98-313 •
RESOLUTION NO. 98-313
RESOLUTION AUTHORIZING THE ISSUANCE AND SALE BY THE CITY OF ELGIN,
TLT INOIS OF NOT TO EXCEED $1,200,000 REVENUE BONDS, SERIES 1998 (SL` LVIT
SCHOOL PROJECT) FOR THE PURPOSE OF FINANCING ALL OR A PORTION OF THE
COSTS OF THE CONSTRUCTION AND EQUIPPING OF AN ADDITION TO A SCHOOL
FACILITY LOCATED N ELGIN, IT INOIS, FOR THE BENEFIT OF ST.INLVIDLT SCHOOL,
INC. (THE "CORPORATION"); AUTHORIZING THE EXECUTION AND DELIVERY OF AN
INDENTURE OF TRUST TO SECURE THE BONDS, A LOAN AGREEMENT UNDER
WHICH THE PROCEEDS OF THE BONDS WILL BE LOANED TO THE CORPORATION,
AND A TAX EXEMPTION CERTIFICA.a. AND AGREEMENT PERTAINING TO THE TAX
EXEMPTION OF THE BONDS;APPROVING CERTAIN OTHER AGREEMENTS; AND
RELATED MATTERS (the 'Resolution")
WHEREAS, the City of Elgin, Illinois (the "Issuer"), is a municipal corporation and home
rule unit of government duly organized and existing under the Constitution and laws of the State
of Illinois and is authorized pursuant to its powers as a home rule unit of government as set forth
in Article VII, Section 6 of the Constitution of the State of Illinois to issue its revenue bonds to
defray the cost of acquisition, construction and equipping of a project in order to relieve
conditions of unemployment, maintain existing levels of employment and encourage the increase
of industry and commerce in the State of Illinois, and
WHEREAS, the Issuer has determined it necessary and advisable to finance the costs of
construction and equipping of an addition to a school building (the "Project") owned and
operated by Summit School, Inc. (the "Corporation") located on the Corporation's campus at
333 West River Road, Elgin, Illinois; and
WHEREAS, the Issuer has now determined that it is necessary and in the public interest
for the Issuer to issue its Revenue Bonds, Series 1998 (Summit School Project) (the `Bonds") in
an aggregate principal amount not to exceed$1,200,000 to pay costs of the Project; and
WHEREAS, the City Council is the elected legislative body of the Issuer and is an
applicable elected representative required to approve the issuance of the Bonds within the
meaning of Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"); and
1
WHEREAS, notice of a public hearing with respect to the proposed issuance of the Bonds
was published on November 12, 1998, in the Courier News, a newspaper of general circulation
in the City of Elgin, Illinois; and
WHEREAS, on December 2, 1998, a public hearing was held with respect to the Project
and the proposed issuance of the Bonds, at which hearing all interested persons were given an
opportunity to appear and be heard, pursuant to the requirements of Section 147(f) of the Code;
and
WHEREAS, it is necessary and desirable that the Issuer and the Corporation enter into a
Loan Agreement (the "Loan Agreement"), a proposed form of which is before the City Council
at this meeting whereby the Issuer will loan the proceeds of the Bonds to the Corporation in
order to finance costs of the Project, and the Corporation will agree to make payments sufficient
to provide for the payment of principal and purchase price of, premium, if any, and interest on
and other amounts payable on the Bonds, as and when the same become due and payable; and
WHEREAS, it is necessary and desirable that the Bonds be issued under and secured by,
an Indenture of Trust (the "Indenture"), a proposed form of which is before the City Council at
this meeting, between the Issuer and American National Bank and Trust Company of Chicago,
Chicago, Illinois, as trustee (the "Trustee"); and
WHEREAS, it is necessary and desirable for the Issuer, the Corporation and the Trustee to
enter into a Tax Exemption Certificate and Agreement, to be dated the date of issuance of the
Bonds (the "Tax Agreement") in substantially the form of which is before the City Council at
this meeting, governing the investment of the gross proceeds of the Bonds and certain other
matters relating to the federal tax exemption of interest on the Bonds:
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NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGLN,
III INO'S, AS FOLLOWS:
Section 1. Pursuant to its home rule powers, the financing of the costs of the Project
through the issuance and sale of the Bonds in accordance with the terms of the Loan Agreement
and the Indenture is hereby authorized and approved. The use of the proceeds of the Bonds to
finance costs of the Project are in furtherance of the public purposes of the Issuer.
Section 2. The Indenture, in substantially the form presented at this meeting and on file
with the City Clerk and containing substantially the terms and provisions set forth therein, is
hereby authorized, approved and confirmed, and the form, terms and provisions of the Indenture
are hereby approved, with such changes and revisions therein as shall be approved by the officers
of the Issuer executing and attesting the same, their signatures thereon to constitute conclusive
evidence of such approval, and the Mayor or the Mayor Pro Tern and the City Clerk or the
Assistant City Clerk of the Issuer are hereby authorized and directed to execute, attest, seal and
deliver the Indenture.
Section 3. The Loan Agreement, in substantially the form presented at this meeting
and on file with the City Clerk and containing substantially the terms and provisions (including
repayment provisions) set forth therein, is hereby authorized, approved and confirmed, and the
form, terms and provisions of the Loan Agreement are hereby approved, with such changes and
revisions therein as shall be approved by the officers of the Issuer executing and attesting the
same, their signatures thereon to constitute conclusive evidence of such approval, and the Mayor
or the Mayor Pro Tern and the City Clerk or the Assistant City Clerk of the Issuer are hereby
authorized and directed to execute, attest, seal and deliver the Loan Agreement.
Section 4. The Tax Agreement in substantially the form presented at this meeting and
on file with the City Clerk and containing substantially the terms and provisions set forth therein,
is hereby authorized, approved, and confirmed, and the form, terms and provisions of the Tax
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Agreement are hereby approved with such changes and revisions therein as shall be approved by
the officer of the Issuer executing the same, her signature thereon to constitute conclusive
evidence of such approval, and the Mayor or Mayor Pro Tern are hereby authorized and directed
to execute and deliver the Tax Agreement.
Section S. The Mayor and the Mayor Pro Tern of the Issuer are hereby authorized,
empowered and directed to cause to be prepared an issue of not to exceed $1,200,000 aggregate
principal amount of the Bonds of the Issuer, bearing interest at the Adjusted Rate (as such term is
defined in the Indenture).
The Bonds shall be designated "City of Elgin, Illinois Revenue Bonds, Series 1998
(Summit School Project)." The Bonds shall be issued in a single bond in the amount of the
entire principal amount of the Bonds. The Bonds shall be dated the date of their initial issuance
and delivery, shall mature no later than December 1, 2028, shall be in fully registered form, shall
be subject to optional and mandatory redemption and optional and mandatory tender in
accordance with the terms and provisions of the Indenture, and shall have such other terms and
provisions as specified in the Indenture to be included therein. The Bonds shall be executed in
the name of the Issuer with the manual or facsimile signature of the Mayor or the Mayor Pro
Tern of the Issuer and attested with the manual or facsimile signature of the City Clerk or the
Assistant City Clerk of the Issuer, and the seal of the Issuer shall be affixed thereto or imprinted
thereon.
Section 6. The Bonds and interest thereon shall be limited obligations of the Issuer,
payable solely out of the revenue and receipts derived by the Issuer pursuant thereto as described
in the Loan Agreement and funds pledged under the Indenture. The Bonds shall not in any
respect be a general obligation of the Issuer, nor shall they be payable in any manner from funds
of the Issuer raised by taxation. The Bonds do not constitute in any respect an indebtedness of
-4-
the Issuer or loan or credit thereof within the meaning of any constitutional or statutory
provision. No holder of any Bond has the right to compel any exercise of the taxing power of the
Issuer to pay the Bonds, the interest or premium, if any, thereon. It shall be plainly stated on the
face of each Bond that it has been issued under the Issuer's home rule authority and it does not
constitute an indebtedness of the Issuer or a loan or credit thereof within the meaning of any
constitutional or statutory provision. Nothing in this Resolution, the Indenture, the Loan
Agreement, the tax agreement or the form of the Bonds, or in any document or agreement
required hereby and thereby, shall be construed as an obligation or commitment by the Issuer to
expend any of its funds other than (i) the proceeds derived from the sale of the Bonds, (ii) the
revenues and receipts derived from and described in the Loan Agreement and the Indenture, and
(iii) any monies arising out of the investment or reinvestment of said proceeds, income, revenue,
receipts or monies.
Section 7. The form of Bond submitted to this meeting, subject to appropriate insertion
and revision in order to comply with the provisions of the Indenture, be, and the same hereby is,
approved, and when Bonds in such form shall be executed on behalf of the Issuer in the manner
contemplated by the Indenture and this Resolution, they shall represent the approved definitive
form of the Bonds of the Issuer.
Section 8. The Issuer is hereby authorized, empowered and directed to issue and sell to
the First National Bank of Chicago, the entire aggregate principal amount of the Bonds, at a price
of 100% of the principal amount thereof.
Section 9. The Mayor or the Mayor Pro Tem and the City Clerk or the Assistant City
Clerk of the Issuer are hereby authorized and directed to execute, attest, seal and deliver any and
all documents and do any and all things deemed necessary to effect the issuance and sale of the
Bonds, the execution and delivery of the Loan Agreement, the Indenture and the Tax Agreement
-5-
and to carry out the intent and purposes of this Resolution, including the preambles hereto. In
the absence of the Mayor, the Mayor Pro Tern, the City Clerk or the Assistant City Clerk, any
officer of the Issuer so authorized by law may perform any of the actions required hereby in lieu
of the Mayor, the Mayor Pro Tern, the City Clerk and the Assistant City Clerk, as the case may
be.
Section 10. This Resolution shall constitute the approval by the City Council of the
Issuer of the issuance of the Bonds pursuant to Section 147(f) of the Internal Revenue Code of
1986.
Section 11. Chapman and Cutler, Chicago, Illinois, is hereby authorized to act as bond
counsel in connection with the issuance of the Bonds.
Section 12. No member of the City Council of the Issuer has any pecuniary interest in
any employment, financing, agreement or other contract made in connection with the Bonds, the
Project, the Corporation or any affiliated entity.
Section 13. This Resolution is contingent upon the Bonds being issued on or before
December 31, 1998.
Section 14. All acts of the officials of the Issuer which are in conformity with the
purposes and intent of this Resolution and in furtherance of the issuance and sale of the Bonds
and the Project be, and the same hereby are, in all respects, approved and confirmed.
Section 15. After the Bonds are issued, this Resolution shall not be repealable until the
Bonds and the interest thereon shall have been fully paid, canceled and discharged.
Section 16. The provisions of this Resolution are hereby declared to be separable and if
any section, phrase or provision shall for any reason be declared to be invalid, such declaration
shall not affect the validity of the remainder of the sections, phrases and provisions.
-6-
Section 17. All ordinances, resolutions and parts thereof Ln conflict herewith are hereby
repealed to the extent of such conflict.
Section 18. This Resolution shall become effective immediately upon passage and all
resolutions or ordinances in conflict herewith are repealed to the extent of the conflict.
Adopted December 16, 1998.
CITY OF ELGIN, TT T INOIS
By s/ Kevin Kelly
Mayor
[SEAL]
Attest
s/ Dolonna Mecum
City Clerk
• ,roFetc
`
c, , 'ti
City of Elgin
Agenda Item No.
November 10 , 1998
TO: Mayor and Members of the City Council
FROM: Joyce A. Parker, City Manager
SUBJECT: Issuance of 501 (c) (3) Bonds - Summit School, Inc .
PURPOSE
The purpose of this memorandum is to seek the approval of the
Mayor and members of the City Council for the issuance of
501 (c) (3) bonds on behalf of Summit School, Inc .
BACKGROUND
Summit School has requested the City Council adopt an ordi-
nance authorizing the issuance of $1, 200, 000 in private
activity bonds . The proceeds of the bond issue would be used
by the school to finance the expansion of the existing school
located at 333 West River Road.
rSummit School, Inc . was established in 1968 as a nonprofit
school . The school offers learning disabled, early learning
and gifted educational programs to students at campuses in
Dundee and Elgin. The Elgin campus has approximately double
the enrollment of Dundee . An additional 80-90 students will
be accommodated as a result of the proposed expansion.
Summit School currently employs 51 people . Twenty-three are
full-time employees, of which ten live in Elgin. New job
generation is expected to be nine, with six being full-time
teachers . Increased payroll is expected to be $200 , 000 . The
average teacher salary is $40, 000 . There will be no benefit
to the City' s tax base as this is a tax exempt facility.
Under the federal tax code, the City may issue non-obligation
"conduit" bonds for the benefit of any corporation, such as
Summit School, which has obtained 501 (c) (3) tax exempt status
from the Internal Revenue Service . Bonds issued by the City
on behalf of 501 (c) (3) corporations are substantially identi-
cal to the industrial development revenue bonds ( "IRS ' s" ) that
have been used to finance industrial facilities in Elgin (with
the exception that these bonds do not affect our volume cap) .
Like IRB ' s, the City would be a "conduit" issuer, and the
repayment of the bonds would not be an obligation of the City.
r According to the structure of the transaction, American
National, and not the City or the bondholders, takes the full
and complete credit risk of nonpayment of the bonds by Summit
School . The bonds do not constitute indebtedness of the City,
Issuance of 501 (c) (3) Bonds - Summit School
November 10, 1998
Page 2
and the school will indemnify the City in connection with the
bond issuance . Due to the fact that the City issues the
bonds, they are considered tax exempt and therefore carry a
lower interest rate .
Speer Financial, Inc . , the City' s financial advisor, has
reviewed the Summit School ' s application for 501 (c) (3) financ-
ing as well as the past five years ' financial audits . They
recommend that the City proceed with the financing. Speer ' s
report is included with this memorandum.
If the Mayor and City Council choose to proceed with the bond
sale, a public hearing should be set for December 2 , 1998 .
COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED
None .
f& FINANCIAL IMPACT
Summit School has paid the $2, 500 IRB application fee . As
stated earlier, the City is not responsible for the repayment
of the bonds .
This bond sale must close in 1998 . Failure to do so would •
limit the opportunity for the City to refund $1, 200, 000 in
bonds should interest rates be low enough. Summit School and
American National have been made aware of this requirement .
VW/ LEGAL IMPACT
None .
ALTERNATIVES
Do not issue the 501 (c) (3) bonds, resulting in Summit School
securing alternative financing which is not tax exempt and
carries a higher interest rate .
RECOMMENDATION
It is recommended that the Mayor and members of the City
Council approve the issuance of $1, 200, 000 in Adjustable Rate
Demand Revenue Bonds, Series 1998 (Summit School Project) .
/) :-_,Ae.A—
C'e-a.
pectfully submi ed,
.
Parker
City Manager
amp
Attachment
PUBLIC FINANCE CONSULTANTS SINCE 1954
ir SPEER FINANCIAL INC.
KEVIN W.McCANNA DAVID F.PHILLIPS LARRY P.BURGER DANIEL D.FORBES BARBARA L.CHEVALIER
PRESIDENT SR.VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT
October 26, 1998
The Honorable Kevin B. Kelly and
Members of City Council
City of Elgin
150 Dexter Court
Elgin, IL 60120
Dear Mayor and Council:
Pursuant to the request of the City, Speer Financial, Inc. has reviewed the 501 (c)(3)tax exempt
entity bond application and supporting documentation, including audited financial reviews, of
Summit School. The audits are on a year ending August 31'basis and are prepared by Bass,
Solomon & Dowell, LLP of Palatine. Summit is applying for City approval of$1,200,000 of bonds.
The purchaser is expected to be American National Bank of Chicago. Bond counsel is Chapman
and Cutler. Proceeds will be used to expand the existing school at 333 W. River Road. The
project consists of estimated construction costs of$1,088,000, equipment cost of$50,000,
architectural fees of$61,000,and legal,financing, and other costs estimated at$80,000.
Summit School, Inc.was established in 1968 as a non-profit school. The School offers learning
disabled, early learning and gifted educational programs to students at campuses in Dundee and
Elgin. The Elgin campus has approximately double the enrollment of Dundee. The School grants
credit to individuals and school districts in the northeastern Illinois area.
Some 51 people currently work for Summit. Of these, 23 are full time. A total of 10 live in Elgin.
New job generation is expected to be nine,with six being full time teachers. Increased payroll is
expected to be$200,000. The average teacher salary is$40,000. There will be no benefit to the
City's tax base as this is a tax exempt facility.
Financial Analysis
Summit Schools is funded 93% by tuition. Overall revenues have been relatively stable, with a six
year range of$3,113,113 to$3,543,316, averaging$3,290,000. Expenses have ranged from
$3,161,835 to$3,332,295, averaging$3,265,000. Surplus over the past three years has
averaged $92,000.
The School's balance sheet is healthy. Highlights are cash and securities in excess of$500,000
for the past two years, reasonable accounts receivable and payable, mortgage notes on the two
existing facilities of less than $500,000 and significant property ownership.
r
SUITE 3435.55 EAST MONROE STREET•CHICAGO,ILLINOIS 60603•(312)346-3700•FAX(312)346-8833
SUITE 500.531 COMMERCIAL STREET•WATERLOO,IOWA 50701•(319)291-2077•FAX(319)291-6787
SPEER FINANCIAL, INC.
The$1,200,000 of bonds are to be amortized over 15 years. The bonds will pay interest at a
floating rate.American National Bank is expected to purchase and hold the bonds. The new debt
is expected to be secured by a mortgage on the Elgin facility. Average 1996-1998 financial
results do not provide coverage of the loan and increased operating costs. Using an average rate
of 7%for the life of the borrowing, the annual debt service is some$130,000. Increased revenues
from the expansion are expected to pay these costs.
Conclusion
In summary,we find the School, based on its audited financial information, to be financially viable.
The project will bring new jobs to Elgin. We find this a worthwhile project and reasonable credit
and recommend that the City proceed with the inducement resolution. We would be pleased to
discuss this with you.
Sincerely,
Kevin W. McCanna
President
KWM/mj
r
r
"") "") "I .
ALL FUNDS
REVENUES AND EXPENSES
AUDITED YEARS ENDING AUGUST 31
Unaudited
1993 1994 1995 1996 1997 1998
REVENUES
Contributions $ 293,145 $ 83,411 $ 176,353 $ 78,443 $ 86,684 $ 76,399
Tuition 2,603,411 2,854,075 3,176,861 2,978,194 3,108,688 3,182,183
Other 216.557 223.298 190.102 135.591 135.061 140.833
Total Revenues $3,113,113 $3,160,784 $3,543,316 $3,192,228 $3,330,433 $3,399,415
EXPENSES
Program Services
Disabled $1,825,817 $1,858,674 $1,818,936 $1,779,808 $1,800,314 DETAILS
Gifted 520,268 550,667 420,626 210,156 204,681 NOT
Preschool 753,430 686,808 938,196 1,013,334 1,041,448 COMPARABLE
Other 5.905 2.780 0 0 0
Total Program
Services $3,105,420 $3,098,929 $3,177,758 $3,003,298 $3,046,443
Supporting
Services 204.458 203.127 154.537 158.537 142.697
Total Expenses $3,309,878 $3,302,056 $3,332,295 $3,161,835 $3,189,140 $3,295,639
Excess
(Deficiency)of
Revenues Over
(Under)
Expenses $ (196,765) $ (141,272) $ 211,021 $ 30,393 $ 141,293 $ 103,776
ALL FUNDS
BALANCE SHEET
AUDITED AS OF AUGUST 31
Unaudited
ASSETS 1993 1994 1995 1996 1997 1998
Cash and Cash
Equivalents $ 227,895 $ 152,210 $ 129,417 $ 169,097 $ 461,477 $ 559,999
Accounts Receivable 152,120 306,270 247,345 161,076 185,998 148,068
Marketable Securities 89,498 101,833 65,541 106,521 123,363 0
Land, Building and
Equipment, Net 3,430,768 3,352,067 3,340,084 3,247,924 3,124,047 3,126,842
Other 43.380 19.954 71.206 41.903 44.845 30.081
Total Assets $3.943.661 $3.932.334 $3.853.593 $3.726.521 $3.939.730 $3.864.990
LIABILITIES AND FUND BALANCES
Liabilities
Accounts Payable $ 104,231 $ 57,887 $ 62,052 $ 45,165 $ 80,082 $ 34,853
Notes Payable 812,756 921,025 627,237 583,611 533,778 482,532
Deferred Revenue 581,046 645,728 676,513 461,400 548,063 523,709
Accruals 88,421 98,238 68,961 58,680 58,849 44,079
Other 9.037 2.559 912 0 0 0
Total Liabilities $1,595,491 $1,725,437 $1,435,675 $1,148,856 $1,220,772 $1,085,173
Fund Balances
Expended $2,617,491 $2,425,076 $2,708,696 $2,468,070 $2,597,056 $2,657,915
Undesignated (269,321) (218,179) (290,778) 0 0 0
Unrestricted 0 0 0 109.595 121.902 121.902
Total Fund Balances $2,348,170 $2,206,897 $2,417,918 $2,577,665 $2,718,958 $2,779,817
Total Liabilities
and Fund Balance $3.943.661 $3.932.334 $3.853.593 $3.726.521 $3.939.730 $3.864.990
,
City of Elgin, Kane and Cook Counties, Illinois
Summit School Issue(501c3 Bonds)
DEBT SERVICE SCHEDULE
Date Principal Coupon Interest Total P+I
1/01/1999 - - - -
1/01/2000 50,000.00 7.000% 84,000.00 134,000.00
1/01/2001 50,000.00 7.000% 80,500.00 130,500.00
1/01/2002 55,000.00 7.000% 77,000.00 132,000.00
1/01/2003 60,000.00 7.000% 73,150.00 133,150.00
1/01/2004 65,000.00 7.000% 68,950.00 133,950.00
1/01/2005 65,000.00 7.000% 64,400.00 129,400.00
1/01/2006 70,000.00 7.000% 59,850.00 129,850.00
1/01/2007 75,000.00 7.000% 54,950.00 129,950.00
1/01/2008 80,000.00 7.000% 49,700.00 129,700.00
1/01/2009 90,000.00 7.000% 44,100.00 134,100.00
1/01/2010 95,000.00 7.000% 37,800.00 132,800.00
1/01/2011 100,000.00 7.000% 31,150.00 131,150.00
1/01/2012 105,000.00 7.000% 24,150.00 129,150.00
1/01/2013 115,000.00 7.000% 16,800.00 131,800.00
1/01/2014 125,000.00 7.000% 8,750.00 133,750.00
Total 1,200,000.00 - 775,250.00 1,975,250.00
rillik YIELD STATISTICS
Bond Year Dollars $11,075.00
Average Life 9.229 Years
Average Coupon 7.0000000%
Net Interest Cost(NIC) 7.0000000%
True Interest Cost(TIC) 6.9821310%
Bond Yield for Arbitrage Purposes 6.9821310%
All Inclusive Cost(AIC) 6.9821310%
IRS FORM 8038
Net Interest Cost 7.0000000%
Weighted Average Maturity 9.229 Years
Speer Financial,Inc. File=ELGIN-Summit-SINGLE PURPOSE
Public Finance Consultants Since 1954 10/21/1998 2:53 PM
,rilk
Page 1
r •
CITY OF ELGIN
APPLICATION FOR INDUSTRIAL DEVELOPMENT BOND FINANCING
Business Name: Summit School, Inc
Address: 333 W. River Road
City, State: Elgin, IL 60123
Representative: Joseph Scime
Telephone: (847) 468-0490
Federal Tax ID Number: 36-2660101
Amount of Proposed Bond Issue: 1,200,000.00
Name of Bond Purchaser: American National Bank & Trust Co. of Chicago
Form of Organization of Borrower:501 (c)(3)Not for Profit Corporation
Name of Bond Counsel: Chapman and Cutler
Chicago, IL
Name of Corporate Lawyer: Robert Trevarthen
Proposed Uses of Proceeds: To build an addition to the existing school. Located
at 333 W. River Road in Elgin. The addition will include a multi-purpose room with a
gymnasium and a media center for computers, research library, and media arts.
r
Is proposal a new facility? No
•
Is the proposal Industrial/Commercial/Retail? School
What is the principal product of the company? Education for children and their
families from birth through eighth
grade.
What are the proposed financing arrangements? $1.2m Revenue Bond Tax-Exempt.
Bond will be purchased by American
National Bank.
Give the approximate dates of construction: November, 1998 - July, 1999.
ECONOMIC
A. Project Costs •
1. Construction Costs $1,088,136.00
2. Financing Cost • $76,500.00
3. Equipment Costs $50,000.00
4. Land $-
5. Architectural $61,864.00
6. Legal $3,000.00
7. Other
B. Financial Stability (provide the following)
1. Prospectus n/a
2. Reports to stockholders n/a
3. 5 years independently audited financial statement see attached
4. Most recent interim financial report see attached
5. Dun&Bradstreet report n/a
6. Name and address of project lender American National
Bank-Elgin
John Ostrem
24 E. Chicago Street
3rd Floor
Elgin, IL 60120
7. Commitment letter for financing see attached
(including length of commitment)
8. Name, address and contact of bond purchaser- American National
Bank- Chicago
Elizabeth Nelson
120 South LaSalle St.
Chicago, IL 60603
Ph. 312-661-6047
9. Estimated tax yield to City None
10. Estimated increased payroll • $200,000
11. Estimated assessed value of additional and total
real property- Tax Exempt
12. Number of years in business 30 years
Is any litigation pending by or against company? NO
Type of Product: School serving families and children from birth-
through eighth grade.
Description of Product: Provide educational programs for infants toddlers,
preschool, and elementary K-8.
Market Area Served: Elgin and surrounding area.
C. Employment (Elgin Campus)
1. Number of Current Employees:
Full Time: 22
Part Time: 28
(Pk
Managers: 1
Employees living in Elgin: 10
2. Number of new jobs created/retained (please specify)
•
a. Permanent Full Time: 6_
b. Permanent Part Time: 3
c. Seasonal/Temporary:
3. Type of new jobs created/retained
a. Clerical: 3
b. Labor: 6 teachers
c. Supervisory:
d. Managerial:
4. Average Employee Salary (present): $40,000
5. Yearly Payroll (present): $1,075,300
6. Employee Skills Required: Bachelors degree with teacher certificate for
instructional personnel and high school with computer skills for clerical personnel.
D. Environmental
A. School Facilities •
1. Location: 333 W. River Road
2. Land Size: 7 acres
Square Feet
3. Present Building 32.000
Addition: 8,820 sq.ft.
4. Land Coverage:
B. Pollution
1. Water/Sewer effluent X domestic
industrial
unusual wastes
2. Air/foreign or toxic substances: None
3. Odors: None
•
4. Glare: None
5. Noise: None
6. Pollution devices required: None
7. According to City Engineer, are there adequate number of Water
and Sewer Connection to the site?
X Yes _ No
E. Community Services
A. Traffic
1. Number of Vehicles into Site per day:
Trucks: 3 Cars: 250
Other Vehicles:
2. Ability to Street to Carry Additional Land
a. Access - sketch of ingress/egress patterns
b. Safety- plans to facilitate any substantial traffic
movement
• B. Utility Requirements
1. Water used per day: same gallons
Fire Protection adequate? Yes
Additional water or sewer requirements: (i.e., pretreatment,
extensions) None
2. Type of Sewage: --
3. A. Projected annual electrical usage:
Currently 793.110 KWH Projected 890.000
B. Projected annual gas usage:
0 therms
C. Schools
Will you project significantly increase school
enrollment?
This addition would accommodate 80 additional
students.
CIVIC AWARENESS
1. Provide evidence of past civic activity: The School opened in 1991. Since
that time we have become members of the Elgin Chamber of Commerce,
participate in United Way Campaign, offer DARE program to our students in
cooperation with Elgin Police Department. Programs offered in collaboration with
school districts. Worked with Easter Seal and both hospitals.
2. How will your company support local civic activities?
We will continue with current efforts and continue to build partnerships.
•
All supportive financial documents and information required by the city of Elgin must be
supplied before application will be considered by the City Council of the City of Elgin..
We agr- - . call the conditions as specified in applicable city ordinances.
Si e•—1..//� Signed: dr
gn _ gn �
Title: '65,
Rpt-d C' co Title: Res/ad /C D
Chief Corporate Officer Chief Financial Officer
Date: ea 2 /111
r
Law Offices of
CHAPMAN AND CUTLER
Theodore S. Chapman 111 West Monroe Street, Chicago, Illinois 60603-4080 2 North Central Avenue
1877-1943 TWX 910-221-2103 Telex 206281 Phoenix, Arizona 85004
Henry E. Cutler 701-2361 (602)256-4060
FAX312
1879-1959 ( )
Telephone (312) 845-3000
50 South Main Street
Salt Lake City, Utah 84144
(801)533-0066
Frederick M.Snow
312 845-3779
November 19, 1998
VIA FEDEX AND MESSENGER
TO THE PERSONS LISTED ON
THE ATTACHED DISTRIBUTION LIST
Re: $1,200,000 City of Elgin, Illinois
Revenue Bonds Series 1998
(Summit School Project)
Ladies/Gentlemen:
Enclosed are first drafts of the Indenture, Loan Agreement, Mortgage and Tax Agreement
for the Summit School Project for your review. Please respond with any questions/comments to
the documents before Wednesday of next week (November 25th).
Also to permit us to transmit documents to you via the Internet, please fax or phone us
with your email address. If you prefer to receive hard copies of documents, you may so indicate.
Very truly yours,
CHAPMAN AND CUTLER
By // �■
Frederi•k M. Sno
FMS:an
Enclosures
836651.01.01
2055523
$1,200,000 CITY OF ELGIN, ILLINOIS REVENUE BONDS
SERIES 1998 (SUMMIT SCHOOL PROJECT)
DISTRIBUTION LIST
BORROWER ISSUER
Summit School City of Elgin
333 West River Road 150 Dexter Court
Elgin,Illinois 60123 Elgin,Illinois 60120
Joseph Scime Jim Nowicki,Fiscal Services Manager
(joes@summitelgin.com) ( .com)
ph: (847)468-0490 ph: (847)931-5625
fax: (847)468-9392 fax: (847)931-5622
Dolonna Mecum,City Clerk
BORROWER'S COUNSEL ( .com)
Ottosen, Trevarthen, Britz &Dooley, Ltd. ph: (847) 931-5660
300 South County Farm Road, 3rd Floor fax: (847) 931-5665
Wheaton, Illinois 60187 William Cogley,Esq.
Robert W. Trevarthen,Esq. ( .com)
( .com) ph: (847)931-5659
ph: (630) 682-0085 fax: (847) 931-5665
fax: (630) 682-0788 Raymond H. Moller
( .com)
BOND AND BANK COUNSEL ph: (847) 931-6749
Chapman and Cutler fax: (847) 931-5610
111 West Monroe Street
Chicago, Illinois 60603 LENDER
Matthew Lewin, Esq. American National Bank and
(lewin@chapman.com) Trust Company of Chicago
ph: (312) 845-3778 24 East Chicago Street
fax: (312) 516-1978 Elgin,Illinois 60120
Frederick M. Snow,Esq. John Ostrem
(snow @ chapman.com) ( .com)
ph: (312) 845-3779 ph: (847) 622-2268
fax: (312) 516-1979 fax: (847) 622 2288
120 South LaSalle Street
FISCAL AGENT Chicago,Illinois 60603
American National Bank and Elizabeth Nelson
Trust Company of Chicago .com)
33 North LaSalle Street ph: (312)661-6047
Chicago,Illinois 60690 fax: (312) 661-7352
Melissa Wilman
( .com) TRUSTEE
ph: (312)661-5950 American National Bank and
fax: (312)661-6491 Trust Company of Chicago
33 North LaSalle Street
Chicago, Illinois 60690
( .com)
ph: (312) 661-
fax: (312) 661-
828746.01.04
2055523
LOAN AGREEMENT
dated as of December 1, 1998
between
CITY OF ELGIN, ILLINOIS
and
SUMMIT SCHOOL, INC.
