EXHIBIT 10.10
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LOAN AGREEMENT
Dated as of August 1, 2000
Between
▇▇▇▇▇▇▇ COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
And
INNOVATIVE SOLUTIONS AND SUPPORT, LLC
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Bond Counsel Authority Counsel
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▇▇▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇▇ O'▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
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Table of Contents
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ARTICLE I
DEFINITIONS
Section 1.1 Use of Terms Defined in Indenture....................................................... 1
Section 1.2 Definitions............................................................................. 2
Section 1.3 Interpretation.......................................................................... 5
Section 1.4 Captions, Headings and Table of Contents................................................ 5
ARTICLE II
REPRESENTATIONS
Section 2.1 Representations and Findings of Issuer.................................................. 6
Section 2.2 Representations of Borrower............................................................. 7
ARTICLE III
ACQUISITION OF PROJECT; ISSUANCE OF BONDS; PROJECT FUND
Section 3.1 Acquisition of Project.................................................................. 9
Section 3.2 Additions and Changes to Project........................................................ 9
Section 3.3 Issuance of Bonds; Application of Proceeds.............................................. 9
Section 3.4 Disbursements from Project Fund......................................................... 10
Section 3.5 Borrower Required to Pay Costs in Event Project Fund Insufficient....................... 10
Section 3.6 Completion.............................................................................. 11
Section 3.7 Investment and Use of Fund Moneys....................................................... 12
Section 3.8 Rebate Fund............................................................................. 12
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Table of Contents
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(continued)
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ARTICLE IV
LOAN BY ISSUER; LOAN PAYMENTS; OTHER PAYMENTS
Section 4.1 Loan by Issuer................................................................................ 13
Section 4.2 Loan Payments................................................................................. 13
Section 4.3 Purchase Payments............................................................................. 13
Section 4.4 Additional Payments........................................................................... 13
Section 4.5 Obligations Unconditional..................................................................... 14
Section 4.6 Assignment of Issuer's Rights................................................................. 14
Section 4.7 Letter of Credit.............................................................................. 14
ARTICLE V
ADDITIONAL COVENANTS OF BORROWER
Section 5.1 Maintenance of Existence...................................................................... 16
Section 5.2 Compliance with Laws; Commencement and Continuation of Operations
at Project; No Sale, Removal or Demolition of Project....................................................... 16
Section 5.3 Right of Inspection........................................................................... 16
Section 5.4 Lease by Borrower............................................................................. 16
Section 5.5 Financial Statements; Books and Records....................................................... 17
Section 5.6 Taxes, Other Governmental Charges and Utility Charges......................................... 17
Section 5.7 Insurance..................................................................................... 17
Section 5.8 Damage to or Condemnation of Project.......................................................... 18
Section 5.9 Litigation Notice............................................................................. 18
Section 5.10 Indemnification............................................................................... 18
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Table of Contents
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(continued)
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Section 5.11 Tax Covenants of Borrower and Issuer.......................................................... 19
Section 5.12 Further Tax Covenants of Borrower............................................................. 20
Section 5.13 No Control of Bank............................................................................ 23
Section 5.14 Annual Certificate............................................................................ 23
Section 5.15 Nondiscrimination............................................................................. 24
ARTICLE VI
REDEMPTION OF BONDS
Section 6.1 Optional Redemption........................................................................... 25
Section 6.2 Extraordinary Optional Redemption............................................................. 25
Section 6.3 Mandatory Redemption.......................................................................... 26
Section 6.4 Actions by Issuer............................................................................. 26
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default............................................................................. 27
Section 7.2 Remedies on Default........................................................................... 28
Section 7.3 Remedies Not Exclusive........................................................................ 29
Section 7.4 Payment of Legal Fees and Expenses............................................................ 29
Section 7.5 No Waiver..................................................................................... 29
Section 7.6 Notice of Default............................................................................. 30
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Term of Agreement............................................................................. 31
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Table of Contents
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(continued)
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Section 8.2 Notices....................................................................................... 31
Section 8.3 Limitation of Liability; No Personal Liability................................................ 32
Section 8.4 Binding Effect................................................................................ 32
Section 8.5 Amendments.................................................................................... 32
Section 8.6 Counterparts.................................................................................. 33
Section 8.7 Severability.................................................................................. 33
Section 8.8 Governing Law................................................................................. 33
Section 8.9 Assignment.................................................................................... 33
Section 8.10 Receipt of Indenture.......................................................................... 33
Exhibit A - Project Site Description
Exhibit B - Project Description
Exhibit C - Form of Disbursement Request
Exhibit D - Nondiscrimination Clause
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LOAN AGREEMENT
THIS LOAN AGREEMENT dated as of August 1, 2000 between ▇▇▇▇▇▇▇ COUNTY
INDUSTRIAL DEVELOPMENT AUTHORITY (the "Issuer"), a public instrumentality and
body corporate and politic of the Commonwealth of Pennsylvania, and INNOVATIVE
SOLUTIONS AND SUPPORT, LLC (the "Borrower"), a limited liability company duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania (the capitalized terms not defined in the recitals being used
therein as defined or otherwise described in Article I of this Agreement),
WITNESSETH THAT:
A. The Issuer is a public instrumentality and a body corporate and
politic of the Commonwealth of Pennsylvania organized and existing under the
Act. Under the Act, and in furtherance of the public purposes thereof, the
Issuer is authorized to enter into agreements providing for the financing of the
Project described below.
B. The Issuer has undertaken the financing of certain costs of a
Project to be located on certain real property more fully described in Exhibit A
attached hereto (the "Project Site"). The Project Site and such facilities are
herein collectively called the "Project". The Project will be owned and operated
by the Borrower. A more complete description of the Project and the estimated
costs thereof are set forth in Exhibit B attached hereto.
C. In order to finance the Project, the Issuer has duly authorized
the issuance and sale of its Industrial Development Revenue Bonds, 2000 Series A
(Innovative Solutions and Support, LLC Project) (the "Bonds") to be issued under
the terms of a Trust Indenture dated as of the date hereof (as the same may
hereafter be amended or supplemented from time to time, the "Indenture") by and
between the Issuer and Chase Manhattan Trust Company, National Association, as
Trustee.
D. The Issuer and the Borrower intend that the interest on the Bonds
will not be included in the gross income of the recipients thereof under the
Code.
E. The Issuer has entered into this Agreement with the Borrower for
the purposes of providing for (i) the loan of the proceeds of the Bonds to the
Borrower in order to finance the Project and (ii) the repayment of such loan by
the Borrower in amounts sufficient to pay, when due, the principal of, premium,
if any, on and interest on the Bonds.
NOW, THEREFORE, intending to be legally bound, the Issuer and the
Borrower hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Use of Terms Defined in Indenture. Terms used in this
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Agreement which are defined in the Indenture and are not otherwise defined in
this Agreement shall have the meanings set forth in the Indenture unless the
context or use clearly indicates another meaning or intent.
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Section 1.2 Definitions. In addition to the terms defined in the
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recital clauses of this Agreement, as used herein:
"Additional Payments" means the amounts required to be paid by
the Borrower pursuant to Section 4.4.
"Agreement" means this Loan Agreement, as amended or supplemented
from time to time.
"Authorized Representative" means, with respect to the Issuer,
each person at the time designated to act on behalf of the Issuer by
written certificate furnished to the Trustee containing the specimen
signature of such person and signed on behalf of the Issuer by its
Secretary or Assistant Secretary, and, with respect to the Borrower, each
person at the time designated to act on behalf of the Borrower by written
certificate furnished to the Trustee containing the specimen signature of
such person and signed on behalf of the Borrower by its Secretary or
Assistant Secretary.
"Bond Purchase Agreement" means the Bond Purchase Agreement among
the Issuer, the Borrower and PNC Capital Markets, Inc., as the underwriter,
relating to the Bonds.
"Bond Service" means, for any period or payable at any time, the
principal of, premium, if any, on and interest on the Bonds for that period
or payable at the time whether due on an Interest Payment Date, at maturity
or upon acceleration or redemption.
"Borrower's Agreements" means this Agreement, the Bond Purchase
Agreement, the Remarketing Agreement and the Reimbursement Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to the Code and Sections of the Code include
relevant applicable regulations, temporary regulations and proposed
regulations thereunder and under the Internal Revenue Code of 1954, as
amended, and any successor provisions to those Sections, regulations,
temporary regulations or proposed regulations.
"Completion Date" means the date of completion of the Project
evidenced in accordance with the requirements of Section 3.6.
"Construction Period" means the period between the beginning of
the acquisition, construction, installation, equipment or improvement of
the Project or the date on which the Bonds are issued, whichever is
earlier, and the Completion Date.
"Event of Default" means any of the events described as an Event
of Default in Section 7.1.
"Exempt Facility Bonds" means bonds issued to finance exempt
facilities as defined in the Code or in the Internal Revenue Code of 1954.
"Issuer's Fee" means the amount of $33,537.50.
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"Loan" means the loan by the Issuer to the Borrower of the
proceeds of the Bonds pursuant to Section 4.1 in the original principal
amount of $4,335,000.
"Loan Payments" means the amounts required to be paid by the
Borrower in repayment of the Loan pursuant to Section 4.2.
"Principal User" shall mean, with respect to any facility, a
"principal user" as such term is used in Section 144(a) of the Code,
including, without limiting the generality of the foregoing, (i) any Person
whose ownership interest in such facility exceeds 10% or, if no ownership
interest in such facility exceeds 10%, any Person (or Persons, in the case
of multiple equal owners) holding the largest ownership interest in such
facility, (ii) any Person who leases more than 10% of such facility under a
lease with a term (taking into account all options to renew and reasonably
anticipated renewals) of more than one year, and (iii) any Person who
enjoys the use of such facility in a degree comparable to the enjoyment of
a Person described in clauses (i) and (ii); for purposes of determining the
extent of a Person's ownership interest, lease interest, lease term and
degree of enjoyment of a facility, the term "Person" includes a Person and
all Related Persons with respect to such Person.
"Project Approval" means the initial official action of the
Issuer declaring its intent with respect to the financing of the Project
with the proceeds of the Issuer's bonds. The date of the Project Approval
is November 17, 1999.
"Project Costs" means costs of the Project permitted under the
Act, including, but not limited to, the following:
(a) Costs incurred in acquisition, construction,
installation, equipment or improvement of the Project, including costs
incurred in respect of the Project for preliminary planning and
studies; architectural, engineering, accounting, consulting, legal and
other professional fees and expenses; labor, services and materials;
(b) Fees, charges and expenses incurred in connection with
the authorization, sale, issuance and delivery of the Bonds, including
without limitation bond discount, printing expense, title insurance,
recording fees and the initial fees and expenses of the Trustee, the
Issuer, the Remarketing Agent and the Bank; provided that the amount
of the proceeds of the Bonds used to finance issuance costs (but
excluding Bank letter of credit fees) shall not exceed 2% of the
aggregate face amount of the Bonds within the meaning of Section
147(g) of the Code;
(c) Payment of interest on the Bonds and fees of the Bank,
Trustee and Remarketing Agent accruing during the Construction Period;
(d) Any other costs, expenses, fees and charges properly
chargeable to the cost of acquisition, construction, installation,
equipment or improvement of the Project; and
(e) Payments made to the Rebate Fund.
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"Purchase Payments" means the amounts required to be paid by the
Borrower pursuant to Section 4.3.
