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EXHIBIT 10.18
WASHINGTON ECONOMIC DEVELOPMENT FINANCE AUTHORITY
ECONOMIC DEVELOPMENT REVENUE BOND
SERIES 1997-E
(INTRACEL CORPORATION PROJECT)
TAX CERTIFICATE AND REGULATORY AGREEMENT
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TABLE OF CONTENTS
Recitals and Covenants................................................. 1
SECTION 1. DEFINITIONS............................................... 2
SECTION 2. REPRESENTATIONS........................................... 2
(a) Authorization............................................. 2
(b) Purposes of the Bonds..................................... 2
(c) Purpose of Tax Certificates............................... 2
(d) Statement as to Facts, Estimates and Circumstances........ 3
(e) Responsible Person........................................ 3
SECTION 3. REASONABLE EXPECTATIONS OF THE AUTHORITY AND COMPANY AS
TO FACTS, ESTIMATES AND CIRCUMSTANCES............................ 4
(a) Application of Total Sale Proceeds........................ 4
(1) General.............................................. 4
(2) Costs of Issuance.................................... 4
(3) Project Amount....................................... 4
(b) No Replacement............................................ 4
(c) No Negative Pledges....................................... 4
(d) No Other Funds............................................ 4
(e) Debt Service Fund......................................... 4
(f) Rebate.................................................... 5
(g) No Overissuance........................................... 5
(h) ▇▇▇▇ ▇▇▇▇▇................................................ 5
(i) Representations Establishing Eligibility for Temporary
Period.................................................. 6
(1) Completion Date...................................... 6
(2) Binding Obligations.................................. 6
(3) Due Diligence........................................ 6
(j) Yield Restrictions........................................ 6
(1) Costs of Issuance.................................... 6
(2) Debt Service Fund.................................... 6
(3) Project Amount....................................... 6
(4) Yield Reduction Payments............................. 6
(k) The Loan Agreement........................................ 7
(l) No Hedge Bonds............................................ 7
(m) Single Issue.............................................. 7
(n) Reimbursement of Prior Expenditures....................... 7
(1) Timing of Prior Expenditures......................... 7
(2) Reimbursable Expenditures............................ 8
(3) Anti-Abuse Rules..................................... 8
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SECTION 4. REBATE REQUIREMENT CALCULATIONS AND PAYMENT.............. 8
(a) General.................................................. 8
(b) Eighteen Month Exception................................. 8
(c) Rebate Requirement....................................... 9
(d) Future Value............................................. 10
(e) Allocation and Accounting Rules.......................... 10
(f) Relationship to Yield Restriction........................ 10
(g) Bond Debt Service Fund................................... 10
(h) Computation and Payment Dates............................ 10
(i) Procedure for Remittance................................. 11
(j) Recordkeeping Obligation................................. 11
(1) In General.......................................... 11
(2) Retention of Records................................ 12
SECTION 5. SEGREGATION OF PROCEEDS.................................. 12
SECTION 6. SURVIVAL ON DEFEASANCE OR OTHER PAYMENT.................. 12
SECTION 7. PRIVATE ACTIVITY BOND REQUIREMENTS....................... 12
(a) Notice................................................... 12
(d) Official Action.......................................... 13
(e) Volume Cap............................................... 13
(f) Costs of Issuance........................................ 13
(g) Prohibited Facilities.................................... 13
(h) No Refunding Bonds....................................... 13
(i) Economic Life of the Project............................. 13
(j) Acquisition of Land...................................... 14
(k) Acquisition of Existing Property......................... 14
(l) Ownership................................................ 14
(m) Qualifying Facilities.................................... 14
(n) Election of $10,000,000 Limit on Capital Expenditures.... 14
(o) Limitation on Capital Expenditures....................... 14
(p) $40,000,000 Limitation................................... 15
(q) Contiguous or Integrated Facilities...................... 15
(r) Principal Users.......................................... 15
SECTION 8. AMENDMENTS............................................... 15
SECTION 9. SUPPLEMENTATION OF THIS CERTIFICATE...................... 15
EXHIBIT A - OFFERING PRICE CERTIFICATE............................... 21
EXHIBIT B - THE PROJECT.............................................. 22
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EXHIBIT C............................................................. 23
EXHIBIT D............................................................. 24
EXHIBIT E
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TAX CERTIFICATE AND REGULATORY AGREEMENT
WASHINGTON ECONOMIC DEVELOPMENT FINANCE AUTHORITY
(THE "AUTHORITY")
INTRACEL CORPORATION (THE "COMPANY")
$1,500,000
ECONOMIC DEVELOPMENT REVENUE BOND
SERIES 1997-E
(INTRACEL CORPORATION)
In connection with the issuance by the Authority of its Revenue Bond,
Series 1997-E (Intracel Corporation ) (the "BONDS" or the "BOND"), in the
maximum aggregate principal amount of $1,500,000 authorized pursuant to its
Resolution No. 96-013 adopted by the Authority on December 10, 1996, and
Resolution No. W-97-021 adopted on September 10, 1997 (collectively, the
"RESOLUTIONS"), a Loan and Security Agreement (the"LOAN AGREEMENT") by and
between the Authority and Intracel Corporation (the "COMPANY"), dated as of
September 11, 1997, and in furtherance of the tax-related covenants and
representations of the Authority and the Company contained in the Loan
Agreement, the Authority and the Company and enter into the following tax
certificate and regulatory agreement (the "TAX CERTIFICATE").