$1,200,000 City of Elgin, Illinois Revenue Bonds
Series 1998 (Summit School Project)
836458.01.02
2055523/FMS/11/19/98
LOAN AGREEMENT
TABLE OF CONTENTS
SECTION HEADING PAGE
ARTICLE I DEFINITIONS 1
ARTICLE II REPRESENTATIONS 2
Section 2.1. Representations of Issuer 2
Section 2.2. Representations of Borrower 3
ARTICLE III ISSUANCE OF BONDS; THE PROJECT 4
Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds 4
Section 3.2. Acquisition and Construction of Project 4
Section 3.3. Disbursements from the Construction Fund 5
Section 3.4. Establishment of Completion Date; Obligation of Borrower
to Complete 6
Section 3.5. Investment of Moneys 8
Section 3.6. Operation of the Project 8
ARTICLE IV REPAYMENT 9
Section 4.1. Repayment 9
Section 4.2. Additional Payments 9
Section 4.3. Prepayments 10
Section 4.4. Obligations of Borrower Unconditional 10
ARTICLE V OTHER BORROWER AGREEMENTS 10
Section 5.1. Maintenance of Existence 10
Section 5.2. Qualification in State 10
Section 5.3. Arbitrage 10
Section 5.4. Borrower's Obligation with Respect to Exclusion of Interest
Paid on the Bonds 11
Section 5.5. Payment of Taxes 11
Section 5.6. Insurance 11
Section 5.7. Maintenance and Repair 12
Section 5.8. Financing Statements 12
ARTICLE VI NO RECOURSE TO ISSUER; INDEMNIFICATION 12
Section 6.1. No Recourse to Issuer 12
Section 6.2. Indemnification 12
-i-
ARTICLE VII ASSIGNMENT 13
Section 7.1. Assignment by Borrower 13
Section 7.2. Assignment by Issuer 13
ARTICLE VIII DEFAULTS AND REMEDIES 13
Section 8.1. Events of Default; Remedies 13
Section 8.2. Delay Not Waiver; Remedies 14
Section 8.3. Attorneys' Fees and Expenses 14
ARTICLE IX MISCELLANEOUS 14
Section 9.1. Notices 14
Section 9.2. Binding Effect 14
Section 9.3. Severability 14
Section 9.4. Amendments 14
Section 9.5. Right of Borrower to Perform Issuer's Agreements 14
Section 9.6. Applicable Law 14
Section 9.7. Captions; References to Sections 14
Section 9.8. Complete Agreement 15
Section 9.9. Termination 15
Section 9.10. Counterparts 16
Exhibit A—Project Description A-1
-ii-
LOAN AGREEMENT dated as of December 1, 1998, between the
CITY OF ELGIN, ILLINOIS, a municipal corporation and home rule
unit of government of the State of Illinois (the "Issuer"), and
SUMMIT SCHOOL, INC. (the "Borrower").
Pursuant to the Constitution and the laws of the State of Illinois (the "State"), and
particularly of the Issuer, as supplemented and
amended (the "Act"), the Issuer is authorized to issue its revenue bonds to finance the cost of a
"project," as defined in the Act; and
The Issuer proposes to issue its $1,200,000 Revenue Bonds, Series 1998 (Summit School
Project) pursuant to the Indenture in order to loan the proceeds of the Bonds to the Borrower, and
the Borrower desires to use the proceeds of the Bonds to finance a portion of the costs of
constructing and equipping of an addition to school facilities and related improvements (the
"Project"). The Project will be owned by the Borrower.
Accordingly, the Issuer and the Borrower hereby agree as follows:
ARTICLE I
DEFINITIONS
For all purposes of this Agreement, unless the context clearly requires otherwise, all
terms defined in Article I of the Indenture have the same meanings in this Agreement.
"Completion Date" means the date the acquisition and construction of the Project is
certified to be complete in accordance with the provisions of Section 4.4 hereof.
"Construction Period" means the period between the beginning of construction or the
Closing Date, whichever is earlier, and the Completion Date.
"Costs of the Project" means the sum of the items authorized to be paid from the
Construction Fund pursuant to the provisions of Section 3.3 hereof.
"Indenture" means the Indenture of Trust relating to the Bonds, dated as of the date of
this Agreement, between the Issuer and American National Bank and Trust Company of
Chicago, as Trustee, as such Indenture of Trust may be amended or supplemented from time to
time in accordance with its terms.
"Qualified Costs" means that portion of the Costs of the Project which are properly
chargeable to the Project's capital account for Federal income tax purposes or which would be so
chargeable either with a proper election under the Code or but for a proper election to deduct
such amount and which were incurred and paid, or are to be incurred and paid, after
, 1998. Costs of issuance of the Bonds shall not be deemed Qualified Costs.
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations of Issuer. The Issuer represents as follows:
(a) The Issuer (1) is a municipal corporation and home rule unit of
government duly organized and existing under the laws of the State, (2) has full power
and authority to enter into the transactions contemplated by this Agreement, the Tax
Exemption Certificate and Agreement and the Indenture and to carry out its obligations
under this Agreement, the Tax Exemption Certificate and Agreement and the Indenture,
including the issuance of the Bonds, (3) is not in default under any provisions of the laws
of the State and (4) by proper corporate action has duly authorized the execution and
delivery of this Agreement, the Bonds, the Tax Exemption Certificate and Agreement and
the Indenture.
(b) Under existing statutes and decisions, no taxes on income or profits are
imposed on the Issuer. The Issuer will not knowingly take or omit to take any action
reasonably within its control which action or omission would impair the exclusion of
interest paid on the Bonds from the federal gross income of the owners of the Bonds.
(c) Neither the execution and delivery by the Issuer of this Agreement, the
Indenture or the Tax Exemption Certificate and Agreement nor the consummation by the
Issuer of the transactions contemplated hereby or thereby conflicts with, will result in a
breach of or default under or will (except with respect to the lien of the Indenture) result
in the imposition of any lien on any property of the Issuer pursuant to the terms,
conditions or provisions of any statute, order, rule, regulation, agreement or instrument to
which the Issuer is a party or by which it is bound.
(d) Each of this Agreement, the Tax Exemption Certificate and Agreement
and the Indenture has been duly authorized, executed and delivered by the Issuer and
each constitutes the legal, valid and binding obligation of the Issuer enforceable against
the Issuer in accordance with its terms.
(e) There is no litigation or proceeding pending, or to the knowledge of the
Issuer threatened, against the Issuer, or to the knowledge of the Issuer affecting it, which
would adversely affect the validity of this Agreement, the Indenture, the Tax Exemption
Certificate and Agreement or the Bonds or the ability of the Issuer to comply with its
obligations under this Agreement, the Indenture, the Tax Exemption Certificate and
Agreement or the Bonds.
(f) The Issuer is not in default under any of the provisions of the laws of the
State which would affect its existence or its powers referred to in the preceding
subsection (a).
-2-
(g) The Issuer has obtained all consents of any governmental authority of the
State or the United States of America required in connection with the issuance and sale of
the Bonds and the performance of the Issuer's obligations under the Bonds, the Indenture,
this Agreement and the Tax Exemption Certificate and Agreement, provided, however,
that no representation is made concerning compliance with the Federal securities laws or
the securities or blue sky laws of the various states.
(h) The Issuer hereby finds and determines that, based on representations of
the Borrower, all requirements of the Act have been complied with and that the financing
of the Project through the issuance of the Bonds will further the public purposes of the
Act. The Project constitutes a"project" as that term is defined in the Act.
(i) No member, officer or official of the Issuer or of the corporate authorities
of the Issuer has any interest (financial, employment or other) in the Borrower or any
related entity or person, the transactions contemplated by this Agreement or in any
contract entered into in connection with the Bonds or the Project or any pecuniary interest
in any employment, financing, agreement or other contract in connection with or related
to the Bonds or the Project.
(j) The Issuer will apply the proceeds from the sale of the Bonds as specified
in the Indenture and this Agreement. So long as any of the Bonds remain outstanding
and except as may be authorized by the Indenture, the Issuer will not issue or sell any
bonds or obligations, other than the Bonds, the principal of or premium, if any, or interest
on which will be payable from the property described in the granting clause of the
Indenture.
Section 2.2. Representations of Borrower. The Borrower represents as follows:
(a) The Borrower (1) is a not-for-profit corporation duly created, validly
existing and in good standing under the laws of the State of Illinois, (2) has full legal
right, power and authority to own the Project and to enter into this Agreement, the Tax
Exemption Certificate and Agreement and the Mortgage and consummate all transactions
contemplated by this Agreement, the Tax Exemption Certificate and Agreement and the
Mortgage and (6) by proper corporate action has duly authorized the execution and
delivery of this Agreement, the Tax Exemption Certificate and Agreement and the
Mortgage.
(b) Neither the execution and delivery by the Borrower of this Agreement, the
Tax Exemption Certificate and Agreement, the Mortgage, nor the consummation by the
Borrower of the transactions contemplated hereby or thereby conflicts with, will result in
a breach of or default under or will result in the imposition of any lien on any property of
the Borrower pursuant to any statute, order, rule, regulation, agreement or instrument to
which the Borrower is a party or by which it is bound.
(c) This Agreement, the Tax Exemption Certificate and Agreement and the
Mortgage have been duly authorized, executed and delivered by the Borrower and
-3-
constitute the legal, valid and binding obligations of the Borrower in accordance with its
terms.
(d) There is no litigation or proceeding pending, or to the knowledge of the
Borrower threatened, against the Borrower which could adversely affect the validity of
this Agreement, the Tax Exemption Certificate and Agreement or the Mortgage or the
ability of the Borrower to comply with its obligations under this Agreement, the Tax
Exemption Certificate and Agreement or the Mortgage.
(e) The Project is wholly located within the school campus of the Borrower
located at 333 West River Road, Elgin, Illinois, within the corporate limits of the City of
Elgin, Illinois.
(f) The representations and warranties of the Borrower contained in the
Project Certificate are hereby incorporated by reference and shall have the same force
and effect as if fully set forth herein.
ARTICLE III
ISSUANCE OF BONDS; THE PROJECT
Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds. In order to
provide funds to finance the Cost of the Project, the Issuer agrees that it will issue under the
Indenture, sell and cause to be delivered, the Bonds, bearing interest and maturing as set forth in
the Indenture. The Issuer will thereupon cause the proceeds received from the sale of the Bonds
to be loaned to the Borrower and deposited into the Construction Fund in accordance with
Section 4.01 of the Indenture.
Section 3.2. Acquisition and Construction of Project. The Borrower hereby agrees to
provide for the acquisition and construction of the Project in accordance with this Article III,
substantially in accordance with the plans and specifications therefor prepared by it including
any and all supplements, amendments and additions (or deletions) thereto (or therefrom);
provided, however, that such other facilities and property contemplated by such supplements,
amendments, additions or deletions to the plans and specifications shall not materially impair the
effective use or character of the Project as contemplated by this Agreement or disqualify the
Project as a "project" within the meaning of the Act or result in the interest on any Bonds
becoming includable in the gross income of the owners of the Bonds for Federal income tax
purposes.
In the event that Exhibit A hereto is to be amended or supplemented in accordance with
the provisions of Section 10.01 of the Indenture, the Issuer will enter into, and will instruct the
Trustee to consent to, an amendment of or supplement to Exhibit A hereto upon receipt of:
(i) a copy of the proposed form of amendment or supplement to Exhibit A
hereto; and
-4-
(ii) the written approving Opinion of Tax Counsel to the effect that such
amendment or supplement will not have the effect of disqualifying the Project as a
"project" within the meaning of the Act or result in the interest on any Bonds becoming
includable in the gross income of the owners of the Bonds for Federal income tax
purposes.
Section 3.3. Disbursements from the Construction Fund. The Issuer authorizes and
directs the Trustee upon compliance with Section 4.07 of the Indenture to disburse the moneys in
the Construction Fund to or on behalf of the Borrower for the following purposes:
(a) Payment to the Borrower of such amounts, if any, as shall be necessary to
reimburse the Borrower for advances and payments made by it prior to or after the
delivery of the Bonds for expenditures in connection with the preparation of plans and
specifications for the Project (including any preliminary study or planning of the Project
or any aspect thereof) and the acquisition and construction of the Project.
(b) Payment of the initial or acceptance fee of the Trustee, fees of the Trustee
and any paying agent incurred during the Construction Period, fees relating to the
underwriting or placement of the Bonds, legal, financial and accounting fees and
expenses, printing and engraving costs incurred in connection with the authorization, sale
and issuance of the Bonds, the execution and filing of the Indenture and the preparation
of all other documents in connection therewith, and payment of all fees, costs and
expenses for the preparation of this Agreement, the Indenture, the Bonds and all related
agreements and instruments.
(c) Payment for labor, services, materials and supplies used or furnished in the
acquisition or construction of the Project, all as provided in the plans, specifications and
work orders therefor, payment for the cost of the construction, acquisition and installation
of utility services or other facilities, and acquisition and installation of all real and
personal property deemed necessary in connection with the Project and payment for the
miscellaneous capitalized expenditures incidental to any of the foregoing items.
(d) Payment of the fees, if any, for architectural, engineering, legal, printing,
underwriting and supervisory services with respect to the Project.
(e) To the extent not paid by a contractor for construction with respect to any
part of the Project, payment of the premiums on all insurance required to be taken out and
maintained during the Construction Period.
(f) Payment of the taxes, assessments and other charges, if any, that may
become payable during the Construction Period with respect to the Project, or
reimbursement thereof if paid by the Borrower.
(g) Payment of expenses incurred in seeking to enforce any remedy against
any contractor or subcontractor in respect of any default under a contract relating to the
Project.
-5-
(h) Interest on the Bonds during the Construction Period.
(i) Payment of any other costs permitted by the Act which will not affect the
exemption from Federal income taxes of interest on the Bonds.
Each of the payments referred to in this Section shall be made upon receipt by the Trustee
of a written order complying with the form set forth in Section 4.07 of the Indenture signed by
the Borrower Representative.
All moneys remaining in the Construction Fund after the Completion Date and after
payment or provision for payment of all other items provided for in the preceding subsections (a)
to (i), inclusive, of this Section, shall at the direction of the Borrower be used in accordance with
Section 3.4 hereof.
The Borrower covenants and agrees that it will cause at least 95% of the moneys in the
Construction Fund (including any earnings on investment of such moneys) to be disbursed for
Qualified Costs and all of such proceeds to be disbursed for costs permitted by the Act. The
Borrower further covenants that no more than $ of the moneys in the Construction Fund
will be disbursed for payment of issuance costs within the meaning of the Code.
Section 3.4. Establishment of Completion Date; Obligation of Borrower to Complete.
The Completion Date shall be evidenced to the Trustee by a certificate signed by the Borrower
Representative stating the Completion Date and the Cost of the Project and stating that (i)
acquisition and construction of the Project has been completed substantially in accordance with
the plans, specifications and work orders therefor and all labor, services, materials and supplies
used in such acquisition and construction have been paid for (other than costs and expenses for
which payment has been withheld), (ii) all other facilities necessary in connection with the
Project have been constructed, acquired and installed in accordance with the plans, specifications
and work orders therefor and all costs and expenses incurred in connection therewith (other than
costs and expenses for which payment has been withheld) have been paid and (iii) at least 95%
of the costs previously disbursed and to be disbursed from the Construction Fund (including
moneys to be disbursed in accordance with the next succeeding paragraph of this Section 3.4) are
Qualified Costs, and all of such costs are costs permitted by the Act. The Borrower may
withhold payment and direct the Trustee to retain in the Construction Fund an amount sufficient
to pay any Cost of the Project which has been incurred; such retained moneys shall be disbursed
after the Completion Date in the manner provided in Section 3.3 hereof. If the Borrower
withholds the payment of any such cost or expense of the Project the certificate shall state the
amount of such withholding and the reason therefor. Notwithstanding the foregoing, such
certificate may state that it is given without prejudice to any rights against third parties which
exist at the date of such certificate or which may subsequently come into being. It shall be the
duty of the Borrower to cause such certificate to be furnished to the Trustee within 60 days after
the Project shall have been completed.
Moneys (including investment proceeds) remaining in the Construction Fund on the date
of such certificate may be used, at the direction of the Borrower Representative, to the extent
indicated, for one or more of the following purposes:
-6-
(1) for the payment, in accordance with the provisions of this Agreement, of
any Cost of the Project not theretofore paid, as specified in the above-mentioned
completion certificate; or
(2) for transfer to the Bond Fund, but only if, and to the extent that, the
Trustee has been furnished with an Opinion of Tax Counsel to the effect that such
transfer is lawful under the Act and does not adversely affect the exclusion from Federal
gross income of interest on any of the Bonds.
Any moneys (including investment proceeds) remaining in the Construction Fund on the
date of the aforesaid certificate and not set aside for the payment of Costs of the Project as
specified in (1) above or transferred to the Bond Fund pursuant to (2) above shall on such date be
deposited by the Trustee in a separate escrow account and used to pay all or part of the
redemption price of Bonds at the earliest redemption date or dates on which Bonds may be
redeemed without the payment of a premium or, at the option of the Borrower, at an earlier
redemption date or dates; provided that, until so used such moneys may also be used, at the
direction of the Borrower Representative, for one or more of the following purposes:
(a) to pay all or part of the price of purchasing Bonds on tender, in the open
market or at private sale, at a purchase price not in excess of 100% of the principal
amount of such Bonds plus accrued interest to the date of such purchase for the purpose
of cancellation;
(b) for the payment of qualifying costs of any additional improvements to be
installed or constructed on the Project site, provided that such use of funds is permitted
under the Act; or
(c) for any other purpose permitted by the Act;
provided, that the earnings on the investment of the moneys on deposit in such escrow account
shall be transferred on each interest payment date on the Bonds to the Bond Fund and shall be
used to pay interest on the Bonds coming due on each interest payment date on the Bonds, but no
moneys on deposit in such escrow account may be used for any of the purposes specified in this
paragraph (including the redemption of Bonds) unless and until the Trustee has been furnished
with an Opinion of Tax Counsel to the effect that such use is lawful under the Act and does not
adversely affect the exclusion from gross income for Federal income tax purposes of the interest
on any of the Bonds; and provided further that, until used for one or more of the foregoing
purposes, moneys on deposit in such escrow account may be invested in investments authorized
by Section 3.5 of this Agreement, but may not be invested to produce a yield on such moneys
(computed from the Completion Date and taking into account any investment of such moneys
during the period from the Completion Date until such moneys were deposited in such escrow
account) greater than the yield on the Bonds from which such proceeds were derived, all as such
terms are used in and determined in accordance with the Code and regulations promulgated
thereunder.
-7-
In the event the moneys in the Construction Fund available for payment of the Costs of
the Project should not be sufficient to pay the costs thereof in full, the Borrower agrees to pay
directly, or to deposit in the Construction Fund moneys sufficient to pay, the costs of completing
the Project as may be in excess of the moneys available therefor in the Construction Fund. The
Issuer does not make any warranty, either express or implied, that the moneys which will be paid
into the Construction Fund and which, under the provisions of this Agreement, will be available
for payment of the Costs of the Project, will be sufficient to pay all the costs which will be
incurred in that connection. The Borrower agrees that if after exhaustion of the moneys in the
Construction Fund the Borrower should pay, or deposit moneys in the Construction Fund for the
payment of any portion of the said costs of the Project pursuant to the provisions of this Section
it shall not be entitled to any reimbursement therefor from the Issuer or from the Trustee or from
the owners of any of the Bonds, nor shall it be entitled to any diminution of the amounts payable
under Article III hereof.
Section 3.5. Investment of Moneys. Any moneys held as a part of the Bond Fund or the
Construction Fund shall be invested or reinvested by the Trustee, at the direction of the Borrower
Representative as provided in Section 4.05 of the Indenture and in the Tax Exemption Certificate
and Agreement, to the extent permitted by law in Qualified Investments. Any such investment
may be purchased at the offering or market price thereof at the time of such purchase. Any such
investment shall mature on or prior to the date or dates on which such funds are anticipated to be
needed under the Indenture. The Trustee may make any and all such investments through its
own bond department.
The investments so purchased shall be held by the Trustee and shall be deemed at all
times a part of the fund for which they were made and the interest accruing thereon and any
profit realized therefrom shall be credited to such fund and any net losses resulting from such
investment shall be charged to such fund and paid by the Borrower.
Section 3.6. Operation of the Project. The Borrower will not make any material change
in its use of the Project unless the Trustee and the Issuer receive an opinion of Bond Counsel to
the effect that such change will not impair the exclusion of interest on the Bonds from the gross
income of holders of the Bonds for federal income tax purposes.
So long as the Project is operated for any purpose, the Borrower will operate the Project
as a "project" as contemplated by the Act and in such a manner that it will not impair the
exclusion of interest on the Bonds from gross income of the holders of the Bonds for federal
income tax purposes.
Upon a sale, lease or sublease of all or any portion of the Borrower's interest in the
Project (to the extent permitted hereunder), the Borrower will obtain, or cause there to be
obtained, the agreement of the purchaser, lessee or sublessee of the Project or any interest therein
to comply with the provisions of this Section, regardless of whether such purchaser, lessee or
sublessee assumes the obligations of the Borrower under this Agreement generally.
-8-
ARTICLE IV
REPAYMENT
Section 4.1. Repayment. (a)Principal, Premium and Interest. The Borrower will repay
the loan made to it under Article IV as follows: On or before 11:00 a.m. (local time at the
principal corporate office of the Trustee) on each day on which any payment of principal of,
premium, if any or interest on the Bonds shall become due (whether on an interest payment date,
at maturity, or upon redemption or acceleration or otherwise), the Borrower will pay, in
immediately available funds, an amount which, together with other moneys held by the Trustee
in the Bond Fund and available therefor, will enable the Trustee to make such payment in full in
a timely manner. If the Borrower defaults in any payment required by this Section, the Borrower
will pay interest (to the extent allowed by law) on such amount until paid at the rate provided for
in the Bonds.
(b) Purchase Price. The Borrower agrees to pay directly to the Bondholder amounts
sufficient to pay the purchase price of Bonds on each date on which Bonds may be purchased
upon demand of the Bondholder pursuant to Section 3.01 of the Indenture. Such amounts shall
be paid in immediately available funds on or before 11:00 a.m. (local time at the principal office
of the Bondholder). If the Borrower defaults in any such payment, the Borrower will pay interest
(to the extent allowed by law) on such amount until paid to the Bondholder at the rate provided
in the Bonds.
(c) Deficiencies. In furtherance of the foregoing, so long as any Bonds are outstanding
the Borrower will pay all amounts required to prevent any deficiency or default in any payment
of the principal of, premium, if any, or interest on the Bonds, including any deficiency caused by
an act or failure to act by the Trustee, the Borrower, the Issuer or any other person.
(d) Assignment. All amounts payable under this Section by the Borrower are assigned
by the Issuer to the Trustee pursuant to the Indenture for the benefit of the Bondholders. The
Borrower consents to such assignment. Accordingly, the Borrower will pay directly to the
Trustee at its principal corporate trust office all payments payable by the Borrower pursuant to
this Section. Notwithstanding the foregoing, the Indenture provides that the Borrower and the
Bondholder may agree that payments on the Bonds shall be made directly by the Borrower to the
Bondholder. In such event, the Borrower shall pay directly to the Bondholder all payments
payable by the Borrower pursuant to this Section.
Section 4.2. Additional Payments. The Borrower will also pay the following within 30
days after receipt of a bill therefor:
(a) The fees and expenses of the Issuer in connection with the issuance of the
Bonds, such fees and expenses to be paid directly to the Issuer.
(b) (i) The fees and expenses of the Trustee for serving as such under the
Indenture, and (ii) all fees and expenses, including attorneys' fees, of the Trustee for any
extraordinary services rendered by it under the Indenture. All such fees and expenses are
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to be paid directly to the Trustee for its own account as and when such fees and expenses
become due and payable.
Section 4.3. Prepayments. The Borrower may prepay to the Trustee all or any part of
the amounts payable under Section 4.1(a) at any time that the Bonds shall be subject to optional
redemption, solely as provided in the Indenture and the Bonds. A prepayment shall not relieve
the Borrower of its obligations under this Agreement until all the Bonds have been paid or
provision for the payment of all the Bonds has been made in accordance with the Indenture. In
the event of a mandatory redemption of the Bonds, the Borrower will prepay all amounts
necessary for such redemption.
Section 4.4. Obligations of Borrower Unconditional. The obligations of the Borrower to
make the payments required by Sections 4.1 and 4.3 and to perform its other agreements
contained in this Agreement shall be absolute and unconditional. Until the principal of and
interest on the Bonds shall have been fully paid or provision for the payment of the Bonds made
in accordance with the Indenture, the Borrower (a) will not suspend or discontinue any payments
provided for in Section 4.1 hereof, (b) will perform all its other agreements in this Agreement
and (c) will not terminate this Agreement for any cause including any acts or circumstances that
may constitute failure of consideration, destruction of or damage to the Project, commercial
frustration of purpose, any change in the laws of the United States or of the State or any political
subdivision of either or any failure of the Issuer to perform any of its agreements, whether
express or implied, or any duty, liability or obligation arising from or connected with this
Agreement.
ARTICLE V
OTHER BORROWER AGREEMENTS
Section 5.1. Maintenance of Existence. The Borrower agrees that during the term of this
Agreement and so long as any Bond is outstanding, it will maintain its existence as an Illinois
not-for-profit corporation, will continue to be a not-for-profit corporation organized and in good
standing under the laws of the State of Illinois, will not terminate or otherwise dispose of all or
substantially all of its assets, unless the transferee legal entity is organized and existing under the
laws of the United States, a state thereof or the District of Columbia, and (if not the Borrower)
assumes in writing all the obligations of the Borrower under this Agreement, the Tax Exemption
Certificate and Agreement, the Project Certificate and the Mortgage, and (ii) no event which
constitutes, or which with the giving of notice or the lapse of time or both would constitute an
Event of Default shall have occurred and be continuing immediately after such merger,
consolidation or transfer.
Section 5.2. Qualification in State. The Borrower agrees that throughout the term of this
Agreement, it will remain qualified to do business in the State.
Section 5.3. Arbitrage. The Borrower covenants with the Issuer and for and on behalf of
the purchasers and owners of the Bonds from time to time outstanding that so long as any of the
Bonds remain outstanding, moneys on deposit in any fund in connection with the Bonds, whether
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or not such moneys were derived from the proceeds of the sale of the Bonds or from any other
sources, will not be used in a manner which will cause the Bonds to be "arbitrage bonds" within
the meaning of Section 148 of the Code, and any lawful regulations promulgated thereunder, as
the same exist on this date, or may from time to time hereafter be amended, supplemented or
revised. The Borrower also covenants for the benefit of the Bondholder to comply with all of the
provisions of the Tax Exemption Certificate and Agreement and the Project Certificate. The
Borrower reserves the right, however, to make any investment of such moneys permitted by
State law, if, when and to the extent that said Section 148 or regulations promulgated thereunder
shall be repealed or relaxed or shall be held void by final judgment of a court of competent
jurisdiction, but only if any investment made by virtue of such repeal, relaxation or decision
would not, in the written Opinion of Tax Counsel, result in making the interest on the Bonds
includible in the federal gross income of the owners of the Bonds.
Section 5.4. Borrower's Obligation with Respect to Exclusion of Interest Paid on the
Bonds. Notwithstanding any other provision hereof, the Borrower covenants and agrees that it
will not take or authorize or permit, to the extent such action is within the control of the
Borrower, any action to be taken which will result in the loss of the exclusion of interest on the
Bonds from the federal gross income of the owners of the Bonds under Section 103 of the Code
(except for any Bond during any period while any such Bond is held by a person referred to in
Section 147(a) of the Code); and the Borrower also will not omit to take any action in its power
which, if omitted, would cause the above result. Toward that end, the Borrower covenants that it
will comply with all provisions of the Tax Exemption Certificate and Agreement and the Project
Certificate. The inclusion of interest on any Bond in the computation of the adjustment used in
determining the alternative minimum tax for certain corporations, the environmental tax imposed
by Section 59A of the Code or the branch profits tax on foreign corporations imposed by
Section 884 of the Code does not constitute a loss of the exclusion from federal gross income of
interest on the Bonds under Section 103 of the Code within the meaning of this paragraph. This
provision shall control in case of conflict or ambiguity with any other provision of this
Agreement.
Section 5.5. Payment of Taxes. The Borrower will pay and discharge, or cause to be
paid and discharged, promptly all lawful taxes, assessments and other governmental charges or
levies imposed upon the Project, or upon any part thereof, as well as all claims of any kind
(including claims for labor, materials and supplies) which, if unpaid, might by law become a lien
or charge upon the Project; provided that the Borrower shall not be required to pay any such tax,
assessment, charge, levy or claim (i) if the amount, applicability or validity thereof shall
currently be contested in good faith by appropriate proceedings promptly initiated and diligently
conducted; (ii) if the Borrower shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting principles) with respect thereto deemed adequate by
the Borrower; and (iii) if failure to make such payment will not impair the use of the Project by
the Borrower.
Section 5.6. Insurance. The Borrower agrees to maintain, or cause to be maintained, all
necessary insurance with respect to the Project in accordance with the Mortgage and the
Borrower's customary insurance practices. The Issuer shall have no obligation to maintain
insurance with respect to the Project.
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Section 5.7. Maintenance and Repair. The Borrower shall at all times during the term of
this Agreement maintain, preserve and keep the Project in good repair, working order and
condition, excepting normal wear and tear, and it will from time to time make or cause to be
made all necessary and proper repairs and replacements in connection with the maintenance,
repairs and replacements referred to in this Section. The Issuer shall have no obligation with
respect to the maintenance or repair of the Project.
Section 5.8. Financing Statements. The Borrower will, at its expense, take all necessary
action to maintain and preserve the lien and security interest of the Indenture so long as any
Bond remains outstanding. The Borrower will cause any financing statements in respect of the
Indenture to be filed, registered and recorded in such manner and in such places as may be
required by law in order to publish notice of and fully to perfect and protect the lien and security
interest created thereby; and from time to time will perform or cause to be performed any other
act as provided by law and will file or cause to be filed any and all continuation statements and
further instruments that may be required by law to maintain and preserve the lien and security
interest of the Indenture. Except to the extent it is exempt therefrom, the Borrower will pay or
cause to be paid all filing, registration and recording fees incident to such filing, registration and
recording, and all expenses incident to the preparation, execution and acknowledgment of such
instruments of further assurance, and all Federal or State fees and other similar fees, duties,
imposts, assessments and charges arising out of or in connection with the execution and delivery
of the Indenture, said financing statements and such instruments of further assurance.