"Rehabilitation Expenditure" shall mean a "rehabilitation
expenditure" as such term is defined in Section 147(d)(3) of the Code,
including, without limiting the generality of the foregoing, a capital
expenditure incurred in connection with the rehabilitation of a building or
structure which is part of the Project, if such expenditure is incurred by
the Borrower, the seller of such building to the Borrower (if incurred
pursuant the sales contract between such seller and the Borrower) or a
successor to the Borrower; provided, that:
(1) if an integrated operation is contained in such
building or structure before its acquisition by the Borrower,
expenditures incurred to rehabilitate existing equipment or to replace
existing equipment with equipment having substantially the same
function is treated as incurred in connection with the rehabilitation
of such building or structure; and
(2) notwithstanding the foregoing, the term "Rehabilitation
Expenditure" does not include any expenditure:
(a) with respect to which the method and period of
depreciation is other than the straight line method over a period
determined under Section 168(c) or (g) of the Code, unless the
alternative depreciation system of Section 168(g) of the Code
applies to such expenditure by reason of Section 168(g)(1)(B) or
(C) of the Code;
(b) for the cost of acquiring any building or interest
therein;
(c) attributable to enlargement of an existing
building;
(d) attributable to the rehabilitation of a certified
historic structure or a building in a registered historic
district, unless either the rehabilitation is a certified
rehabilitation or, with respect to a building other than a
certified historic structure, the Secretary of the Interior has
certified to the Secretary of the Treasury that the building is
not of historic significance to the district (all terms used in
this paragraph (d) have the meanings assigned in Section
47(c)(2)(B) of the Code);
(e) allocable to the portion of such building which
is, or may reasonably be expected to be, tax-exempt use property
within the meaning of Section 168(h) of the Code; or
(f) by a lessee of such building.
"Reimbursement Agreement" means the Reimbursement, Credit and
Security Agreement between the Bank and the Borrower relating to the Letter
of Credit and the Bonds, as amended, supplemented or replaced from time to
time.
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"Related Person" shall have the meaning set forth in Section
144(a)(3) of the Code and shall include (to the extent there provided)
any parent, subsidiary, affiliated corporation or unincorporated
enterprise, majority shareholder and commonly owned entity.
"Remarketing Agreement" means the Remarketing Agreement between
the Borrower and the Remarketing Agent relating to the Bonds, as
amended, supplemented or replaced from time to time.
"Remedial Action Date" means the earliest of the following dates:
(i) the Completion Date; (ii) the date on which the Borrower
determines that the Project will not be completed; or (iii) the date
on which the entire Project is placed in service, within the meaning
of the Code.
"Resolutions" means the resolution or resolutions of the Issuer
approving and authorizing the Bonds, the Indenture and this Agreement.
"Small Issue Bonds" means bonds issued under the $1,000,000 or
$10,000,000 limits imposed by the Section 144(a) of the Code or
Section 103 of the Internal Revenue Code of 1954.
"Test Period" means the three-year period beginning on the later
of the date tax-exempt bonds are issued or the date the facilities
financed by such tax-exempt bonds are placed in service.
"Unassigned Issuer's Rights" means all of the rights of the
Issuer to receive Additional Payments under Section 4.4, to be held
harmless and indemnified under Section 5.10, to be reimbursed for
attorney's fees and expenses under Section 7.4, and to give or
withhold consent to or approval of amendments, modifications,
termination or assignment of this Agreement, or amendment, sale,
transfer, assignment, lease (or assignment of lease) or other disposal
of the Project, under Sections 3.2, 5.1, 5.2, 5.4, 8.5 and 8.9.
Section 1.3 Interpretation. In this Agreement, unless the context
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indicates otherwise, words importing the singular number include the plural
number, and vice versa, the terms "hereof", "hereby", "herein", "hereto",
"hereunder" and similar terms refer to this Agreement, and the term "hereafter"
means after and the term "heretofore" means before the Series Issue Date, and
words of any gender include the correlative words of the other genders. In this
Agreement, unless otherwise indicated, all references to particular Articles,
Sections, Subsections or paragraphs are references to the Articles, Sections,
Subsections or paragraphs of this Agreement.
Section 1.4 Captions, Headings and Table of Contents. The
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captions, headings and table of contents in this Agreement are solely for
convenience of reference and in no way define, limit or describe the scope or
intent of any Articles, Sections, Subsections or paragraphs hereof.
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ARTICLE II
REPRESENTATIONS
Section 2.1 Representations and Findings of Issuer. The Issuer
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hereby confirms its findings and represents that:
(a) The Issuer is a public body corporate and politic
established in the Commonwealth of Pennsylvania pursuant to the laws of the
Commonwealth of Pennsylvania (including the Act). Under the Act, the Issuer has
the power to enter into the Indenture, the Bond Purchase Agreement and this
Agreement and to carry out its obligations thereunder and to issue the Bonds to
finance the Project.
(b) By adoption of the Resolutions at one or more duly
convened meetings of the Issuer at which a quorum was present and acting
throughout, the Issuer has duly authorized the execution and delivery of the
Indenture, the Bond Purchase Agreement and this Agreement and performance of its
obligations thereunder and the issuance of the Bonds. Simultaneously with the
execution and delivery of this Agreement, the Issuer has duly executed and
delivered the Indenture and issued and sold the Bonds.
(c) Based on representations and information furnished to
the Issuer by or on behalf of the Borrower, the Issuer has found that the
Borrower is qualified to be a beneficiary of financing provided by the Issuer
pursuant to the Act.
(d) Based on representations and information furnished to
the Issuer by or on behalf of the Borrower, the Issuer has found that the
Project (i) will promote the public purposes of the Act, (ii) is located within
the boundaries of the Commonwealth of Pennsylvania and within the boundaries of
the County of ▇▇▇▇▇▇▇, and (iii) will constitute a project within the meaning of
the Act.
(e) The Issuer has filed a Preliminary Allocation Request
("PAR") for purposes of receiving an allocation of the tax-exempt bond authority
of the Commonwealth of Pennsylvania and has received approval of the PAR from
the Pennsylvania Department of Community and Economic Development (the
"Department"), certifying approval of such allocation for the Project as
required by Section 146 of the Code. The Issuer will simultaneously with the
issuance of the Bonds deliver a Final Allocation Request to the Department to
obtain a final confirmation of such allocation.
(f) The Project has been approved (1) by the Pennsylvania
Secretary of Community and Economic Development, as required by the Act, (2) by
the Board of Commissioners of the County of Chester, Pennsylvania, as the
"applicable elected representative", as that term is defined under the Code,
after a public hearing held upon reasonable notice, as required by the Code, and
(3) by the Issuer by adoption of the Resolutions, as required by the Act.
(g) The Issuer has not and will not pledge the income and
revenues derived from this Agreement other than pursuant to and as set forth in
the Indenture.
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(h) The Issuer hereby elects to have the $10,000,000 limit
for Small Issue Bonds under the Code apply to the Bonds.
Section 2.2 Representations of Borrower. The Borrower represents
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that:
(a) The Borrower is a limited liability company duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania, and has full power and authority to execute, deliver and perform
its obligations under the Borrower's Agreements and to enter into and carry out
the transactions contemplated thereby.
(b) The Borrower's Agreements have been duly authorized,
executed and delivered by the Borrower and constitute valid and binding
obligations of the Borrower. The execution, delivery and performance of the
Borrower's Agreements by the Borrower do not, and will not, violate any
provision of law applicable to the Borrower or the Borrower's certificate of
organization or operating agreement or any agreement or instrument to which the
Borrower is a party or by which it or any of its properties is bound.
(c) The Project will promote the public purposes of the Act
and will not cause, directly or indirectly, the removal, either in whole or in
part, of a plant, facility or establishment from one area of the Commonwealth of
Pennsylvania to another. The Project is located within the boundaries of the
County of Chester, Pennsylvania.
(d) The Borrower has acquired or will acquire before they
are needed all permits and licenses, and has satisfied or will satisfy other
requirements necessary, for the acquisition, construction, installation and/or
operation of the Project. The Project is a project within the meaning of the Act
and will be operated as such.
(e) The Borrower presently intends to use or operate the
Project in a manner consistent with the Act until the date on which the Bonds
have been fully paid and knows of no reason why the Project will not be so used
or operated.
(f) The aggregate of the following amounts does not, at the
Series Issue Date, exceed $10,000,000:
(i) The outstanding amount of prior Small Issue
Bonds with respect to facilities which are to be or have been used by the
Borrower, any other Principal User of the Project or any Related Person and
are located within the same city, town, borough, township or other
incorporated municipality as the Project;
(ii) The face amount of the Bonds; and
(iii) Any and all capital expenditures, including any
expenditures which could at the option of any Person be capitalized under
any provision of the Code, paid or incurred by any Person within three
years preceding the Series Issue Date, with respect to any facilities
located in the same city, town, borough, township or other incorporated
municipality as the Project of which the Borrower, any other Principal User
of the Project or any Related Person is a Principal User, except
expenditures made with proceeds of any prior Small Issue Bonds or
expenditures reimbursed with the proceeds of the Bonds.
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(g) The information furnished by the Borrower and used by
the Issuer in preparing the arbitrage certificate pursuant to Section 148 of the
Code and information statement pursuant to Section 149(e) of the Code is
accurate and complete as of the Series Issue Date.
(h) The proceeds of the Bonds will not exceed the Project
Costs.
(i) The costs of issuance financed with proceeds of the
Bonds, including any bond discount on the sale of the Bonds, but not including
fees and charges in respect of the Letter of Credit, will not exceed 2% of the
proceeds of the Bonds.
(j) No costs of the Project to be financed with the
proceeds of the Bonds have been paid by or on behalf of the Borrower or any
Related Person more than 60 days prior to the date of the Project Approval.
(End of Article II)
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ARTICLE III
ACQUISITION OF PROJECT;ISSUANCE OF BONDS; PROJECT FUND
Section 3.1 Acquisition of Project. The Borrower (a) has acquired, or
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on the Series Issue Date is acquiring, the Project Site and shall construct,
install, equip and/or improve the Project on the Project Site with all
reasonable dispatch and in accordance with the description thereof in Exhibit B
attached hereto and applicable law, (b) shall procure or cause to be procured
all permits and licenses necessary for the prosecution of any and all work on
the Project, and (c) shall pay when due all costs and expenses incurred in
connection with such acquisition, construction, installation, equipment and
improvement from funds made available therefor in accordance with this Agreement
or otherwise. It is understood that the Project is the property of the Borrower
and that any contracts made by the Borrower with respect thereto and any work to
be done by the Borrower on the Project are made or done by the Borrower in its
own behalf and not as agent or contractor for the Issuer.
Section 3.2 Additions and Changes to Project. Subject to Sections
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5.11 and 5.12, the Borrower may, at its option and at its own cost and expense,
at any time and from time to time, revise the description of the Project in
Exhibit B attached hereto and/or make such additions and changes to the Project
as it may deem to be desirable for its uses and purposes, provided that (i) such
additions and changes shall constitute part of the Project, (ii) the Borrower
shall supplement the information contained in Exhibit B attached hereto by
filing with the Issuer and the Trustee such supplemental information as is
necessary to reflect such additions and changes so that the Issuer and the
Trustee will be able to ascertain the nature and cost of the facilities included
in the Project and covered by this Agreement and (iii) if an addition or change
is substantial in relation to the Bonds, the Borrower shall have first obtained
and filed with the Issuer and the Trustee an opinion of Bond Counsel to the
effect that such addition or change is authorized or permitted under the Act and
will not adversely affect the exclusion from gross income of interest on the
Bonds under the Code. In any case, the Borrower shall obtain the Issuer's
approval of the addition to the Project of any proposed facilities or any other
changes not generally described in Exhibit B attached hereto on the date of
delivery of this Agreement, and the Borrower shall delete any facilities from
the Project if such deletion is necessary to maintain the exclusion from gross
income of interest on the Bonds under the Code.
