Exhibit
10.23


 




 





TAX
REGULATORY AGREEMENT


 


 


by
and among


 


 


CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK


 


U.S.
BANK TRUST NATIONAL ASSOCIATION,


as
Trustee,


 


and


 


ROLLER
BEARING COMPANY OF AMERICA, INC.


 


DATED
AS OF APRIL 1, 1999


 


 


EXECUTED
AS PART OF THE PROCEEDINGS FOR THE


AUTHORIZATION
AND ISSUANCE OF:


 


$4,800,000


CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK


VARIABLE
RATE DEMAND


INDUSTRIAL
DEVELOPMENT REVENUE BONDS, SERIES 1999


(ROLLER
BEARING COMPANY OF AMERICA, INC. - SANTA ANA PROJECT)




 





 





















 


TABLE OF CONTENTS


 


(This Table of Contents is
for convenience of reference only and is not part of the Tax Regulatory
Agreement.)


 


	
  Article I

  
	
  DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
  Definitions

  	
   

  
	
  Section 1.02.

  	
  Reliance on
  Borrower’s Information

  	
   

  
	
   

  	
   

  	
   

  
	
  Article II

  
	
   

  	
   

  	
   

  
	
  CERTAIN
  REPRESENTATIONS BY THE BORROWER

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Description of
  the Project and Description of the Facilities

  	
   

  
	
  Section 2.02.

  	
  Capital
  Expenditures

  	
   

  
	
  Section 2.03.

  	
  Prior Issues
  and $40 Million Limit

  	
   

  
	
  Section 2.04.

  	
  Federal Tax
  Return Information

  	
   

  
	
  Section 2.05.

  	
  Composite
  Issues

  	
   

  
	
  Section 2.06.

  	
  Prohibited Uses

  	
   

  
	
  Section 2.07.

  	
  No Composite
  Project

  	
   

  
	
  Section 2.08.

  	
  Acquisition
  of Existing Property

  	
   

  
	
  Section 2.09.

  	
  Land
  Acquisition Limit and No Acquisition of Farmland

  	
   

  
	
  Section 2.10.

  	
  Representations
  by the Borrower for Purposes of IRS Form 8038

  	
   

  
	
   

  	
   

  	
   

  
	
  Article III

  
	
   

  	
   

  	
   

  
	
  USE
  OF BOND PROCEEDS

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Anticipated Use
  of Proceeds

  	
   

  
	
  Section 3.02.

  	
  Certification
  as to Costs of the Project

  	
   

  
	
   

  	
   

  	
   

  
	
  Article IV

  
	
   

  	
   

  	
   

  
	
  ARBITRAGE

  
	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Arbitrage
  Representations and Elections

  	
   

  
	
  Section 4.02.

  	
  Arbitrage
  Compliance

  	
   

  
	
  Section 4.03.

  	
  Calculation of
  Rebate Amount

  	
   

  



 





















 


	
  Section 4.04.

  	
  Payment to
  United States

  	
   

  
	
  Section 4.05.

  	
  Recordkeeping

  	
   

  
	
  Section 4.06.

  	
  Rebate Analyst

  	
   

  
	
   

  	
   

  	
   

  
	
  Article V

  
	
   

  	
   

  	
   

  
	
  COMPLIANCE
  WITH CODE

  	
   

  
	
   

  	
   

  	
   

  
	
  Article VI

  
	
   

  	
   

  	
   

  
	
  TERM OF TAX REGULATORY
  AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  Article VII

  
	
   

  	
   

  	
   

  
	
  AMENDMENTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Article VIII

  
	
   

  	
   

  	
   

  
	
  EVENTS OF DEFAULT, REMEDIES

  
	
   

  	
   

  	
   

  
	
  Section 8.01.

  	
  Events of
  Default

  	
   

  
	
  Section 8.02.

