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EXHIBIT 10.8
LOAN AGREEMENT
between
RIVERSIDE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
and
CALAVO GROWERS OF CALIFORNIA
Dated as of September 1, 1985
This Loan Agreement and all right, title and interest of the Riverside County
Industrial Development Authority (the "Authority") in any payments or revenues
derived under this Loan Agreement (other than rights of the Authority under
Sections 4.4 and 8.2 hereof) have been assigned and pledged to First Interstate
Bank of California, as Trustee under an Indenture of Trust, dated as of
September 1, 1985, between the Authority and the Trustee, which secures the
Authority's Variable Rate Demand Industrial Development Revenue Bonds (Calavo
Growers of California Project) in the principal amount of $4,200,000.
This instrument was prepared by:
O'MELVENY & XXXXX
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
(000) 000-0000
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LOAN AGREEMENT
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and is not a
part of this Loan Agreement.)
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PARTIES 1
PREAMBLES 1
ARTICLE I. DEFINITIONS; RULES OF INTERPRETATION 2
Section 1.1. Definitions 2
Section 1.2. Rules of Interpretation 13
Section 1.3. Indenture Controls as to
Conflicting Provisions 13
ARTICLE II. REPRESENTATIONS AND WARRANTIES 13
Section 2.1. Representations and Warranties
of Authority 13
Section 2.2. Representations and Warranties
of Company 15
Section 2.3. Representations and Covenants
of Company and Authority with
Respect to Federal and California
Personal Income Tax Matters and
Capital Expenditures 18
Section 2.4. Survival of Representations and
Warranties 21
ARTICLE III. ISSUANCE OF THE BONDS; THE COMPANY LOAN 21
Section 3.1. Agreement to Issue the Bonds;
Application of Proceeds 21
Section 3.2. Agreement to Make the
Company Loan 21
Section 3.3. Disbursements from the
Construction Fund 22
Section 3.4. Furnishing Documents to Trustee 22
Section 3.5. Investment of Money 23
Section 3.6. Special Arbitrage Covenants 23
Section 3.7. No Federal Guarantee 25
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ARTICLE IV. COMPANY LOAN REPAYMENT 25
Section 4.1. Provisions for Repayment of Loan 25
Section 4.2. Provisions for Payment of
Purchase Price 26
Section 4.3. Credits 26
Section 4.4. Other Payment Obligations
of Company 27
Section 4.5. Mandatory Prepayment of the
Company Loan 27
Section 4.6. Optional Prepayment of the
Company Loan 27
Section 4.7. Letter of Credit 29
Section 4.8. Authority Security Documents 31
Section 4.9. Obligations Absolute and
Unconditional 31
ARTICLE V. THE PROJECT 32
Section 5.1. Company Covenants Concerning
the Project 32
Section 5.2. Establishment of
Completion Date 33
ARTICLE VI. COVENANT TO COMPLY WITH INDENTURE 33
Section 6.1. Financing Statements; Further Assurances 33
Section 6.2. Payments Assigned and Pledged 33
Section 6.3. Company's Performance Under Indenture 34
ARTICLE VII. INSURANCE, DAMAGE, DESTRUCTION 34
AND CONDEMNATION
Section 7.1. Insurance 34
Section 7.2. Damage, Destruction and Condemnation 34
Section 7.3. Application of Net Proceeds 35
Section 7.4. Insufficiency of Net Proceeds 35
Section 7.5. Company-Owned Property 35
Section 7.6. Title Insurance 36
ARTICLE VIII. ADDITIONAL COVENANTS 36
Section 8.1. Maintenance and Operation
of Project; Taxes 36
Section 8.2. Authority's Expenses; Release
and Indemnification 36
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Section 8.3. Maintenance of Corporate Existence;
Qualification in the State 37
Section 8.4. Requirement for Certain Notices 38
Section 8.5. Cooperation 38
Section 8.6. Access to Books and Records 38
Section 8.7. Compliance with Laws 38
Section 8.8. Limitation on Assignment
of Loan Agreement 38
Section 8.9. Wages 39
ARTICLE IX. DEFAULTS AND REMEDIES 39
Section 9.1. Events of Default 39
Section 9.2. Remedies on Default 40
Section 9.3. No Remedy Exclusive 41
Section 9.4. Attorneys' Fees and Expenses 41
Section 9.5. No Implied Waiver 41
ARTICLE X. MISCELLANEOUS 41
Section 10.1. Term of this Loan Agreement 41
Section 10.2. Notices 42
Section 10.3. Power of Authorized Company
Representative 42
Section 10.4. Binding Effect 42
Section 10.5. Severability 43
Section 10.6. Amounts Remaining in Funds 43
Section 10.7. Amendments, Changes and
Modifications 43
Section 10.8. Execution in Counterparts 43
Section 10.9. Captions 43
Section 10.10. Law Governing Construction
of Loan Agreement 43
Section 10.11. No Rights Created in Third
Parties 43
Section 10.12. Benefit of the Owners of the Bonds 43
Section 10.13. Notice of Taxability 43
SIGNATURES 44
EXHIBIT "A" - PROJECT SUMMARY A-1
EXHIBIT "B" - FUNDING REQUISITION B-1
EXHIBIT "C" - COMPLETION CERTIFICATE C-1
EXHIBIT "D" - SPECIAL ARBITRAGE INSTRUCTIONS D-1
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THIS LOAN AGREEMENT (the "Loan Agreement"), dated as of September
1, 1985, is by and between the RIVERSIDE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
(the "Authority"), a public, corporate instrumentality of the State of
California, and CALAVO GROWERS OF CALIFORNIA, (the "Company"), a company
organized and existing under the laws of the State of California;
WITNESSETH:
WHEREAS, the California Industrial Development Financing Act of
the State of California, California Government Code Sections 91500 et seq., as
amended (the "Act"), permits an industrial development authority to issue
revenue bonds for the purpose of financing the acquisition, construction and/or
rehabilitation of facilities, including both real and personal property suitable
for industrial uses such as assembling, fabricating, manufacturing, processing
or warehousing activities with respect to any products of agriculture, forestry,
mining or manufacture; and
WHEREAS, the Authority is authorized by Ordinance No. 587, duly
adopted by the Board of Supervisors of the County of Riverside, California (the
"County"), on February 8, 1983, to exercise powers under the Act, including the
power to issue bonds for the purpose of acquiring, constructing, improving,
furnishing, equipping, repairing, reconstructing, and/or rehabilitating
facilities and to enter into and execute this Loan Agreement; and
WHEREAS, the Authority, pursuant to a resolution, duly adopted on
March 5, 1985, accepted the Company's application for financial assistance and
published notice of such acceptance; and declared its intention to issue
approximately $4,200,000 of its Variable Rate Demand Industrial Development
Revenue Bonds (Calavo Growers of California Project) and to lend the proceeds
therefrom to the Company for the purpose of financing the acquisition,
construction and equipping of certain food packing house facilities in the
County, (the "Project") secured solely by payments to be made by the Company to
the Trustee for deposit into the Revenue Fund, and by an irrevocable letter of
credit (the "Letter of Credit") issued by Security Pacific National Bank, a
national banking association (the "Bank"), in favor of the Trustee for the
benefit of the Owners from time to time of the Bonds; and
WHEREAS, the Board of Supervisors of the County, pursuant to a
resolution, duly adopted on March 26, 1985, after notice and public hearing, has
approved the issuance and sale of the Bonds for the purpose of financing the
Project; and
WHEREAS, the Authority, pursuant to a resolution, duly adopted on
September 3, 1985, has approved the issuance and sale of its Variable Rate
Demand Industrial Development Revenue Bonds (Calavo Growers of California
Project) in the aggregate principal amount of $4,200,000 (the "Bonds") and the
loan of the proceeds from the sale of the Bonds to the Company to enable it to
acquire,
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construct and equip the Project and to pay the costs of issuing the Bonds,
pursuant to the terms of this Loan Agreement; and
WHEREAS, the California Industrial Development Financing Advisory
Commission has determined that the Project is in compliance with the criteria
set forth in, and that the issuance of the Bonds qualifies for issuance as
required by, Section 91531 of the Act; and
WHEREAS, the Authority proposes to finance the Project by lending
to the Company the funds for the acquisition, construction and equipping thereof
and the Company desires to borrow such funds from the Authority and to acquire,
construct and equip the Project upon the terms and conditions set forth herein;
and
WHEREAS, the Authority has determined that the acquisition,
construction and equipping of the Project is likely to result in employment
benefits, resource conservation benefits, consumer benefits, and/or production
of new or improved products or facilities; and
WHEREAS, the Bonds will be issued under and secured by an
Indenture of Trust, dated as of September 1, 1985 (the "Indenture"), between the
Authority and First Interstate Bank, as Trustee (the "Trustee"), under the terms
of which the Authority will assign and pledge all of its right, title and
interest in this Loan Agreement (except as provided herein and therein) and all
payments under this Loan Agreement to the payment of the principal of, premium,
if any, and interest on the Bonds as the same become due;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby and for and in consideration of the premises and the mutual covenants
herein contained, do hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
SECTION 1.1. DEFINITIONS. In addition to the words and terms
elsewhere defined herein, the following words and terms as used herein shall
have the following meanings unless the context or use clearly indicates another
or different meaning or intent, and any other words and terms defined in the
Indenture shall have the same meanings when used herein as assigned them in the
Indenture unless the context or use clearly indicates another or different
meaning or intent:
"Act" means the California Industrial Development Financing Act,
California Government Code Sections 91500 et seq., as amended;
"ACT OF BANKRUPTCY" means the filing of a petition in bankruptcy
(or other commencement of a bankruptcy or similar proceeding) by or against the
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Company or by or against the Authority under any applicable bankruptcy,
insolvency, reorganization or similar law now or hereafter in effect;
"ACT OF BANKRUPTCY OF BANK" means that the Bank has become
insolvent or has failed to pay its debts generally as such debts become due or
has admitted in writing its inability to pay any of its indebtedness or has
consented to or has petitioned or applied to any authority for the appointment
of a receiver liquidator, trustee or similar official for itself or for all or
any substantial part of its properties or assets or that any such trustee,
receiver, liquidator or similar official has been appointed or that insolvency,
reorganization, arrangement or liquidation proceedings (or similar proceedings),
have been instituted by or against the Bank;
"ADJUSTABLE INTEREST RATE" means the interest rate determined at
the times and in the manner provided in Section 203 of the Indenture;
"ADMINISTRATION EXPENSES" means the reasonable and necessary
expenses incurred by the Authority in the administration of this Loan Agreement,
the Indenture and the Intercreditor Agreement, including, without limitation,
fees and costs of attorneys, consultants and others, but excluding the
Trustee's, any Paying Agent's and Tender Agent's fees, overhead and similar
costs;
"ANNUAL DEBT SERVICE" means, for any Bond Year, the sum on the
first day of such Bond Year of (i) the interest due in such Bond Year
(calculated in accordance with the Regulations) on Outstanding Bonds and Bonds
with respect to which all liability of the Authority has been discharged in
accordance with Article XII of the Indenture and (ii) the principal amount of
Outstanding Bonds and Bonds with respect to which all liability of the Authority
has been discharged in accordance with Article XII of the Indenture falling due
by their terms in such Bond Year.
"APPLICABLE JURISDICTION" means the area within the political
boundaries of the County and all area within one-half mile of the Project
whether or not located within the political boundaries of the County;
"AUTHORITY" means the Riverside County Industrial Development
Authority, a public, corporate instrumentality of the State of California duly
authorized and validly existing under the Act or any board, body, commission,
department or officer succeeding to the principal functions thereof or to whom
the powers conferred upon the Authority shall be given by law;
"AUTHORITY SECURITY DOCUMENTS" means collectively, the First Deed
of Trust, the First Security Agreement, the First Financing Statement and the
First Fixture Filing;
"AUTHORIZED BANK REPRESENTATIVE" means the person or persons
authorized to sign Funding Requisitions on behalf of the Bank;
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"AUTHORIZED COMPANY REPRESENTATIVE" means any one of the following
officers of the Company: Chairman of the Board, President, Vice President,
Treasurer or Assistant Treasurer, who is designated to act on behalf of the
Company by written certificate furnished to the Authority and the Trustee
containing the specimen signature of such designated officer and signed on
behalf of the Company by any other officer of the Company. Such certificate may
designate an alternate or alternates;
"BANK" means Security Pacific National Bank, a national banking
association, acting as issuer of the Letter of Credit, or the issuer of a
Substitute Letter of Credit, if one has been issued as provided in Section 4.7
hereof;
"BANK SECURITY DOCUMENTS" means, collectively, the Second Deed of
Trust, the Second Security Agreement, the Second Financing Statement and the
Second Fixture Filing;
"BOND" OR BONDS" means the Variable Rate Demand Industrial
Development Revenue Bonds (Calavo Growers of California Project) of the
Authority referred to in Section 3.1 hereof and to be issued pursuant to the
Indenture;
"BOND COUNSEL" means an attorney at law or a firm of attorneys,
acceptable to the Authority, the Trustee and the Bank, of nationally recognized
standing in matters pertaining to the tax exempt nature of interest on bonds
issued by states and their political subdivisions duly admitted to the practice
of law before the highest court of any state of the United States of America or
the District of Columbia;
"BOND FUND" means the Bond Fund created by Section 302 of the
Indenture;
"BONDHOLDER" OR "HOLDER OF BONDS" OR "OWNER OF BONDS" means the
Registered Owner of any Bond;
"BOND ISSUANCE DATE" means the date of delivery of the Bonds,
being September 5, 1985;
"BOND YEAR" means the period of twelve (12) consecutive months
ending on September 4 in any year during which Bonds are or will be Outstanding;
provided, however, the final Bond Year shall end on the date on which the last
Bond is paid or redeemed. For purposes of this definition, the term Outstanding
shall include Bonds with respect to which all liability of the Authority has
been discharged in accordance with Article XII of the Indenture.
"BUSINESS DAY" means any day other than a Saturday, Sunday, a
legal holiday or a day on which banking institutions in the city in which the
Bank's principal office is located or in the city in which the principal
corporate trust office of the Trustee or any Paying Agent or Tender Agent is
located, are
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authorized or obligated by law or executive order to close, and on which The New
York Stock Exchange is not closed;
"CODE" means the Internal Revenue Code of 1954, as amended, and
any applicable regulations thereunder;
"COMPANY" means Calavo Growers of California, a California
corporation, its successors and assigns, and any surviving, resulting or
transferee company as permitted under Section 8.3 hereof;
COMPANY BONDS" means the Bonds purchased with the proceeds of a
draw on the Letter of Credit pursuant to Section 1301 or Section 1302 of the
Indenture which are registered in the name of the Company pursuant to Section
1310 of the Indenture.
"COMPANY DOCUMENTS" means this Loan Agreement, the Authority
Security Documents, the Reimbursement Agreement, the Bank Security Documents,
the Remarketing Agreement and the Placement Agent Agreement;
"COMPANY LOAN" means the loan originated by the Authority to the
Company in an amount equal to $4,200,000 for the purpose of financing the
acquisition, construction, improvement and equipping of the Project;
"COMPLETION CERTIFICATE" means the certificate of completion to be
provided by the Company pursuant to the provisions of Section 5.2 hereof in the
form attached hereto as Exhibit B;
"COMPLETION DATE" means the date of completion of the Project, as
certified in the Completion Certificate;
"COMPUTATION DATE" means, for each Bond Year, the last scheduled
Interest Payment Date in such Bond Year.