RECITALS AND COVENANTS
WHEREAS, the Authority and the Company have covenanted that they will not
take any action or omit any action if it would cause the Bonds to become
"arbitrage bonds" within the meaning of Section 148 of the Internal Revenue
Code of 1986 as amended (the "CODE").
WHEREAS, the Authority and the Company hereby covenant that they will
comply with the provisions of this Tax Certificate.
WHEREAS, the Company has covenanted in the Loan Agreement to cause to be
paid to the United States all amounts required to be so paid pursuant to
Section 148(f) of the Code.
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WHEREAS the Company has covenanted to operate the facilities financed with
the proceeds of the Bond so that the Bond is and remains a "qualified small
issue bond" under Section 144 of the Code.
WHEREAS, the Authority and the Company understand and acknowledge that the
opinion of Bond Counsel (as defined below) regarding the exclusion of the
interest on the Bonds from gross income for Federal income tax purposes is
rendered in reliance upon the representations and statements of fact, estimates
and expectations contained herein and assumes the Authority's and the Company's
continued compliance with the provisions of this Tax Certificate.
NOW, THEREFORE, pursuant to Section 1.148-2(b)(2) of the Treasury
Regulations, the Authority and the Company certify, covenant and agree as
follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein shall have the
meanings set forth herein or in Appendix One, attached hereto, or where not so
defined, shall have the meanings set forth in the Indenture and the Loan
Agreement.
SECTION 2. REPRESENTATIONS.
(a) AUTHORIZATION. The Bonds are being issued pursuant to the Constitution
and statutes of the State of Washington, specifically Washington Revised
Statutes Chapter 43.163, the Resolutions, the Indenture and the Loan Agreement.
(b) PURPOSES OF THE BONDS. The Bonds are being issued for the purposes of
(i) making a loan to the Company to finance a portion of the costs of the
acquisition, and equipping of new equipment for the manufacture of medical
diagnostic devices located in Issaquah, Washington (the "PROJECT") and (ii)
paying the costs of issuance of the Bonds. Interest will accrue on the Bonds
only with respect to the outstanding principal amount of the amount previously
drawn down, and the interest rate will be independently established for each
draw. The Company will draw down an amount of $1,500,000 in two installments of
$750,000 each.
(c) PURPOSE OF TAX CERTIFICATE. This Tax Certificate is made in part for
the purpose of establishing the Authority's reasonable expectations as to the
amount and use of proceeds of the Bonds. It is intended to be and may be relied
on for the purposes of Sections 103, and 141 through 150 of the Code and as a
certificate described in Treasury Regulations Section 1.148-2(b)(2). The Tax
Certificate is being executed and delivered as part of the record of proceedings
in connection with the issuance of the Bonds. The Authority and the Company
understand that, despite the representations and statements of expectation made
in this Tax Certificate, that the taking of any deliberate, intentional action
by the Authority, the Company, or the Lessee after the Delivery Date in order to
earn arbitrage will cause the Bond to be "arbitrage bonds" within the meaning of
Section 148 of the Code if such action, had it been expected on the Delivery
Date, would have caused the Bond to be arbitrage bonds and that an intent to
violate the
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requirements of Section 141 or 148 of the Code is not necessary for an action
to be considered deliberate within the meaning of the Code. In addition, the
Authority and the Company understand that, despite the representations and
statements of expectation made in this Tax Certificate, the failure of the
Bonds to satisfy the requirements of Section 144 and 147 of the Code may cause
the bonds to fail to be "qualified small issue bonds," regardless of whether
the events giving rise to such failure are deliberate.
(d) STATEMENTS AS TO FACTS, ESTIMATES AND CIRCUMSTANCES. The facts
and estimates set forth in Section 3 of this Tax Certificate, on which the
Authority's and the Company's expectations as to the Bonds are based, are true
to the best of the knowledge and belief of the undersigned officers of the
Authority and the Company, and the Authority's and the Company's expectations
are reasonable. The Authority and the Company, understand that, for the purposes
of the Code, the statements of facts, estimates, representations and
expectations contained herein constitute evidence of the Authority's and the
Company's expectations but do not establish any conclusions of law or any
presumptions regarding either the Authority's or the Company's actual
expectations or their reasonableness.