Section 3.3 Issuance of Bonds; Application of Proceeds. To provide
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funds to make the Loan for the purpose of paying Project Costs in accordance
with Exhibit B attached hereto, the Issuer will issue the Bonds in the aggregate
principal amount of $4,335,000. The Bonds will be issued pursuant to the
Indenture and will bear interest, mature and be subject to redemption and
tender, all as set forth therein. The Borrower hereby approves the terms and
conditions of the Indenture and the Bonds, and the terms and conditions under
which the Bonds will be issued, sold and delivered.
The proceeds from the sale of the Bonds (including any bond discount)
shall be loaned to the Borrower pursuant to Section 4.1 and such proceeds (net
of any bond discount) shall be paid over to the Trustee for deposit in the
Project Fund. Pending disbursement pursuant to Section 3.4, the proceeds of the
Bonds so deposited in the Project Fund, together
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with any investment earnings thereon, shall constitute a part of the Trust
Estate and shall be subject to the lien of the Indenture pursuant to the
granting clauses therein as security for the obligations described in such
granting clauses, and to such end the Borrower hereby grants to the Trustee as
security for such obligations a security interest in all of the Borrower's
right, title and interest in and to the Project Fund.
Section 3.4 Disbursements from Project Fund. Subject to the
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provisions below, disbursements from the Project Fund shall be made to reimburse
or pay the Borrower, or any Person designated by the Borrower, for Project
Costs. The Borrower agrees that the sums so disbursed from the Project Fund will
be used only for the payment of Project Costs, and will not be used for any
other purpose.
Any disbursements from the Project Fund for the payment of the Project
Costs shall be made by the Trustee only upon the written order of an Authorized
Representative of the Borrower, with the written approval of the Bank, delivered
to the Trustee; provided that disbursements made for costs described in clause
(b) of the definition of Project Costs may be made by the Trustee upon delivery
to the Trustee of a closing statement signed by the respective Authorized
Representatives of the Borrower and approved by the Bank. Each such written
order shall be substantially in the form of the disbursement request attached
hereto as Exhibit C and shall be consecutively numbered and accompanied by
invoices or other appropriate documentation supporting the payments or
reimbursements requested. Any disbursement for any item not described in, or the
cost for which item is other than as described in, the information statement
filed by the Issuer in connection with the issuance of the Bonds as required by
Section 149(e) of the Code and referred to in Section 5.12, shall be accompanied
by an opinion of a Bond Counsel to the effect that such disbursement does not
result in the interest on the Bonds becoming included in the gross income of the
Holders for federal income tax purposes. In case any contract provides for the
retention by the Borrower of a portion of the contract price, there shall be
paid from the Project Fund only the net amount remaining after deduction of any
such portion, and only when that retained amount is due and payable, may it be
paid from the Project Fund.
Any moneys in the Project Fund (including the earnings from
investments therein) remaining after the Completion Date and payment, or
provision for payment, in full of the Project Costs shall, at the written
direction of an Authorized Representative of the Borrower, be transferred to the
General Account of the Bond Fund and applied as provided in Subsection 5.04(c)
of the Indenture; provided that (i) any such transfer and application shall be
made only to the extent that such use or application does not, in the opinion of
Bond Counsel or under ruling of the Internal Revenue Service, cause the interest
on the Bonds to become included in the gross income of the Holders for federal
income tax purposes, and (ii) unless there shall be delivered to the Trustee a
similar opinion of Bond Counsel, the Borrower shall not direct the investment of
such remaining moneys in "investment property" (as defined in Section 148 of the
Code) at a yield in excess of the yield on the Bonds.
Section 3.5 Borrower Required to Pay Costs in Event Project Fund
----------------------------------------------------
Insufficient. If moneys in the Project Fund are not sufficient to pay all
------------
Project Costs, the Borrower nonetheless shall complete the Project in accordance
with Exhibit B attached hereto and shall pay all such additional Project Costs.
The Borrower shall not be entitled to any
10
reimbursement for any such payments from the Issuer, the Trustee, the Bank or
any Holder; nor shall it be entitled to any abatement, diminution or
postponement of the Loan Payments.
Section 3.6 Completion. Except to the extent otherwise approved by
----------
the Issuer and by an opinion of Bond Counsel furnished by the Borrower to the
Trustee, within three years of the date of original delivery and payment for the
Bonds, the Borrower shall have completed the Project and caused all of the
proceeds of the Bonds to be expended for Project Costs in accordance with
Exhibit B attached hereto or otherwise applied as described in Section 3.4. The
Borrower shall notify the Issuer and the Trustee of the Completion Date by a
certificate signed by an Authorized Representative of the Borrower stating
(a) the date on which the Project was substantially completed,
(b) that all other facilities necessary in connection with the
Project have been acquired, constructed, installed, equipped and improved,
(c) that the acquisition, construction, installation, equipment
and/or improvement of the Project and such other facilities have been
accomplished in such a manner as to conform with all applicable zoning,
planning, building, environmental and other similar governmental regulations,
(d) that except as provided in clause (e) below, all costs of
the Project then or theretofore due and payable have been paid, and
(e) the amounts which the Trustee shall retain in the Project
Fund for the payment of Project Costs not yet due or for liabilities which the
Borrower is contesting or which otherwise should be so retained and the reasons
therefor.
Such certificate may state that it is given without prejudice to any rights
against third parties which then exist or subsequently may come into being. The
Authorized Representative of the Borrower shall include with such certificate a
statement specifically describing all items of personal property comprising a
part of the Project. The certificate shall be delivered as promptly as
practicable after the Borrower is in a position to certify as to the matters
referred to in clauses (a) through (e) above. Within 10 days of the delivery by
the Authorized Representative of the Borrower of such certificate evidencing the
Completion Date, the Trustee shall retain in the Project Fund a sum equal to the
amounts necessary for payment of Project Costs not then due and payable or the
liability for which the Borrower is contesting as set forth in said certificate.
Any amount not to be retained in the Project Fund for such costs, and all
amounts so retained but not subsequently used and for which written notice of
such failure of use has been given by the Borrower to the Trustee, and all
amounts on deposit in the Project Fund if the Borrower determines that the
Project will not be completed, shall be segregated by the Trustee and used by
the Trustee, at the written direction of the Authorized Representative of the
Borrower, within 90 days of the Remedial Action Date for one of the following
purposes: (a) to redeem Bonds prior to maturity on the earliest redemption date
permitted by this Agreement and the Indenture, (b) to purchase Bonds prior to
such redemption date for the purpose of cancellation, or (c) for any other
purpose; provided that the Trustee is furnished with an opinion of Bond Counsel
to the effect that such use is lawful under the Act and does not adversely
affect the exclusion of interest on any of the Bonds from gross income of the
owners thereof for federal income tax purposes. Until used for one or more of
the foregoing purposes, such segregated amount may be invested as permitted
11
by Section 3.7, but may not be invested by the Borrower, without an opinion of
Bond Counsel to the effect that such investment does not adversely affect the
exclusion of interest on any of the Bonds from gross income of the owners
thereof for federal income tax purposes, to produce a yield on such amount
(computed from the Completion Date and taking into account any investment of
such amount from the Completion Date) greater than the yield on the Bonds,
computed in accordance with the applicable provisions of the Code. The Issuer
agrees to cooperate with the Trustee and take all required action necessary to
redeem the Bonds or to accomplish any other purpose contemplated by this
Section.
Section 3.7 Investment and Use of Fund Moneys. At the oral or written
---------------------------------
direction of an Authorized Representative of the Borrower, any moneys held as
part of the Bond Fund (except moneys in the Letter of Credit Debt Service
Account created under Section 5.04 of the Indenture and except any moneys
representing principal of, or premium, if any, or interest on, any Bonds which
are deemed paid under Section 10.02 of the Indenture) or the Project Fund shall
be invested or reinvested by the Trustee in Eligible Investments. The Issuer and
the Borrower each hereby covenants that it will restrict that investment and
reinvestment and the use of the proceeds of the Bonds in such manner and to such
extent, if any, as may be necessary, after taking into account reasonable
expectations at the time of delivery of and payment for the Bonds, so that the
Bonds will not constitute arbitrage bonds under Section 148 of the Code.
Any Authorized Representative of the Issuer having responsibility for
issuing the Bonds is authorized and directed, alone or in conjunction with an
Authorized Representative of the Borrower and/or any other officer, partner,
employee or agent of or consultant to the Issuer or the Borrower, to give an
appropriate certificate of the Issuer pursuant to Section 148 of the Code, for
inclusion in the transcript of proceedings for the issuance of the Bonds,
setting forth the reasonable expectations of the Issuer regarding the amount and
use of the proceeds of the Bonds and the facts, estimates and circumstances on
which those expectations are based, all as of the Series Issue Date. The
Borrower shall provide the Issuer with, and the Issuer's certificate may be
based on, a certificate of the Authorized Representative of the Borrower or
other appropriate officer, partner, employee or agent of or consultant to the
Borrower setting forth the reasonable expectations of the Borrower on the Series
Issue Date regarding the amount and use of the proceeds of the Bonds and the
facts, estimates and circumstances on which they are based.
Section 3.8 Rebate Fund. The Borrower agrees to engage a Financial
-----------
Consultant to determine Excess Earnings, to make such payments to the Trustee as
are required of the Borrower under Section 5.08 of the Indenture and to
otherwise comply with requirements of Section 5.08 of the Indenture applicable
to the Borrower. The obligation of the Borrower to make such payments shall
remain in effect and be binding upon the Borrower notwithstanding the release
and discharge of the Indenture.
(End of Article III)
12
ARTICLE IV
LOAN BY ISSUER; LOAN PAYMENTS;OTHER PAYMENTS
Section 4.1 Loan by Issuer. Upon the terms and conditions of this
--------------
Agreement, the Issuer will make the Loan to the Borrower on the Series Issue
Date in a principal amount equal to the aggregate principal amount of the Bonds.
The Loan shall be deemed fully advanced upon deposit of the proceeds of the
Bonds (net of any bond discount) in the Project Fund pursuant to Section 3.3.
Section 4.2 Loan Payments. In consideration of and in repayment of
-------------
the Loan, the Borrower shall make, as Loan Payments, payments which correspond,
as to amounts and due dates, to the Bond Service on the Bonds. Amounts received
upon a drawing by the Trustee under the Letter of Credit for the payment of Bond
Service shall be credited against the Loan Payments otherwise payable by the
Borrower corresponding to such Bond Service; provided that the Bank has been
fully reimbursed for such drawing by the Borrower.
It is the intention of the Issuer and the Borrower that,
notwithstanding any other provision of this Agreement, the Trustee, as assignee
of the Issuer, shall receive funds from or on behalf of the Borrower (taking
into account such credits for amounts drawn on the Letter of Credit) in such
amounts and at such times as will enable the Issuer to pay when due all of its
Bond Service on the Bonds and any obligations arising under Section 4.3 and any
such obligations surviving the payment of the Bonds.
All Loan Payments shall be payable in lawful money of the United
States of America and shall be made by, or on behalf of the Borrower, to the
Trustee at its Principal Office for the account of the Issuer and deposited in
the General Account of the Bond Fund created by the Indenture. Such Loan
Payments shall be applied as provided in the Indenture.
The Borrower shall be entitled to credits against the Loan Payments as
and to the extent provided in Subsection 5.04(f) of the Indenture.
Section 4.3 Purchase Payments. To the extent that moneys on deposit
-----------------
in the Remarketing Proceeds Purchase Account or the Letter of Credit Purchase
Account established under the Indenture are insufficient to pay the full
purchase price of Bonds payable pursuant to Sections 4.01 and 4.02 of the
Indenture on the applicable Purchase Date, the Borrower shall also pay to the
Trustee as Purchase Payments for deposit in the Borrower Purchase Account
established under the Indenture amounts sufficient to cover the shortfalls.
