agreement are the obligations of the Authority or the Company only and shall not
be deemed obligations of the Trustee.
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ARTICLE II
THE PROJECT
Section 2.1. Description of the Project. The Company represents, warrants,
covenants and agrees that:
(a) The financing and refinancing of land, an existing building, and
renovations to the building, together with the acquisition and installation of
equipment to be located in the building, which constitute the Project has
commenced and will be completed within 18 months of the Date of Issue. The
Project is currently in service.
(b) The Project consists of land, an existing building and equipment,
located in Newtown, Connecticut, all to be used for manufacturing, including the
manufacture of liquid processors and welding equipment used in the bonding of
plastics.
(c) Based on current tax and accounting principles, the Project is and
will continue to be land or depreciable property.
(d) So long as any of the Bonds shall be outstanding, the Company
covenants and agrees to maintain and operate the Project as it is described in
this Agreement.
(e) So long as any of the Bonds is outstanding, the Company will not take
any action, nor fail to take any action, which would adversely affect the
tax-exempt status of the Bonds and that it will take and cause to be taken all
actions that may be required of it for the Bonds to be and remain tax exempt.
(f) No portion of the Bond Proceeds (except for the 3% amount discussed in
Section 3.2(a) below) will be used to finance or refinance the costs of
acquiring or renovating its 7,120 square feet of space in the facility which may
be leased to other unrelated persons.
Section 2.2. Project Representations. The Company hereby represents as
follows:
(a) The Project consists only of a facility used in the manufacturing and
production of tangible personal property together with directly related and
ancillary activities located at the same site; except that portions of the
Project to which are allocated not more than 3% of the Bond proceeds may be used
for other activities (e.g. executive offices, sales area). Manufacturing
constitutes substantially all of the economic activity on the site.
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(b) The Project is not, and will not become, part of a single building,
enclosed shopping mall or strip of offices, stores or warehouses any of which
use or will use substantially common facilities such as, but not limited to,
common heating, cooling or other utilities, or common entrances, plazas, malls,
lobbies, parking, elevators or stairways for use by employees, patrons or other
persons, which is, has been or will be financed with the proceeds of any
Tax-Exempt Private Activity Bonds, other than the Bonds.
(c) No more than 25% of the Net Proceeds will be used to finance, a
facility the primary purpose of which is retail food and beverage services,
automobile sales and service or the provision of recreation or entertainment.
(d) None of the proceeds of the Bonds will be used to finance:
(i) any private or commercial golf course, country club, massage
parlor, tennis club, skating facility (including roller skating,
skateboard, and ice skating), racquet sports facility (including any
handball or racquetball court), hot tub facility, suntan facility or
racetrack;
(ii) any airplane, skybox or other private luxury box, any facility
used primarily for gambling, any store the principal business of which is
the sale of alcoholic beverages for consumption off-premises or health
club facility;
(iii) residential real property for family units; or
(iv) farmland.
(e) All office space, if any, included as part of the Project is located
on the premises of the manufacturing building and is used (except for a de
minimis extent) solely for day-to-day operations at such manufacturing facility.
(f) The Standard Industrial Classification Code (SIC Code) for the Project
is 3623.
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ARTICLE III
GENERAL REPRESENTATIONS AND COVENANTS OF THE AUTHORITY
Section 3.1. Authorization and Public Approval. The Authority makes the
following representations, warranties, covenants and agreements as the basis for
the undertakings on its part contained in the financing documents in respect of
the Bonds:
(a) The Inducement Resolution describes the Project and states that,
subject to the conditions therein, the Authority will issue bonds to finance the
Project.
(b) In compliance with Section 147(f) of the Code, the Authority on
November 18, 1997 held a public hearing on the issuance of the Bonds and the
nature and location of the Project following publication of notice of the
hearing on November 4, 1997. The public hearing was conducted by an authorized
representative of the Authority at the offices of the Authority, located at 000
Xxxx Xxxxxx, Xxxxx Xxxx, Xxxxxxxxxxx. Xx November 28, 1997, the Applicable
Elected Representative approved the issuance of the Bonds. To the best of the
Authority's knowledge, said approval has not been withdrawn, revoked, amended or
superseded and it remains in full force and effect.
Section 3.2. Reporting Requirements; Volume Cap; Election as to Issue
Size.
(a) The Authority has complied or will comply with the information
reporting requirements applicable to the issuance of the Bonds under Section
149(e) of the Code.
(b) The limit on the amount of Private Activity Bonds as defined in the
Code which may be issued by the Authority was established by an allocation made
by the State of Connecticut Legislature in Public Act 87-539 as amended by
Public Act 91-210, pursuant to the requirements of Section 146 of the Code. To
the best of the Authority's knowledge, the statute has not been repealed,
withdrawn, amended, or superseded and remains in full force and effect.
(c) The Authority has received from the State of Connecticut private
activity bond volume cap (within the meaning of Section 146 of the Code), and
has remaining unused cap, in an amount at least equal to the greater of the
principal amount or Issue Price of the Bonds.
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(d) In connection with the issuance of the Bonds, the Authority elects to
utilize the $10,000,000 exemption authorized in Section 144(a)(4)(A) of the
Code.
Section 3.3. Issuance Costs.
In no event will the amount of the proceeds derived from the sale of the
Bonds, or the investment income thereon, used to pay Issuance Costs of the Bonds
exceed 2% of the Issue Price of the Bonds. The Company shall provide for the
payment of all Issuance Costs in excess of 2% of the Issue Price of the Bonds
from other available money and not from the proceeds of any obligation the
interest on which is excludable from gross income for federal income tax
purposes under Section 103(a) of the Code sold by a governmental unit within 15
days of the date hereof.
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ARTICLE IV
USE OF PROCEEDS OF THE BONDS
Section 4.1. Company's Certification as to Project Costs. The Company
hereby certifies as follows:
(a) No part of the Project was placed in service (for purposes of the
investment tax credit or cost recovery deductions) by or on behalf of the
Company more than eighteen months before the Date of Issue.
(b) The amount of earnings expected to be received from the investment of
Bond proceeds is as shown in Schedule D-1. Such estimated investment earnings is
based on a projected expenditure schedule for Bond proceeds that is consistent
with the schedule used to estimate interest during acquisition and construction
of the Project.
(c) The amounts shown in Schedule D-1 as Issuance Costs consist only of
costs which are directly related to and necessary for the issuance of the Bonds
and the sum of such amounts do not exceed 2% of the Issue Price of the Bonds.
(d) The amounts shown in Schedule D-1 as Qualified Costs consist only of
Project Costs paid or incurred not earlier than 60 days prior to the adoption of
the Authority's Inducement Resolution which are chargeable to the tax basis of
the Project under Section 1012 of the Code or would be so chargeable but for (or
with) a proper election by the Company.
(e) No person who (i) was a Substantial User of the Project, or any part
or component thereof (or Related Person to such a Substantial User) within the
five-year period preceding the issuance of the Bonds, and (ii) is or will be a
Substantial User of the Project, or any part or component thereof (or a Related
Person to such a Substantial User), within the five-year period immediately
following the issuance of the Bonds has or will receive, directly or indirectly,
an amount equal to five percent or more of the Bond Proceeds for his interest in
the Project or any part or component thereof, except to the extent of any Bond
Proceeds paid as reimbursement for any Project Costs paid or incurred after the
date of the Inducement Resolution to a person who first became a Substantial
User of the Project (or Related Person to such Substantial User) no more than 60
days prior to such date.
(f) The total amount shown in Item 5 of Schedule D-1 as Qualified
Costs (land or depreciable property) is 95% or more of the amount of Net
Proceeds of the Bonds shown in Item 4 of Schedule D-1.
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(g) The amount included in Qualified Costs shown in Item 5 of
Schedule D-1 as costs of "facilities directly related and ancillary to a
manufacturing facility" does not exceed 25% of the Net Proceeds of the Bonds.
"Facilities directly related and ancillary to a manufacturing facility" consist
of short-term warehousing for raw materials and finished products; laboratory
for quality control and for testing potential raw materials; loading docks; rail
spurs; fork lifts (but not delivery trucks or vans); employee parking (provided
it is free of charge and requires no parking attendants); employee restrooms,
locker rooms and eating area (but not in cafeteria or vending machines); display
area stocked with samples to show buyers (but not area staffed with sales
persons); and administrative offices for billing, receiving, inspection and
bookkeeping, provided they are not located in separate building or wing (but not
executive office space).
(h) The amount shown in Item 5 of Schedule D-1 as cost of Land, if
any, is less than 25% of the Net Proceeds of the Bonds.
(i) No amount shown in Item 5 of Schedule D-1 represents a cost
incurred to acquire used equipment unless such equipment was purchased with the
Net Proceeds as an integral component of an existing structure.
(j) No part of the Net Proceeds of the Bonds is or will be used (i)
to finance inventory or for working capital or (ii) to pay any element of profit
(above actual costs incurred) to the Company or any other Principal User or any
Related Person thereto.
(k) No amount shown in Item 5 of Schedule D-1 represents a cost
incurred to acquire an existing building unless "rehabilitation expenditures"
described in paragraph (l) are being made in the amount described in paragraph
(m).
(l) All amounts shown in Item 5 of Schedule D-1 as "rehabilitation
expenditures" consist of costs which are chargeable to capital account, incurred
or to be incurred by the person acquiring the building or equipment (or by a
successor to such person or by the seller of the property under a sales
contract) before the date which is 2 years after the later of the date of
acquisition of the property or the date of issue of the Bonds for property in
connection with the rehabilitation of the building or equipment. In the case of
an integrated operation contained in a building before its acquisition, the term
"rehabilitation expenditures" includes the cost of rehabilitating existing
equipment in the building or replacing it with equipment having substantially
the same function. No portion of the costs listed as "rehabilitation
expenditures" represents (i) costs of
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acquiring the property, (ii) any expenditure attributable to the enlargement of
a building, (iii) any expenditure attributable to a certified historic structure
or to a building located in a registered historic district unless either the
rehabilitation has been certified by the Secretary of the Interior or, in the
case of a building located in a registered historic district, the Secretary of
the Interior has certified that the building is not of historic significance, or
(iv) any expenditure of a lessee if, on the date the rehabilitation is
completed, the remaining term of the lease (determined without regard to renewal
periods) is less than 15 years.
(m) The amounts shown in Item 5 of Schedule D-1 as "rehabilitation
expenditures - Existing Building," together with equity to be expended on
rehabilitation expenditures for the existing building, are 15% or more of that
portion of the cost of acquiring the building financed with Net Proceeds.
Section 4.2. Final Disbursement. Upon the final requisition of Bond
Proceeds to pay Project Costs, the Company shall deliver to the Trustee the
following:
(a) A schedule of the actual amount and use of Proceeds of the Bonds
substantially identical in form and substance to Schedule D-1, Use of Bond
Proceeds.
(b) A certificate of an Authorized Representative of the Company as
to use of Proceeds of the Bonds setting forth substantially the same material as
set forth in Section 2.2 and Section 4.1 hereof.
(c) A report of a certified public accountant to the effect that he
or she is a public accountant as defined under the Rules of Conduct of the Code
of Professional Ethics of the American Institute of Certified Public
Accountants; that they have read the Company's certificate as to use of proceeds
of the Bonds and accompanying schedule of use of proceeds of the Bonds as
referred to in (a) above; that, they have conducted an examination of such
certificate and schedule in accordance with generally accepted auditing
standards and accordingly included such tests of the accounting records and such
other auditing procedures as they considered necessary in the circumstances; and
that in their opinion the amounts shown in the schedule and the statements made
in the certificate are accurate.
Section 4.3. Excess Proceeds Redemption. The Bonds do not have call
protection for a period longer than 10.5 years from the date hereof. Any
redemption of Bonds pursuant to Section 5.2(F) of the Indenture shall comply
with the requirements of Section 1.142-2(c) of the Income Tax Regulations and
the Bonds will be redeemed on the earliest call date or such other
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requirements as Bond Counsel determines to be necessary to assure that interest
on the Bonds remains not includable in gross income for federal income tax
purposes.
Section 4.4. Form 8038. The Summary of Use of Bond Proceeds (the
"8038 Schedule") annexed to Schedule D sets forth the allocation of the Sale
Proceeds to Project Costs. Said summary will be included in the Form 8038 to be
submitted by the Authority to the Internal Revenue Service.
Section 4.5. Issuance Costs of Bonds. The Company hereby certifies
as follows in respect of the Issuance Costs of the Bonds:
(a) The Company or a Related Person shall provide for the payment of
the portion of the Issuance Costs of the Bonds which exceeds 2% of the Issue
Price of the Bonds. This amount is not derived from the proceeds of any
obligation the interest on which is excludable from gross income for purposes of
Section 103(a) of the Code sold by a governmental unit within 15 days of the
date hereof.
(b) The amount paid by the Company or any Related Party as a fee to
the Authority in respect of the Bonds shall be paid at the closing in an amount
equal to .50% of the original principal amount. No other fees are to be paid by
the Company or a Related Person to the Authority in respect of the Bonds.
Section 4.6. Sale of the Project. Prior to any sale or disposition
by the Company (including the grant of a purchase option or a long term
leasehold interest) of or interest in any portion of the Project, the Company
shall furnish to the Authority a written opinion of bond counsel acceptable to
the Authority to the effect that such sale or disposition will not adversely
affect the exclusion of interest on the Bonds from gross income for federal
income tax purposes pursuant to Code Section 103(a). The foregoing shall not
apply to the sale or other disposition of personal property for cash which has
become worn out or obsolete or which is disposed of in the ordinary course of
business due to the other reasons described above, provided that the amount
received from such sale or other disposition shall be used within 6 months for
such purpose as would qualify for tax-exempt financing under Code Section
144(a).
Section 4.7. Change in Use. The Company understands that a change in
the use of the property financed with the Net Proceeds to a use that causes any
of the representations in Article II or the certifications in Section 4.1 to be
inaccurate will result in a loss of income tax deductions for rent, interest, or
equivalent amounts paid by the person making the unqualified use, in addition to
the loss of tax exemption on bond inter-
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est. The Company covenants that the Project will be used as set forth in Section
2.1 of this Tax Regulatory Agreement and the Net Proceeds will be spent in a
manner consistent with Sections 2.2 and 4.1 of this Tax Regulatory Agreement.
The Company agrees that in the event of post-issuance date noncompliance, as
determined in an opinion of Bond Counsel, it will use its best efforts to redeem
the Bonds at the earliest call date or establish a defeasance escrow to call
Bonds at the earliest call date.
