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HomeMy WebLinkAboutResolutions - RS-96-13 - 07/31/1996 - Bonds for Chroms CorpRESOLUTION NO. RS-96-13 A BOND RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF INDUSTRIAL PROJECT REVENUE BONDS, SERIES 1996 (CHROMA CORPORATION PROJECT) IN THE AGGREGATE PRINCIPAL AMOUNT OF $1,300,000 TO FINANCE AN INDUSTRIAL PROJECT FOR CHROMA CORPORATION; AUTHORIZING THE EXECUTION AND DELIVERY BY THE CITY OF MCHENRY, ILLINOIS OF A LOAN AGREEMENT, ASSIGNMENT AND SECURITY AGREEMENT, BOND PURCHASE AGREEMENT, ARBITRAGE REGULATION AGREEMENT AND CLOSING DOCUMENTS IN CONNECTION THEREWITH; CONFIRMING THE SALE OF SUCH BONDS TO THE PURCHASER THEREOF; AND RELATED MATTERS. WHEREAS, the City of McHenry, Illinois, a municipality existing under the laws of the State of Illinois (the "Issuer") is authorized and empowered by the provisions of the Industrial Project Revenue Bond Act, 65 ILCS 5/11-74-1 to 5/11-74- 14, inclusive, as from time to time supplemented and amended (the "Act") to issue its revenue bonds to finance the costs of any industrial project to the end that the Issuer may be able to relieve conditions of unemployment, to maintain existing levels of employment and to encourage the increase of industry and commerce within the City of McHenry, Illinois, thereby reducing the evils attendant upon unemployment and provide for the public safety, benefit and welfare of the residents of the City of McHenry; and WHEREAS, as a result of negotiations between the Issuer and Chroma Corporation, a Delaware corporation (the "Borrower"), contracts have been or will be entered into by the Borrower for the acquisition of a parcel of land located at 1260 Belden Street, McHenry, Illinois and the construction and equipping of a manufacturing facility thereon with related uses (the "Project") to be used by the Borrower or its affiliates and lessees or sublessees, and which Project will be of the character and will accomplish the purposes provided by the Act, and the Issuer is willing to issue its revenue bonds to finance a portion of the cost of acquisition, construction and equipping of the Project, all as set forth in the details and provisions of the Loan Agreement hereinafter identified (the "Agreement"); and WHEREAS, it is estimated that the costs of the Project, including costs relating to the preparation and issuance of the revenue bonds, will be not less than $1,300,000; and WHEREAS, the Issuer proposes to sell the revenue bonds (the "Bonds") hereinafter authorized and designated "Industrial Project Revenue Bonds, Series 1996 (Chroma Corporation Project)" upon a negotiated basis to American National Bank and Trust Company of Chicago located in Chicago, Illinois; and WHEREAS, pursuant to the provisions of Section 149(a) of the Internal Revenue Code of 1986, as amended, a public hearing on the proposed plan of financing of the Project was held by the Issuer prior to the adoption of this Resolution, pursuant to notice published by the Issuer in the Northwest Herald, a newspaper of general circulation in the City of McHenry, Illinois, on July 15, 1996; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF MCHENRY, ILLINOIS, MCHENRY COUNTY, ILLINOIS, AS FOLLOWS: DEFINITIONS Section 1. The following words and terms as used in this Bond Resolution shall have the following meanings unless the context or use indicates another or different meaning or intent: "Act" means 65 ILCS 5/11-74-1 et seq. (1994 State Bar Edition), as supplemented and amended. "Agreement" means the Loan Agreement dated as of August 1, 1996 by and between the Issuer and the Borrower, as from time to time amended and supplemented. "Arbitrage Regulation Agreement" means the Arbitrage Regulation Agreement dated as of August 1, 1996 by and among the Issuer, the Borrower and the Bondholder, as from time to time amended and supplemented. "Assignment" means the Assignment and Security Agreement dated as of August 1, 1996, from the Issuer to the Bondholder. "Assignment of Rents" means the Assignment of Rents and Leases dated as of August 1, 1996 from the Borrower to the Bank. "Authorized Borrower Representative" means the person or persons who at the time shall have been designated as such pursuant to the provisions of the Agreement. "Bank" means American National Bank and Trust Company of Chicago, or the successor holder of the Bonds. "Bonds" means the Bonds authorized to be issued here - under. "Bond Fund" means the Bond Fund created in Section 6 hereof. "Bond Interest Rate" shall mean the interest borne by the Bonds in accordance with their terms at the time of reference. -2- "Bond Purchase Agreement" means the Bond Purchase Agreement dated as of August 1, 1996 among the Issuer, the Borrower and the Bank. "Bond Resolution" means this Bond Resolution. "Bondowner", "Bondholder" or "owner of the Bond" means any owner from time to time of the Bonds. "Borrower" means Chroma Corporation, a Delaware corporation, and its successors and assigns. "Code" means the Internal Revenue Code of 1986, as amended and supplemented. "Cost of the Project" means those costs more specifically described in the Agreement. "Default" means an