ARTICLE VI
NO RECOURSE TO ISSUER; INDEMNIFICATION
Section 6.1. No Recourse to Issuer. The Issuer will not be obligated to pay the Bonds
except from revenues provided by the Borrower. The issuance of the Bonds will not directly or
indirectly or contingently obligate the Issuer or the State to levy or pledge any form of taxation
whatever or to make any appropriation for their payment. Neither the Issuer nor any member or
officer of the Issuer nor any person executing the Bonds shall be liable personally for the Bonds
or be subject to any personal liability or accountability by reason of the issuance of the Bonds.
Section 6.2. Indemnification. The Borrower during the term of this Agreement releases
the Issuer and the Trustee and their officers from and covenants and agrees that the Issuer and
the Trustee and their officers shall not be liable for, and agrees to indemnify and hold the Issuer,
the Trustee harmless against, any loss or damage to property or any injury to or death of any
person occurring on or about or resulting from any defect in the Project, provided that the
indemnity provided in this sentence shall be effective only to the extent of any loss that may be
sustained by the Issuer, the Trustee or their officers in excess of the net proceeds received by the
Issuer or the Trustee from any insurance carried with respect to the loss sustained, and provided
further, that the indemnity shall not be effective for damages that result from the negligence or
intentional acts on the part of the Issuer, the Trustee or their officers. The Borrower will also
indemnify and save harmless the Trustee for, and hold it harmless against, any loss, liability or
expense incurred without negligence or bad faith on its part, arising out of or in connection with
the acceptance or administration of the trust created under the Indenture, including the cost and
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expense of defending itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties under the Indenture.
ARTICLE VII
ASSIGNMENT
Section 7.1. Assignment by Borrower. The Borrower may assign its rights and
obligations under this Agreement without the consent of either the Issuer or the Trustee, but no
assignment will relieve the Borrower from primary liability for any obligations under this
Agreement.
Section 7.2. Assignment by Issuer. The Issuer will assign its rights under and interest in
this Agreement (except for the Unassigned Rights) to the Trustee pursuant to the Indenture as
security for the payment of the Bonds. Otherwise, the Issuer will not sell, assign or otherwise
dispose of its rights under or interest in this Agreement nor create or permit to exist any lien,
encumbrance or other security interest in or on such rights or interest.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.1. Events of Default; Remedies. The occurrence of any Event of Default under
the Indenture shall constitute an Event of Default hereunder for so long as such Event of Default
under the Indenture is continuing. Whenever any Event of Default has occurred and is
continuing, the Trustee may take whatever action may appear necessary or desirable to collect
the payments then due or to become due or to enforce performance of any agreement of the
Borrower in this Agreement. Upon any acceleration of the Bonds under the Indenture, all
amounts payable under Section 4.1(a) hereof shall be immediately due and payable without the
necessity of any action by any party.
In addition, if an Event of Default is continuing with respect to any of the Unassigned
Rights, the Issuer may take whatever action may appear necessary or desirable to it to enforce
performance by the Borrower of such Unassigned Rights.
Any amounts collected pursuant to action taken under this Section (except for amounts
payable directly to the Issuer or the Trustee pursuant to Section 4.2, 6.2 and 8.3) shall be applied
in accordance with the Indenture.
Nothing in this Agreement shall be construed to permit the Issuer, the Trustee, any
Bondholder or any receiver in any proceeding brought under the Indenture to take possession of
or exclude the Borrower from possession of the Project by reason of the occurrence of an Event
of Default.
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Section 8.2. Delay Not Waiver; Remedies. A delay or omission by the Issuer or the
Trustee in exercising any right or remedy accruing upon an Event of Default shall not impair the
right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 8.3. Attorneys' Fees and Expenses. If the Borrower should default under any
provision of this Agreement and the Issuer should employ attorneys or incur other expenses for
the collection of the payments due under this Agreement, the Borrower will on demand pay to
the Issuer or the Trustee, as the case may be, the reasonable fees of such attorneys and such other
reasonable expenses so incurred by the Issuer or the Trustee, as the case may be.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Notices. All notices or other communications hereunder shall be
sufficiently given and shall be deemed given when delivered or mailed as provided in the
Indenture.
Section 9.2. Binding Effect. This Agreement shall inure to the benefit of and shall be
binding upon the Issuer, the Borrower and their respective successors and assigns, subject,
however, to the limitations contained in Section 7.1.
Section 9.3. Severability. If any provision of this Agreement shall be determined to be
unenforceable at any time, that shall not affect any other provision of this Agreement or the
enforceability of that provision at any other time.
Section 9.4. Amendments. After the issuance of the Bonds, this Agreement may not be
effectively amended or terminated without the written consent of the Trustee and in accordance
with the provisions of the Indenture.
Section 9.5. Right of Borrower to Perform Issuer's Agreements. The Issuer irrevocably
authorizes and empowers the Borrower to perform in the name and on behalf of the Issuer any
agreement made by the Issuer in this Agreement or in the Indenture which the Issuer fails to
perform in a timely fashion if the continuance of such failure could result in an Event of Default.
This Section will not require the Borrower to perform any agreement of the Issuer.
Section 9.6. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
Section 9.7. Captions; References to Sections. The captions in this Agreement are for
convenience only and do not define or limit the scope or intent of any provisions or Sections of
this Agreement. References to Articles and Sections are to the Articles and Sections of this
Agreement, unless the context otherwise requires.
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Section 9.8. Complete Agreement. This Agreement represents the entire agreement
between the Issuer and the Borrower with respect to its subject matter.
Section 9.9. Termination. When no Bonds are Outstanding under the Indenture, the
Borrower and the Issuer shall not have any further obligations under this Agreement; provided
that the Borrower's covenants in Sections 5.3 and 5.4 and the provisions of Section 4.3 with
respect to mandatory redemption of the Bonds shall survive so long as any Bond remains unpaid.
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Section 9.10. Counterparts. This Agreement may be signed in several counterparts. Each
will be an original,but all of them together constitute the same instrument.
CITY OF ELGIN, ILLINOIS
By
Mayor
[SEAL]
Attest:
By
City Clerk
SUMMIT SCHOOL INC.
By
President
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EXHIBIT A
PROJECT DESCRIPTION
The Project consists of the construction of an approximately square foot addition
to school facilities consisting of a gymnasium, computer media center, parking lot and roadway
and related improvements to be owned by the Borrower and operated as a school facility. Costs
of the Project may also include interest on the Bonds during the period of construction of the
Project and costs of issuing the Bonds. The Project is further described in the Project Certificate.
INDENTURE OF TRUST
Dated as of December 1, 1998
between
CITY OF ELGIN, ILLINOIS
and
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
as Trustee
$1,200,000
City of Elgin, Illinois Revenue Bonds
Series 1998 (Summit School Project)
836469.01.02
2055523/FMS/11/19/98
INDENTURE OF TRUST
TABLE OF CONTENTS
SECTION HEADING PAGE
Granting Clause 1
ARTICLE I DEFINITION AND RULES OF CONSTRUCTION 1
Section 1.01. Definitions 1
Section 1.02. Rules of Construction 4
ARTICLE II THE BONDS 4
Section 2.01. Issuance of Bonds; Form; Dating 4
Section 2.02. Interest on the Bonds 5
Section 2.03. Execution and Authentication 5
Section 2.04. Bond Register 6
Section 2.05. Registration of Bonds; Persons Treated as Owners 6
Section 2.06. Mutilated, Lost, Stolen or Destroyed Bonds 7
Section 2.07. Cancellation of Bonds 7
Section 2.08. Temporary Bonds 7
ARTICLE III OPTIONAL TENDER AND REDEMPTION 7
Section 3.01. Optional Tender 7
Section 3.02. Redemption 7
Section 3.03. Notices to Trustee 7
Section 3.04. Redemption Dates 8
Section 3.05. Redemption Notices 8
Section 3.06. Payment of Bonds Called for Redemption 8
Section 3.07. Bonds Redeemed in Part 8
ARTICLE IV FUNDS 8
Section 4.01. Application of Proceeds 8
Section 4.02. Creation of the Bond Fund 8
Section 4.03. Moneys to Be Held in Trust 9
Section 4.04. Repayment to the Borrower from the Bond Fund 9
Section 4.05. Investment of Moneys 9
Section 4.06. Construction Fund 9
Section 4.07. Payments into Construction Fund; Disbursements 9
Section 4.08. Completion of Project 10
Section 4.09. Transfer of Construction Fund 11
ARTICLE V COVENANTS 11
Section 5.01. Payment of Bonds 11
Section 5.02. Further Assurances 11
Section 5.03. Financing Statements 11
ARTICLE VI DISCHARGE OF INDENTURE 11
Section 6.01. Bonds Deemed Paid; Discharge of Indenture 11
Section 6.02. Application of Trust Money 12
Section 6.03. Repayment to Borrower 12
ARTICLE VII DEFAULTS AND REMEDIES 12
Section 7.01. Events of Default 12
Section 7.02. Acceleration 13
Section 7.03. Other Remedies 14
Section 7.04. Waiver of Past Defaults 14
Section 7.05. Control by Bondholder 14
Section 7.06. Collection Suit by Trustee 14
Section 7.07. Trustee May File Proofs of Claim 14
Section 7.08. Priorities 14
ARTICLE VIII TRUSTEE 15
Section 8.01. Duties of Trustee 15
Section 8.02. Rights of Trustee 16
Section 8.03. Individual Rights of Trustee 16
Section 8.04. Trustee's Disclaimer 16
Section 8.05. Notice of Defaults 17
Section 8.06. Compensation and Indemnity of Trustee 17
Section 8.07. Eligibility of Trustee 17
Section 8.08. Replacement of Trustee 17
Section 8.09. Successor Trustee by Merger 18
ARTICLE IX AMENDMENTS OF AND SUPPLEMENTS TO INDENTURE 18
Section 9.01. Consent of Bondholder and Borrower Required 18
Section 9.02. Notation on or Exchange of Bonds 18
Section 9.03. Signing by Trustee of Amendments and Supplements 18
ARTICLE X AMENDMENTS OF AND SUPPLEMENTS TO LOAN
AGREEMENT 19
Section 10.01. Consent of Bondholder Required 19
Section 10.02. Consents by Trustee to Amendments or Supplements 19
ARTICLE XI MISCELLANEOUS 19
Section 11.01. Notices 19
Section 11.02. Limitation of Rights 19
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Section 11.03. Severability 19
Section 11.04. Payments Due on Non-Business Days 19
Section 11.05. Governing Law 19
Section 11.06. Captions 20
Section 11.07. No Recourse Against Issuer's Officers 20
Section 11.08. Counterparts 21
Signatures 21
Exhibit A — Form of Bond
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INDENTURE OF TRUST dated as of December 1, 1998, between
CITY OF ELGIN, ILLINOIS, a municipal corporation organized and
existing under the Constitution and laws of the State of Illinois (the
"Issuer"), and AMERICAN NATIONAL BANK OF TRUST COMPANY
OF CHICAGO, ILLINOIS, a national bank duly organized, existing
and authorized to accept trusts of the character herein set out under
and by virtue of the laws of the United States (the "Trustee"), as
trustee.
The Constitution and laws of the State of Illinois, and particularly
as supplemented and amended (the "Act"), empower the Issuer to issue its revenue bonds and to
lend the proceeds thereof for the purpose of financing costs of a "project" within the meaning of
the Act. The Issuer has entered into a Loan Agreement with Summit School, Inc. (the
"Borrower"), providing for the loan by the Issuer to such corporation of the proceeds of the
Issuer's bonds. The Issuer wishes to provide in this Indenture for the issuance of its bonds, and
the Trustee is willing to accept the trusts provided for in this Indenture.
Accordingly, the Issuer and the Trustee agree as follows for the benefit of the other and
for the benefit of the holders of the Bonds issued pursuant to this Indenture.
GRANTING CLAUSE
To secure the payment of the Bonds, the Issuer assigns to the Trustee and grants to the
Trustee a security interest in all right, title and interest of the Issuer in and to (a) the Loan
Agreement, including the current and continuing right to claim, collect, receive and give receipts
for all amounts payable by or receivable from the Borrower under the Loan Agreement, to bring
actions and proceedings under the Loan Agreement or for the enforcement of the Loan
Agreement and to do all things that the Issuer is entitled to under the Loan Agreement, but
excluding the Unassigned Rights, and (b) all moneys and securities held from time to time by the
Trustee under this Indenture as provided in this Indenture for the equal and proportionate benefit
of all holders of the Bonds without priority or distinction as to lien or otherwise of any Bonds
over any other Bonds, except as otherwise provided in this Indenture.
ARTICLE I
DEFINITION AND RULES OF CONSTRUCTION
Section 1.01. Definitions. For all purposes of this Indenture, unless the context requires
otherwise, the following terms shall have the following meanings:
"Act" means of the Issuer, as supplemented and amended.
"Bond Fund" means the fund by that name established by Section 4.02 hereof.
"Bondholder" or "holder" means the registered owner of the Bond.
"Bond Registrar" means the Trustee.
"Bonds" means the bonds issued pursuant to this Indenture.
"Borrower" means Summit School Inc., and its successors and assigns, and any
surviving, resulting or transferee entity as provided in Section 5.1 of the Loan Agreement.
"Borrower Representative" means a person at the time designated to act on behalf of the
Borrower in matters related to this Indenture by a written instrument furnished to the Trustee
containing the specimen signature of such person and signed on behalf of the Borrower by any of
its authorized signatories. The certificate may designate an alternate or alternates. The person so
designated may be an officer of Tensor.
"Business Day" means any day other than a day on which banks in Chicago, or the city
of the Trustee's principal corporate trust office, are required or authorized to close.
"Closing Date" means the date of initial issuance and delivery of the Bonds to the
purchaser thereof.
"Code" means the Internal Revenue Code of 1986, as amended. Each citation to a
Section of the Code shall include the Treasury regulations applicable to such Section.
"Construction Fund" means the fund by that name established by Section 4.06 hereof.
"Event of Default" is defined in Section 7.01.
"Indenture" means this Indenture of Trust, as it may be amended or supplemented from
time to time in accordance with its terms.
"Loan Agreement" means the Loan Agreement, dated as of the date of this Indenture,
between the Issuer and the Borrower, as such loan agreement may be amended or supplemented
from time to time in accordance with its terms.
"Mortgage" means the Construction Mortgage and Security Agreement with Assignment
of Rents dated December , 1998 from the Borrower to American National Bank and Trust
Company of Chicago, as amended.
"Opinion of Counsel" means a written opinion of counsel who is acceptable to the
Trustee. The counsel may be an employee of or counsel to the Issuer, the Trustee or the
Borrower.
"Opinion of Tax Counsel" means an Opinion of Counsel experienced in matters relating
to the tax exemption of interest on obligations issued by states and their political subdivisions.
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The term "outstanding" when used with reference to Bonds, or "Bonds outstanding"
means all Bonds which have been authenticated and delivered by the Trustee under this
Indenture, except the following:
(a) Bonds canceled or delivered to the Trustee for cancellation.
(b) Bonds that have become due (at maturity or on redemption, acceleration or
otherwise) and for the payment, including interest accrued to the due date, of which
sufficient moneys are held by the Trustee.
(c) Bonds deemed paid by Section 6.01.
(d) Bonds in lieu of which others have been authenticated under Section 2.05
(relating to registration and exchange of Bonds) or 2.06 (relating to mutilated, lost, stolen
or destroyed Bonds).
"Project" means the construction and equipping of an addition to school facilities and
related improvements located in Elgin, Illinois, as described in Exhibit A to the Loan Agreement.
"Project Certificate" means the Certificate Re: Use of Proceeds of Bonds and the Project
of the Borrower, dated the date of initial issuance and delivery of the Bonds.
"Qualified Investments" means any of the following obligations or securities, to the
extent permitted by law: (i) U.S. Government Obligations, (ii) certificates of deposit issued by,
or bankers' acceptances of, or time deposits with, any bank, trust company or national banking
association incorporated, having a branch in or doing business under the laws of the United
States of America or one of the states thereof having combined capital and surplus and retained
earnings of at least $100,000,000, including the Trustee, (iii) commercial paper of any holding
company of a bank, trust company or national banking association described in (ii),
(iv) commercial paper of companies incorporated or doing business under the laws of the United
States of America or one of the states thereof and in each case having a rating assigned to such
commercial paper by a Rating Agency (as defined below) equal to the highest rating assigned by
such organization, (v) U.S. dollar-denominated certificates of deposits issued by, or time deposits
with, the European subsidiaries of any bank, trust company or national banking association
incorporated or doing business under the laws of the United States of America or one of the
states thereof having combined capital and surplus and retained earnings of at least $100,000,000
and in each case having a rating assigned to its senior debt securities by a Rating Agency equal
to an investment grade rating assigned by such organization, (vi) repurchase agreements with any
bank (including the Trustee), broker, dealer or other financial institution having combined capital
and surplus and retained earnings of at least $50,000,000 secured by any of the obligations
described in clauses (i) through (v) above, (vii) Tax-Exempt Obligations (as defined in the Tax
Exemption Certificate and Agreement) rated in one of the two highest full rating categories by
either Rating Agency, (viii) money market funds, which funds may be money market funds of
the Trustee, registered as investment companies under the federal "Investment Company Act of
1940", as amended, whose investment policies include seeking to maintain a constant share price
and which invest exclusively in the investments or securities referred to in (i) through (v) above,
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or (ix) any other investment permitted by the Bondholder. "Rating Agency" means Moody's
Investors Service or Standard & Poor's, a division of The McGraw Hill Companies, and their
successors and assigns.
"Rebate Fund" means the fund by that name created under the Tax Exemption
Certificate and Agreement.
"Record Date" is defined in the Bonds.
"Responsible Officer" means any authorized officer of the Trustee assigned by the
Trustee to administer the corporate trust matters relating to the Bonds.
"State" means the State of Illinois.
"Tax Exemption Certificate and Agreement" means the Tax Exemption Certificate and
Agreement among the Issuer, the Borrower and the Trustee, dated the date of initial issuance and
delivery of the Bonds, as amended from time to time.
"Trustee" means the entity identified as such in the heading of this Indenture and its
successors under this Indenture.
"Unassigned Rights" means the rights of the Issuer under Section 4.2 (relating to fees
and expenses), Section 6.2 (relating to indemnification) and Section 8.3 (relating to expenses of
collection) of the Loan Agreement and all rights to receive notice and to consent under the
Agreement.
"U.S. Government Obligations" is defined in Section 6.01.
Section 1.02. Rules of Construction. Unless the context otherwise requires,
(a) an accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles, and
(b) references to Articles and Sections are to the Articles and Sections of this
Indenture.
ARTICLE II
THE BONDS
Section 2.01. Issuance of Bonds; Form; Dating. The Bonds shall be designated "City of
Elgin, Illinois Revenue Bonds Series 1998 (Summit School Project)." The Bonds shall be issued
in the initial principal amount of$1,200,000, and the total principal amount of Bonds that may
be outstanding shall not exceed such amount, except as provided in Section 2.06 with respect to
replacement of mutilated, lost, stolen, destroyed or undelivered Bonds. The Bonds shall be
substantially in the form of Exhibit A which is part of this Indenture. The Bonds shall be issued
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as a single fully registered Bond in the denomination of the then outstanding principal amount of
the Bonds. The Bonds may have notations, legends or endorsements required by law or usage.
The Bonds will be dated the Closing Date. Principal of the Bonds shall be payable in
monthly installments in the amount of$ (subject to adjustment with a change in the
interest rate) payable on the first day of each month commencing on January 1, 1999 with a final
principal installment in the amount of the then outstanding principal amount of the Bonds
payable on December 1, 2018.
Bonds issued in exchange for Bonds surrendered for transfer or in place of mutilated,
lost, stolen, destroyed or undelivered Bonds will bear interest from the last date to which interest
has been paid in full on the Bonds being transferred, exchanged or replaced or, if no interest has
been paid, from the Closing Date. Bonds will be numbered as determined by the Trustee.
Upon the execution and delivery of this Indenture, the Issuer will execute and deliver to
the Trustee, and the Trustee will authenticate, the Bonds and deliver them to the purchaser or
purchasers as directed by the Issuer.
Section 2.02. Interest on the Bonds. The Bonds shall bear interest from their date at the
Adjusted Rate (as defined below) (computed on the basis of a 360-day year for actual days
elapsed) until the payment of principal in full. The Bonds shall bear interest at the Adjusted
Rate plus_% on overdue principal and, to the extent permitted by law, on overdue interest.
The Adjusted Rate shall be equal to the sum of (i) a varying rate per annum equal to
seventy-seven and two tenths percent (77.2%) (the "Multiplier") of the rate equal to one quarter
percent (0.25%) plus the interest rate announced from time to time by the First National Bank of
Chicago as its corporate base rate of interest (the "Base Rate"), the Adjuted Rate to change on
the same date as any change in the Base Rate, until the principal installments on the Bonds are
fully paid.
If a change of law occurs which reduces any deduction, credit or other allowance
available to the Bondholder with respect to the Bonds or imposes any tax upon the Bondholder
as an owner of the Bonds or increases the cost to the Bondholder of owning the Bonds or reduces
the net after-tax yield on the Bonds to the Bondholder, the Bondholder shall adjust the Multiplier
to preserve the Bondholder's net after-tax yield on the Bonds.
Section 2.03. Execution and Authentication. The Bonds will be signed on behalf of the
Issuer with the manual or facsimile signatures of its Mayor and attested by the manual or
facsimile signature of its City Clerk, and the seal of the Issuer will be impressed or imprinted on
the Bonds by facsimile or otherwise. If an officer of the Issuer whose signature is on a Bond no
longer holds that office at the time the Trustee authenticates the Bond, the Bond shall
nevertheless be valid. Also, if a person signing a Bond is the proper officer on the actual date of
execution, the Bond shall be valid even if that person is not the proper officer on the nominal
date of action.
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A Bond shall not be valid for any purpose under this Indenture until the Trustee manually
signs the certificate of authentication on the Bond. Such signature shall be conclusive evidence
that the Bond has been authenticated under this Indenture.
The Bonds are special, limited obligations of the Issuer, payable solely from the revenues
derived by the Issuer under Sections 4.1(a), 4.1(b) and 4.3 of the Loan Agreement, the proceeds
of the Bonds and the income from the temporary investment thereof. The Bonds and the
premium, if any, and interest thereon shall not now and shall never constitute an indebtedness or
a loan of credit of the Issuer, the State or any political subdivision thereof, within the meaning of
any constitutional or statutory provisions, and shall never constitute nor give rise to a charge
against the general credit or taxing powers of the Issuer, the State or any political subdivision
thereof, but shall be a special, limited obligation of the Issuer, payable solely from the revenues
referenced above, the proceeds of the Bonds and the income from the temporary investment
thereof. The Bondholder shall not have the right to compel any exercise of the taxing power of
the Issuer, the State or any political subdivision thereof to pay the principal of, premium, if any
or interest on the Bonds.
Section 2.04. Bond Register. Bonds may be presented at the principal corporate trust
office of the Trustee for registration, transfer and exchange, and Bonds may be presented at that
office for payment. The Trustee shall keep a register of Bonds and of their transfer and
exchange.
Section 2.05. Registration of Bonds; Persons Treated as Owners. Bonds may be
transferred only on the register maintained by the Trustee. Upon surrender for transfer of any
Bond to the Trustee, duly endorsed for transfer or accompanied by an assignment duly executed
by the holder or the holder's attorney duly authorized in writing, the Trustee will authenticate a
new Bond or Bonds in an equal total principal amount and registered in the name of the
transferee.
The Trustee shall not be required to register the transfer of any Bond after notice calling
such Bond or portion thereof for redemption has been mailed or during the 15-day period
preceding the mailing of a notice of redemption of any Bonds.
The Trustee shall deliver to the transferee any applicable notice of redemption when it
effects a transfer of any Bond after the mailing of notice calling the Bond or any portion of the
Bond for redemption.
The Issuer and the Trustee may treat the registered owner of any Bond as the absolute
owner thereof forall purposes, whether or not such Bond shall be overdue, and shall not be
bound by any notice to the contrary. All payments of or on account of the principal of and
premium, if any, and the interest on any such Bonds as herein provided shall be made only to or
upon the written order of the registered owner thereof or his legal representative, but such
registration may be changed as herein provided. All such payments shall be valid and effectual
to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid.
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The Trustee will require the payment by a Bondholder requesting exchange or transfer of
any tax or other governmental charge required to be paid in respect of the exchange or transfer
but will not impose any other charge.
Section 2.06. Mutilated, Lost, Stolen or Destroyed Bonds. If any Bond is mutilated, lost,
stolen or destroyed, the Trustee will authenticate a new Bond of the same denomination if any
mutilated Bond shall first be surrendered to the Trustee, and if, in the case of any lost, stolen or
destroyed Bond, there shall first be furnished to the Trustee evidence of such loss, theft or
destruction, together with a satisfactory indemnity to the Trustee, the Issuer and the Borrower. If
the Bond has matured, instead of issuing a duplicate Bond, the Trustee may with the consent of
the Borrower pay the Bond without requiring surrender of the Bond (except in the case of a
mutilated Bond) and make such requirements as the Trustee deems fit for its protection,
including a lost instrument bond. The Issuer, the Borrower and the Trustee may charge their
customary fees and reasonable expenses in this connection.
Section 2.07. Cancellation of Bonds. Whenever a Bond is delivered to the Trustee for
cancellation (upon payment, redemption or otherwise), or for transfer or replacement pursuant to
Section 2.05 or 2.06, the Trustee will promptly cancel and destroy the Bond in accordance with
its customary procedures and issue a certificate of destruction to the Borrower and the Issuer.
Section 2.08. Temporary Bonds. Until definitive Bonds are ready for delivery, the Issuer
may execute and the Trustee will authenticate temporary Bonds substantially in the form of the
definitive Bonds, with appropriate variations. The Issuer will, without unreasonable delay,
prepare and the Trustee will authenticate definitive Bonds in exchange for the temporary Bonds.
Such exchange shall be made by the Trustee without charge to the Bondholder.
ARTICLE III
OPTIONAL TENDER AND REDEMPTION
Section 3.01. Optional Tender. The Bonds shall be purchased by the Borrower with
funds furnished by the Borrower pursuant to Section 4.1(b) of the Loan Agreement at the option
of the Bondholder on December 1, 2003, December 1, 2008 and on December 1, 2013 (each, an
"Optional Tender Date") at a purchase price of 100% of then outstanding principal amount
thereof. To exercise such option on either Optional Tender Date, the Bondholder must deliver to
the Trustee and the Borrower written notice of its intention to exercise such option, which notice
must be delivered on or before the preceding such Optional Tender Date. Bonds
purchased pursuant to this Section shall thereafter be registered in the name of the Borrower, or
such other person or entity as the Borrower shall designate, or at the direction of the Borrower,
shall be canceled.
Section 3.02. Redemption. The Bonds shall be subject to optional, extraordinary optional
and mandatory redemption as provided in the form of the Bonds set forth in Exhibit A hereto.
Section 3.03. Notices to Trustee. If the Borrower wishes that any Bonds be redeemed
pursuant to any optional or extraordinary optional redemption provision in the Bonds, the
Borrower will notify the Issuer and the Trustee of the applicable provision, the redemption date,
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the principal amount of Bonds to be redeemed and other necessary particulars. The Borrower
will give the notice at least 45 days before the redemption date.
Section 3.04. Redemption Dates. The redemption date of Bonds to be redeemed pursuant
to any optional or extraordinary optional redemption provision in the Bonds will be a date
permitted by the Bonds and specified by the Borrower in the notice delivered pursuant to the
preceding Section. The redemption date for a mandatory redemption will be determined by the
Trustee consistently with the provisions of the Bonds.
Section 3.05. Redemption Notices. The Trustee will give notice of each redemption as
provided in the Bonds. The notice shall identify the Bonds to be redeemed and will state (1) the
redemption date, (2) the redemption price, (3) that the Bonds called for redemption must be
surrendered to collect the redemption price, (4) the address at which the Bonds must be
surrendered and (5) that interest on the Bonds called for redemption ceases to accrue on the
redemption date.
Failure to give any required notice of redemption as to any particular Bonds will not
affect the validity of the call for redemption of any Bonds in respect of which no such failure has
occurred. Any notice mailed as provided in the Bonds will be conclusively presumed to have
been given whether or not actually received by any holder.
Section 3.06. Payment of Bonds Called for Redemption. Upon surrender to the Trustee,
Bonds called for redemption shall be paid at the redemption price stated in the notice, plus
interest accrued to the redemption date.
Section 3.07. Bonds Redeemed in Part. Upon surrender of a Bond optionally redeemed in
part, the Trustee will authenticate for the holder a new Bond or Bonds equal in principal amount
to the unredeemed portion of the Bond surrendered. Partial redemption payments shall be
allocated to the principal installments payable on the Bonds in the inverse order of their maturity,
or otherwise as agreed to by the Bondholder and the Borrower.
ARTICLE IV
FUNDS
Section 4.01. Application of Proceeds. The Issuer will cause the proceeds of the initial
sale of the Bonds to be deposited by the Trustee on the Closing Date in the Construction Fund.
Section 4.02. Creation of the Bond Fund. There is hereby created by the Issuer and
ordered established with the Trustee a trust fund to be designated "City of Elgin, Revenue Bond
Fund, Series 1998 (Summit School Project)" (the "Bond Fund"). There shall be deposited into
the Bond Fund from time to time all payments by the Borrower pursuant to Section 4.1(a) or 4.3
of the Loan Agreement. Moneys in the Bond Fund shall be used solely for the payment of the
principal of, premium, if any, and interest on the Bonds when due, whether on an interest
payment date, at maturity or upon redemption or acceleration of the Bonds. There shall be
credited against the amount payable from the Bond Fund to pay principal of, premium, if any, or
interest on the Bonds the corresponding amounts, if any, paid to the Bondholder pursuant to the
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Mortgage and debt service on the Bonds paid directly by the Borrower to the Bondholder as
permitted by the Bonds.
Section 4.03. Moneys to Be Held in Trust. All moneys required to be deposited with or
paid to the Trustee for deposit into the Bond Fund or the Construction Fund shall be held by the
Trustee in trust, while so held, constitute part of the Trust Estate and be subject to the lien hereof
for the benefit of the Bondholders.
Section 4.04. Repayment to the Borrower from the Bond Fund. Any amounts remaining
in the Bond Fund after payment in full of the principal of, premium, if any, and interest on the
Bonds (or provision for payment thereof as provided in this Indenture), the fees, charges and
expenses of the Issuer and the Trustee, and all other amounts required to be paid under the
Agreement and this Indenture shall be paid to the Borrower.
Section 4.05. Investment of Moneys. To the extent permitted by law, the Trustee will
invest and reinvest moneys held by it under this Indenture as directed in writing by a Borrower
Representative in any Qualified Investment not in conflict with the Tax Exemption Certificate
and Agreement.
The Trustee may make investments permitted by this Article through its own bond
department or the bond department of any entity under common control with the Trustee.
Investments will be made so as to mature or be subject to redemption at the option of the holder
on or before the date or dates that the Trustee (or, in the case of the Construction Fund, the
Borrower) anticipates that moneys from the investments will be required. Investments will be
registered in the name of the Trustee and held by or under the control of the Trustee. The
Trustee, when authorized by the Borrower, may trade with itself in the purchase and sale of
securities for such investment. The Trustee shall not be liable or responsible for any loss
resulting from any such investments. The Trustee shall sell and reduce to cash a sufficient
amount of investments whenever the cash held by the Trustee is insufficient for the purposes of
this Indenture.