Section 4.4 Additional Payments. The Borrower shall pay as Additional
-------------------
Payments hereunder: (a) to the Issuer, the Issuer's Fee on the Series Issue Date
and any and all costs and expenses (including reasonable legal fees and
expenses) incurred or to be paid by the Issuer in connection with the issuance
and delivery of the Bonds or otherwise related to actions taken by the Issuer
under this Agreement or the Indenture or any amendment thereof, supplement
thereto or waiver or consent thereunder, including without limitation, any
annual charge made by a Rating Service to maintain a rating on the Bonds; (b) to
the Remarketing Agent, the fees and expenses of the Remarketing Agent under the
Indenture and the Remarketing Agreement for
13
services rendered in connection with the Bonds; (c) to the Trustee, the
reasonable fees, charges and expenses of the Trustee and its agents for acting
as such under the Indenture; and (d) all other reasonable fees and expenses
incurred in connection with the issuance of the Bonds.
Section 4.5 Obligations Unconditional. The obligations of the
-------------------------
Borrower to make Loan Payments, Purchase Payments, Additional Payments and any
payments required under Section 3.8 shall be absolute and unconditional, and the
Borrower shall make such payments without abatement, diminution or deduction
regardless of any cause or circumstances whatsoever including without limitation
any defense, set-off, recoupment or counterclaim which the Borrower may have or
assert against the Issuer, the Trustee, the Remarketing Agent, the Bank or any
other Person, whether express or implied, or any duty, liability or obligation
arising out of or connected with this Agreement, it being the intention of the
parties that the payments required of the Borrower hereunder will be paid in
full when due without any delay or diminution whatsoever. Loan Payments and
Purchase Payments required to be paid by or on behalf of the Borrower hereunder
shall be received by the Issuer or the Trustee as net sums and the Borrower
agrees to pay or cause to be paid all charges against or which might diminish
such net sums.
Section 4.6 Assignment of Issuer's Rights. To secure the payment of,
-----------------------------
first, the Bond Service, and second, the Borrower's obligations under the
----- ------
Reimbursement Agreement, the Issuer shall pledge and assign to the Trustee all
the Issuer's rights in, to and under this Agreement (except for the Unassigned
Issuer's Rights), the Revenues and the other property comprising the Trust
Estate. The Borrower consents to such pledge and assignment and agrees to make
or cause to be made Loan Payments and Purchase Payments directly to the Trustee
without defense or set-off by reason of any dispute between the Borrower and the
Trustee. Whenever the Borrower is required to obtain the consent of the Issuer
hereunder, the Borrower shall also obtain the consent of the Trustee; provided
that, except as otherwise expressly stipulated herein or in the Indenture, the
Borrower shall not be required to obtain the Trustee's consent with respect to
the Unassigned Issuer's Rights.
Section 4.7 Letter of Credit. Concurrently with the initial delivery
----------------
of the Bonds pursuant to Section 2.01 of the Indenture, the Borrower shall cause
the initial Letter of Credit to be issued by the Bank pursuant to the
Reimbursement Agreement, which Letter of Credit (1) shall be substantially in
the same form as the exhibit attached to the Reimbursement Agreement; (2) shall
be dated the date of delivery of the Bonds; and (3) shall authorize the Trustee
to draw on the Bank, subject to the terms and conditions thereof, up to (a) an
amount equal to the principal amount of the Bonds (i) to enable the Trustee to
pay the principal amount of the Bonds when due at maturity or upon redemption or
acceleration and (ii) to enable the Trustee to pay the portion of the purchase
price of Bonds tendered to it for purchase and not remarketed corresponding to
the principal amount of such Bonds, plus (b) an amount equal to 50 days interest
on the Bonds at the Maximum Rate with respect to the Weekly Rate (i) to enable
the Trustee to pay interest on the Bonds when due and (ii) to enable the Trustee
to pay the portion of the purchase price of Bonds tendered to it for purchase
and not remarketed corresponding to the accrued interest on such Bonds. The
Letter of Credit may be extended, amended or replaced by an Alternate Letter of
Credit or other credit enhancement complying with the provisions of Sections
2.05 and 5.09 of the Indenture.
14
It is anticipated that all payments of principal of and interest on
the Bonds, and all payments of purchase price of the Bonds payable upon optional
or mandatory tender for purchase for the payment of which remarketing proceeds
are not available pursuant to Article IV of the Indenture, will be funded from
draws on the Letter of Credit.
The Borrower shall take whatever action may be necessary to maintain
the Letter of Credit in full force and effect during the period required by the
Indenture, including the payment of any transfer fees required by the Bank upon
any transfer of the Letter of Credit to any successor Trustee.
(End of Article IV)
15
ARTICLE V
ADDITIONAL COVENANTS OF BORROWER
Section 5.1 Maintenance of Existence. If the Borrower is a
------------------------
corporation, partnership, limited liability company or other entity, the
Borrower shall do all things necessary to preserve and keep in full force and
effect its existence, rights, franchises and qualification to do business in the
Commonwealth of Pennsylvania and shall not (a) dissolve or otherwise sell,
transfer or dispose of all, or substantially all, of its assets or (b)
consolidate with or merge into any other entity; provided that, subject to the
provisions of Sections 5.11 and 5.12, the preceding restrictions shall not apply
to a transaction to which the Issuer and the Bank consent in writing if the
transferee or the surviving or resulting entity, if other than the Borrower, by
written instrument satisfactory to the Trustee, irrevocably and unconditionally
assumes and agrees to perform and observe the agreements and obligations of the
Borrower under this Agreement and the provisions of Section 8.9 are satisfied.
Section 5.2 Compliance with Laws; Commencement and Continuation of
------------------------------------------------------
Operations at Project; No Sale, Removal or Demolition of Project. The Borrower
----------------------------------------------------------------
will acquire, construct, install, operate and maintain the Project in such
manner as to comply with the Act and all applicable requirements of federal,
state and local laws and the regulations, rules and orders of any federal, state
or local agency, board, commission or court having jurisdiction over the Project
or the operation thereof, including without limitation applicable zoning,
planning, building and environmental laws, regulations, rules and orders;
provided that the Borrower shall be deemed in compliance with this Section so
long as it is contesting in good faith any such requirement by appropriate legal
proceedings. The Borrower (or its lessee) shall commence operations at the
Project within three years from the Series Issue Date and shall continue such
operations throughout the term of this Agreement. The Borrower shall not sell,
assign or otherwise dispose of (whether in one transaction or in a series of
transactions) its interest in the Project or any material portion thereof (other
than as permitted by Section 5.1 and other than leases permitted under Section
5.4) or undertake or permit the demolition or removal of the Project or any
material portion thereof without (i) the prior written consent of the Issuer and
(ii) delivery to the Trustee of an opinion of Bond Counsel to the effect that
such sale, assignment or other disposal does not adversely affect the exclusion
from gross income of interest on the Bonds for federal income tax purposes;
provided that the Borrower shall be permitted to sell, transfer, assign or
otherwise dispose of or remove any portion of the Project which is retired or
replaced in the ordinary course of business.
Section 5.3 Right of Inspection. Subject to reasonable security and
-------------------
safety regulations and upon reasonable notice, the Issuer and the Trustee, and
their respective agents, shall have the right during normal business hours to
inspect the Project.
Section 5.4 Lease by Borrower. The Borrower may, subject to the
-----------------
provisions of Sections 5.11 and 5.12, lease the Project, in whole or in part, to
one or more other Persons, provided that:
16
(a) No such lease shall relieve the Borrower from its
obligations under this Agreement, the Reimbursement Agreement or the Remarketing
Agreement;
(b) In connection with any such lease the Borrower shall retain
such rights and interests as will permit it to comply with its obligations under
this Agreement, the Reimbursement Agreement and the Remarketing Agreement;
(c) No such lease shall impair materially the accomplishment of
the purposes of the Act to be accomplished by operation of the Project as herein
provided;
(d) Any such lease shall require the lessee to operate the
Project as a "project" under the Act as long as the Bonds are outstanding;
(e) In the case of a lease to a new lessee or an assignment of
an existing lease to a new lessee of substantially all of the Project, such new
lessee shall have been approved by the Issuer (such approval not to be
unreasonably withheld); and
(f) The lessees under any such leases, including any leases in
force on the Series Issue Date, shall be subject to the applicable terms and
conditions of Section 5.12.
Section 5.5 Financial Statements; Books and Records. The Borrower
---------------------------------------
shall prepare or have prepared such financial statements and reports in such
form as are required by the Bank or as otherwise shall be in accordance with
generally accepted accounting principles, and shall keep true and proper books
of records and accounts in which full and correct entries are made of all its
business transactions. Copies of such financial statements and reports shall be
provided to the Issuer and the Trustee promptly upon request, and such books of
records and accounts shall be made available for inspection during normal
business hours upon request by the Issuer, the Trustee and their respective
agents.
Section 5.6 Taxes, Other Governmental Charges and Utility Charges.
-----------------------------------------------------
The Borrower shall pay, or cause to be paid before the same become delinquent,
all taxes, assessments, whether general or special, and governmental charges of
any kind whatsoever that may at any time be lawfully assessed or levied against
or with respect to the Project, including any equipment or related property
installed or brought by the Borrower therein or thereon, and all utility and
other charges incurred in the operation, maintenance, use, occupancy and upkeep
of the Project. With respect to special assessments or other governmental
charges that lawfully may be paid in installments over a period of years, the
Borrower shall be obligated to pay only such installments as are required to be
paid during the term hereof. The Borrower may, at its expense, in good faith
contest any such taxes, assessments and other charges and, in the event of any
such contest, may permit the taxes, assessments or other charges so contested to
remain unpaid during the period of such contest and any appeal therefrom, unless
the Issuer or the Trustee shall notify the Borrower that, in the opinion of
counsel selected by the Issuer or the Trustee, by nonpayment of any such items
the Project or any part thereof will be subject to loss or forfeiture, in which
event such taxes, assessments or charges shall be paid promptly. The Borrower
shall also comply at its own cost and expense with all notices received from
public authorities with respect to the Project.
Section 5.7 Insurance. The Borrower shall at its own cost and
---------
expense obtain or cause to be obtained insurance policies against such risks,
and in such amounts, as are
17
customarily insured against by entities owning facilities of like size and type
to the Project, paying, as the same become due and payable, all premiums in
respect thereof.
Section 5.8 Damage to or Condemnation of Project. In the event of
------------------------------------
damage, destruction or condemnation of part or all of the Project, the Borrower
shall either: (i) restore the Project or (ii) if permitted by the terms of the
Bonds, direct the Issuer to call the Bonds for redemption as set forth in
Section 6.2. Damage to, destruction of or condemnation of all or a portion of
the Project shall not terminate this Agreement or cause any abatement of or
reduction in the payments to be made by the Borrower under this Agreement.
Section 5.9 Litigation Notice. The Borrower shall give the Trustee,
-----------------
the Remarketing Agent and the Bank prompt notice of any action, suit or
proceeding pending or threatened against it at law or in equity, or before any
governmental instrumentality or agency, which, if adversely determined, would
materially impair the right of the Borrower to carry on the business which is
contemplated in connection with the Project or would materially and adversely
affect its business, operations, properties, assets or condition.