The expectations of the Authority concerning the use of proceeds
derived from the sale of the Bond and other matters are based in whole or in
part upon representations of the Company and other parties set forth in this Tax
Certificate and in the exhibits hereto. The Authority is not aware of any facts
and circumstances that would cause it to question the accuracy or reasonableness
of any representation made in this Tax Certificate or in the exhibits hereto,
including those representations made by the Company. The expectations of the
Company concerning certain uses of proceeds derived from the sale of the Bonds
and other matters are based in whole or in part on representations of the
Authority and other parties set forth in this Tax Certificate and in the
exhibits hereto. The Company is not aware of any facts or circumstances that
would cause it to question the accuracy or reasonableness of any representation
made in this Tax Certificate or in the exhibits hereto, including those
representations made by the Authority.
(e) RESPONSIBLE PERSON. The undersigned are the persons charged with
the responsibility for executing the documents related to the issuance of the
Bonds, and have made due inquiry with respect to and are fully informed as to
the matters set forth in Section 3 of this Tax Certificate.
(f) SECURITY. The Bonds are special obligations payable solely from
loan payments pledged under the Loan Agreement between the Company and the
Authority. The Bonds do not constitute an indebtedness or lending of credit of
the Authority within the meaning of any constitutional or statutory limitation
and do not constitute nor give rise to a pecuniary liability of the Authority
or a charge against its general credit, but are payable solely out of Loan
Payments under the Loan Agreement.
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SECTION 3. REASONABLE EXPECTATIONS OF THE AUTHORITY AND COMPANY AS TO
FACTS, ESTIMATES AND CIRCUMSTANCES. The Authority, the Company makes the
following representations and statements of fact, estimate and expectation on
the basis of which it is not expected that the proceeds of the Bonds will be
used in a manner that will cause the Bond to be "arbitrage bonds" within the
meaning of Section 148 of the Code.
(a) APPLICATION OF TOTAL SALE PROCEEDS.
(1) GENERAL. The maximum amount of Sale Proceeds to be received by
the Authority from the sale of the Bond is $1,500,000.
(2) COSTS OF ISSUANCE. The amount of the Sale Proceeds and the
investment earnings thereon from each draw to be used to pay costs of issuance
will not exceed 2% of the amount of such draw.
(3) PROJECT AMOUNT. A minimum amount of Sale Proceeds equal to 98%
of each draw will be used to pay Project Costs.
(b) NO REPLACEMENT. No portion of the amounts received from the sale of
the Bond will be used as a substitute for any other funds that would otherwise
be used as a source of financing for any portion of the cost of the Project or
that will be used to acquire, directly or indirectly, obligations producing a
yield in excess of the Bond Yield.
(c) NO NEGATIVE PLEDGES. There are no amounts held under any agreement to
maintain funds at a particular level for the direct or indirect benefit of the
holders of the Bonds, excluding for this purpose (i) amounts in which the
Authority, the Company, the Lessee (or a substantial beneficiary of the Bonds)
may grant rights that are superior to the rights of the holders of the Bonds
and (ii) amounts that do not exceed the reasonable needs for which they are
maintained and that may be spent without any substantial restriction other
than a requirement to replenish the amount by a testing date that may occur no
more frequently than every six (6) months.
(d) NO OTHER FUNDS. Other than the funds and accounts specifically
described in this Tax Certificate, no fund or account which secures or
otherwise relates to the Bonds have been established, nor are any such funds
or accounts expected to be established, pursuant to any instrument.
(e) DEBT SERVICE FUND. The Debt Service Fund is intended to achieve a
proper matching of revenues under the Loan Agreement and the scheduled annual
debt service on the Bonds (the "DEBT SERVICE FUND").
All amounts on deposit in the Debt Service Fund will be expended to pay
debt service on the Bonds within thirteen months of the date such amounts are
first received by the Authority.
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The Debt Service Fund will be depleted at least once each year except for any
carryover amounts which will not exceed the greater of (i) the earnings in the
Debt Service Fund for the immediately preceding Bond Year or (ii) one-twelfth
of the principal and interest payments on the Bonds for the immediately
preceding Bond Year. The schedule of payment of interest on and principal of
the Bonds has been established on the basis of, and is intended to achieve, a
proper matching of revenues with debt service on the Bonds.
Neither the Authority nor the Company has created or established, or
expects to create or establish, any fund in connection with the Bonds that is
reasonably expected to be used to pay debt service on the Bonds other than Debt
Service Fund.
(f) REBATE. The Company shall be responsible for the calculation and
payment of the Rebate Requirement and any related penalties under Section
148(f) of the Code.
(g) NO OVERISSUANCE. The amount of the proceeds and the anticipated
investment earnings thereon, together with other amounts available for and
expected to be used for such purposes, do not exceed the amounts necessary to
accomplish the governmental purposes of the Bonds set forth in Section 2(b).
The Bonds will not remain outstanding longer than is otherwise reasonably
necessary to accomplish the governmental purposes of the Bonds, based on all
facts and circumstances. As reflected in Exhibit B, the Bonds have a weighted
average maturity that does not exceed 120 percent of the average reasonably
expected economic life of the Project.