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ARTICLE V
AGGREGATE FACE AMOUNT
Section 5.1. Prior Issues. The Company hereby represents that:
(a) The aggregate face amount of the Bonds includes certain
previously issued and outstanding bonds, notes or other debts which are tax
exempt under Section 144(a) of the Code or under the predecessor Section
103(b)(6) of the Internal Revenue Code of 1954 ("Prior Issues"). The Prior
Issues included in the aggregate face amount of the Bonds are those used to
finance property:
(i) a Principal User of such property is also a Principal User
of the Project (or is a Related Person to a Principal User of the Project), and
(ii) the property financed by the Prior Issues is located in,
or is based in, the same incorporated municipality (or same county if the
Project is in an unincorporated area) as the Project, or is located in an
adjacent jurisdiction and the other property is either contiguous with the
Project or is integrated with the Project operations.
(b) The principal amount of such outstanding Prior Issues described
in (a) above is $-0-.
(c) The amount listed in (b) above plus the principal amount of the
Bonds is $3,810,000.
Section 5.2. Capital Expenditures and Other Facilities.
(a) If the amount in Section 5.1(c) above exceeds $1,000,000,
certain capital expenditures with respect to the Project and certain other
facilities are included in determining the aggregate face amount of the Bonds
for purposes of the $10,000,000 limitation in Section 144(a) of the Code. Such
expenditures must be included if paid or incurred within the six year period
beginning three years prior to the date hereof and ending three years after the
date hereof.
(b) Capital expenditures include any amount which may be treated as
chargeable to capital account under general principles of federal income tax law
and accounting, without regard to any rule that would also permit the payor to
elect to treat such expenditures as a current expense and regardless of the
treatment actually elected. Amounts financed from the
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principal of the Bonds or from Prior Issues are not included as capital
expenditures.
(c) Capital expenditures for certain other facilities are included
in the determination of face amount. Such capital expenditures include those
made by any person (not just by the owner or lessee) with respect to the Project
and with respect to facilities:
(i) a Principal User of such facility is also a Principal User
of the Project (or is a Related Person to a Principal User of the Project), and
(ii) the facility is located in the same incorporated
municipality (or the same county if the Project is in an unincorporated area) as
the Project, or is located in an adjacent jurisdiction and the facility is
either contiguous with the Project or is integrated with the Project operations.
Such facilities are "Other Facilities" for purposes of this Section.
(d) The capital expenditures paid or incurred with respect to the
Project and with respect to the other facilities described in (c) above which
have been incurred within the three year period prior to the date hereof are in
the amount of $-0-. The Company reasonably expects that capital expenditures
with respect to the Project and such other facilities during the period three
years after the date hereof will be $50,000.
Section 5.3. Aggregate Face Amount. The amount listed in Section
5.1(c), and the amounts listed in Section 5.2(d), equals $3,860,000.
Section 5.4. Action Affecting Aggregate Face Amount. If at any time
during which any of the Bonds are Outstanding, the Company, any other Principal
User or Related Person proposes (a) to merge or consolidate with, acquire more
than a fifty percent (50%) interest in, or have more than a fifty percent (50%)
interest acquired by any other Person having Other Facilities located in the
Municipality; (b) to lease more than ten percent (10%) of the Project measured
by space or rental value to any other Person having Other Facilities; (c) to
enter into any contract with any Person having Other Facilities under which such
Person is entitled to take output of the Project under terms that would cause
such Person to be a Principal User of the Project; or (d) otherwise take any
action causing any Person not previously considered as a Related Person or a
Principal User to be so considered, the Company hereby covenants and agrees that
it shall first file with the Trustee and the Authority an Opinion of Counsel
satisfactory to the Trustee and the Authority to the
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effect that such action would not cause the interest on the Bonds to be
includable in the gross income of the recipient thereof for Federal income tax
purposes.
Section 5.5. Aggregation of Projects with Respect to Capital
Expenditures. The Company hereby covenants and agrees that it shall use its best
efforts to prohibit any Person from applying any portion of the proceeds of any
Tax-Exempt Private Activity Bond to any financing with respect to the Project or
to any single building, any shopping center or any strip of buildings sharing
substantial common facilities of which the Project is a part, without first
filing with the Trustee and the Authority, an Opinion of Counsel, satisfactory
to the Trustee and the Authority, to the effect that such action would not cause
interest on the Bonds to be includable in the gross income of the recipient
thereof for Federal income tax purposes.
Section 5.6. Covenant. The Company covenants that it will take no
action and will permit no action to be taken which would cause the Aggregate
Face Amount of the Bonds, computed as set forth herein as of this date or any
date prior to three years from the date hereof, to exceed $10,000,000.
Section 5.7. Violation of $10,000,000 Limit; Loss of Interest
Deduction. The Company understands that from such time as the sum of the
original aggregate face amount of the Bonds and the amount of capital
expenditures as described in Section 5.2 paid or incurred during the six year
period beginning three years before, and ending three years after, the Date of
Issue, exceeds $10,000,000, no income tax deduction will be allowed for interest
accruing on the Bonds.
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ARTICLE VI
AVERAGE ECONOMIC LIFE AND
AVERAGE MATURITY OF BONDS
Section 6.1. Average Economic Life.
(a) The Company represents that Schedules F1-F4 set forth the computation
of the Average Economic Life of the Project. As shown in Schedule F4, the
Average Economic Life is 38.8 years.
(b) Computation of Average Economic Life. The Company represents in
connection with the computation of Average Economic Life as follows:
(i) The amount shown in Item 1 of Schedule F1 is the total cost of
all assets eligible for financing under the Indenture whether or not such assets
are actually being financed with the Net Proceeds.
(ii) Schedule F1 sets forth for each asset eligible for financing,
its cost, the ratio of asset cost to total cost and the Net Proceeds allocable
to such asset.
(iii) Schedule F2 sets forth for each asset eligible for financing
its economic life based on Rev. Proc. 62-21 (1962-2 C.B. 418) (for real
property), the Class Life Asset Depreciation Range midpoint life as set forth in
Rev. Proc. 83-35 (for new property other than real property) or an appraisal, a
copy of which is attached to Schedule F2.
(iv) Land is not taken into account in the computation of Average
Economic Life and has been omitted from the list in Schedule F2 because the cost
of Land represents less than 25% of the Net Proceeds.
(v) Column E of Schedule F3 sets forth the adjusted economic life of
each asset listed in Schedule F2, taking into account the period of construction
or acquisition from the date of issue of the Bonds or the period the asset has
been placed in service before the date of issue of the Bonds.
(vi) Column D of Schedule F4 sets forth the weighted life of each
asset calculated by multiplying the amount set forth in Column B of Schedule F4
as Net Proceeds allocable to the asset by its Adjusted Economic Life.
(vii) The Average Economic Life is computed by dividing the total of
the weighted lives set forth in Column D of
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Schedule F4 for all assets by the total amount set forth in Column B of Schedule
F4 as Net Proceeds allocable to the assets.
Section 6.2. Average Maturity of the Bonds.
(a) The Company represents that Schedule F5 sets forth the computation of
the Average Maturity of the Bonds. As shown in Schedule F5, the Average Maturity
of the Bonds is 10.511.
(b) Computation of Average Maturity. The Company represents in connection
with the computation of the Average Maturity of the Bonds, as follows:
(i) Column A of Schedule F5 sets forth the Issue Price of each
separate maturity of Bonds issued as part of such issues, including serial bonds
and mandatory sinking fund installments of term bonds. In the case of a single
term bond being amortized on a level debt, level principal or some other basis,
Column A sets forth the amount of principal maturing in each year.
(ii) Column B of Schedule F5 sets forth the length of term (the
number of years carried to the first decimal point from the date of issue to the
maturity date) for each maturity of Bonds listed in Column A of Schedule F5.
(iii) Column C of Schedule F5 sets forth the weighted maturity for
each maturity of Bonds determined by multiplying the Issue Price (Column A) by
the length of term (Column B).
(iv) The Average Maturity of the Bonds is computed by dividing the
total of the weighted maturities shown in Column C of Schedule F5, by the total
of the Issue Price (Column A).
(c) 120 Percent Rule. Based on the representations described above, the
Average Maturity of the Bonds does not exceed 120 percent of the Average
Economic Life of the Project.
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ARTICLE VII
COMPOSITE ISSUES AND FEDERAL GUARANTEES
Section 7.1. Composite Issues.
(a) Company Representation. The Company represents that no state or
political subdivision thereof, or entity acting on behalf of any state or
political subdivision, has sold any other Tax-Exempt Private Activity Bonds in
the 15 day period preceding the date of sale of the Bonds the proceeds of which
were or are to be used in whole or in part, directly or indirectly, for the
benefit of the Company, any other Principal User of the Project or any Related
Person and that no state or political subdivision thereof, or any entity acting
on behalf of any state or political subdivision, will sell any other Tax-Exempt
Private Activity Bonds in the 15 day period following the date of sale of the
Bonds the proceeds of which are to be applied to such use.
(b) Date of Sale of Variable Rate Obligations. For purposes of Section
7.1(a), the date of sale of Variable Rate Obligations (such as the Bonds) is the
date of sale of such obligations.
Section 7.2. Federal Guarantees.
(a) The Company represents that the United States (or any agency or
instrumentality thereof) will not guarantee (in whole or in part), directly or
indirectly, the payment of principal or interest on the Bonds within the meaning
of Section 149(b) of the Code, and will not lease any portion of the Project.
(b) Other than amounts invested pending use to pay Project Costs or in a
reasonably required reserve fund, if any, none of the Net Proceeds of the Bonds
will be (a) used to make loans or other investments the payments on which are
guaranteed, in whole or in part, by the United States (or any agency or
instrumentality thereof) or (b) invested, directly or indirectly, in deposits or
accounts in a federally insured financial institution within the meaning of
Section 149(b) of the Code.
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ARTICLE VIII
COVENANTS AGAINST ARBITRAGE BONDS
Section 8.1. Covenants Against Arbitrage Bonds.
(a) The Authority and the Company covenant and agree that the Proceeds,
Investments acquired with Proceeds and any other moneys on deposit in any fund
or account maintained in respect of the Bonds (whether such moneys were derived
from the proceeds of the sale of the Bonds or from other sources) will not be
used in a manner which would cause the Bonds to be "arbitrage bonds" within the
meaning of such term in Section 148 of the Code.
(b) The Authority and the Company specifically covenant and agree to
comply with the provisions contained in this Article VIII and all other
provisions of Section 148 of the Code and of Treasury Regulations Sections
1.148-O through and 1.148-11, 1.150-1 and -2, Temporary Treasury Regulations
Sections 1.148-1T through 1.148-11T and 1.150-1T and any successor regulation
for the purpose of assuring that the Bonds do not become "arbitrage bonds"
within the meaning of such term in Section 148 of the Code.
Section 8.2. Responsibility for Rebate Compliance. The Company covenants
and agrees to be responsible for compliance with the provisions contained in
Section 148(f) of the Code and of Treasury Regulations 1.148-0 through 1.148-11
, 1.150-1, and -2, Temporary Treasury Regulations Sections 1.148-1T through
1.148-11T and 1.150-1T and any successor regulations thereto, for the purpose of
assuring that the Bonds do not become "arbitrage bonds" within the meaning of
such term in Section 148 of the Code.
Section 8.3. Covenants Pertaining to Rebate Requirement.
(a) Responsibilities of Parties.
(i) Company. The Authority and the Company acknowledge that the
continued exclusion from federal gross income of interest on the Bonds depends,
in part, upon compliance with the rebate requirement of Section 148(f) of the
Code. The Authority authorizes the Company to take any action necessary to
comply with this requirement. The Company hereby agrees and covenants that it
shall do and perform all acts and things necessary, to the extent such actions
are within the control of the Company, in order to assure that the rebate
requirement of Section 148(f) of the Code is met. To that end, the Company, on
behalf of the Authority, shall take the actions described in Section 8.3.
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(ii) Trustee. The Trustee shall furnish the investment information
and make the transfers, dispositions and payments required by this Section 8.3
and Section 5.6 of the Indenture upon receipt of proper direction by the
Company. The Trustee shall be deemed conclusively to have complied with the
provisions of this Section 8.3 and Section 5.6 of the Indenture if it follows
the directions made to it by or on behalf of the Company pursuant to this
Section 8.3, including supplying all necessary information. The Trustee shall
have no obligation to rebate any amounts required to be rebated to the federal
government pursuant to this Section 8.3, other than from moneys held in the
funds or accounts created under the Indenture or from other funds provided it by
the Authority or the Company. The Trustee shall be fully protected in acting on
any determination made by the Company or its Rebate Agent regarding rebate
payments of any kind or contained in any certificate and shall not be liable or
responsible in any manner, except for gross negligence or wilful misconduct, to
any person so acting, notwithstanding any error in such determination. The
Trustee shall not be responsible or liable to the Authority or the Company, or
any other party, for the failure of the Authority or the Company to comply with
the provisions of this Section 8.3 or Section 5.6 of the Indenture and shall
have no obligation to notify the Company of its failure to so comply.
Notwithstanding any other provision herein or in any supplement hereto, the
Trustee shall have no responsibility or liability as to the accuracy of the
representations of the Authority or the Company herein or in any supplement
hereto or as to compliance by the Authority or the Company with the covenants
and agreements of the Authority and the Company herein or in any supplement
hereto.
(iii) Cooperation of Authority. The Authority covenants and agrees
that it shall do and perform all acts and things necessary, to the extent such
actions are within the control of the Authority, in order to assure that the
rebate requirement of Section 148 is met in respect of the Bonds. Upon request
of the Company or the Trustee, the Authority agrees to render all reasonable
cooperation and assistance as may be required to carry out the provisions of
this Section 8.3 and Section 5.6 of the Indenture, such cooperation to include
the Authority's authorization of the Company to communicate with the Internal
Revenue Service on behalf of the Authority and in respect of the rebate
requirement of Code Section 148(f) as applied to the Bonds and any related
administrative or judicial proceedings.
(iv) Company's Indemnification of Authority and Trustee. The Company
shall be liable and shall indemnify and hold the Authority and the Trustee
harmless against liability for any and all payments due to the United States
pursuant to Section 148(f) of the Code. Further, the Company agrees that the
Authority and the Trustee shall not be held liable for any mistake or
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error, other than, in the case of the Trustee, an act of gross negligence or
wilful misconduct, in the filing of the payment or the determination of the
amount due the United States or the providing of information necessary for such
determination, resulting in any consequence other than liability for payments
due to the United States.
(b) Exceptions from Rebate Requirement
(i) General. Each of the following exceptions from the rebate
requirement operates independently. Gross Proceeds may qualify for one exception
without regard to whether another of the exceptions is also available. If an
exception is applicable, the Company may nevertheless choose not to use the
exception, except in the case of Section 8.3(b)(v).
(ii) Six Month Exception. The rebate requirement does not apply if
95% of the Gross Proceeds (other than certain types of Gross Proceeds described
below) are spent for the Project within six months of the Date of Issue and 100%
within one year. The Gross Proceeds not eligible for this exception, and thus
subject to the rebate requirement (unless another exception applies), are:
amounts in a Bona Fide Debt Service Fund, amounts in a reasonably required
reserve fund (including amounts in any collateral fund for a credit facility),
Gross Proceeds arising after the six month period that were not reasonably
expected as the Date of Issue, and payments on the Loan Agreement. The exception
will not apply if on the Date of Issue Gross Proceeds are reasonably expected to
arise after the six month period.