  	
  Remedies for
  an Event of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A-1

  	
  SOURCES AND USES OF FUNDS

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A-2

  	
  PROPERTY FINANCED OR REFINANCED BY THE
  BONDS

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B-1

  	
  FORM OF PROVIDER CERTIFICATION FOR A
  CERTIFICATE OF DEPOSIT

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B-2

  	
  FORM OF PROVIDER CERTIFICATION FOR AN
  INVESTMENT CONTRACT

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B-3

  	
  FORM OF BORROWER’S CERTIFICATION FOR A
  CERTIFICATE OF DEPOSIT INVOLVING THREE BIDS

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
  USEFUL LIFE CALCULATION

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT D

  	
  DECLARATION OF OFFICIAL INTENT

  	
   

  



 


ii





















 


TAX REGULATORY AGREEMENT


 


THIS TAX REGULATORY AGREEMENT
(this “Tax Regulatory Agreement”) is made and dated as of April 1, 1999, by and
among CALIFORNIA INFRASTRUCTURE AND DEVELOPMENT BANK and its successors or
assigns (the “Issuer”), ROLLER BEARING COMPANY OF AMERICA, INC., a corporation
duly organized and existing under the laws of the State of Delaware and its
successors or assigns (the “Borrower”), and U.S. BANK TRUST NATIONAL
ASSOCIATION, solely in its capacity as trustee under the Indenture, as defined
below (the “Trustee”);


 


W I T N E S S E T H:


 


WHEREAS, the Issuer has
authorized the issuance of $4,800,000 aggregate principal amount of its
Variable Rate Demand Industrial Development Revenue Bonds, Series 1999 (Roller
Bearing Company of America, Inc. (Santa Ana Facility) Project) (the “Bonds”),
the proceeds of which are being loaned to the Borrower pursuant to a Loan
Agreement, dated as of April 1, 1999, between the Issuer and the Borrower (the “Agreement”),
to finance the acquisition and rehabilitation of a manufacturing facility and
the acquisition and installation of certain manufacturing equipment, as more
fully set forth in the Agreement (the “Project”) and to pay a portion of the
costs of issuance of the Bonds;


 


WHEREAS, the Borrower will
use the Project in the manufacture of roller bearings and precision components
or for the manufacture of other tangible personal property; and


 


WHEREAS, the Issuer has
determined that the issuance, sale and delivery of the Bonds is needed to
finance the Project; and


 


WHEREAS, this Tax Regulatory
Agreement has been entered into by the Issuer, the Borrower and the Trustee to
ensure compliance with the provisions of the Code (as hereinafter defined; and


 


WHEREAS, to ensure that
interest on the Bonds will be and remain excludable from gross income under the
Code, the restrictions listed in this Tax Regulatory Agreement must be
satisfied.


 


NOW THEREFORE, the Issuer,
the Borrower and the Trustee hereby agree as follows:


 


ARTICLE I


 


DEFINITIONS


 


SECTION 1.01.
DEFINITIONS. The following words and phrases shall have the following meanings.
Any capitalized word or term used herein but not defined herein shall have the
same meaning given in the hereinafter defined Indenture.


 


“ABUSIVE ARBITRAGE DEVICE”
means any action which has the effect of (a) enabling the Issuer or the
Borrower to exploit the difference between taxable and tax-exempt interest
rates to


 





















 


obtain a material financial
advantage; and (b) overburdening the tax-exempt bond market as defined in ss.
1.148-10 of the Regulations.


 


“ACCOUNTING METHOD” means
both the overall method used to account for the Gross Proceeds of the Bonds
(e.g., the cash method or a modified accrual method) and the method used to
account for or allocate any particular item within that overall accounting
method (e.g., accounting for Investments, Expenditures, allocations to and from
different sources and particular items of the foregoing).


 


“AGREEMENT” means the Loan
Agreement, dated as of April 1, 1999, between the Issuer and the Borrower, and
any amendments and supplements thereto.


 


“AVERAGE ECONOMIC LIFE” means
the average reasonably expected economic life of the Facilities as defined in
ss. 147(b) of the Code.


 


“AVERAGE MATURITY” means the
average maturity of the Bonds as defined in ss. 147(b) of the Code.


 


“BOND COUNSEL” means a law
firm of nationally recognized bond counsel who is requested to deliver its
approving opinion with respect to the issuance of and the exclusion from
federal income taxation of interest on the Bonds.


 


“BOND YEAR” means the period
commencing April 1 of each calendar year and terminating on March 31 of the
immediately succeeding calendar year during the term of the Bonds, except that
the first Bond Year shall commence on the Date of Issuance and end on March 31,
2000 (unless a different period is required by the Regulations or selected by
the Borrower pursuant to the Regulations).


 


“BOND YIELD” means the Yield
of the Bonds calculated in accordance with Section 1.148-4 of the Regulations.


 


“BORROWER” means Roller
Bearing Company of America, Inc., a corporation duly organized and existing
under the laws of the State of Delaware or any entity which is the surviving,
resulting or transferee entity in any merger, consolidation or transfer
permitted under the Agreement.