(h) BOND YIELD. The yield on the Bonds will be computed separately for
each Computation Period. The yield on the Bonds for a Computation Period (the
"BOND YIELD") generally means that discount rate that, when used in computing
the present value on the first day of the Computation Period of all payments of
principal, interest and fees for qualified guarantees on the Bonds attributable
to the Computation Period produces an amount equal to the present value, using
the same discount rate on the first day of the Computation Period of the
aggregate issue prices of the Bonds (defined as the initial offering prices or
yields to the public, excluding bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters or wholesalers, at which
price or yield a substantial amount of such Bonds and maturity was sold), or the
deemed issue prices of the Bonds within the meaning of Treasury Regulations
Section 1.148-4(c)(2)(iv). For this purpose, any mandatory sinking fund payments
required to be made with respect to the Bonds shall be taken into account. The
present value of the aggregate issue prices of the Bonds cannot be determined
until the last draw by the Company of Proceeds of the Bonds. The Bond Yield for
a Computation Period will be affected if the Issuer or the Company either enters
into a hedging transaction with respect to the Bonds, within the meaning of
Treasury Regulations Section 1.148-4(h)(3) or, transfers, waives, modifies or
enters into any similar transaction affecting any right that is part of the
terms of a Bond. Prior to entering into any transaction described in the
immediately preceding sentence, the Authority and the Company, as the case may
be, shall inform Bond Counsel of its intent and
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shall not enter into such transaction without receiving a prior written opinion
from Bond Counsel that such transaction will not adversely affect the exclusion
from gross income of interest on the Bonds.
(i) REPRESENTATIONS ESTABLISHING ELIGIBILITY FOR TEMPORARY PERIOD.
(1) COMPLETION DATE. The Company reasonably expects that Sale
Proceeds of the Bonds deposited in the Project Fund will be used to pay the
costs of the Project no later than September 11, 2000.
(2) BINDING OBLIGATIONS. The Company reasonably expects that,
within 6 months of the Delivery Date, it will spend (or enter into binding
obligations with third parties obligating the Company to spend) an amount equal
to at least 5 percent of the Sale Proceeds of the Bonds with respect to the
Project.
(3) DUE DILIGENCE. It is reasonably expected that work on the
Project and the allocation of the Sale Proceeds of the Bonds to expenditures
with respect thereto will proceed with due diligence.
(j) YIELD RESTRICTIONS. Any amounts on deposit in any account
established for the Bond will not be invested at a yield which exceeds the Bond
Yield, except as follows:
(1) COST OF ISSUANCE. Sale Proceeds of the Bonds to pay costs
of issuance and the investment earnings thereon may be invested without regard
to yield restriction for a three-year period beginning on the date hereof, and
are subject to the Rebate Requirement.
(2) DEBT SERVICE FUND. Amounts deposited in the Debt Service
Fund may be invested at an unrestricted yield for a period of 13 months from
the date of deposit of such amounts in the Debt Service Fund. Earnings on such
amounts that are retained in such fund may be invested at an unrestricted yield
for a period of 13 months from the date of receipt of the amount earned. Such
amounts are subject to the Rebate Requirement under the circumstances set forth
in Section 4(h) hereof.
(3) PROJECT AMOUNT. Sale Proceeds to be used to pay the costs
of the Project, and the investment earnings thereon, may be invested without
regard to yield restriction for a three-year period commencing on the date
hereof, and are subject to the Rebate Requirement.
(4) YIELD REDUCTION PAYMENTS. Notwithstanding any of the
provisions of this section 3(m) that require the investment of proceeds derived
from the sale of the Bonds and investment earnings thereon at a yield not in
excess of the Bond Yield, the yield on certain Nonpurpose Investments acquired
with proceeds of the Bonds will not be considered to be higher than the
applicable yield limitation described in this Section 3(m), if the Authority or
the Company makes "yield reduction payments" to the United States Treasury at
the times and in
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the amounts described in section 1.148-5(c) of the Treasury Regulations. The
Company and the Authority covenant to retain and consult with Bond Counsel prior
to making any "yield reduction payments" pursuant to Section 1.148-5(c) of the
Treasury Regulations.
(k) THE LOAN AGREEMENT. The yield on the Loan Agreement, computed
without regard to qualified administrative costs incurred by the Authority and
paid by the Company, may not exceed the Bond Yield by more than .125%. For this
purpose, qualified administrative costs include costs or expenses paid, directly
or indirectly, to purchase, carry, sell or retire the Loan Agreement and costs
of issuing, carrying, or repaying the Bonds. Although actual payments by the
Company with respect to qualified administrative costs, such as, for instance
fees paid to the Authority, may be made at any time, for purposes of calculating
the yield on the Loan Agreement, a pro rata portion of each payment made by the
Company is treated as a reimbursement of reasonable administrative costs, such
that the present value of such payments does not exceed the present value of the
reasonable administrative costs paid by the Authority, using the yield on the
Bonds as the discount rate.
(l) NO HEDGE BONDS. The Authority and the Company expect that more
than 85% of the Net Sale Proceeds of the Bonds will be expended for the purposes
of the Resolution and the Bonds no later than September 11, 2000. In addition,
not more than 50% of the proceeds of the Bond will be invested in Nonpurpose
Investments having a substantially guaranteed yield for 4 years or more.