"CONSTRUCTION FUND" means the Construction Fund created by Section
302 of the Indenture;
"CONVERSION DATE" means the Interest Payment Date on which the
Bonds begin to bear interest at the Fixed Interest Rate, as provided in Section
204 of the Indenture;
"COUNSEL" means an attorney at law or a firm of attorneys duly
admitted to practice law before the highest court of any state of the United
States of America and who is not a full time employee, director, officer or
partner of the Authority or the Trustee or the Company;
"COUNTY" means Riverside County, California;
"DATE OF OFFICIAL ACTION" means March 5, 1985, the date on which
"a bond resolution or other similar official action was taken . . . with respect
to . . ." the Bonds as such phrase is used in Treasury Regulation Section
1.103-8(a)(5)(v);
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"DETERMINATION OF TAXABILITY" means any of the following events:
(i) the Company files a Supplemental Statement which indicates that it has
exceeded the maximum capital expenditures permitted under Section 103(b)(6)(D)
of the Code, or (ii) the Company gives a notice to the Authority and the Trustee
that it has exceeded or intends to exceed the maximum capital expenditures under
Section 103(b)(6)(D) of the Code, or (iii) the Company gives a notice to the
Authority and the Trustee that it has exceeded or intends to exceed the maximum
aggregate limit of outstanding tax-exempt industrial development bonds permitted
under Section 103(b)(15) of the Code, or (iv) the enactment of legislation, or a
judgment or order of a court of original jurisdiction or a final ruling or
decision of the Internal Revenue Service which determines that interest paid or
payable on any Bond is or was includable in the gross income of an Owner of the
Bonds for Federal income tax purposes under the Code (other than an Owner who is
a substantial user or related person within the meaning of Section 103(b) of the
Code), provided, however, that a ruling or decision of the Internal Revenue
Service shall be considered final only if no appeal or action for judicial
review has been filed and the time for filing such appeal or action has expired;
"EARNINGS FUND" means the Earnings Fund created by Section 302 of
the Indenture.
"EXCESS EARNINGS ACCOUNT" means the Excess Earnings Account
created by Section 302 of the Indenture.
"EVENT OF DEFAULT" means one of the events described as an event
of default in Section 9.1 hereof;
"FACILITIES" means property, both real and personal, or any
interests therein, suitable for industrial uses including, without limitation,
assembling, fabricating, manufacturing, processing or warehousing activities
with respect to any products of agriculture, forestry, mining or manufacture,
and includes any facilities incidental thereto;
"FIRST DEED OF TRUST" means the First Deed of Trust and assignment
of Rents (Construction Trust Deed) with respect to the Project, of even date
herewith, executed by the Company, as trustor, to the Title Company, as trustee,
for the benefit of the Authority, as beneficiary;
"FIRST FINANCING STATEMENT" means a UCC-1 financing statement
executed by the Company, as debtor pursuant to the First Security Agreement, and
naming the Authority as the secured party and the Trustee as the assignee of the
secured party;
"FIRST FIXTURE FILING" means a fixture filing executed by the
Company, as debtor pursuant to the First Security Agreement, and naming the
Authority as the secured party and the Trustee as the assignee of the secured
party;
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"FIRST SECURITY AGREEMENT" means the First Security Agreement with
respect to the Project, of even date herewith, executed by the Company, as
debtor, in favor of the Authority, as secured party;
"FIXED INTEREST RATE" means the interest rate in effect on the
Bonds from and after the Conversion Date as said rate is determined in
accordance with Section 204 of the Indenture;
"FUNDING REQUISITION" means the requisition form requesting
disbursement of monies from the Construction Fund in the form attached hereto as
Exhibit C;
"GENERAL EARNINGS ACCOUNT" means the General Earnings Account
created by Section 302 of the Indenture.
"GOVERNMENT OBLIGATIONS" means any of the following which at the
time of investment are legal investments under the laws of the State for the
money proposed to be invested therein: direct obligations issued by the United
States Treasury or obligations unconditionally guaranteed as to the payment of
principal and interest by the full faith and credit of the United States of
America which may be permitted under Section 103(h)(3)(B)(v) of the Code and
regulations issued thereunder, or which, in the opinion of Bond Counsel, will
not impair the exemption from federal income taxation of the interest on the
Bonds;
"GROSS PROCEEDS" shall have the meaning ascribed to such term in
the Regulations.
"INDENTURE" means that certain Indenture of Trust, of even date
herewith, by and between the Authority and the Trustee, pursuant to which the
Bonds are authorized to be issued and the interests of the Authority in this
Loan Agreement and the revenues received by the Authority hereunder are to be
pledged and assigned as security for the payment of the principal of, premium,
if any, and interest on the Bonds, including any amendments and supplements
thereto;
"INTERCREDITOR AGREEMENT" means that certain Intercreditor
Agreement of even date herewith among the Authority, the Trustee and the Bank,
as amended and supplemented from time to time;
"INTEREST PAYMENT DATE" means, prior to the Conversion Date, the
first Business Day of each month, commencing October 1, 1985, and, after the
Conversion Date, March 1 and September 1 of each year;
"INVESTMENT EXCESS" shall mean, for the applicable computation
period, (1) the aggregate amount of interest, profits and other income actually
earned on the investment of Gross Proceeds in Nonpurpose Obligations (other than
(i) Gross Proceeds held in the Excess Earnings Account of the Earnings Fund
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and (ii) except as otherwise required by the Regulations, Gross Proceeds
invested in the Bond Fund), less (2) the aggregate amount that would have been
earned if such Gross Proceeds had been invested at a Yield equal to the Yield on
the Bonds.
"LETTER OF CREDIT" means the irrevocable direct draw letter of
credit issued by the Bank to the Trustee as beneficiary, at the request of and
for the account of the Company in accordance with Section 4.7 hereof, or any
Substitute Letter of Credit;
"MAXIMUM INTEREST RATE" means twelve percent (12%) per annum;
"MOODY'S" means Xxxxx'x Investors Service, a corporation organized
and existing under the laws of the State of Delaware, its successors and their
assigns, and, if such corporation shall for any reason no longer perform the
function of a securities rating agency, "Moody's" shall be deemed to refer to
any other nationally recognized rating agency designated by the Authority with
the approval of the Company and the Bank;
"NET PROCEEDS" means, with respect to any insurance proceeds or
any condemnation award, the amount remaining after deducting all expenses
(including attorneys' fees) incurred in the collection of such proceeds or award
from the gross proceeds thereof;
"NONPURPOSE OBLIGATION" shall have the meaning ascribed to such
term in the Regulations.
"OUTSTANDING," when used as of any particular time with reference
to Bonds, means all Bonds theretofore, or thereupon being, authenticated and
delivered by the Trustee under this Indenture except
(1) Bonds theretofore cancelled by the Trustee or surrendered to
the Trustee for cancellation;
(2) Bonds with respect to which all liability of the Authority
shall have been discharged in accordance with Article XII of the
Indenture; and
(3) Bonds for the transfer or exchange of or in lieu of or in
substitution for which other Bonds shall have been authenticated and
delivered by the Trustee pursuant to the Indenture.
"PAYING AGENT" means the Trustee and any other bank or trust
company designated by the Authority pursuant to the Indenture to serve as a
paying agency or place of payment for the Bonds;
"PERMITTED INVESTMENTS" means any of the following which at the
time are legal investments for the Authority under the laws of the State, and on
which the Company is not the obligor:
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(a) Government Obligations;
(b) certificates of deposit or time deposits, or repurchase
agreements with national or state banks, including the Trustee or its
affiliates, or international banks with domestic United States
operations, with capital, surplus and undivided profits of $50,000,000 or
more, and certificates of deposit of federal savings and loan
associations (including the certificates of deposit of any bank, savings
and loan association or building and loan association acting as
depository, custodian or trustee for any such bond proceeds);
(c) commercial paper of "prime quality" approved by the Trustee
and bearing a rating by a nationally recognized rating agency of "A-1",
"P-1", "F-1" or any similar rating or better;
(d) bills of exchange or time drafts drawn on and accepted by a
commercial bank (i.e., banker's acceptances) which are eligible for
purchase by the Federal Reserve System; or
(e) obligations of a state, territory or possession of the United
States or any political subdivision of the foregoing the interest on
which is exempt from federal income taxation under Section 103(a) of the
Code which bear a rating in either of the two highest rating categories
of a nationally recognized rating agency;
"PERSON" means a natural person, firm, partnership, association,
corporation, trust or public body;
"PLACEMENT AGENT AGREEMENT" means the Placement Agent Agreement
dated as of September 1, 1985, by and among the Authority, the Company and
Security Pacific Capital Markets Group (Security Pacific National Bank) as
Placement Agent;
"POST-CONVERSION LETTER OF CREDIT" means a Substitute Letter of
Credit issued by the Bank for the benefit of the Trustee on and after the
Conversion Date;
"PRINCIPAL USER" means "principal user" as that term is used in
Section 103(b)(6) of the Code;
"PROJECT" means the Facilities to be acquired, constructed and
equipped with the proceeds of the sale of the Bonds or the proceeds of any
payment by the Company pursuant to Section 5.1 hereof, which Facilities are more
fully described in the Project Summary attached hereto as Exhibit A;
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"PROJECT COSTS" means those costs incurred by the Company in
connection with the Project and in connection with the issuance of the Bonds
including, but not limited to, the following:
(a) the cost of construction, improvement, repair, and
reconstruction;
(b) the cost of acquisition, including rights in land and other
property, both real and personal and improved and unimproved, and
franchises, and disposal rights;
(c) the cost of demolishing, removing, or relocating any building
or structures on lands so acquired, including the cost of acquiring any
lands to which such buildings or structures may be moved or relocated;
(d) the cost of machinery, equipment and furnishings, of
engineering and architectural surveys, plans, and specifications, and of
transportation and storage until the Project is operational;
(e) the cost of agents or consultants, including, without
limitation, legal, financial, engineering, accounting, and auditing,
necessary or incident to the Project and of the determination as to the
feasibility or practicability of undertaking the Project;
(f) the cost of financing interest prior to, during, and for a
reasonable period after completion of the Project, and reserves for
principal and interest and for extensions, enlargements, additions,
repairs, replacements, renovations and improvements;
(g) the cost of acquiring or refinancing existing obligations
incident to the undertaking and carrying out, including the financing of,
the Project, and the reimbursement to any governmental entity or agency,
or any company, of expenditures made by or on behalf of such entity,
agency or company that are Project costs hereunder without regard to
whether or not such expenditures may have been made before or after the
adoption of a resolution of intention with respect to the Project by the
Authority; and
(h) the cost of making relocation assistance payments as provided
by Chapter 16 (commencing with Section 7260) of Division 7 of Title 1 of
the California Government Code.
"PROJECT SUMMARY" means the Project Summary prepared by the
Company, a copy of which is attached hereto as Exhibit "A" and incorporated
herein by this reference;
"QUALIFIED PROJECT COSTS" means the Project Costs (other than the
expenses incurred in connection with the issuance of the Bonds) incurred after
the Date of Official Action which are incurred in connection with the
acquisition, construction, reconstruction, or improvement of land or property
described
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in Section 167 of the Code and are chargeable to the capital account of the
Company with respect to the Project for federal income tax and financial
accounting purposes, and shall not include working capital, the cost of
inventory, goodwill or other non-depreciable property other than land; provided,
however, that: (i) the Qualified Project Costs shall not include the costs of
acquiring land or any interest in land that will be used for agricultural
purposes; (ii) no more than 25% of the Qualified Project Costs shall be costs of
acquiring land other than agricultural land or any interest therein; and (iii)
any rehabilitation expenditures within the meaning of Section 103(b)(17)(C) of
the Code with respect to any building or equipment thereon shall equal or exceed
fifteen percent (15%) of that portion of the Project Costs to acquire such
building and equipment financed with the proceeds of the sale of the Bonds;
"REBATE AMOUNT" shall mean, for the applicable computation period,
the Investment Excess for such period, plus the aggregate amount of all
interest, profits and other income earned on investments in the Excess Earnings
Account of the Earnings Fund during such period;
"REGISTERED OWNER" means the person or persons in whose name or
names a Bond shall be registered on books of the Trustee kept for that purpose
in accordance with the terms of the Indenture;
"REGULATIONS" shall mean the regulations of the United States
Department of the Treasury proposed or promulgated under Section 103(c)(6) of
the Code which by their terms are effective with respect to the Bonds;
"REIMBURSEMENT AGREEMENT" means that certain Reimbursement
Agreement of even date herewith, by and between the Bank and the Company
providing for the issuance of the Letter of Credit, as amended and supplemented
from time to time;
"REMARKETING AGENT" means the agent appointed in accordance with
the provisions of Section 1303 of the Indenture, initially Security Pacific
Capital Markets Group (Security Pacific National Bank);
"REMARKETING AGREEMENT" means the Remarketing Agreement of even
date herewith among the Authority, the Company and the Remarketing Agent, as
amended and supplemented from time to time;
"RELATED PERSON" means any "related person" as such term is
defined in Section 103(b)(6)(C) of the Code;
"SEASONED FUNDS" means monies paid by the Company to the Trustee
for deposit into the Company Monies Account of the Revenue Fund or the Special
Redemption Account of the Bond Fund which monies shall have been held in the
Company Monies Account or the Special Redemption Account for at least 126
consecutive days, provided, that no Act of Bankruptcy shall have occurred during
such 126-day period and provided further, that no Act of Bankruptcy shall
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have occurred during the 126-day period immediately preceding such deposit; the
Trustee shall be entitled to rely on the Company's failure to furnish the
Trustee with a certificate to the effect that an Act of Bankruptcy has occurred
as evidence that no such bankruptcy has occurred;
"SECOND DEED OF TRUST" means the Second Deed of Trust and
Assignment of Rents (Construction Trust Deed) with respect to the Project, of
even date herewith, executed by the Company, as trustor, to the Title Company,
as trustee, for the benefit of the Bank, as beneficiary;
"SECOND FINANCING STATEMENT" means the UCC-1 financing statement
executed by the Company, as debtor pursuant to the Second Security Agreement,
and naming the Bank as the secured party;
"SECOND FIXTURE FILING" means the fixture filing executed by the
Company, as debtor pursuant to the Second Security Agreement, and naming the
Bank as the secured party;
"SECOND SECURITY AGREEMENT" means the Second Security Agreement
with respect to the Project, of even date herewith, executed by the Company, as
debtor, in favor of the Bank, as secured party;
"SPECIAL ARBITRAGE INSTRUCTIONS" means the Special Arbitrage
Instructions attached hereto as Exhibit D;
"STATE" means the State of California;
"SUBSIDIARY" means any company of which the Company owns, directly
or indirectly, more than fifty percent (50%) of the voting shares thereof or
otherwise controls;
"SUBSTITUTE LETTER OF CREDIT" means a letter of credit delivered
to the Trustee in accordance with Section 4.7 of this Loan Agreement;
"SUPPLEMENTAL STATEMENT" means any statement, supplemental
statement or other tax schedule or return or document filed with the Internal
Revenue Service (whether pursuant to Treasury Regulation Section
1.103-10(b)(2)(vi)(c) as the same may be amended or supplemented from time to
time, or otherwise);
"TENDER AGENT" means Chemical Bank, a New York banking
corporation, acting in the capacity of Tender Agent under the Indenture;
"TITLE COMPANY" means Ticor Title Insurance Company of California,
a California corporation;
"TITLE POLICY" means an ALTA Loan Policy - 1970 with ALTA
Endorsement Form 1 Coverage (LP 10), issued by the Title Company, naming the
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Trustee as the insured, with liability in the amount of the aggregate principal
amount of the Bonds, insuring the validity and priority of the lien of the First
Deed of Trust, as assigned by the Authority to the Trustee, subject only to such
other exceptions as are approved in writing by the Authority, and including CLTA
endorsements 100, 104.7, 111.5, 112.1, and 116.1, and such other endorsements as
the Authority may require;
"TRUSTEE" means First Interstate Bank of California as trustee,
and any co-trustee or any successor trustee under the Indenture.
"YIELD" shall have the meaning ascribed to such term in the
Regulations.
SECTION 1.2. RULES OF INTERPRETATION. The definitions set forth in
Section 1.1 shall be equally applicable to both the singular and the plural
forms of the terms therein defined and shall cover all genders.