(iii) Eighteen Month Exception. The rebate requirement does not
apply if all of the Gross Proceeds (other than certain types of Gross Proceeds
described below) are spent for the Governmental Purpose in accordance with the
following schedule: at least 15% within the 6 months from the Date of Issue, at
least 60% within 12 months of the Date of Issue, and 100% within 18 months of
the Date of Issue, except that a reasonable retainage (not to exceed 5% of such
Gross Proceeds) to promote performance or to cover disputes need not be expended
until 30 months after the Date of Issue. Also, failure to satisfy the third
spending requirement is disregarded if the Company exercises due diligence to
complete the Project and the amount of the failure does not exceed the lesser of
3% of the Issue Price or $250,000. To determine compliance with the first two
spending periods, the amounts of Investment Proceeds included in Gross Proceeds
is the amount estimated as of the Date of Issue. The Gross Proceeds not eligible
for this exception and thus subject to the rebate requirement (unless another
exception applies) are: amount in a Bona Fide Debt Service Fund, amount in a
reasonably required reserve fund (including amounts in any collateral fund for a
credit facility), Gross Proceeds arising more
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than 18 months after the Date of Issue that were not reasonably expected as of
the Date of Issue; and payments on the Loan.
(iv) Project Purpose. In applying Sections 8.3(b)(ii) and (iii), the
Project includes payments of interest, but not principal, on the Bonds.
(v) Bona Fide Debt Service Fund Exception. Any amount earned on a
Bona Fide Debt Service Fund for a Bond Year shall not be subject to the Rebate
Requirement if the gross earnings on such fund for such year is less than
$100,000. Gross earnings shall be deemed to be less than $100,000, if the
average annual debt service on the Bonds is less than $2,500,000.
(c) Investment Information Requirements.
(i) Investment Information to be obtained from the Trustee. The
Company shall obtain from the Trustee the following information:
(A) the date upon which each Investment is purchased with
amounts in funds and accounts under the Indenture;
(B) the purchase price of each Investment (net of commissions,
administrative expenses and similar expenses);
(C) the date of sale or maturity of each Investment;
(D) the proceeds received on the sale or maturity of each
Investment (recording separately commissions, administrative
expenses and similar expenses to the extent such information is
obtainable with a good faith effort); and
(E) earnings received with respect to each Investment.
The Trustee agrees to supply the foregoing information not later
than 20 days after the end of each Bond Year.
(ii) Investment Information Requirements Applicable to the Company.
The Company will maintain records adequate to determine the Rebate Requirement.
Such records will include, but are not necessarily limited to, information
regarding the following with respect to each and every Nonpurpose Investment by
the Company allocated to Gross Proceeds:
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(A) the date of expenditure of all amounts held in the funds and
accounts under the Loan Agreement and Indenture and
(B) with respect to each Investment held in the funds or accounts
under the Indenture:
(1) the purchase price (recording separately commissions,
administrative expenses and similar expenses);
(2) nominal rate of interest;
(3) amount of accrued interest (included in purchase price)
(4) par or face amount;
(5) purchase date;
(6) maturity date;
(7) amount of original issue discount or premium (if any);
(8) type of Investment;
(9) frequency of periodic payments;
(10) period of compounding;
(11) yield to maturity;
(12) date of disposition;
(13) amount realized on the disposition (including accrued
interest) recording separately commissions, administrative expenses
and similar expenses)
(14) market price data sufficient to establish that the
purchase price was equal to the fair market value on the date of
acquisition or, if earlier, on the date of a binding contract to
acquire such Investment; and
(15) market price data sufficient to establish the fair market
value of any Investment as of any Computation Date, and as of the
date such Investment becomes allocable to, is sold, or otherwise
ceases to be allocable to, Gross Proceeds.
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(d) Record-Keeping Obligation. The Company shall retain such information,
together with the records described in Section 8.3(c)(i) hereof and the records
of the determinations required by Section 8.3 hereof until six years after the
Final Computation Date or for such other period as the Treasury Department may,
by regulations or rulings, provide.
In the event, as a result of a failure of the Company to provide
directions, the Trustee invests amounts held under the Indenture without
direction from the Company, the Trustee shall retain with respect to such
investments documentation to establish that all such investments have been
acquired and disposed of in arms'-length transactions at prices equal to their
Fair Market Value. In particular, the Trustee shall retain evidence to show that
the requirements relating to the specific investments described in Section
8.3(e)(i)(C) and Section 8.3(e)(i)(D) have been met. For United States Treasury
obligations purchased directly from the Treasury, proof of the price paid
therefor shall be sufficient evidence.
(e) Investment Valuation Rules.
(i) In General. The Company agrees to comply with the following
provisions and procedures in respect of the acquisition and disposition of
Nonpurpose Investments. In this regard, the Company agrees, among other things,
that it will not acquire or cause to be acquired any Nonpurpose Investment
acquired with Gross Proceeds for an amount in excess of its Fair Market Value or
sell or otherwise dispose of any such Nonpurpose Investment for an amount less
than its Fair Market Value.
(A) The Fair Market Value of any Nonpurpose Investment for which
there is an Established Securities Market shall be determined as provided
below. Except as otherwise provided below, any market especially
established to provide a Nonpurpose Investment to an issuer of municipal
obligations shall not be treated as an established market. Any investment
not of a type traded on an Established Securities Market is rebuttably
presumed to be acquired or disposed of for a price that is not equal to
its Fair Market Value, except for the safe harbors set forth in paragraphs
3 and 4 hereof.
(B) The Fair Market Value of any Nonpurpose Investment for which
there is an Established Securities Market shall mean the price at which a
willing buyer would purchase the investment from a willing seller in a
bona fide arms'-length transaction determined on the date on which the
contract to purchase or sell becomes binding (i.e. the trade date).
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If a United States Treasury obligation is acquired directly from or
disposed of directly to the United States Treasury, such acquisition or
disposition shall be treated as establishing a market for the obligation
and as establishing the Fair Market Value of the obligation.
(C) In the case of a certificate of deposit issued by a commercial
bank which has a fixed interest rate, a fixed principal payment schedule,
and a substantial penalty for early withdrawal, the certificate of deposit
shall be considered acquired or disposed of for an amount equal to the
Fair Market Value of the certificate of deposit if the certificate of
deposit has a yield not less than the yield on reasonably comparable
direct obligations of the United States and the yield on the certificate
of deposit is not less than the highest yield that is published or posted
by the provider to be currently available from the provider on comparable
certificates of deposit offered to the public (See Schedule J for the
certification).
(D) In the case of a Guaranteed Investment Contract, the obligations
acquired thereunder shall be considered acquired or disposed of for an
amount equal to the Fair Market Value of such obligations if:
(1) the purchaser makes a bona fide solicitation for a
Guaranteed Investment Contract with specified material terms and
receives at least three bids on the contract from persons other than
those with an interest in the Bonds (e.g., underwriters or brokers);
(2) the purchaser purchases the highest yielding
investment contract for which a qualified bid is made (determined
net of broker's fees);
(3) the determination of the price of the Guaranteed
Investment Contract takes into account as significant factors, the
purchaser's reasonably expected draw-down schedule for the funds to
be invested, exclusive of float funds and reasonably required
reserve or replacement funds;
(4) the collateral security requirements and other terms
for the Guaranteed Investment Contract are reasonable, based on all
the facts and circumstances;
(5) the provider of the Guaranteed Investment Contract
certifies those administrative costs that are reasonably expected to
be paid to third parties in connection with the contract (see
Schedule I); and
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(6) the yield on the Guaranteed Investment Contract
(determined net of brokers' fees) is not less than the yield
currently available from the provider on reasonably comparable
contracts offered by the provider to other persons, if any, from a
source of funds other than gross proceeds of an issue of tax-exempt
bonds.
(f) Computation of Bond Yield; Variable Yield Issue.
(i) General. When the Bonds are a Variable Yield Issue, the Bond
Yield is computed separately for each Computation Period and means the Yield
that produces, as of the first day of the Computation Period, a Present Value of
all payments made on the Bonds attributable to the Computation Period equal to
the Present Value of all prices received for the Bonds during such period.
(ii) Bond Payments. Payments on the Bonds attributable to a
Computation Period are:
(A) the Purchase Price of Bonds actually tendered for by
Bondholders for purchase during such period, the Redemption Prices (or, if
greater, Value) of the Bonds actually redeemed during such period and the
principal of the Bonds coming due during such period;
(B) payments during such period for Bond interest that accrued
during such period or that accrued during the preceding Computation Period and
was included in the Value of a Bond outstanding at the end of such preceding
period;
(C) the Value of the Bonds outstanding on the last day of such
period; and
(D) amounts properly allocable to fees for a Qualified
Guarantee of the Bonds for such period.
(iii) Bond Prices. Prices received for the Bonds attributable to the
Computation Period are:
(A) in the case of the first day of the first Computation
Period (i.e., the Date of Issue), the Issue Price of the Bonds; and in the case
of the first day of each succeeding Computation Period, the Value of the Bonds
outstanding as of the last day of the preceding Computation Period; and
(B) the Purchase Prices of Bonds paid by buyers in a
remarketing of the Bonds which occurs during the period.
(iv) Fixed Yield Bonds Included in a Variable Yield Issue. If, when
the Bonds are Variable Yield Issue, some of the
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Bonds are Fixed Yield Bonds, the Bond Yield shall be computed pursuant to this
Section 8.3(f); however, the special rules set forth in Section 8.3(g)(iii) for
certain Fixed Yield Bonds shall apply to determine Bond payments and Bond prices
in respect of such Bonds in a Computation Period.
(g) Computation of Bond Yield: Fixed Yield Issue.
(i) General. When the Bonds are a Fixed Yield Issue, the Bond
Yield shall be the Yield that produces, as of the Conversion Date, a Present
Value of all unconditionally payable payments of principal and interest paid
after such date and fees for a Qualified Guarantee properly allocable to the
period after such date equal to the Value of the Bonds outstanding on such date.
(ii) Mandatory Sinking Fund Redemption. In determining Bond
Yield, Bonds of the same maturity subject to the same mandatory sinking fund
redemption schedule shall be treated as redeemed in accordance with the
redemption schedule for an amount equal to their Present Value, unless the
Stated Redemption Price at maturity of such Bonds does not exceed the Value of
the Bonds at the Conversion Date by 1/4% times the product of the Stated
Redemption Price at maturity and the number of years to the weighted average
maturity date of the Bonds subject to the same redemption schedule, in which
case the Bonds are treated as redeemed at their outstanding principal amount
plus accrued, unpaid interest.
(iii) Optional Early Redemption. In determining Bond Yield,
certain Bonds subject to optional early redemption shall be treated as redeemed
for their Stated Redemption Price on the optional redemption date that produces
the lowest Bond Yield. This rule applies to Bonds subject to optional redemption
if (1) the first optional redemption date is within 5 years of the Conversion
Date and the Bond Yield (assuming no optional redemptions occur) is .125%
greater than the Bond Yield (assuming all Bonds optionally redeemable within 5
years of the Conversion Date are redeemed at their earliest redemption date);
(2) the Value of the Bonds exceeds their Stated Redemption Price at Maturity by
more than the product of 1/4% and the number of complete years to the first
optional redemption date of the Bonds; or (3) the Bonds bear interest at
increasing interest rates (i.e. stepped coupon bond).
(iv) No Recomputation of Bond Yield. The Bond Yield of a Fixed
Yield Issue shall be computed as of the Conversion Date and shall not be
recomputed unless the Authority transfers, waives, modifies, or engages in a
similar transaction regarding any right that is part of the terms of a Bond or
is otherwise associated with the Bond (e.g., a redemption right) in
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a transaction separate and apart from the event that causes the Bonds to be a
Fixed Yield Issue. If such a transfer, waiver, etc., occurs the Bond Yield shall
be recomputed as if the Bonds were retired and reissued on the date of such
occurrence for a price equal to the Value of the Bonds on such date and the
recomputed Bond Yield shall take into account any amounts received by the
Authority or the Company or a Related Person to the foregoing as consideration
for the transfer, waiver, etc.
(h) Allocation of Qualified Guarantee Payments.
(A) General. Payments for a Qualified Guarantee must be
allocated to Bonds and Computation Periods in a manner properly reflecting the
proportionate credit risk to the guarantor.
(B) Initial Fees. Reasonable credit facility set-up fees may
be allocated ratably during the initial term of the credit facility.
(C) Variable Yield Bonds.
(1) If a Variable Yield Bond is redeemed early, the fees
otherwise allocable to the period after redemption are allocable to Bonds that
remain outstanding, or, if none, the period before the redemption.
(2) Non-level fees for a Qualified Guarantee for
Variable Yield Bonds are properly allocated if, after each Bond Year the
guarantee is in effect, an equal amount (proportionately reduced for any short
Bond Year) is treated as paid at the beginning of that Bond Year. The Present
Value (computed using a discount rate equal to the yield on the guaranteed Bonds
determined without regard for the non-level payments) of the annual amounts must
equal the fee for the guarantee allocated to that Bond.
(i) Hedge. Neither the Authority nor the Company nor any Related Person to
the foregoing has entered into, or expects to enter into a hedge in respect of
the Bonds. In the event a hedge is entered into for the Bonds, the Authority and
the Company covenant to consult with Bond Counsel as to the computation of Bond
Yield.
(j) Rebatable Arbitrage.
(i) Frequency of Calculation; Rebate Exceptions. Rebatable Arbitrage
shall be calculated as of each Computation Date and as of the last day of each
Bond Year. However, see Section 8.3(b) above for instances in which Rebatable
Arbitrage need not be computed in respect of certain Gross Proceeds.
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(ii) Special Rule for End of Bond Year Calculations. When the Bonds
are a Variable Yield Issue, Rebatable Arbitrage shall be calculated as of the
last day of a Bond Year based on a Bond Yield determined in a manner similar to
the method of determination set forth in Section 8.3(f), using the Bond Year as
the period of computation. Calculations performed at the end of a Bond Year are
performed solely for determining the deposits to the Rebate Fund and do not
affect the calculation of the Rebatable Arbitrage on each Computation Date.
(iii) Receipts. Receipts with respect to a Nonpurpose Investment
include all constructive as well as all actual receipts with respect to such
investment. Constructive receipts include (1) in the case of a Nonpurpose
Investment that is allocated to Gross Proceeds as of the last day of the
Computation Period (or as of the last day of the Bond Year), the Value of the
Nonpurpose Investment on such date and (2) in the case of a Nonpurpose
Investment that ceases to be allocated to Gross Proceeds before its disposition
or redemption (e.g., the investment becomes allocable to transferred proceeds of
another issue or ceases to be allocated to the issue by operation of the
Universal Cap) the Value of the Nonpurpose Investment on the date it ceases to
be allocated to the issue. Receipts in respect of a Nonpurpose Investment are
reduced by reasonable direct Administrative Costs (see paragraph (v) below).