event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Escrow Agent" means Guaranty National Title Company. "Escrow Agreement" means the Escrow Agreement dated as of August 1, 1996 among the Bondholder, the Borrower, and the Escrow Agent. "Escrow Fund" means the Escrow Fund created pursuant to the Escrow Agreement. "Event of Default" means any of those events specified in Section 10 hereof. The words "hereof", "herein", "hereunder" and other words of similar import refer to this Bond Resolution as a whole. "Issuer" means the City of McHenry, Illinois, a municipal corporation duly created and validly existing under the laws of the State of Illinois, and any successor body to the duties or functions of the Issuer. "Mortgage" means the Mortgage and Security Agreement dated as of August 1, 1996 from the Borrower to the Bondholder. "Person" means any individual, firm, association, trust, partnership, corporation or public body. "Project" means the facilities described in Exhibit A to the Agreement. -3- "Reset Date" means August 1, 2006 and any date thereafter upon which the Bonds begin to bear interest at a different rate for the succeeding Reset Period. "Reset Period" means the periods established pursuant to the terms of the Bonds. "Reset Rate" means the rate of interest borne by the Bonds as determined in accordance with the terms thereof. AUTHORIZATION OF THE PROJECT Section 2. The Project, as described in the preamble hereto shall be and is hereby approved and authorized to be financed through the issuance of the Bonds as described herein. The action of the Issuer in publishing notice of said public hearing as required by Section 149(a) of the Code is in all respects hereby ratified, confirmed and approved, and the holding of said public hearing by the Issuer is hereby acknowledged and approved. The estimated Cost of the Project is not less than $1,300,000. It is hereby found and declared that the financing of the Project and the use thereof by the Borrower as hereinafter provided is necessary to accomplish the public purposes described in this Section 2. AUTHORIZATION AND ISSUE OF BONDS; PREPAYMENT OF BONDS Section 3. (a) Authorization and Issue. For the purpose of financing the cost of acquisition, construction and equipping there shall be and there is hereby authorized to be issued by the Issuer its Industrial Project Revenue Bonds, Series 1996 (Chroma Corporation Project), in the aggregate principal sum of $1,300,000, to be dated the date of issuance thereof, and payable to the order of the Bank, and substantially in the form contained in Section 4 hereof. The form, terms and provisions of the Bonds, in the form contained in Section 4 hereof, are approved, with such changes therein as are not inconsistent herewith. The Bonds shall be prepared in typewritten form. The Mayor is hereby authorized and directed to execute the Bonds, and the City Clerk is hereby authorized to and directed to attest the Bonds, and each is authorized to deliver the Bonds. The Bonds shall be signed by the manual or facsimile signature of the Mayor and attested by the manual or facsimile signature of the City Clerk of the Issuer. The seal of the Issuer is hereby authorized and directed to be affixed to the Bonds. The Bonds, together with interest thereon, shall be a special, limited obligation of the Issuer secured by the Assignment and payable solely from the revenues and receipts derived from the -4- Agreement (except to the extent paid out of moneys attributable to the Bond proceeds or the income from the temporary investment thereof) and shall be a valid claim of the owner thereof only against the Escrow Fund and the Bond Fund and other moneys held by the Bank and the revenues and receipts derived from the Note (as defined in the Agreement), the Agreement, the Mortgage and the Assignment of Rents, which revenues and receipts shall be used for no other purpose than to pay the principal installments of, premium, if any, and interest and other expenses due and owing, if any, on the Bonds, except as may be otherwise expressly authorized in this Bond Resolution and in such documents. The Bonds and the obligation to pay interest thereon does not now and shall never constitute an indebtedness, an obligation or a loan of credit of the Issuer, the State of Illinois or any political subdivision thereof, or a charge against their general credit or taxing powers, if any, within the purview of any constitutional limitation or provision, but shall be secured by the Assignment and payable solely from the revenues and receipts from the Agreement. No owner of the Bond shall have the right to compel any exercise of the taxing power, if any, of the Issuer, the State of Illinois or any political subdivision thereof to pay the principal of, premium, if any, or interest on the Bonds. Pursuant to the Bond Purchase Agreement, the Bonds shall be sold to the Bank at a private sale at a purchase price equal to 1000 of the principal amount of the Bonds. The Bonds shall be transferable only as a whole as provided herein. Upon surrender for transfer of the Bonds at the principal office of the Bank, duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or his attorney duly