(m) SINGLE ISSUE. No other obligations of the Authority (i) are
reasonably expected to be paid from substantially the same source of funds as
the Bonds (determined without regard to guarantees from unrelated parties), (ii)
are being sold at substantially the same time as the Bonds (i.e., within
fourteen days of September 11, 1997, the delivery date of the Bonds.
(n) REIMBURSEMENT OF PRIOR EXPENDITURES. A portion of the proceeds
of the Bond to be applied to the cost of the Project may be used to reimburse
the Company for expenditures on the Project, previously incurred and paid, in
anticipation of the issuance of the Bond (the "PRIOR EXPENDITURES"). The Company
represents the following with respect to such reimbursement.
(1) TIMING OF PRIOR EXPENDITURES. All of the Prior Expenditures
either (A) were incurred no earlier than sixty (60) days prior to December 10,
1996, (B) constitute preliminary expenditures in an amount not exceeding 20% of
the $1,500,000.00 of maximum Sale Proceeds identified in Section 3(a)(1), above
(or $300,000), or (C) do not exceed an amount in excess of the lesser of
$100,000 or 5 percent of the Sale Proceeds. For this purpose, "preliminary
expenditures" include architectural, engineering, surveying, soil testing and
similar costs incurred prior to commencement of acquisition and construction of
the Project, other than land acquisition, site preparation and similar costs
incident to commencement of construction.
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(2) REIMBURSABLE EXPENDITURES. The Prior Expenditures are either (i)
capital expenditures (within the meaning of Section 1.150-1(b) of the Treasury
Regulations), (ii) costs of issuance of the Bond, or (iii) working capital
expenditures for extraordinary, nonrecurring items that are not customarily
payable from current revenues. None of the Prior Expenditures were incurred for
day-to-day operating expenses of the Company.
(3) ANTI-ABUSE RULES. None of the proceeds of the Bond being used to
reimburse the Company for Prior Expenditures will be used, directly or
indirectly, within one year of the Delivery Date, in a manner that result in
the creation of Replacement Proceeds, other than amounts deposited in a bona
fide debt service fund.
SECTION 4. REBATE REQUIREMENT CALCULATIONS AND PAYMENT. The Authority and
the Company have been advised by Bond Counsel that the following provisions and
procedures also apply to the proceeds of the Bonds.
(a) GENERAL. Certain Gross Proceeds of the Bonds will be exempt from the
Rebate Requirement described in Section 4(c) hereof if the Bonds satisfy the
requirements of Section 4(b) hereof.
(b) EIGHTEEN MONTH EXCEPTION. The Rebate Requirement described in Section
4(d) hereof shall not apply to the Gross Proceeds of the Bonds if the following
percentages (the "QUALIFYING EXPENDITURES") of such Gross Proceeds are expended
for the governmental purposes of the Bonds by the last day of each of the
periods identified below (the "QUALIFYING DATES"). The governmental purposes of
the Bonds includes (A) payments of interest on but no payments of principal of
the Bonds, (B) payments of interest on other obligations of the Authority issued
for the benefit of the Company, which interest either (i) accrues on such other
obligations during a one-year period including the Delivery Date, (ii) is a
capital expenditure as defined in Treasury Regulations Section 1.150-1(b), or
(iii) is a de minimis Working Capital Expenditure, and (C) payments of costs of
issuance made from earnings on Gross Proceeds. For this purpose, Gross Proceeds
has the meaning set forth in Appendix One to this Certificate, except that it
does not include (i) amounts held in a bona fide debt service fund, (ii) amounts
held in a reasonably required reserve or replacement fund, and (iii) amounts
that, as of the Delivery Date, are not reasonably expected to be Gross Proceeds,
but that become Gross Proceeds after the end of the eighteen-month period.
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Required Percentage Expenditure
of Gross Proceeds Qualifying Date
----------------- ---------------
15% March __, 1998
60% September __, 1998
100% March __, 1999
The Qualifying Expenditures as of the last of the Qualifying Dates set forth
above will be treated as made if, as of the third such date, all such Gross
Proceeds have been spent for the governmental purposes of the Bonds, except for
a Reasonable Retainage not exceeding 5 percent of the Gross Proceeds as of such
date, and 100% of the Gross Proceeds are actually spent for the governmental
purposes of the Bonds within the 30-month period beginning on the Delivery Date.