 


“CAPITAL EXPENDITURE” means
any cost of a type that is for the acquisition, construction, reconstruction or
improvement of land or property of a character subject to the allowance for
depreciation. For example, costs incurred to acquire, construct, reconstruct or
improve land, buildings and equipment generally are Capital Expenditures.
Whether an expenditure is a capital expenditure is determined at the time the
expenditure is paid with respect to the property. Future changes in law do not
affect whether an expenditure is a capital expenditure.


 


“CAPITAL PROJECT” means all
Capital Expenditures that carry out the governmental purpose of the Bonds. For
example, a Capital Project may include Capital Expenditures for one or more
building improvements or equipment, plus related capitalized interest paid or
accrued prior to the in-service date for the Capital Project.


 


2





















 


“CLASS OF INVESTMENTS” means
one of the following, each of which represents a different Class of Investments:


 


(a)
Each category of yield restricted Purpose Investment and Program Investment, as
defined in ss. 1.148-1(b), that is subject to a different definition of
materially higher Yield under ss. 1.148-2(d)(2);


 


(b)
Yield restricted Nonpurpose Investments; and


 


(c)
All other Nonpurpose Investments.


 


“CODE” means the Internal
Revenue Code of 1986, as amended.


 


“COMPUTATION DATE” means the
Initial Computation Date, an Installment Computation Date or the Final
Computation Date.


 


“COMPUTATION DATE CREDIT” means
on the last day of each Bond Year during which there are Gross Proceeds subject
to the rebate requirement of Article IV hereof, and on the Final Computation
Date, the amount of $1,000.


 


“CONSISTENTLY APPLIED” means
applied uniformly within a fiscal period and between fiscal periods to account
for Gross Proceeds of an issue and any amounts that are in a commingled fund.


 


“COSTS OF ISSUANCE” means all
costs incurred in connection with the issuance of the Bonds, other than fees
paid to or on behalf of credit enhancers as fees for “qualified guarantees” as
defined in ss. 1.148-4(f) of the Regulations or to the Issuer as a portion of
its higher Yield permitted on the Agreement under ss. 1.148-2(d)(2) of the
Regulations. Examples of Costs of Issuance include (but are not limited to):


 


(a)
underwriter’s spread (whether realized directly or derived through purchase of
the Bonds at a discount below the price at which a substantial number of the
Bonds are sold to the public) or placement agent’s fee;


 


(b)
counsel fees (including bond counsel, underwriter’s counsel, placement agent’s
counsel, issuer’s counsel, borrower’s counsel, trustee’s counsel, and any other
specialized counsel fees incurred in connection with the issuance of the
Bonds);


 


(c)
financial advisor fees incurred in connection with the issuance of the Bonds;


 


(d)
rating agency fees (except for any such fee that is paid in connection with or
as a part of the fee for credit enhancement of the Bonds);


 


(e)
trustee fees incurred in connection with the issuance of the Bonds;


 


(f)
accountant fees incurred in connection with the issuance of the Bonds;


 


3





















 


(g)
printing costs (for the Bonds and of the preliminary and final offering
circulars or official statements);


 


(h)
costs incurred in connection with the required public approval process (e.g.,
publication costs for public notices generally and costs of the public
hearing); and


 


(i)
Issuer fees to cover administrative costs and expenses incurred in connection
with the issuance of the Bonds.


 


“COSTS OF ISSUANCE FUND”
means the Costs of Issuance Fund established pursuant to the Indenture.


 


“CURRENT OUTLAY OF CASH”
means an outlay reasonably expected to occur not later than 5 banking days
after the date as of which the allocation of Gross Proceeds to the Expenditure
is made.


 


“DATE OF ISSUANCE” means
April 30, 1999.


 


“DISCHARGED” means, with
respect to any Bond, the date on which all amounts due with respect to such
Bond are actually and unconditionally due, if cash is available at the place of
payment, and no interest accrues with respect to such Bond after such date.


 


“ECONOMIC ACCRUAL METHOD”
(also known as the CONSTANT INTEREST METHOD or ACTUARIAL METHOD) means the
method of computing Yield that is based on the compounding of interest at the
end of each compounding period.


 


“EXPENDITURE” means a book or
record entry which allocates Proceeds of the Bonds in connection with a Current
Outlay of Cash.