authorized in writing, the Issuer shall execute and deliver in the name of the transferee substitute fully registered Bonds of the same series, in the denomination of the unpaid principal amount thereof, with the same maturity and interest rate, dated the first day of the calendar month (to which interest has been paid) next preceding the date of its issuance, or if issued on the first day of a calendar month (to which interest has been paid), as of such date. The owner of the Bonds may give written notice to the Borrower of any proposed mandatory purchase pursuant to Section 3(b)(5) hereof at least thirty (30) days prior to any Reset Date in which event the Borrower shall have the option to find an alternate purchaser of the Bonds at the same price, on the same date and upon substantially the same terms and conditions of purchase as the transfer proposed by the owner of the Bonds. If the Borrower has found such an alternate purchaser, the Bonds shall be transferred to the alternate purchaser on the date designated by the Bondholder pursuant to Section 3 (b) (5) hereof at the price of par plus accrued interest to the date of transfer. -5- The Issuer shall cause books for the registration and for the transfer of the Bonds as provided in this Resolution to be kept by the Bank which is hereby constituted and appointed the Bond Registrar of the Issuer. The Bank, as Bond Registrar, shall keep and maintain, on behalf of the Issuer, registration books indicating the name and address of the owner from time to time of the Bonds. The Bonds shall never be registered in the name of bearer. The Bank shall not be required to transfer the Bonds during the period of ten (10) days next preceding any interest payment date of the Bonds nor to transfer the Bonds after the mailing of notice calling the Bonds (or a portion thereof) for prior redemption has been given as herein provided. The person in whose name the Bonds shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal installments of, premium, if any, or interest on the Bonds 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 hereinabove provided. All such payments shall be valid and effectual to satisfy and discharge the liability upon the Bonds to the extent of the sum or sums so paid. In each case the Issuer shall require the payment by the owner of the Bonds requesting transfer of any tax or other government charge required to be paid with respect to such transfer. In the event any Bond is mutilated, lost, stolen or destroyed, the Issuer may execute a substitute Bond of like date, tenor and maturity as the Bond mutilated, lost, stolen or destroyed; provided, that, in the case the Bond is mutilated, the mutilated Bond shall first be surrendered to the Issuer, and in the case the Bond is lost, stolen or destroyed, there shall be first furnished to the Issuer evidence of such loss, theft or destruction satisfactory to the Issuer, together with indemnity from the Bondholder satisfactory to the Issuer. In the event all of the principal installments of any Bond shall have matured, instead of issuing a duplicate Bond the Issuer may pay the same without surrender thereof. The Issuer may charge the owner of the Bond with reasonable fees and expenses in this connection. (b) Prepayment of Bond. (1) The Bonds are subject to prepayment in part in the event any moneys shall be deposited in the Bond Fund (relating to moneys remaining after construction of the Project). If called for prepayment as a result of such events, the Bonds shall be subject to prepayment by the Issuer in part at a prepayment price of 100% of the principal amount thereof being prepaid plus accrued interest to the prepayment date. ( 2 ) The Bonds are subject to prepayment at the option of the Borrower at any time, in whole or in part, at any time provided (A) at least thirty (30) days, notice is given to the Bondholder of such prepayment, and (B) if such repayment is made at any time prior to August 1, 1999, a prepayment premium shall be paid to the Bondholder as follows: DATE OF PREPAYMENT Prior to August 1, On or after August prior to August On or after August prior to August PREPAYMENT PREMIUM 1997 30 of principal amount prepaid 1, 1997 and 2% of principal amount prepaid 1, 1998 1, 1998 and 1% of principal amount prepaid 1, 1999 (3) The Bonds are also subject to prepayment, in whole or in part, at a prepayment price of 100% of the principal amount thereof being prepaid, plus accrued interest to the prepayment date, from the proceeds of insurance or condemnation with respect to the Project, but only upon the conditions and pursuant to Sections 5.20 and 5.21 of the Agreement. (4) The Bonds are subject to mandatory prepayment upon an Event of Default (as such term is defined in the Agreement) pursuant to Section 7.2 of the Agreement. (5) The Bonds are subject to mandatory prepayment in whole at the option of the Bondholder within thirty (30) days of August 1, 2006 and each Reset Date thereafter. In lieu of mandatory prepayment, the Borrower may provide an alternate purchaser as provided in Section 3(a) hereof. -7- Section 4. following form: R-1 BOND FORM The Bonds shall be in substantially the THIS BOND MAY BE