"HEREIN," "HEREBY," "HEREUNDER," "HEREOF," "HEREINBEFORE,"
"HEREINAFTER" and other equivalent words refer to this Loan Agreement and not
solely to the particular Article, Section or subdivision hereof in which such
word is used.
Reference herein to an Article number (e.g., Article IV) or a
Section number (e.g., Section 6.2) shall be construed to be a reference to the
designated Article number or Section number hereof unless the context or use
clearly indicates another or different meaning or intent.
SECTION 1.3. INDENTURE CONTROLS AS TO CONFLICTING PROVISIONS. In
the event any of the provisions of this Loan Agreement (including the
definitions of terms herein) conflict in any respect with the provisions of the
Indenture and cannot be reconciled, the provisions of the Indenture shall
control.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF AUTHORITY. As of
the date hereof and as of the Bond Issuance Date, the Authority hereby
represents and warrants as follows:
(a) The Authority is a public, corporate instrumentality of the
State, duly organized and validly existing under and pursuant to the Act,
and the County has adopted an ordinance declaring the need for the
Authority and that it shall function for the purposes expressed in the
Act. The Authority agrees that it will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence.
(b) Under the provisions of the Act, the Authority has the power
and authority to enter into the transactions contemplated by this Loan
Agreement, the Indenture, the Placement Agent Agreement, the
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Remarketing Agreement, and the Intercreditor Agreement and to carry out its
obligations hereunder and thereunder, and it has complied with all provisions of
the Act in all matters relating to such transactions.
(c) The Authority, by proper action, has authorized the execution
and delivery of this Loan Agreement, the Indenture, the Placement Agent
Agreement, the Remarketing Agreement and the Intercreditor Agreement, the
sale, issuance, execution and delivery of the Bonds, and the performance
of its obligations hereunder and thereunder.
(d) The Project constitutes and will constitute a "project" within
the meaning of the Act.
(e) Neither the execution and delivery of the Bonds, this Loan
Agreement, the Indenture, the Placement Agent Agreement, the Remarketing
Agreement and the Intercreditor Agreement, the consummation of the
transactions contemplated thereby and hereby, nor the fulfillment of or
compliance with the terms and conditions or provisions of the Bonds, this
Loan Agreement, the Indenture, the Placement Agent Agreement, the
Remarketing Agreement, or the Intercreditor Agreement conflict with or
result in the breach of any of the terms, conditions or provisions of any
constitutional provision or statute of the State or of any agreement,
instrument, judgment, order or decree to which the Authority is now a
party or by which it is bound, or constitutes a default under any of the
foregoing, or results in the creation or imposition of any prohibited
lien, charge or encumbrance of any nature or upon any property or assets
of the Authority under the terms of any instrument or agreement.
(f) There is no action, suit, proceeding, inquiry or investigation
pending or, to the best of the Authority's knowledge, after due
investigation, threatened against the Authority by or before any court,
governmental agency or public board or body which (i) affects or seeks to
prohibit, restrain or enjoin the sale, issuance, execution, delivery or
payment of the Bonds, or the loan of the proceeds from the sale of the
Bonds to the Company, or (ii) affects or seeks to prohibit, restrain or
enjoin the execution, delivery or performance of this Loan Agreement, the
Indenture, the Bonds, the Placement Agent Agreement, the Remarketing
Agreement or the Intercreditor Agreement; or (iii) affects or questions
the organization, powers or authority of the Authority to carry out the
transactions contemplated by the Bonds, this Loan Agreement, the
Indenture, the Placement Agent Agreement, the Remarketing Agreement or
the Intercreditor Agreement or the right of the officers of the Authority
to hold their respective offices; or (iv) affects or questions the
validity or enforceability of this Loan Agreement, the Indenture, the
Placement Agent Agreement, the Remarketing Agreement, the Intercreditor
Agreement or the Bonds; or (v) questions the tax-exempt status of the
Bonds.
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(g) The Authority will not take or permit any action to be taken
which results in the interest paid on the Bonds being included in the
gross income of the holder thereof (other than a "substantial user" or
"related person") for purposes of Federal or State income taxation.
(h) To lend financial assistance to the Company for the purposes
of acquiring, constructing and equipping the Project, the Authority
proposes to issue the Bonds in the principal amount of $4,200,000
following the execution and delivery of this Loan Agreement. The date,
interest rate, date of maturity, redemption provisions and other
pertinent provisions with respect to the Bonds are as set forth in the
Indenture, and such provisions are hereby incorporated herein.
(i) Simultaneously herewith, the Authority's rights, title,
interests and duties in and under this Loan Agreement will be assigned
and conveyed to the Trustee (with certain reservations and exceptions
noted in the Indenture), without recourse, as security for payment of the
principal of, premium, if any, and interest on the Bonds.
(j) Notwithstanding anything contained herein to the contrary, any
obligation the Authority may hereby incur for the payment of money shall
not constitute an indebtedness of the County or the State and shall not
constitute or give rise to a pecuniary liability of the County or the
State or a charge against the general credit or taxing powers of the
County or the State, but shall be payable solely from the revenues,
proceeds and receipts derived from this Loan Agreement.
SECTION 2.2. REPRESENTATIONS AND WARRANTIES OF COMPANY. As of the
date hereof and the Bond Issuance Date, the Company hereby represents and
warrants as follows:
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of California.
(b) The Company has full corporate power and authority to carry on
its business as now conducted and to enter into this Loan Agreement and
the other Company Documents and to obtain the Letter of Credit, and the
execution and delivery of this Loan Agreement and the other Company
Documents have been duly authorized by proper corporate action. This Loan
Agreement and the other Company Documents constitute valid and legally
binding obligations of the Company.
(c) No consent or approval of any trustee or holder of any
indebtedness or obligation of the Company or any Subsidiary, and no
consent, approval, permission, authorization, order or license of any
governmental authority is required to be obtained by the Company for: (i)
the execution and delivery of this Loan Agreement and the other Company
Documents and any instrument or agreement required of the Company
hereunder; (ii) the fulfillment of and compliance with the provisions
hereof;
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and (iii) the acquisition, construction and equipping of the Project,
except as may have been obtained and certified copies of which have been
delivered to the Authority.
(d) The Company is not subject to any charter, by-law or
contractual limitation or provision of any nature whatsoever which in any
way limits, restricts or prevents the Company from entering into this
Loan Agreement or the other Company Documents or from performing any of
its obligations hereunder or thereunder, except to the extent that such
performance maybe limited by bankruptcy, insolvency, reorganization or
other laws affecting creditors' rights generally. Neither the execution
and delivery of this Loan Agreement or the other Company Documents, and
the consummation of the transactions contemplated hereby and thereby, nor
the fulfillment of or compliance with the provisions hereof and thereof
conflicts with, violates or will result in a material breach of any
charter or by-law of the Company, any of the terms, conditions or
provisions of any indenture, instrument or agreement to which the Company
is a party or by which the Company is bound, or any statute, rule or
regulation, or any judgment, decree or order of any court or agency
binding on the Company or constitutes a default under any of the
foregoing which has not been waived or consented to in writing by the
appropriate party or parties, or results in the creation or imposition of
any lien, charge, security interest or encumbrance of any nature
whatsoever upon any of the property or assets of the Company not
permitted under the terms of any restriction, agreement, instrument,
statute, governmental rule or regulation, court order, judgment or
degree.
(e) There is no action, suit, proceeding, inquiry or investigation
by or before any court, governmental agency or public board or body
pending or, to the best knowledge of the Company threatened against the
Company which (i) affects or seeks to prohibit, restrain or enjoin the
issuance, sale or delivery of the Bonds or the loaning of the proceeds of
the Bonds to the Company or the execution and delivery of the Company
Documents, (ii) affects or questions the validity or enforceability of
the Bonds, the Indenture, the Letter of Credit or the Company Documents,
(iii) questions the tax-exempt status of the Bonds or (iv) questions the
power or authority of the Company to carry out the transactions
contemplated by, or to perform its obligations under, the Company
Documents or the powers of the Company to own, acquire, construct, equip
or operate the Project.
(f) The proposed issuance of the Bonds by the Authority and the
making of the Company Loan to the Company to finance the Project Costs
have induced the Company to acquire, construct and equip the Project.
(g) The Company has complied or will comply with all legal
requirements relating to the Project and the operation, repair and
maintenance of the Project, including (i) the attainment of any rezoning
or variances, building, development and other permits and approvals, and
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licenses and other entitlements for use, and (ii) securing the issuance
of any certificates of need, convenience and necessity or other
certificates or franchises, and has provided the Authority with
satisfactory evidence of such compliance.
(h) The Company will not use any of the funds provided by the
Authority hereunder, or any other funds, nor will it permit any of the
funds provided by the Authority hereunder, or any other funds, to be used
in a manner which would impair the exemption of interest on the Bonds
from Federal or State income taxation.
(i) When duly executed, this Loan Agreement, the other Company
Documents and all other agreements entered into by the Company
contemplated herein or in the Indenture will be enforceable against the
Company according to their terms, except as may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights
generally.
(j) The information and documents concerning the Company submitted
to the Authority in or with the Company's application for financing and
any supplements thereto were true and complete on the date of submission
and are true and complete in all material respects on the Bond Issuance
Date.
(k) The audited financial statements of the Company submitted to
the Authority with the Company's application for financing present fairly
the financial position of the Company as of the dates indicated and the
results of its operations for the periods specified, and such financial
statements have been prepared in conformity with generally accepted
accounting principles consistently applied to the periods involved,
except as otherwise stated in the notes accompanying such financial
statements.
(1) Any unaudited financial statements of the Company submitted to
the Authority in connection with the Company's application for financing
present fairly the financial position of the Company as of the dates
indicated and the results of its operations for the periods specified,
subject to year-end adjustments, and such financial statements have been
prepared on a basis consistent with prior interim periods.
(m) As to any expenditures which the Company has heretofore made
for purposes of acquiring, constructing and equipping the Project for
which it seeks reimbursement from the Company Loan, such expenditures
were made in anticipation of issuance of the Bonds and reimbursement from
the proceeds thereof.
(n) Prior to the Date of Official Action no xxxxxxx money
agreement had been entered into, no contract had been awarded or entered
into (except the agreement with the architect for the Project), no
purchase order had been issued, no on-site or off-site renovations or
installation had
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commenced with respect to any component of the Project, and no other
physical work at the Project site for the purpose of acquiring,
constructing or equipping the Project or any such component thereof had
been commenced.
(o) As of September 1, 1985, no component of the Project has
reached a degree of completion which would permit operation of the
Project at substantially the level for which it is designed, and, as of
the said date, no component of the Project was, in fact, in operation at
such level.
(p) Any certificate signed by the Authorized Company
Representative and delivered pursuant to this Loan Agreement or the
Indenture shall be deemed to be a representation and warranty by the
Company as to the statements made therein.
SECTION 2.3. REPRESENTATIONS AND COVENANTS OF COMPANY AND
AUTHORITY WITH RESPECT TO FEDERAL AND CALIFORNIA PERSONAL INCOME TAX MATTERS AND
CAPITAL EXPENDITURES. The Authority is issuing the Bonds pursuant to an election
made by it under Section 103(b)(6)(D) of the Code, and, prior to the issuance
and delivery of the Bonds, the Authority will have made all necessary filings in
order to effect such election in accordance with Section 8.11 hereof. It is the
intention of the parties hereto that the interest on the Bonds shall be exempt
from federal income taxation and California personal income taxation and to that
end the Authority and the Company covenant with each other and with the Trustee
as follows:
(a) The Company warrants that, except in connection with the
issuance of the Bonds, neither the Company nor any Related Person of the
Company has entered or will enter into any contract, agreement or
understanding providing for the issuance of obligations of any political
subdivision, agency, authority, instrumentality or company of a public or
quasi-public nature to acquire facilities in the Applicable Jurisdiction,
the Principal User of which is to be Company or any such Related Person
and which obligations are to be issued on or prior to the Bond Issuance
Date;
(b) The Authority warrants that, except in connection with the
issuance of the Bonds, it has not entered into and will not enter into
any contract, agreement or understanding providing for the issuance of
obligations by the Authority to acquire facilities in the Applicable
Jurisdiction the Principal User of which is to be the Company or any
person which, to the knowledge of the Authority, is a Related Person of
the Company, and which obligations are to be issued on or prior to the
Bond Issuance Date;
(c) The Company warrants that there have never been issued any
bonds or other obligations with respect to "facilities" described in
Section 103(b)(6) of the Code, the Principal User of which facilities is
the Company or one or more Related Persons to the Company which are
located in the Applicable Jurisdiction, and which bonds or other
obligations would be
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taken into account in determining the face amount of the Bonds, as
provided in Section 103(b)(6)(D)(ii) of the Code;
(d) The Company warrants that neither the Company nor any Related
Person of the Company is a party to or shall enter into any contract,
agreement or commitment which would require them or any of them to make
or cause to be made any capital expenditures with respect to "facilities"
described in Section 103(b)(6)(E) of the Code which are located in the
Applicable Jurisdiction which would cause the interest on the Bonds to be
subject to federal income taxation;
(e) The Company will file in a timely manner all Supplemental
Statements required by Treasury Regulation Section 1.103-10(b)(2)(vi)(c)
as amended or supplemented from time to time. The Company shall furnish
to the Trustee, within thirty (30) days after the filing thereof, true
and complete copies of all Supplemental Statements;
(f) The Authority and the Company each agree to comply fully,
during the term of this Loan Agreement, with all effective rules, rulings
and regulations promulgated by the Department of the Treasury or the
Internal Revenue Service, with respect to bonds or other obligations
issued under Section 103(b)(6)(D) of the Code, so as to maintain the
tax-exempt status of interest on the Bonds, including, without
limitation, the requirements of Treasury Regulation Section
1.103-10(b)(2)(vi), as amended or supplemented concerning the filing of
Supplemental Statements;
(g) The Company warrants that (i) there are no Principal Users of
the Project other than the Company, and (ii) there are no Related Persons
to the Company which must be considered as Principal Users of the Project
or other facilities located in the Applicable Jurisdiction by virtue of
Section 103(b)(6)(E) of the Code. The Company covenants that neither it
nor any Related Person is a Principal User of any facilities other than
the Project in the Applicable Jurisdiction which must be taken into
account with respect to the Bonds for purposes of section 103(b)(6)(A) of
the Code;
(h) The Company warrants that at least 95% of the proceeds of the
Bonds, after the payments of the costs of issuance of the Bonds, will be
used to pay or reimburse the Company for Qualified Project Costs; and
(i) As of the Bond Issuance Date, the Company warrants that within
the three (3)-year period preceding the Bond Issuance Date, no costs
which are chargeable, for federal income tax purposes, to the capital
account of any Person have been paid or incurred with respect to the
Project or other facilities, of which the Company or any Related Person
is a Principal User, located in the Applicable Jurisdiction, other than
costs to be paid or reimbursed with the proceeds of the Bonds or costs
listed in the certificate of the Authorized Company Representative
furnished to the Authority on the Bond Issuance Date. The Company further
covenants and agrees that neither it nor any other person will pay or
incur within the
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three (3)-year period immediately succeeding the Bond Issuance Date any
costs (other than costs to be paid or reimbursed with the proceeds of the
Bonds) which are chargeable for federal income tax purposes to the
capital account of any Person (hereinafter referred to as "Capital
Expenditures"), with respect to the Project, or other facilities of which
the Company or any Related Person is a Principal User located in the
Applicable Jurisdiction which, if added to the principal amount of the
Bonds and all prior Capital Expenditure including, but not limited to
costs listed in the certificate of the Authorized Company Representative
furnished to the Authority on the Bond Issuance Date which are not paid
or reimbursed with the proceeds of the Bonds, would exceed $10,000,000.