Section 5.10 Indemnification. The Borrower will indemnify and hold
---------------
harmless the Issuer and each member, director, officer, employee, attorney and
agent of the Issuer for and against any and all claims, losses, damages or
liabilities (including the costs and expenses of defending against any such
claims) to which the Issuer or any member, director, officer, employee or agent
of the Issuer may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise directly or indirectly out of
(a) any loss or damage to property or injury to or death of or loss by any
Person that may be occasioned by any cause whatsoever pertaining to the
construction, maintenance, operation and use of the Project; (b) any breach or
default on the part of the Borrower in the performance of any covenant or
agreement of the Borrower under any of the Borrower's Agreements or any related
document, or arising from any act or failure to act by the Borrower or any of
its agents, contractors, servants, employees or licensees; (c) the
authorization, issuance and sale of the Bonds, or the provision of any
information or certification furnished in connection therewith concerning the
Bonds, the Project or the Borrower (including, without limitation, any
information furnished by the Borrower for inclusion in any certification made by
the Issuer or for inclusion in, or as a basis for preparation of, the
information statements furnished by the Issuer and any information or
certification obtained from the Borrower) to assure the exclusion of the
interest on the Bonds from the gross income of the Holders for federal income
tax purposes; (d) the Borrower's failure to comply with any requirements of this
Agreement pertaining to compliance with the Code to assure such exclusion of the
interest or the provisions set forth in Sections 5.11 and 5.12; (e) any failure
by the Borrower to comply with the provisions of the Act; and (f) any claim,
action or proceeding brought with respect to any matter set forth in clause (a),
(b), (c), (d) or (e) above.
The Borrower will indemnify and hold the Trustee and its directors,
officers, agents and employees harmless from and against any and all claims,
liabilities, losses, damages, fines, penalties and expenses (including out-of-
pocket, incidental expenses, legal fees and expenses, and the allocated costs
and expenses of in-house counsel and legal staff) that may be imposed on,
incurred by, or asserted against, the Trustee and its directors, officers,
agents and employees or any of them for following any instruction or other
direction upon which the Trustee is authorized to rely pursuant to the terms of
this Agreement, the Indenture, the Bonds and the Letter of Credit. In addition
to and not in limitation of the immediately preceding
18
sentence, the Borrower will indemnify and hold the Trustee and its directors,
officers, agents and employees and each of them harmless from and against any
and all claims, liabilities, losses, damages, fines, penalties and expenses
(including out-of-pocket, incidental expenses, legal fees and expenses, and the
allocated costs and expenses of in-house counsel and legal staff) that may be
imposed on, incurred by, or asserted against the Trustee and its directors,
officers, agents and employees or any of them in connection with or arising out
of the Trustee's performance under this Agreement, the Indenture, the Bonds and
the Letter of Credit; provided the Trustee has not acted with gross negligence
or engaged in willful misconduct. The provisions of this paragraph shall survive
the termination of this Agreement and the Indenture and the resignation or
removal of the Trustee for any reason.
The Borrower will indemnify and hold harmless the Remarketing Agent
for and against all liabilities, claims, costs and expenses incurred without
gross negligence or bad faith on the part of the Remarketing Agent on account of
any action taken or omitted to be taken by the Remarketing Agent in accordance
with the terms of this Agreement, the Bonds, the Reimbursement Agreement, the
Letter of Credit, the Remarketing Agreement or the Indenture or any action taken
at the request of or with the consent of the Borrower, including the costs and
expenses incurred by the Remarketing Agent in defending itself against any such
claims.
In case any action or proceeding is brought against the Issuer, the
Remarketing Agent or the Trustee in respect of which indemnity may be sought
hereunder, the party seeking indemnity promptly shall give notice of that action
or proceeding to the Borrower, and the Borrower upon receipt of that notice
shall have the obligation and the right to assume the defense of the action or
proceeding; provided that failure of a party to give that notice shall not
relieve the Borrower from any of its obligations under this Section unless (and
then only to the extent) that failure prejudices the defense of the action or
proceeding by the Borrower. At its own expense, an indemnified party may employ
separate counsel and participate in the defense. The Borrower shall not be
liable for any settlement made without its consent, which shall not be
unreasonably withheld. The Borrower shall not settle any claim or action
affecting the Issuer, the Trustee or the Remarketing Agent without the consent
of the Issuer, the Trustee or the Remarketing Agent, as applicable, which
consent shall not be unreasonably withheld.
The indemnification set forth above is intended to and shall (i)
include the indemnification of all affected directors, officers, agents and
employees of the Issuer, the Remarketing Agent and the Trustee, respectively,
and (ii) be enforceable by the Issuer, the Remarketing Agent and the Trustee,
respectively, to the full extent permitted by law.
Section 5.11 Tax Covenants of Borrower and Issuer. The Borrower
------------------------------------
covenants and represents that it will at all times do and perform all acts and
things necessary or desirable and within its reasonable control in order to
assure that interest paid on the Bonds shall not be includable in the gross
income of any Holder for federal income tax purposes, unless such Holder is a
"substantial user" of the Project or a "related person" of such a user within
the meaning of Section 147(a) of the Code. The Borrower also covenants and
represents that it shall not take or omit to take, or permit to be taken on its
behalf, any actions which, if taken or omitted, would adversely affect the
excludability from the gross income of the Holders of interest paid on the Bonds
for federal income tax purposes. The Issuer and the Borrower mutually covenant
for the benefit of the Holders that they will not use the proceeds of the Bonds,
any moneys derived, directly or indirectly, from the use or investment thereof
or any other
19
moneys on deposit in any fund or account maintained in respect of the Bonds
(whether such moneys were derived from the proceeds of the sale of the Bonds or
from other sources) in a manner which would cause the Bonds to be treated as
"arbitrage bonds" within the meaning of Section 148 of the Code or would
otherwise violate Section 6.08 of the Indenture.
Section 5.12 Further Tax Covenants of Borrower. The Borrower further
---------------------------------
represents and covenants as follows:
(a) Action to Maintain Tax-Exempt Status. The Borrower will
------------------------------------
take such actions as shall be necessary or desirable, from time to time and
within its reasonable control, to cause all of the representations and
warranties in this Section to remain true and correct during such periods as
shall be necessary to maintain at all times the exclusion of interest paid on
the Bonds from the gross income of the Holders for federal income tax purposes
(other than a Holder who is a "substantial user" of the Project or a "related
person" as those terms are used in Section 147(a) of the Code), pursuant to the
requirements of the Code.
(b) Operation as Manufacturing Facility. Until payment in
-----------------------------------
full of the Bonds, the Borrower shall operate the Project as a "manufacturing
facility" within the meaning of Section 144(a)(12)(C) of the Code. Without
limiting the generality of the foregoing definition, a "manufacturing facility"
is, generally, any facility which is used in the manufacturing or production of
tangible personal property, including processing resulting in a change of
condition of such property. The Borrower shall use no more than 25% of the net
proceeds of the Bonds to provide on-site facilities which are directly related
and ancillary to the manufacturing facility, including temporary warehousing of
raw materials and finished product, office facilities and product development
facilities.
(c) Ninety-five Percent Capital Costs Test. The Borrower
--------------------------------------
shall spend not less than 95% of the net proceeds of the Bonds for capital costs
of the manufacturing facility being financed. Capital costs are defined as costs
of land or property of a character subject to allowance for depreciation under
Section 167 of the Code and do not include inventory or working capital.
(d) Land Acquisition Limitation. The Borrower will not use,
---------------------------
directly or indirectly, 25% or more of the net proceeds of the Bonds for the
acquisition of land or an interest therein.
(e) Existing Facility and Rehabilitation Limitations. The
------------------------------------------------
Borrower will not use any proceeds of the Bonds to acquire any property of which
the Borrower would not be the first user, except as permitted by the next
sentence. If any proceeds of the Bonds are used to acquire (i) an existing
building, (ii) an existing building and equipment thereof, (iii) an existing
structure (other than a building), or (iv) an existing structure and equipment
thereof, then the Borrower will, within two years of the later of the Series
Issue Date or the date the Borrower acquires such building or structure, incur
Rehabilitation Expenditures in an amount at least equal to (x) 15% of the
portion of the cost of acquiring all existing buildings and equipment thereof
which is financed with net proceeds of the Bonds, plus (y) 100% of the portion
of the cost of acquiring all existing structures (other than a building) and
equipment thereof which is financed with net proceeds of the Bonds.
20
(f) Limitation on Financing Certain Facilities. The
------------------------------------------
Borrower will not use more than 25% of the net proceeds of the Bonds to provide
any portion of the Project the primary purpose of which is to provide retail
food or beverage services (exclusive of grocery stores), automobile sales or
services, or the provision of recreation or entertainment.
(g) Prohibition on Financing Certain Facilities. The
-------------------------------------------
Borrower will not use any proceeds of the Bonds to provide any portion of the
Project to be used for a private or commercial golf course, country club,
massage parlor, tennis club, skating facility (including roller skating,
skateboard and ice skating), racquet sports facility (including any handball or
racquetball court), hot tub facility, suntan facility or racetrack. The Borrower
will not use any proceeds of the Bonds to provide any airplane, any sky box or
other private luxury box, any health club facility, any facility primarily used
for gambling, or any store the principal business of which is the sale of
alcoholic beverages for consumption off premises.
(h) $10,000,000 Limitation. Neither the Borrower, any other
----------------------
Principal User of the portion of the Project financed with Bond proceeds nor any
Related Person with respect to the Borrower or any such Principal User of the
Project will, during the six-year period beginning three years before the Series
Issue Date, pay or incur any capital expenditures, or become a Principal User of
a facility with respect to which capital expenditures have been made in such
period, if --
(i) The capital expenditures are financed other than
with the proceeds of the Bonds;
(ii) The facility with respect to which the capital
expenditures are paid or incurred is the Project or is located in the city,
borough, town, township or other incorporated municipality in which the
Project is located; and
(iii) The amount of the capital expenditures, when
added to the face amount of the Bonds and any other prior tax-exempt
obligations outstanding on the Series Issue Date subject to aggregation
with the Bonds under the Code, would exceed $10,000,000.
Neither the Borrower, any other Principal User of the portion of the Project
financed with Bond proceeds nor any Related Person with respect to the Borrower
or any such Principal User of the Project will, during the Test Period in
respect of the Bonds, merge with, acquire more than 50% of the stock of or
otherwise become a Related Person to another entity so as to cause the foregoing
$10,000,000 limitation to be violated when the capital expenditures and prior
tax-exempt obligations with respect to such entity and all Related Persons with
respect to such entity are taken into account.
(i) $40,000,000 Limitation on Acquisition of Other
----------------------------------------------
Property, Mergers and Leases. If the taxability condition described below is
----------------------------
present, then neither Borrower, any other Principal User of the portion of the
Project financed with Bond proceeds nor any Related Person with respect to the
Borrower or any such Principal User of the Project will, during the Test Period
in respect of the Bonds, either (i) be or become a Principal User of a facility
financed with tax-exempt bonds issued prior to the Series Issue Date (a "prior
issue") or (ii) merge with or become a Related Person with respect to a
Principal User of a facility financed by a prior issue. The taxability condition
that, if present, shall prevent the Borrower, any other Principal User of
21
the portion of the Project financed with Bond proceeds and any Related Person
with respect to the Borrower or any such Principal User of the Project from
entering into the foregoing transactions during the Test Period, is that the
prior issue is either Exempt Facility Bonds, an issue of qualified redevelopment
bonds (as defined in Section 144(c) of the Code) or Small Issue Bonds, the Test
Period for the prior issue has not expired as of the Series Issue Date, and the
portion of the prior issue allocable under the Code to the Borrower (and all
Related Persons with respect to the Borrower) or any other Principal User of the
portion of the Project financed with Bond proceeds (and all Related Persons with
respect to such Principal User), when added to the outstanding amount of the
Bonds and any other prior tax-exempt financing allocable under the Code to the
Borrower (and such Related Persons) or such Principal User (and such Related
Persons), as the case may be, would exceed $40,000,000.