TRANSFERRED ONLY AS A WHOLE UNITED STATES OF AMERICA STATE OF ILLINOIS COUNTY OF MCHENRY CITY OF MCHENRY INDUSTRIAL PROJECT REVENUE BONDS, SERIES 1996 (CHROMA CORPORATION PROJECT) $1,300,000 The City of McHenry, Illinois, a municipal corporation of the State of Illinois (the "Issuer"), for value received, promises to pay, solely and only from the source and as hereinafter provided, to the order of American National Bank and Trust Company of Chicago (the "Bank"), the principal sum of: One Million Three Hundred Thousand and no/100 Dollars ($1,300,000) in equal semi-annual installments of principal and interst on August 1, 1997 and on each February 1 and August 1 thereafter to and including August 1, 2021 (each a "Payment Date") with interest calculated at the rate of the Bond Interest Rate (as such term is hereinafter defined) and the principal amortized over a period of twenty-five (25) years, all as provided on Schedule I attached hereto and made a part of this Bond (the "Bond Payment Schedule"); provided each such day is a Business Day (as defined, in the hereinafter defined Agreement) or on the immediately succeeding Business Day and further provided that there shall be one payment of interest only on Febrary 1, 1997 in the amount of interest at the Bond Interest Rate accrued from the date of this Bond through the last day of January, 1997. At least fifteen (15) days prior to the commencement of each Reset Period (as such term is hereinafter defined), the Bondholder shall provide the Borrower and the Issuer with a revised Bond Payment Schedule amortizing the unpaid principal balance of this Bond over the period from the date such Reset Period commences to August 1, 2021 at the then applicable Bond Interest Rate. M-4a "Bond Interest Rate" shall mean the rate of 6.6870-o per annum for the period commencing on the date of this Bond to and including July 31, 2006 and for each Reset Period the rate per annum of 77.201 of the sum of (i) the then applicable rate, determined on the date twenty (20) days prior to the commencement date of the applicable Reset Period, for United States Treasury Securities of a maturity comparable to the length of the applicable Reset Period and (ii) 2%; provided that from and after a Determination of Taxability (as defined in the Agreement) , the Bond Interest Rate shall be computed by dividing the Bond Interest Rate which would otherwise then be applicable by .772 retroactive to the date interest on the Bonds ceased to be exempt from federal income taxation by reason of such Determination of Taxability (the "Taxable Rate"). "Reset Period" shall mean one-year incremental periods of time which are equal to or greater than one year but not greater than five years as determined by the Borrower for the periods commencing August 1, 2006 (the "Initial Reset Date") and at the end of each Reset Period thereafter and with written notice in the form as provided in Schedule II attached to the Note dated the date hereof of the Borrower given by the Borrower to the Issuer and the Bondholder at least forty-five days but not more than sixty days prior to (i) the Initial Reset Date and (ii) after the Initial Reset Date the end of the Reset Period then in effect. This Bond shall bear interest on any overdue installment of principal and (to the extent that the payment of such interest shall be legally enforceable) on any overdue installment of interest at a rate equal to the Base Rate (as defined in the Agreement), plus 3% per annum. Both principal hereof and interest hereon are payable in immediately available funds at or before 1 P.M. Chicago time at the principal office of the Bank, in Chicago, Illinois. This Bond is issued in the principal sum of $1,300,000 pursuant to the hereinafter described Act and to a Bond Resolution duly adopted by the governing body of the Issuer (the "Bond Resolution") for the purpose of providing funds to finance the cost of acquiring a parcel of land located at 1260 Belden Street in McHenry, Illinois and the constructing and the equipping of an manufacturing facility thereon (the "Project") and paying expenses incidental thereto. The proceeds of the Bond will be loaned by the Issuer to Chroma Corporation, a Delaware corporation (the "Borrower"), for payment of a portion of the costs of acquisition, construction and equipping of the Project, under the terms of a Loan Agreement dated as of August 1, 1996 (the "Agreement"). This Bond is secured by a pledge and assignment of revenues and receipts derived by the Issuer pursuant to the Agreement, a mortgage on the Project and an assignment of rents and leases on the Project, as more fully described in the Bond Resolution. Reference is made to the Bond Resolution for a description of the provisions, among others, with respect to the Wz nature and extent of the security, the rights, duties and obligations of the Issuer, the rights of the owner of the Bond, and the terms on which the Bond is or may be issued and to all the provisions of which the owner hereof by the acceptance of this Bond assents. This Bond may be declared due prior to its express maturity date, voluntary prepayments may be made thereon by the Borrower on behalf of