The Issuer agrees for the benefit of the Bondholders that moneys held by the Trustee in
connection with the Bonds, whether or not such moneys were derived from the proceeds of the
sale of the Bonds, will not be used in a manner which will cause the Bonds to be classified as
arbitrage bonds within the meaning of Section 148 of the Code. Pursuant to such agreement, the
Issuer will comply with the requirements of that Section. The Issuer and the Trustee agree for
the benefit of the Bondholders that they will comply with the provisions of the Tax Exemption
Certificate and Agreement.
Section 4.06. Construction Fund. There is hereby created and established with the
Trustee a trust fund in the name of the Issuer to be designated "City of Elgin, Illinois Bond
Construction Fund, Series 1998 (Summit School Project)" (the "Construction Fund"), which
shall be expended in accordance with the provisions of the Agreement and this Indenture.
Section 4.07. Payments into Construction Fund; Disbursements. Proceeds of the issuance
and delivery of the Bonds shall be deposited in the Construction Fund as provided in
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Section 4.01 hereof. Moneys in the Construction Fund shall be expended on orders signed by a
Borrower Representative stating with respect to each payment to be made:
(a) The requisition number;
(b) The name and address of the person, firm or corporation to whom payment
is due or has been made, which may include the Borrower;
(c) The amount to be or which has been paid;
(d) That each obligation mentioned therein has been properly incurred, is a
proper charge against the Construction Fund and has not been the basis of any previous
requisition;
(e) That each item for which payment is proposed to be made is or was
necessary in connection with the Project;
(0 That after taking into account the costs proposed to be paid or reimbursed
in said certificate, at least 95% of the costs paid or reimbursed out of the Construction
Fund are Qualified Costs (as defined in the Loan Agreement);
(g) That after taking into account the costs proposed to be paid or reimbursed
in said certificate, no more than $ of the costs paid or reimbursed out of the
Construction Fund are issuance costs within the meaning of the Code;
(h) That the payment to be made is one permitted by and in accordance with
the Project Certificate; and
(i) That no Event of Default exists under the Agreement.
As a further pre-condition to the disbursement of moneys from the Construction Fund,
the order signed by the Borrower Representative must be accompanied by the written consent of
the Bondholder to such disbursement.
The Trustee is hereby authorized and directed to make each disbursement required by the
provisions of the Agreement and to issue its checks therefor. The Trustee shall keep and
maintain adequate records pertaining to the Construction Fund and all disbursements therefrom,
and after the Project has been completed and a certificate of payment of all costs is or has been
filed as provided in Section 4.08 hereof, the Trustee shall file a statement thereof with the Issuer
and the Borrower.
Section 4.08. Completion of Project. The completion of the Project and payment or
provision made for payment of the full Cost of the Project shall be evidenced by the filing with
the Trustee of a certificate required by the provisions of Section 3.4 of the Loan Agreement.
Any balance remaining in the Construction Fund on the Completion Date shall be used in
accordance with said Section.
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Section 4.09. Transfer of Construction Fund If the Borrower should prepay all amounts
payable under Section 4.3 of the Loan Agreement, any balance then remaining in the
Construction Fund shall without further authorization be deposited in the Bond Fund by the
Trustee.
ARTICLE V
COVENANTS
Section 5.01. Payment of Bonds. The Issuer will promptly pay the principal of and
interest on the Bonds on the dates and in the manner provided in the Bonds, but only from the
amounts assigned to and held by the Trustee under this Indenture.
Section 5.02. Further Assurances. The Issuer will execute and deliver such supplemental
indentures and such further instruments, and do such further acts, as the Trustee may reasonably
require for the better assuring, assigning and confirming to the Trustee the amounts assigned
under this Indenture for the payment of the Bonds.
Section 5.03. Financing Statements. The Trustee shall, at the expense of the Borrower,
cause such security agreements, financing statements and all supplements thereto and other
instruments as may be required from time to time to be kept, to be recorded and filed in such
manner and in such places as may be required by law in order to fully preserve, protect and
perfect the security of the Owners of the Bonds and the rights of the Trustee, and to perfect the
security interest created by this Indenture.
ARTICLE VI
DISCHARGE OF INDENTURE
Section 6.01. Bonds Deemed Paid; Discharge of Indenture. The Bonds will be deemed
paid for all purposes of this Indenture when (a) payment of the principal of and interest on the
Bonds to the due date of such principal and interest (whether at maturity, upon redemption or
otherwise) either (1) has been made in accordance with the terms of the Bonds or (2) has been
provided for by depositing with the Trustee (A) moneys sufficient to make such payment and/or
(B) U.S. Government Obligations maturing as to principal and interest in such amounts and at
such times as will ensure, without reinvestment, the availability of sufficient moneys to make
such payment (which shall, if required by the Trustee, be evidenced by a certificate, in form
satisfactory to the Trustee, of a firm of independent certified public accountants acceptable to the
Trustee) and (b) all compensation and expenses of the Trustee pertaining to the Bonds in respect
of which such deposit is made have been paid or provided for to the Trustee's satisfaction.
When the Bonds are deemed paid, they will no longer be secured by or entitled to the benefits of
this Indenture or be an obligation of the Issuer, except for payment from moneys or U.S.
Government Obligations under (a)(2) above and except that it may be transferred registered or
replaced as provided in Article II.
"U.S. Government Obligations" means obligations described in clause (a) of the
definition of Qualified Investments herein.
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Notwithstanding the foregoing, no deposit under clause (a)(2) of the first paragraph of
this Section shall be made until the Borrower has furnished the Trustee an Opinion of Tax
Counsel stating that the deposit of such cash or U.S. Government Obligations will not adversely
affect the exclusion from gross income of interest on the Bonds. In addition, no deposit under
clause (a)(2) of the first paragraph of this Section shall be deemed a payment of the Bonds if
such deposit has been made prior to December 1, 2006 (the second Optional Tender Date as
described in Section 3.01 hereof) unless irrevocable provisions have been made for the Bonds to
be called for redemption on the next following Optional Tender Date.
Also, if the Bonds are to be redeemed prior to maturity, notice of redemption of the
Bonds must be given in accordance with Article III in order for such deposit to be deemed a
payment of the Bonds. If the Bonds are not to be redeemed or paid within the next 60 days, the
Borrower must give the Trustee, in form satisfactory to the Trustee, irrevocable instructions (i) to
provide notice, as soon as practicable, in accordance with Article III, that the deposit required by
(a)(2) above has been made with the Trustee and that the Bonds are deemed to be paid under this
Article and stating the maturity or redemption date upon which moneys are to be available for
the payment of the principal of the Bonds, and, (ii) unless the Bonds mature in 60 days or less, to
give notice of redemption not less than 30 nor more than 60 days prior to the redemption date for
the Bonds.
When all outstanding Bonds are deemed paid under the foregoing provisions of this
Section, the Trustee will upon request acknowledge the discharge of the lien of this Indenture,
provided, however that the obligations under Article II in respect of the transfer, registration and
replacement of Bonds shall survive the discharge of the lien of this Indenture.
Section 6.02. Application of Trust Money. The Trustee shall hold in trust money or U. S.
Government Obligations deposited with it pursuant to the preceding Section and shall apply the
deposited money and the money from the U.S. Government Obligations in accordance with this
Indenture only to the payment of principal of and interest on the Bonds.
Section 6.03. Repayment to Borrower. The Trustee shall promptly pay to the Borrower
upon request any excess money or securities held by the Trustee at any time under this Article
and any money held by the Trustee under any provision of this Indenture for the payment of
principal or interest that remains unclaimed for two years.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.01. Events of Default. An "Event of Default" is any of the following:
(a) There is a failure to make due and punctual payment of any interest on any
Bond when due and such failure continues for five Business Days.
(b) There is a failure to make due and punctual payment of principal on any
Bond when due, at maturity, upon acceleration or redemption or otherwise and such
failure continues for five Business Days.
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(c) The Issuer fails to perform any of its agreements in this Indenture or the
Bonds (except a failure that results in an Event of Default under clause (a) or (b) above),
the performance of which is material to the Bondholders, and the failure continues after
the notice and for the period specified in this Section.
(d) The Borrower fails to perform any of its agreements in the Loan
Agreement (except a failure that results in an Event of Default under clause (a) or (b) of
this Section), and the failure continues after the notice and for the period specified in this
Section.
(e) The Borrower pursuant to or within the meaning of any Bankruptcy Law
(as defined below) (1) commences a voluntary case, (2) consents to the entry of an order
for relief against it in an involuntary case, (3) consents to the appointment of a Custodian
(as defined below) for the Borrower, or any substantial part of its property or (4) makes a
general assignment for the benefit of its, his or her creditors.
(f) A court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (1) is for relief against the Borrower in an involuntary case,
(2) appoints a Custodian for the Borrower or any substantial part of its, his or her
property or (3) orders the winding up or liquidation of the Borrower, and the decree or
order remains unstayed and in effect for 60 days.
(g) An event of default occurs and is continuing under the Mortgage.
(h) An event of default occurs and is continuing under any agreement between
the Borrower and the Bondholder.
"Bankruptcy Law" means Title 11 of the United States Code or any similar Federal or
state law for the relief of debtors. "Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
A default under clause (c) or (d) of this Section is not an Event of Default until the
Trustee or the Bondholder gives the Issuer, the Borrower a notice specifying the default,
demanding that it be remedied and stating that the notice is a "Notice of Default," and the Issuer
or the Borrower does not cure the default within 60 days after receipt of the notice, or within
such longer period as the Trustee shall agree. The Trustee shall not unreasonably refuse to agree
to a longer period if the default can be cured but cannot reasonably be cured within 60 days after
receipt of the notice and the Issuer or the Borrower has begun within 60 days and continued
diligent efforts to correct the default. The Issuer authorizes the Borrower to perform, in the name
and on behalf of the Issuer and for the purpose of curing or preventing the occurrence of an
Event of Default, any agreement of the Issuer in this Indenture or the Bonds.
Section 7.02. Acceleration. If any Event of Default occurs and is continuing, the Trustee
by notice to the Issuer and the Borrower, or the Bondholder by notice to the Issuer, the Borrower
and the Trustee (except for an Event of Default under clause (e) or (f) of the foregoing Section,
for which a declaration can be made without any notice), may declare the principal of and
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accrued interest on the Bonds to be due and payable immediately, and such principal and interest
shall thereupon become and be immediately due and payable. The Trustee shall immediately
give notice of acceleration to the Bondholder. The Trustee may, and upon the request of the
Bondholder shall, rescind an acceleration and its consequences if all existing Events of Default
have been cured or waived, if the rescission would not conflict with any judgment or decree and
if all payments due the Trustee and any predecessor Trustee under Section 8.06 have been made.
Section 7.03. Other Remedies. If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy by proceeding at law or in equity to collect the
principal of or interest on the Bonds or to enforce the performance of any provision of the Bonds,
this Indenture or the Loan Agreement.
The Trustee may maintain a proceeding even if it does not possess any of the Bonds or
does not produce any of them in the proceeding. A delay or omission by the Trustee or the
Bondholder in exercising any right or remedy accruing upon an Event of Default shall not impair
the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy
is exclusive of any other remedy. All available remedies are cumulative.
Section 7.04. Waiver of Past Defaults. The Bondholder by notice to the Trustee may
waive an existing Event of Default and its consequences. When an Event of Default is waived, it
is cured and stops continuing, but no such waiver shall extend to any subsequent or other Event
of Default or impair any right consequent to it.
Section 7.05. Control by Bondholder. The Bondholder may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or, subject to Section 8.01, or would involve the Trustee in
personal liability.
Section 7.06. Collection Suit by Trustee. If an Event of Default under Section 7.01(a) or
(b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Borrower for the whole amount remaining unpaid.
Section 7.07. Trustee May File Proofs of Claim. The Trustee may 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 and the Bondholder allowed in any judicial proceedings relative to the
Borrower, its creditors or its property and, unless prohibited by law or applicable regulations,
may vote on behalf of the holders in any election of a trustee in bankruptcy or other person
performing similar functions.
Section 7.08. Priorities. If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
FIRST: To the Trustee for amounts to which it is entitled under Section 8.06.
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SECOND: To the Bondholder as follows: (i) first to the payment of all interest
then due, in order of maturity, with interest on defaulted interest at the rate borne by the
Bonds to the extent permitted by law and, if the amount available is insufficient to pay in
full any particular installment, then to the payment ratably, without preference or priority
of any kind, according to the amounts due on such installment; and (ii) second, to the
payment of the unpaid principal of the Bonds which has become due, with interest on the
Bonds from the date on which they become due, and, if the amount available is
insufficient to pay in full Bonds due together with such interest, then to the payment first
of interest ratably according to the amount of interest due on such date, and then to the
payment of principal, ratably, without preference or priority of any kind; and (iii) third, to
the payment of any redemption premium then due.
THIRD: To the Borrower.
The Trustee may fix a payment date for any payment to the Bondholder.
ARTICLE VIII
TRUSTEE
Section 8.01. Duties of Trustee. (a) Prior to the occurrence of an Event of Default, the
Trustee shall have no liability for any action or omission in the performance of its duties
hereunder, except in the case of negligence or willful misconduct on the part of the Trustee.
During the existence of an Event of Default, the Trustee shall exercise its rights and powers and
use the same degree of care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default,
(i) the Trustee shall be required to perform only those duties that are
specifically set forth in this Indenture and no others, and
(ii) in the absence of bad faith on its part, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions expressed, upon
certificates or opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and opinions to
determine whether they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that
(i) this paragraph does not limit the effect of paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in good faith
by any employee of the Trustee assigned by the Trustee to administer its corporate trust
matters (a "Responsible Officer"), unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts;
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(iii) the Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to Section 7.05;
and
(iv) no provision of this Indenture shall require the Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any of its
duties hereunder or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(d) Every provision of this Indenture that in any way relates to the Trustee is subject to
all the paragraphs of this Section.
(e) The Trustee may refuse to perform any duty or exercise any right or power unless it
receives indemnity satisfactory to it, which indemnity shall survive termination of this Indenture,
against any loss, liability or expense, but the Trustee may not require indemnity as a condition to
declaring the principal of, premium, if any, and interest on the Bonds to be due immediately
under Section 7.02 or to making any payment of principal or interest on the Bonds.
(f) The Trustee shall not be liable for interest on any cash held by it except as the
Trustee may agree with the Borrower or the Issuer with the consent of the Borrower.
Section 8.02. Rights of Trustee. Subject to the foregoing Section:
(a) The Trustee may rely on any document believed by it to be genuine and to have
been signed or presented by the proper person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require a certificate of an
appropriate officer or officers of the Issuer or the Borrower or an opinion-of counsel; provided
that it may not require such a certificate as a condition to declaring the principal of and interest
on the Bonds to be due immediately under Section 7.02 or to making any payment on the Bonds.
The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on
the certificate or opinion of counsel.
(c) The Trustee may act through agents or co-trustees and shall not be responsible for
the misconduct or negligence of any agent or co-trustee appointed with due care.
Section 8.03. Individual Rights of Trustee. The Trustee in its individual or any other
capacity may become the owner or pledgee of Bonds and may otherwise deal with the Issuer or
with the Borrower or its affiliates with the same rights it would have if it were not trustee. Any
paying agent may do the same with like rights.
Section 8.04. Trustee's Disclaimer. The Trustee makes no representation as to the
validity or adequacy of this Indenture or the Bonds, it shall not be accountable for the
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Borrower's use of the proceeds from the Bonds paid to the Borrower, and it shall not be
responsible for any statement in the Bonds other than the Trustee's certificate of authentication.
Section 8.05. Notice of Defaults. (a) If an event occurs which with the giving of notice or
lapse of time or both would be an Event of Default, and if the event is continuing and if it is
known to the Trustee, the Trustee shall mail to the Bondholder notice of the event within 30 days
after it occurs. Except in the case of a default in payment or purchase on any Bonds, the Trustee
may withhold the notice if and so long as a committee of its Responsible Officers (as defined in
Section 8.01(c)) in good faith determines that withholding the notice is in the interests of
Bondholder.
(b) The Trustee shall not be required to take notice or be deemed to have notice of
any default or Event of Default hereunder, or in any other document or instrument executed in
connection with the execution and delivery of the Bonds, except an Event of Default under
Section 6.01(a) or (b) hereof, unless the Trustee shall be specifically notified in writing of such
default or Event of Default by the Issuer, the Borrower or the Bondholder. All notices or other
instruments required by this Indenture to be delivered to the Trustee shall be delivered at the
principal corporate trust office of the Trustee and, in the absence of such notice so delivered, the
Trustee may conclusively assume there is no default except as aforesaid.
Section 8.06. Compensation and Indemnity of Trustee. For acting under this Indenture,
the Trustee shall be entitled to payment of customary fees for its services and reimbursement of
advances, counsel fees and other expenses reasonably and necessarily made or incurred by the
Trustee in connection with its services under this Indenture.
To secure the payment or reimbursement to the Trustee provided for in this Section, the
Trustee shall have a senior claim, to which the Bonds are made subordinate, on all money or
property held or collected by the Trustee, except that held under Article VI or otherwise held in
trust to pay principal of and interest on the Bonds.
Section 8.07. Eligibility of Trustee. This Indenture shall always have a Trustee that is a
corporation or national banking association organized and doing business under the laws of the
United States or any state or the District of Columbia, is authorized under such laws and the laws
of the State to exercise corporate trust powers, is subject to supervision or examination by United
States or state authority, has a combined capital and surplus of at least $50,000,000 as set forth in
its most recent published annual report of condition, and has an office located in the State.
Section 8.08. Replacement of Trustee. The Trustee may resign by notifying the Issuer,
and the Borrower.. The Bondholder or, if no Event of Default is then existing, the Issuer at the
direction of the Borrower and with the consent of the Bondholder, may remove the Trustee by
notifying the removed Trustee. The Issuer may, and at the request of the Borrower will, remove
the Trustee if (a) the Trustee fails to comply with the foregoing Section, (b) the Trustee is
adjudged a bankrupt or an insolvent or if the Trustee appears about to become insolvent, (c) a
receiver or other public officer takes charge of the Trustee or its property or (d) the Trustee
otherwise becomes or appears about to become incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any
reason, the Issuer, at the direction of the Borrower and with the consent of the Bondholder, shall
promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to the retiring
Trustee, the Issuer and the Borrower and the Bondholder. Immediately thereafter, the retiring
Trustee shall transfer all property held by it as Trustee to the successor Trustee, the resignation
or removal of the retiring Trustee shall then (but only then) become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this Indenture.
If a successor Trustee does not take office within 60 days after the retiring Trustee
resigns or is removed, the retiring Trustee, the Issuer, the Borrower or the Bondholder may
petition any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with the foregoing Section, the Bondholder may petition
any court of competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
Section 8.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or
converts into, or transfers all or substantially all its assets (or, in the case of a bank or trust
company, its corporate trust assets) to, another corporation, the resulting, surviving or transferee
corporation without any further act shall be the successor Trustee.
ARTICLE IX
AMENDMENTS OF AND SUPPLEMENTS TO INDENTURE
Section 9.01. Consent of Bondholder and Borrower Required. The Issuer and the Trustee
may not amend or supplement this Indenture or the Bonds without the written consent of the
Bondholder and the Borrower.
Section 9.02. Notation on or Exchange of Bonds. If an amendment or supplement
changes the terms of the Bonds, the Trustee may require the Bondholder to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Bond about the changed terms
and return it to the holder. Alternatively, if the Trustee, the Issuer and the Borrower determine,
the Issuer in exchange for the Bond will issue and the Trustee will authenticate a new Bond that
reflects the changed terms.
Section 9.03. Signing by Trustee of Amendments and Supplements. The Trustee will sign
any amendment or supplement to the Indenture or the Bonds authorized by this Article if the
amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of
the Trustee. If it does, the Trustee may, but need not, sign it. In signing an amendment or
supplement, the Trustee will be entitled to receive and (subject to Section 8.01) will be fully
protected in relying on an Opinion of Counsel stating that such amendment or supplement is
authorized by this Indenture.
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ARTICLE X
AMENDMENTS OF AND SUPPLEMENTS TO
LOAN AGREEMENT
Section 10.01. Consent of Bondholder Required. No amendment of or supplement to the
Loan Agreement shall be made without the written consent of the Bondholder and the Trustee.
Section 10.02. Consents by Trustee to Amendments or Supplements. The Trustee will
consent to any amendment or supplement to the Loan Agreement authorized by this Article if the
amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of
the Trustee. If it does, the Trustee may, but need not, sign it. In signing a consent to an
amendment or supplement, the Trustee shall be entitled to receive and (subject to Section 8.01)
shall be fully protected in relying on an Opinion of Counsel stating that such amendment or
supplement is authorized by this Indenture.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Notices. (a) Any notice, request, direction, designation, consent,
acknowledgment, certification, appointment, waiver or other communication required or
permitted by this Indenture or the Bonds must be in writing except as expressly provided
otherwise in this Indenture or the Bonds.
(b) Any notice or other communication shall be sufficiently given and deemed given
when delivered by hand or mailed by first-class mail, postage prepaid, addressed as follows: if
to the Issuer, to 150 Dexter Court, Elgin, Illinois 60120, Attention: Fiscal Services Manager, if
to the Trustee, to 33 North LaSalle Street, Chicago, Illinois 60690, Attention: Corporate Trust
Department; if to the Borrower, to 333 West River Road, Elgin, Illinois 60123, Attention:
President; and if to the American National Bank and Trust Company of Chicago, as Bondholder,
to 24 East Chicago Street, Elgin, Illinois 60120, Attention: John Ostrem. Any addressee may
designate additional or different addresses for purposes of this Section.
Section 11.02. Limitation of Rights. Nothing expressed or implied in this Indenture or the
Bonds shall give any person other than the Trustee, Issuer, Borrower and the Bondholder any
right, remedy or claim under or with respect to this Indenture.
Section 11.03. Severability. If any provision of this Indenture shall be determined to be
unenforceable, that shall not affect any other provision of this Indenture.
Section 11.04. . Payments Due on Non-Business Days. If a payment date is not a Business
Day at the place of payment, then payment may be made at that place on the next Business Day,
and no interest shall accrue for the intervening period.
Section 11.05. Governing Law. This Indenture shall be governed by and construed in
accordance with the laws of the State.
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Section 11.06. Captions. The captions in this Indenture are for convenience only and do
not define or limit the scope or intent of any provisions or Sections of this Indenture.
Section 11.07. No Recourse Against Issuer's Officers. No officer, agent or employee of
the Issuer shall be individually or personally liable for any payment on the Bonds or be subject to
any personal liability or accountability by reason of the issuance of the Bonds, but this Section
shall not relieve an officer, agent or employee of the Issuer from the performance of any official
duty provided by law or this Indenture.
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Section 11.08. Counterparts. This Indenture may be signed in several counterparts. Each
will be an original,but all of them together constitute the same instrument.
CITY OF ELGIN, ILLINOIS
By
Mayor
[SEAL]
A n EST:
By
City Clerk
AMERICAN NATIONAL BANK OF TRUST
COMPANY OF CHICAGO,
as Bond Trustee,
By
Authorized Officer
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EXHIBIT A
[FORM OF BOND]
No. R-1 $1,200,000
UNITED STATES OF AMERICA
STATE OF ILLINOIS
$1,200,000 CITY OF ELGIN, ILLINOIS REVENUE BONDS
SERIES 1998 (SUMMIT SCHOOL PROJECT)
Dated Date: December_, 1998
Registered Owner: American National Bank and Trust Company of Chicago
Principal Amount: One Million Two Hundred Thousand Dollars and No Cents
THIS BOND HAS BEEN ISSUED UNDER THE CONSTITUTION AND LAWS OF THE STATE OF
ILLINOIS, INCLUDING PARTICULARLY THE ISSUER'S POWERS AS A HOME RULE UNIT OF
GOVERNMENT AND OF THE ISSUER, AS SUPPLEMENTED
AND AMENDED. THIS BOND IS A SPECIAL, LIMITED OBLIGATION OF THE ISSUER, THE
PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON WHICH SHALL BE PAYABLE SOLELY OUT OF
THE REVENUES DERIVED BY THE ISSUER PURSUANT TO THE LOAN AGREEMENT DESCRIBED
HEREIN. THE BOND SHALL NOT IN ANY RESPECT CONSTITUTE AN INDEBTEDNESS OF THE
ISSUER, THE STATE OF ILLINOIS OR ANY POLITICAL SUBDIVISION THEREOF, OR A LOAN OF
CREDIT THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION,
NOR SHALL IT BE PAYABLE IN ANY MANNER FROM FUNDS RAISED BY TAXATION.
THE CITY OF ELGIN, ILLINOIS, a municipal corporation and home rule unit of
government organized and existing under the Constitution and laws of the State of Illinois (the
"Issuer"), promises to pay, solely from the sources described in this Bond, to the registered
owner identified above, or registered assigns, on the principal payment dates described below (or
if this Bond is called for earlier redemption as described herein, on the redemption date), the
principal amount identified above and to pay interest solely from the sources described in this
Bond, from the date hereof on the balance of said principal sum from time to time remaining
unpaid at the Adjusted Rate (as defined in the hereinafter defined Indenture) (computed on the
basis of a 360-day for actual days elapsed) on the first day of each calendar month commencing
January 1, 1999 until the payment of principal in full, and promises to pay interest on overdue
principal, premium, if any, and, to the extent permitted by law, on overdue interest at said rate.
Principal of this Bond is payable in lawful money of the United States of America at the
principal corporate trust office of American National Bank and Trust Company of Chicago, as
Trustee (the "Trustee"); interest payments shall be made to the registered owner hereof as of the
fifteenth day of the month immediately preceding each interest payment date (the "Record
Date") by wire transfer to the registered owner. If any payment on the Bonds is due on a non-
Business Day, it will be made on the next Business Day, and no interest will accrue as a result.
Notwithstanding the foregoing, the Borrower (as hereinafter defined) and the registered owner of
this Bond (the "Bondholder") may provide that payments of principal of, premium, if any, and
interest on the Bonds be made directly by the Borrower to the Bondholder and any such
payments shall be deemed to be payments on the Bonds as if made as described above.
Principal of this Bond shall be payable in monthly installments in the amount of
$ (subject to adjustment with a change in the interest rate) payable on the first day of
each month commencing on January 1, 1999 with a final principal installment in the amount of
the then outstanding principal amount of the Bonds payable on December 1, 2018.
1. Indenture; Loan Agreement. This Bond is the bond (the "Bond" or the "Bonds"),
limited to $1,200,000 in aggregate principal amount, issued under the Indenture of Trust dated as
of December 1, 1998 (the "Indenture"), between the Issuer and American National Bank and
Trust Company of Chicago, Chicago, Illinois, as Trustee (the "Trustee"). The terms of the
Bonds include those in the Indenture. The Bondholder is referred to the Indenture for a
statement of those terms. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Indenture.
The Issuer has loaned the proceeds of the Bonds to Summit School Inc. (the
"Borrower"), pursuant to a Loan Agreement dated as of December 1, 1998 (the "Loan
Agreement"), between the Issuer and the Borrower. The Borrower will use the proceeds of the
Bonds to finance a portion of the costs of the construction and equipping of an addition to school
facilities and related improvements located in the City of Elgin, Illinois and further described in
Exhibit A to the Loan Agreement (the "Project"). The Borrower has agreed in the Loan
Agreement to pay the Issuer amounts sufficient to pay all amounts coming due on the Bonds, and
the Issuer has assigned its rights to such payments under the Loan Agreement to the Trustee as
security for the Bonds. The payment of the principal of, premium, if any, and interest on the
Bonds, together with other obligations of the Borrower, have been secured by a Construction
Mortgage and Security Agreement with Assignment of Rents from the Borrower to the
Bondholder.
2. Source of Payments. The Bonds are special, limited obligations of the Issuer and, as
provided in the Indenture, are payable solely from payments to be made by the Borrower under
the Loan Agreement or proceeds of the Bonds held by the Trustee under the Indenture.
3. Redemption. The Bonds are subject to redemption only as described below:
Extraordinary Optional Redemption. The Bonds may be redeemed in whole at the option
of the Borrower at any time at a redemption price equal to the principal amount of outstanding
Bonds plus accrued interest to the redemption date, without premium, upon the exercise by the
Borrower of its option to cause the Bonds to be redeemed as a result of the occurrence of any of
the events described below:
(1) the Project has been damaged or destroyed to such an extent that, in the
judgment of the Borrower, (i) it cannot be reasonably restored to substantially the
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condition thereof immediately preceding such damage or destruction, (ii) the Borrower is
thereby prevented from carrying on normal operations at the Project for a period of nine
or more consecutive months following such damage or destruction, or (iii) it would not
be economically feasible for the Borrower to replace, repair, rebuild or restore the same;
(2) title in and to, or the temporary use of, all or substantially all of the Project
has been taken under the exercise of the power of eminent domain (or sold in lieu of such
a taking) by any governmental authority, or person acting under governmental authority
and such a taking or sale, in the judgment of the Borrower, may result in the Borrower
being prevented thereby from carrying on normal operations at the Project for a period of
nine or more consecutive months; or
(3) as a result of any changes in the Constitution of the State or the
Constitution of the United States of America or by legislative or administrative action
(whether State or Federal) or by final decree,judgment, decision or order of any court or
administrative body (whether State or Federal), the Loan Agreement has become void or
unenforceable or impossible of performance in accordance with the intent and purposes
of the parties as expressed therein.
To exercise its option to effect an extraordinary optional redemption, the Borrower must
deliver to the Trustee written notice of the occurrence of any such event and of its election to
cause the Bonds to be redeemed as a result thereof. Such notice shall specify the redemption
date which shall be at least 45 days after the date of delivery of such notice to the Trustee.
Optional Redemption. The Bonds are subject to optional redemption, in whole, or in part,
on any Business Day, in all cases at the direction of the Borrower, upon at least _ days' prior
written notice from the Borrower to the Trustee at a redemption price equal to 100% of the
aggregate principal amount of the Bonds to be redeemed, plus accrued interest thereon to the
redemption date, without premium.:
Mandatory Redemption on Determination of Taxability. The Bonds will be redeemed in
whole (or in part as provided below) at a redemption price equal to the principal amount of
Bonds redeemed plus accrued interest to the redemption date plus a premium equal to any
optional redemption premium which would be payable if such Bonds were optionally redeemed
on such date in accordance with the provisions under "Optional Redemption" above. The
redemption shall be made on any day within 180 days after the Borrower receives written notice
from the Bondholder or any former registered owner of the Bonds or the Trustee of a final
determination by the Internal Revenue Service or a court of competent jurisdiction that the
interest paid or to be paid on any Bond (except to a"substantial user" of the Project or a "related
person" within the meaning of Section 147(a) of the Internal Revenue Code of 1986 (the
"Code")) is or was includible in the gross income of the Bond's owner for Federal income tax
purposes. No such determination will be considered final unless the Bondholder or former
registered owner involved in the determination gives the Borrower and the Trustee prompt
written notice of the commencement of the proceedings resulting in the determination and offers
the Borrower, subject to the Borrower's agreeing to pay all expenses of the proceedings and to
indemnify the Bondholder or former registered owner against all liabilities that might result from
A-3
it, the opportunity to control the defense of the proceeding and either the Borrower does not
agree within 30 days to pay the expenses, indemnify the Bondholder or former registered owner
and control the defense or the Borrower exhausts or chooses not to exhaust available procedures
to contest or obtain review of the result of the proceedings.