(j) Lease of Project. In connection with any lease or grant by
----------------
the Borrower of the use of the portion of the Project financed with Bond
proceeds, the Borrower will require that the lessee or user of any portion of
the Project and all Related Persons with respect to such lessee or user will not
violate the covenants set forth herein.
(k) Bond Maturity Limitation. The average reasonably expected
------------------------
economic life of the property financed with the proceeds of the Bonds,
disregarding land, will be at least 84% of the average maturity of the Bonds, as
determined pursuant to Section 147(b) of the Code.
(l) Aggregation of Issues with Respect to Single Project. The
----------------------------------------------------
portion of the Project financed with Bond proceeds does not and will not
comprise a part of a single building, an enclosed shopping mall or a strip of
offices, stores or warehouses using substantial common facilities, any portion
of which has been financed through any other tax-exempt issue.
(m) Arbitrage Rebate. As required by Section 3.8, the Borrower
----------------
will pay to or for the account of the Issuer all amounts needed to comply with
the requirements of Section 148 of the Code, concerning arbitrage bonds,
including Section 148(f), which requires generally a rebate payment to the
United States of America of arbitrage profit from investment of the proceeds of
the Bonds in obligations other than tax-exempt obligations. The obligation of
the Borrower to make such payments is unconditional and is not limited to funds
representing the proceeds of the Bonds or income from the investment thereof or
any other particular source.
(n) Nonpurpose Investments. After the expiration of any
----------------------
applicable temporary period under Section 148(c) of the Code, (i) at no time
during any bond year will the aggregate amount of gross proceeds of the Bonds
invested in nonpurpose investments with a yield higher than the yield on the
Bonds exceed 150% of the debt service on the Bonds for such bond year, and the
aggregate amount of gross proceeds of the Bonds invested in nonpurpose
investments with a yield higher than the yield on the Bonds, if any, will be
promptly and appropriately reduced as the amount of outstanding Bonds is
reduced, provided that the foregoing shall not require the sale or disposition
of any investments in nonpurpose investments if such sale or disposition would
result in a loss which exceeds the amount which would be paid to the United
States pursuant to Section 5.08 of the Indenture (but for such sale or
disposition) at the time of such sale or disposition if a payment under Section
5.08 of the Indenture were due at such time and (ii) not more than the lesser of
5% of the proceeds of the Bonds or $100,000 (in addition to the amounts allowed
under Sections 148(c) and (d) of the Code and subject to the
22
yield adjustment provisions of Treasury Regulations ss.1.148-5(C)) of the
proceeds of the Bonds will be invested in higher yielding investments.
At no time will any funds constituting gross proceeds of the
Bonds be used to acquire investments at other than fair market value within the
meaning of the applicable Treasury Regulations pertaining to, or in any other
fashion as would constitute failure of compliance with, Section 148 of the Code.
Investments or deposits in certificates of deposit or pursuant to investment
contracts shall not be made without compliance, at or prior to such investment
or deposit, with the requirements of Treasury Regulations Section 1.148-
5(d)(6)(ii) and (iii), respectively, or with any successor provisions thereto.
Theterms "bond year", "proceeds", "gross proceeds", "nonpurpose
investments", "yield", "higher yielding investments" and "debt service" have the
meanings assigned to them for purposes of Section 148 of the Code.
(o) No Higher Yield Collateral to Bank. In no event will the
----------------------------------
Borrower provide collateral to the Bank which bears a yield higher than the
yield on the Bonds within the meaning of Section 148 of the Code and any lawful
regulations promulgated thereunder, except upon receipt by the Borrower of an
opinion of Bond Counsel to the effect that the pledge of such collateral shall
not cause the interest on the Bonds to be included in the gross income of the
Holders for federal income tax purposes; provided that no such yield restriction
or opinion is required with respect to the pledge of any collateral that
consists of obligations, the interest on which is excluded from the gross income
of the holders thereof for federal income tax purposes.
(p) No Same Issue Bonds. Neither the Borrower nor any other
-------------------
Principal User of the portion of the Project financed with Bond proceeds nor any
Related Person has participated, or will participate, in the offering for sale
or sale of any issue of Exempt Facility Bonds, Small Issue Bonds or qualified
redevelopment bonds (as defined in Section 144(b) of the Code), which are or
will be required to be aggregated with the Bonds as part of the "same issue"
within the meaning of Section 144(a)(6) of the Code.
Section 5.13 No Control of Bank. The Bank does not control,
------------------
either directly or indirectly through one or more intermediaries, the Borrower.
Likewise, the Borrower does not control, either directly or indirectly, through
one or more intermediaries, the Bank. "Control" for this purpose has the meaning
given to such term in Section 2(a)(9) of the Investment Company Act of 1940, as
amended and as interpreted by the Securities and Exchange Commission. (Under
Section 2(a)(9), "control" means the power to exercise a controlling influence
over the management or policies of a company, unless such power is solely the
result of an official position with such company. Any Person who owns
beneficially, either directly or through one or more controlled companies, more
than 25% of the voting securities of a company shall be presumed to control such
company. Any Person who does not own more than 25% of the voting securities of
any company shall be presumed not to control such company.) The Borrower will
provide written notice to the Trustee and the Remarketing Agent 30 days prior to
consummation of any transaction that would result in the Borrower controlling or
being controlled by the Bank.
Section 5.14 Annual Certificate. The Borrower will furnish to
------------------
the Issuer and to the Trustee within 120 days after the close of each fiscal
year of the Borrower, a certificate of the Borrower signed by the Authorized
Representative of the Borrower stating that the Borrower has
23
made a review of its activities during such fiscal year for the purpose of
determining whether or not the Borrower has complied with all of the terms,
provisions and conditions of this Agreement and the Borrower has kept, observed,
performed and fulfilled each and every covenant, provision and condition of this
Agreement on its part to be performed, and is not in default in the performance
or observance of any of the terms, covenants, provisions or conditions hereof,
or if the Borrower shall be in default such certificate shall specify all such
defaults and the nature thereof.
Section 5.15 Nondiscrimination. The Borrower hereby accepts and agrees
-----------------
to be bound by the nondiscrimination clause set forth in Exhibit D attached
hereto.
(End of Article V)
24
ARTICLE VI
REDEMPTION OF BONDS
Section 6.1 Optional Redemption. Provided no Event of Default shall
-------------------
have occurred and be subsisting, at any time and from time to time, the Borrower
may deliver or cause to be delivered Loan Payments to the Trustee in addition to
the scheduled Loan Payments required to be made under Section 4.2 and direct the
Trustee to use the Loan Payments so delivered for the purpose of calling Bonds
for optional redemption in accordance with the applicable provisions of the
Indenture and redeeming such Bonds at the redemption price stated in the
Indenture. Such Loan Payments shall be held and applied as provided in Section
5.04 of the Indenture and delivery thereof shall not operate to ▇▇▇▇▇ or
postpone Loan Payments otherwise becoming due or to alter or suspend any other
obligations of the Borrower under this Agreement. Whenever the Bonds are subject
to optional redemption pursuant to the Indenture, the Issuer will, but only upon
direction of the Borrower, direct the Trustee to call the same for redemption as
provided in the Indenture.
Section 6.2 Extraordinary Optional Redemption. The Borrower shall
---------------------------------
have, subject to the conditions hereinafter imposed, the option to direct the
redemption of the Bonds in accordance with the applicable provisions of the
Indenture upon the occurrence of any of the following events:
(a) The Project shall have been damaged or destroyed to such
an extent that (1) it cannot reasonably be expected by the Borrower to be
restored, within a period of six months, to the condition thereof immediately
preceding such damage or destruction or (2) its normal use and operation is
reasonably expected by the Borrower to be prevented for a period of six
consecutive months.
(b) Title to, or the temporary use of, all or a significant
part of the Project shall have been taken under the exercise of the power of
eminent domain (1) to such extent that the Project cannot reasonably be expected
by the Borrower to be restored within a period of six months to a condition of
usefulness comparable to that existing prior to the taking or (2) as a result of
the taking, normal use and operation of the Project is reasonably expected by
the Borrower to be prevented for a period of six consecutive months.
(c) As a result of any changes in state or federal laws or as
a result of legislative or administrative action (whether state or federal) or
by final decree, judgment or order of any court or administrative body (whether
state or federal) entered after the contest thereof by the Issuer or the
Borrower in good faith, this Agreement shall have become void or unenforceable
or impossible of performance in accordance with the intent and purpose of the
parties as expressed in this Agreement, or if unreasonable burden or excessive
liability shall have been imposed with respect to the Project or the operation
thereof, including without limitation federal, state or other ad valorem,
property, income or other taxes not being imposed on the date of this Agreement
other than ad valorem taxes presently generally levied upon privately owned
property used for the same general purpose as the Project.
25
(d) Changes in the economic availability of raw materials,
operating supplies, energy sources or supplies, or facilities (including, but
not limited to, facilities in connection with the disposal of industrial wastes)
necessary for the operation of the Project shall have occurred or technological
or other changes shall have occurred which the Borrower cannot reasonably
overcome or control and which in the Borrower's reasonable judgment render the
Project uneconomic.
To exercise such option, the Borrower shall, within 90 days following the
event giving rise to the exercise of that option, or at any time during the
continuation of the condition referred to in clause (d) above, give written
notice to the Issuer and the Trustee specifying the date on which the Borrower
will deliver the funds required for such redemption, which date shall be not
more than 90 days from the date such notice is mailed and shall make
arrangements satisfactory to the Trustee for the giving of the required notice
of redemption.
The amount payable by the Borrower in the event of its exercise of the
option granted in this Section shall be the sum of (i) an amount of money which,
when added to the moneys and investments held to the credit of the Bond Fund,
will be sufficient pursuant to Section 5.04 and Article X of the Indenture to
pay, or provide for the payment of, the redemption price of Bonds on the
redemption date and to fully reimburse the Bank with respect to all drawings on
the Letter of Credit, such amount to be paid to the Trustee, plus (ii) an amount
of money equal to the Additional Payments accrued and to accrue until actual
final payment and redemption of the Bonds, such amount or applicable portions
thereof to be paid to the Trustee or to the Persons to whom those Additional
Payments are or will be due. The requirement of clause (ii) above with respect
to Additional Payments to accrue may be met if provisions satisfactory to the
Trustee and the Issuer are made for paying those amounts as they accrue.
Section 6.3 Mandatory Redemption. The Borrower shall deliver or cause to be
--------------------
delivered to the Trustee the moneys needed to redeem the Bonds in accordance
with the mandatory redemption provisions set forth in the Bonds and the
Indenture and to fully reimburse the Bank with respect to all drawings on the
Letter of Credit with respect thereto. Whenever the Bonds are subject to
mandatory redemption pursuant to the Indenture, the Borrower will cooperate with
the Issuer and the Trustee in effecting such redemption.
Section 6.4 Actions by Issuer. At the request of the Borrower or the
-----------------
Trustee, the Issuer shall take all steps required of it under the applicable
provisions of the Indenture or the Bonds to effect the redemption of all or a
portion of the Bonds pursuant to this Article.