Receipts in respect of Investments do not include recoveries of overpayments of
rebate.
(iv) Payments. Payments with respect to a Nonpurpose Investment
include all amounts of Gross Proceeds directly used to purchase such Nonpurpose
Investment, adjusted for direct Administrative Costs. Where a Nonpurpose
Investment is allocated to Gross Proceeds but was not directly purchased with
Gross Proceeds, there shall be treated as a payment in respect of such
investment the Value of such investment on the date it is allocated to Gross
Proceeds. For a Nonpurpose Investment allocated to an issue at the end of the
Computation Period (or at the end of the Bond Year), the Value of that
investment on the first day of the next Computation Period (or on the first day
of the next Bond Year) shall be treated as a payment. Payments in respect of
Nonpurpose Investments include the Computation Credit and any Yield Reduction
Payments made on Nonpurpose Investments.
(v) Reasonable, direct and indirect Administrative Costs may be
taken into account with respect to investments of Gross Proceeds in both
regulated investment companies (within the meaning of Section 67(c)(2)(b) of the
Code) and in a Commingled Fund in which the Authority and the Company and all
members of the same controlled group as the Authority or the Company own less
than 10% of the beneficial interest in the investments of the Commingled Fund.
For purposes of regulated investment companies and Commingled Funds only,
"administrative costs"
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include costs paid by or on behalf of an issuer for brokerage or selling
commissions, legal and accounting fees, investment advisory fees, recordkeeping,
safekeeping, custody, and similar costs and expenses of a fund as well as
indirect costs such as general overhead. Administrative Costs also include
12(b)-1 fees charged by a regulated investment company.
Administrative Costs for other investments include a brokerage
commission for an investment contract purchased with Gross Proceeds regardless
of whether the brokerage commission is paid or incurred on behalf of the
Authority or the provider of the investment contract. Whether the administrative
costs are reasonable is based on all the facts and circumstances including,
without limitation, whether or not comparable in nature and amount to customary
administrative costs that would be charged for the same investment if the
investment were made from a source of funds other than Gross Proceeds. See
Section 1.148-5T(e) (2)(iii) of the Temporary Treasury Regulations for the
special rule for administrative costs of a Guaranteed Investment Contract.
Under no circumstances, however, may administrative costs paid or
incurred for computing Rebateable Arbitrage be taken into account.
(vi) Future Value Formula. The future value of a receipt or payment
in respect of a Nonpurpose Investment shall be determined by using the following
formula:
FV=PV(1 + i)^n
where:
FV = the future value of the receipt or payment;
PV = the amount of the receipt or payment;
i = Bond Yield divided by the number of compounding
intervals in a year; and
n = the number of whole or fractional compounding intervals from the
date of the receipt or payment to the last day of a Bond Year or the
Computation Period.
(vii) Maintenance of Rebate Requirement in the Rebate Fund; Deposits
and Withdrawals from Rebate Fund. There shall be maintained in the Rebate Fund
an amount equal to the Rebatable Arbitrage for the Bonds determined from time to
time as of each date of calculation of the Rebatable Arbitrage. If the Rebatable
Arbitrage as so determined exceeds the amount on deposit in the Rebate Fund,
then within 60 days of such calculation date, the Company shall transfer from
its own funds (or the Company shall
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direct the Trustee to withdraw from the funds and accounts held under the
Indenture and transfer) to the Rebate Fund an amount such that the balance in
the Rebate Fund after such transfer equals the Rebatable Arbitrage as of such
date of calculation. If the amount on deposit in the Rebate Fund exceeds the
Rebatable Arbitrage as so determined, the Trustee, upon written direction of the
Company, shall withdraw such excess amount and transfer such amount as provided
in the Indenture. Any amounts remaining in the Rebate Fund after payment with
respect to all the Bonds and payment of the amounts described in subsection (ix)
of this Section 8.3(j), or provision made therefor satisfactory to the Trustee,
including accrued interest and payment of any applicable fees to the Trustee and
satisfaction of the requirements of this Section 8.3(j), shall be withdrawn by
the Trustee and paid to the Company upon written direction of the Company. The
Company covenants to make deposits to the Rebate Fund in the event the amounts
in the Rebate Fund and transfers of the available amounts from the funds and
accounts under the Indenture are insufficient to meet the Rebatable Arbitrage
requirement on the end of any Bond Year or any Computation Date.
(viii) Withdrawals to Pay United States. Within 60 days after each
Computation Date, the Company shall direct the Trustee to make any required
rebate payments related to such date to the United States. The rebate payment as
of any Installment Computation Date shall be an amount which, when added to the
future value of previous rebate payments, equals at least 90% of the Rebatable
Arbitrage calculated as of such Computation Date. The rebate payment as of the
Final Computation Date shall be an amount, which when added to the future value
of all previous rebate payments, equals 100% of the Rebatable Arbitrage
calculated as of such Final Computation Date.
(ix) Place and Manner of Rebate Payments. Each rebate payment shall
be made to the Internal Revenue Service Center, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
on or before the date such payment is due and shall be accompanied by IRS Form
8038-T.
(k) Survival of Defeasance or Payment. Notwithstanding anything in this
Tax Regulatory Agreement or the Indenture to the contrary, the obligation of the
Authority and the Company to remit the amount determined pursuant to section 8.3
to the Internal Revenue Service, and to comply with all other requirements
contained in this Section 8.3, shall survive the defeasance or payment in full
of the Bonds.
Section 8.4. Non-Arbitrage Certifications of the Authority. The Authority
hereby certifies that:
(a) Authorized Officer. The undersigned officer of the Authority is a duly
chosen, qualified official of the Authority,
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and as such is charged, together with other officials, with the responsibility
for issuing the Bonds. The undersigned officer of the Authority is familiar with
the facts, estimates and expectations of the Authority set forth herein and is
duly authorized to deliver the certifications contained in this Section 8.4 on
behalf of the Authority.
(b) Authorization and Purpose. The Bonds are being issued pursuant to the
Act and the Indenture for the purpose of providing funds to pay a portion of the
Project Costs and Costs of Issuance.
(c) Facts, Estimates and Circumstances. On the basis of the facts,
estimates and circumstances in existence on the date hereof, the undersigned
officer of the Authority reasonably expects the following with respect to the
amount and use of proceeds of the Bonds and certain other funds.
(i) Proceeds.
(A) Sale Proceeds.
(1) Total. The Bonds are being delivered on this day to the
initial purchaser in exchange for Sale Proceeds of $3,810,000.
Such amount is calculated as the principal amount of the Bonds
($3,810,000) plus accrued interest, if any, and minus
underwriter's discount, if any.
(2) Accrued Interest. The amount of Proceeds received as
accrued interest on the Bonds (i.e., $-0-) will be deposited
in the Debt Service Fund and will be used to pay a portion of
the interest on the Bonds on the next interest payment date.
(3) Project Fund. $3,810,000 of the proceeds of the Bonds will
be deposited in the Project Fund which will be used to pay the
costs of the Project including costs of issuance in the amount
of $47,768.
(4) Capitalized Interest. Proceeds in the amount of $112,488
will be deposited in the Project Fund to pay a portion of the
interest during the acquisition, construction and installation
of the Project.
(5) Binding Obligations. An amount greater than 5% of the net
sale proceeds has been expended on the Project.
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(6) Due Diligence. Work on the Project will proceed with due
diligence.
(7) Expenditure. A portion of the proceeds and Investment
Proceeds in the Project Fund are expected to pay Project Costs
before December 12, 2000. A portion of the proceeds may be
used to reimburse costs incurred by the Company prior to the
date of issue of the Bonds. No proceeds will be used to
reimburse expenditures made earlier than 60 days prior to date
of the Inducement Resolution.
(ii) Investment Proceeds. The Investment Proceeds of the Bonds
derived from Bond proceeds in the funds held under the Indenture, will be
deposited to the Earnings Fund and after any transfers to the Rebate Fund,
credited to the Project Fund prior to the Completion Date. After the
Completion Date, the earnings on such funds will be credited first to the
Earnings Fund and Rebate Fund, if necessary, and then applied to pay debt
service on the Bonds. Earnings on all funds and accounts will be deposited
in the Rebate Fund to the extent required by the Indenture and this Tax
Regulatory Agreement.
(iii) No Overissuance. The Net Proceeds and Investment Proceeds of
the Bonds do not exceed the amount necessary to pay the costs of the
Project, to pay accrued interest and interest on the Bonds, and to pay the
Costs of Issuance of the Bonds.
(d) Debt Service. The Authority expects that debt service on the Bonds
will be paid from payments of principal and interest under the Loan Agreement,
amounts transferred to the Debt Service Fund as accrued interest and earnings on
amounts in the Debt Service Fund. Payments of principal and interest shall be
paid to the Trustee for deposit in the Debt Service Fund. Amounts so deposited
in the Debt Service Fund (other than prepayments, which shall be used for the
optional redemption of Bonds) will be applied (i) on the next Interest Payment
Date to pay interest then due on the Bonds, principal of the Bonds, at maturity
or upon redemption prior to maturity and (ii) to pay the Trustee's annual fee.
The Debt Service Fund (other than any carryover amount exceeding
one-twelfth of annual debt service) will be used primarily to properly match
payments of interest and principal on the Loan Agreement with debt service
payments on the Bonds in each Bond Year and the Authority expects that such
account and fund will be depleted at least once a year, except possibly for any
capitalization interest account and a carryover amount which
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will not exceed one year's earnings on such account and fund or, in the
aggregate, one-twelfth of the debt service on the Bonds for the immediately
preceding Bond Year. Optional prepayments are not anticipated, but if made, they
will be deposited in the Debt Service Fund and it is expected that they will be
expended to redeem Bonds on the earliest available date for redemption.
Earnings from amounts in the Debt Service Fund will be deposited in the
Earnings Fund and after provision for rebate, if any, to the Debt Service Fund
and applied for the purposes thereof.
(e) Renewal Fund. No renewal fund has been created for the Project.
(f) Earnings and Rebate Funds. Amounts will be transferred to the Earnings
Fund and the Rebate Fund pursuant to section 5.7(B) of the Indenture and this
Tax Regulatory Agreement. Amounts in the Rebate Fund shall be paid to the United
States in the amounts and at the times set forth in this Tax Regulatory
Agreement, or to the extent remaining after final payment of the Rebate
Requirement, shall be remitted to the Company.
(g) No Other Sinking Funds or Funds Pledged with Reasonable Assurance of
Availability for Debt Service. Except for the Debt Service Fund, no other funds
have been created by the Authority or the Company as to which amounts deposited
therein are reasonably expected to be used directly or indirectly to pay debt
service on the Bonds or which directly or indirectly secure the Bonds and for
which there is a reasonable assurance that amounts therein will be available to
pay debt service on the Bonds in the event financial difficulties are
encountered.
(h) No Replacement. No portion of the Bond Proceeds will be used as a
substitute for other funds of the Authority or the Company (i) which were
otherwise to be used to pay the cost of the Project, (ii) which will not be so
used, and (iii) which have been or will be so used to acquire directly or
indirectly, Investments producing a Yield in excess of the Yield on the Bonds.
(i) Yield on the Bonds.
(i) General. For purposes of this Tax Regulatory Agreement, Yield on
the Bonds means that percentage rate which, when used in computing (by the
actuarial method using semi-annual compounding) the present value of all
payments of interest on and principal of Bonds and of all Qualified
Guarantee Payments, if any, produces an amount equal to the
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Issue Price of the Bonds. Because the interest rate on the Bonds to
maturity is not determinable on the date hereof, the yield to maturity
cannot be determined on the date hereof.
(j) Yield on the Loan Agreement.
(i) General. Pursuant to the terms and limitations of the Loan
Agreement, the Company has promised to pay the principal and interest on
the Bonds. The Yield on the loan is calculated as the percentage rate
which, when used in computing (by the actuarial method and using
semi-annual compounding) the present value of all scheduled and expected
payments and of certain fees paid to the Authority, produces an amount
equal to the adjusted purchase price of the loan. The purchase price of
the loan shall be equal to the Issue Price of the Bonds. Calculated in
such manner, Bond Counsel, based on the calculations of Xxxxx Brothers
Xxxxxxxx & Co., has advised the Authority that the Yield on the loan will
not exceed the Yield on the Bonds by more than .125 percent.
(k) Yield on the Investments Other Than Loan Agreement.
(i) Accrued Interest. The amount of Proceeds received as accrued
interest, if any, will be invested without Yield restriction until used on
the next interest payment date to pay a portion of the interest then due
on the Bonds.
(ii) Project Fund. Amounts on deposit in the Project Fund (including
capitalized interest) may be invested without regard to Yield restriction
until the earlier of the date of expenditure of such amounts or the date
three years from the date hereof.
(iii) Investment Proceeds. Investment Proceeds will be invested
without restriction as to Yield for one year from the date of receipt of
the amount earned.
(iv) Debt Service Fund (Other Than Excess Carryover Amounts).
Amounts in the Debt Service Fund (other than carryover amounts exceeding
one-twelfth of debt service on the Bonds for the immediately preceding
Bond Year and other than any capitalized interest account) will be
invested without Yield restriction for a period not exceeding thirteen
months from the date of deposit of such amounts in such fund. Carryover
amounts in the Debt Service Fund exceeding one-twelfth of debt service on
the Bonds for the immediately preceding Bond Year (other than any
capitalized interest account) will be invested, at a yield not exceeding
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the Yield on the Bonds, in Tax Exempt Investments or will be the subject
of Yield Reduction Payments as described in section 8.7 hereof.
(v) Rebate Fund. Amounts deposited in the Rebate Fund which are
Investment Proceeds and other amounts in the Rebate Fund will be invested
without Yield limitation while they are held in the Rebate Fund.
(vi) Yield Limitation. Amounts referenced above as subject to a
three year, one year, or 13 month period of investment which remain
unexpended at the end of such period, will be invested at a Yield not
exceeding the Yield on the Bonds, in Tax-Exempt Investments or will be the
subject of Yield Reduction Payments to the extent that such amounts in the
aggregate (with other Yield-restricted amounts) exceeds $100,000, unless a
ruling of the Internal Revenue Service, or an Opinion of Counsel, is first
obtained to the effect that no such Yield restriction is necessary.
Notwithstanding the foregoing, no Yield restriction shall apply to any
Nonpurpose Investment not allocated to the Bonds pursuant to Section 8.6.
(vii) Valuation of Investments. In determining the amounts on
deposit in any account for purposes of this Section 8.5(o), the purchase
price of Investments, including accrued interest, shall be added together,
and there shall be added to or subtracted from such purchase price any
discount or premium computed ratably on an annual basis.