Notice of Redemption. At least 30 days before each redemption date, the Trustee will
mail a notice of redemption by first-class mail to each registered owner at the registered owner's
registered address. Any notice mailed as provided in this paragraph will be conclusively
presumed to have been given whether or not actually received by the addressee. Any notice of
redemption at the direction of the Borrower may state that the redemption is conditioned on
receipt of moneys for such redemption by the Trustee prior to the redemption date. If such
moneys are not received, the redemption of the Bonds for which notice was given shall not be
made.
Effect of Notice of Redemption. When notice of redemption is given, Bonds called for
redemption become due and payable on the redemption date at the applicable redemption price;
in such case when funds are deposited with the Trustee sufficient for redemption, interest on the
Bonds to be redeemed ceases to accrue as of the date of redemption.
5. Optional Tender. This Bond shall be purchased by the Borrower pursuant to the
Loan Agreement at the option of the Bondholder on December 1, 2003, December 1, 2008 and
on December 1, 2013 (each, an "Optional Tender Date") at a purchase price of 100% of the then
outstanding principal amount hereof, pursuant to and under the conditions set forth in the
Indenture.
6. Denominations; Transfer; Exchange. The Bonds are issued as a single fully
registered Bond without coupons in the denomination equal to the then outstanding principal
amount hereof.
A registered owner may transfer Bonds in accordance with the Indenture. The Trustee
may require a registered owner, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by the Indenture.
The Trustee shall deliver any applicable notice of redemption when it effects a transfer of any
Bond after the mailing of a notice of redemption of such Bond.
The Trustee shall not be required to register the transfer of any Bond after notice calling
such Bond or portion thereof for redemption has been mailed or during the 15-day period next
preceding the mailing of a notice of redemption of any Bonds.
7. Persons Deemed Owners. The registered owner of this Bond may be treated as the
owner of it for all purposes. Any action by the registered owner of this Bond shall be irrevocable
and shall bind any subsequent owner of this Bond or any Bond delivered in substitution for this
Bond.
8. Unclaimed Money. If money for the payment of principal or interest remains
unclaimed for two years from the date it was deposited with the Trustee for the purpose of such
A-4
payment, the Trustee will pay the money to or for the account of the Borrower. After that,
registered owners entitled to the money must look only to the Borrower and not to the Trustee
for payment unless an applicable abandoned property law designates another person. Unclaimed
moneys may be held uninvested by the Trustee and the Trustee shall not be liable to Bondholders
for investment earnings thereon.
9. Discharge Before Redemption or Maturity. If the Borrower at any time deposits
with the Trustee money or U.S. Government Obligations as described in the Indenture sufficient
to pay at redemption or maturity principal of and interest on the outstanding Bonds, and if the
Borrower also pays all other sums then payable by the Borrower under the Indenture, the lien of
the Indenture will be discharged. After discharge, registered owners must look only to the
deposited money and securities for payment.
10. Amendment, Supplement, Waiver. Subject to certain exceptions, the Indenture, the
Loan Agreement or the Bonds may be amended or supplemented, and any past default or
compliance with any provision may be waived, with the consent of the Bondholder.
Amendments to the Mortgage may be made, and waivers of defaults or compliance with any
provision may be made, by the parties thereto and without the consent of the Trustee, the Issuer
or the Owners of the Bonds.
11. Defaults and Remedies. The Indenture provides that the occurrences of certain
events constitute Events of Default. If an Event of Default occurs and is continuing, the Trustee
or the Bondholder may declare the principal of all the Bonds to be due and payable immediately.
An Event of Default and its consequences may be waived as provided in the Indenture. Except
as specifically provided in the Indenture, the Trustee may refuse to enforce the Indenture or the
Bonds unless it receives indemnity satisfactory to it. Subject to certain limitations, the
Bondholder may direct the Trustee in its exercise of any trust or power.
12. No Recourse Against Others. A member, director, officer or employee, as such, of
the Issuer shall not have any liability for any obligations of the Issuer or the Borrower under the
Bonds or the Indenture or for any claim based on such obligations or their creation. Each
registered owner by accepting a Bond waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Bond.
A-5
13. Authentication. This Bond shall not be valid until the Trustee or an authenticating
agent signs the certificate of authentication on the other side of this Bond.
CITY OF ELGIN, ILLINOIS
[SEAL]
By
Mayor
A I"1'EST:
City Clerk
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, as
Bond Trustee,
certifies that this is one of the Bonds
referred to in the Indenture
By
Authorized Officer
Date of Authentication:
December_, 1998
A-6
[FORM OF ASSIGNMENT]
For value received, the undersigned hereby sells, assigns and transfers unto
the within Bond, and does hereby irrevocably constitute and appoint
, attorney to transfer such Bond on the books kept for registration and
transfer of the within Bond, with full power of substitution in the premises.
Dated:
NOTE: The signature to this Assignment
must correspond with the name as it appears
upon the face of the within Bond in every
particular, without enlargement or alteration
or any change whatsoever.
Signature guaranteed by:
NOTE: The signature to this assignment
must correspond with the name as it appears
upon the face of the within Bond in every
particular, without alteration or enlargement
or any change whatever. Signature(s) must
be guaranteed by an "eligible guarantor
institution" meeting the requirements of the
Trustee, which requirements include
membership or participation in STAMP or
such other "signature guaranty program" as
may be determined by the Trustee in
addition to or in substitution for STAMP, all
in accordance with the Securities Exchange
Act of 1934, as amended.
[FORM OF REGISTRATION INFORMATION]
Under the terms of the Indenture, the Trustee will register a Bond in the name of a
transferee only if the owner of such Bond (or his duly authorized representative) provides as
much of the information requested below as is applicable to such owner prior to submitting this
Bond for transfer.
Name:
Address:
Social Security or Employer
Identification Number:
If a Trust, Name and Address of
Trustee(s) and Date of Trust:
A-7
TAX EXEMPTION AGREEMENT AND CERTIFICATE
AMONG
CITY OF ELGIN, ILLINOIS,
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
as Trustee
AND
SUMMIT SCHOOL, INC.
Dated December_, 1998
$1,200,000 City of Elgin, Illinois Revenue Bonds
Series 1998 (Summit School Project)
836517.01.02
2055523•FMS•November 19, 1998
I.4
TABLE OF CONTENTS
SECTION HEADING PAGE
ARTICLE I. DEFINITIONS 2
ARTICLE II. DESCRIPTION OF THE PURPOSE OF THE BONDS 4
Section 2.1. Purpose of the Bonds 4
Section 2.2. Reimbursement 5
Section 2.3. Acquiring, Constructing, Renovating, Improving and
Equipping of Project—Binding Commitment and Timing 5
Section 2.4. Working Capital. 5
Section 2.5. Consequences of Contrary Expenditure. 6
Section 2.6. Investment of Bond Proceeds 6
Section 2.7. Hedges. 6
Section 2.8. Grants 6
ARTICLE III. USE OF PROCEEDS; DESCRIPTION OF FUNDS 6
Section 3.1. Use of Proceeds; Funds Established 6
Section 3.2. Purpose of the Bond Fund 8
Section 3.3. No Replacement, Sinking or Pledged Funds 8
ARTICLE IV. REBATE FUND; ARBITRAGE REBATE REQUIREMENT 8
Section 4.1. Creation of Rebate Fund 8
Section 4.2. Issuer and Corporation Covenants 9
Section 4.3. Records 9
Section 4.4. Prohibited Payments; Certificates of Deposit and Investment
Agreements 9
Section 4.5. Arbitrage Elections 11
ARTICLE V. ADDITIONAL PAYMENTS 11
ARTICLE VI. YIELD AND YIELD LIMITATIONS 11
Section 6.1. Issue Price 11
Section 6.2. Yield Limits 11
Section 6.3. Continuing Nature of Yield Limits 12
Section 6.4. Yield on the Loan Agreement 12
Section 6.5. Other Payments Relating to the Bonds 12
Section 6.6. Restricted Yield Investments; Prohibited Investments 13
ARTICLE VII. PROGRAM COVENANTS 13
ARTICLE VIII. CONCERNING THE TRUSTEE 13
-i-
Section 8.1. Trustee Charges and Expenses; Other Expenses 13
Section 8.2. Resignation and Removal of the Trustee 14
Section 8.3. Acceptance 14
ARTICLE IX. PROJECT CERTIFICATE; MISCELLANEOUS 15
Section 9.1. Project Certificate 15
Section 9.2. Termination; Interest of Corporation and Issuer in Rebate
Fund 15
Section 9.3. No Common Plan of Financing 15
Section 9.4. No Sale of Financed Properties 15
Section 9.5. Future Events 15
Section 9.6. Permitted Changes; Opinion of Bond Counsel 16
Section 9.7. Severability 16
Section 9.8. Counterpart 16
Section 9.9. Notices 16
Section 9.10. Successors and Assigns 17
Section 9.11. Headings 17
Section 9.12. Governing Law 17
Section 9.13. Expectations 17
Signature Page 18
EXHIBIT A — Sources and Uses of Funds
EXHIBIT B — Drawdown Schedule
EXHIBIT C — Certificate of Placement Agent
EXHIBIT D — Letter of Chapman and Cutler
EXHIBIT E — Schedule of Elections
-ll-
TAX EXEMPTION AGREEMENT AND CERTIFICATE
The undersigned are, respectively, the duly qualified and acting Mayor of the CITY OF
ELGIN, ILLINOIS (the "Issuer"), a Trust Officer of AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, as trustee for the hereinafter described Bonds (the "Trustee"), and the
President of SUMMIT SCHOOL INC., an Illinois not for profit corporation (the "Corporation").
As Mayor of the Issuer, is charged, with others, with the responsibility
for executing and delivering the $1,200,000 aggregate principal amount of $1,200,000 City of
Elgin, Illinois Revenue Bonds Series 1998 (Summit School Project) (the "Bonds") on the date
hereof. The Bonds were authorized pursuant to the Issuer's resolution adopted December_,
1998, and are issued pursuant to the Indenture of Trust dated as of December 1, 1998 (the
"Indenture"), between the Issuer and the Trustee. Certain terms used herein are defined in
Article I hereof. Terms used herein and not defined herein have the meanings given to them in
the Indenture.
One purpose of executing this Tax Agreement is to set forth various facts regarding the
Bonds and to establish the expectations of the Issuer, the Trustee and the Corporation as to future
events regarding the Bonds and the use of Bond proceeds. To the extent such facts do not relate
directly to the Issuer, the Issuer is relying upon the certifications of the Corporation, which
certifications the Issuer believes are reasonable and prudent. The certifications and
representations made herein and expectations presented herein are intended, and may be relied
upon, as a certification of an officer of the Issuer given in good faith described in
Section 1.148-2(b)(2) of the Regulations.
The Trustee is executing and delivering this Tax Agreement solely for the purposes of
acknowledging the matters set forth herein, and being bound to undertake the specific duties and
responsibilities set forth with respect to the Trustee in this Tax Agreement. With respect to
matters set forth in the remaining Sections of this Tax Agreement, the Trustee has made no
investigation, makes no representation and undertakes no duties or responsibilities. No implied
duties or responsibilities may be read into this Tax Agreement against the Trustee, and the
Trustee shall be entitled to the protections, privileges, exculpation and indemnities contemplated
under the Indenture.
The certifications, covenants and agreements contained herein are made on behalf of the
Issuer, the Trustee and the Corporation for the benefit of the owners from time to time of the
Bonds. We do hereby certify, covenant and agree, on behalf of the Issuer, the Trustee and the
Corporation,respectively, the following:
ARTICLE I
DEFINITIONS
Capitalized terms shall have the meanings assigned to them where first used and the
following terms shall have the following meanings unless, in either case, the context or use
clearly indicates another or different meaning is intended.
"Bond Counsel" means Chapman and Cutler, or any other nationally recognized firm of
attorneys experienced in the field of municipal bonds whose opinions are generally accepted by
purchasers of municipal bonds and which firm is acceptable to the Issuer.
"Closing" means the date of this Tax Agreement, which is the first date on which the
Issuer is receiving the purchase price for the Bonds.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commingled Fund" means any fund or account containing both Gross Proceeds and an
amount in excess of$25,000 that are not Gross Proceeds if the amounts in the fund or account
are invested and accounted for, collectively, without regard to the source of funds deposited in
the fund or account. An open-ended regulated investment company under Section 851 of the
Code is not a Commingled Fund.
"Construction Fund" means the Construction Fund established pursuant to the Indenture.
"Control" means the possession, directly or indirectly through others, of either of the
following discretionary and non-ministerial rights or powers over another entity:
(a) to approve and to remove without cause a controlling portion of the
governing body of a Controlled Entity; or
(b) to require the use of funds or assets of a Controlled Entity for any purpose.
"Controlled Entity" means any entity or one of a group of entities that is subject to
Control by a Controlling Entity or group of Controlling Entities.
"Controlling Entity" means any entity or one of a group of entities directly or indirectly
having Control of any entities or group of entities.
"Controlled Group" means a group of entities directly or indirectly subject to Control by
the same entity or group of entities, including the entity that has the Control of the other entities.
"External Commingled Fund" means a Commingled Fund in which the Issuer, the
Corporation and all Related Persons own, in the aggregate, not more than ten percent of the
beneficial interests in such fund.
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"Gross Proceeds" means (a) Sale Proceeds, (b) any Transferred Proceeds, (c) all
amounts in the funds and accounts created with respect to the Bonds (other than the Rebate
Fund), (d) any other Replacement Proceeds, and (e) amounts actually or constructively received
from the investment and reinvestment of amounts described in (a), (b) or (c) above.
"Guaranteed Investment Contract" or "GIC" means (i) any investment that has
specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated
interest rate and (ii) any agreement to supply investments on two or more future dates (e.g., a
forward supply contract).
"Indenture" means that certain Indenture of Trust pursuant to which the Bonds are being
issued and identified in the preamble to this Tax Agreement.
"Loan Agreement" means the Loan Agreement dated as of December 1, 1998 between
the Corporation and the Issuer.
"Person" means any natural person, firm, joint venture, association, partnership,
business trust, corporation, public body, agency or political subdivision thereof or any other
similar entity.
"Project Certificate" means the Certificate Regarding the Financed Property and the
Expenditure of Funds, dated the date hereof of the Corporation, executed and delivered in
connection with the issuance of the Bonds.
"Purchaser" means American National Bank and Trust Company of Chicago.
"Rebate Fund" means the Rebate Fund created pursuant to Section 4.1 hereof, which is
not pledged to the payment of the Bonds.
"Reimbursed Expenditures" means amounts, if any, used from Sale Proceeds and
investment earnings thereon to reimburse the Corporation for an expenditure paid prior to
Closing.
"Regulations" means United States Treasury Regulations dealing with the tax-exempt
bond provisions of the Code.
"Related Obligation" means any obligation of the Issuer, the Corporation or any Related
Person to either of them arising under any credit enhancement or liquidity arrangement relating
to the Bonds or the Loan Agreement.
"Related Person" means any member of a Controlled Group of which the Issuer or the
Corporation is a member.
"Replacement Proceeds" means (a) amounts in debt service funds, redemption funds,
reserve funds, replacement funds or any similar funds to the extent reasonably expected to be
used directly or indirectly to pay principal or interest on the Bonds or the obligations under the
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Loan Agreement, or the obligations arising under any Related Obligation, (b) any amounts for
which there is provided, directly or indirectly, a reasonable assurance, in substance, that the
amount will be available to pay principal or interest on the Bonds or the obligations under the
Loan Agreement or the obligations arising under any Related Obligation even if the Issuer or the
Corporation encounters financial difficulties, including any liquidity device or negative pledge to
the extent described in Section 1.148-1(c)(3)(ii) of the Regulations and (c) any other amounts
treated as replacement proceeds under Section 1.148-1(c) of the Regulations.
"Sale Proceeds" means amounts actually or constructively received from the sale of the
Bonds, including (a) amounts used to pay placement agent's discount or compensation and
accrued interest, other than accrued interest for a period not greater than one year before Closing
but only if it is to be paid within one year after Closing and (b) amounts derived from the sale of
any right that is part of the terms of a Bond or is otherwise associated with a Bond (e.g., a
redemption right).
"Tax Agreement" means this Tax Exemption Agreement and Certificate.
"Tax Exempt Obligations" means (i) obligations described in Section 103(a) of the Code,
the interest on which is not includable in the gross income of the owner thereof for federal
income tax purposes and is not an item of tax preference for purposes of the alternative minimum
tax imposed by Section 55 of the Code, (ii) interests in regulated investment companies to the
extent that at least 95 percent of the income to the holder of the interest is interest which is not
includable in the gross income of any owner thereof for federal income tax purposes and is not
an item of tax preference for purposes of the alternative minimum tax imposed by Section 55 of
the Code and (iii) certificates of indebtedness issued by the United States Treasury pursuant to
the Demand Deposit State and Local Government Series program described in 31 CFR part 344.
"Yield" or "yield" means that discount rate which when used in computing the present
value of all payments of principal and interest paid and to be paid on an obligation (using
semiannual compounding on the basis of a 360-day year) produces an amount equal to the
obligation's purchase price, including accrued interest.
ARTICLE II
DESCRIPTION OF THE PURPOSE
OF THE BONDS
Section 2.1. Purpose of the Bonds. The Bonds are being issued to provide a portion of
the funds necessary to finance the construction of certain educational facilities of the
Corporation. The assets financed, directly or indirectly, in whole or in part, from the proceeds of
the Bonds or of any obligation refinanced, directly or indirectly, in whole or in part, from the
proceeds of the Bonds are referred to collectively as the "Project." A breakdown of the sources
and uses of funds is attached as Exhibit A.
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The Issuer is issuing the Bonds pursuant to its home rule power pursuant to the
Constitution and the laws of the State of Illinois and of the Issuer, as
supplemented and amended (the "Act").
Section 2.2. Reimbursement. None of the Sale Proceeds of the Bonds or investment
earnings thereon will be used to reimburse the Corporation for Reimbursed Expenditures.
Section 2.3. Constructing, Renovating, Improving and Equipping of Project—Binding
Commitment and Timing. The Corporation will, within six months of the date of this Agreement,
incur a substantial binding obligation (not subject to contingencies within the control of the
Issuer, the Corporation or any Related Person to any of the foregoing) to a third party to expend
at least five percent (5%) of the proceeds of the Bonds on the Project. It is expected that the
work of constructing, renovating, improving and equipping the Project and the expenditure of
amounts deposited in the Construction Fund will continue to proceed with due diligence through
, at which time all proceeds of the Bonds and investment earnings thereon
will have been spent. It is expected that all proceeds of the Bonds deposited in the Construction
Fund, including investment earnings on the Construction Fund, will be spent to pay costs of the
Project in accordance with the estimated drawdown schedule contained in Exhibit B.
Estimated total investment income from the proceeds of the Bonds as set forth in
Exhibit A has been calculated on the basis of an expected overall investment rate as set forth
therein on such amounts assuming that the costs of the Project are drawn down in accordance
with the schedule contained in Exhibit B. The foregoing assumptions represent the Corporation's
best estimate, as of this date, of the drawdown schedule of and investment earnings on the
proceeds of the Bonds. In accordance with the terms of the Indenture, the investment earnings
on the moneys on deposit in the Bond Fund will be used to pay interest on the Bonds.
With respect to moneys on deposit in any Fund held under the Indenture, including
investment earnings thereon, the Corporation has retained flexibility under the Indenture to use
such moneys to make the necessary deposit to the Rebate Fund on any payment due to the
United States Government in accordance with this Tax Agreement, if any. If such excess
moneys are not so used, the rebate or other amount due to the United States Government, if any,
will be paid from the Corporation's general funds.
Section 2.4. Working Capital. All Sale Proceeds (including investment earnings
thereon) will be used, directly or indirectly, to pay principal and interest on the Bonds, except
that such proceeds may also be used for the following:
(i). Costs of Issuance and qualified administrative costs of investments within
the meaning of Sections 1.148-5(e)(2)(i), 1.148-5(e)(2)(ii) or 1.148-5(e)(3) of the
Regulations;
(ii) payments of rebate or yield reduction payments made to the United States
of America under the Regulations;
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(iii) principal of or interest on the Bonds paid from unexpected excess Sale
Proceeds and investment proceeds thereon; and
(iv) payment of the costs of qualified guarantees (as defined in Section 1.148-
4(f) of the Regulations) of the Bonds or payments for a qualified hedge (if any) for the
Bonds.
Section 2.5. Consequences of Contrary Expenditure. The Issuer and the Corporation
acknowledge that if Gross Proceeds of the Bonds are spent for purposes other than as permitted
by Section 2.4 hereof, a like amount of then available funds of the Corporation will be treated as
unspent Sale Proceeds which, among other things, may be subject to the yield restrictions
described in Section 6.2 hereof and rebate described in Article IV hereof.
Section 2.6. Investment of Bond Proceeds. No portion of the Bonds is being issued
solely for the purpose of investing Sale Proceeds or investment earnings thereon at a yield higher
than the yield on the Bonds.
Section 2.7. Hedges. Neither the Issuer, the Corporation nor any Related Person has
entered into or expects to enter into any hedge (e.g., interest rate swap, interest rate cap, futures
contract, forward contract or an option) with respect to the Bonds. The Issuer and the
Corporation acknowledge that any such hedge could affect the calculation of Bond yield under
the Regulations and that the Internal Revenue Service could recalculate Bond yield if the failure
to account for the hedge fails to clearly reflect the economic substance of the transaction.
Section 2.8. Grants. None of the Sale Proceeds or investment earnings will be used to
make grants to any Person.
ARTICLE HI
USE OF PROCEEDS;
DESCRIPTION OF FUNDS
Section 3.1. Use of Proceeds;Funds Established. (a) The Bond proceeds will be used as
follows:
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ORIGINAL PROCEEDS
OF THE BONDS
APPLICATION
$ of Bond proceeds. $ of proceeds of the Bonds to the credit
of the Construction Fund to finance certain of the
costs of the Project ($__ of which
constitutes future Project costs);
$ of Bond Proceeds to the credit of the
Construction Fund to pay the expenses of issuing the
Bonds; and
(b) Other than the foregoing funds and accounts the only fund or account created under
the Indenture is the Bond Fund. No proceeds of the sale of the Bonds have been deposited in
such fund at Closing.
(c) Except as otherwise provided herein, earnings on investment of moneys in any fund
shall be retained in the fund or account to which the investment is credited from which such
income is derived, in accordance with the Indenture.
(d) Principal and premium, if any, and interest on the Bonds will be paid from the Bond
Fund. In the event funds are deposited into the Bond Fund pursuant to Section 5.15 of the Loan
Agreement relating to the application of gifts, such funds may, at the option of the Issuer, upon
the direction of the Corporation, remain on deposit in the Bond Fund and be invested at a rate of
interest not in excess of the Yield on the Bonds until such time as the Bonds may be redeemed in
accordance with Section 501(a) of the Indenture at a redemption price equal to 100% of the
principal amount thereof plus accrued interest to the redemption date or an opinion of Bond
Counsel is received in accordance with Section 5.15 of the Loan Agreement.
(e) Costs of the Project will be paid from the Construction Fund and no other moneys
are expected to be deposited therein. Investment earnings on moneys in the Construction Fund
are expected to be retained in the Construction Fund until delivery of the Completion Certificate,
and thereafter will be applied in accordance with the Indenture.
(f) Costs of Issuance in an amount not exceeding two percent of the proceeds of the
Bonds incurred in connection with the Bonds will be paid from the Construction Fund. Any
moneys remaining in the Construction Fund after the payment of all Costs of Issuance permitted
to be paid from such fund shall be retained in the Construction Fund and disbursed to pay other
costs of the Project. Any other Costs of Issuance will be paid by the Corporation from a source
other than tax-exempt financing.
(g) Payments made by the Corporation under the Loan Agreement will be deposited in
the Bond Fund, when received by the Trustee, to be used to pay interest on and principal of the
Bonds, as provided in the Indenture.
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Section 32. Purpose of the Bond Fund. The Bond Fund will be used primarily to
achieve a proper matching of revenues and earnings with principal and interest payments on the
Bonds in each bond year. It is expected that the Bond Fund will be depleted at least once a year,
except for a reasonable carry-over amount not to exceed the greater of (i) the earnings, in the
aggregate, on the investment of moneys in such fund for the immediately preceding bond year or
(ii) in the aggregate, one-twelfth (1/12th) of the principal and interest payments on the Bonds for
the immediately preceding bond year.
Section 3.3. No Replacement, Sinking or Pledged Funds. (a) Except as otherwise
provided in Section 3.1 and the Loan Agreement, after the issuance of the Bonds on this date,
neither the Issuer, the Corporation nor any Related Person has on hand any property, including
cash and securities ("Property"), that is legally required or otherwise restricted (no matter where
held or the source thereof) to be used, directly or indirectly, for the purposes for which the Bonds
are being issued.
(b) Except as otherwise provided in Section 3, neither the Issuer, the Corporation nor
any Related Person has established or expects to establish any funds or accounts (no matter
where held or the source thereof) that may result in the creation of Replacement Proceeds.
(c) Except as otherwise provided in Section 3, no property has been or is expected to be
pledged or otherwise restricted (no matter where held or the source thereof) to provide
reasonable assurance, in the event the Issuer, the Corporation or any Related Person encounters
financial difficulty, of its availability to be used, directly or indirectly, for the payment of
amounts due or to become due on the Bonds, the Loan Agreement or any Related Obligation.
No compensating balance, negative pledge, liquidity account or similar arrangement exists with
respect to, in any way, the Bonds, or the Loan Agreement or any Related Obligation.
(d) No portion of the Bonds is being issued solely for the purpose of investing the
proceeds thereof at a yield higher than Bond yield.
(e) The term of the Bonds is not longer than is reasonably necessary for the
governmental purposes of the Bonds. The weighted average maturity of the Bonds does not
exceed 120 percent of the average reasonably expected economic life of the property being
financed,refinanced or reimbursed, directly or indirectly, in whole or in part with the proceeds of
the Bonds, determined under Section 147(b) of the Code, as evidenced in the Project Certificate.
ARTICLE IV
REBATE FUND; ARBITRAGE REBATE REQUIREMENT
Section 4.1. Creation of Rebate Fund. The Issuer shall immediately create and establish
with the Trustee a special trust fund in the name of the Issuer to be known as the "Rebate Fund -
Summit School Inc." (the "Rebate Fund"), which shall be continuously held, invested,
expended and accounted for in accordance with the Act, the Indenture and this Tax Agreement;
provided, however, that the Rebate Fund need not be maintained if the Issuer, the Trustee and the
Corporation shall have received an opinion of Bond Counsel acceptable to the Issuer to the effect
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that failure to maintain the Rebate Fund shall not cause the Bonds to become arbitrage bonds
within the meaning of Section 148 of the Code or otherwise adversely affect the exclusion from
gross income of interest on the Bonds for federal income tax purposes. Moneys in the Rebate
Fund shall not be considered moneys held under the Indenture and shall not constitute a part of
the "trust estate" held for the benefit of the Bondholders, or, except as provided in Section 9.2
hereof, for the benefit of the Issuer or the Corporation. Except as provided in the Regulations,
moneys in the Rebate Fund (including earnings and deposits therein) shall be held in trust by the
Trustee and shall be held for future payment to the United States Government as required by
Section 148(f) of the Code and by the Regulations and as contemplated under the provisions of
this Tax Agreement.
Section 42. Issuer and Corporation Covenants. The Issuer and the Corporation
covenant and agree to take such actions and make, or cause to be made, all calculations, transfers
and payments that may be necessary to comply with the rebate requirements contained in
Section 148(f) of the Code with respect to the Bonds at the Corporation's sole expense. The
Issuer and the Corporation will make, or cause to be made, rebate payments in accordance with
law with respect to the Bonds. Bond Counsel has provided a letter attached hereto as Exhibit D
concerning the principles set forth in certain Regulations regarding rebate.
Section 43. Records. The Trustee and the Corporation agree to keep and retain or cause
to be kept and retained, until , adequate records with respect to the investment of
all Gross Proceeds and amounts in the Rebate Fund. Such records shall include (i) purchase
price, (ii) purchase date, (iii) type of investment, (iv) accrued interest paid, (v) interest rate (if
applicable), (vi) principal amount, (vii) maturity date, (viii) interest payment date (if applicable),
(ix) date of liquidation, (x) receipt upon liquidation and (xi) such other information as is
requested by the Issuer. If any investment becomes Gross Proceeds of the Bonds on a date other
than the date such investment is purchased, the records required to be kept shall include the fair
market value of such investment on the date it becomes Gross Proceeds. If any investment is
retained after the date the last Bond is retired, the records required to be kept shall include the
fair market value of such investment on the date the last Bond is retired. Amounts will be
segregated wherever held in order to maintain these records.
Section 4.4. Prohibited Payments; Certificates of Deposit and Investment Agreements.
The Corporation will direct the Trustee to, and to the extent the Trustee has investment discretion
the Trustee shall, continuously invest all amounts that constitute Gross Proceeds and amounts in
the Rebate Fund in investments permitted under this Tax Agreement and the Indenture. In so
directing the Trustee, the Corporation shall, and to the extent the Trustee has investment
discretion in making such investments, the Trustee shall, take into account prudent investment
standards and the date on which such moneys may be needed. Except as provided in the next
sentence, all amounts that constitute Gross Proceeds and all amounts in the Rebate Fund shall be
invested at all times to the greatest extent practicable in investments permitted under this Tax
Agreement and the Indenture, and no amounts may be held as cash or be invested in zero yield
investments other than obligations of the United States purchased directly from the United
States. In the event moneys cannot be invested, other than as provided in this sentence due to the
denomination, price or availability of investments, such amounts shall be invested in an interest
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bearing deposit account of a bank with a yield not less than that paid to the general public or held
uninvested to the minimum extent necessary.
In addition to the investments permitted in the immediately preceding paragraph, if the
Corporation shall direct or the Trustee shall invest Gross Proceeds and any amounts in the
Rebate Fund in the investments described below, such investments shall be made only in
accordance with the following provisions:
(a) Investments in certificates of deposit of banks or savings and loan
associations that have fixed interest rates, fixed payment schedules and substantial
penalties for early withdrawal shall be made only if (A) the yield on the certificate of
deposit (i) is not less than the yield on reasonably comparable direct obligations of the
United States and (ii) is not less than the highest yield that is published or posted by the
provider to be currently available from the provider on reasonably comparable
certificates of deposit offered to the public or (B) the investment is an investment in a
Guaranteed Investment Contract and qualifies under (b) below.
(b) Investments in GICs shall be made only if
(i) a bona fide solicitation is made for a specified GIC
and at least three bona fide bids from different providers that have no
material financial interest in the Bonds (e.g., as underwriters or
brokers) are received;
(ii) the highest-yielding GIC for which a qualifying bid is
made (determined net of broker's fees) is in fact purchased;
(iii) the Yield on the GIC (determined net of broker's
fees) is not less than the Yield then available from the provider on
reasonably comparable GICs, if any, offered to other persons from a
source of funds other than Gross Proceeds of tax-exempt obligations;
(iv) the determination of the terms of the GIC takes into
account as a significant factor the reasonably expected drawdown
schedule for the amounts to be invested, except for amounts
deposited in the Bond Fund;
(v) the terms of the GIC, including collateral security
requirements, are reasonable;
(vi) the obligor on the GIC certifies the administrative
costs that it is paying or expects to pay to third parties in connection
with the GIC;
(vii) any agent used to conduct the bidding for the GIC
does not bid to provide the GIC;
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(viii) all bidders for the GIC have equal opportunity to bid
so that, for example, no bidder is given the opportunity to review
others bids (a last look) before bidding; and
(ix) all bidders for the GICs are reasonably competitive
providers of investments of the type purchased.