 


“FACILITIES” means the
Manufacturing Facility financed or refinanced with the Proceeds of the Bonds
and described in Exhibit A-2 hereto.


 


“FAIR MARKET VALUE” means the
price at which a willing buyer would purchase an Investment from a willing
seller in a bona fide, arm’s-length transaction. Fair Market Value generally is
determined on the date on which a contract to purchase or sell the Nonpurpose
Investment becomes binding (i.e., the trade date rather than the settlement
date). Except as otherwise provided in this definition, an Investment that is
not of a type traded on an established securities market (within the meaning of
ss. 1273 of the Code), is rebuttably presumed to be acquired or disposed of for
a price that is not equal to its Fair Market Value. The Fair Market Value of a
United States Treasury obligation that is purchased directly from the United
States Treasury is its purchase price. The following guidelines shall apply for
purposes of determining the Fair Market Value of the obligations described
below:


 


(a)
CERTIFICATES OF DEPOSIT. The purchase of certificates of deposit with fixed
interest rates, fixed payment schedules and substantial penalties for early
withdrawal will be deemed to be an Investment purchased at its Fair Market
Value on the purchase date if the Yield on the certificate of deposit is not
less than:


 


4





















 


(i)
the Yield on reasonably comparable direct obligations of the United States; and


 


(ii)
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.


 


(b)
GUARANTEED INVESTMENT CONTRACTS. A Guaranteed Investment Contract is a
Nonpurpose Investment that has specifically negotiated withdrawal or
reinvestment provisions and a specifically negotiated interest rate, and also
includes any agreement to supply Investments on two or more future dates (e.g.,
a forward supply contract). The purchase price of a Guaranteed Investment
Contract is treated as its Fair Market Value on the purchase date if:


 


(i)
The Borrower makes a bona fide solicitation for a specified Guaranteed
Investment Contract and receives at least three bona fide bids from providers
that have no material financial interest in the issue (e.g., as underwriters or
brokers);


 


(ii)
The Borrower purchases the highest-Yielding Guaranteed Investment Contract for
which a qualifying bid is made (determined net of broker’s fees);


 


(iii)
The Yield on the Guaranteed Investment Contract (determined net of broker’s
fees) is not less than the Yield then available from the provider on reasonably
comparable Guaranteed Investment Contracts, if any, offered to other persons
from a source of funds other than gross proceeds of tax-exempt bonds;


 


(iv)
The determination of the terms of the Guaranteed Investment Contract takes into
account as a significant factor the Borrower’s reasonably expected drawdown
schedule for the amounts to be invested, exclusive of amounts deposited in debt
service funds and reasonably required reserve or replacement funds;


 


(v)
The terms of the Guaranteed Investment Contract, including collateral security
requirements, are reasonable; and


 


(vi)
The obligor on the Guaranteed Investment Contract certifies the administrative
costs that it is paying (or expects to pay) to third parties in connection with
the Guaranteed Investment Contract.


 


“FINAL COMPUTATION DATE”
means the date the last Bond is Discharged.


 


“FUTURE VALUE” means the
Value of a Receipt or Payment at the end of any interval as determined by using
the Economic Accrual Method and equals the Value of that Payment or Receipt
when it is paid or received (or treated as paid or received), plus interest
assumed to be


 


5





















 


earned and compounded over
the period at a rate equal to the Yield on the Bonds, using the same
compounding interval and financial conventions used to compute the Yield on the
Bonds.


 


“GROSS PROCEEDS” means any
Proceeds or Replacement Proceeds of the Bonds.


 


“INDENTURE” means, the
Indenture of Trust, dated as of April 1, 1999, between the Issuer and the
Trustee, and any amendments and supplements thereto.


 


“Initial Computation Date”
means the date a rebate calculation is required, if any, pursuant to Section
3.03(c) of the Indenture.


 


“INSTALLMENT COMPUTATION DATE”
means the last day of the fifth Bond Year and each succeeding fifth Bond Year
as stated in Section 4.01 hereof or the last day of any Bond Year prior to the
fifth Bond Year selected by the Borrower.


 


“INVESTMENT” means any
Purpose Investment or Nonpurpose Investment, including any other tax-exempt
bond.


 


“INVESTMENT INSTRUCTIONS”
means the letter of instructions set forth as an exhibit to the No Arbitrage
Certificate of the Issuer dated the Date of Issuance.