(j) The Company covenants and agrees that it will not use or
permit the use of any of the funds provided by the Authority pursuant to
this Loan Agreement, or any other funds of the Company, directly or
indirectly, or direct the Trustee to invest any funds held by it under
the Indenture or this Loan Agreement, in such a manner as would cause the
Bonds to be treated as federally guaranteed within the meaning of Section
103(h) of the Code.
(k) The Company warrants that there are no "test period
beneficiaries" of the Project (as defined in Section 103(b)(15)(D) of the
Code) other than the Company and that the total outstanding face amount
of all tax-exempt industrial development bonds of any Person with respect
to facilities used by the Company or by any Related Person to the Company
as of the Bond Issuance Date is $30,000. The Company covenants that
neither it nor any Related Person is or will become a user of any
facilities (other than the Project) with respect to which there were
outstanding tax-exempt industrial development bonds on the Bond Issuance
Date, if such use will result in a violation of Code Section 103(b)(15).
The Company further covenants that it will not cause or allow the use of
the Project by any Person during the three year period commencing on the
date the Project is placed in service if the use of the Project by such
Person will cause the requirements of Section 103(b)(15) of the Code to
be violated.
(l) The Company warrants that there are no other obligations
heretofore issued or to be issued by or on behalf of any state, territory
or possession of the United States, or any political subdivision of any
of the foregoing, or of the District of Columbia, which constitute
"industrial development bonds" within the meaning Section 103(b)(2) of
the Internal Revenue Code of 1954, as amended (the "Code"), and which
have been or are to be sold (1) at substantially the same time as the
Bonds, (2) at substantially the same interest rate as the rate of
interest on the Bonds, (3) pursuant to a common plan of marketing with
the marketing of the Bonds, and (4) which are payable directly or
indirectly by the Company or from a common or pooled security which is
also used or available to pay debt service on the Bonds.
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(m) The Company covenants and agrees that it will promptly notify
the Authority and the Trustee if it exceeds or intends to exceed the
maximum capital expenditures in the Applicable Jurisdication permitted by
Section 103(b)(6)(D) of the Code, or the maximum aggregate amount of
tax-exempt industrial development bonds permitted by Section 103(b)(15)
of the Code.
(n) Neither the Authority nor the Company shall use or direct or
permit the use of any of the proceeds of the Bonds in such a manner as
to, or take or omit to take any action which would, cause the Bonds to be
"arbitrage bonds" within the meaning of Section 103(c) of the Code and
applicable regulations thereunder.
(o) The Authority shall have filed prior to the issuance of the
Bonds, the election required pursuant to Treasury Regulations
1.103-10(b)(2)(vi)(a) to have Section 103(b)(6) of the Code apply to the
Bonds.
(p) The Authority shall file or cause to be filed Internal Revenue
Service Form 8038 as required by Code.
SECTION 2.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in this Article II shall remain in full
force and effect at and shall survive delivery of the Bonds.
ARTICLE III
ISSUANCE OF THE BONDS; THE COMPANY LOAN
SECTION 3.1. AGREEMENT TO ISSUE THE BONDS; APPLICATION OF
PROCEEDS. The Authority agrees to sell, issue and cause to be delivered to the
purchasers thereof the Bonds for the purpose of making the Company Loan. The
Authority further agrees to deposit all proceeds received from said sale with
the Trustee in accordance with Section 303 of the Indenture. The Company hereby
approves the sale, issuance and delivery of the Bonds as described in the
Indenture.
SECTION 3.2. AGREEMENT TO MAKE THE COMPANY LOAN. Subject to the
terms and conditions of this Loan Agreement and in reliance upon the
representations and warranties of the Company set forth herein, the Authority
hereby agrees to lend to the Company the sum of $4,200,000 (the "Company Loan"),
derived solely from the proceeds of the Bonds and the Company hereby agrees to
borrow said sum from the Authority pursuant to this Loan Agreement, which sum
shall be used by the Company exclusively for payment of Project Costs. The
obligation of the Authority to make the Company Loan as herein provided shall be
subject to the receipt by it of the proceeds of issuance and sale of the Bonds.
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The Loan shall mature on August 29, 2005. The Loan shall bear interest on the
principal amount outstanding from time to time at the rate which at all times
equals the rate of interest on the Bonds, as established pursuant to the
Indenture. Interest shall be due and payable on the third Business Day
immediately preceding each Interest Payment Date as provided in Section 4.1
hereof.
SECTION 3.3. DISBURSEMENTS FROM THE CONSTRUCTION FUND. Pursuant to
the terms of, and on the conditions set forth in the Indenture, the Authority
has authorized and directed the Trustee to disburse amounts in the General
Earnings Account and the Excess Earnings Account of the Earnings Fund and
amounts in the Construction Fund for the payment of Project Costs or to
reimburse the Company for any Project Costs incurred by it. Such disbursement
shall be made by the Trustee as follows:
(a) prior to the Completion Date, the Trustee shall disburse to
the Bank first from the Excess Earnings Account and the General Earnings
Account of the Earnings Fund, then from the Construction Fund,
immediately upon receipt by the Trustee of the proceeds of a draw upon
the Letter of Credit representing a payment of interest on the Company
Loan, an amount equal to the amount of such draw;
(b) for payment of Project Costs other than interest on the
Company Loan, the Trustee shall disburse funds first from the Excess
Earnings Account and General Earnings Account in the Earnings Fund, then
from the Construction Fund upon receipt of a Funding Requisition signed
by the Authorized Company Representative, and approved by an Authorized
Bank Representative in the form attached hereto as Exhibit B, with
respect to each requested disbursement; and
(c) in the event the Company elects to prepay the Company Loan
pursuant to Section 4.6(a) hereof, the Trustee shall disburse to the Bank
all amounts remaining on deposit in the Construction Fund, immediately
upon receipt by the Trustee of the proceeds of a draw upon the Letter of
Credit representing the amount of the prepayment.
In making any disbursement from the Earnings Fund or the
Construction Fund pursuant to Subsection 3.3(b) hereof, the Trustee may rely on
any Funding Requisition delivered to it pursuant to this Section, and shall be
relieved of any liability with respect to the disbursement of funds pursuant to
any such Funding Requisition.
Notwithstanding anything to the contrary contained herein, neither
the Authority nor the Company shall cause the proceeds of the Bonds to be used
in any manner which would result in the loss of the exemption from Federal
income taxation under Section 103(b)(6)(D) of the Code of the interest on the
Bonds.
SECTION 3.4. FURNISHING DOCUMENTS TO TRUSTEE. The Company shall
prepare and submit to the Trustee the documents referred to in Section 3.3
hereof as required pursuant thereto, and such additional documentation with
respect to disbursements from the Earnings Fund or the Construction Fund as the
Trustee may reasonably request.
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SECTION 3.5. INVESTMENT OF MONEY. Except as otherwise provided in
this Loan Agreement or the Indenture, any money held in any Funds or Accounts at
any time held by the Trustee shall, in the manner provided in Article V of the
Indenture, be invested or reinvested by the Trustee at the written request of
and as directed by the Company, solely in Permitted Investments. Notwithstanding
the foregoing, all monies on deposit in the Special Redemption Account if
invested, shall be invested solely in obligations of a state, territory or
possession of the United States or any political subdivision of the foregoing,
the interest on which is exempt from federal income taxation under Section
103(a) of the Code, and all monies on deposit in the Bond Payment Account of the
Bond Fund and the Purchase Fund shall be held as cash or invested in Government
Obligations maturing at such time or times as said monies shall be needed for
the purposes for which they were deposited, but in no event shall such
Government Obligations have a maturity in excess of thirty (30) days.
SECTION 3.6. SPECIAL ARBITRAGE COVENANTS.
(a) The Company hereby covenants and represents to the Authority,
and, based upon said representations, the Authority and the Company jointly and
severally covenant with all purchasers and owners of the Bonds, that until the
last Bond shall have been paid or redeemed, the Authority and the Company will
comply with all requirements of Section 103(c)(6) of the Code and all applicable
Regulations. The Company and the Authority further specifically agree that:
(1) The Company shall deposit or cause to be deposited with the
Trustee, for credit to the General Earnings Account of the Earnings Fund,
all interest, profits and other income attributable to the investment of
Gross Proceeds in Nonpurpose Obligations (other than (i) Gross Proceeds
paid to the Authority pursuant to Section 4.4 hereof and (ii) Gross
Proceeds invested in the Excess Earnings Account.)
(2) Except with respect to Gross Proceeds invested during an
applicable temporary period, as expressly permitted under the
Regulations, neither the Company nor the Authority, with respect to Gross
Proceeds under its control, will allow Gross Proceeds of the Bonds in an
amount greater than 150% of the Annual Debt Service for any Bond Year to
be invested during such Bond Year in Nonpurpose Obligations with a Yield
in excess of the Yield on the Bonds. The Company will make all
computations required to ensure compliance with the foregoing investment
limitation and will instruct the Trustee in writing with respect to any
sale or disposition of Nonpurpose Obligations required to comply with
such investment limitation.
(3) On each Computation Date, the Company will compute the
Investment Excess for the preceding twelve month period. Immediately
thereafter, the Company will instruct the Trustee in writing to transfer
such Investment Excess (to the extent not previously expended to pay
Project Costs or debt service on the Bonds) from the General Earnings
Account to the Excess Earnings Account of the Earnings Fund.
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(4) No later than twenty-nine (29) days from the fifth Computation
Date and every fifth Computation Date thereafter, the Company will
transfer to the Trustee for payment to the United States Government an
amount that, when added to any amount held in the Excess Earnings Account
on such date plus the amount of all prior payments under this Section
3.6, equals at least 90% of the Rebate Amount for the period from the
date of issuance through such Computation Date. No later than thirty (30)
days after the day on which the last Bond is paid or redeemed, the
Company will transfer to the Trustee for payment to the United States
Government an amount that, when added to any amount held in the Excess
Earnings Account on such date plus all prior payments under this Section
3.6, equals 100% of the Rebate Amount for the period from the date of
issuance through the retirement date.
(5) Neither the Company nor the Authority will (i) invest Gross
Proceeds or cause Gross Proceeds to be invested in Nonpurpose
Obligations, if the Yield on such Nonpurpose Obligations would be less
than the Yield that would have resulted from an arm's length transaction,
or (ii) sell or otherwise dispose of or cause to be sold or otherwise
disposed of Nonpurpose Obligations, if such sale or disposition would
result in a smaller profit or larger loss than would have resulted from a
sale at fair market value arrived at in an arm's length transaction.
(6) No later than March 4, 1986, the Authority will expend (i) all
Gross Proceeds received by it pursuant to Section 4.4 hereof, and (ii)
all income, profits and other earnings attributable to the investment of
such Gross Proceeds in Nonpurpose Obligations. The Authority will use its
best efforts to appropriate an amount equal to the Investment Excess
earned by the Authority from the investment of such Gross Proceeds in
Nonpurpose Obligations and to pay such amount to the Company no later
than five (5) days prior to the first date on which the Company is
obligated to make a payment to the Trustee pursuant to Section 3.6(a)(3)
hereof.
(7) The Company and, as appropriate, the Authority will comply in
all respects with the Special Arbitrage Instructions attached as Exhibit
D hereto.
(8) The Company shall retain all records with respect to the
calculations required by Sections 3.6(a)(2) and 3.6(a)(3) hereof for at
least six years after the date on which the principal of and interest on
the Bonds has been paid in full, whether upon maturity, redemption or
acceleration thereof.
(9) The Company will value each Nonpurpose Obligation at its fair
market value on and as of the date such obligation is acquired with Gross
Proceeds or otherwise becomes a Nonpurpose Obligation.
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(b) Notwithstanding any provision of this Section 3.6, if the
Company shall provide to the Trustee and the Authority an opinion of Bond
Counsel that any action required by this Section 3.6 or the Special Arbitrage
Instructions is no longer required or that some further action is required to
maintain the exclusion from federal income tax of interest on the Bonds, the
Trustee and the Authority may rely conclusively on such opinion in complying
with the requirements of this Section 3.6 and the Special Arbitrage
Instructions, and the covenants hereunder shall be deemed modified to that
extent.
(c) Notwithstanding any provision of this Section 3.6, if within
six months from the date of issuance of the Bonds, (i) the Company delivers to
the Authority and the Trustee a certification to the effect that all Gross
Proceeds of the Bonds (excluding amounts in the Bond Fund) have been expended
and that it is not anticipated that other Gross Proceeds will arise during the
term of the Bonds and (ii) the Trustee and the Authority no longer hold any
Gross Proceeds of the Bonds, the provisions of this Section 3.6 shall no longer
be deemed applicable and no action required by this Section 3.6 need be taken;
provided, however, that should Gross Proceeds (other than amounts in the Bond
Fund) arise at any time thereafter, the provisions of this Section 3.6 shall
apply to such Gross Proceeds. For purposes of this Subsection 3.6(c), the
Authority and the Trustee may request, receive and rely with acquittance on an
opinion of Bond Counsel to the effect that the Trustee and the Authority no
longer hold any Gross Proceeds of the Bonds.
SECTION 3.7. NO FEDERAL GUARANTEE. Notwithstanding any other
provision of this Loan Agreement, all money held by the Trustee after September
1, 1988, in any of the funds or accounts established pursuant to the Indenture
shall, at the written direction of the Company, be (a) invested solely as part
of a bona fide debt service fund or of a reserve fund which meets the
requirements of Section 103(c)(4)(B) of the Code, or (b) invested solely in
Government Obligations, unless the Company shall have furnished the Trustee a
ruling of the Internal Revenue Service or an opinion of Bond Counsel to the
effect that a proposed investment will not cause the interest on the Bonds to be
subject to federal income taxation or California income taxation.
ARTICLE IV
COMPANY LOAN REPAYMENT
SECTION 4.1. PROVISIONS FOR REPAYMENT OF LOAN. The Company shall
repay the Company Loan and interest thereon by payments in immediately available
funds to the Trustee for deposit into the Revenue Fund as provided in Article
III of the Indenture on the date payment is due by 10:00 a.m. Los Angeles time
at its office in Los Angeles, California or at such other place within the
continental United States as the Trustee may direct in writing.
The Company covenants and agrees to repay the Company Loan,
together with interest and premium, if any, thereon, in payments in an amount
which, together with other money available therefor under the Indenture, will be
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sufficient to pay the interest, principal, and premium, if any, on the
Outstanding Bonds, which will become due on each respective payment date.
Notwithstanding any payments made pursuant to the provisions of
this Loan Agreement, if, on any date when interest, principal, or premium, if
any, is to be paid, the balance in the Bond Fund available for such payment is
insufficient to make the required payments on such date, the Company shall make
an additional payment on such date in immediately available funds in the amount
of such deficiency.
The obligation of the Company to make any payment hereunder with
respect to the Company Loan and the Bonds shall be deemed satisfied and
discharged to the extent of any Seasoned Funds applied by the Trustee to such
obligation pursuant to the terms of the Indenture, to the extent of any monies
applied by the Trustee to the payment of Company Bonds pursuant to the terms of
the Indenture, and to the extent of payments made by the Bank to the Trustee
under the Letter of Credit.
SECTION 4.2. PROVISIONS FOR PAYMENT OF PURCHASE PRICE. The Company
shall pay, or cause to be paid, to the Trustee and the Tender Agent such amounts
as shall be necessary to enable the Trustee and the Tender Agent to pay the
purchase price of Bonds delivered for purchase pursuant to Sections 1301 and
1302 of the Indenture, such amounts to be paid by the Company to the Trustee and
the Tender Agent on the dates such payments pursuant to Sections 1301 and 1302
of the Indenture are to be made; provided, however, that the obligation of the
Company to make any such payment hereunder shall be reduced by the amount of any
money available for such payment under Subsection 1307(b)(i) of the Indenture;
and provided, further, that the obligation of the Company to make any payment
hereunder shall be deemed to be satisfied and discharged to the extent of the
corresponding payment made by the Bank under the Letter of Credit pursuant to
Section 4.7 hereof.