the Issuer, and the owner hereof may cause the early prepayment hereof, all in the events, on the terms and in the manner and amounts as provided in the Bond Resolution. This Bond is issued pursuant to and in full compliance with the laws of the State of Illinois, particularly 65 ILCS 5/11- 74-1 et seq. (1994 State Bar Edition), as supplemented and amended (the "Act"). This Bond and the obligation to pay interest hereon are special, limited obligations of the Issuer, secured by an assignment to the Bank of the Agreement (except for certain rights retained by the Issuer), a note of the Borrower delivered pursuant to the Agreement, a mortgage, an assignment of rents and leases, and payable solely out of the revenues and receipts derived by the Issuer from the Agreement and otherwise as provided in the Bond Resolution and the Agreement. This Bond and the obligation to pay interest hereon shall not be deemed to constitute an indebtedness or an obligation of the Issuer, the State of Illinois or any political subdivision thereof, within the purview of any constitutional limitation or provision. No owner of this Bond shall have the right to compel the taxing powers, if any, of the Issuer, the State of Illinois or any political subdivision thereof to pay any principal installments of, premium, if any, or interest on this Bond. Pursuant to the provisions of the Agreement, payments sufficient for the prompt payment when due of the principal installments of and interest on this Bond are to be paid by the Borrower to the Bank for the account of the Issuer and deposited in a special account created by the Issuer and designated "City of McHenry, Illinois Industrial Project Revenue Bond Fund (Chroma Corporation Project), Series 199611, and all revenues and receipts under the Agreement have been duly pledged and assigned to the Bank to secure payment of such principal installments and interest. This Bond is non -transferable by the Bank, except as a whole and as provided in the Bond Resolution. Modifications, alterations or amendments of the provisions of the Bond Resolution may be made only to the extent and in the circumstances permitted by the Bond Resolution. This Bond is issued with the intent that the laws of the State of Illinois will govern its construction. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by the Constitution and laws -10- of Illinois happen, exist and be performed precedent to and in the issuance of this Bond have happened, exist and have been performed in due time, form and manner as required by law. IN WITNESS WHEREOF, the City of McHenry, Illinois has caused this Bond to be signed on its behalf by its Mayor and attested by its City Clerk and the official seal of said Issuer to be affixed hereto, all as of August 7, 1996. CITY OF MCHENRY, ILLINOIS By ATTEST; Mayor City Clerk (SEAL) APPROVAL OF AGREEMENT, NOTE, ASSIGNMENT, BOND PURCHASE AGREEMENT, MORTGAGE AND ESCROW AGREEMENT; AUTHORIZATION OF AGREEMENT, ASSIGNMENT, ARBITRAGE REGULATION AGREEMENT AND BOND PURCHASE AGREEMENT Section 5. The forms, terms, and provisions of the Agreement, the Note, the Assignment, the Bond Purchase Agreement, the Escrow Agreement, the Arbitrage Regulation Agreement, the Mortgage and the Assignment of Rents are approved and the Issuer shall enter into the Agreement, the Assignment, the Arbitrage Regulation Agreement and the Bond Purchase Agreement in the forms of each of such documents presented at this meeting, with such changes therein as shall be approved by the Mayor, as evidenced by his execution thereof. The Mayor is hereby authorized and directed to execute and deliver the Agreement, the Assignment, the Arbitrage Regulation Agreement and the Bond Purchase Agreement, and the City Clerk is hereby authorized and directed to affix the seal to and to attest the Agreement, the Assignment, the Arbitrage Regulation Agreement and the Bond Purchase Agreement. REVENUES; BOND FUND Section 6. There is hereby created by the Issuer and ordered established with the Bank, as depositary, a special fund to be designated "City of McHenry, Illinois Industrial Project Revenue Bond Fund, Series 1996 (Chroma Corporation Project)" (the "Bond Fund"), which shall be used to pay the principal installments of, premium, if any, and the interest on the Bonds. There shall be deposited into the Bond Fund, as and when received: (a) all prepayments specified in Articles IV, VII and VIII of the Agreement; and (b) all other moneys received by the -11- Bank under and pursuant to any of the provisions of the Agreement. The Bank is authorized and directed to apply amounts available therefor in the Bond Fund to the payment when due of the principal of and interest on the Bonds. The Issuer covenants and agrees that should there be a default under the Agreement, the Issuer shall fully cooperate with the Bank and with any other owner of the Bonds to the end of fully protecting the rights and security of such owner; provided that the Issuer shall be reimbursed by such owner for all its reasonable expenses, including attorneys' fees, in so cooperating with the owner. Nothing herein shall be construed as requiring the Issuer to operate the Project or to use