 


“INVESTMENT PROCEEDS” means
any amounts actually or constructively received from investing Proceeds of the
Bonds.


 


“INVESTMENT-TYPE PROPERTY”
means any property, other than property described in ss. 148(b)(2)(A), (B), (C)
or (E) of the Code that is held principally as a passive vehicle for the
production of income. Except as otherwise provided, a prepayment for property
or services is Investment-Type Property if a principal purpose for prepaying is
to receive an Investment return from the time the prepayment is made until the
time payment otherwise would be made. A prepayment is not Investment-Type
Property if--


 


(a)
the prepayment is made for a substantial business purpose other than Investment
return and the issuer has no commercially reasonable alternative to the
prepayment, or


 


(b)
prepayments on substantially the same terms are made by a substantial
percentage of persons who are similarly situated to the issuer but who are not
beneficiaries of tax-exempt financing.


 


“ISSUE PRICE” means, except
as otherwise provided, issue price as defined in ss.ss. 1273 and 1274 of the
Code. Generally, the Issue Price of bonds that are publicly offered is the
first price at which a substantial amount of the bonds is sold to the public.
Ten percent is a substantial amount. The public does not include bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters or wholesalers. The Issue Price does not change if part of the
issue is later sold at a different price. The Issue Price of bonds that are not
substantially identical is determined separately. The Issue Price of bonds for
which a bona fide public offering is made is determined as of the sale date
based upon reasonable expectations regarding the initial


 


6





















 


public offering price. If a
bond is issued for property, the applicable Federal tax-exempt rate is used in
lieu of the Federal rate in determining the Issue Price under ss. 1274 of the
Code. The issue price of bonds may not exceed their Fair Market Value as of the
sale date. With respect to the Bonds, the Issue Price is $4,800,000.


 


“MANUFACTURING FACILITY”
means a Capital Project that is used in the manufacturing or production of
tangible personal property (including the processing resulting in a change in
the condition of such property) including facilities that are directly related
and ancillary to a Manufacturing Facility if such directly related and
ancillary facilities are located on the same site as the Manufacturing Facility
and not more than 25% of the net proceeds of an issue that finances the
Manufacturing Facility (after deducting costs of issuance) are used to provide
such directly related and ancillary facilities.


 


“NET SALE PROCEEDS” means
Sale Proceeds, less the portion of those Sale Proceeds invested in a reasonably
required reserve or replacement fund under ss. 148(d) of the Code and as part
of a minor portion under ss. 148(e) of the Code.


 


“NONPURPOSE INVESTMENT” means
any security, obligation, annuity contract or Investment type property as
defined in ss. 148(b) of the Code, but excluding all obligations the interest
on which is excludable from federal gross income. The term “Nonpurpose
Investment” does not include the Borrower’s obligations to make payments to the
Issuer pursuant to the provisions of the Agreement.


 


“PAYMENTS” means, for
purposes of computing the Rebate Amount, (a) amounts actually or constructively
paid to acquire a Nonpurpose Investment (or treated as paid to a commingled
fund); (b) for a Nonpurpose Investment that is allocated to an issue on a date
after it is actually acquired (e.g., an Investment that becomes allocable to
Transferred Proceeds or to Replacement Proceeds) or that becomes subject to the
rebate requirement of the Code on a date after it is actually acquired (e.g.,
an Investment allocated to a reasonably required reserve or replacement fund
for a construction issue at the end of the two-year spending period), the Value
of that Investment on that date; (c) for a Nonpurpose Investment that was
allocated to an issue at the end of the preceding computation period, the Value
of that Investment at the beginning of the computation period; (d) on the last
day of each Bond Year during which there are amounts allocated to Gross
Proceeds of an issue that are subject to the rebate requirement of the Code,
and on the final maturity date, a Computation Date Credit; and (e) Yield
Reduction Payments on Nonpurpose Investments made pursuant to ss. 1.148-5(c) of
the Regulations. For purposes of computing the Yield on an Investment
(including the Value of the Investment), Payment means amounts to be actually
or constructively paid to acquire the Investment; provided, however, that
payments made by a conduit borrower, such as the Borrower, are not treated as
paid until the conduit borrower ceases to receive the benefit of earnings on
those amounts. Payments on Investments, including Guaranteed Investment
Contracts, are adjusted for Qualified Administrative Costs of acquiring a
Nonpurpose Investment.