SECTION 4.3. CREDITS. Anything herein to the contrary
notwithstanding, any monies held by the Trustee in the Company Bond Account in
the Bond Fund for the payment of principal of, premium, if any, and interest on
Company Bonds, any Seasoned Funds at any time held by the Trustee in the Special
Redemption Account and the Bond Payment Account in the Bond Fund for the payment
of principal of, premium, if any, and interest on the Bonds (other than Company
Bonds), and any Seasoned Funds on deposit in the Purchase Fund and any monies
delivered to the Trustee pursuant to Subsection 1307(b)(i) of the Indenture for
the payment of the purchase price of Bonds tendered for purchase pursuant to
Section 1301 or 1302 of the Indenture shall be credited against the next
succeeding payment referred to in Section 4.1 and 4.2 hereof and shall reduce
such payment to the extent such amount is in excess of any amount required for
payment of any principal or interest on the Bonds due but not yet paid or the
purchase price of Bonds; and, provided, further, that if the amount of Seasoned
Funds held by Trustee in the Special Redemption Account and the Bond Payment
Account in the Bond Fund should be sufficient to pay at the times required, the
principal of, premium, if any, and interest on the Bonds
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(other than Company Bonds) then remaining unpaid and any other payments required
hereunder, the Company shall not be obligated to make any further payments
provided for in Section 4.1. or 4.2 hereof.
SECTION 4.4. OTHER PAYMENT OBLIGATIONS OF COMPANY. The Company
shall make prompt payment of all amounts payable pursuant to this Loan Agreement
when and as such payments become due. In addition, until payment in full of the
Bonds shall have been made, the Company shall pay all Administration Expenses.
The Company agrees to pay directly to the Trustee, until payment
in full of the Bonds shall have been made: the Ordinary Expenses and
Extraordinary Expenses of the Trustee for acting hereunder and under the
Indenture and the Intercreditor Agreement (including acting as paying agent and
registrar for the Bonds) as defined in the Indenture, the reasonable fees and
expenses of Trustee's Counsel, and any applicable fees of the California
Industrial Development Financing Advisory Commission and the Authority.
SECTION 4.5. MANDATORY PREPAYMENT OF THE COMPANY LOAN. The Company
Loan is subject to mandatory prepayment in whole at a prepayment price equal to
the principal amount thereof, together with accrued interest to the date fixed
for redemption of the Bonds to be redeemed with such prepayment on the day
selected by the Trustee to redeem Bonds after the Trustee has received notice of
a Determination of Taxability.
The Company's obligation to make any payments under this Section
4.5 shall be deemed satisfied and discharged to the extent of the corresponding
payment made by the Bank under the Letter of Credit. The Trustee shall deposit
and use prepayments of the Company Loan pursuant to this Section in accordance
with Section 306(A) of the Indenture.
SECTION 4.6. OPTIONAL PREPAYMENT OF THE COMPANY LOAN.
(a) In the event any monies remain in the Construction Fund on
February 1, 1986, the Company may, at its option, prepay the Company Loan in an
amount equal to the amount of monies remaining in the Construction Fund together
with accrued interest to the date on which Bonds will be redeemed with such
payment, on the third Business Day immediately preceding the first date for
which notice of redemption of Bonds to be redeemed with such prepayment can be
timely given, provided however, that in the event the amount of monies on
deposit in the Construction Fund is not an integral multiple of $5,000, such
prepayment shall be in an amount equal to the next greater integral multiple of
$5,000.
(b) The Company may also, at its option, prepay the Company Loan
in whole or in part, in any integral multiple of $100,000 prior to the
Conversion Date, or in any integral multiple of $5,000 subsequent to the
Conversion Date from Net Proceeds of insurance or condemnation 126 days
immediately
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preceding the date on which notice of redemption of Bonds to be redeemed with
such prepayment is given.
(c) The Company, at its option, may prepay the Company Loan, prior
to the Conversion Date, in whole or in part (other than from Net Proceeds of
insurance or condemnation), in any integral multiple of $100,000, together with
accrued interest to the date on which Bonds will be redeemed with such payment,
126 days preceding the date on which notice of redemption of Bonds to be
redeemed with such prepayment is given.
(d) The Company may also, at its option, prepay the Company Loan,
in whole or in part (other than from Net Proceeds of insurance or condemnation),
126 days preceding the date on which notice of redemption of Bonds to be
redeemed with such prepayment is given, in any integral multiple of $5,000, at
the prepayment prices set forth below, expressed as a percentage of the
principal amount prepaid, together with accrued interest to the redemption date:
Redemption Date
(Measured in terms of years Prepayment
following Conversion Date) Prices
-------------------------- ----------
September 1 of the fifth year through
the next succeeding August 31 103%
September I of the sixth year through
the next succeeding August 31 102
September 1 of the seventh year through
the next succeeding August 31 101
September 1 of the eight year and
thereafter 100
Except for prepayments made pursuant to Subsection 4.6(a) hereof,
which shall be made from the proceeds of a draw upon the Letter of Credit, any
optional prepayment of the principal of the Company Loan must be made by the
Company to the Trustee at least 126 days prior to the date on which the Trustee
mails notice of redemption of the Bonds to be redeemed with such prepayment,
unless the Bank shall have delivered to the Trustee its written consent to a
draw on the Letter of Credit for purposes of paying the principal amount of such
prepayment. Any prepayment premium on the Company Loan must be deposited by the
Company with the Trustee at least 126 days prior to the date on which the
Trustee mails notice of redemption of the Bonds to be redeemed with such
prepayment. The Trustee shall deposit and use prepayments of the Company Loan
pursuant to this Section 4.6 in accordance with Section 305(B) of the Indenture.
On the date of such payment, the Company shall give written notice to the
Authority, the Bank and the Trustee of the principal amount to be optionally
prepaid on the applicable redemption date. No optional prepayment
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shall occur if an Act of Bankruptcy occurs within the 126-day period prior to
the date notice of redemption is mailed. In such event, the Trustee shall
deliver the funds of the Company furnished to it pursuant to this Section 4.6 to
the Bank.
If, prior to the Conversion Date the principal amount of any
optional prepayment in part shall not be an integral multiple $100,000 in the
case of an optional prepayment (other than an optional prepayment pursuant to
Subsection 4.6(a) hereof) then the required principal amount of such prepayment
shall be deemed to be the next greater integral multiple of $100,000; provided,
further if, following any such prepayment there shall be Outstanding any Bond of
a denomination less than $500,000, then the required principal amount of any
optional prepayment shall be deemed to be not less than $500,000. If, subsequent
to the Conversion Date, or in the case of any optional prepayment pursuant to
Subsection 4.6(a) hereof, the principal amount of any optional prepayment in
part shall not be an integral multiple of $5,000, then the required principal
amount of such prepayment shall be deemed to be the next greater integral
multiple of $5,000, and any premium in connection with such prepayment shall be
calculated using such greater amount.
SECTION 4.7. LETTER OF CREDIT.
(a) To secure its obligations to repay the Company Loan and its
other obligations, agreements and covenants to be performed and observed
hereunder, the Company hereby agrees to obtain the Letter of Credit and to do
all things necessary to keep the Letter of Credit or Substitute Letter of Credit
in full force and effect until the Company Loan is repaid in full.
(b) To satisfy the Company's obligations under Sections 4.1 and
4.2 hereof (other than with respect to Company Bonds), the Trustee shall and is
hereby directed by the Company to, draw upon the Letter of Credit as follows:
(i) to the extent Seasoned Funds in the Bond Fund,
as described in Section 306 of the Indenture are not available to
pay interest on the Bonds (other than Company Bonds), when due on
any Interest Payment Date, the Trustee shall draw upon the Letter
of Credit no later than 10:00 a.m. Los Angeles time on the fourth
Business Day immediately preceding such Interest Payment Date;
(ii) to the extent Seasoned Funds in the Bond Fund
as described in Section 306 of the Indenture are not available to
pay principal of the Bonds (other than Company Bonds), when due
(whether by reason of maturity redemption, acceleration or
otherwise) the Trustee shall draw upon the Letter of Credit no
later than 10:00 a.m. Los Angeles time on the fourth Business Day
immediately preceding such maturity date or date fixed for
redemption; and
(iii) to the extent monies described in Section
1307(b)(i) and 1307(b)(ii) of the Indenture are not available to
pay when due the principal of and accrued interest on Bonds
tendered for purchase
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pursuant to Section 1301 or 1302 of the Indenture, the Trustee
shall draw upon the Letter of Credit no later than 10:00 a.m. Los
Angeles time on the fourth Business Day immediately preceding the
purchase date with respect to such Bonds.
In computing the amount of any drawing to pay interest on the
Company Loan pursuant to Subsection 4.7(b)(i) or 4.7(b)(iii) hereof, the Trustee
shall assume that interest on the Bonds will accrue at the Maximum Interest Rate
during any period for which the Remarketing Agent has not yet determined the
Adjustable Interest Rate pursuant to Section 203 of the Indenture.
The Trustee shall immediately give telephonic or telegraphic
notice to the Company, the Authority, and the Bank upon failure of the Trustee
to receive the proceeds of any draw upon the Letter of Credit in accordance with
the terms of the Letter of Credit.
(c) The Company may, at its election and with the consent of the
Bank, provide for one or more extensions of the Letter of Credit or provide a
Substitute Letter of Credit pursuant to Section 4.7(d) hereof. Any Substitute
Letter of Credit shall be delivered to the Trustee not less than thirty (30)
days prior to the expiration of the term of the Letter of Credit.
(d) In the event that the Company shall deliver to the Trustee (i)
a Substitute Letter of Credit (A) that is effective from a date not later than
the date of the expiration of the Letter of Credit and extends to a period of
one year or integral multiple thereof from the date of such expiration, (B) that
has a stated amount equal to not less than the principal amount of the Bonds
Outstanding plus 46 days' interest thereon at the Maximum Interest Rate or, in
the case of a Post-Conversion Letter of Credit, a stated amount equal to the
principal amount of the Bonds Outstanding, plus 186 days' interest at the Fixed
Interest Rate, and, (C) that has terms relating to the ability of the Trustee to
make drawings thereunder that are substantially identical to those of the Letter
of Credit, (ii) an opinion of Bond Counsel stating that the delivery of such
Substitute Letter of Credit to the Trustee is authorized under this Loan
Agreement and that such Substitute Letter of Credit complies with the terms
hereof, (iii) opinions of Counsel in form and substance satisfactory to the
Trustee to the effect that (A) the Substitute Letter of Credit is the valid and
binding obligation of the Bank, enforceable against the Bank in accordance with
its terms, except insofar as its enforceability may be limited by any insolvency
or similar proceedings applicable to the Bank or by proceedings affecting
generally the rights of the Bank's creditors, and that (B) a payment on the
Bonds from the proceeds of a drawing on the Substitute Letter of Credit will not
constitute a voidable preference under the Federal Bankruptcy Code or under
other applicable laws and regulations in the event of a bankruptcy or insolvency
of any entity other than the Bank; and (iv) written evidence from Xxxxx'x to the
effect that such rating agency has reviewed the proposed Substitute Letter of
Credit and that the substitution of the proposed Substitute Letter of Credit for
the Letter of Credit will not, by itself, result in a reduction of its ratings
of the Bonds from those which then prevail, and if the administrative provisions
of such Substitute
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Letter of Credit are reasonably satisfactory to the Trustee, acting in good
faith, the Trustee shall accept such Substitute Letter of Credit and promptly
surrender the Letter of Credit to the Bank for cancellation.
SECTION 4.8 AUTHORITY SECURITY DOCUMENTS. To further secure its
obligations to repay the Company Loan and its other obligations, agreements and
covenants to be performed and observed hereunder the Company will execute and
deliver to the Authority concurrently herewith, the First Deed of Trust and the
First Fixture Filing, duplicate originals of which shall have been duly recorded
in the Official Records of the County, the First Security Agreement, and the
First Financing Statement, a duplicate original of which shall have been duly
filed in the Office of the California Secretary of State.
SECTION 4.9. OBLIGATIONS ABSOLUTE AND UNCONDITIONAL. All of the
obligations of the Company under this Loan Agreement, including, but not limited
to, the obligations to make the payments required to be made under this Loan
Agreement and to perform and observe the other covenants, terms and conditions
applicable to it contained herein shall be absolute and unconditional and shall
not be subject to diminution by set-off, counterclaim, abatement or otherwise
until such time as the principal of and interest on the Bonds shall have been
paid fully or provision for the payment thereof shall have been made in
accordance with this Loan Agreement and the Indenture. The Company (a) will not
suspend or discontinue any payments required to be made under this Loan
Agreement except to the extent the same have been prepaid, (b) will perform and
observe all its other covenants, terms and conditions contained in this Loan
Agreement and (c) except as provided in Section 4.6 hereof, will not terminate
this Loan Agreement for any cause, including, without limiting the generality of
the foregoing, failure to complete the Project, any acts or circumstances that
may constitute failure of consideration, sale, loss, destruction or condemnation
of or damage to the Project or commercial frustration of purposes, any change in
the tax or other laws of the United States of America or of the State or any
political subdivision of either or any failure of the Authority to perform and
observe any covenant, term or condition whether express or implied, or any duty,
liability or obligation arising out of or in connection with this Loan
Agreement. The Company hereby waives to the extent permitted by law, any and all
rights which it may now have or which at any later time may be conferred upon
it, by statute or otherwise, to terminate or cancel, or to limit its liability,
except as provided in Section 4.6 hereof. Nothing contained in this Section
shall be construed to release the Authority from the performance of any of the
covenants, terms or conditions applicable to it contained herein; and in the
event the Authority should fail to perform any such covenant, term or condition
the Company may institute such action against the Authority as the Company may
deem necessary to compel such performance so long as such action does not result
in a breach of the covenants and conditions on the part of the Company contained
in this Section.
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ARTICLE V
THE PROJECT
SECTION 5.1. COMPANY COVENANTS CONCERNING THE PROJECT. (a) The
Company agrees that the acquisition, construction and equipping of the Project
will be completed with all reasonable dispatch and that it will exercise due
diligence in completing the Project, but if for any reason the Project is not
completed, there shall be no resulting liability on the part of the Authority
and no diminution in or postponement of the Company's obligation to make any
payments required under this Loan Agreement. The Company agrees to make,
execute, acknowledge and deliver, or cause to be made, executed, acknowledged
and delivered, any contracts, orders, receipts, writings and instructions with
any Persons and in general to do all things which it deems requisite or proper
to accomplish the timely completion of the Project.
(b) The acquisition, construction, equipping and completion of the
Project shall be accomplished in accordance with the Project Summary, as amended
from time to time by the Company and approved by the Authority; provided,
however, that no material amendment shall be made in the Project Summary unless
there shall be filed with the Authority and the Trustee an opinion of Bond
Counsel satisfactory to the Trustee stating that such amendment and the
expenditure of money from the Construction Fund to pay Project Costs in
accordance with the Project Summary as amended will not change the nature of the
Project as a "project" within the meaning of the Act and will not impair the
exemption of the interest on the Bonds from Federal income taxation pursuant to
Section 103(b)(6)(D) of the Code.
(c) In the event the monies in the Construction Fund and the
Earnings Fund available for payment of the Project Costs are insufficient to pay
the Project Costs in full, the Company agrees for the benefit of the Authority
and the Owners of the Bonds to complete the Project or to cause the Project to
be completed and to pay or cause to be paid that portion of the Project Costs in
excess of the money available therefor in the Construction Fund and the Earnings
Fund; provided that no such payment shall be made by the Company hereunder which
would result in the loss of the exemption from federal income taxation of
interest on the Bonds. In the case of any such amounts the Company proposes to
cause to be provided by others, the Company shall provide satisfactory evidence
to the Authority that such amounts will be provided when required to complete
the Project in a timely manner.