(l) Bonds Not Hedge Bonds. At least eighty-five percent (85%) of the Net
Proceeds of the Bonds will be expended within three years of the date hereof and
no amount of the Net Proceeds or Investment Proceeds is or will be invested in
either Nonpurpose Investments or Tax-Exempt Investments, having a guaranteed
yield for 4 years or more.
(m) Reliance Upon Certification, Advice and Computations. The Authority's
certifications contained in Section 8.4(c)(iii) No Overissuance, Section 8.4(g)
No Other Sinking Funds or Funds Pledged with Reasonable Assurance of
Availability for Debt Service, and Section 8.4(h) No Replacement are made in
reliance upon the Non-Arbitrage Certifications of the Company contained in
Section 8.7. The Authority's certification as to the Yield on the loan has been
made in reliance on the advice of Bond Counsel and calculation by Xxxxx Brothers
Xxxxxxxx & Co. The Authority is not aware of any facts or circumstances that
would cause it to question the accuracy of such certifications, representations,
computations and advice.
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(n) Hedging Transactions. The Company has not entered into, nor does it
expect to enter into, any "hedging" transactions (i.e. transactions involving
interest rate swaps, caps, collars, or similar mechanisms to shift interest rate
risk) in respect of the Bonds or the loan. If the Company does enter into a
"hedging" transaction in respect of the Bonds or the loan, the Company will
obtain and furnish to the Authority the written Opinion of Counsel with respect
to such transaction and its effect on the tax exemption for the interest on the
Bonds.
(o) Reasonable Expectations. To the best of the knowledge and belief of
the undersigned officer of the Authority, there are no facts, estimates or
circumstances other than those expressed herein that would adversely affect the
expectations expressed above and the Authority's expectations are reasonable.
The certifications set forth above are made for the purpose of establishing the
reasonable expectations of the Authority as to the amount and use of proceeds of
the Bonds and certain other amounts. They are intended and may be relied upon as
a certification described in Section 1.148-2(b) of the Treasury Regulations or
successor regulations and delivered as part of the record of proceedings in
connection with the issuance of the Bonds.
Section 8.5. Universal Cap Limit on Allocation of Nonpurpose Investments.
(a) General Rule. Nonpurpose Investments of Gross Proceeds are allocated
to the Bonds only to the extent that the Value of such investments does not
exceed the Universal Cap.
(b) Exception. Nonpurpose Investments of Gross Proceeds in a Bona Fide
Debt Service Fund (e.g., the Debt Service Fund other than a carryover amount in
excess of one-twelfth of debt service on the Bonds for the preceding Bond Year
and any capitalized interest account) are allocated to the Bonds without regard
to the Universal Cap.
(c) Dates of Application of Universal Cap. The Universal Cap is applied on
the second anniversary date of the Date of Issue and on of the first day of each
Bond Year thereafter.
(d) Valuation of Nonpurpose Investments. On each date of application of
the Universal Cap, all Nonpurpose Investments shall be valued at their Value.
(e) Allocation of Amounts Exceeding Universal Cap. If on a date of
application of the Universal Cap, Nonpurpose Investments have a Value in excess
of the Universal Cap, the Value of such investments equal to such excess shall
cease to be allocated to the Bonds in the following order: (i) Nonpurpose
Investments of
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replacement proceeds, (ii) Nonpurpose Investments of "transferred proceeds" and
(iii) Nonpurpose Investments of Sale Proceeds and Investment Proceeds.
Nonpurpose Investments which cease to be allocated to the Bonds shall be deemed
sold at their Value for purpose of the Rebate Requirement and shall be no longer
subject to Yield restriction.
(f) Failure to Apply Universal Cap. A failure to apply the Universal Cap
does not violate the Code or applicable Treasury Regulations, if, in the absence
of the failure, the Bonds would have satisfied the Universal Cap rule.
Section 8.6. Yield Reduction Payments. Any amount paid to the United
States, including a rebate amount, shall be treated as a payment for the
investment that reduces the yield on the investment. Eligible investments
include:
(a) Nonpurpose investments allocable to proceeds of an issue that
qualified for a temporary period under Treasury Regulation Section
1.148-2(e)(2), (3), (4) or (6);
(b) Investments allocable to an issue in which at least 5% of the Value of
the issue is composed of Variable Yield Bonds, unless the issue is a
"hedge bond";
(c) Nonpurpose Investments allocable to transferred proceeds of a current
refunding issue or an advance refunding issue which cannot comply with
Yield restriction by investing in zero yield obligations;
(d) Replacement proceeds in a nonqualified reserve fund (due to exceeding
the size limitation) and such amounts are either (i) not greater than 15%
of the principal amount or the issue price if there is more than de
minimis original issue discount or premium or (ii) such amounts are not
expected to be used for debt service on the Bonds; and
(e) Replacement proceeds of a refunded issue due to the Universal Cap
rule.
Yield Reduction Payments shall be made at the same time and in the same
manner as rebate payments or as the Commissioner of Internal Revenue prescribes
otherwise.
Section 8.7. Non-Arbitrage Certifications of the Company. The Company has
read Section 8.5 of this Tax Regulatory Agreement. The Company acknowledges that
said section sets forth (i) the Authority's reasonable expectations as to the
amount, investment, expenditure and use of the proceeds of the Bonds, other
amounts held under the Indenture, and earnings derived from the investment of
the foregoing, all in respect of the Bonds,
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(ii) amounts due to the Authority under the Loan Agreement and (iii) the facts,
estimates and circumstances existing on the date hereof which form the basis for
such expectations of the Authority. The Company recognizes that certain of the
facts, estimates and circumstances forming the basis of the Authority's
certifications are within the knowledge of the Company and that, as indicated in
Section 8.4(m), the Authority is relying on the Company as to the accuracy and
completeness of such matters. The Company hereby certifies that the statements
made in the paragraphs referenced in Section 8.4(m) as made in reliance on the
Company are accurate, complete and reasonable in all material respects and the
Company consents to the Authority's reliance on this certification for the
purpose of delivering its Non- Arbitrage Certifications. The Company certifies
that it is not aware of any facts or circumstances that would cause it to
question the accuracy or completeness of the matters recited in Section 8.4 of
this Tax Regulatory Agreement.
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ARTICLE IX
$40 MILLION LIMITATION ON PAB ACTIVITY
Section 9.1. Current Test-Period Beneficiaries of the Bonds. The Company
represents that currently, the only Test- Period Beneficiaries of the Bonds are
the Company and any Related Person to the foregoing.
Section 9.2. Current Compliance. The Company represents that as of this
date, except as set forth in Schedule G hereto, there are no outstanding
Tax-Exempt Private Activity Bonds that finance facilities which are or were used
by the Company and any Related Person or any Successor Person in a manner
causing any of them to be a Test-Period Beneficiary of such obligations.
Section 9.3. Future Compliance. The Company covenants that before taking
any of the actions described in subsections (a),(b) or (c) below, it shall file
with the Authority a Certificate of Compliance with the $40 Million Tax-Exempt
Private Activity Bond Limit establishing that the portion of the original
principal amount of the Bonds allocable to a Test-Period Beneficiary plus the
amount of Tax-Exempt Private Activity Bonds which are allocable to such
Test-Period Beneficiary and which are outstanding on the Date of Issue of the
Bonds does not exceed $40 million.
(a) Other Facilities. The action described in this paragraph is that the
Company or a Related Person or another Test-Period Beneficiary, if any, of the
Bonds, becomes an owner or user of a facility financed with Tax-Exempt Private
Activity Bonds outstanding on the Date of Issue of the Bonds.
(b) Other Test-Period Beneficiaries. The actions described in this
paragraph are that the Company or any Related Person to the foregoing in cases
(i) and (iii) below, or another Test-Period Beneficiary, if any, of the Bonds
(including a Related Person thereto) in cases (i) - (iii) below: (i) leases or
sells more than 10% of the Project, measured by space, capacity or value to
another person; (ii) increases its percentage of ownership or use of the
Project; or (iii) otherwise takes any action causing any person not previously
treated as a Test-Period Beneficiary of the Bonds to become a Test-Period
Beneficiary of the Bonds.
(c) Additional Related Persons. The actions described in this paragraph
are that the Company, or another Test-Period Beneficiary, if any, of the Bonds,
or a Related Person to any of the foregoing, (i) merges, consolidates with,
acquires more than a 50% interest in, or is acquired by another person or entity
or
-50-
(ii) transfers substantially all of its properties to any person or entity, who
is not, prior to such transfer, a Related Person, (iii) receives substantially
all of the assets of any person or entity, who is not, prior to such transfer, a
Related Person, or (iv) acquires or transfers assets to or from a corporation
(who is not, prior to such event, a Related Person) in a transaction described
in Code Section 381(a). Actions described in this paragraph also include a
Test-Period Beneficiary (including the Company) of the Bonds or a Related Person
to such Test Period Beneficiary taking action that results in another person or
entity becoming a Related Person to such Test-Period Beneficiary or Related
Person.
Section 9.4. Allocation Rules.
(a) General. The allocation of portions of issues of Bonds and Tax-Exempt
Private Activity Bonds and portions of facilities financed thereby to
Test-Period Beneficiaries shall be made in accordance with Code Section
144(a)(10)(C) and Proposed Treasury Regulation Section 1.103-10(i)(4) or any
successor regulation.
(b) Maximum Allocation Rule. The portion of a bond issue allocable to a
Test-Period Beneficiary is the highest percent of the facility financed by the
issue that the beneficiary owned or used during the three-year period described
in the definition of Test-Period Beneficiary.
(c) Amount of Issue Allocable to Related Person; No Double Counting. The
portion of a bond issue allocable to a Related Person of a Principal User of
facilities financed by the issue is the same portion allocable to such Principal
User. However, if both such persons use the same bond-financed facility, then
the portion of the bonds allocable to each such person shall be allocated only
once.
(d) Certain Redeemed Bonds Not Counted. Tax-Exempt Private Activity Bonds
otherwise allocable to a Test-Period Beneficiary of the Bonds will not be so
allocated to the extent they are redeemed (other than from the proceeds of a
tax-exempt refunding issue) no later than 180 days after such beneficiary
becomes a Test-Period Beneficiary of the bonds to be redeemed.
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ARTICLE X
COVENANTS AND AMENDMENTS
Section 10.1. Compliance with Code.
(a) The Company agrees and covenants that it shall at all times do and
perform all acts and things necessary or desirable and within their reasonable
control in order to ensure that interest paid on the Bonds shall, for the
purpose of Federal income taxation, be excludable from the gross income of the
recipients thereof, except in the event that such recipient is a Substantial
User or Related Person.
(b) The Company acknowledges that the covenants and conditions set forth
in this Tax Regulatory Agreement are based upon the Code as it exists on the
date hereof and that the Code may be subsequently interpreted or modified by the
Federal government in a manner which is inconsistent with the covenants set
forth herein. The Company agrees that any such subsequent modification or
interpretation of the Code will be deemed a requirement that must be met
pursuant to the general tax covenant set forth in (a) above.
Section 10.2. Amendments. This Tax Regulatory Agreement may be amended
only by a writing signed by Authorized Representatives of the Authority and the
Company, after approval by Bond Counsel. No amendment shall be made to any
provision relating to the Trustee, and no amendment adding to the duties,
covenants or representations of the Trustee shall be made without the prior
written consent of the Trustee.
Section 10.3. Reliance. The Authority and the Company acknowledge that all
parties to the transaction for the Bonds, including the Beneficial Owners, the
Trustee, Bond Counsel and counsel to the parties are relying on and are entitled
to rely on the representations and expectations made by the Authority and the
Company herein.
Section 10.4. Execution in Counterpart. This Tax Regulatory Agreement may
be executed by the various parties hereto in several counterparts, each of which
shall be executed by the Authority, the Company and the Trustee and be deemed to
be an original and all of which shall constitute together but one and the same
agreement.
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Section 10.5 Trustee Notice Requirements. In the event that the Trustee
has not received from the Company an instruction, computation, calculation,
notice or payment (based upon such computation) required to be delivered to the
Trustee at the time and in the manner as specifically required by, and set forth
in, this Tax Regulatory Agreement, the Trustee shall notify the Authority of
such failure of the Company to furnish such item.
IN WITNESS WHEREOF, the Authority, the Company and the Trustee have caused
this Tax Regulatory Agreement to be executed on their behalf by their respective
authorized representatives as of the date first above written.
CONNECTICUT DEVELOPMENT AUTHORITY
By: /s/ Xxxxxx X. Xxxxxxx III
-------------------------------
SONICS & MATERIALS, INC.
By: /s/ [ILLEGIBLE]
-------------------------------
Authorized Officer
XXXXX BROTHERS XXXXXXXX TRUST
COMPANY
By: /s/ [ILLEGIBLE]
-------------------------------
Authorized Officer
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Schedule A
PUBLIC HEARING PROCEDURES
FOR FEDERAL TAX COMPLIANCE PURPOSES
The Authority is required by current federal tax law to conduct a public
hearing regarding issues of industrial development bonds. Reasonable public
notice must be given in advance of the hearing. These procedures are adopted by
the Authority to guide the conduct of the federally required hearings.
Reference. These procedures may be referred to by the Authority in its
certifications regarding industrial development bonds as "Public Hearing
Procedures for Federal Tax Compliance Purposes."
Purpose. The purpose of these procedures is to provide general guidance
for the conduct of the public notice and public hearing requirements of Section
147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), relating
to the issuance of certain tax-exempt industrial development bonds.
Scope. Hearings concerning Self-Sustaining Program and Umbrella Program
notes and bonds shall be conducted substantially in accordance with these
guidelines, except to the extent alternative procedures may be approved by Bond
Counsel or by an Authorized Representative of the Authority as sufficient to
achieve the purpose of the hearings. No hearing need be conducted for issues or
portions of issues exempted from the hearing requirement by the Code.
Authorization. The adoption of these procedures is authorized by the State
Commerce Act. Nothing contained therein, however, shall be construed to imply
that a public hearing regarding industrial development bonds is or shall be
required for the purposes of State law or that hearings conducted under these
procedures must be conducted under the Uniform Administrative Procedure Act.
Timing. The public hearing for any industrial development bond issue may
be conducted at any time prior to the approval of the bonds by an appropriate
elected official of the State and authorization of the issuance of the bonds by
the Authority.
Notice. Notice of the hearing scheduled for any proposed bond issue shall
be published, substantially in the form attached hereto as Appendix A, at least
14 calendar days in advance of the scheduled public hearing date.
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Newspaper. Notice shall be published in the newspaper for the city or town
in which the proposed project is to be located. The Authority, based on
reasonable inquiry and investigation, hereby determines that the publication of
notice in the manner provided herein is reasonably designed to apprise residents
of the affected city or town of the proposed issuance of the bonds.
Location. The hearing shall be conducted at the offices of the Authority
in Rocky Hill, Connecticut. The Authority, based on reasonable inquiry and
investigation, hereby further determines that locating the hearing at such
offices would be convenient for persons affected by the facilities financed by
the bonds.