A failure to satisfy the final spending requirements will be disregarded if the
Authority and the Company exercise due diligence to complete the Project and the
amount of the failure does not exceed the lesser of 3 percent of the issue price
of the Bonds or $250,000. For purposes of determining whether the above
Qualifying Expenditures have been made as of the first two Qualifying Dates, the
Authority and Company shall include any earnings reasonably expected by the
Authority and the Company as of the Delivery Date to be generated for the entire
18-month spending period. For purposes of determining whether the Qualifying
Expenditures have been made as of the third and any subsequent Qualifying Dates,
the Authority and the Company shall include only actual investment earnings
generated as of such date. In the event any of the Qualifying Expenditures are
not made as and when required, all Gross Proceeds of the Bonds shall be subject
to the Rebate Requirement set forth in Section 4(c) of this Tax Certificate. In
the event the Bonds satisfy all requirements described in this Section 4(b)
necessary to qualify for the exemption from the Rebate Requirement, the
Authority, at the request of the Company, may nevertheless subsequently elect to
disregard the available exemption from the Rebate Requirement provided in this
Section 4(b) and to satisfy the Rebate Requirement with respect to all Gross
Proceeds of the Bonds. Notwithstanding the above, Gross Proceeds of the Bonds
shall not be eligible for the exemption from the Rebate Requirement described in
this Section 4(b) unless the Rebate Requirement set forth in Section 4(d) is met
for Gross Proceeds of such issue not required to be spent within the 18-month
spending period (other than earnings on amounts in the Debt Service Fund).
(c) REBATE REQUIREMENT. The Rebate Requirement as of any Computation
Date, subject to such modifications as may be made by Treasury Regulations or
rulings, is an amount equal to the excess (if any) of the future value of all
Nonpurpose Receipts over the future value of all Nonpurpose Payments. All
future values are computed as of the Computation Date using an interest rate
equal to the Bond Yield.
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(d) FUTURE VALUE. The future value of a Nonpurpose Receipt or Payment is
calculated using the following formula:
FV = PV (1 + i)(n)
where FV = The future value of the Nonpurpose Receipt or
Payment;
PV = The amount of the Nonpurpose Receipt or Payment;
i = Bond Yield for the Computation Period divided by
the number of compounding intervals in a Bond Year;
and
n = The number of compounding intervals from the date
of the Nonpurpose Receipt or Payment through the
Computation Date.
(e) ALLOCATION AND ACCOUNTING RULES. Generally, investments are
allocated to the Bond for the period that (1) begins on the date Gross Proceeds
are allocated to the Bond and to the investment, and (2) ends on the date such
Gross Proceeds cease to be allocated to the Bond or to the investment.
(f) RELATIONSHIP TO YIELD RESTRICTION. Subject to Section 4(g) hereof,
the requirements of this Section 4 relating to the Rebate Requirement of the
Code apply to all Gross Proceeds, regardless of whether such amounts are
subject to yield restriction or are unrestricted as to yield. Thus, an amount
of Gross Proceeds may be "unrestricted as to yield" but will, notwithstanding
that characterization, be subject to the Rebate Requirement of the Code.
Similarly, an amount of Gross Proceeds may be "restricted as to yield" but
will, notwithstanding that characterization, also be subject to the Rebate
Requirement of the Code.
(g) BOND DEBT SERVICE FUND. Earnings on amounts in the Debt Service Fund
will be exempt from rebate in any calendar year in which the aggregate
investment earnings on amounts in such fund are less than $100,000. In the
event that the aggregate earnings on amounts in such fund for a calendar year
exceed $100,000, pursuant to Treasury Regulations Section 1.148-3(k) earnings
on amounts in the Debt Service Fund for such year either may or may not be
included in the calculation of the Rebate Requirement, at the election of the
Authority.
(h) COMPUTATION AND PAYMENT DATES. The Rebate Requirement, net of the
Computation Date Credit, must be computed by the Company as of each Installment
Computation Date and as of the Final Computation Date. Rebate installments of
an amount which, when added to the future value of all previous rebate payments
made with respect to the Bond, equals at least 90 percent of the Rebate
Requirement, must be paid by the Company on behalf of the Authority no later
than the date 60 days after each Installment Computation Date.
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The final rebate payment of an amount which, when added to the future value of
all previous rebate payments made with respect to the Bond, equals 100 percent
of the Rebate Requirement as of the Final Computation Date, must be paid by the
Company to the Department of Treasury no later than the date 60 days after the
Final Computation Date.
(i) PROCEDURE FOR REMITTANCE. Each payment to be made by the Company
pursuant to this Section shall be filed with the Internal Revenue Service
Center, Philadelphia, Pennsylvania 19255 on or before the date payment is due,
and shall be accompanied by Internal Revenue Service Form 8038-T, executed by
the Authority.
(j) RECORDKEEPING OBLIGATION.
(1) IN GENERAL. The Issuer shall maintain, or cause to be
maintained, records adequate to determine the Rebate Requirement with respect
to any Gross Proceeds under their control. Such records will include, but are
not necessarily limited to, information regarding the following with respect to
each and every investment acquired with Gross Proceeds:
(i) the purchase price;
(ii) nominal rate of interest;
(iii) amount of accrued interest purchased
(included in purchase price);
(iv) par or face amount;
(v) purchase date;
(vi) maturity date;
(vii) amount of original issue discount or premium
(if any);
(viii) type of Investment Property;
(ix) frequency of periodic payments;
(x) period of compounding;
(xi) date of disposition;
(xii) amount realized on the disposition
(including accrued interest);
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(xiii) market price data sufficient to establish
that the purchase price was equal to the fair
market value on the date of acquisition or,
if earlier, on the date of a binding contract
to acquire such Investment Property; and
(xiv) market price data sufficient to establish the
fair market value of any Nonpurpose
Investment as of any Computation Date, and as
of the date such Nonpurpose Investment
becomes allocable to, or ceases to be
allocable to, Gross Proceeds.