The Authority disclaims any warranty, express or implied, that the
money which will be paid into the Construction Fund and the Earnings Fund will
be sufficient to pay all Project Costs. The Company agrees that if, after
exhaustion of the money in the Construction Fund and the Earnings Fund, it
should pay any portion of the Project Costs pursuant to the provisions of this
Section, it shall not be entitled to any reimbursement therefor from the
Authority, from the Trustee or from the owners of the Bonds, nor shall it be
entitled to any diminution in or postponement of its obligations, or any amounts
payable by it hereunder.
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SECTION 5.2. ESTABLISHMENT OF COMPLETION DATE. The Completion Date
shall be evidenced to the Trustee by a Certificate signed by the Authorized
Company Representative in the form attached hereto as Exhibit C. The Company
shall deliver the Completion Certificate to the Trustee as soon as practicable
after the completion of the Project.
Upon receipt of the Completion Certificate, the Trustee shall
retain in the Construction Fund a sum equal to the amounts, if any, necessary
for the payment of Project Costs not then due and payable to the extent such
amounts are set forth and identified as such in the Completion Certificate; the
remaining amounts in the Project Fund shall immediately be transferred by
Trustee into the Special Redemption Account in the Bond Fund unless, in the
opinion of Bond Counsel another use of such funds will not impair the exemption
of interest on the Bonds from Federal or State income taxation. Amounts held in
the Special Redemption Account shall be invested at the written direction of the
Company solely in obligations of a state, territory or a possession of the
United States or any political subdivision of the foregoing, the interest on
which is exempt from federal income taxation under Section 103(a) of the Code.
Money in the Special Redemption Account shall be applied to make the principal
payments on or to redeem the Bonds at the earliest redemption date permitted by
the Indenture, and the Authority and the Company consent to any such redemption.
The Company shall pay any costs incurred with respect to such redemption,
including any premium required by the Indenture to be paid on such redemption.
Any amounts remaining in the Special Redemption Account as of the maturity date
of the Bonds may be used to make all or a portion of the principal payment due
on such date.
ARTICLE VI
COVENANT TO COMPLY WITH INDENTURE
SECTION 6.1. FINANCING STATEMENTS; FURTHER ASSURANCES. The Company
agrees to execute and file or cause to be executed and filed any and all
financing statements or amendments thereof or continuation statements necessary
to perfect and continue the perfection of the security interests granted in the
Indenture. The Company shall pay all costs of filing such instruments. The
Company further agrees to cause the Trustee to execute or join in the execution
of any such further or additional instruments and file or join in the filing
thereof at such time or times and in such place or places as may be necessary to
preserve the lien of the Indenture on the Trust Estate, or any part thereof,
subject to the provisions of Section 704 of the Indenture.
SECTION 6.2. PAYMENTS ASSIGNED AND PLEDGED. The Company
understands and agrees that all payments required to be made to the Authority
under this Loan Agreement, and all right, title and interest of the Authority in
and to this Loan Agreement (other than the rights of the Authority pursuant to
Sections 4.4 and 8.2 hereof), are assigned and pledged to the Trustee under the
Indenture. The Company consents to such assignment and further agrees that all
payments under this Loan Agreement, unless otherwise specifically provided
herein, shall
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be paid directly to the Trustee for the account of the Authority and shall be
applied as set forth herein and in the Indenture.
SECTION 6.3. COMPANY'S PERFORMANCE UNDER INDENTURE. The Company
shall, for the benefit of the Owners of the Bonds and the Trustee, do and
perform all acts and things that are to be done or performed by it under the
terms of the Indenture.
ARTICLE VII
INSURANCE, DAMAGE, DESTRUCTION AND CONDEMNATION
SECTION 7.1. INSURANCE. The Company agrees that it will at its own
expense obtain and maintain extended insurance coverage with respect to the
Project insuring against loss or damage from such perils usually insured against
by businesses operating or owning like properties, and shall maintain public
liability insurance and all workmen's compensation or other similar insurance as
may be required by law. Prior to the Completion Date, the Company will at its
own expense maintain builders' risk or such other similar insurance. The Company
will cause the Trustee to be named as loss payee or as an additional insured
under such coverage.
All such insurance shall be placed with generally recognized
responsible insurance companies organized under the laws of one of the states of
the United States and qualified to do business in the State. All policies of
fire and extended coverage insurance may be written with deductible amounts as
now provided in the existing policies of the Company or as may be from time to
time consistent with customary insurance practices in the industry.
Upon execution and delivery of this Loan Agreement, and thereafter
not less thirty (30) days prior to the expiration dates of any policies, if
requested by the Authority, the Company shall deliver to the Authority
certificates issued by the respective insurers of the policies obtained by the
Company in accordance with this Section. If requested in writing by the
Authority, the Company shall furnish the Authority with a schedule of premium
payment dates and receipted bills or other evidence satisfactory to the
Authority of the payment when due of all premiums for all policies of insurance
at any time required to be maintained hereunder. Upon reasonable prior written
notice, the Company will permit the Authority or the Trustee to visit the
offices of the Company and inspect the Company's insurance records, including
all policies of insurance maintained pursuant to this Loan Agreement, and to
make copies of all or any part thereof.
SECTION 7.2. DAMAGE, DESTRUCTION AND CONDEMNATION. If prior to
full payment of the Bonds (or provision for payment thereof in accordance with
the provisions of the Indenture) (a) the Project or any portion thereof are
destroyed (in whole or in part) or are damaged by fire or other casualty, or (b)
title to, or the temporary use of, the Project or any portion thereof shall be
taken under the exercise of the power of eminent domain by any governmental body
or by any
34
39
person, firm or company acting under governmental authority, the Company shall
nevertheless be obligated to continue to pay all amounts due hereunder, unless
such amounts are prepaid in accordance with Section 4.6 hereof.
SECTION 7.3. APPLICATION OF NET PROCEEDS. The Net Proceeds, if
any, of any insurance and/or condemnation awards resulting from the damage,
destruction or condemnation of the Project or any portion thereof shall be
deposited and applied in one or more of the following ways as shall be elected
by the Company in a written notice to the Authority and the Trustee:
(a) for credit to the Insurance and Condemnation Proceeds Account
to be applied to the prompt repair, restoration, relocation, modification
or improvement of the stage of completion of construction of the damaged,
destroyed or condemned portion of the Project to enable such portion of
the Project to accomplish the purposes that such portion of the Project
was designed to accomplish prior to such damage or destruction or
exercise of such power of eminent domain. Any balance of Net Proceeds
remaining after such work has been completed shall be transferred by the
Trustee to the Company Monies Account to be applied to the prepayment of
the Company Loan pursuant to Section 4.6(b) hereof; or
(b) for credit to the Company Monies Account to be applied to the
prepayment of the Company Loan pursuant to Section 4.6(b) hereof.
SECTION 7.4. INVESTMENT OF NET PROCEEDS. Any Net Proceeds held
pending repair, restoration or relocation shall be invested at the written
direction of the Company solely in obligations of a state, territory or a
possession of the United States or any political subdivision of the foregoing,
the interest on which is exempt from federal income taxation under Section
103(a) of the Code. Any earnings or profits on such investments shall be
considered part of the Net Proceeds.
SECTION 7.5. INSUFFICIENCY OF NET PROCEEDS. If the Project or a
portion thereof is to be repaired, restored, relocated, modified or improved
pursuant to Section 7.3(a) hereof and if the Net Proceeds are insufficient to
pay the cost of such repair, restoration, relocation, modification or
improvement, the Company will nonetheless cause the work to be completed and
will pay or cause to be paid any cost in excess of the amount of the Net
Proceeds available therefor. The Authority shall have no obligation to complete
the Project or repair, restoration, relocation, modification or improvement of
the Project.
SECTION 7.6. COMPANY-OWNED PROPERTY. The Company shall be entitled
to any condemnation award or insurance proceeds or portion thereof, in the full
amount remaining after deducting all expenses (including attorneys' fees)
incurred in the collection of such award or proceeds from the gross amount
thereof, for damages to, destruction of or takings of its own property not
included in the Project.
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40
SECTION 7.7 TITLE INSURANCE. The Company will obtain and cause to
be delivered to the Trustee on the Bond Issuance Date, the Title Policy. Any Net
Proceeds of title insurance shall be applied in accordance with Section 7.3
hereof.
ARTICLE VIII
ADDITIONAL COVENANTS
SECTION 8.1. MAINTENANCE AND OPERATION OF PROJECT; TAXES. The
Company will at its own expense maintain and operate the Project. The Company
will pay, or cause to be paid, all taxes levied with respect to the Project and
the income therefrom, including any assessments or other public charges secured
by liens upon the Project or the Company's interests therein.
SECTION 8.2. AUTHORITY'S EXPENSES; RELEASE AND INDEMNIFICATION.
Whether or not the transactions contemplated by this Loan Agreement and the
Indenture are consummated, the Company shall:
(a) hold the Authority harmless against, and pay, any liability
for the payment of out-of-pocket expenses arising in connection with the
transactions contemplated hereby, including the reasonable fees and
expenses of the Authority's Counsel; and
(b) protect and indemnify the Authority or the Trustee, its
directors, officers, agents and employees from and against all liability,
losses, damages, costs, expenses (including attorneys' fees), taxes,
causes of action, suits, claims, demands and judgments of any nature of,
from, by or on behalf of any Person arising in any manner from the
transaction of which this Loan Agreement is part or arising in any manner
in connection with the Project or the financing of the Project,
including, without limiting the generality of the foregoing, those
arising from (i) any work done in connection with, or the operation of
the Project during the term of this Loan Agreement, (ii) any breach or
default on the part of the Company in the performance of any of its
obligations under this Loan Agreement or the Indenture, (iii) the Project
or any part thereof, (iv) any violation of contract, agreement or
restriction by the Company relating to the Project, this Loan Agreement
or the Indenture, (v) any violation of law, ordinance or regulation
affecting the Project or any part thereof or the ownership or occupancy
or use thereof, or (vi) any untrue statement or alleged untrue statement
of any material fact or the omission or alleged omission to state a
material fact necessary to make the statements made not misleading in any
statement, information or material furnished by the Company to the
Authority, including, but not limited to, any statement, information or
material furnished by the Company for inclusion in any disclosure
document utilized by the Authority in connection with the sale of the
Bonds; provided, however, that nothing herein shall be construed as
requiring indemnity for any liability resulting from willful misconduct
or gross
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41
negligence on the part of the Authority, its directors, officers, agents
or employees, or as requiring indemnity for any liability resulting from
willful misconduct or negligence on the part of the Trustee, its
directors, officers, agents or employees.
It is the intention of the parties that the Authority and the
Trustee, their directors, officers, agents and employees shall not incur
pecuniary liability by reason of the terms of this Loan Agreement, or of the
Indenture, or by reason of the undertakings required by the Authority or the
Trustee, as the case may be, its or their directors, officers, agents and
employees hereunder or thereunder in connection with the issuance of the Bonds,
the execution of the Indenture, the performance of any act by the Authority or
the Trustee, as the case may be, its or their directors, officers, agents and
employees required by this Loan Agreement or the Indenture, or the performance
of any act by the Authority or the Trustee, as the case may be, its or their
directors, officers, agents and employees requested by the Company or in any way
arising from the transaction of which this Loan Agreement and the Indenture are
a part or arising in any manner in connection with the Project or the financing
of the Project; nevertheless, if the Authority or the Trustee or any of its or
their directors, officers, agents or employees should incur any such pecuniary
liability, the Company shall indemnify and hold harmless Authority and/or the
Trustee, as the case may be, and its or their directors, officers, agents and
employees against all claims, costs and expenses incurred by them in connection
with any such claim or in connection with any action or proceeding brought in
connection with any action or proceeding brought thereon. The Authority and/or
the Trustee shall promptly notify the Company of any action or proceeding
brought in connection with any of the above, and the Authority and the Trustee
agree that they will not settle any such action or proceeding without the prior
written consent of Company which consent shall not be unreasonably withheld. The
Company shall, in its own name or in the name of the Authority and/or the
Trustee, be responsible for and control the defense of the Authority and/or the
Trustee, as the case may be, its or their directors, officers, agents and
employees in any such action or proceeding, and the Authority and the Trustee
agree to cooperate fully with the Company and to take all reasonable action
necessary, to the extent it might lawfully do so, to effect the substitution of
the Company for the Authority and/or the Trustee in such action or proceeding.
The provisions of this Section shall not apply to any claim or liability
resulting from any act of gross negligence, willful misconduct, bad faith, fraud
or deceit on the part of the Authority or its directors, officers, agents or
employees, or to any claim or liability resulting from any act of negligence,
willful misconduct, bad faith, fraud or deceit on the part of the Trustee or its
directors, officers, agents or employees.
SECTION 8.3. MAINTENANCE OF CORPORATE EXISTENCE; QUALIFICATION IN
THE STATE. The Company shall, so long as the Bonds remain Outstanding, maintain
its corporate existence and qualification to do business in the State and shall
not dissolve or otherwise dispose of all or substantially all of its assets nor
merge into or consolidate with any other company or entity or permit one or more
other companies to consolidate or merge with it, except as provided below.
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42
The Company may consolidate with or merge with another company incorporated and
existing under the laws of one of the states of the United States of America or
permit one or more other foreign or domestic companies to consolidate with or
merge with it, or sell or otherwise transfer to another domestic or foreign
company all or substantially all of its assets as an entirety and thereafter
dissolve; provided, it furnishes to the Authority and the Trustee an opinion of
Bond Counsel stating that such consolidation, merger, sale or transfer will not
adversely affect the exemption from federal income taxation of interest on the
Bonds, provided further, in the event the Company is not the surviving,
resulting or transferee company, as the case may be, that the surviving,
resulting or transferee company (a) assumes in writing all of the obligations of
the Company hereunder, and (b) is, or as soon as practicable becomes, qualified
to do business in the State.
SECTION 8.4. REQUIREMENT FOR CERTAIN NOTICES. The Company shall
give prompt written notice to the Authority and the Trustee of (i) any Event of
Default or any event which, upon a lapse of time or notice or both, would become
an Event of Default; and (ii) the occurrence of a Determination of Taxability or
any event which upon a lapse of time or notice or both would result in a
Determination of Taxability.
SECTION 8.5. COOPERATION. The Company agrees that it will perform,
on request of the Authority, such reasonable acts as may be necessary or
advisable to carry out the intent of this Loan Agreement or of the Indenture.
SECTION 8.6. ACCESS TO BOOKS AND RECORDS. The Company shall
maintain adequate books, accounts and records in compliance with the regulations
of any governmental regulatory body having jurisdiction thereof. The Company
shall permit employees or agents of the Authority or the Trustee, at any
reasonable time and upon reasonable prior notice, to inspect the Company's
properties and to examine or audit the Company's books, accounts and records and
make copies and memoranda thereof.
SECTION 8.7. COMPLIANCE WITH LAWS. The Company agrees that it will
at all times comply with, or cause to be complied with, all laws, statutes,
rules, regulations, orders and directions of any governmental authority having
jurisdiction over the Company or its business if a breach of any such law,
statute, rule, regulation, order, or direction would materially and adversely
affect the Project, except where contested in good faith and by proper
proceedings.
SECTION 8.8. LIMITATION ON ASSIGNMENT OF LOAN AGREEMENT. Except as
provided in Section 8.3 hereof, and the Intercreditor Agreement, this Loan
Agreement, the Company's rights hereunder, the proceeds of the Loan and the use
thereof may not be assigned by the Company without the prior written consent of
the Authority. Any such assignment by the Company shall not relieve the Company
of primary liability for payments due under this Loan Agreement and of the
performance of all other obligations required under this Loan Agreement. In
addition, subject to the terms of the Intercreditor Agreement, any assignee or
transferee shall assume the obligations of the Company
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43
hereunder to the extent of the interest assigned or transferred, and the Company
shall forthwith furnish or cause to be furnished to the Authority and the
Trustee a true and complete copy of all documents evidencing such assignment or
transfer and assumption of obligations.