Hearing Officer. Any Authorized Representative of the Authority may
conduct the public hearing. For this purpose, Authorized Representatives include
any member or duly designated alternate member of the Authority, the Executive
Director, the Deputy Director, any Program Manager and any Loan Officer.
Subject. The public hearing shall address the subject of the nature and
location of the proposed project and the issuance of bonds to finance the
project.
Conduct. The hearing shall be conducted at a time and in a manner that
provides reasonable opportunity for persons with differing views on the subject
of the hearing to be heard. The hearing officer shall present a short statement
regarding the subject of the hearing, including the identity of the
participants, the nature and location of the proposed project, the nature of the
bond issue, and the public purpose of the transaction. Reasonable questions and
verbal comment shall be entertained.
In the discretion of the hearing officer, the time for verbal expression
may be limited or written statements accepted if appropriate in the
circumstances of the hearing. Priority of appearance and all other matters
necessary to assure the expeditious and orderly conduct of the hearing in the
interests of its purpose shall be determinatively established by the hearing
officer present. Hearings may be conducted in conjunction with or apart from
board meetings.
For the convenience of the Authority or any other cause, hearings once
scheduled may be postponed, canceled, rescheduled, discontinued or recontinued
without restriction, except that notice shall be again published regarding any
rescheduled hearing to the extent it is required by the Code.
In the event that for any proposed issue no persons appear to address the
hearing within one-half hour of the time scheduled
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for its commencement, the hearing officer may declare the hearing to have been
held unattended and to be concluded.
Plan of Financing. The public hearing also may address subsequent issues
of obligations to occur within three years of the initial issue providing
financing for a proposed project. The subsequent obligations may be issued for
refunding purposes or to provide financing for further phases of construction or
acquisition initially approved.
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Schedule B
RECORD OF PUBLIC HEARING
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[LETTERHEAD OF THE NEWS-TIMES, DANBURY, CONNECTICUT]
CT DEVELOPMENT AUTHORITY 501966
XXXX XXXXX
000 XXXXX XXXXXX
XXXXX XXXX XX 00000
THE NEWS-TIMES
AFFIDAVIT OF PUBLICATION
STATE OF CONNECTICUT
COUNTY OF FAIRFIELD SS. DANBURY
--------------------------------------------------------------------------------
LEGAL NOTICE
NOTICE OF PUBLIC HEARING
The Connecticut Development Authority (the "Authority") is empowered under
the State Commerce Act to issue its tax exempt revenue bonds for authorized
projects subject to a public hearing, as required by Section 147(f) of the
Internal Revenue Code of 1986, as amended. The project(s) to be financed with
the proceeds of the bonds will general consist of land, buildings and equipment,
and it is expected they will increase or maintain the tax base, employment and
economic diversity in the State of Connecticut.
The following loan(s) have been requested and a hearing is scheduled for
10:00 a.m. on Tuesday, November 18, 1997, at the Authority offices located at
000 Xxxx Xxxxxx, Xxxxx Xxxx, XX 00000. The subject of the hearing will be the
nature and location of the proposed project and the issuance of bonds by the
Authority to provide financing. Interested persons are invited to attend and
will have an opportunity to make a statement regarding the project or the
financing. Written comments and general inquiries may be directed to the
Authority at the address above, attention Xxxxxx X. Xxxxxxx, III.
NAME OF BORROWER/OCCUPANT -- Sonics & Materials, Inc.
PROJECT ADDRESS -- 00 Xxxxxx Xxxx Xxxx Xxxxxxx, XX 00000.
TYPE OF PROJECT AND PROJECT DESCRIPTION -- A loan to a manufacturer of
ultrasonic bonding equipment and ultrasonic liquid processors for the purchase
of 7.5 acres of land with an existing 62,000 sq. ft. building situated thereon,
the construction of renovations thereto and other site improvements thereon, the
acquisition and installation of new production machinery and equipment therein
and other related project costs.
MAXIMUM AMOUNT OF FINANCING -- $4,000,000.
ASSETS TO BE FINANCED -- Land, buildings, machinery & equipment and other
costs including costs of issuance and required reserves, if any.
--------------------------------------------------------------------------------
ON THIS 6th OF NOV, 1997 PERSONALLY APPEARED BEFORE THE UNDERSIGNED, A NOTARY
PUBLIC, WITHIN AND FOR SAID COUNTY AND STATE, XXXXX XXXXXXX OF THE NEWS TIMES, A
DAILY NEWSPAPER PUBLISHED AT DANBURY IN SAID COUNTY OF FAIRFIELD AND STATE OF
CT, WHO, BEING DULY SWORN, STATES ON OATH THAT THE FOLLOWING ADVERTISEMENT S
APPEARED IN THE NEWS-TIMES ON THE BELOW LISTED DATES.
/s/ Xxxxx Xxxxxxx
-------------------------------------------
XXXXX XXXXXXX
SUBSCRIBED AND SWORN TO BEFORE ME, ON THIS 6 DAY OF NOV 1997 A.D.
/s/ Virginia [ILLEGIBLE]
-------------------------------------------
NOTARY PUBLIC 10 31 99
PUBLICATION EXPIRE DATE AD CAPTION # TIMES AMOUNT
THE NEWS TIMES 11/04/97 SONICS/MATERIAL 1 478.32
11/04/97
[LETTERHEAD OF CONNECTICUT DEVELOPMENT AUTHORITY]
VIA FACSIMILE (860) 241-3866
October 30, 1997
The Hartford Courant
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Classified - Legal Notices
To Whom it May Concern:
Please find enclosed our Notice of Public Hearing information which must
be published in your newspaper on Tuesday, November 4,1997.
Please send us an "Affidavit of Publication Certificate" and a cutout of
the newspaper notice immediately upon publication. Such Affidavit and Cutout
should be received by this office not later than Friday, November 14, 1997.
Any questions regarding the notice should be directed to Xxxxxx X.
Xxxxxxx, III at (000) 000-0000. All correspondence should be addressed to:
Xx. Xxxxx Xxxxx
Connecticut Development Authority
000 Xxxx Xxxxxx
Xxxxx Xxxx, XX 00000
Very truly yours,
/s/ Xxxxxx X. Xxxxxxx III
Xxxxxx X. Xxxxxxx III
Senior Vice President
enc.
cc: X. Xxxxx
X. Xxxxxxx
NOTICE OF PUBLIC HEARING
The Connecticut Development Authority (the "Authority") is empowered under
the State Commerce Act to issue its tax exempt revenue bonds for authorized
projects subject to a public hearing, as required by Section 147(f) of the
Internal Revenue Code of 1986, as amended. The project(s) to be financed with
the proceeds of the bonds will general consist of land, buildings and equipment,
and it is expected they will increase or maintain the tax base, employment and
economic diversity in the State of Connecticut.
The following loan(s) have been requested and a hearing is scheduled for
10:00 a.m. on Tuesday, November 18, 1997, at the Authority offices located at
000 Xxxx Xxxxxx, Xxxxx Xxxx, XX 00000. The subject of the hearing will be the
nature and location of the proposed project and the issuance of bonds by the
Authority to provide financing. Interested persons are invited to attend and
will have an opportunity to make a statement regarding the project or the
financing. Written comments and general inquiries may be directed to the
Authority at the address above, attention Xxxxxx X. Xxxxxxx, III.
PROPOSED PROJECT(S)
------------------------------------------------------------------------------------------------------------------------------------
Name of Project Address Type of Project and Project Description Maximum Amount Assets to be
Borrower/Occupant of Financing Financed
------------------------------------------------------------------------------------------------------------------------------------
Sonics & Materials, 00 Xxxxxx Xxxx Xxxx A loan to a manufacturer of ultrasonic bonding $4,400,000 Land, buildings,
Inc. Xxxxxxx, XX 00000 equipment and ultrasonic liquid processors for machinery &
the purchase of 7.5 acres of land with an equipment and
existing 62,000 sq. ft. building situated other costs
thereon, the construction of renovations including costs of
thereto and other site improvements thereon, issuance and
the acquisition and installation of new required reserves,
production machinery and equipment therein if any.
and other related project costs.
------------------------------------------------------------------------------------------------------------------------------------
077699
Affidavit of Publication
State of Connecticut )
) ss. HARTFORD, CONN.
County of Hartford )
I Xxxxx Xxxx do solemnly swear that I am credit representative of the Hartford
Courant, printed and published at Harftord, in the State of Connecticut and that
from my own personal knowledge and reference to the files of said publication
the advertisement of
(SEE ATTACHED)
11/18/97 Hearing $251.10
was inserted in the regular editions on dates as follows: 11/4/97
--------------------------------------------------------------------------------
Connecticut
--------------------------------------------------------------------------------
NOTICE OF PUBLIC HEARING
The Connecticut Development Authority (the "Authority") is empowered under
the State Commerce Act to issue its tax exempt revenue bonds for authorized
projects subject to a public hearing, as required by Section 147(f) of the
Internal Revenue Code of 1986, as amended. The project(s) to be financed with
the proceeds of the bonds will general consist of land, buildings and equipment,
and it is expected they will increase or maintain the tax base, employment and
economic diversity in the State of Connecticut.
The following loan(s) have been requested and a hearing is scheduled for
10:00 a.m. on Tuesday, November 18, 1997, at the Authority offices located at
000 Xxxx Xxxxxx, Xxxxx Xxxx, XX 00000. The subject of the hearing will be the
nature and location of the proposed project and the issuance of bonds by the
Authority to provide financing. Interested persons are invited to attend and
will have an opportunity to make a statement regarding the project or the
financing. Written comments and general inquiries may be directed to the
Authority at the address above, attention Xxxxxx X. Xxxxxxx, III.
PROPOSED PROJECT(S)
Name of Project Address Type of Project and Project Description Maximum Amount Assets to be
Borrower/Occupant of Financing Financed
Sonics & Materials, 00 Xxxxxx Xxxx Xxxx A loan to a manufacturer of ultrasonic bonding $4,400,000 Land, buildings,
Inc. Xxxxxxx, XX 00000 equipment and ultrasonic liquid processors for machinery &
the purchase of 7.5 acres of land with an equipment and
existing 62,000 sq. ft. building situated other costs
thereon, the construction of renovations including costs of
thereto and other site improvements thereon, issuance and
the acquisition and installation of new required reserves,
production machinery and equipment therein if any.
and other related project costs.
--------------------------------------------------------------------------------
/s/ [ILLEGIBLE]
Subscribed and sworn to before me this 7th day of November 1997
/s/ Xxxxxxx X. XxXxxxxx
..................................
Notary Public
[SEAL] XXXXXXX X. XxXXXXXX
NOTARY PUBLIC, HARTFORD COUNTY, CT
CONNECTICUT DEVELOPMENT AUTHORITY
000 Xxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxxx 00000
MINUTES
Public Hearing
NOVEMBER 18, 1997
Members present from the Authority included Xxxxxx X. Xxxxxxx, III,
Hearing Officer, and Xxxxx Xxxxx, Recording Secretary.
Xx. Xxxxxxx called the hearing to order at 10:00 a.m.
PROJECTS HEARD:
1. SONICS & MATERIALS, INC., 00 Xxxxxx Xxxx Xxxx, Xxxxxxx, XX 00000,
$4,400,000 to finance a loan to a manufacturer of ultrasonic bonding equipment
and ultrasonic liquid processors for the purchase of 7.5 acres of land with an
existing 62,000 sq. ft. building situated thereon, the construction of
renovations thereto and other site improvements thereon, the acquisition and
installation of new production machinery and equipment therein and other related
project costs. (L&B; M&E; & other costs including costs of issuance and required
reserves, if any)
There being no one present from the general public or comments or
corrections, the hearing was adjourned at 10:30 a.m.
/s/ Xxxxx Xxxxx /s/ Xxxxxx X. Xxxxxxx, III
--------------------------- -----------------------------
Xxxxx Xxxxx Xxxxxx X. Xxxxxxx, III
Recording Secretary Hearing Officer
--------------------------------------------------------------------------------
Connecticut
--------------------------------------------------------------------------------
NOTICE OF PUBLIC HEARING
The Connecticut Development Authority (the "Authority") is empowered under
the State Commerce Act to issue its tax exempt revenue bonds for authorized
projects subject to a public hearing, as required by Section 147(f) of the
Internal Revenue Code of 1986, as amended. The project(s) to be financed with
the proceeds of the bonds will general consist of land, buildings and equipment,
and it is expected they will increase or maintain the tax base, employment and
economic diversity in the State of Connecticut.
The following loan(s) have been requested and a hearing is scheduled for
10:00 a.m. on Tuesday, November 18, 1997, at the Authority offices located at
000 Xxxx Xxxxxx, Xxxxx Xxxx, XX 00000. The subject of the hearing will be the
nature and location of the proposed project and the issuance of bonds by the
Authority to provide financing. Interested persons are invited to attend and
will have an opportunity to make a statement regarding the project or the
financing. Written comments and general inquiries may be directed to the
Authority at the address above, attention Xxxxxx X. Xxxxxxx, III.
PROPOSED PROJECT(S)
Name of Project Address Type of Project and Project Description Maximum Amount Assets to be
Borrower/Occupant of Financing Financed
Sonics & Materials, 00 Xxxxxx Xxxx Xxxx A loan to a manufacturer of ultrasonic bonding $4,400,000 Land, buildings,
Inc. Xxxxxxx, XX 00000 equipment and ultrasonic liquid processors for machinery &
the purchase of 7.5 acres of land with an equipment and
existing 62,000 sq. ft. building situated other costs
thereon, the construction of renovations including costs of
thereto and other site improvements thereon, issuance and
the acquisition and installation of new required reserves,
production machinery and equipment therein if any.
and other related project costs.
--------------------------------------------------------------------------------
Schedule C
APPROVAL OF APPLICABLE ELECTED REPRESENTATIVE
-58-
CONNECTICUT DEVELOPMENT AUTHORITY
$4,000,000 INDUSTRIAL DEVELOPMENT BONDS
SONICS & MATERIALS, INC.
PROJECT - SERIES 1997
GOVERNOR'S APPROVAL
I, Xxxx X. Xxxxxxx, Governor of the State of Connecticut, (i) hereby
certify that I am chief elected officer of the State of Connecticut, and (ii)
pursuant to Section 147(f)(2) of the Internal Revenue Code of 1986, as amended
(the "Code"), and based upon the attached Certificate of the Executive Director
of the Connecticut Development Authority (the "Authority") which indicates the
Authority has determined that it is in compliance with said Section 147(f),
hereby approve the issuance of the above-titled bonds for the purpose of issuing
a loan to Sonics & Materials, Inc. (the "Borrower"), a corporation organized and
existing under the laws of the State of Delaware duly qualified to do business
as a foreign corporation in the State of Connecticut, for a facility described
in the notice of public hearing which is an exhibit to the attached Certificate
and other related project costs, and (iii) based upon such Certificate, hereby
certify that the private activity bond limitations in Section 146 of the Code
have been complied with.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of
November, 1997.