any funds or revenues from any source other than funds and revenues derived from the Agreement. Any amounts remaining in the Bond Fund, after payment in full of the principal installments of, premium, if any, and interest on the Bonds and all other amounts required to be paid under the Agreement, the Note, the Mortgage, the Assignment of Rents, the Arbitrage Regulation Agreement, this Bond Resolution and any other agreement executed by the Borrower or the Issuer in connection therewith, shall be paid to the Borrower as provided in Section 14 hereof. CUSTODY AND APPLICATION OF PROCEEDS OF BONDS: ESCROW FUND Section 7. In accordance with Section 3.1 of the Agreement principal proceeds received by the Issuer from the sale of the Bonds shall be deposited in the Escrow Fund. Moneys in the Escrow Fund shall be expended in accordance with the provisions of the Escrow Agreement and the Agreement, and particularly Section 3.2 of the Agreement. The Escrow Agent shall keep and maintain adequate records pertaining to the Escrow Fund and all disbursements therefrom, and after the Project has been completed and a certificate of payment of all costs filed as provided in this Section, the Escrow Agent shall deliver copies of such records to the Issuer, the Bank and the Borrower. The completion of the Project and payment of all costs and expenses incident thereto shall be evidenced by the filing with the Issuer and the Bank of a certificate of the Authorized Borrower Representative required by Section 3.4 of the Agreement. Any moneys thereafter remaining in the Escrow Fund shall be applied in accordance with Section 8.1 of the Agreement. -12- INVESTMENTS; ARBITRAGE Section 8. Any moneys held as part of the Bond Fund and the Escrow Fund created pursuant to Section 7 hereof may be invested or reinvested on the direction of the Authorized Borrower Representative, in accordance with the provisions of Section 3.3 of the Agreement and the Arbitrage Regulation Agreement. Any such investment shall be held by or under control of the Bank or the Escrow Agent, as the case may be, as depositary, and shall be deemed at all times a part of such Fund and the interest accruing thereon and any profit realized from such investments shall be credited to such fund, and any loss resulting from such investments shall be charged to such fund, which loss shall be an obligation of the Borrower as provided in the Agreement. As and when any amount invested pursuant to this Section may be needed for disbursement, the Borrower may direct the Bank or the Escrow Agent, as the case may be, to cause a sufficient amount of the investments to be sold and reduced to cash to the credit of such funds regardless of the loss on such liquidation. With respect to Section 148(a) of the Code, the Issuer hereby, acting in reliance on certain certifications and representations made by the Borrower to the Issuer in the Arbitrage Regulation Agreement, which certifications and representations by this reference are incorporated herein and made a part hereof, adopts and ratifies such certifications and representations and hereby covenants with the purchaser and any owner of the Bonds that so long as any principal installment of the Bonds remains unpaid, the Issuer will not take or authorize the taking of any action which will cause the Bonds to be classified as an "arbitrage bond" within the meaning of Section 148(a) of the Code and any lawful regulations promulgated or proposed thereunder and covenants to comply with the Arbitrage Regulation Agreement. GENERAL COVENANTS Section 9. The Issuer covenants that, acting through the Bank as its assignee pursuant to the Assignment, it will promptly cause to be paid solely and only from the source mentioned in the Bonds, the principal installments of and interest on the Bonds hereby authorized at the place, on the dates and in the manner provided herein and in the Bonds according to the true intent and meaning thereof. The Bonds and the obligation to pay interest thereon are special, limited obligations of the Issuer, secured by the Note, the Agreement, the Mortgage and the Assignment of Rents and payable solely out of the revenues and receipts derived by the Issuer therefrom and otherwise as provided herein and in the Agreement. The Issuer covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations and -13- provisions contained in this Bond Resolution, in the Bond and in all proceedings of its governing body pertaining thereto. The Issuer represents that it is duly authorized under the Constitution and laws of the State of Illinois to issue the Bonds authorized hereby; that all actions on its part for the issuance of the Bonds have been duly and effectively taken and that the Bonds are and will be a valid and enforceable special, limited obligation of the Issuer according to the true intent and meaning thereof. The Issuer covenants that it will execute, acknowledge and deliver such instruments, financing statements and other documents as the owner of the Bonds or the Bank may reasonably require for the better assuring, granting, pledging and assigning the rights of the Issuer in and to the revenues and receipts hereby assigned and