Subject to the provisions of the Intercreditor Agreement, the
Company covenants and agrees that it shall not, without the prior written
consent of the Authority and the Trustee, sell, lease, convey or encumber the
Project and any or all of its rights therein. Any such sale, lease conveyance or
encumbrance shall not relieve the Company of primary liability for payments due
under this Loan Agreement and of the performance of all other obligations under
this Loan Agreement. Notwithstanding the foregoing, the Authority and the
Trustee shall not consent to the sale, lease conveyance or encumbrance by the
Company of the Project or of any or all of its rights therein unless the Trustee
and the Authority shall have received an opinion of Bond Counsel stating that
such sale, lease conveyance or encumbrance will not adversely affect the
exemption from federal income taxation of interest on the Bonds.
SECTION 8.9. WAGES. In accordance with Section 91533(1) of the
Act, the Company agrees that on any construction, improvement, reconstruction or
rehabilitation financed in whole or in part with proceeds of the Bonds all
workers employed in such work, exclusive of maintenance work, will be paid not
less than the general prevailing rate of per diem wages for work of a similar
character in the locality in which the work is performed, and not less than the
general prevailing rate of per diem wages for holiday and overtime work. Such
rates shall be as determined by the Director of the Department of Industrial
Relations of the State in accordance with the standards set forth in Section
1773 of the California Labor Code and Sections 1773.1, 1773.5, 1774 and 1776
(excepting subdivision (f)) of such Labor Code shall apply.
ARTICLE IX
DEFAULTS AND REMEDIES
SECTION 9.1. EVENTS OF DEFAULT. The following shall be "Events of
Default" under this Loan Agreement and the term "Event of Default" shall mean,
whenever it is used in this Loan Agreement, any one or more of the following
events:
(a) failure by the Company to pay or cause to be paid when due the
amounts required to be paid under this Loan Agreement and such failure
for a period of three Business Days;
(b) failure by the Company to observe and perform any covenant,
condition or agreement on its part contained in Section 2.3 and 3.6
hereof or of any other covenant with respect to the tax-exempt status of
interest on the Bonds herein or any covenant, condition or agreement on
its part with respect to the tax-exempt status of interest on the Bonds
in any other
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44
document or instrument executed by the Company in connection herewith; or
(c) any representation or warranty by the Company contained in
Section 2.3 of this Loan Agreement or any related instruments or
certificates relating to the tax-exempt status of interest on the Bonds
is false or misleading in any material respect as of the date of the
making or furnishing thereof.
No default under Subsections 9.1(b) or (c) above shall constitute
an event of default until written notice of such default shall be given to the
Company by the Trustee or the Authority, and the Company shall have had thirty
(30) days after receipt of such notice to correct such default or cause such
default to be corrected, and shall not have corrected such default or caused
such default to be corrected within the applicable period unless the Trustee
shall agree to an extension of such time period or if the breach or failure is
such that it cannot be corrected within the applicable period, corrective action
is instituted by the Company within the applicable period and diligently pursued
until the default is corrected. The Authority and the Trustee shall send a copy
of any notice sent pursuant to this Section 9.1 to the Bank.
SECTION 9.2. REMEDIES ON DEFAULT. Subject to the terms and
conditions of the Intercreditor Agreement, whenever any Event of Default
pursuant to Sections 9.1(a) hereof shall have happened and be continuing, the
Trustee shall, and whenever any other Event of Default shall have happened and
be continuing may (and upon the direction of the Owners of twenty-five percent
(25%) in aggregate principal amount of the Outstanding Bonds shall), take any
one or more of the following steps:
(a) By written notice to the Company and the Bank declare an
amount equal to (i) the then unpaid amount of the Company Loan plus (ii)
all interest on the Company Loan then due and accrued to the date of
redemption of the then Outstanding Bonds, plus (iii) unless actually
being contested as specifically provided herein, any other amounts due
hereunder, to be immediately due and payable, whereupon the same shall
become immediately due and payable by the Company to the Trustee;
(b) Have reasonable access to and inspect, examine and make copies
of the books and records and any and all accounts, data and income tax
and other tax returns of the Company during regular business hours of the
Company if reasonably necessary in the opinion of the Trustee; and
(c) Seek recovery under the Letter of Credit in an amount
sufficient to pay the principal due on the Company Loan plus accrued
interest thereon to the date of redemption of the then Outstanding Bonds.
In addition, the Trustee may take whatever action at law or in
equity may appear necessary or desirable to collect any amounts then due and
thereafter to become due hereunder or to enforce the observance or
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45
performance of any obligation, agreement or covenant of the Company under this
Loan Agreement.
Any amounts collected pursuant to action taken under this Section,
after retention of the costs involved in such collection, shall be paid into the
Bond Fund and applied in accordance with the provisions of the Indenture, and
after payment in full of the Bonds and all other amounts payable under the
Indenture, and the payment of any costs occasioned by an Event of Default
hereunder, except as provided in Section 3.6 hereof, any excess money in the
Funds and Accounts held by the Trustee (other than money held for payment of the
Bonds) shall be paid to the Bank.
SECTION 9.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon
or reserved to the Trustee is intended to be exclusive of any other available
remedy or remedies but each and every such remedy shall be cumulative and shall
be in addition to every other remedy herein or now or hereafter existing at law,
in equity or by statute. No delay or omission to exercise any right or power
accruing upon an Event of Default shall impair any such right or power or shall
be construed to be a waiver thereof (unless expressly waived by the Trustee),
but any such right or power may be exercised from time to time and as often as
may be deemed expedient. The Trustee and the Owners of the Bonds, subject to the
provisions of the Indenture, shall be entitled to the benefit of all agreements
herein contained.
SECTION 9.4. ATTORNEYS' Fees and Expenses. Should an Event of
Default occur and the Trustee employ attorneys or incur other expenses for the
collection of amounts due hereunder or the enforcement of performance of any
obligation of the Company hereunder, the Company shall on demand pay to the
Trustee the reasonable fees and expenses of such attorneys and such other
reasonable expenses so incurred.
SECTION 9.5. NO IMPLIED WAIVER. In the event any agreement,
covenant or condition contained in this Loan Agreement should be breached by
either party and thereafter waived by the other party, such waiver shall be
limited to the particular breach so waived and shall not be deemed to waive any
other breach hereunder.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. TERM OF THIS LOAN AGREEMENT. This Loan Agreement
shall remain in full force and effect from the date hereof until such time as
the Bonds shall have been fully paid, or provision made for such payment, and
the fees and expenses of the Trustee and any amounts due the Authority hereunder
or under the Indenture shall have been fully paid; provided, however, that this
Loan Agreement may be terminated, subject to the provisions of this paragraph,
by written notice from either party to the other prior to said date if the
41
46
Company shall prepay all amounts payable hereunder pursuant to and in accordance
with Sections 4.5 and 4.6 hereof.
SECTION 10.2. NOTICES. Except as otherwise specifically provided
herein, all notices, approvals, consents, requests and other communications
hereunder shall be in writing and shall be deemed to have been given when such
writing is delivered or mailed by first class registered or certified mail,
postage prepaid, addressed as follows:
(a) If to the Company: Calavo Growers of California
X.X. Xxx 0000 Xxxxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
(b) If to the Authority: Riverside County Industrial Development
Authority
0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
(c) If to the Trustee: First Interstate Bank of California
000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Corporate Trust Department (W 10-2)
(d) If to the Bank: Security Pacific National Bank
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
A duplicate copy of each notice, certificate or other
communication given hereunder by either the Authority, the Company or the
Trustee to any one of the others shall also be given to all of the others. The
Authority, the Company and the Trustee may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates or
other communications shall be sent.
SECTION 10.3. POWER OF AUTHORIZED COMPANY REPRESENTATIVE. Whenever
the Company's approval is required under the provisions of this Loan Agreement
or the Authority or the Trustee is required to take some action at the request
of the Company, the approval or request shall be made by the Authorized Company
Representative unless otherwise specified in this Loan Agreement. The Authority
and the Trustee shall be authorized to act on any such approval or request and
the Company shall have no complaint against the Authority or the Trustee that
such request was unauthorized.
SECTION 10.4. BINDING EFFECT. This Loan Agreement shall inure to
the benefit of and shall be binding upon the Authority, the Company and their
respective successors and assigns.
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47
SECTION 10.5. SEVERABILITY. In the event any provision of this
Loan Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
SECTION 10.6. AMOUNTS REMAINING IN FUNDS. Except as expressly
provided in Section 3.6 hereof, any amounts remaining in the Funds and Accounts
held by the Trustee upon expiration or sooner termination of and as provided in
this Loan Agreement, shall be paid by the Trustee to the Bank.
SECTION 10.7. AMENDMENTS, CHANGES AND MODIFICATIONS. Except as
otherwise provided in this Loan Agreement or in the Indenture, subsequent to the
issuance of the Bonds and prior to their payment in full (or provision therefor
made in accordance with the Indenture), this Loan Agreement may not be amended,
changed, modified, altered or terminated except as provided in Article XI of the
Indenture.
SECTION 10.8. EXECUTION IN COUNTERPARTS. This Loan Agreement may
be executed in several counterparts, each of which shall be an original and all
of which shall constitute but one and the same instrument.
SECTION 10.9. CAPTIONS. The captions or headings in this Loan
Agreement are for convenience only and in no way define, limit or describe the
scope or intent of any provision of this Loan Agreement.
SECTION 10.10. LAW GOVERNING CONSTRUCTION OF LOAN AGREEMENT. This
Loan Agreement shall be governed by and construed in accordance with the laws of
the State.
SECTION 10.11. NO RIGHTS CREATED IN THIRD PARTIES. The terms of
this Loan Agreement are not intended to establish nor to create any rights in
any persons other than the Authority, the Company, the Trustee and the Owners of
the Bonds and the respective successors of each.
SECTION 10.12. BENEFIT OF THE OWNERS OF THE BONDS. This Loan
Agreement is executed in part to induce the purchase by others of the Bonds to
be issued by the Authority, and accordingly all covenants and agreements on the
part of the Company and the Authority as set forth in this Loan Agreement are
hereby declared to be for the benefit of the Owners from time to time of the
Bonds.
SECTION 10.13. NOTICE OF TAXABILITY. In the event the Trustee
receives written notice from any Owner of Bonds stating that (i) the Owner of
Bonds has been notified in writing by the Internal Revenue Service that it
proposes to include the interest on any Bonds in the gross income of such Owner
of Bonds for the reasons described herein or any other proceeding has been
instituted against such Owner of Bonds which may lead to a final decree,
judgment, or action as described herein, and (ii) such Owner of Bonds will
afford the Company the opportunity to contest the same, either directly or in
the name
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48
of the Owner of Bonds, and file an action for judicial review then the Trustee
shall promptly give notice thereof to the Company, the Authority and the Bank.
IN WITNESS WHEREOF, the Authority and the Company have caused this
Loan Agreement to be executed in their respective corporate names, all as of the
date first above written.
RIVERSIDE COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
[SEAL]
By /s/ XXXXXXXX XXXXXX
--------------------------------------
Chairman
ATTEST:
By /s/ XXXXXX X. XXXXXXX
-------------------------------
Secretary
CALAVO GROWERS OF CALIFORNIA
By /s/ XXXXXX XXXXXXX
--------------------------------------
Its Vice President and Secretary
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49
EXHIBIT A
PROJECT SUMMARY
A-1
50
TEMECULA PROJECT
COST ESTIMATE AND TIME TABLE
REVISED 8/7/85
Original
Type Supplier Cost Budget Finish
------------------------------------------------------- -------- -------- -------- --------
A) Architecture Kulweic $117,584 $140,000 June
-------- --------
B) Building: HMH
1 - Earthwork $ 55,300 June 30
2 - Site Utilities 33,900 July 31
3 - Storm Drain 7,145 August
4 - Asphalt paving 101,717 Nov. 15
5 - Chain link fence 13,250 Dec. 15
6 - Landscape and Irrigation 27,855 Dec. 21
7 - Fine Grade and Fill Planters 5,000 Nov. 30
8 - Building and Site Concrete 653,211 Oct. 31
9 - Concrete floor seal 1,625 Nov. 15
10 - Structural Steel 65,689 Oct. 31
11 - Rough carpentry 49,661 Oct. 31
12 - Panelized Roof 171,998 Sept. 30
13 - Truss Joist 6,000 Oct. 15
14 - Cabinet Work 1,950 Nov. 30
15 - Thermal & Sound Insulation 10,611 Oct. 31
16 - Cooler Construction 264,856 Oct. 25
17 - Built up Roofing 49,900 Oct. 15
18 - Flashing and Sheet Metal 8,250 Oct. 15
19 - Skylights and Roof Hatch 3,789 Oct. 15
20 - Sealants and Caulking 5,000 Oct. 31
21 - Doors, Frames and Hardware 11,000 Nov. 15
22 - Install Doors and Frames 2,240 Nov. 15
23 - Overhead Coiling Doors 26,000 Nov. 15
24 - Glass and Glazing 14,234 Nov. 21
25 - Lath and Plaster 8,500 Oct. 31
26 - Gypsum Drywall 21,700 Nov. 15
27 - Ceramic Tile 11,624 Nov. 21
28 - Acoustical Tile 8,474 Dec. 15
29 - Carpet and Resilent Tile 9,474 Dec. 15
51
Temecula Project
Cost Estimate and Time Table
Revised 8/7/85
Page Two
Original
Type Supplier Cost Budget Finish
------------------------------------------------------ ---------- ----------- --------- -------
30 - Painting $ 75,000 Dec. 21
31 - Toilet Partition 2,559 Dec. 15
32 - Toilet Accessories 2,921 Dec. 15
33 - Dock Equipment 9,496 Nov. 30
34 - Plumbing 63,600 Dec. 21
35 - HV & AC 148,875 Dec. 21
36 - Fire Sprinklers 92,000 Dec. 15
37 - Cooler Pads/Condensable Pipe 8,500 Nov. 15
38 - Electrical 226,200 Dec. 21
39 - Light Pole Bases 3,000 Nov. 30
40 - Interior Plenum Walls 24,952 Oct. 21
41 - Super. and Misc. Job Expense 72,500 Dec. 31
42 - Overhead and profit 130,894 Dec. 31
---------- ----------
TOTAL $2,510,778 $3,020,000
---------- ----------
C) Refrigeration Am. Refrig 328,702
----------
D) Electrical 135,000 135,000
E) Utility Connections SCE 2,112 --
F) Sizer Line X. Xxxxxx 277,622 233,180
G) Bin Dump - Grading Line Packers Mfg 302,500 427,690
H) Packing Tubs (100) 77,910 71,250
I) Packer Stands (30) 14,278 22,800
J) Scales Xxxxxx 14,000 14,000
K) Forklifts (8) Hyster 178,640 208,000
L) 5 Pallet forklift Hyster 51,767 65,000
M) Bin hoist 6,000 6,000
N) Vibrator count fill 10,000 --
Pallet jacks (2) 1,200 1,200
P) Box former and sealer Weyerhauser N/C N/C
Q) Pallet Squeeze Converter 5,000 8,600
52
Temecula Project
Cost Estimate and Time Table
Revised 8/7/85
Page Two
Original
Type Supplier Cost Budget Finish
------------------------------------------------------ ---------- ----------- --------- -------
R) Shop Equipment $ 7,000 $ 7,000
S) Office Equipment and Lunch Room 10,000 10,000
T) Telephone system 12,000 12,000
U) Office Furniture 15,000 15,000
V) Computer IBM 10,000 10,000
W) Air Compressor 11,000 13,000
X) Bin Sanitizer XxXxxxx 7,500 7,500
Y) Dry Matter Test Equipment 6,000 6,000
Z) Water Treatment System 3,000 3,000
AA) Day Coders Xxxxx 1,200 1,200
B) Pack Station Stamps 2,000 2,000
CC) Freight 6,000 --
---------- ----------
Sub-Total $4,109,793 $4,439,620
Sales Tax 11,225 42,530
Interest on Project 248,500 248,500
Contingency 171,129 --
Permits and Fees 12,338
---------- ----------
TOTAL CONSTRUCTION COST $4,552,985 $4,730,650
========== ==========
53
EXHIBIT B
FUNDING REQUISITION
Date:
-------------------
Requisition No._________
1. Amount due and to be disbursed: $_______________________
2. The undersigned hereby represents that: (a) each obligation to which the
amount specified above relates has been properly incurred in connection with the
Project being financed with the proceeds of the Loan specified above (the
"Loan"), is a reimbursable Project Cost properly chargeable against the
Construction Fund and has not been the basis of any previous disbursement made
to or on behalf of the undersigned; (b) the expenditure of the amount specified
above, when added to all disbursements under previous requisitions under the
Loans, other than disbursements to pay the costs of issuing the Bonds, will
result in not less than 95% of all such disbursements having been used to pay or
reimburse the undersigned for amounts which are Qualified Project Costs; (c) the
expenditure of the amount specified above, when added to all disbursements to
the undersigned under all previous requisitions under the Loans, will result in
less than 25% of all such disbursements to the undersigned having been used to
acquire land or any interest therein; and (d) this disbursement is for the items
set forth on Exhibit 1 hereto.