/s/ Xxxx X. Xxxxxxx
------------------------------
Xxxx X. Xxxxxxx
Governor
CERTIFICATE OF EXECUTIVE DIRECTOR
CONCERNING PUBLIC NOTICE AND APPROVAL OF BONDS
OF THE
Connecticut Development Authority For
$4,000,000 Industrial Development Bonds
(Sonics & Materials, Inc.
Project) Series 1997
Borrower Project Type Location
-------- ------------ --------
Sonics & Materials, Inc. Manufacturing Newtown,
Connecticut
WHEREAS, Section 147(f) of the Internal Revenue Code of 1986, as amended
("Section 147(f)"), requires issues of bonds of the Connecticut Development
Authority (the "Authority") to be approved by an applicable elected
representative of the State of Connecticut (the "State"); and
WHEREAS, Section 149(e) ("Section 149(e)") of the Code requires the
Governor of the State, or his delegate, to certify that issues of bonds meet the
requirements of Section 146 ("Section 146") of the Code (relating to the cap on
private activity bonds); and
WHEREAS, the chief elected executive of the executive branch of the State
pursuant to Article Fourth, Section 5 of the Connecticut Constitution and
Chapter 31 of the Connecticut General Statutes is the Governor of the State; and
WHEREAS, I am Executive Director of the Authority, authorized pursuant a
resolution of the Members of the Board of Directors of the Authority adopted on
November 19, 1997, and am one of the officers of the Authority who is
responsible for the above captioned Project;
NOW THEREFORE, the Undersigned hereby certifies to the Governor of the
State as follows:
1. That the Authority published the attached Notice of Public Hearing on
November 4,1997 in the following newspapers:
The Hartford Courant.
The Danbury News-Times
2. That the Notice of Public Hearing was published at least 14 days prior
to the public hearing.
3. That the public hearing was held on November 18, 1997.
4. That the duly authorized Board of Directors of the Authority adopted a
resolution on November 19, 1997 after a Notice of Regular Meeting was duly filed
with the Secretary of State in the manner provided by law;
5. That the foregoing complies with the provisions of said Section 147(f)
of the Code.
6. That the limit of the amount of private activity bonds as defined in
Section 146 which may be issued by the Authority from 1997 volume cap is
$52,387,840;
7. That as of the date hereof, $40,202,840 remains of the Authority's 1997
volume cap allocation; and
IN WITNESS WHEREOF, I have hereunto set my hand as Executive Director of
the Authority as of this _____ day of November, 1997.
/s/ Xxxxxxx Xxxxxxx
------------------------------
Xxxxxxx Xxxxxxx
Executive Director
2
Schedule D-1
USE OF BOND PROCEEDS
1. Amount received on the sale of Bonds (exclusive of accrued interest): face
amount of the Bonds, $3,810,000, minus original issue discount $-0-, plus
premium $-0-, equals $3,810,000.
2. Amount of earnings estimated to accrue on investment of Bond proceeds
prior to disbursement for Project Costs, $37,746.
3. Amount of Issuance Costs of the Bonds to be paid from (1) and (2) above:
$47,768. Such cost equals 2% of the Issue Price of the Bonds or less and
therefore is not greater than the 2% limitation established by the Code.
4. From the sum of the amount received on the sale of the Bonds (Item 1:
$3,810,000) and earnings on investments (Item 2: $37,746), subtract any
reasonably required reserve fund of ($-0-): $3,847,746. This amount is
referred to in this Schedule A as "Net Proceeds".
5. The amount of Qualified Costs to be paid from the Net Proceeds of the
Bonds equals $3,654,738. The amount of Nonqualified Costs to be paid from
Net Proceeds of Bonds equals $193,008. The following breakdown of costs
includes labor and installment costs:
Use of Net Proceeds
-------------------
Qualified Nonqualified
Costs Costs
--------- ------------
LAND AND EXISTING BUILDINGS
Cost of acquiring land................$430,240 $-0-
Cost of acquiring building............$638,795 $-0-
Purchase price of option to acquire
Project Realty......................$-0- $-0-
Other (specify).......................$-0- $-0-
RENOVATION EXPENDITURES -
EXISTING BUILDING(S)
Architectural and engineering.........$-0- $-0-
Construction (Room Systems included)..$1,658,999 $15,000
Network Wiring........................$24,258 $-0-
Site Work & Sanitary Disposal.........$-0- $129,586
Contingency...........................$258,958 $-0-
Other (GA, legal, insurance,
clerk of works, reserve)..............$-0- $-0-
Subtotal $3,011,250 $144,586
-59-
CONSTRUCTION COSTS - NEW BUILDINGS
Architectural and engineering.........$-0- $-0-
Construction contracts................$-0 $-0-
Site preparation......................$-0- $-0-
Materials.............................$-0- $-0-
Labor.................................$-0- $-0-
Utilities.............................$-0- $-0-
Paving and landscaping................$-0- $-0-
Other (builder's profit)..............$-0- $-0-
Subtotal $3,011,250 $144,586
MACHINERY AND EQUIPMENT -
Invoice Cost and Installation.........$500,000 $-0-
INTEREST ON BORROWINGS SPECIFICALLY
FOR THE PROJECT PRIOR TO BOND ISSUANCE
Attributable to Improvements
Construction (from 9/25/97 to
12/12/97............................$31,000 $-0-
Attributable to Equipment
Acquisition (from _____ to __________
__________)...........................$-0- $-0-
INTEREST ON BONDS
From 12/12, 1997 to 6/12,
1998..................................$112,488 $-0-
MISCELLANEOUS
Letter of Credit Fee..................$-0- $-0-
Real Property Taxes
during Construction...................$-0- $-0-
Contingency...........................$-0- $654
Issuance Costs........................$-0- $47,768
TOTAL.................................$3,654,738 $193,008
6. Amount of Qualified Costs from Item 5 ($3,654,738) is equal to 95% of the
amount of Net Proceeds from Item 4 ($3,847,746), and therefore is not less
than the 95% limitation established by the Code.
7. The cost of acquiring Land as shown in Item 5 ($430,240) is equal to 11.3%
of the Net Proceeds of the Bonds (excluding any investment earnings) as
shown in Item 4 ($3,810,000) and therefore is less than the 25% limitation
established by the Code.
-60-
Schedule D-2
SUMMARY OF USE OF BOND PROCEEDS*
The following information on the Project must be furnished to the Internal
Revenue Service by the Authority on Form 8038.
1. Face amount of issue of Bonds................ $3,810,000
2. Costs of Issuance (including any
Underwriter's Discount)...................... $47,768
3. Reasonably Required Reserve Fund
deposits..................................... $-0-
4. Non-Refunding Proceeds (Amount on Line 1
Less Amounts on Lines 2 and 3)............... $3,762,232
5. Allocation of Non-Refunding Proceeds
a. Cost of 3-year ACRS property (or
portion thereof) financed by Bond Proceeds... $
b. Cost of 5-year ACRS property (or
portion thereof) financed by Bond Proceeds... $
c. Cost of 10-year ACRS property (or
portion thereof) financed by Bond Proceeds... $500,000
d. Cost of 19-year ACRS property (or
portion thereof) financed by Bond Proceeds... $-0-
e. Cost of Land (or portion thereof)
financed by Bond Proceeds.................... $430,240
f. Cost of other property (or portion
thereof) financed by Bond Proceeds........... $2,879,760
----------
* Solely for purposes of completing the 8038 Schedule, the Company has
classified property financed with Non-Refunding Proceeds according to the ACRS
classes of property in effect through the end of 1986.
-61-
g. Other use of Non-Refunding Proceeds....... $-0-
Total (Non-Refunding Proceeds)............... $3,810,000
6. Refunding Proceeds........................... $-0-
==========
-62-
Schedule E
[RESERVED]
-63-
Schedules F1-F5
Schedule F1
IDENTIFICATION OF ASSETS
1. Total cost of all assets eligible for financing under the Indenture
(whether or not such assets were actually financed with Bond Proceeds):
$3,847,746.
2. Face amount of Bonds: $3,810,000.
ABCD
Ratio of Total
Cost of Each Bond Proceeds
Asset (B) to Allocable to Each
Total Cost of Asset (C x Face
Total Cost All Assets Amount of Bonds
Asset* of Each Asset (from Item 1.) (from Item 2.)**
------ ------------- -------------- ----------------
1. Land $430,240 .112 $426,720
2. Land Im- $148,854 .038 $144,780
provements
3. Building $638,795 .166 $632,460
4. Equipment $500,000 .13 $495,300
5. Renovation $1,942,215 .505 $1,924,050
6. Other $187,642 .048 $185,801
Total $3,847,746
----------
* Assets may be grouped by Class Life Asset Depreciation Range
(CLADR), as set forth in Rev. Proc. 83-35, if applicable.
The categories should be indicated by a brief description and
the CLADR reference number.
** In the absence of a special allocation of Bond Proceeds in the Financing
Documents to Particular assets, Bond Proceeds will be prorated among all
assets as set forth in this Schedule F1.
-64-
Schedule F2
ECONOMIC LIFE
A B C
Asset Number(a) Economic Life(b) Basis of
(from F1) (in years) Determination(c)(d)(e)
--------------- ---------------- ----------------------
Land Improvements 20 (d)
Land N/A code sec 147(b)(3)(B)
Building & Renovations 45 (c)
Equipment 10(CLADR 35.0) (d)(e)
----------
(a) The Land is not taken into account in the computation of Average Economic
Life and has been omitted from Column A because the cost of the Land
represents less than 25% of the Bond Proceeds.
(b) Economic Life is not to be determined based on ACRS lives.
(c) If real property -- based on Rev. Proc. 62-21 (1962-2 C.B.
418).
(d) If new property other than real property -- based on Class Life Asset
Depreciation Range ("CLADR") midpoint as set forth in Rev. Proc. 83-35
(specify CLADR class number).
(e) If used personal property -- based on an appraisal, a copy of which is
attached to this Schedule F2.
-65-
Attachment to Schedule F2
AVERAGE ECONOMIC LIFE
APPRAISAL REPORT
(For Used Personal Property)
N/A
-66-
Schedule F3
ADJUSTED ECONOMIC LIFE
A B C D E
Acquisition
Period in or Construc- Adjusted
Service tion Period Economic
Prior to following Life
Asset Economic Bond Issuance Bond Issuance (B-C
Number Life Date (years Date (years or
(from F1) (from F2) or Portions)* or portions)* B+D)
--------- --------- ------------- ------------- ----
Land N/A N/A N/A N/A
Land Improvements 20 -0- .5 20.5
Building 45 -0- -0- 45
Equipment 00 -0- .0 00.0
Xxxxxxxx Xxxxx. 00 -0- .5 45.5
* If inapplicable, indicate "N/A"
-67-
Schedule F4
AVERAGE ECONOMIC LIFE
A B C D
Bond Proceeds Adjusted
Allocable to Economic
Asset Asset Life
Number (Col. D (Col. E of Weighted Life
(from F1) of F1) F3) (B x C)
--------- ------------- ---------- -------------
Land Improvements $ 144,780 20.5 $ 2,967,990
Building $ 632,460 45 $ 28,460,700
Equipment $ 495,300 10.5 $ 5,200,650
Building Renov $ 1,924,050 45.5 $ 87,544,275
Total B: $ 3,196,590 Total D: $124,173,615
----------- ------------
Average Economic Life = Total D = 38.8
------- ----
Total B
-68-
Schedule F5
AVERAGE MATURITY OF THE BONDS
A B C
Weighted Maturity
Issue Price* Length of Term** (Col. A x Col. B)
------------ ---------------- -----------------
[SEE ATTACHED]
Average Maturity*** = 10.511 yrs.
----------
* Issue Price as defined in Treas. Reg. 1.148-8 is the Price paid by the
first purchaser in a private placement or by the general public in a
public offering, of each separate maturity of Bonds issued as part of the
issue, including [serial bonds] and mandatory or expected sinking fund
installments of term bonds. In the case of a single term bond being
amortized on a level debt, level principal or some other basis, Column A
sets forth the amount of Principal maturing in each year.
** Number of years or portions thereof -- carried to first decimal point from
date of issue to maturity date.
*** The Average Maturity of the Bonds cannot exceed 120 percent of the Average
Economic Life of the Project set forth in Schedule F4.