pledged to the payment of the principal installment of and interest on the Bonds as provided in the Assignment. The Issuer covenants and agrees that, except as herein and in the Agreement provided, it will not sell, convey, mortgage, encumber or otherwise dispose of any part of the revenues and receipts derived from the Agreement, or of its rights under the Agreement. The Issuer covenants and agrees that all books and documents in its possession relating to the Project and the revenues and receipts derived from the Agreement shall at all reasonable times be open to inspection by the owner of the Bonds or such accountants or other agencies as such owner may from time to time designate. EVENTS OF DEFAULT AND REMEDIES Section 10. If any of the following events occur it is hereby defined as and declared to be and to constitute an "Event of Default": (a) Default in the due and punctual payment of any interest on the Bonds or of any principal installments of the Bonds, whether at the stated or any accelerated maturity thereof and continuation of such default for 5 days thereafter; or (b) The occurrence and continuation of an Event of Default under Section 7.1 of the Agreement; or (c) The occurrence and continuation of an Event of Default under Section 3.1 of the Mortgage. Upon the occurrence of an Event of Default, the Bank by notice in writing delivered to the Issuer and the Borrower, may declare the principal installments of the Bonds and the interest accrued thereon immediately due and payable, and such principal installments and interest shall thereupon become and be immediately due and payable. Upon any such declaration all payments under the -14- Agreement from the Borrower immediately shall become due and payable as provided in Section 7.2 of the Agreement. While any principal installments of the Bonds or interest are unpaid, the Issuer shall not exercise any of the remedies on default specified in Section 7.2 of the Agreement without prior written consent of the Bank. Upon the occurrence of an Event of Default, the Bank may pursue any available remedy at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of the principal installments and interest on the Bonds and to enforce and compel the performance of the duties and obligations of the Issuer as herein set forth. No remedy by the terms of this Bond Resolution conferred upon or reserved to the Bank is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Bank or to the owner hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right, power or remedy accruing upon any Event of Default shall impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default or acquiescence therein; and every such right, power or remedy may be exercised from time to time as often as may be deemed expedient. All moneys received pursuant to any right given or action taken under the provisions of this Section or under the provisions of Article VII of the Agreement (after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Issuer, the Bank or the owner of the Bonds) at the time of the occurrence of an Event of Default shall be deposited in the Bond Fund and all such moneys in the Bond Fund shall be applied to the payment of the principal installments and interest then due and unpaid upon the Bonds to the person entitled thereto. Whenever moneys are to be applied pursuant to the provisions of this Section, such moneys shall be applied at such times, and from time to time, as the Bank shall determine. Whenever all principal installments and interest on the Bonds have been paid under the provisions of this Section and all exoenses the Bank and the Issuer have been paid, any balance remaining in the Bond Fund shall be paid to the Borrower. With regard to any default concerning which notice is given to the Borrower under the provisions of this Section, the Issuer hereby grants the Borrower full authority for account of the Issuer to perform or observe any covenant or obligation alleged in -15- said notice not to have been performed or observed, in the name and stead of the Issuer with full power to do any and all things and acts to the same extent that the Issuer could do in order to remedy such default. PERFORMANCE PROVISIONS Section 11. The Mayor and City Clerk, for and on behalf of the Issuer be, and each of them hereby is, authorized and directed to do any and all things necessary to effect the performance of all obligations of the Issuer under and pursuant to this Bond Resolution, the execution and delivery of the Bonds and the performance of all other acts of whatever nature necessary to effect and carry out the authority conferred by this Bond Resolution. The Mayor and City Clerk be, and they are hereby, further authorized and directed for and on behalf of the Issuer, to execute all papers, documents, certificates and other instruments that may be required for the carrying out of the authority conferred by this Bond Resolution or to evidence said authority and to exercise and otherwise take all necessary action to the full discharge of the obligations of the Issuer under the Agreement, the Assignment, the Arbitrage Regulation Agreement and the Bond Purchase Agreement. NOTICES Section 