3. The amount to be disbursed hereunder shall be deposited into
_____________________________________________.
Capitalized terms as used herein shall have the meanings given to them in the
Loan Agreement dated as of September 1, 1985, between the Riverside County
Industrial Development Authority and Calavo Growers of California ("Company").
CALAVO GROWERS OF CALIFORNIA
By:
------------------------------------
Its:
------------------------------------
Disbursement Consented To:
SECURITY PACIFIC NATIONAL BANK
By:
---------------------------------
Authorized Representative
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EXHIBIT C
COMPLETION CERTIFICATE
The undersigned hereby certify that all portions of the Project
were substantially completed and available either for occupancy or use as of
_________________.
CALAVO GROWERS OF CALIFORNIA
By:
-------------------------------------
Company Representative
[ARCHITECT OR ENGINEER]
By:
-------------------------------------
[GENERAL CONTRACTOR]
By:
-------------------------------------
The undersigned hereby certifies that:
(1) the aggregate amount disbursed on the Company loan to date is
$_______________.
(2) all amounts disbursed on the Company Loan have been applied to
pay or reimburse the undersigned for the payment on Project Costs and none of
the amounts disbursed on the Company Loan have been applied to pay or reimburse
any party for the payment of costs or expenses other than Project Costs; and
(3) at least 95 percent of the amounts disbursed on the Company
Loan, less the amounts applied pursuant to the Indenture to pay for the costs of
issuing the Bonds, have been applied to pay or reimburse the Company for the
payment of Qualified Project Costs.
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CALAVO GROWERS OF CALIFORNIA
By:
-------------------------------------
Company Representative
The undersigned hereby certifies that to date $_________________
has been disbursed on the Company Loan.
----------------------------------------
---------------, as Trustee
By:
-------------------------------------
Authorized Officer
C-2
56
EXHIBIT D
SPECIAL ARBITRAGE INSTRUCTIONS
D-1
57
SPECIAL ARBITRAGE INSTRUCTIONS
These instructions are delivered to Calavo Growers of California
(the "Company") and the Riverside County Industrial Development Authority (the
"Authority") in connection with the $4,200,000 aggregate face amount Riverside
County, Industrial Development Authority Variable Rate Demand Industrial
Development Revenue Bonds (Calavo Growers of California Project). The
instructions are designed to provide guidelines for compliance with the
provisions of Section 103(c)(6) of the Code, Sections 307 and 504 of the
indenture of trust between the Authority and Irving Trust Company (the
"Indenture") and Section 3.6 of the loan agreement between the Company and the
Authority dated as of August 1, 1985 (the "Loan Agreement"). All capitalized
terms used in these instructions and not defined herein shall have the meanings
ascribed to them by the Indenture or the Loan Agreement. The term "Regulations"
shall mean all regulations of the United States Department of the Treasury
promulgated or proposed under Section 103(c) of the Code which are applicable to
the Bonds.
1. Significant Terms.
Gross Proceeds. Gross Proceeds include (1) original proceeds (as
defined in Section 1.103-13(b)(2)(i) of the
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Regulations); (ii) investment proceeds (as defined in Section 1.103(b)(2)(ii) of
the Regulations); (iii) transferred proceeds (as defined in Section
1.103-14(e)(2)(ii) of the Regulations); (iv) all amounts held in any sinking
fund established under the Indenture (including any "afterborn" sinking fund);
(v) any securities or other obligations pledged as security for debt service on
the Bonds; (vi) amounts paid to the Authority as fees until expended by the
Authority; (vii) other amounts to be used to pay debt service on the Bonds; and
(viii) any amounts received as a result of investing any of the foregoing.
Nonpurpose Obligations. A Nonpurpose Obligation is any security or
obligation in which Gross Proceeds are invested, other than (i) a tax-exempt
state or local governmental obligation described in Section 103(a) of the Code
and (ii) the Loan Agreement. Thus, for example, all investments in the
Construction Fund, the Revenue Fund, the Earnings Fund and the Bond Fund (unless
such investments are tax-exempt under Section 103(a)) will be Nonpurpose
Obligations. A Nonpurpose Obligation must be valued at fair market value on and
as of the date such obligation is acquired with Gross Proceeds or otherwise
becomes Gross Proceeds (e.g., by a pledge of such security or obligation to
secure the Bonds). Nonpurpose obligations need not be revalued unless required
by the Indenture. Securities or obligations not purchased with
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Gross Proceeds may not be allocated to Nonpurpose Obligations.
Yield. (a) In accordance with Section 1.103-13(c) of the
Regulations, the Yield on the Bonds and the Yield on Nonpurpose Obligations is
that yield which, when used in computing the present worth of all payments of
principal and interest paid or to be paid on the Bonds or Nonpurpose Obligation
during the computation period, produces an amount equal to the Purchase Price
(as defined below).
(b) Bond Yield. For purposes of determining the Yield on the
Bonds, the Purchase Price is the initial offering price of the Bonds to the
public or, if privately placed, the price paid by the first buyer of the Bonds
or the acquisition cost of the first buyer.
Prior to the Conversion Date, (i) for purposes of the Computation
of Investment Excess, the Yield on the Bonds shall be based on actual payments
of principal and interest for the applicable computation period (taking into
account any discount or premium on a constant yield to maturity basis); (ii) for
purposes of the Investment Limitation, the expected Yield on the Bonds shall be
computed on the date of issue, assuming an interest rate of __ percent per
annum, and shall be recomputed on the first day of each Bond Year
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60
thereafter, assuming an interest rate equal to the weighted average rate of
interest paid on the Bonds for the preceding Bond Year. On the Conversion Date,
the expected Yield shall be computed for all purposes thereafter, taking into
account the actual yield to date and assuming no optional calls or redemptions;
however, in the event that there are any calls or optional redemptions after the
Conversion Date, the yield must be recomputed on the last Interest Payment Date
of any Bond Year in which such calls or redemptions occurs.
(c) Nonpurpose Obligation Yield. For purposes of computing the
Yield on Nonpurpose Obligations, the Purchase Price is the fair market value of
the Nonpurpose Obligation determined as of the date on which such obligation
becomes a Nonpurpose Obligation. The expected Yield on a variable rate
Nonpurpose Obligation shall be computed on the date such obligation is acquired
or becomes a Nonpurpose Obligation and, for purposes of the Investment
Limitation, on the first day of each Bond Year thereafter, assuming an interest
rate equal to the weighted average rate of interest paid on such Nonpurpose
Obligation for the preceding year; provided, however, if acquired on its date of
issue, the expected Yield on a Nonpurpose Obligation shall be determined for the
first Bond Year as if such obligation bore interest at the initial
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rate of interest applicable to such Nonpurpose Obligation on the date of issue.
2. Investment Limitation.
Gross Proceeds Subject to the Limitation. Excluding Gross Proceeds
invested during an applicable temporary period, the amount of Gross Proceeds
invested in Nonpurpose Obligations with a Yield in excess of the Yield on the
Bonds may not exceed 150% of Annual Debt Service (the "Investment Limitation").
Because of the temporary period exception, the Investment Limitation will apply
only to Nonpurpose Obligations held in (i) a pledge fund, (ii) a reasonably
required reserve fund or (iii) an afterborn sinking fund. Although none of such
funds are anticipated at this time, a creation of any of such funds in the
future will necessitate compliance with the Investment Limitation.
Annual Debt Service. For purposes of the Investment Limitation,
Annual Debt Service for each Bond Year is the sum of (1) all interest due on
outstanding Bonds (including Bonds that have been defeased) during such Bond
Year, (2) the principal amount of Bonds (including Bonds that have been
defeased) falling due by their terms during such Bond Year, and (3) the
aggregate amount of mandatory sinking fund payments required during such Bond
Year. Annual Debt Service
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is computed on the first day of each Bond Year assuming, for the first Bond
Year, an interest rate of __ percent per annum and, for each Bond Year
thereafter commencing prior to the Conversion Date, an interest rate equal to
the weighted average rate of interest paid on the Bonds during the preceding
Bond Year. On and after the Conversion Date, Annual Debt Service for the current
Bond Year shall be recomputed to reflect the Fixed Interest Rate.
The initial investment of Gross Proceeds subject to the Investment
Limitation must be made in compliance with the Investment Limitation.
Thereafter, on or prior to the first day of each Bond Year and on the Conversion
Date, the Company must determine the amount, if any, by which the fair market
value of Nonpurpose Obligations subject to the Investment Limitation and
invested at a Yield in excess of the Yield on the Bonds exceeds (or will exceed)
150% of Annual Debt Service as of such date. In the event of an excess, the
Company shall instruct the Trustee in writing (a) to sell or otherwise dispose
of Nonpurpose Obligations with a fair market value at least equal to such excess
no later than 30 days after the first day of the Bond Year or the Conversion
Date, whichever is applicable and (b) to reinvest the proceeds of such sale or
disposition in a manner that does not cause the Investment Limitation to be
exceeded; provided, however, the 30-day grace period shall not apply in any Bond
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63
Year commencing after the Conversion Date, and all dispositions of excess
Nonpurpose Obligations after the Conversion Date must be made no later than the
first day of the applicable Bond Year.
In the event of an unscheduled (i.e., optional) redemption of
Bonds, Annual Debt Service must be recomputed as of the date of such redemption.
If, upon such recomputation, the Investment Limitation is exceeded, the Company
must instruct the Trustee to sell or otherwise dispose of Nonpurpose Obligations
with a fair market value at least equal to the amount of such excess, no later
than 30 days after the date of such unscheduled redemption, and to reinvest the
proceeds of such sale or disposition manner that will not cause the Investment
Limitation to be exceeded.
No Disposition in Case of Loss. Notwithstanding the foregoing,
Nonpurpose Obligations subject to the Investment Limitation need not be sold or
disposed of if such sale or disposition would result in a loss (an "Investment
Loss"). An Investment Loss would occur if the sale or disposition would result
in the realization of a loss for Federal income tax purposes in excess of the
Rebate Amount that would be due to the United States under Section 504 of the
Indenture, if such Rebate Amount (determined as if such sale or disposition had
not occurred) were due at the time of the proposed sale
7
64
or disposition. For purposes of the Investment Loss determination, all
Nonpurpose Obligations that have identical terms and provisions and that became
Nonpurpose Obligations at the same time must be treated as a single Nonpurpose
Obligation.
Assuming that the Investment Limitation continues to be exceeded,
Nonpurpose Obligations that have been retained to avoid an Investment Loss must
be sold or disposed of no later than 30 days after the last Interest Payment
Date of any Bond Year if, as of such date, such Nonpurpose Obligations can be
sold or disposed of without incurring an Investment Loss.
3. Rebate Requirement.
Computation of Investment Excess. On the last Interest Payment
Date of each Bond Year, the Company must compute the Investment Excess for the
preceding twelve month period. For purposes of that computation, the aggregate
amount of interest, profits and other income derived from investments in
Nonpurpose Obligations which are held in the Revenue Fund and the Bond Fund need
not be taken into account for any Bond Year in which such income is less than
$100,000; for any Bond Year in which the income on such funds is $100,000 or
more, the entire amount of such income must be
8
65
taken into account in computing Investment Excess for such Bond Year.
The computation of Investment Excess must take into account all
income realized under Federal income tax accounting principles with respect to a
Nonpurpose Obligation, including gain or loss realized on a sale, exchange or
other disposition of any Nonpurpose Obligation (whether or not the person
earning such income is subject to Federal income tax). All transaction costs
incurred in acquiring, carrying, selling or redeeming Nonpurpose Obligations are
disregarded for this purpose and will not, therefore, reduce such gain or
increase such loss.
Transfers to Excess Earnings Account. If, immediately following
payment of all interest and principal due on the Bonds on the last Interest
Payment Date of any Bond Year, any monies remain on deposit in the General
Earnings Account of the Earnings Fund, the Company shall instruct the Trustee to
transfer such monies, up to the annual amount of Investment Excess computed on
such date, to the Excess Earnings Account of the Earnings Fund.
Computation of Rebate Amount. The Rebate Amount shall be computed
on the last Interest Payment Date of (i) the fifth Bond Year and (ii) every
fifth Bond Year
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thereafter, and (ii) on the date the last Bond is paid or redeemed. Each such
computation shall be for the period from the date of issue through the date of
computation. The Rebate Amount includes the Investment Excess for the
computation period plus all interest, profits or other income earned on amounts
computed annually as Investment Excess and invested in the Excess Earnings
Account (whether or not invested in Nonpurpose Obligations). The final Rebate
Amount must (i) take into account any unrealized gain or loss on Nonpurpose
Obligations as of the date of retirement of the last Bond, and (ii) include all
earnings, if any, on investments in the Excess Earnings Account from the date of
retirement through the date of the final payment (excluding any gain on the
disposition of Nonpurpose Obligations to the extent such gain was taken into
account as unrealized gain in the final computation of Investment Excess).
4. Prohibited Payments.
No transaction involving Gross Proceeds may be entered into if it
will result in (i) a Yield on Nonpurpose Obligations less than the Yield that
would have resulted from an arm's length transaction or (ii) a smaller profit or
larger loss on the disposition of a Nonpurpose Obligation than would have
resulted from an arm's length transaction.
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To implement this prohibition, the following rules apply to the investment of
Gross Proceeds:
Certificates of Deposit. (a) The purchase or sale of any
certificate of deposit issued by a commercial bank must be at the bona fide bid
price quoted by a dealer who maintains an active secondary market in such
certificates;
(b) Where there is no active secondary market for a certificate of
deposit, it may be purchased or sold only (i) at a Yield equal to or greater
than the current yield on comparable obligations offered by the United States
Treasury, or (ii) after the Trustee or the Company has obtained a certificate
executed by a dealer who maintains an active secondary market in comparable
certificates, certifying that, based upon actual trades and the stability and
reputation of the issuer of the certificate, the certificate has Yield at least
as high as the yield on comparable obligations traded on an active secondary
market.
Investment Contracts. Nonpurpose obligations may be purchased or
sold pursuant to an investment contract only if (i) the Trustee or the Company
has obtained at least three bids for such contract from persons other than the
Underwriter or other persons interested in the Bonds; (ii) the Trustee or the
Company has obtained a certificate of a duly
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authorized officer of the successful bidder, certifying that, based on such
officer's reasonable expectations as of the contract date, Nonpurpose
Obligations will not be (a) purchased at a price in excess of their fair market
value, or (b) sold at a price less than their fair market value; and (iii) the
Yield on the investment contract is (a) at least equal to the highest Yield
offered by a disinterested bidder, and (b) at least equal to the Yield offered
on similar obligations under similar investment contracts.
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