-69-
Calculation of Weighted Average Maturity
(Monthly Payments)
Issue Date Maturity Principal Years Bond Years
--------------------------------------------------------------------------------
12-Dec-97 1-Jan-99 16,710.52 1.05 17,614.10
1-Feb-99 16,710.52 1.14 19,032.38
1-Mar-99 16,710.52 1.22 20,313.40
1-Apr-99 16,710.52 1.30 21,731.68
1-May-99 16,710.52 1.38 23,104.21
1-Jun-99 16,710.52 1.47 24,522.49
1-Jul-99 16,710.52 1.55 25,895.02
1-Aug-99 16,710.52 1.63 27,313.29
1-Sep-99 16,710.52 1.72 28,731.57
1-Oct-99 16,710.52 1.80 30,104.10
1-Nov-99 16,710.52 1.89 31,522.38
1-Dec-99 16,710.52 1.97 32,894.90
1-Jan-00 16,710.52 2.05 34,313.18
1-Feb-00 16,710.52 2.14 35,731.46
1-Mar-00 16,710.52 2.22 37,058.24
1-Apr-00 16,710.52 2.30 38,476.52
1-May-00 16,710.52 2.38 39,849.04
1-Jun-00 16,710.52 2.47 41,267.32
1-Jul-00 16,710.52 2.55 42,639.85
1-Aug-00 16,710.52 2.64 44,058.13
1-Sep-00 16,710.52 2.72 45,476.40
1-Oct-00 16,710.52 2.80 46,848.93
1-Nov-00 16,710.52 2.89 48,267.21
1-Dec-00 16,710.52 2.97 49,639.74
1-Jan-01 16,710.52 3.06 51,058.02
1-Feb-01 16,710.52 3.14 52,476.29
1-Mar-01 16,710.52 3.22 53,757.32
1-Apr-01 16,710.52 3.30 55,175.60
1-May-01 16,710.52 3.38 56,548.13
1-Jun-01 16,710.52 3.47 57,966.40
1-Jul-01 16,710.52 3.55 59,338.93
1-Aug-01 16,710.52 3.64 60,757.21
1-Sep-01 16,710.52 3.72 62,175.49
1-Oct-01 16,710.52 3.80 63,548.01
1-Nov-01 16,710.52 3.89 64,966.29
1-Dec-01 16,710.52 3.97 66,338.82
1-Jan-02 16,710.52 4.05 67,757.10
1-Feb-02 16,710.52 4.14 69,175.38
1-Mar-02 16,710.52 4.22 70,456.40
1-Apr-02 16,710.52 4.30 71,874.68
1-May-02 16,710.52 4.38 73,247.21
1-Jun-02 16,710.52 4.47 74,665.49
1-Jul-02 16,710.52 4.55 76,038.01
1-Aug-02 16,710.52 4.64 77,456.29
1-Sep-02 16,710.52 4.72 78,874.57
1-Oct-02 16,710.52 4.80 80,247.10
1-Nov-02 16,710.52 4.89 81,665.37
1-Dec-02 16,710.52 4.97 83,037.90
1-Jan-03 16,710.52 5.05 84,456.18
1-Feb-03 16,710.52 5.14 85,874.46
1-Mar-03 16,710.52 5.22 87,155.48
1-Apr-03 16,710.52 5.30 88,573.76
1-May-03 16,710.52 5.38 89,946.29
1-Jun-03 16,710.52 5.47 91,364.57
1-Jul-03 16,710.52 5.55 92.737.10
1-Aug-03 16,710.52 5.63 94,155.37
1-Sep-03 16,710.52 5.72 95,573.65
1-Oct-03 16,710.52 5.80 96,946.18
1-Nov-03 16,710.52 5.89 98,364.46
1-Dec-03 16,710.52 5.97 99,736.98
1-Jan-04 16,710.52 6.05 101,155.26
1-Feb-04 16,710.52 6.14 102,573.54
1-Mar-04 16,710.52 6.22 103,900.32
1 Apr-04 16,710.52 6.30 105,318.60
1-May-04 16,710.52 6.38 106,691.12
1-Jun-04 16,710.52 6.47 108,109.40
1-Jul-04 16,710.52 6.55 109,481.93
1-Aug-04 16,710.52 6.64 110,900.21
1-Sep-04 16,710.52 6.72 112,318.48
1-Oct-04 16,710.52 6.80 113,691.01
1-Nov-04 16,710.52 6.89 115,109.29
1-Dec-04 16,710.52 6.97 116,481.82
1-Jan-05 16,710.52 7.06 117,900.10
1-Feb-05 16,710.52 7.14 119,318.37
1-Mar-05 16,710.52 7.22 120,599.40
1-Apr-05 16,710.52 7.30 122,017.68
1-May-05 16,710.52 7.38 123,390.21
1-Jun-05 16,710.52 7.47 124,808.48
1-Jul-05 16,710.52 7.55 126,181.01
1-Aug-05 16,710.52 7.64 127,599.29
1-Sep-05 16,710.5t 7.72 129,017.57
1-Oct-05 16,710.52 7.80 130,390.09
1-Nov-05 16,710.52 7.89 131,808.37
1-Dec-05 16,710.52 7.97 133,180.90
1-Jan-06 16,710.52 8.05 134,599.18
1-Feb-06 16,710.52 8.14 136,017.46
1-Mar-06 16,710.52 8.22 137,298.48
1-Apr-06 16,710.52 8.30 138,716.76
1-May-06 16,710.52 8.38 140,089.29
1-Jun-06 16,710.52 8.47 141,507.57
1-Jul-06 16,710.52 8.55 142,880.09
1-Aug-06 16,710.52 8.64 144,298.37
1-Sep-06 16,710.52 8.72 145,716.65
1-Oct-06 16,710.52 8.80 147,089.18
1-Nov-06 16,710.52 8.89 148,507.45
1-Dec-06 16,710.52 8.97 149,879.98
1-Jan-07 16,710.52 9.05 151,298.26
1-Feb-07 16,710.52 9.14 152,716.54
1-Mar-07 16,710.52 9.22 153,997.56
1-Apr-07 16,710.52 9.30 155,415.84
1-May-07 16,710.52 9.38 156,788.37
1-Jun-07 16,710.52 9.47 158,206.65
1-Jul-07 16,710.52 9.55 159,579.18
1-Aug-07 16,710.52 9.63 160,997.45
1-Sep-07 16,710.52 9.72 162,415.73
1-Oct-07 16,710.52 9.80 163,788.26
1-Nov-07 16,710.52 9.89 165,206.54
1-Dec-07 16,710.52 9.97 166,579.06
1-Jan-08 16,710.52 10.05 167,997.34
1-Feb-08 16,710.52 10.14 169,415.62
1-Mar-08 16,710.52 10.22 170,742.40
1-Apr-08 16,710.52 10.30 172,160.68
1-May-08 16,710.52 10.38 173,533.20
1-Jun-08 16,710.52 10.47 174,951.48
1-Jul-08 16,710.52 10.55 176,324.01
1-Aug-08 16,710.52 10.64 177,742.29
1-Sep-08 16,710.52 10.72 179,160.56
1-Oct-08 16,710.52 10.80 180,533.09
1-Nov-08 16,710.52 10.89 181,951.37
1-Dec-08 16,710.52 10.97 183,323.90
1-Jan-09 16,710.52 11.06 184,742.18
1-Feb-09 16,710.52 11.14 186,160.45
1-Mar-09 16,710.52 11.22 187,441.48
1-Apr-09 16,710.52 11.30 188,859.76
1-May-09 16,710.52 11.38 190,232.29
1-Jun-09 16,710.52 11.47 191,650.56
1-Jul-09 16,710.52 11.55 193,023.09
1-Aug-09 16,710.52 11.64 194,441.37
1-Sep-09 16,710.52 11.72 195,859.65
1-Oct-09 16,710.52 11.80 197,232.17
1-Nov-09 16,710.52 11.89 198,650.45
1-Dec-09 16,710.52 11.97 200,022.98
1-Jan-10 16,710.52 12.05 201,441.26
1-Feb-10 16,710.52 12.14 202,859.54
1-Mar-10 16,710.52 12.22 204,140.56
1-Apr-10 16,710.52 12.30 205,558.84
1-May-10 16,710.52 12.38 206,931.37
1-Jun-10 16,710.52 12.47 208,349.65
1-Jul-10 16,710.52 12.55 209,722.17
1-Aug-10 16,710.52 12.64 211,140.45
1-Sep-10 16,710.52 12.72 212,558.73
1-Oct-10 16,710.52 12.80 213,931.26
1-Nov-10 16,710.52 12.89 215,349.53
1-Dec-10 16,710.52 12.97 216,722.06
1-Jan-11 16,710.52 13.05 218,140.34
1-Feb-11 16,710.52 13.14 219,558.62
1-Mar-11 16,710.52 13.22 220,839.64
1-Apr-11 16,710.52 13.30 222,257.92
1-May-11 16,710.52 13.38 223,630.45
1-Jun-11 16,710.52 13.47 225,048.73
1-Jul-11 16,710.52 13.55 226,421.26
1-Aug-11 16,710.52 13.63 227,839.53
1-Sep-11 16,710.52 13.72 229,257.81
1-Oct-11 16,710.52 13.80 230,630.34
1-Nov-11 16,710.52 13.89 232,048.62
1-Dec-11 16,710.52 13.97 233,421.14
1-Jan-12 16,710.52 14.05 234,839.42
1-Feb-12 16,710.52 14.14 236,257.70
1-Mar-12 16,710.52 14.22 237,584.48
1-Apr-12 16,710.52 14.30 239,002.76
1-May-12 16,710.52 14.38 240,375.28
1-Jun-12 16,710.52 14.47 241,793.56
1-Jul-12 16,710.52 14.55 243,166.09
1-Aug-12 16,710.52 14.64 244,584.37
1-Sep-12 16,710.52 14.72 246,002.64
1-Oct-12 16,710.52 14.80 247,375.17
1-Nov-12 16,710.52 14.89 248,793.45
1-Dec-12 16,710.52 14.97 250,165.98
1-Jan-13 16,710.52 15.06 251,584.26
1-Feb-13 16,710.52 15.14 253,002.53
1-Mar-13 16,710.52 15.22 254,283.56
1-Apr-13 16,710.52 15.30 255,701.84
1-May-13 16,710.52 15.38 257,074.37
1-Jun-13 16,710.52 15.47 258,492.64
1-Jul-13 16,710.52 15.55 259,865.17
1-Aug-13 16,710.52 15.64 261,283.45
1-Sep-13 16,710.52 15.72 262,701.73
1-Oct-13 16,710.52 15.80 264,074.25
1-Nov-13 16,710.52 15.89 265,492.53
1-Dec-13 16,710.52 15.97 266,865.06
1-Jan-14 16,710.52 16.05 268,283.34
1-Feb-14 16,710.52 16.14 269,701.62
1-Mar-14 16,710.52 16.22 270,982.64
1-Apr-14 16,710.52 16.30 272,400.92
1-May-14 16,710.52 16.38 273,773.45
1-Jun-14 16,710.52 16.47 275,191.73
1-Jul-14 16,710.52 16.55 276,564.25
1-Aug-14 16,710.52 16.64 277,982.53
1-Sep-14 16,710.52 16.72 279,400.81
1-Oct-14 16,710.52 16.80 280,773.34
1-Nov-14 16,710.52 16.89 282,191.61
1-Dec-14 16,710.52 16.97 283,564.14
1-Jan-15 16,710.52 17.05 284,982.42
1-Feb-15 16,710.52 17.14 286,400.70
1-Mar-15 16,710.52 17.22 287,681.72
1-Apr-15 16,710.52 17.30 289,100.00
1-May-15 16,710.52 17.38 290,472.53
1-Jun-15 16,710.52 17.47 291,890.81
1-Jul-15 16,710.52 17.55 293,263.34
1-Aug-15 16,710.52 17.63 294,681.61
1-Sep-15 16,710.52 17.72 296,099.89
1-Oct-15 16,710.52 17.80 297,472.42
1-Nov-15 16,710.52 17.89 298,890.70
1-Dec-15 16,710.52 17.97 300,263.22
1-Jan-16 16,710.52 18.05 301,681.50
1-Feb-16 16,710.52 18.14 303,099.78
1-Mar-16 16,710.52 18.22 304,426.56
1-Apr-16 16,710.52 18.30 305,844.84
1-May-16 16,710.52 18.38 307,217.36
1-Jun-16 16,710.52 18.47 308,635.64
1-Jul-16 16,710.52 18.55 310,008.17
1-Aug-16 16,710.52 18.64 311,426.45
1-Sep-16 16,710.52 18.72 312,844.72
l-Oct-16 16,710.52 18.80 314,217.25
1-Nov-16 16,710.52 18.89 315,635.53
1-Dec-16 16,710.52 18.97 317,008.06
1-Jan-17 16,710.52 19.06 318,426.34
1-Feb-17 16,710.52 19.14 319,844.61
1-Mar-17 16,710.52 19.22 321,125.64
1-Apr-17 16,710.52 19.30 322,543.92
1-May-17 16,710.52 19.38 323,916.45
1-Jun-17 16,710.52 19.47 325,334.72
1-Jul-17 16,710.52 19.55 326,707.25
1-Aug-17 16,710.52 19.64 328,125.53
1-Sep-17 16,710.52 19.72 329,543.81
1-Oct-17 16,710.52 19.80 330,916.33
1-Nov-17 16,710.52 19.89 332,334.61
1-Dec-17 16,711.96 19.97 333,735.90
TOTAL 3,810,000.00 40,046,349.58
Weighted Average Maturity 10.511
Schedule G
CERTIFICATE OF COMPLIANCE WITH
$40 MILLION TAX-EXEMPT PRIVATE ACTIVITY BOND LIMIT
PORTION OF
OUTSTANDING(1)
TAX-EXEMPT AMOUNT
PRIVATE SUBJECT
PORTION OF ACTIVITY TO $40
BONDS BONDS MILLION
NAME OF ALLOCABLE ALLOCABLE LIMIT
TEST-PERIOD TO TO (COL.2 &
BENEFICIARY BENEFICIARY BENEFICIARY COL.3)
----------- ----------- ----------- ------
Sonics & Materials, Inc. 100% -0- $3,810,000
----------
(1) Portion of bonds outstanding as of the Date of Issue of the Bonds.
-71-
Schedule H
ISSUE PRICE LETTER
December 12, 1997
Connecticut Development Authority
Rocky Hill, Connecticut
Xxxxxxx Breed Xxxxxx & Xxxxxx LLP
Greenwich, Connecticut
Re: $3,810,000 Connecticut Development Authority
Industrial Development Revenue Bonds (Sonics &
Materials, Inc. Project) Series 1997 (the "Bonds")
Gentlemen:
This letter is furnished by Xxxxx Brothers Xxxxxxxx & Co., as the
purchaser of the Bonds, to provide the Connecticut Development Authority (the
"Authority") and Xxxxxxx Breed Xxxxxx & Xxxxxx LLP, as bond counsel in respect
of the Bonds, with certain information in connection with the issuance of the
Bonds. Unless otherwise defined, the capitalized terms used herein shall have
the same meaning as defined in the Tax Regulatory Agreement to which this letter
is attached.
We hereby certify that we have purchased the Bonds as an investment
for its own account, without a present intent to reoffer the Bonds (as
participations in the Bonds) to others.
No representation is made as to the legal sufficiency of this
certificate for any purpose. We assume no obligation to advise you of any
changes that come to our attention subsequent to the date hereof and that would
have caused us to alter in any respect the information set forth herein. We
understand that the foregoing information will be relied upon by the Authority
for the purposes of making certain of the representations contained in the Tax
Regulatory Agreement, and will be relied upon by counsel, Xxxxxxx Breed Xxxxxx &
Xxxxxx LLP, in rendering its opinion that interest on the Bonds is excludable
from gross income of the owners thereof for federal income tax purposes.
Xxxxx Brothers Xxxxxxxx & Co.
By: /s/ [ILLEGIBLE]
--------------------------------
-71-
Schedule I
FORM OF CERTIFICATION IN
CONNECTION WITH AN INVESTMENT CONTRACT
I, [Name], [Position], of [Entity Providing Investment Contract]
(the "Provider"), HEREBY CERTIFY in connection with the investment contract
between [Name of Company] and the Provider dated as of ____________ (the
"Investment Contract") that (i) in determining the offering price of the
Investment contract, the Provider took into account as significant factors the
reasonably expected drawdown schedule for proceeds of the [Bonds] other than
float funds and reserve funds, (ii) the yield on the Investment Contract is not
less than the yield currently available from the Provider on reasonably
comparable investment contracts offered to investors of funds other than
proceeds of tax-exempt bonds and (iii) set forth below are the administrative
costs reasonably expected to be paid to third parties in connection with the
Investment Contract.
Date: By:
------------------------- ---------------------------------
Name:
Title:
-72-
Schedule J
FORM OF CERTIFICATION OF POSTED YIELD
OF A CERTIFICATE OF DEPOSIT
I, [Name], [Position] of [Issuer of the Certificate of Deposit] (the
"Issuer"), HEREBY CERTIFY that the yield on the certificate of deposit purchased
by the [Trustee] is not less than the highest yield that is published or posted
by the Issuer as currently available from the Issuer on comparable certificates
of deposit offered to the public.
Date: By:
------------------------- ---------------------------------
Name:
Title:
-73-