Moneys to be rebated to the United States shall be invested in investments maturing on or
prior to the anticipated rebate payment date. All investments of Gross Proceeds and amounts in
the Rebate Fund shall be bought and sold at fair market value. The fair market value of an
investment is the price at which a willing buyer would purchase the investment from a willing
seller in a bona fide, arm's-length transaction. Except as described in (a) and (b) above and
except for United States Treasury Obligations that are purchased directly from the United States
Treasury, no investment that is not of a type traded on an established securities market, within
the meaning of the Regulations under Section 1273 of the Code, will be purchased.
Section 4.5. Arbitrage Elections. Attached hereto as Exhibit E is a schedule of elections
regarding certain matters with respect to arbitrage executed by the Issuer on the date hereof. The
elections made by the Issuer on Exhibit E are incorporated by reference as if made herein.
ARTICLE V
ADDITIONAL PAYMENTS
In addition to the amounts provided in this Tax Agreement, the Corporation hereby
agrees to pay to the Trustee for deposit in the Rebate Fund for payment to the United States any
amount which under Section 148(f) of the Code and/or under the Regulations must be deposited
in the Rebate Fund for payment to the United States with respect to the Bonds but which is not
available under the Indenture for transfer to the Rebate Fund for payment to the United States.
ARTICLE VI
YIELD AND YIELD LIMITATIONS
Section 6.1. Issue Price. The Purchaser has certified, inter alia, in Exhibit C that the first
offering price at which it sold all of the Bonds is par.
Section 61. Yield Limits. (a) All Gross Proceeds and all amounts in the Rebate Fund, to
the extent not exempted in (b) below, shall be invested at market prices and at a yield (after
taking into account any yield reduction payments to the extent permitted by and made pursuant
to Section 1.148-5(c) of the Regulations) not in excess of the yield on the Bonds.
(b) The following may be invested without yield restriction:
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(i) amounts invested in Tax-Exempt Obligations (to the extent permitted
by the Act and the Indenture);
(ii) amounts in the Rebate Fund;
(iii) amounts deposited in the Bond Fund (other than capitalized interest)
that have not been on deposit under the Indenture for more than 13 months, so long
as such fund continues to qualify as a bona fide debt service fund as described in
Section 3.2 hereof;
(iv) amounts in the Construction Fund (other than amounts used to pay
Costs of Issuance) prior to the earlier of (a) three years after the date the Bonds
were issued or (b) the completion (or abandonment) of the Project;
(v) amounts in the Construction Fund used to pay Costs of Issuance
prior to the earlier of thirteen months after Closing or the payments of all Costs of
Issuance to be paid from that fund;
(vi) all amounts for the first 30 days after they become Gross Proceeds;
and
(vii) all amounts derived from the investment of Sale Proceeds and
investment earnings thereon for a period of one year from the date received.
(c) An amount not to exceed $100,000 (the "Minor Portion") may be invested without
regard to yield restriction.
Section 6.3. Continuing Nature of Yield Limits. Subject to Section 9.6, once moneys are
subject to the yield limits of Section 6.2(a), they remain yield restricted until they cease to be
Gross Proceeds.
Section 6.4. Yield on the Loan Agreement. Payments of repayment installments under
the Loan Agreement will be due on not later than the day and in the same amount as payments
are due on the Bonds. The earnings and profits of any temporary investments of amounts held
under the Indenture, if any, will accrue to the Corporation, not to the Issuer.
Section 65. Other Payments Relating to the Bonds. The only amounts charged by the
Issuer for the issuance of the Bonds are the issuance fee of$
Except for (a) the receipt of payments under the Loan Agreement as described above, (b)
the payment of the Costs of Issuance relating to the Bonds, (c) normal and customary fees and
expenses of the Trustee as set forth in Section 8.1 hereof and (d) the payment of the fee of the
Issuer as described above no consideration, in cash or in kind, is being or will be paid by any
Person to any Person in connection with or relating to issuing, carrying or redeeming the Bonds
or repaying the amounts owing under the Loan Agreement.
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Section 6.6. Restricted Yield Investments; Prohibited Investments. Except for
investments meeting the requirements of Section 6.2(b), investments of Gross Proceeds shall not
be made in (i) investments constituting obligations of or guaranteed, directly or indirectly, by the
United States (except obligations of the United States Treasury, obligations guaranteed by the
Federal Housing Administration, the Federal National Mortgage Association, the Federal Home
Loan Mortgage Corporation, the Government National Mortgage Association, the Student Loan
Marketing Association, any guarantee by the Bonneville Power Authority pursuant to the
Northwest Power Act (16 U.S.C. 839d) as in effect on the date of enactment of the Tax Reform
Act of 1984, or investments in obligations issued pursuant to Section 21B(d)(3) of the Federal
Home Loan Bank Act, as amended (e.g., Refcorp Strips)); or (ii) federally insured deposits or
accounts (as defined in Section 149(b)(4)(B) of the Code).
ARTICLE VII
PROGRAM COVENANTS
The Bonds are being issued by the Issuer as part of its program to finance projects under
the Act (the "Program"). In carrying out its Program, the Issuer acquires, to carry out the
governmental purposes of bonds issued by the Issuer, obligations of not for profit corporations
("Acquired Program Obligations") that are organizations described in Section 501(c)(3) of the
Code and are exempt from federal income taxation under Section 501(a), which are engaged in
trades or businesses that are related to their exempt purposes ("501(c)(3) Organizations"). At
least 95% of all Acquired Program Obligations acquired under the Program, by amount of cost
outstanding, are evidences of loans to 501(c)(3) Organizations. At least 95% of all amounts
received by the Issuer with respect to Acquired Program Obligations will be used for one or
more of the following purposes: to pay principal, interest or redemption premiums on
obligations issued by the Issuer in pursuance of the Program; to pay, or reimburse the Issuer for
payment of, administrative costs of obligations issued pursuant to the Program or of the Program
and anticipated future losses directly related to the Program; to make additional loans for the
same general purposes of the Program; or to redeem and retire Issuer obligations at the next
earliest possible date of redemption. The documents relating to the Bonds provide that neither
the Corporation nor any Related Person shall purchase the Issuer's obligations in any amount
related to the amount of obligations so acquired by the Issuer under the Loan Agreement and
there is no arrangement, formal or informal, to the contrary.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1. Trustee Charges and Expenses; Other Expenses. The Corporation hereby
agrees to pay to the Trustee all reasonable fees, charges and expenses of the Trustee charged or
incurred in connection with its services as depository hereunder and any payments due the
Trustee under Section 8.3 hereof, including legal fees and expenses of agents such as accountants
employed in connection with this Tax Agreement, provided that any such agent shall only be
employed with the written consent of the Corporation, which consent shall not be unreasonably
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withheld. The Corporation shall pay all reasonable fees, charges and expenses of the Issuer
incurred in connection with the Tax Agreement.
Section 8.2. Resignation and Removal of the Trustee. The Trustee at the time acting
hereunder may at any time resign and be discharged from the trusts created by this Tax
Agreement by giving written notice to the Issuer and the Corporation as provided in the
Indenture.
The Trustee may be removed by the owners of a majority in aggregate principal amount
of the Bonds at any time by prior written notice delivered to the Trustee, the Issuer and the
Corporation (i) stating that a new Trustee has been designated and (ii) stating the date such
termination is to become effective.
The Trustee, upon the effective appointment or designation of a successor Trustee, shall
transfer or deliver all moneys and investments held by it pursuant to this Tax Agreement to such
successor Trustee. Should any transfer, assignment or instrument in writing from the Issuer be
required by the Trustee or the successor Trustee in order more fully and certainly to vest in such
successor Trustee the moneys, investments, powers and duties hereby vested or intended to be
vested in the Trustee hereunder, any such transfer, assignment or instrument in writing shall, on
the request of the Trustee or such successor Trustee, be executed, acknowledged and delivered
by the Issuer.
Any corporation into which the Trustee may be merged or converted or with which it
may be consolidated, or to whom it may sell or transfer its corporate trustee business as a whole
or substantially as a whole, or any corporation or association resulting from any such conversion,
sale, merger, consolidation or transfer to which the Trustee or any successor to it shall be a party,
provided such corporation or association is eligible under the Indenture to be Trustee, shall be
and become the successor Trustee hereunder without the execution or filing of any instrument or
other act, deed or conveyance on the part of any of the parties hereto, unless otherwise required
by law.
Section 8.3. Acceptance. The Trustee shall accept the trusts imposed upon it by this Tax
Agreement and agree to perform said trusts, but only upon and subject to the express terms and
conditions stated in Article VIII of the Indenture.
The Trustee shall not be under any liability for interest on any moneys received here-
under except as provided in this Tax Agreement with respect to the continuous investment of
funds and except as may otherwise be agreed upon.
When any consent or other action by the Trustee is called for pursuant to this Tax
Agreement, it may defer such action pending such investigation or inquiry or receipt of such
supporting evidence as it may require. The Trustee shall be entitled to reimbursement for
expenses reasonably incurred and advances reasonably made, with interest, in the performance of
its obligations hereunder. Notwithstanding anything to the contrary herein, absent negligence or
willful misconduct, the Trustee shall not be liable to the Issuer, the Corporation or any
bondholders for any action taken or not taken hereunder.
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The Trustee will take such further action as the Corporation may direct in order to
comply with the rebate requirements contained in Section 148(f) of the Code.
ARTICLE IX
PROJECT CERTIFICATE; MISCELLANEOUS
Section 9.1. Project Certificate. The Corporation covenants that it will take all actions
that may be necessary to cause all representations and covenants in the Project Certificate with
respect to future events to be true.
Section 92. Termination;Interest of Corporation and Issuer in Rebate Fund. This Tax
Agreement shall terminate if(a) the Issuer shall have filed with the Trustee and the Corporation a
written notice of termination of this Tax Agreement, which notice shall contain a certification
that the Bonds have been fully paid and retired, (b) all amounts due to the Trustee under
Section 8.1 hereof shall have been paid to the Trustee, and (c) all amounts remaining on deposit
in the Rebate Fund, if any, shall have been paid to or upon the order of the United States and any
other payments required to satisfy the rebate provisions of the Code have been made to the
United States. Notwithstanding the foregoing, the provisions of Section 4.3 hereof shall not
terminate until the sixth anniversary of the date the Bonds are fully paid and retired.
Termination of this Tax Agreement shall not affect the provisions of Section 8.3 hereof with
respect to the duties and liabilities of the Trustee.
The parties hereto recognize that amounts, if any, on deposit in the Rebate Fund are held
for payments to the United States Treasury. The foregoing notwithstanding, the Corporation and
the Issuer shall be deemed to have an interest in such amounts to the extent such amounts
represent amounts available to satisfy the obligation of the Issuer and the Corporation to rebate
certain amounts to the United States Treasury.
Section 9.3. No Common Plan of Financing. Subsequent to November 1, 1998, neither
the Issuer nor the Corporation nor any Related Person has sold (nor will either the Issuer or the
Corporation or any Related Person sell within 15 days after the date hereof) any other obligations
that are reasonably expected to be paid out of substantially the same source of funds as the
Bonds or will be paid directly or indirectly from the proceeds of the Bonds.
Section 9.4. No Sale of Financed Properties. No portion of any of the Corporation's
properties financed or refinanced with proceeds of the Bonds is expected to be sold or otherwise
disposed of prior to the last maturity of the Bonds, except as otherwise provided in the Loan
Agreement and the Project Certificate.
Section 95. Future Events. The Issuer, the Trustee and the Corporation acknowledge
that any changes in facts or expectations from those set forth herein may result in different yield
restrictions or rebate requirements from those set forth herein and in the letter of Bond Counsel
attached as Exhibit D and agree that Bond Counsel will be contacted if such changes do occur
and, with respect to the Trustee, only if the Trustee is aware of such changes.
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Section 9.6. Permitted Changes; Opinion of Bond Counsel. The yield restrictions
contained in Section 6.2(a) or any other restriction or covenant contained herein need not be
observed or may be changed if the Issuer, the Trustee and the Corporation receive an opinion of
Bond Counsel to the effect that such nonobservance or change will not result in the loss of any
exemption for the purpose of federal income taxation to which interest on the Bonds is otherwise
entitled.
Section 9.7. Severability. If any clause, provision or Section of this Tax Agreement is
ruled invalid by any court of competent jurisdiction, the invalidity of such clause, provision or
Section shall not affect any of the remaining clauses, sections or provisions hereof.
Section 9.8. Counterpart. This Tax Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and the same
instrument.
Section 9.9. Notices. All notices, demands, communications and requests which may or
are required to be given hereunder by any party hereto shall be deemed given on the date on
which the same shall have been mailed by registered or certified mail,postage prepaid, addressed
as follows:
If to the Issuer:
City of Elgin, Illinois
150 Dexter Court
Elgin, Illinois 60120
Attention: Fiscal Services Manager
If to the Corporation:
Summit School, Inc.
333 West River Road
Elgin, Illinois 60123
Attention: President
If to the Trustee:
American National Bank and Trust Company of Chicago
120 South LaSalle Street
Chicago, IL 60603
Attention: Corporate Trust Department
The Issuer, the Trustee and the Corporation may, by notice given to the others, designate
any different addresses to which subsequent notices, demands, requests or communications shall
be sent.
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Section 9.10. Successors and Assigns. The terms, provisions, covenants and conditions of
this Tax Agreement shall bind and inure to the benefit of the respective successors and assigns of
the Issuer, the Corporation and the Trustee.
Section 9.11. Headings. The headings of this Tax Agreement are inserted for
convenience only and shall not be deemed to constitute a part of this Tax Agreement.
Section 9.12. Governing Law. This Tax Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois.
Section 9.13. Expectations. The Issuer and the Corporation have reviewed the facts,
estimates and circumstances presented by the Corporation and other Persons in existence on the
date of issuance of the Bonds. Such facts, estimates and circumstances, together with the expec-
tations of the Issuer and the Corporation as to future events, are set forth in summary form in this
Tax Agreement. Such facts and estimates are true and are not incomplete in any material
respect. On the basis of such facts and estimates contained herein and in the Project Certificate,
the undersigned have adopted the expectations contained herein. On the basis of such facts,
estimates, circumstances and expectations, it is not expected that the proceeds from the sale of
the Bonds or any other moneys or property will be used in a manner that will cause the Bonds to
be arbitrage bonds within the meaning of Section 148 of the Code and Regulations. Such
expectations are reasonable and there are no other facts, estimates and circumstances that would
materially change such expectations. To the extent the Issuer is relying on the representations,
expectations and covenants of the Corporation, it is reasonable and prudent for the Issuer to do
so.
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DATED: December J, 1998.
CITY OF ELGIN, ILLINOIS
By
Mayor
Attest:
By:
Its:
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, as Trustee
By
Trust Officer
SUMMIT SCHOOL, INC.
By
President
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EXHIBIT A
SOURCES AND USES OF FUNDS
SOURCES
Sale Proceeds of Bonds $
TOTAL $
U SES
Construction Fund $
Costs of Issuance Expenses
TOTAL $
A-1
EXHIBIT B
DRAWDOWN SCHEDULE
AMOUNT EXPECTED
TO BE EXPENDED
DATE ON WHICH BOND FOR THE PROJECT,
PROCEEDS ARE EXPECTED INCLUDING COSTS
TO BE EXPENDED OF ISSUANCE
$
Total:
B-1
EXHIBIT C
CERTIFICATE OF PURCHASER
The undersigned, an officer of American National Bank and Trust Company of Chicago
(the "Purchaser"), hereby certifies on behalf of the Placement Agent as follows:
1. The Purchaser hereby confirms that the first price at which all of the Bonds have
been sold to the public (excluding bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents or wholesalers) is equal to par, there
being no accrued interest. The initial interest rate for the Bonds was the lowest rate necessary to
sell the Bonds at par at Closing.
2. All of the Bonds have been the subject of a bona fide initial offering to the public
(excluding bond houses, brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers) at prices equal to par. Based upon our
assessment of then prevailing market conditions, par is not greater than the fair market value of
each Bond as of the Sale Date.
3. The Purchaser hereby confirms that the weighted average maturity of the Bonds is
not greater than years.
4. The Purchaser will not receive any moneys from the proceeds of the sale of the
Bonds.
All terms not defined herein shall have the same meanings as in the Tax Exemption
Certificate and Agreement, to which this Certificate is attached.
Dated: December_, 1998
Very truly yours,
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By
Its
C-1
EXHIBIT D
December_, 1998
City of Elgin, Illinois
Elgin, Illinois
American National Bank and Trust
Company of Chicago, as Trustee
Chicago, Illinois
Summit School, Inc.
Elgin, Illinois
Re: $1,200,000 City of Elgin, Illinois Revenue Bonds
Series 1998 (Summit School Project)
Ladies and Gentlemen:
We have acted as Bond Counsel in connection with the issuance on this date of the
Bonds. In a Tax Exemption Agreement and Certificate delivered by you on this date (the "Tax
Agreement"), the City of Elgin, Illinois (the "Issuer") and Summit School, Inc. (the
"Corporation") have agreed to comply with the arbitrage rebate requirements of Section 148 of
the Internal Revenue Code of 1986, and American National Bank and Trust Company of
Chicago, as trustee (the "Trustee"), has agreed to comply with certain of such requirements.
The purpose of this letter is to set out generally the rules that you must follow to comply with the
Tax Agreement. This letter does not describe how to compute the amount to be rebated to the
United States, and due to the complexity involved, the computation will, in all likelihood,require
consultation with an expert.
The Internal Revenue Service has issued final and temporary regulations relating to
arbitrage and rebate matters. This memorandum is based upon these regulations, which are
subject to change in the future. Such changes may require future recalculation of rebate
amounts. For these reasons, it is very important for you and your tax advisors to keep abreast of
developments in this area.
The following advice is based on factual information contained in the Tax Agreement. If
the facts or expectations stated therein change, please call us to determine whether this results in
a change in the following rules. Please note that the rules governing permissible Yield on
investments set forth in the Tax Agreement are in addition to the rebate rules and, although you
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might be allowed to earn a Yield in excess of Bond Yield under the Yield rules, such excess may
still be required to be rebated. In some cases, the payment of rebate may assist in compliance
with the Yield restriction requirements. Thus, rebate compliance and Yield restriction
compliance may operate together rather than independently. In any case, rebate compliance is
essential to the maintenance of tax exemption even if no amounts are subject to Yield restriction.
Terms not defined herein shall have the meanings set forth in the Tax Agreement.
General Rule. Except in the case of certain exceptions and elections as summarized
below, every five years and at the final retirement of all of the Bonds the Corporation must
compute and pay (as described below) to the United States the difference (the "Excess
Earnings") between the amount earned on all investments and reinvestments of"gross proceeds"
(as listed on Appendix A) of the Bonds ("Actual Earnings") and the amount that would have
been earned if gross proceeds of the Bonds had been invested at Bond Yield (the "Allowable
Earnings"). Earnings to be taken into account are not determined under normal tax accounting
principles. In addition to taking into account earnings received (either actually or
constructively), receipts with respect to investments that have not been liquidated are computed
by assuming that such investments are, in essence, converted to cash as of each computation date
(as such dates are described below). The "cash value" of investments determined in this manner
is subject to many special rules. Under many circumstances, the "market value" of an
investment may be used. The application of these rules is complex and requires a comprehensive
understanding of the rebate regulations.
To properly plan for the eventual payment of rebate to the United States, we suggest that
you make annual calculations estimating rebate liability. The Tax Agreement establishes a
"rebate fund" into which the Corporation may also wish to deposit annual estimates of rebate
liability so that the payment to the United States may be made from amounts set aside. Federal
tax law does not, however, require such set asides. In any event, we strongly encourage you, at
the Corporation's expense, to make an annual estimate of the rebate liability. The calculations
can be lengthy and often produce surprising results. Experience in operating our rebate
calculation service indicates that the calculation is far more difficult as the period of time for
which the calculation is being performed increases.
Phantom Income. With certain exceptions, amounts paid for administrative costs are not
treated as increasing earnings for purposes of rebate calculations. Administrative costs that do
not increase earnings are reasonable, direct administrative costs, other than carrying costs, and
generally include brokerage commissions for the purchase of investment agreements (but only to
the extent that the commission does not exceed 0.05 percent of the amount reasonably expected
to be invested per year) and separately stated brokerage or selling commissions, but not legal and
accounting fees,record keeping, custody, and similar costs and expenses.
Computation Dates. Each calculation of Excess Earnings should be made as of a
"Computation Date." The Computation Date should be the same date in each calendar year
(except that the final Computation Date should be the date on which all of the Bonds are actually
retired). As indicated above, a Computation Date is required at least every five years. The first
Computation Date must be on or before the fifth anniversary of the issuance of the Bonds. Each
Computation Date, other than the Final Computation Date, is the end of a bond year. A bond
D-2
year ends on any date within one year of the issuance of the Bonds that you choose. If you do
not choose an ending date for a bond year, it will be the anniversary date of the issuance of the
Bonds.
Except as provided below, on a variable Yield issue such as the Bonds, Excess Earnings
are computed for the period of time between Computation Dates (or from the date of issue of the
Bonds in the case of the first Computation Date) by calculating Allowable Earnings based on
Bond Yield for that period of time and comparing it with Actual Earnings for the same period.
Once calculated for each such period, rebate for that period cannot change—i.e., a snapshot for
that period is taken and it never changes. Prior to the first date on which a rebate payment is
required, you may choose to treat the end of any bond year as a computation date for purposes of
the snapshot approach.
Bond Yield. For variable Yield issues, as discussed above, Bond Yield is computed as of
each Computation Date for the period from the prior Computation Date (or from the date of issue
of the Bonds in the case of the first Computation Date) to the current Computation Date, and it is
based upon (a) the actual payments of principal and interest on the Bonds (including amounts
treated as interest) and (b) the assumed receipt on such date of an amount equal to the value of
the outstanding Bonds. As with the calculation of Yield on a fixed Yield issue, the actual rules
for computing Bond Yield are quite complex and an expert should be consulted.
Generally, upon conversion of a variable Yield issue to a fixed Yield issue the Yield on
the issue after the conversion date will be calculated under the fixed Yield rules discussed above.
Certain special rules and elections apply upon such a conversion and an expert should be
consulted.
For variable Yield issues, you may select the computation dates, using all information
available, so as to minimize rebate liability. Such selection may be made up to the first required
payment date (generally five years after the date of issue). Periods as short as one year or as long
as five years may be selected. Following the selection, all subsequent periods must be one-year
or five-year periods. Use of shorter periods does not accelerate rebate liability.
Gross Proceeds. Based upon the facts and expectations presented in the Tax Agreement,
the gross proceeds of the Bonds are all moneys and investments in the funds and accounts
(regardless of where held) listed on Appendix A. If, contrary to the expectations described in the
Tax Agreement, moneys or investments are pledged or otherwise set aside for payment of
principal of or interest on the Bonds, such amounts may also constitute gross proceeds. Please
call us if this occurs.
Universal Cap. Gross proceeds will cease to be allocated to the Bonds (and will
therefore be treated as if spent) to the extent that the amount of gross proceeds exceeds the
outstanding amount of the Bonds (the "Universal Cap"). Although special rules are applicable
in the case of discount bonds, the outstanding amount of bonds is roughly equal to the
outstanding principal amount. Generally, but not always, the market value of investments is
used to test the amount of gross proceeds. The Universal Cap may cause allocations on the
second anniversary of the issue date and as of the first day of each bond year thereafter.
D-3
Commingled Funds. Funds allocated to two or more issues, or containing amounts that
are not gross proceeds of the Bonds and amounts that are gross proceeds of the Bonds (including,
for example, parity reserve funds) in which amounts are invested collectively without regard to
source of funds must be treated as commingled funds. Investment earnings on commingled
funds must be allocated to the gross proceeds of the Bonds according to a consistently applied
reasonable allocation method. Such method, for example, may be based on average daily
balances. Investments in commingled funds must be valued annually to properly allocate
unrealized gain or loss to the gross proceeds of the Bonds. This mark to market requirement will
not apply if the weighted average maturity of all investments held in the commingled fund
during a particular fiscal year does not exceed 18 months and does not apply to commingled debt
service and debt service reserve funds.
Bona Fide Debt Service Fund Exception to the General Rule. Based upon the
information in the Tax Agreement, the Bond Fund is a bona fide debt service fund. If earnings in
the Bond Fund in a bond year (as described above under "Computation Dates") are less than
$100,000, they will not be subject to the rebate requirement and you may keep such earnings for
that year. If during such period earnings on such fund(s) are $100,000 or greater, all such
earnings will be subject to rebate. However, if the average annual debt service on the Bonds is
no more than $2,500,000, then you may treat the Bond Fund as satisfying the $100,000
limitation in each bond year. To the extent that the Bond Fund ceases to be a "bona fide debt
service fund" as described in Section 3.2 of the Tax Agreement, some Bond Fund moneys may
be subject to the rebate requirement (if this occurs,please call us for advice).
Six-Month Exception to the General Rule. If all gross proceeds of the Bonds (including
earnings thereon) are spent within six months of the date the Bonds are issued, other than
amounts deposited in a reasonably required reserve fund or a bona fide debt service fund, no
rebate is required except as described below in the case of an issue secured by a reasonably
required reserve fund or in the case of unexpected gross proceeds arising after the date of
Closing. If all proceeds (including earnings thereon) required to be spent are so spent within this
six-month period, except for 5% of Bond proceeds and you spend the 5% (plus earnings
thereon), within one year from the Closing, no rebate is required except as described below in the
case of an issue secured by a reasonably required reserve fund. If the issue is secured by a
reasonably required reserve fund, rebate is required on the reserve fund from the date the Bonds
are issued, but not on the other funds. To qualify for the six-month exception, there must be no
collateral having a Yield (as contrasted with a mortgage of real property) pledged to, or
otherwise available for, the payment of the Bonds other than a reasonably required reserve or
replacement fund or a bona fide debt service fund. Even if you qualify for this exception, you
may have to rebate with respect to any amounts that arise or are pledged to the payment of the
Bonds at a later date. If this occurs, please call us for advice.
Tax-Exempt Obligation Exception to the General Rule. To the extent that any gross
proceeds are invested in Tax Exempt Obligations (as defined in Article I of the Tax Agreement,
generally not including as Tax-Exempt Obligations those obligations subject to the individual
alternative minimum tax), the earnings thereon would not be considered when calculating Excess
Earnings. To the extent that 100% of gross proceeds are continually invested in Tax Exempt
D-4
Obligations, there would be no rebate requirement. Please call us for advice if you plan to use
this exception.
Investment of Rebate Fund and Other Funds. Investments of moneys in the Rebate Fund
and any other fund must be made in arm's-length transactions in a manner that does not reduce
the amount to be rebated to the United States. Investment decisions (other than the decision to
invest in Tax Exempt Obligations to avoid rebate) must be made on the basis of normal
investment criteria of safety, Yield, and when the money will be needed. All interest rates and
Yields must be market rates and Yields. Money must not be allowed to remain uninvested except
for small amounts or for short periods of time, as provided in Section 4.4 of the Tax Agreement.
Specific rules exist for certificates of deposit and investment agreements (including repurchase
agreements) as set forth in Section 4.4 of the Tax Agreement.
Rebate Payments. Within 60 days after the Computation Date that is the end of the fifth
bond year and every fifth bond year thereafter, at least 90% of the Excess Earnings and all
earnings on the Excess Earnings (net of an appropriate credit depending on whether unexpended
gross proceeds continue to exist) must be paid to the United States. Within 60 days of final
payment of principal and interest on the Bonds to the Bondholders, all Excess Earnings and all
earnings on the Excess Earnings (net of the credit) must be paid to the United States. Mailing
instructions are contained in Appendix B.
CHAPMAN AND CUTLER
D-5
APPENDIX A
GROSS PROCEEDS
Construction Fund
Bond Fund
* If, contrary to the expectations described in the Tax Agreement, moneys or investments are pledged or
otherwise set aside for payment of principal of or interest on the Bonds,any amounts are derived from the
sale of any right that is part of the terms of a Bond or is otherwise associated with a Bond (e.g., a
redemption right) or the Corporation or the Issuer enters into any agreement to maintain certain levels of
types of assets for the benefit of a holder of the Bond or any credit enhancement with respect to the Bonds,
such amounts may also constitute Gross Proceeds. Further, if any Bond-financed property is sold or
otherwise disposed of contrary to the expectations described in the Tax Agreement,any amounts received
from such sale or other disposition may also constitute Gross Proceeds. Please call us if any of these events
occur.
APPENDIX B
MAILING INSTRUCTIONS
All payments to the United States will be by check mailed to:
Internal Revenue Service Center
Philadelphia, Pennsylvania 19255
or to such other address as may be provided by the Internal Revenue Service of the United States
for such payments. Payment shall be accompanied by a Form 8038-T. Form 8038-T must be
signed by the issuer of the obligations with respect to which rebate is being paid.
EXHIBIT E
SCHEDULE OF ELECTIONS
ISSUER'S NAME DATE OF ELECTION
December_, 1998
ISSUER'S ADDRESS DATE OF ISSUE
December_, 1998
FULL NAME AND FACE AMOUNT OF ISSUE
With regard to the above-referenced issue (the "Bonds"), the above-referenced issuer
(the "Issuer") hereby makes the elections indicated below with an "X". Any election below that
has not been marked with an "X"has not been made:
A. Selection of Initial Computation Periods
❑ The Issuer hereby selects under Treas. Reg. Section 1.148-3(e)(1)(i) the last day
of the bond year occurring in each of the following calendar years as computation periods:
This election is being made on or before the first date that rebate is required to be paid.
B. Selection of Subsequent Computation Periods
❑ The Issuer hereby selects under Treas. Reg. Section 1.148-3(e)(1)(ii) to treat the
last day of each bond year ending after , as a computation date. This
election is being made on or before the first date that rebate is required to be paid.
❑ The Issuer hereby selects under Treas. Reg. Section 1.148-3(e)(1)(ii) to treat the
end of each fifth bond year ending after , as a computation date. This election
is being made on or before the first date that rebate is required to be paid.
C. Waiver of Program Investment Treatment
❑ The Issuer hereby waives under Treas. Reg. Section 1.148-1(b) the
characterization of its purpose investment as a qualified program investment. This waiver may
be made at any time.
E-1
D. Election to Waive Temporary Periods or Reasonably Required Reserve or
Replacement Fund
❑ The Issuer hereby waives under Treas. Reg. Section 1.148-2(h) or Treas. Reg.
Section 1.148-9(g) its right to invest amounts in the following funds or accounts in higher
yielding investments:
This waiver applies to any exceptions to Yield restriction that might otherwise apply to
such amounts for a temporary period or as part of a reasonably required reserve fund. This
election is being made on or before the issue date of the Bonds.
E. Waiver of Minor Portion
❑ The Issuer hereby waives under Treas. Reg. Section 1.148-2(h) or Treas. Reg.
Section 1.148-9(g) described below its right to invest amounts in the funds or accounts described
below in higher yielding investments as a result of any available minor portion.
This waiver may be made at any time.
F. Election as to Pooled Financing Bonds
❑ The Issuer hereby elects under Section 148(f)(4)(C)(xi) of the Internal Revenue
Code of 1986 (the "Code"), and Treas. Reg. Section 1.148-7(b)(6)(ii) to have the spending
exceptions to rebate be (i) determined separately for each loan made to a conduit borrower and
(ii) begin on the earlier of the date the loan is made or the first day following the one-year period
beginning on the issue date of the Bonds and subject to rebate the available construction
proceeds prior to the date on which the spending period for such proceeds begins (as determined
above). This election is being made on or before the issue date of the Bonds.