(2) RETENTION OF RECORDS. The Company agrees to retain records of
the determinations and the manner in which the Rebate Requirement was
calculated required by this Section 4 until six years after the retirement of
the last obligation of the Bonds or for such other period as the Treasury
Department may, by regulations or rulings, provide.
SECTION 5. SEGREGATION OF PROCEEDS. In order to perform the calculations
required by the Code, it is necessary to separately account for all of the
Gross Proceeds and each specific investment acquired therewith. To that end,
the Authority, the Company and the Lessee agree to establish separate
sub-accounts or to take other accounting measures in order to account fully and
with specificity for all Gross Proceeds and each investment acquired therewith.
SECTION 6. SURVIVAL ON DEFEASANCE OR OTHER PAYMENT. Notwithstanding
anything in this Tax Certificate or the Resolutions to the contrary, the
obligation of the Company to remit the Rebate Requirement to the United States
Department of Treasury and to comply with all other requirements contained in
this Tax Certificate shall survive the defeasance or payment in full of the
Bonds.
SECTION 7. PRIVATE ACTIVITY BOND REQUIREMENTS
(a) NOTICE. On July 29, 1997, and July 30, 1997, respectively, the
Authority caused to be published in the Daily Journal of Commerce and the
Eastside Journal, notices of a public hearing to be held by the Authority
regarding issuance of the Bonds to finance the costs of the Project and
certain related expenses.
(b) HEARING. On August 13, 1997, the Authority held the
aforementioned public hearing. At this hearing, all interested persons were
invited and given an opportunity to comment upon the nature and location of
the facilities comprising the Project and the financing thereof with the
proceeds derived from the sale of the Bonds.
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(c) APPROVAL BY APPLICABLE ELECTED REPRESENTATIVE. Following the
hearing, and pursuant to Section 147(f) of the Code, the Governor of the State,
being the "applicable elected representative" of the Authority within the
meaning of Section 147(f)(2)(E) of the Code, approved the issuance of
$1,500,000.00 aggregate principal amount of Bonds for the purpose of financing
the costs of the Project and certain related costs.
(d) OFFICIAL ACTION. The Authority represents that on December 10,
1996 and September 10, 1997, the Authority adopted its resolutions (the
"INDUCEMENT RESOLUTIONS") stating its findings as to the public benefits of the
Project and its intention to issue its industrial development revenue bonds to
assist in the financing of the Project. The Inducement Resolutions state the
Authority's intent to issue revenue bonds for the purpose of financing the
Project. The Inducement Resolutions were intended to constitute a declaration
of official intent by the Authority within the meaning of Sections 1.1150-2 and
1.103-8(a)(5) of the Treasury Regulations.
(e) VOLUME CAP. The Authority and the Company represent that the
Bond is subject to the private activity bond volume cap requirements of Section
146 of the Code. The Lieutenant Governor of the State of Washington has
confirmed allocation of the 1997 private activity volume cap in the amount of
$1,500,000.00 for the Project.
(f) COSTS OF ISSUANCE. The Authority and the Company represent that
no more than 2% of each draw of Sale Proceeds of the Bonds of the proceeds of
the Bond will be used directly or indirectly to pay Costs of Issuance.
(g) PROHIBITED FACILITIES. The Authority and the Company represent
that none of the proceeds of the Bond will be used to finance any airplane,
skybox or other private luxury box, health club facility, facility primarily
used for gambling, store the principal business of which is the sale of
alcoholic beverages for consumption off premises, private or commercial golf
course, country club, massage parlor, tennis club, skating facility (including
roller skating, skate board and ice skating), racquet sports facility
(including any handball or racquet ball court), hot tub facility, suntan
facility, race track, automobile sales or service facility, retail food or
beverage facility or entertainment facility.
(h) NO REFUNDING BONDS. The Authority and the Company represent that
none of the proceeds of the Bond will be used (directly or indirectly) to pay
any principal on, interest of or call premium on any bonds or obligations of
the Authority or the Company.
(i) ECONOMIC LIFE OF THE PROJECT. The Company represents that the
average reasonably expected economic life of the Project is at least _____
years. The weighted average maturity of the Bonds is _____ years. The weighted
average maturity of the Bonds therefore does not exceed 120% of the average
reasonably expected economic life of the Project. For this purpose, land
represents less than twenty-five percent (25%) of the proceeds of the Bond
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18
and, therefore, was not taken into account in determining the average economic
life of the Project financed with the proceeds of the Bonds.