(End of Article VI)
26
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default. Each of the following shall be an Event of
-----------------
Default:
(a) Failure by the Borrower to make or cause to be made any Loan
Payment or Purchase Payment on or prior to the date on which such payment is due
and payable;
(b) Failure by the Borrower to observe and perform any other
agreement, term or condition contained in this Agreement and continuation of
such failure for a period of 30 days after notice thereof shall have been given
to the Borrower by the Issuer or the Trustee, or for such longer period as the
Issuer and the Trustee may agree to in writing; provided that if the failure is
other than the payment of money and is of such nature that it can be corrected
but not within the applicable period, such failure shall not constitute an Event
of Default so long as the Borrower institutes curative action within the
applicable period and diligently pursues such action to completion;
(c) The Borrower shall (i) apply for or consent to the appointment
of a receiver, trustee, liquidator or custodian or the like of itself or of its
property, or (ii) admit in writing its inability to pay its debts generally as
they become due, or (iii) make a general assignment for the benefit of
creditors, or (iv) be adjudicated a bankrupt or insolvent, or (v) commence a
voluntary case under the United States Bankruptcy Code, or file a voluntary
petition or answer seeking reorganization, an arrangement with creditors or an
order for relief, or seeking to take advantage of any insolvency law or file an
answer admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization, or insolvency proceeding, or action shall be taken
by it for the purpose of effecting any of the foregoing, or (vi) have instituted
against it, without the application, approval or consent of the Borrower, a
proceeding in any court of competent jurisdiction, under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect
of the Borrower an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or
arrangement with creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or the like of the Borrower or of all
or any substantial part of its assets, or other like relief in respect thereof
under any bankruptcy or insolvency law, and, if such proceeding is being
contested by the Borrower in good faith, the same shall (A) result in the entry
of an order for relief or any such adjudication or appointment or (B) remain
unvacated, undismissed and undischarged for a period of 60 days;
(d) Any representation or warranty made by the Borrower herein or
any statement in any report, certificate, financial statement or other
instrument furnished in connection with this Agreement or with the purchase of
the Bonds shall at any time prove to have been false or misleading in any
material respect when made or given;
(e) For any reason the Bonds are declared due and payable by
acceleration in accordance with Section 7.03 of the Indenture;
27
(f) The Trustee receives written notice from the Bank (i) stating
that an Event of Default as defined in the Reimbursement Agreement has occurred
and is continuing and (ii) directing the Trustee to call the Bonds for mandatory
purchase (if the Bonds are in the Weekly Mode) or to declare the principal of
the outstanding Bonds immediately due and payable; or
(g) The Trustee receives notice from the Bank prior to the tenth
calendar day following payment of a drawing under the Letter of Credit for
interest on Bonds which remain outstanding after the application of the proceeds
of such drawing, stating that the Letter of Credit will not be reinstated with
respect to such interest.
The declaration of an Event of Default under paragraph (c) above, and the
exercise of remedies upon any such declaration, shall be subject to any
applicable limitations of federal bankruptcy law affecting or precluding that
declaration or exercise during the pendency of or immediately following any
bankruptcy, liquidation or reorganization proceedings.
Section 7.2 Remedies on Default.
-------------------
(a) Whenever an Event of Default shall have happened and be
subsisting, any one or more of the following remedial steps may be taken:
(i) If acceleration of the principal amount of the Bonds has
been declared pursuant to Section 7.03 of the Indenture, the Trustee shall
declare all Loan Payments to be immediately due and payable, whereupon the
same shall become immediately due and payable; and
(ii) The Issuer or the Trustee may pursue any and all remedies
now or hereafter existing at law or in equity to collect all amounts then
due and thereafter to become due under this Agreement or the Letter of
Credit or to enforce the performance and observance of any other obligation
or agreement of the Borrower under this Agreement.
(b) The Borrower covenants that, in case it shall fail to pay or
cause to be paid any Loan Payments or Purchase Payments as and when the same
shall become due and payable whether at maturity, upon redemption prior to
maturity or by acceleration or otherwise, then, upon demand of the Trustee, the
Borrower will pay to the Trustee the whole amount that then shall have become
due and payable hereunder; and, in addition thereto, such further amounts as
shall be sufficient to cover the costs and expenses of collection, including a
reasonable compensation to the Trustee and its agents, and any expenses or
liabilities incurred by the Issuer or the Trustee (including reasonable legal
fees and expenses). In case the Borrower shall fail forthwith to pay such
amounts upon such demand, the Trustee shall be entitled and empowered to
institute any actions or proceedings at law or in equity for the collection of
the sums so due and unpaid.
(c) In case there shall be pending proceedings for the bankruptcy
or reorganization of the Borrower under the federal bankruptcy laws or any other
applicable law, or in case a receiver or trustee shall have been appointed for
the benefit of the creditors or the property of the Borrower, the Trustee shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount due
28
hereunder, including interest owing and unpaid in respect thereof, and, in case
of any judicial proceedings, to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee allowed in such judicial proceedings relative to the Borrower, its
creditors or its property, and to collect and receive any moneys or other
property payable or deliverable on any such claims, and to distribute the same
after the deduction of its charges and expenses. Any receiver, assignee or
trustee in bankruptcy or reorganization is hereby authorized to make such
payments to the Issuer or the Trustee, and to pay to the Issuer or the Trustee
any amount due it for compensation and expenses, including counsel fees and
expenses incurred by it up to the date of such distribution.
Notwithstanding the foregoing, the Trustee shall not be obligated to take
any step which in its opinion will or might cause it to expend money or
otherwise incur liability unless and until a satisfactory indemnity bond or
other indemnity satisfactory to it has been furnished to the Trustee at no cost
or expense to the Trustee. Any amounts collected as Loan Payments or applicable
to Loan Payments and any other amounts which would be applicable to payment of
Bond Service collected pursuant to action taken under this Section shall be paid
into the Bond Fund and applied in accordance with the provisions of the
Indenture or, if the outstanding Bonds have been paid and discharged in
accordance with the provisions of the Indenture, shall be paid as provided in
Article X of the Indenture for transfers of remaining amounts in the Bond Fund.
The provisions of this Section are subject to the further limitation that
the annulment by the Trustee of its declaration that all of the Bonds are
immediately due and payable also shall constitute an annulment of any
corresponding declaration made pursuant to Subsection 7.2(a)(i); provided that
no such waiver or rescission shall extend to or affect any subsequent or other
default or impair any right consequent thereon.
Section 7.3 Remedies Not Exclusive. No remedy conferred upon or reserved to
----------------------
the Issuer or the Trustee by this Agreement is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or the Letter of Credit, or now or hereafter existing at law or in
equity. No delay or omission to exercise any right or power accruing upon any
default shall impair that right or power or shall be construed to be a waiver
thereof, but any such right and power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle the Issuer or the Trustee
to exercise any remedy reserved to it in this Article, it shall not be necessary
to give any notice, other than any notice required by law or for which express
provision is made herein.
Section 7.4 Payment of Legal Fees and Expenses. If an Event of Default
----------------------------------
should occur and the Issuer or the Trustee should incur expenses, including
attorneys' fees and expenses, in connection with the enforcement of this
Agreement or the Letter of Credit or the collection of sums due thereunder, the
Borrower shall reimburse the Issuer and the Trustee, as applicable, for the
expenses so incurred, upon demand.
Section 7.5 No Waiver. No failure by the Issuer or the Trustee to insist
---------
upon the strict performance by the Borrower of any provision hereof shall
constitute a waiver of their right to strict performance and no express waiver
shall be deemed to apply to any other existing or subsequent right to remedy the
failure by the Borrower to observe or comply with any provision hereof.
29
The Issuer and the Trustee may waive any Event of Default hereunder only
with the prior written consent of the Bank.
Section 7.6 Notice of Default. The Borrower shall notify the Trustee, the
-----------------
Issuer and the Bank in writing immediately if it becomes aware of the occurrence
of any Event of Default hereunder or of any fact, condition or event which, with
the giving of notice or passage of time or both, would become an Event of
Default.
(End of Article VII)
30
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Term of Agreement. This Agreement shall be and remain in full
-----------------
force and effect from the Series Issue Date until such time as all of the Bonds
shall have been fully paid (or provision made for such payment) pursuant to the
Indenture, the Indenture shall have been released pursuant to Section 10.01
thereof, and all other sums payable by the Borrower under this Agreement and the
Reimbursement Agreement shall have been paid, except for obligations of the
Borrower under Section 5.10, which shall survive any termination of this
Agreement.
Section 8.2 Notices. All notices, certificates, requests or other
-------
communications hereunder shall be in writing and shall be deemed to be
sufficiently given when mailed by registered or certified mail, postage prepaid,
or hand delivered or sent by express delivery service or telecopy (with
transmission confirmed) and addressed as follows:
If to the Borrower: Innovative Solutions and Support, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Issuer: ▇▇▇▇▇▇▇ County Industrial Development Authority
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Trustee: Chase Manhattan Trust Company, National
Association, Trustee
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Capital Markets Fiduciary Services
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Remarketing
Agent: PNC Capital Markets, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Sales Department
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
31
If to the Bank: PNC Bank, National Association
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
The Borrower, the Issuer, the Trustee, the Bank and the Remarketing Agent, by
notice given hereunder to the Persons listed above, may designate any further or
different addresses or telecopier numbers to which subsequent notices,
certificates, requests or other communications shall be sent.
Section 8.3 Limitation of Liability; No Personal Liability. In the exercise
----------------------------------------------
of the powers of the Issuer, the Trustee or the Remarketing Agent hereunder or
under the Indenture, including without limitation the application of moneys and
the investment of funds, neither the Issuer, the Trustee, the Remarketing Agent
nor their members, directors, officers, employees or agents shall be accountable
to the Borrower for any action taken or omitted by any of them in good faith and
with the belief that it is authorized or within the discretion or rights or
powers conferred. The Issuer, the Trustee, the Remarketing Agent and their
members, directors, officers, employees and agents shall be protected in acting
upon any paper or document believed to be genuine, and any of them may
conclusively rely upon the advice of counsel and may (but need not) require
further evidence of any fact or matter before taking any action. In the event of
any default by the Issuer hereunder, the liability of the Issuer to the Borrower
shall be enforceable only out of the Issuer's interest under this Agreement and
there shall be no other recourse for damages by the Borrower against the Issuer,
its members, directors, officers, attorneys, agents and employees, or any of the
property now or hereafter owned by it or them. All covenants, obligations and
agreements of the Issuer contained in this Agreement or the Indenture shall be
effective to the extent authorized and permitted by applicable law. No such
covenant, obligation or agreement shall be deemed to be a covenant, obligation
or agreement of any present or future member, director, officer, agent or
employee of the Issuer, and no official executing the Bonds shall be liable
personally on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof or by reason of the covenants,
obligations or agreements of the Issuer contained in this Agreement or the
Indenture.
Section 8.4 Binding Effect. This Agreement shall inure to the benefit of
--------------
and shall be binding in accordance with its terms upon the Issuer, the Borrower
and their respective successors and assigns; provided that this Agreement may
not be assigned by the Borrower (except in connection with a sale or transfer of
assets pursuant to Section 5.1 or in compliance with Section 8.9) and may not be
assigned by the Issuer except to the Trustee pursuant to the Indenture or as
otherwise may be necessary to enforce or secure payment of Bond Service. This
Agreement may be enforced only by the parties, their assignees and others who
may, by law, stand in their respective places. In addition, the Remarketing
Agent and the Bank are hereby explicitly recognized as third party beneficiaries
of this Agreement.
Section 8.5 Amendments. Except as otherwise expressly provided in this
----------
Agreement or the Indenture, subsequent to the issuance of the Bonds and unless
and until all conditions provided for in the Indenture for release of the
Indenture having been met, this Agreement may not be effectively amended,
modified or terminated except by an instrument in
32
writing signed by the Borrower and the Issuer, consented to by the Trustee, and
in accordance with the provisions of Article IX of the Indenture, as applicable.
Section 8.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be regarded as an original and all of which
shall constitute one and the same instrument.