 


“PRE-ISSUANCE ACCRUED
INTEREST” means amounts representing interest that accrued on an obligation for
a period not greater than one year before the Date of Issuance but only if
those amounts are paid within one year after the Date of Issuance.


 


7





















 


“PRINCIPAL USER” means a
person who is a principal owner, principal lessee, a principal output purchaser
or “other” principal user and any Related Person to a Principal User. A
principal owner is a person who at any time holds more than a 10% ownership
interest (by value) in a facility or, if no person holds more than a 10%
ownership interest, then the person (or persons in the case of multiple equal
owners) who holds the largest ownership interest in the facility. A person is
treated as holding an ownership interest if such person is an owner for federal
income tax purposes generally. A principal lessee is a person who at any time
leases more than 10% of the facility (disregarding portions used by the lessee
under a short-term lease). The portion of a facility leased to a lessee is
generally determined by reference to its fair rental value. A short-term lease
is one which has a term of one year or less, taking into account all options to
renew and reasonably anticipated renewals. A principal output purchaser is any
person who purchases output of a facility, unless the total output purchased by
such person during each one-year period beginning with the date such facility
is placed in service is 10% or less of such facility’s output during each such
period. An “other” principal user is a person who enjoys a use of a facility
(other than a short-term use) in a degree comparable to the enjoyment of a
principal owner or a principal lessee, taking into account all the relevant
facts and circumstances, such as the person’s participation in control over use
of such facility or its remote or proximate geographic location.


 


“PRIOR ISSUES” means any
issue of tax-exempt obligations (whether or not the issuer of each issue is the
same) to which Section 103(b)(6) of the 1954 Code or Section 144(a) of the Code
applies.


 


“PROCEEDS” means any Sale
Proceeds, Investment Proceeds and Transferred Proceeds of an issue. Proceeds do
not include, however, amounts actually or constructively received with respect
to a Purpose Investment that are properly allocable to the immaterially higher
Yield under ss. 1.148-2(d) of the Regulations or section 143(g) of the Code or
to Qualified Administrative Costs recoverable under ss. 1.148-5(e) of the
Regulations.


 


“PROJECT” has the meaning
given to such term in the preambles hereto.


 


“PROJECT FUND” means the
Project Fund established pursuant to the Indenture.


 


“PURCHASE FUND” means the
Purchase Fund established pursuant to the Indenture.


 


“PURPOSE INVESTMENT” means an
Investment that is acquired to carry out the governmental purpose of an issue.
The Agreement constitutes a Purpose Investment.


 


“QUALIFIED ADMINISTRATIVE
COSTS” means reasonable, direct administrative costs, other than carrying
costs, such as separately stated brokerage or selling commissions, but not
legal and accounting fees, recordkeeping, custody and similar costs. General
overhead costs and similar indirect costs of the issuer such as employee
salaries and office expenses and costs associated with computing the Rebate
Amount are not Qualified Administrative Costs. In general, administrative costs
are not reasonable unless they are comparable to administrative costs that
would be charged for the same Investment or a reasonably comparable Investment
if acquired with a source of funds other than Gross Proceeds of tax-exempt
bonds.


 


8





















 


“QUALIFIED HEDGING
TRANSACTION” means a contract which meets the requirements of ss. 1.148-4(h)(2)
of the Regulations.


 


“REBATE AMOUNT” means the
excess of the Future Value of all Receipts on Nonpurpose Investments over the
Future Value of all the Payments on Nonpurpose Investments. Future Value is
computed as of the Computation Date. Rebate Amount additionally includes any
penalties and interest on underpayments reduced for recoveries of overpayments.


 


“REBATE ANALYST” shall mean
the entity chosen by the Borrower and the Issuer in accordance with Section
4.06 hereof to determine the amount of required deposits to the Rebate Fund, if
any.


 


“REBATE FUND” means the
Rebate Fund established pursuant to the Indenture.