12. It shall be sufficient service of any notice, request, complaint, demand or other paper on the Issuer if the same shall, except as otherwise be provided herein, be duly mailed to the Issuer by first class mail, postage prepaid, or given by telephone or telecopier and confirmed by such mail, and to the other parties addressed to the Issuer at 333 South Green Street, McHenry, Illinois 60050, Attention: Mayor, telephone (815)363-2100, fax (815)363-2119, or to such other address as the Issuer may from time to time file with the Bank and the Borrower. It shall be sufficient service of any notice, request, complaint, demand or other paper on the Borrower if the same shall be duly mailed to the Borrower by first class mail, postage prepaid, or given by telephone or telecopier and confirmed by such mail, and to the other parties addressed to the Borrower at 3900 Dayton Street, McHenry, Illinois 60050, Attention: President, telephone (815)385- 8100, fax (815)385-1518, or to such other address as the Borrower may from time to time file with the Issuer and the Bank. It shall be sufficient service of any notice, request, complaint, demand or other paper on the Bank if the same shall be duly mailed to the Bank by first class mail addressed to the Bank at 33 North LaSalle Street, Chicago, Illinois 60690, Attention: Commercial Loan Department, telephone (312)661-5678, fax (312)664-6675 or to such other address as the Bank may from time to time file with the Issuer and the Borrower. -16- BOND RESOLUTION A CONTRACT; PROVISIONS FOR MODIFICATIONS, ALTERATIONS AND AMENDMENTS Section 13. The provisions of this Bond Resolution shall constitute a contract between the Issuer and the owners of the Bonds hereby authorized; and after the issuance of the Bonds no modification, alteration, amendment or supplement to the provisions of this Bond Resolution shall be made in any manner except with the written consent of the Bondholder until such time as all principal installments of and interest on the Bonds shall have been paid in full. SATISFACTION AND DISCHARGE Section 14. All rights and obligations of the Issuer and the Borrower under the Agreement, the Bonds, the Bond Purchase Agreement and this Bond Resolution shall terminate and such instruments shall cease to be of further effect, and the Bank shall cancel the Bonds deliver it to the Issuer, and deliver copies of the cancelled Bonds to the Borrower and shall assign and deliver to the Borrower any moneys in the Bond Fund required to be paid to the Borrower (except moneys held by the Bank for the payment of principal of, premium, if any, or interest on the Bonds) when: (a) all reasonable expenses of the Issuer and the Bank shall have been paid; (b) the Issuer and the Borrower shall have performed all of their covenants and promises in the Agreement, the Bonds, the Mortgage, the Escrow Agreement, the Bond Purchase Agreement, the Assignment, the Arbitrage Regulation Agreement and in this Bond Resolution; and (c) all principal installments and interest on the Bonds have been paid. SEVERABILITY Section 15. If any section, paragraph, clause or provision of his Bond Resolution shall be ruled by any court of competent jurisdiction to be invalid, the invalidity of such section, paragraph, clause or provision shall not affect any of the remaining provisions hereof. APPROVAL Section 16. The Issuer hereby acknowledges that a Public Hearing was held on July 31, 1996 and hereby approves the Project and the issuance of the Bonds. -17- INTENT Section 17. That all acts and doings 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 in the aggregate principal amount of $1,300,000 and the financing of the Project be, and the same hereby are, in all respects, approved and confirmed. ELECTION Section 18. That the Issuer hereby elects to have the provisions of Section 144(a)(4)(A) of the Internal Revenue Code of 1986, as amended, apply to the hereinabove described bond issue and hereby affirmatively notes said election in this Resolution. VOLUME CAP Section 19. The obligation of the Issuer to issue and deliver the Bonds is subject to the availability for such purpose of a necessary and sufficient cap allocation under Section 146 of the Internal Revenue Code of 1986, as amended. The Issuer has received a reallocation of 1996 volume cap allocation from the City of Crystal Lake, Illinois in the amount of $1,300,000. ACT Section 20. The Bonds shall be issued in compliance with and under the authority of the provisions of the Act and this Resolution. CAPTIONS Section 21. The captions or headings of this Bond Resolution are for convenience only and in no way define, limit or describe the scope or intent of any provision of this Bond Resolution. PROVISIONS IN CONFLICT REPEALED Section 22. All by-laws, ordinances, resolutions, and orders, or parts thereof, in conflict with the provisions of this Bond Resolution are, to the extent of such conflict, hereby repealed. -18- This Bond Resolution shall be in full force and effect immediately upon its adoption. AYES: Rnlgpr_ Locke,Bates, Lawson, Baird NAYS: None ABSENT: None PASSED this 31st day of July, 1996. APPROVED this 31st day of July, 1996. ATTEST: ar City Clerk -19-