Section 8.7 Severability. If any provision of this Agreement is determined
------------
by a court to be invalid or unenforceable, such determination shall not affect
any other provision hereof, each of which shall be construed and enforced as if
the invalid or unenforceable portion were not contained herein. Such invalidity
or unenforceability shall not affect any valid and enforceable application
thereof, and each such provision shall be deemed to be effective, operative and
entered into in the manner and to the full extent permitted by applicable law.
Section 8.8 Governing Law. This Agreement shall be deemed to be a contract
-------------
made under the laws of the Commonwealth of Pennsylvania and for all purposes
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
Section 8.9 Assignment. The Borrower shall not assign this Agreement or
----------
any interest of the Borrower herein, either in whole or in part, without the
prior written consent of the Trustee, which consent shall be given if the
following conditions are fulfilled: (i) the assignee assumes in writing all of
the obligations of the Borrower hereunder; (ii) in the opinion of counsel to the
Borrower, neither the validity nor the enforceability of this Agreement shall be
adversely affected by such assignment; (iii) the Project shall continue in the
opinion of Bond Counsel to be a "project" as such term is defined in the Act
after such assignment; (iv) such assignment shall not, in the opinion of Bond
Counsel, have an adverse effect on the exclusion from gross income for federal
income tax purposes of interest on the Bonds; and (v) consent by the Issuer,
which consent shall not be unreasonably withheld. For purposes of this Section,
no foreclosure by the Bank, or conveyance in lieu thereof, or other transfer to
the Bank or an affiliate of the Bank, shall, of itself, be deemed an assignment
for purposes of this Section or a sale, transfer, assignment or other
disposition for purposes of Section 5.2. Subject to the foregoing, the terms
"Issuer", "Borrower", "Trustee" and "Remarketing Agent" shall, where the context
requires, include the respective successors and assigns of such Persons. No
assignment pursuant to this Section shall release the Borrower from its
obligations under this Agreement, unless the Bank has consented to such release.
Section 8.10 Receipt of Indenture. The Borrower hereby acknowledges that it
--------------------
has received an executed copy of the Indenture and is familiar with its
provisions, and agrees that it is subject to and bound by the terms thereof and
it will take all such actions as are required or contemplated of it under the
Indenture to preserve and protect the rights of the Trustee and of the Holders
and the Bank thereunder and that it will not take any action which would cause a
default thereunder. Any redemption of Bonds prior to maturity shall be effected
as provided in the Indenture.
(End of Article VIII)
33
IN WITNESS WHEREOF, the Issuer and the Borrower, intending to be legally
bound, have caused this Agreement to be duly executed in their respective names,
all as of the date first above written.
▇▇▇▇▇▇▇ COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
Attest: _________________________ By: ________________________________
Name: Name:
Title: Title:
INNOVATIVE SOLUTIONS AND
SUPPORT, LLC, by its sole Member and
Manager INNOVATIVE SOLUTIONS
AND SUPPORT, INCORPORATED
By: ________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer
This execution page is part of the Loan Agreement dated as of August 1,
2000 between ▇▇▇▇▇▇▇ County Industrial Development Authority and Innovative
Solutions and Support, LLC.
34
EXHIBIT A
PROJECT SITE
[Legal Description]
A-1
EXHIBIT B
INNOVATIVE SOLUTIONS AND SUPPORT, LLC PROJECT
---------------------------------------------
The Project consists of an approximately 44,800 square foot
manufacturing facility and related equipment to be located on approximately 7.5
acres of land at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (▇▇▇ 7) in the Township of Upper
Uwchlan, ▇▇▇▇▇▇▇ County, Pennsylvania, to be acquired, constructed and equipped
by the Borrower and operated by the Borrower as a facility for the manufacture
of airplane parts.
Sources and Uses of Funds to Acquire Project
--------------------------------------------
Other
Bond Borrowed
Proceeds Funds Equity Total
-------- -------- ------ -----
Acquisition of Land $ 200,000 -- $ 805,750 $1,005,750
New Construction 4,048,300 -- 755,950 4,804,250
Acquisition of New Equipment -- -- -- --
Costs of Issuance 86,700 103,300 190,000
----------- -------- --------- -----------
Total $4,335,000 -- $1,665,000 $6,000,000
B-1
EXHIBIT C
FORM OF DISBURSEMENT REQUEST
----------------------------
STATEMENT NO. ________ REQUESTING DISBURSEMENT OF FUNDS FROM
PROJECT FUND PURSUANT TO SECTION 3.4 OF THE LOAN AGREEMENT
DATED AS OF AUGUST 1, 2000 ("LOAN AGREEMENT") BETWEEN ▇▇▇▇▇▇▇
COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY ("ISSUER") AND
INNOVATIVE SOLUTIONS AND SUPPORT, LLC ("BORROWER").
The terms used herein shall have the meanings specified for such terms
in or pursuant to the Loan Agreement. Pursuant to Section 3.4 of the Loan
Agreement, the undersigned Authorized Representative of the Borrower hereby
requests and authorizes the Trustee to pay to the Borrower or to the Person(s)
listed on the Disbursement Schedule hereto out of the moneys deposited in the
Project Fund the aggregate sum of $___________ to reimburse the Borrower or to
pay such Person(s), as indicated in the Disbursement Schedule, for the items of
Project Cost listed in the Disbursement Schedule.
In connection with the foregoing request and authorization,the
undersigned hereby certifies that:
(a) Each item for which disbursement is requested hereunder is due, is
an item of incurred Project Cost properly reimbursable or payable
out of the Project Fund in accordance with the terms and
conditions of the Loan Agreement and none of those items has
formed the basis for any disbursement heretofore made from the
Project Fund.
(b) Each such item is or was necessary or appropriate in connection
with the acquisition, construction or equipment of the Project.
(c) Each such item is as described in the information statement filed
by the Issuer in connection with the issuance of the Bonds (as
defined in the Loan Agreement), as required by Section 149(e) of
the Code; provided that if any such item is not as described in
that information statement, attached hereto is an opinion of Bond
Counsel that such disbursement will not result in the interest on
the Bonds becoming included in the gross income of the Holders for
federal income tax purposes.
(d) The reimbursement or payment of the Project Costs requisitioned
hereby will comply with the restrictions contained in Sections
3.4, 5.11 and 5.12 of the Loan Agreement.
C-1
(e) This statement and all exhibits hereto, including the Disbursement
Schedule, shall constitute full warrant, protection and authority
to the Trustee for its actions taken pursuant hereto.
Dated: ________________
INNOVATIVE SOLUTIONS AND SUPPORT, LLC
By: _______________________________
Authorized Representative
Approved by PNC BANK, NATIONAL ASSOCIATION
By:_________________________
Authorized Signatory
------------------------------------------------------------------------------
DISBURSEMENT SCHEDULE
TO STATEMENT NO. ___________ REQUESTING AND
AUTHORIZING DISBURSEMENT OF FUNDS FROM PROJECT FUND
PURSUANT TO SECTION 3.4 OF THE LOAN AGREEMENT DATED
AS OF AUGUST 1, 2000 BETWEEN ▇▇▇▇▇▇▇ COUNTY
INDUSTRIAL DEVELOPMENT AUTHORITY AND INNOVATIVE
SOLUTIONS AND SUPPORT, LLC.
PAYEE AMOUNT PURPOSE
----- ------ -------
C-2
EXHIBIT D
NONDISCRIMINATION CLAUSE
During the term of this contract, the Borrower agrees as to itself and
each tenant of the Project controlling, controlled by or under common control
with the Borrower (each of the Borrower and each such tenant, a "Contractor") as
follows:
1. Contractor shall not discriminate against any employee, applicant
for employment, independent contractor or any other person because of race,
color, religious creed, handicap, ancestry, national origin, age or sex.
Contractor shall take affirmative action to insure that applicants are employed,
and that employees or agents are treated during employment, without regard to
their race, color, religious creed, handicap, ancestry, national original age or
sex. Such affirmative action shall include, but not limited to: employment,
upgrading, demotion or transfer, recruitment or recruitment advertising; layoff
or termination; rates of pay or other forms of compensation; and selection for
training. Contractor shall post in conspicuous places, available to employees,
applicants for employment and other persons, a notice to be provided by the
contracting agency setting forth the provisions of this nondiscrimination
clause.
2. Contractor shall in advertisements or requests for employment placed
by it or on its behalf, state that all qualified applicants will receive
consideration for employment without regard to race, color, religious creed,
handicap, ancestry, national origin, age or sex.
3. Contractor shall send to each labor union or workers' representative
with which it has a collective bargaining agreement or other contract or
understanding, a notice advising said labor union or workers' representative of
its commitment to this nondiscrimination clause. Similar notice shall be sent to
every other source of recruitment regularly utilized by Contractor.
4. It shall be no defense to a finding of noncompliance with this
nondiscrimination clause that Contractor had delegated some of its employment
practices to any union, training program or other source of recruitment which
prevents it from meeting its obligations. However, if the evidence indicates
that Contractor was not on notice of the third-party discrimination or made a
good faith effort to correct it, such factor shall be considered a mitigating
circumstance in determining appropriate sanctions.
5. Where the practices of a union or of any training program or other
program of recruitment will result in the exclusion of minority group persons,
so that Contractor will be unable to meet its obligations under this
nondiscrimination clause, Contractor shall then employ and fill vacancies
through other nondiscriminatory employment procedures.
6. Contractor shall comply with all applicable state and federal laws
prohibiting discrimination in hiring or employment opportunities. In the event
of Contractor's noncompliance with the nondiscrimination clause of this contract
or with any such laws, the Loan Payments may be accelerated, and Contractor may
be declared temporarily ineligible for further Commonwealth of Pennsylvania
contracts, and other sanctions may be imposed and remedies invoked.
7. Contractor shall furnish all necessary employment documents and
records to, and permit access to its books, records and accounts by, the
contracting agency for purposes
D-1
of investigation to ascertain compliance with the provisions of this clause. If
Contractor does not possess documents or records reflecting the necessary
information requested, it shall furnish such information on reporting forms
supplied by the contracting agency.
8. Contractor shall actively recruit minority subcontractors and women
subcontractors or subcontractors with substantial minority or women
representation among their employees.
9. Contractor shall include the provisions of this nondiscrimination
clause in every subcontract, so that such provisions will be binding upon each
subcontractor.
10. Contractor obligations under this clause are limited to
Contractor's facilities within Pennsylvania or, where the contract is for
purchase of goods manufactured outside of Pennsylvania, the facilities at which
such goods are actually produced.
D-2
"WORD"
Long Document Name: LOAN AGREEMENT - ▇▇▇▇▇▇▇ COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY AND INNOVATIVE
SOLUTIONS & SUPPORT
System Document Number: 54609 - PTE
Additional Information: converted from i:\wpd\loan agreement.doc and
formatted
================================================================================
You will have line numbers down the side of each draft document unless you
indicate otherwise. 1.5 line spacing will be used on all drafts unless you
indicate otherwise.
Return To: Location:
_______ _______
Return: _____draft _____final _____redlined _____stapled
Line Spacing: _____ same _____ 1.0 _____ 1.5 _____ 2.0
Duplicate: _____ yes _____ no (New Client/Matter No: _ )
---------
Save New Version For Redlining Prior To Revisions: _____ yes _____ no
Caret Method _____ Standard Method _____
================================================================================
Notes:
Origination Date: March 23, 2000
Author's Initials: pte
Last Revised By: aml/kad (toc only)/pte/lel/pte/kmc(@tr145)/laz/SJG/nb/
pte/nb
Last Edit Date: 3/24;3/24;3-27; 3-28;4-27;7-20;7-28;7-31;8-1
3