G. Election to Treat Portions of the Issue Separately
❑ The Issuer hereby elects under Section 148(f)(4)(C)(v) of the Internal Revenue
Code of 1986 (the "Code"), and Treas. Reg. Section 1.148-70)(1) to treat a portion of the issue
(the "Construction Portion") with an issue price of $ (which portion contains
100 percent of the Bonds to be used for construction expenditures, plus an amount for non-
E-2
construction expenditures, not to exceed 25 percent of the entire Construction Portion, with
respect to property owned by a governmental unit or a Section 501(c)(3) organization and the
entire remaining portion of the Bonds (other than any portion of the Bonds being used for
refunding purposes) as separate issues for purposes of Section 148(f)(4)(C) of the Code and
Treas. Reg. Section 1.148-7(e). The Issuer reasonably expects, as of this date, that the
construction portion will finance all of the construction expenditures to be financed by the
Bonds. This election is being made on or before the issue date of the Bonds.
H. Election to Rebate on Earnings on Reserve
❑ The Issuer hereby elects under Section 148(f)(4)(C)(vi)(IV) of the Internal
Revenue Code of 1986 (the "Code"), and Treas. Reg. Section 1.148-7(i)(2) to exclude from
available construction proceeds earnings on the (a reasonably required reserve
or replacement fund) and apply the rebate requirements of Section 148(f)(2) of the Code to such
earnings. This election is being made on or before the issue date of the Bonds.
I. Election-Out of Reasonable Expectations
❑ The Issuer hereby elects under Treas. Reg. Section 1.148-7(0(2) to apply the
provisions of Treas. Reg. Sections 1.148-7(e) through 1.148-7(m), relating to the two-year
construction expenditure rule based on actual facts rather than based on the Issuer's reasonable
expenditures. This election is being made on or before the issue date of the Bonds (except in the
case of certain in pooled financings).
J. Election to Pay Penalty Instead of Rebate (the "1.5 Percent Penalty")
❑ The Issuer hereby irrevocably elects under Section 148(f)(4)(C)(vii) of the
Internal Revenue Code of 1986, and Treas. Reg. Section 1.148-7(k) to pay a 1.5 Percent Penalty
in lieu of rebate. This election is being made on or before the issue date of the Bonds (except in
the case of certain pooled financings).
K. Election to Terminate 1.5 Percent Penalty After the End of the Initial
Temporary Period
❑ Under Section 148(f)(4)(C)(viii) of the Internal Revenue Code of 1986 (the
"Code"), and Treas. Reg. Section 1.148-7(1)(1), the Issuer hereby irrevocably elects to terminate
(and pay a three percent penalty in lieu thereof) the 1.5 Percent Penalty previously elected under
Section 148(f)(4)(C)(vii) of the Code and Treas. Reg. Section 1.148-7(k). This election is being
made not later than 90 days after the earlier of the end of the initial temporary period or the date
on which construction is substantially completed.
L. Election to Terminate the 1.5 Percent Penalty Before the End of the
Initial Temporary Period
❑ Under Section 148(f)(4)(C)(ix) of the Internal Revenue Code of 1986 (the
"Code"), and Treas. Reg. Section 1.148-7(1)(2), the Issuer hereby irrevocably elects to terminate
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(and pay the three percent penalty in lieu thereof) the 1.5 Percent Penalty previously elected
under Section 148(f)(4)(C)(vii) of the Code and Treas. Reg. Section 1.148-7(k). The amount of
available construction proceeds that will not be spent for the governmental purposes of the issue
is equal to $ . This election is being made before the close of the initial temporary
period and not later than 90 days after construction was substantially completed.
M. Elective Retroactive Application of Final Regulations in Whole
❑ The Issuer hereby elects under Treas. Reg. Section 1.148-11(b) to apply the
provisions of Treas. Reg. Sections 1.148-1 through 1.148-11 to the Bonds. The Bonds were
outstanding on June 30, 1993, and are subject to Section 148(f) of the Code or to Section
103(c)(6) or 103A(i) of the Internal Revenue Code of 1954. This election may be made at any
time.
N. Elective Retroactive Application of Certain Provisions of Final Regulations
❑ The Issuer hereby elects under Treas. Reg. Section 1.148-11(c) to apply the
commingled reserve rules contained in Treas. Reg. Section 1.148-6(e) to all issues issued prior to
August 15, 1993 secured by such commingled reserve. At least one issue secured by such
commingled fund was issued after June 30, 1993 or the Issuer elected to apply the provisions of
Treas. Reg. Sections 1.148-1 through 1.148-11 to such issue. This election may be made at any
time.
❑ The Issuer hereby elects under Treas. Reg. Section 1.148-11(c) to apply the rules
contained in Treas. Reg. Section 1.148-5(c)(3)(i)(F) to (the "Prior
Issue") allowing the Issuer to make Yield Reduction Payments with regard to amounts in a
refunding escrow that have or will become replacement (sinking fund) proceeds of the Prior
Issue. The Prior Issue was issued on or before June 30, 1993 and was refunded by the Bonds.
The Bonds were issued on or before August 15, 1993. This election may be made at any time.
No Elections Made
[Authorized Representative of Issuer]
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This Document Prepared By
and After Recording Return To:
Frederick M. Snow, Esq.
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
SPACE ABOVE THIS LINE RESERVED FOR
RECORDER'S USE ONLY
CONSTRUCTION MORTGAGE AND SECURITY AGREEMENT
WITH ASSIGNMENT OF RENTS
Dated as of
December 1, 1998
FROM
SUMMIT SCHOOL, INC.
TO
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
836098.01.03
2055523/FMS/11/19/98
CONSTRUCTION MORTGAGE AND SECURITY AGREEMENT WITH
ASSIGNMENT OF RENTS
This Mortgage dated as of December 1, 1998 between Summit School Inc. with its
principal place of business at 333 West River Road, Elgin, Illinois 60123 (hereinafter referred to
as "Mortgagor") and American National Bank and Trust Company of Chicago, a national bank
with its principal place of business at 33 North LaSalle Street, Chicago, Illinois 60690
(hereinafter referred to as "Mortgagee"):
WITNESSETH THAT:
WHEREAS, Mortgagor is indebted to Mortgagee in the principal sum of One Million Two
Hundred Thousand Dollars ($1,200,000) as evidenced by Revenue Bonds Series 1998 (Summit
School Project) (the "Bonds") of the City of Elgin, Illinois (the "Issuer") (such Bonds issued to
the Mortgagee, as bondholder, pursuant to the Indenture of Trust dated as of December 1, 1998
(the "Indenture") between the Issuer and American National Bank and Trust Company of
Chicago, as trustee (the "Trustee"), the proceeds of which were loaned to the Mortgagor
pursuant to a Loan Agreement dated as of December 1, 1998 (the "Loan Agreement") between
the Issuer and the Mortgagor);
NOW, THEREFORE, to secure (i) the payment of principal and premium, if any, and
interest due pursuant to the Loan Agreement and the Indenture and obligations of the Mortgagor
relating to the Bonds as and when the same become due and payable (whether by lapse of time,
acceleration or otherwise), (ii) the payment of all other indebtedness, obligations and liabilities
which this Mortgage secures pursuant to any of its terms and (iii) the observance and
performance of all covenants and agreements contained herein, in the Loan Agreement and in
any other instrument or document at any time evidencing or securing any of the foregoing or
setting forth terms and conditions applicable thereto (all of such indebtedness, obligations and
liabilities described in clauses (i), (ii) and (iii) above being hereinafter collectively referred to as
the "Secured Indebtedness"), Mortgagor does hereby grant, bargain, sell, convey, mortgage,
warrant, assign and pledge unto Mortgagee, its successors and assigns, and grant to Mortgagee,
its successors and assigns a security interest in, all and singular the properties, rights, interests,
titles and privileges of Mortgagor, whether now owned or hereafter acquired, described in
Granting Clauses I, II, III, IV, V, VI, VII and VIII below, all of the same being collectively
referred to herein as the "Mortgaged Premises":
GRANTING CLAUSE I
The real estate in the City of Elgin, DuPage County and State of Illinois described in
Schedule I hereto (the "Land").
GRANTING CLAUSE II
All buildings and improvements of every kind and description heretofore or hereafter
erected or placed on the Land and all materials intended for construction, reconstruction,
alteration and repairs of such buildings and improvements, all of which materials shall be
deemed to be included within the premises immediately upon the delivery thereof to the Land
(collectively, the "Improvements").
GRANTING CLAUSE III
All machinery, apparatus, equipment, fittings and articles of personal property
constituting fixtures to the Improvements or to the Land, now or hereafter attached to or
contained in or used or useful in connection with the Land and the Improvements and the
operation, maintenance and protection thereof and all renewals or replacements thereof or
articles in substitution therefor (collectively, the "Equipment").
GRANTING CLAUSE IV
All present or future leases or subleases, whether written or oral, or any lettings of
possession of, or any agreements for the use or occupancy of, the whole or any part of the Land
and the Improvements which the Mortgagor has made or agreed to, or may hereafter make or
agree to, or which may be made or agreed to by Mortgagee under the powers granted in this
Mortgage, including all amendments and supplements to and renewals thereof at any time made
(collectively, the "Leases"), together with all and singular the estates, tenements, hereditaments,
privileges, easements, licenses, franchises, appurtenances and royalties, mineral, oil, and water
rights belonging or in any way appertaining to the Land and the Improvements and all rents,
issues, profits, revenues, royalties, bonuses, rights and benefits due, payable or accruing
(including all deposits of money as advanced rent or for security) under any and all of the
foregoing, or under any contracts or options for the sale of all or any part of, such property
(including during any period allowed by law for the redemption of such property after any
foreclosure or other sale), together with the right, but not the obligation, to collect, receive and
receipt for all such rents and other sums and apply them to the Secured Indebtedness and to
demand, sue for and recover the same when due or payable.
GRANTING CLAUSE V
All plans, specifications, working drawings and like materials prepared in connection
with improvements constituting part of the Mortgaged Premises, whether now owned by
Mortgagor or hereafter acquired, all rights of Mortgagor against vendors or manufacturers in
connection with equipment located upon the Mortgaged Premises whether now existing or
hereafter acquired and whether arising by virtue of warranty or otherwise, and all rights against
contractors, sub-contractors and materialmen arising in connection with work performed at or on
the Mortgaged Premises or with materials furnished for the construction of improvements at or
on the Mortgaged Premises and all rights of Mortgagor under contracts to provide any of the
foregoing, whether now existing or hereafter arising.
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GRANTING CLAUSE VI
All judgments, awards of damages, settlements and other compensation heretofore or
hereafter made resulting from condemnation proceedings or any taking of the Land or any part
thereof or any building or other Improvement or any easement or other appurtenance thereto
under the power of eminent domain, or any similar power or right (including any award from the
United States Government at any time after the allowance of the claim therefor, the
ascertainment of the amount thereof and the issuance of the warrant for the payment thereof),
whether permanent or temporary, or for any damage (whether caused by such taking or
otherwise) to such property or any part thereof or the improvements thereon or any part thereof,
or to any rights appurtenant thereto, including severance and consequential damage, and any
award for change of grade of streets (collectively, "Condemnation Awards") and all proceeds of
insurance relating to the properties, rights, interests and privileges described in Granting Clauses
I, II, III, IV, VI and VII hereof.
GRANTING CLAUSE VII
All property and rights which are by the express provisions of this Mortgage required to
be subjected to the lien hereof and any additional property and rights that may from time to time
hereafter be subjected to the lien hereof.
GRANTING CLAUSE VIII
All rights in and to common areas and access roads on adjacent properties heretofore or
hereafter granted to Mortgagor and any after-acquired title or reversion in and to the beds of any
ways,roads, streets, avenues and alleys adjoining the Land or any part thereof.
GRANTING CLAUSE IX
All proceeds and products of the property described in Granting Clauses I, II, III, IV, V,
VI, VII and VIII, whether now existing or hereafter arising.
TO HAVE AND TO HOLD the Mortgaged Premises and the properties, rights and
privileges hereby granted, bargained, sold, conveyed, mortgaged, pledged and assigned, and in
which a security interest is granted, or intended to be granted, unto Mortgagee, its successors and
assigns, forever;provided, however, that this instrument is upon the express condition that if the
principal, premium, if any, and interest due pursuant to the Loan Agreement and the Indenture
and the obligations of the Mortgagor relating to the Bonds have been paid in full and all other
Secured Indebtedness has been fully paid and performed, then this Mortgage and the estate and
rights hereby granted shall cease, determine and be void and this Mortgage shall be released by
Mortgagee upon the written request and at the expense of Mortgagor, otherwise to remain in full
force and effect.
It is expressly understood and agreed that the Secured Indebtedness will in no event
exceed two hundred percent (200%) of(i) the aggregate principal amounts of the Bonds plus (ii)
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the total interest which may hereafter accrue on the Bonds plus (iii) any fees, costs or expenses
which may be payable hereunder.
Mortgagor hereby covenants and agrees with Mortgagee as follows:
1. Payment of the Indebtedness. The Secured Indebtedness will be paid promptly
when due.
2. Further Assurances. Mortgagor will execute and deliver such further instruments
and do such further acts as may be necessary or proper to carry out more effectively the purpose
of this Mortgage and, without limiting the foregoing, to make subject to the lien hereof any
property agreed to be subjected hereto or covered or intended to be covered by the Granting
Clauses hereof.
3. Ownership of Mortgaged Premises. Mortgagor covenants and represents that it is
lawfully seized of and has good and marketable fee simple title to the Land and good title to the
remainder of the Mortgaged Premises free and clear of any liens, charges and encumbrances
(other than liens, charges and encumbrances described on Schedule II hereto ("Permitted
Encumbrances")) and Mortgagor has the right, power and authority to convey, transfer and
mortgage the same to Mortgagee for the uses and purposes set forth in this Mortgage. Mortgagor
will defend the title to the Mortgaged Premises against all claims and demands.
4. Possession. While Mortgagor is not in default hereunder, Mortgagor shall be
suffered and permitted to remain in full possession, enjoyment and control of the Mortgaged
Premises, subject always to the observance and performance of the terms of this Mortgage.
5. Payment of Property Charges. Mortgagor shall pay before any penalty attaches, all
taxes, assessments and all charges of any kind which may be levied, assessed, imposed or
charged on or against the Mortgaged Premises or any part thereof and which, if unpaid, might by
law become a lien or charge upon the Mortgaged Premises or any part thereof. Mortgagor shall,
upon written request, exhibit to Mortgagee official receipts evidencing such payments. Subject
to the provisions of the next sentence, Mortgagor may contest without payment any amount
otherwise payable under this Section unless (a) payment of such amount in full or in part is
required by law, or (b) foreclosure, distraint, sale or other proceedings have commenced with
respect to the Mortgaged Premises or any part thereof. No such contest will be hereunder unless
(i) it is conducted in good faith and with due diligence, (ii) Mortgagor has provided Mortgagee
with prior notice thereof, (iii) it operates to prevent collection of payment of the amount in
question and the sale or foreclosure of the Mortgaged Premises and any part thereof, and (iv)
Mortgagor has furnished all security required in the proceedings relating to such contest or as
otherwise required by Mortgagee.
6. Payment of Taxes on Secured Indebtedness, Mortgage or Interest of Mortgagee.
Mortgagor will pay, or will cause to be paid, upon demand of Mortgagee (to the extent permitted
by law) any tax, assessment or imposition (other than any income tax on interest payments on the
principal portion of the Secured Indebtedness imposed by any jurisdiction having control over
the Mortgagee) levied, assessed or charged on (a) this Mortgage, (b) the Secured Indebtedness,
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(c) the interest of Mortgagee in the Mortgaged Premises or (d) Mortgagee by reason of any of the
foregoing. Mortgagor shall also reimburse Mortgagee on demand (to the extent permitted by
applicable law) for any payment of any such taxes, assessments or impositions paid by
Mortgagee. Mortgagor agrees to exhibit to Mortgagee, upon request, official receipts showing
payment of all taxes, charges or impositions which Mortgagor is required to pay under this
Section.
7. Recordation and Related Expenses. Mortgagor will cause this Mortgage, all
mortgages supplemental hereto and any financing statement or other notice of a security interest
required by Mortgagee at all times to be kept, recorded and filed at its own expense in such
manner and in such places as may be required by law or reasonably requested by Mortgagee in
order fully preserve and protect the rights of Mortgagee under this Mortgage. In addition,
Mortgagor will pay or reimburse Mortgagee for the payment of any and all taxes (including
documentary stamp and other similar taxes), fees or other charges incurred in connection with
any such recordation.
8. Insurance. The Mortgagor will insure, or cause to be insured, the Improvements, all
property (whether real, personal or mixed) incorporated therein and all materials and supplies
delivered to the Mortgaged Premises for use in connection with construction and installation of
the Improvements and all equipment to be used for that purpose under insurance policies in
builders' risk form with standard non-contributory mortgage clauses providing that any loss is to
be adjusted with, and any recovery payable to, Mortgagee as its interest may appear. Following
completion of the Improvements, Mortgagor will, at its expense, keep all Improvements,
Equipment and other property now or hereafter constituting part of the Mortgaged Premises
insured against (i) loss or damage (including loss of rent) by fire, lightning, windstorm,
explosion and such other risks as are usually included under extended coverage policies, or
which are usually insured against by owners of like property, and (ii) such insurable hazards as
Mortgagee from time to time may require, including, without limitation, boiler and machinery
insurance, insurance against flood risks, host liquor liability and war risk insurance when and to
the extent obtainable from the United States Government or any agency thereof, in amounts
sufficient to prevent Mortgagor or Mortgagee from becoming a co-insurer of any partial loss
under the applicable insurance policies, but in no event less than the then full insurable value
(actual replacement value without deduction for physical depreciation) thereof, as determined
from time to time at the request of Mortgagee and at Mortgagor's expense by the insurer or
insurers or by an expert approved by Mortgagee. Such insurance shall be maintained under
insurance policies acceptable to Mortgagee and payable, in case of loss or damage, to
Mortgagee, as evidenced by a non-contributory form of mortgagee clause which is acceptable to
Mortgagee and attached to each policy. Mortgagor shall not carry separate insurance concurrent
in kind or form and contributing in the event of loss,with any insurance required hereby.
Mortgagor will also obtain and maintain general liability insurance in comprehensive
form (including broad form contractual liability) covering the Mortgaged Premises and the
operations of the Borrower in the amount of $1,000,000 each occurrence and in the aggregate,
which policies shall name Mortgagee and as an additional insured party. Mortgagor shall also
obtain and maintain public liability, property damage and worker's compensation insurance in
-5-
each case in form and content approved by Mortgagee and in amounts as are customarily carried
by owners of like property and reasonably acceptable to Mortgagee.
All insurance required hereby shall (a) be maintained with insurance companies
satisfactory to Mortgagee, including, without limitation, insurance companies having a rating of
not less than A-15 by Best's Key Rating Guide for at least the past three years, (b) not provide
for any deductible amount unless approved in writing by Mortgagee, (c) provide that any losses
will be payable notwithstanding any act or negligence of Mortgagor or any occupant of the
Mortgaged Premises or any occupancy or use of the Mortgaged Premises for purposes more
hazardous than permitted in such policies, (d) provide that no cancellation thereof shall be
effective until at least 30 days after Mortgagee receives written notice thereof, and (e) be
satisfactory to Mortgagee in all other respects. Mortgagor shall deliver all policies, including
additional and renewal policies, to Mortgagee marked "paid," and, in case of insurance policies
about to expire, the Mortgagor shall deliver renewal policies not less than thirty (30) days prior
to the respective dates of expiration. In the event of foreclosure, Mortgagor authorizes and
empowers Mortgagee to obtain and maintain insurance with respect to the Mortgaged Premises
covering such losses and liabilities, and in amounts, as Mortgagee deems necessary, for a period
covering the time of redemption from foreclosure sale provided by law, and if necessary therefor
to cancel any or all existing insurance policies.
UNLESS MORTGAGOR PROVIDES MORTGAGEE WITH EVIDENCE OF THE INSURANCE
COVERAGE REQUIRED BY THIS MORTGAGE, MORTGAGEE MAY PURCHASE INSURANCE AT
MORTGAGOR'S EXPENSE TO PROTECT MORTGAGEE'S INTERESTS IN THE MORTGAGED
PREMISES. THIS INSURANCE MAY, BUT NEED NOT, PROTECT MORTGAGOR'S INTERESTS IN THE
MORTGAGED PREMISES. THE COVERAGE PURCHASED BY MORTGAGEE MAY NOT PAY ANY
CLAIMS THAT MORTGAGOR MAKES OR ANY CLAIM THAT IS MADE AGAINST MORTGAGOR IN
CONNECTION WITH THE MORTGAGED PREMISES. MORTGAGOR MAY LATER CANCEL ANY SUCH
INSURANCE PURCHASED BY MORTGAGEE, BUT ONLY AFTER PROVIDING MORTGAGEE WITH
EVIDENCE THAT MORTGAGOR HAS OBTAINED INSURANCE AS REQUIRED BY THIS MORTGAGE.
IF MORTGAGEE PURCHASES INSURANCE FOR THE MORTGAGED PREMISES, MORTGAGOR WILL
BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE,INCLUDING INTEREST AND ANY OTHER
CHARGES THAT MORTGAGEE MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE
INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE
INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE SECURED INDEBTEDNESS.
THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE MORTGAGOR
MAY BE ABLE TO OBTAIN ON ITS OWN.
9. Damage to or Destruction of Mortgaged Premises. (a)Notice. Mortgagor will
promptly notify Mortgagee of any material damage to or destruction of the Mortgaged Premises
or any part thereof, describing in reasonable detail the nature and extent of such damage or
destruction.
(b) Restoration. Mortgagor will, upon any damage or loss to the Mortgaged Premises
or any part thereof, promptly restore or repair such Mortgaged Premises, in a good and
workmanlike manner, to the equivalent of its condition and value immediately prior to such
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damage or loss, whether or not insurance proceeds received on account thereof are sufficient or
made available for such purpose.
(c) Adjustment of Loss. Mortgagor hereby authorizes Mortgagee, at Mortgagee's
option, to adjust and compromise any losses claimed under any insurance policy covering the
Mortgaged Premises. Unless Mortgagee elects to adjust or compromise such losses, such
adjustment and/or compromise shall be made by Mortgagor, subject to final approval of
Mortgagee in the case of losses exceeding $25,000.
(d) Application of Insurance Proceeds. Mortgagee may, in its sole discretion, elect to
(i) apply the net proceeds of any insurance policy covering the Mortgaged Premises (after
deduction of Mortgagee's reasonable costs and expenses, if any, in collecting the same) in
reduction in the Secured Indebtedness in such order and manner as Mortgagee may elect,
whether or not then due and payable, or otherwise adequately secured, (ii) hold the net proceeds
of any such insurance as collateral security for the payment and performance of the Secured
Indebtedness, or (iii) make such net proceeds available to Mortgagor for the restoration or repair
of the Mortgaged Premises. Mortgagee may perform all acts necessary to complete any
restoration of the Mortgaged Premises, including advancing additional funds. Any additional
funds so advanced shall constitute part of the Secured Indebtedness and shall be payable on
demand with interest at the Default Rate.
10. Eminent Domain. Mortgagor acknowledges that Condemnation Awards have been
assigned to Mortgagee and that Mortgagee is hereby irrevocably authorized to collect and
receive the Condemnation Awards, and to give appropriate receipts and acquittances therefor.
Mortgagee may, in its sole discretion, elect to (i) apply the net proceeds of any Condemnation
Awards (after deduction of Mortgagee's reasonable costs and expenses, if any, in collecting the
same) in reduction in the Secured Indebtedness in such order and manner as Mortgagee may
elect, whether or not then due and payable, or otherwise adequately secured, (ii) hold the net
proceeds of any such Condemnation Awards as collateral security for the payment and
performance of the Secured Indebtedness, or (iii) make such Condemnation Awards available to
Mortgagor for the restoration or repair of the Mortgaged Premises. Mortgagee may perform all
acts necessary to complete any restoration of the Mortgaged Premises, including advancing
additional funds. Any additional funds so advanced shall constitute part of the Secured
Indebtedness and shall be payable on demand with interest at the Default Rate. Mortgagor will
give Mortgagee immediate notice of the actual or threatened commencement of any proceedings
affecting all or any part of the Mortgaged Premises relating to condemnation or other taking
under the power of eminent domain or any other similar power or right or relating to severance
and consequential damage to the Mortgaged Premises or change in grade of streets. Mortgagor
will promptly deliver to Mortgagee copies of any and all papers served in connection with any
such proceedings. Mortgagor also will assign all Condemnation Awards to Mortgagee, upon
request, free, clear and discharged of any encumbrances of any kind, and will execute and deliver
all assignments and instruments deemed necessary by Mortgagee for such purpose.
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11. Construction,Repair, Waste, Etc. Mortgagor agrees:
(a) that except as set forth in the plans and specifications for construction of
Improvement on the Mortgaged Property delivered to and approved by the Mortgagee, no
Improvement will be altered, removed or demolished and that no fixtures or appliances
on, in or about any of the Improvements will be severed, removed, sold or mortgaged,
without the prior written consent of Mortgagee;
(b) to replace promptly any Equipment with similar fixtures, chattels and
articles of personal property at least equal in quality and condition to those replaced, free
from any security interest therein or encumbrance thereon or reservation of title thereto;
(c) to permit, commit or suffer no waste, impairment or deterioration of the
Mortgaged Premises or any part thereof;
(d) to keep and maintain the Mortgaged Premises and every part thereof in
good repair and condition and to make such repairs as Mortgagee may reasonably require
and make all needful and proper replacements and additions to the Improvements and
Equipment so that they will, at all times, be in good condition, fit and proper for their
respective purposes;
(e) to comply with all statutes, orders, requirements or decrees of any
governmental authority which relate to the Mortgaged Premises;
(f) to observe and comply with all conditions and requirements necessary to
preserve and extend any and all rights, licenses, permits (including, but not limited to,
zoning variances, special exceptions and non-conforming uses), privileges, franchises and
concessions which are applicable to the Mortgaged Premises or which have been granted
to or contracted for by Mortgagor in connection with any existing or presently
contemplated use of the Mortgaged Premises or any part thereof and not to initiate or
acquiesce in any changes to or terminations of any of the foregoing or of any zoning
classifications affecting the use to which the Mortgaged Premises or any part thereof may
be put without the prior written consent of Mortgagee; and
(g) to make no material alterations in or improvements or additions to the
Mortgaged Premises, except as required by any governmental authority or as permitted
by Mortgagee.
12. Liens and Encumbrances. Mortgagor will not, without the prior written consent of
Mortgagee, directly or indirectly, create or suffer to be created or to remain, and will discharge
or promptly cause to be discharged, any mortgage, lien, encumbrance or charge on, pledge of, or
conditional sale or other title retention agreement with respect to, the Mortgaged Premises or any
part thereof, whether superior or subordinate to the lien hereof(except for this Mortgage and the
Permitted Encumbrances); provided, however, that the Mortgagor may provide the Mortgagee
with a surety bond issued by an insurance company, and upon terms, acceptable to the
Mortgagee in a principal amount equal to at least 110% of such lien or encumbrance.
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13. Right of Mortgagee to Perform Mortgagor's Covenants, Etc. If Mortgagor fails to
make any payment or perform any act required to be made or performed hereunder, Mortgagee,
without waiving or releasing any obligation or default, may (but shall be under no obligation to)
at any time thereafter make such payment or perform such act for the account and at the expense
of Mortgagor, and may enter upon the Mortgaged Premises or any part thereof for such purpose
and take all such action thereon as, in the opinion of Mortgagee, may be necessary or appropriate
therefor. All sums so paid by Mortgagee and all costs and expenses (including without limitation
attorneys' fees and expenses) so incurred, together with interest thereon from the date of
payment or incurrence at the Default Rate, shall constitute additional Secured Indebtedness in the
amount of such sums and shall be paid by Mortgagor to Mortgagee on demand. Mortgagee, in
making any payment authorized under this Section relating to taxes or assessments, may do so
according to any bill, statement or estimate procured from the appropriate public office without
inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax,
assessment, sale, forfeiture, tax lien or title or claim. Mortgagee, in performing any act
hereunder, shall be the sole judge of whether Mortgagor is required to perform such act under the
terms of this Mortgage.
14. After-Acquired Property. Any and all property hereafter acquired by Mortgagor
which is the type of property described in the Granting Clauses hereof shall automatically, and
without any further conveyance, assignment or act on the part of Mortgagor, be subject to the
lien of this Mortgage. Mortgagor shall from time to time, if requested by Mortgagee, execute
and deliver any and all such further assurances, conveyances and assignments as Mortgagee may
reasonably require for the purpose of expressly and specifically subjecting all such property to
the lien of this Mortgage.
15. Inspection by Mortgagee. Mortgagee and any participant in the Secured
Indebtedness shall have the right to inspect the Mortgaged Premises at all reasonable times, and
access thereto shall be permitted for that purpose.
16. Financial Reports. In addition to any information required to be provided pursuant
to the terms of the Loan Agreement, Mortgagor will furnish to Mortgagee such information and
data with respect to the financial condition, business affairs and operations of Mortgagor and the
Mortgaged Premises as Mortgagee may reasonably request.
17. Uniform Commercial Code Security Agreement. This Mortgage shall constitute a
security agreement under the Uniform Commercial Code of Illinois (the "Code") for any portion
of the Mortgaged Premises which, under applicable law, may be subject to a security interest
pursuant to the Code, and Mortgagor hereby grants Mortgagee a security interest in such
Mortgaged Premises. Any reproduction of this Mortgage or of any other security agreement or
financing statement will be sufficient as a financing statement. In addition, Mortgagor agrees to
execute and deliver to Mortgagee any financing statements, as well as extensions, renewals and
amendments thereof, and reproductions of this Mortgage in such form as Mortgagee may require
to perfect a security interest in such Mortgaged Premises. Mortgagor hereby authorizes and
empowers Mortgagee and irrevocably appoints Mortgagee its agent and attorney-in-fact to
execute and file, on Mortgagor's behalf, all financing statements and refilings and continuations
thereof as Mortgagee deems necessary or advisable to create, preserve and protect such lien.
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Mortgagor shall pay all costs of filing such financing statements and any extensions, renewals,
amendments and releases thereof, and shall pay all reasonable costs and expenses of any record
searches for financing statements Mortgagee may reasonably require. If such costs are paid by
Mortgagee, the amount thereof shall constitute additional Secured Indebtedness, will bear
interest at the Default Rate and will be payable upon demand.