(j) ACQUISITION OF LAND. The Authority and the Company represent
that no more than 25% of the Sale Proceeds of the Bonds and the investment
earnings thereon will be used, directly or indirectly, to finance the
acquisition of land or any interest therein.
(k) ACQUISITION OF EXISTING PROPERTY. The Company represents that no
property (or any interest therein) will be acquired by the Company with
proceeds of the Bonds unless the first use of such property was pursuant to
such acquisition.
(l) OWNERSHIP. The Company represents, warrants and covenants that
the Project is and will be owned for federal tax purposes exclusively by the
Company. The portion of the Project financed with proceeds of the Bond is not
expected to be sold or otherwise disposed of, in whole or in part, other than
as permitted pursuant to the Loan Agreement and except due to normal wear, tear
and obsolescence, before payment in full of the Bonds.
(m) QUALIFYING FACILITIES. Substantially all (95%) of the proceeds
of the Bonds will be used to provide qualifying manufacturing facilities within
the meaning of Section 144(a) of the Code and Treasury Regulations promulgated
thereunder. All of the costs of the Project, as set forth in Exhibit C attached
hereto, were paid or incurred after December 10, 1996 and were or will be
charged to the capital accounts of land or property subject to the allowance
for depreciation for federal income tax purposes. No more than 25% of the Sale
Proceeds of the Bonds and the investment earnings thereon will be spent on
"ancillary facilities" within the meaning of Section 144(a)(12)(C) of the Code.
(n) ELECTION OF $10,000,000 LIMIT ON CAPITAL EXPENDITURES. The
Authority hereby elects to have the provisions of Section 144(a)(4) of the Code
apply to the Bond. There are no outstanding issues the proceeds of which have
been or will be used primarily with respect to facilities (i) the principal
user or users of which are or will be the same or related persons and (ii)
which are located in the incorporated municipality of Issaquah, in King County,
Washington.
(o) LIMITATION ON CAPITAL EXPENDITURES. The aggregate amount of
capital expenditures (other than those paid or reimbursed out of the proceeds
of the Bond) paid or incurred during the six-year period beginning on
September __, 1994, with respect to (a) the Project, and (b) any other property
located within the corporate limits of Issaquah, Washington (including property
moved to another location), with respect to which the Company, the Lessee or
any "related person" to the Company has been a "principal user" at any time
during the six-year period beginning on September __, 1994, will not exceed
$10,000,000. The total capital expenditures to date made within this period in
the city of Issaquah is $_______, as set forth on Exhibit , D, attached hereto.
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(p) $40,000,000 LIMITATION. As set forth in Exhibit E, attached hereto,
the Company and any "related person" to the Company (within the meaning of
Section 147(b)(3) of the Code) are not the beneficiaries of outstanding
tax-exempt governmental obligations in an amount which, together with the
face amount of the Bonds allocated to such persons, would exceed $40,000,000.
The Company will not allow any person to become a beneficiary of the Bonds if
the amount allocated to such person, together with other outstanding tax-exempt
governmental obligations allocated to such person, would exceed $40,000,000.
The Company will not become a beneficiary of other outstanding tax-exempt
governmental obligations if the amount allocated to it thereunder would cause
it to exceed such $40,000,000 limitation with respect to the Bonds.
(q) CONTIGUOUS OR INTEGRATED FACILITIES. Neither the Company nor any
"related person" to the Company (within the meaning of Section 147(b)(3) of the
Code) will be a "principal user" of any facilities that (i) are located outside
of the corporate limits of Bellevue, Washington and (ii) would be considered
"contiguous or integrated" (within the meaning of Section
1.103-10(b)(2)(ii)(e) of the Treasury Regulations) with the Project.
(r) PRINCIPAL USERS. The Company will be the exclusive owner and operator
of the Project. Accordingly the Company will be the only "principal users" of
the Project. For purposes of this Tax Certificate, the term "principal user"
has the meaning ascribed thereto for purposes of Section 103(b)(6)(C) of the
Internal Revenue Code of 1954, as amended (the "1954 CODE") and the final and
proposed Treasury Regulations promulgated thereunder.
SECTION 8. AMENDMENTS. Notwithstanding any other provision herein, the
covenants and obligations contained herein may be and shall be deemed modified
to the extent the Authority secures a written opinion of Bond Counsel that any
action required hereunder is no longer required or that some further action is
required in order to maintain the exclusion of the interest component payable on
the Bond from gross income for purposed of Federal income taxation.
SECTION 9. SUPPLEMENTATION OF THIS CERTIFICATE. The Authority understands
the need to supplement this Tax Certificate periodically to reflect further
developments in the Federal income tax laws governing the exclusion from gross
income for
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Federal income tax purposes of the interest component payable on the Bond and
will periodically seek the advice of Bond Counsel as to the propriety of
seeking the review of and supplements to this Tax Certificate from Bond
Counsel.
Date: September __, 1997 WASHINGTON ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
By:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chair
INTRACEL CORPORATION
By:
--------------------------------
Title:
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16 - Tax Certificate