18. Events of Default. Any one or more of the following shall constitute an "event of
default" hereunder:
(a) the occurrence of an Event of Default (as defined in the Loan Agreement)
under the Loan Agreement; or
(b) default in the observance of any of the covenants set forth in Section 8 or
12 hereof; or
(c) default in the observance or compliance with any other terms or provisions
of this Mortgage or of any other instrument, document or agreement (including any
separate assignment of leases and/or rents) securing any of the Secured Indebtedness
which has not been remedied within thirty (30) days after written notice thereof from the
Mortgagee to Mortgagor; or
(d) any representation or warranty made by Mortgagor herein or in any other
instrument, document or agreement (including any separate assignment of leases and/or
rents) securing any of the Secured Indebtedness or in any statement or certificate
furnished by Mortgagor pursuant hereto or thereto proves to be untrue in any material
respect as of the date of issuance or making thereof; or
(e) the Mortgaged Premises or any part thereof is sold, transferred, or
conveyed, whether voluntarily or involuntarily, by operation of law or otherwise, except
for sales of obsolete, worn out or unusable fixtures or personal property which are
concurrently replaced with similar fixtures or personal property at least equal in quality
and condition to those sold and owned by Mortgagor free of any lien, charge or
encumbrance other than the lien of this Mortgage; or
(0 any indebtedness secured by a lien or charge on the Mortgaged Premises
or any part thereof is not paid when due (unless such lien or charge is the type described
in Section 5 hereof and Mortgagor is at all times in compliance with the requirements of
such Section relating to non-payment and contest) or proceedings are commenced to
foreclose or otherwise realize upon any such lien or charge or to have a receiver
appointed for the property subject thereto or to place the holder of such indebtedness or
its representative in possession thereof; or
(g) the Mortgaged Premises is abandoned.
For the purposes of this Mortgage, the Mortgaged Premises shall be deemed to have been
sold, transferred or conveyed in the event that more than fifty percent of the equity interest in
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Mortgagor shall be sold, transferred or conveyed, subsequent to the date hereof, whether
voluntarily or involuntarily, whether in one or a series of related or unrelated transactions.
19. Remedies. In addition to any other rights and remedies which may be available to
the Mortgagee pursuant to the agreements and instruments related to the Bonds and under
applicable law or in equity, when any Event of Default has occurred and is continuing
(regardless of the pendency of any proceeding which has or might have the effect of preventing
Mortgagor from complying with the terms of this instrument and of the adequacy of the security
for the Secured Indebtedness):
(a) Acceleration. Mortgagee may, by written notice to Mortgagor, declare the
Secured Indebtedness to be immediately due and payable, whereupon the same shall be
immediately due and payable, without other notice or demand of any kind.
(b) Uniform Commercial Code. Mortgagee shall, with respect to any part of
the Mortgaged Premises constituting property of the type in respect of which realization
on a lien or security interest granted therein is governed by the Uniform Commercial
Code, have all the rights, options and remedies of a secured party under the Uniform
Commercial Code of Illinois. Any requirement of such Code for reasonable notification
shall be met by mailing written notice to Mortgagor at its address set forth above at least
10 days prior to the sale or other event for which such notice is required. The expenses
of retaking, selling and otherwise disposing of such property, including reasonable
attorney's fees and legal expenses incurred in connection therewith, shall constitute
additional Secured Indebtedness in the amount of such expenses and shall be payable
upon demand with interest at the Default Rate.
(c) Foreclosure and Other Sales. Mortgagee may proceed to protect and
enforce the rights of Mortgagee hereunder (i) by any action at law, suit in equity or other
appropriate proceedings, whether for the specific performance of any agreement
contained herein, or for an injunction against the violation of any of the terms hereof, or
in aid of the exercise of any power granted hereby or by law, or (ii) by the foreclosure of
this Mortgage. The foreclosure of this Mortgage and the sale or sales of less than all of
the Mortgaged Premises shall not exhaust the right to foreclose hereunder and the lien
and security interests granted herein. Mortgagee is specifically empowered to institute
successive foreclosures and/or sales hereunder until all of the Mortgaged Premises has
been sold. If the proceeds of any such sale of less than all of the Mortgaged Premises is
less than the aggregate of the Secured Indebtedness and the expenses of such
proceedings, this Mortgage and the lien and security interest hereof shall remain in full
force and effect as to the unsold portion of the Mortgaged Premises just as though no sale
had been made. Mortgagor shall never have any right to require the sale or sales of less
than the whole of the Mortgaged Premises, or to require the marshalling of the
Mortgaged Premises. Mortgagee shall have the right, at its sole election, to sell less than
the whole of the Mortgaged Premises. Mortgagee has the option to proceed as if under a
full foreclosure, conducting the sale as herein provided without declaring the entire
Secured Indebtedness due. If the sale is made because of a default in the payment of a
portion of the Secured Indebtedness, such sale may be made subject to the unmatured
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portion of the Secured Indebtedness; and such sale, if so made, shall not in any manner
affect the unmatured part of the Secured Indebtedness and as to such unmatured part, this
Mortgage shall remain in full force and effect as though no sale had been made under the
provisions of this Mortgage. Any number of sales may be made hereunder without
exhausting the lien and security interests of this Mortgage for any unmatured part of the
Secured Indebtedness.
(d) Appointment of Receiver. Mortgagee shall, as a matter of right, without
notice and without giving bond to Mortgagor or anyone claiming by, under or through it,
and without regard to the solvency or insolvency of Mortgagor or the then value of the
Mortgaged Premises, be entitled to have a receiver appointed for all or any part of the
Mortgaged Premises and the rents, issues and profits thereof, with such power as the
court making such appointment shall confer, and Mortgagor hereby consents to the
appointment of such receiver and shall not oppose any such appointment. Any such
receiver may, to the extent permitted under applicable law, without notice, enter upon and
take possession of the Mortgaged Premises or any part thereof by force, summary
proceedings, ejectment or otherwise, and may remove Mortgagor or other persons and
any and all property therefrom, and may hold, operate and manage the same and receive
all earnings, income, rents, issues and proceeds accruing with respect thereto or any part
thereof, whether during the pendency of any foreclosure or until any right of redemption
shall expire or otherwise.
(e) Taking Possession, Collecting Rents, Etc. Mortgagee may enter and take
possession of the Mortgaged Premises or any part thereof and manage, operate, insure,
repair and improve the same and take any action which, in Mortgagee's judgment, is
necessary or proper to conserve the value of the Mortgaged Premises. Mortgagee may
also use any and all personal property that is part of the Mortgaged Premises. Mortgagee
shall be entitled to collect and receive all earnings, revenues, rents, issues and profits
(collectively, the "Revenues") of the Mortgaged Premises or any part thereof and to
apply same to the reduction of the Secured Indebtedness;provided, however, Mortgagee
agrees, not as a limitation of or condition on its lien on or right to receive the Revenues
under this Mortgage, but as a personal covenant available only to Mortgagor, that before
an Event of Default has occurred, Mortgagor may collect, receive and enjoy the
Revenues (but in no event will Mortgagor collect rents or other Revenues more than 30
days in advance). Mortgagor hereby irrevocably appoints Mortgagee as its true and
lawful attorney-in-fact (which appointment is coupled with an interest) and authorizes
Mortgagee to receive, collect and receipt for the Revenues in the name and in place of the
Mortgagor. Mortgagor also irrevocably acknowledges that any payment made to
Mortgagee as described above will be a good receipt and acquittance against Mortgagor
of the amount paid. The rights of Mortgagee described in this subsection shall be in
addition to all other rights or remedies of Mortgagee under this Mortgage or afforded by
law, and may be exercised concurrently therewith or independently thereof. The
expenses (including any receiver's fees, counsel fees, costs and agent's compensation)
incurred pursuant to the powers set forth in this subsection shall constitute additional
Secured Indebtedness in the amount of such expenses which Mortgagor promises to pay
upon demand together with interest thereon at the Default Rate. Mortgagee shall not be
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liable to account to Mortgagor for any action taken pursuant hereto other than to account
for any rents actually received by Mortgagee. Without taking possession of the
Mortgaged Premises, Mortgagee may, in the event the Mortgaged Premises becomes
vacant or is abandoned, take such steps as it deems appropriate to protect and secure the
Mortgaged Premises and all costs incurred in so doing shall constitute additional Secured
Indebtedness in the amount thereof payable upon demand with interest thereon at the
Default Rate.
20. Waiver of Right to Redeem From Sale - Waiver of Appraisement, Valuation, Etc.
Mortgagor hereby waives the benefit of, and agrees not to apply for or avail itself of, any
appraisement, valuation, stay extension or exemption laws, or any so-called "Moratorium
Laws," now existing or hereafter enacted in order to prevent or hinder the enforcement or
foreclosure of this Mortgage. Mortgagor (for itself and all who may claim through or under it)
waives any and all right to have the property and estates comprising the Mortgaged Premises
marshalled upon any foreclosure of the lien hereof and agrees that any court having jurisdiction
to foreclose such lien may order the sale of the Mortgaged Premises as an entirety. The
Mortgaged Premises may be sold pursuant to this Mortgage in one parcel as an entirety or in
separate lots or parcels at the same or different times, all as the Mortgagee may determine.
Mortgagee may be the purchaser at any sale made pursuant to this Mortgage and shall have the
right to be credited upon the amount of bid it makes therefor with the amount payable to
Mortgagee out of the net proceeds of such sale. In the event of any such sale, the Secured
Indebtedness, if not previously due, shall be and become immediately due and payable without
demand or notice of any kind. To the extent permitted by applicable law, Mortgagor hereby
waives any and all rights of redemption from sale under any order or decree of foreclosure
pursuant to rights herein granted, on behalf of Mortgagor and all other persons (including each
person acquiring any interest in, or title to any of the Mortgaged Premises after the date hereof).
21. Costs and Expenses of Foreclosure. In any suit to foreclose the lien hereof there
shall be allowed and included as additional indebtedness in the decree for sale all expenditures
and expenses which may be paid or incurred by or on behalf of Mortgagee for reasonable
attorney's fees, appraiser's fees, outlays for documentary and expert evidence, stenographic
charges, publication costs and costs (which may be estimated as the items to be expended after
the entry of the decree) of procuring all such abstracts of title, title searches and examination,
guarantee policies, Torrens certificates and similar data and assurances with respect to title as
Mortgagee may deem to be reasonably necessary either to prosecute any foreclosure action or to
evidence to the bidder at any sale pursuant thereto the true condition of the title to or the value of
the Mortgaged Premises. All of such expenditures shall become additional Secured Indebtedness
which Mortgagor agrees to pay and which shall be immediately due and payable with interest
thereon from the date of expenditure until paid at the Default Rate.
22. Application of Proceeds. The proceeds of any foreclosure sale of the Mortgaged
Premises or of any sale of Mortgaged Premises pursuant to Section 19(b) hereof shall be
distributed in the following order of priority: First, on account of all costs and expenses incident
to the foreclosure or other proceedings, including all such items as are mentioned in
Sections 19(b) and 21 hereof; Second, to the Secured Indebtedness (other than the principal
portion of the Bonds) with interest thereon as herein provided and Third, to the payment of the
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principal portion of the Bonds; provided, however, that if any or all of the Secured Indebtedness
is not then due and payable, all such proceeds shall be held by Mortgagee as cash collateral and
will be applied, in the manner described above, to the payment of the Secured Indebtedness as
and when the Secured Indebtedness becomes due and payable. If the Letter of Credit has been
returned to Mortgagee for cancellation and the Secured Indebtedness has been fully paid and
performed, then any remaining proceeds will be paid to the persons lawfully entitled thereto.
23. Deficiency Decree. If at any foreclosure proceeding the Mortgaged Premises shall
be sold for a sum less than the total amount of indebtedness for which judgment is therein given,
the judgment creditor shall be entitled to the entry of a deficiency decree against Mortgagor and
against the property of Mortgagor for the amount of such deficiency. Mortgagor hereby
irrevocably consents to the appointment of a receiver for the Mortgaged Premises and the
property of Mortgagor and of the rents, issues and profits thereof after such sale and until such
deficiency decree is satisfied in full.
24. Mortgagee's Remedies Cumulative - No Waiver. The rights of Mortgagee under
this Mortgage are cumulative and not exclusive of any rights or remedies which Mortgagee
would otherwise have. No delay in the exercise or omission to exercise any remedy or right
accruing on any default shall impair any such remedy or right or be construed to be a waiver of
any such default or acquiescence therein, nor shall it affect any subsequent default of the same or
a different nature. Every such remedy or right may be exercised concurrently or independently,
and when and as often as deemed expedient by Mortgagee.
25. Mortgagee Party to Suits. Mortgagor agrees to pay to Mortgagee, immediately, and
without demand, all costs, charges, expenses and reasonable attorneys' fees incurred by
Mortgagee if Mortgagee (a) is made a party to or intervenes in any action or proceeding affecting
the Mortgaged Premises or the title thereto or the interest of Mortgagee under this Mortgage
(including probate and bankruptcy proceedings), (b) employs an attorney to collect any or all of
the Secured Indebtedness or to enforce any of the terms hereof or realize or protect the liens and
security interests granted hereunder, or (c) incurs any costs or expenses in preparation for the
commencement of any foreclosure proceedings or for the defense of any threatened suit or
proceeding which might affect the Mortgaged Premises or the security hereof, whether or not
any such foreclosure or other suit or proceeding is actually commenced. Amounts payable under
this Section shall constitute additional Secured Indebtedness payable upon demand with interest
at the Default Rate.
26. No Liability on Mortgagee. Notwithstanding anything contained herein, this
Mortgage is only intended as security for the Secured Indebtedness, and Mortgagee shall not be
obligated to perform or discharge, and does not hereby undertake to perform or discharge, any
obligation, duty or liability of Mortgagor with respect to any of the Mortgaged Premises. No
liability shall be enforced or asserted against Mortgagee in its exercise of the powers granted to it
in this Mortgage, and Mortgagor expressly waives and releases Mortgagee from any such
liability. Mortgagor hereby agrees to indemnify and hold Mortgagee harmless from and against
(i) any and all liability, loss or damage which Mortgagee incurs under or by reason of the
exercise of its rights under this Mortgage and (ii) any and all claims and demands whatsoever
which may be asserted against Mortgagee by reason of any alleged obligations or undertakings
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on its part to perform or discharge any of the terms, covenants or agreements of Mortgagor
contained herein or with respect to any of the Mortgaged Premises, except in the case of liability
or loss resulting solely and directly from Mortgagee's gross negligence or willful misconduct.
Mortgagee shall not have responsibility for the control, care, management or repair of the
Mortgaged Premises, nor shall Mortgagee be responsible or liable for any negligence in the
management, operation, upkeep, repair or control of the Mortgaged Premises resulting in loss or
injury or death to any licensee, employee, tenant or stranger. Without limiting the foregoing,
Mortgagee shall not be responsible for any recitals herein or for insuring the Mortgaged
Premises, or for the recording, filing or refiling of this Mortgage; nor shall the Mortgagee be
bound to ascertain or inquire as to the performance or observance of any covenants, conditions or
agreements on the part of the Mortgagor contained herein.
27. Modifications Not to Affect Lien. Mortgagee, without notice to anyone, and without
regard to the consideration, if any, paid therefor, or the presence of other liens on the Mortgaged
Premises, may (a) in its discretion release any part of the Mortgaged Premises or any person
liable for any of the Secured Indebtedness, (b) extend the time of payment of any of the Secured
Indebtedness and may grant waivers or other indulgences with respect hereto and thereto, and
(c) agree with Mortgagor to modifications to the terms and conditions contained herein or
otherwise applicable to any of the Secured Indebtedness (including modifications in the rates of
interest applicable thereto), in each case, without in any way affecting or impairing the liability
of any party liable upon any of the Secured Indebtedness or the priority of the lien of this
Mortgage upon all of the Mortgaged Premises not expressly released. Any party acquiring any
direct or indirect interest in the Mortgaged Premises shall take such interest subject to all of the
provisions of this Mortgage.
28. Notices. All communications provided for herein shall be in writing and shall be
deemed to have been given when delivered (i) personally or mailed by certified mail, return
receipt requested, postage prepaid, addressed to the parties hereto at their addresses as shown at
the beginning of this Mortgage or to such other and different address as Mortgagor or Mortgagee
may designate pursuant to a written notice sent in accordance with the provisions of this Section
or (ii) in accordance with the terms of the Indenture. All notices hereunder shall be deemed
effective at the times specified in such Section of the Indenture.
29. Environmental Representations and Warranties; Covenants; Definitions. The
Mortgagor represents and warrants that: (i) the Mortgagor and the Mortgaged Premises comply
with all applicable Environmental Laws; (ii) the Mortgagor has obtained all governmental
approvals required for its operations and the Mortgaged Premises by any applicable
Environmental Law; (iii) the Mortgagor has not, and has no knowledge of any other person who
has, caused any Release, threatened Release or disposal of any Hazardous Material at, on, about,
or off the Mortgaged Premises and, to the knowledge of the Mortgagor, the Mortgaged Premises
is not adversely affected by any Release, threatened Release or disposal of a Hazardous Material
originating or emanating from any other property; (iv) the Mortgaged Premises does not contain
and has not contained any: (1) underground storage tank, (2) asbestos containing building
material, (3) landfills or dumps, (4 hazardous waste management facility as defined pursuant to
RCRA or any comparable state law, or (5) site on or nominated for the National Priority List
promulgated pursuant to CERCLA or any state remedial priority list promulgated or published
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pursuant to any comparable state law; (v) the Mortgagor has not used a material quantity of any
Hazardous Material and has conducted no Hazardous Material Activity at the Mortgaged
Premises; (vi) the Mortgagor has no liability for response or corrective action, natural resource
damage or other harm pursuant to CERCLA, RCRA or any comparable state law; (vii) the
Mortgagor is not subject to, has no notice or knowledge of and is not required to give any notice
of any Environmental Claim involving the Mortgagor or the Mortgaged Premises, and there are
no conditions or occurrences at the Mortgaged Premises which could reasonably be anticipated
to form the basis for an Environmental Claim against the Mortgagor or the Mortgaged Premises;
(viii) the Mortgaged Premises is not subject to any, and the Mortgagor has no knowledge of any
imminent, restriction on the ownership, occupancy, use or transferability of the Mortgaged
Premises in connection with any (1) Environmental Law or (2) Release, threatened Release or
disposal of a Hazardous Material; and (ix) there are no conditions or circumstances at the
Mortgaged Premises which pose a risk to the environment or the health or safety of persons.
(b) Covenants. The Mortgagor shall at all times do the following: (i) comply with, and
maintain the Mortgaged Premises in compliance with, all applicable Environmental Laws;
(ii) require that each tenant and subtenant, if any, of the Mortgaged Premises or any part thereof
comply with all applicable Environmental Laws; (iii) obtain and maintain in full force and effect
all governmental approvals required by any applicable Environmental Law for operations at the
Mortgaged Premises; (iv) cure any violation by it or at the Mortgaged Premises of applicable
Environmental Laws; (v) not allow the presence or operation at the Mortgaged Premises of any
(1) landfill or dump or (2) hazardous waste management facility or solid waste disposal facility
as defined pursuant to RCRA or any comparable state law; (vi) not manufacture, use, generate,
transport, treat, store, release, dispose or handle any Hazardous Material at the Mortgaged
Premises (except as disclosed in report of Environmental Monitoring and Technologies, Inc.
dated April 18, 1998); (vii) within 10 business days notify the Mortgagee in writing of and
provide any requested documents upon learning of any of the following in connection with the
Mortgagor or the Mortgaged Premises: (1) any liability for response or corrective action, natural
resource damage or other harm pursuant to CERCLA, RCRA or any comparable state law;
(2) any Environmental Claim; (3) any violation of an Environmental Law or Release, threatened
Release or disposal of a Hazardous Material; (4) any restriction on the ownership, occupancy,
use or transferability arising pursuant to any (x) Release, threatened Release or disposal of a
Hazardous Substance or (y) Environmental Law; or (5) any environmental, natural resource,
health or safety condition; (viii) conduct at its expense any investigation, study, sampling,
testing, abatement, cleanup, removal, remediation or other response action necessary to remove,
remediate, clean up or abate any Release, threatened Release or disposal of a Hazardous Material
as required by any applicable Environmental Law, (ix) abide by and observe any restrictions on
the use of Mortgaged Premises imposed by any governmental authority as set forth in a deed or
other instrument affecting the Mortgagor's interest therein; (x) promptly provide or otherwise
make available to the Mortgagee any requested environmental record concerning the Mortgaged
Premises which the Mortgagor possesses or can reasonably obtain; (xi) perform, satisfy, and
implement any operation or maintenance actions required by any governmental authority or
Environmental Law, or included in any no further action letter or covenant not to sue issued by
any governmental authority under any Environmental Law; and (xii) from time to time upon the
written request of the Mortgagee, timely provide at the Mortgagor's expense a report of an
environmental assessment of scope, form and depth (including, where appropriate, invasive soil
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or groundwater sampling) by a consultant acceptable to the Mortgagee as to any matter for which
notice is provided pursuant to the above requirements or which may be believed by the
Mortgagee to form the basis of an Environmental Claim in connection with the Mortgaged
Premises. If such a requested environmental report is not delivered within 75 days after receipt
of the Mortgagee's request, then the Mortgagee may arrange for the same, and the Mortgagor
hereby grants to the Mortgagee and its representatives access to the Mortgaged Premises and a
license to undertake such an assessment (including, where appropriate, invasive soil or
groundwater sampling). The costs of any assessment arranged for by the Mortgagee will
constitute additional Secured Indebtedness, will be payable by the Mortgagor on demand and
will bear interest at the Default Rate.
(d) Definitions.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. §§9601 et seq., and any future amendments.
"Damages" means all damages including, without limitation, punitive damages,
liabilities, costs, expenses, losses, diminutions in value, fines, penalties, demands, claims,
cost recovery actions, lawsuits, administrative proceedings, orders, response action,
removal and remedial costs, compliance costs, investigation expenses, consultant fees,
attorneys' and paralegals' fees and litigation expenses.
"Environmental Claim" means any investigation, notice, violation, demand,
allegation, action, suit, injunction, judgment, order, consent decree, penalty, fine, lien,
proceeding or claim (whether administrative, judicial or private in nature) arising
(a)pursuant to, or in connection with an actual or alleged violation of, any Environmental
Law, (b) in connection with any Hazardous Material, (c) from any abatement, removal,
remedial, corrective or response action in connection with a Hazardous Material,
Environmental Law or order of a governmental authority, or (d) from any actual or
alleged damage, injury, threat or harm to health, safety, natural resources or the
environment.
"Environmental Law" means any current or future Legal Requirement pertaining
to (a) the protection of health, safety and the indoor or outdoor environment, (b) the
conservation, management or use of natural resources and wildlife, (c) the protection or
use of surface water or groundwater, (d) the management, manufacture, possession,
presence, use, generation, transportation, treatment, storage, disposal, Release, threatened
Release, abatement, removal, remediation or handling of, or exposure to, any Hazardous
Material, or (e) pollution (including any Release to air, land, surface water or
groundwater), and any amendment, rule,regulation, order or directive issued thereunder.
"Hazardous Material" means any substance, chemical, compound, product, solid,
gas, liquid, waste, byproduct, pollutant, contaminant or material which is hazardous or
toxic, and includes, without limitation, (a) asbestos, polychlorinated biphenyls and
petroleum (including crude oil or any fraction thereof) and (b) any material classified or
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regulated as "hazardous" or"toxic" or words of like import pursuant to an Environmental
Law.
"Hazardous Material Activity" means any activity, event or occurrence involving
a Hazardous Material, including, without limitation, the manufacture, possession,
presence, use, generation, transportation, treatment, storage, disposal, Release, threatened
Release, abatement, removal, remediation, handling of or corrective or response action to
any Hazardous Material.
"Legal Requirement" means any treaty, convention, statute, law, regulation,
ordinance, license, permit, governmental approval, injunction,judgment, order, consent
decree or other requirement of any governmental authority, whether federal, state, or
local.
"Material Adverse Effect" means any change or effect that individually or in the
aggregate is or is reasonably likely to be materially adverse to (a) the assets, operations,
income, condition (financial or otherwise) or business prospects of the Mortgagor, (b) the
lien of any mortgage, deed of trust or other security agreement covering the Mortgaged
Premises or any part thereof, (c) the ability of the Mortgagor to perform its obligations
under any loan agreement, promissory note, mortgage, deed of trust, security agreement
or any other instrument or document evidencing or securing any indebtedness,
obligations or liabilities of the Mortgagor owing to the Mortgagor or setting forth terms
and conditions applicable thereto or otherwise relating thereto, or (d) the condition or fair
market value of the Mortgaged Premises.
"RCRA" means the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of
1984, 42 U.S.C. §§6901 et seq., and any future amendments.
"Release" means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, migration, dumping, or disposing into the
indoor or outdoor environment, including, without limitation, the abandonment or
discarding of barrels, drums, containers, tanks or other receptacles containing or
previously containing any Hazardous Material.
30. Future Advances. This Mortgage is given, in part, to secure amounts advanced by
Mortgagee pursuant to the Loan Agreement and shall secure not only existing Secured
Indebtedness but also such future advances, as are made within twenty (20) years from the date
hereof, to the same extent as if such future advances were made on the date of the execution of
this Mortgage, although there may be no advance made at the time of execution of this Mortgage
and although there may be no Secured Indebtedness outstanding at the time any advance is made.
The lien of this Mortgage shall be valid as to all Secured Indebtedness, including future
advances, from the time of its filing for record in the recorder's or registrar's office of the county
in which the Mortgaged Premises is located. The total amount of Secured Indebtedness may
increase or decrease from time to time, but the total unpaid principal balance of Secured
Indebtedness (including disbursements which the Mortgagee may make under this Mortgage, or
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under the Loan Agreement) shall not exceed the amount set forth immediately after the Granting
Clauses herein, including, without limitation, any disbursements made for payment of taxes,
special assessments or insurance on the Mortgaged Premises and interest on such disbursements
(all such indebtedness being hereinafter referred to as the "maximum amount secured hereby").
This Mortgage shall be valid and have priority over all subsequent liens and encumbrances,
including statutory liens, excepting solely taxes and assessments levied on the Mortgaged
Premises, to the extent of the maximum amount secured hereby.
31. Partial Invalidity. All rights, powers and remedies provided herein are intended to
be limited to the extent necessary so that they will not render this Mortgage invalid,
unenforceable or not entitled to be recorded, registered or filed under any applicable law. If any
term of this Mortgage shall be held to be invalid, illegal or unenforceable, the validity and
enforceability of the other terms of this Mortgage shall in no way be affected thereby.
32. Successors and Assigns. Whenever any party hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party. All the covenants,
promises and agreements made by or on behalf of Mortgagor or Mortgagee in this Mortgage,
shall bind and inure to the benefit of their respective successors and assigns.
33. Default Rate. The term, "Default Rate" shall mean the rate per annum determined
by adding 2% to the Prime Rate (with any change in the Default Rate resulting from a change in
such Prime Rate to be and become effective as of and on the date of such change in such Prime
Rate). The term "Prime Rate" shall mean for any day the rate of interest announced by the
Mortgagee from time to time as its commercial base rate for U.S. dollar loans, or equivalent, as
in effect on such day, with any change in the Prime Rate resulting from a change in said
commercial base rate to be effective as of the date of the relevant change in said commercial
base rate.
34. Direct and Primary Security -No Subrogation. The lien and security herein created
and provided for stand as direct and primary security for the Secured Indebtedness. No
application of any sums received by Mortgagee in respect of the Mortgaged Premises or any
disposition thereof to the reduction of the Secured Indebtedness or any part thereof shall in any
manner entitle Mortgagor to any right, title of interest in or to the Secured Indebtedness or any of
the Mortgaged Premises or other collateral security therefor, whether by subrogation or
otherwise, unless and until all Secured Indebtedness has been fully paid and satisfied and the
Letter of Credit has been returned to the Mortgagee for cancellation.
35. Headings. The headings in this instrument are for convenience of reference only
and shall not limit or otherwise affect the meaning of any provision hereof.
36. Governing Law. This Mortgage shall be governed by and construed in accordance
with the internal laws of the State of Illinois, without giving effect to conflict of law principles.
37. Entire Agreement. This Mortgage constitutes the entire understanding of the parties
with respect to the subject matter thereof and any prior agreements, whether written or oral, with
respect thereto are superseded hereby.
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38. Terms of Loan Agreement Not Superseded. Nothing contained herein shall be
deemed or construed to permit any act or omission which is prohibited by the terms of the Loan
Agreement or any other agreement related to the Bonds and the covenants and agreements
contained herein are in addition to and not in substitution for the covenants and agreements
contained in the Loan Agreement and such related documents.
39. Changes, Etc. This Mortgage and the provisions hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the Mortgagor and
Mortgagee.
40. Mortgage Constitutes Construction Mortgage. This Mortgage secures an obligation
for the construction of improvements on real property herein described. As such, this Mortgage
constitutes a construction mortgage for the purpose of Article Nine of the Uniform Commercial
Code of Illinois and is entitled to all of the benefits afforded construction mortgages thereunder.
41. Inspection and Cooperation. The Mortgagor will permit the Mortgagee or its
representatives at all reasonable times and as often as the Mortgagee may request to inspect the
Improvements and the materials to be used in the construction thereof, to examine all detailed
plans and drawings which relate to construction of the Improvements and to examine and copy
all books and account records and other papers relating to the Mortgaged Premises and the
construction of the Improvements and will cause contractors related to the construction of the
Project to cooperate with the Mortgagee to enable it to exercise its rights hereunder.
42. Independent Consultant. The Mortgagee shall have the right to appoint an
independent consultant at the reasonable expense of the Mortgagor to assist the Mortgagee in
analyzing the plans, construction schedule, to conduct monthly compliance inspections, approve
requests for a disbursement of the proceeds of the Bonds, perform such other services as may,
from time to time, be reasonably required by the Mortgagee, and to prepare reports regarding all
of the above for the Mortgagee.
43. Americans with Disabilities Act. The Mortgaged Premises does, and at all times
shall, comply the Americans with Disabilities Act and any rules or regulations issued under or
pursuant thereto and any laws, rules or regulations of the State of Illinois covering the same or
similar subject matter (the "ADA Requirements"). The Mortgagor hereby indemnifies and saves
harmless the Mortgagee, its officers, directors, employees, agents, successors or assigns from
and against any and all losses, claims, discharges, penalties, costs and/or expenses (including
attorneys' fees and court costs), fines, injuries and penalties they may incur as a result of the
failure of the Mortgaged Premises to comply with the ADA Requirements.
44. Mechanics' Lien Claims. The Mortgagor will not suffer or permit to exist any
mechanics' lien claims asserted against the Improvements, and Mortgagor will promptly
discharge same in the event of the filing thereof; provided, however, that the Mortgagor may
provide the Mortgagee with a surety bond issued by an insurance company, and upon terms,
acceptable to the Mortgagee in a principal amount equal to at least 110% of such lien claim.
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IN WITNESS WHEREOF, Mortgagor has caused these presents to be signed and sealed the
day and year first above written.
SUMMIT SCHOOL, INC.
By
Its
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STATE OF ILLINOIS )
) SS
COUNTY OF )
I, a Notary Public in and for said County, in the State
aforesaid, do hereby certify that , the
of Summit School, Inc., an Illinois not-for-profit corporation, who
is personally known to me to be the same person whose name is subscribed to the foregoing
instrument as such appeared before me this day in person and
acknowledged that he/she signed and delivered the said instrument as his/her own free and
voluntary act and as the free and voluntary act of said corporation, as aforesaid for the uses and
purposes therein set forth.
Given under my hand and notarial seal, this day of December, 1998.
Notary Public
(TYPE OR PRINT NAME)
(Seal)
My Commission Expires:
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• SCHEDULEI
LEGAL DESCRIPTION
Property Identification Number:
Common Street Address: 333 West River Road
Elgin, Illinois
SCHEDULE II
PERMITTED ENCUMBRANCES
1. Taxes for the year 1998 not yet due or payable.