 


“RECEIPTS” means, for
purposes of computing the Rebate Amount, (a) amounts actually or constructively
received from a Nonpurpose Investment (including amounts treated as received
from a commingled fund), such as earnings and return of principal; (b) for a
Nonpurpose Investment that ceases to be allocated to an issue before its
disposition or redemption date (e.g., an Investment that becomes allocable to
Transferred Proceeds of another issue or that ceases to be allocable to the issue
pursuant to the universal cap under ss. 1.148-6 of the Regulations) or that
ceases to be subject to the rebate requirement of the Code on a date earlier
than its disposition or redemption date (e.g., an Investment allocated to a
fund initially subject to the rebate requirement of the Code but that
subsequently qualifies as a bona fide debt service fund), the Value of that
Nonpurpose Investment on that date; and (c) for a Nonpurpose Investment that is
held at the end of a computation period, the Value of that Investment at the
end of that period. For purposes of computing Yield on an Investment, Receipts
means amounts to be actually or constructively received from the Investment,
such as earnings and return of principal (including the Value of an Investment).
Receipts on Investments, including Guaranteed Investment Contracts, are
adjusted (reduced) for Qualified Administrative Costs.


 


“RECOMPUTATION EVENT” means a
transfer, waiver, modification or similar transaction of any right that is part
of the terms of the Bonds or a Qualified Hedging Transaction is entered into,
or terminated, in connection with the Bonds.


 


“REGULATION” or “REGULATIONS”
means the temporary, proposed or final Income Tax Regulations promulgated by
the Department of the Treasury and applicable to the Bonds.


 


“RELATED PERSON” means any
person if (a) the relationship to such person would result in a disallowance of
loss under Sections 267 or 707(b) of the Code or (b) such person is a member of
the same controlled group of corporations (as defined in Section 1563(a) of the
Code, except that “more than 50 percent” shall be substituted for “at least 80
percent” each place it appears therein).


 


“REPLACEMENT PROCEEDS” means
amounts which have a sufficiently direct nexus to the Bonds or to the governmental
purpose of the Bonds to conclude that the amounts would have been used for that
governmental purpose if the Proceeds of the Bonds were not used or to be used
for that governmental purpose, as more fully defined in ss. 1.148-1(c) of the
Regulations.


 


9





















 


“REVENUE FUND” means the
Revenue Fund established pursuant to the Indenture.


 


“SALE PROCEEDS” means any
amounts actually or constructively received from the sale of the Bonds,
including amounts used to pay underwriters’ discount or compensation or
placement agent’s fee and accrued interest other than Pre-Issuance Accrued
Interest.


 


“SLGS” means United States
Treasury Certificates of Indebtedness, Notes and Bonds State and Local
Government Series.


 


“TAX REGULATORY AGREEMENT”
means this Tax Regulatory Agreement.


 


“TEST-PERIOD BENEFICIARY”
means any person who is an owner or a Principal User of facilities financed by
an issue or issues of tax-exempt obligations issued under the 1954 Code or the
Code during the three-year period beginning on the later of the date such
facilities were placed in service or the date of issuance for such issue or
issues of tax-exempt obligations. For purposes of determining whether a person
is a Test-Period Beneficiary, all persons who are Related Persons shall be
treated as one person.


 


“TRANSFERRED PROCEEDS” means
Proceeds of a refunding issue which become transferred proceeds of a refunding
issue and cease to be Proceeds of a prior issue when Proceeds of the refunding
issue discharge any of the outstanding principal amount of the prior issue. The
amount of Proceeds of the prior issue that become transferred proceeds of the
refunding issue is an amount equal to the Proceeds of the prior issue on the
date of that discharge multiplied by a fraction:


 


(a)
the numerator of which is the principal amount of the prior issue discharged
with Proceeds of the refunding issue on the date of that discharge; and


 


(b)
the denominator of which is the total outstanding principal amount of the prior
issue on the date immediately before the date of that discharge.


 


“UNIVERSAL CAP” means the
Value of all outstanding Bonds.


 


“VALUE” means Value as
determined under ss. 1.148-4(e) of the Regulations for a Bond and Value
determined under ss. 1.148-5(d) of the Regulations for an Investment.


 


“YIELD” means, for purposes
of determining the Yield on the Bonds, the Yield computed under the Economic
Accrual Method using consistently applied compounding intervals of not more
than one year. A short first compounding interval and a short last compounding
interval may be used. Yield is expressed as an annual percentage rate that is
calculated to at least four decimal places (e.g., 5.2525%). Other reasonable,
standard financial conventions, such as the 30 days per month/360 days per year
convention, may be used in computing Yield but must be consistently applied.
The Yield on an issue that would be a Purpose Investment (absent ss.
148(b)(3)(A) of the Code) is equal to the Yield on the conduit financing issue
that financed that Purpose Investment. The Yield on a fixed yield issue is the
discount rate that, when used in computing the present Value as of the issue
date of all unconditionally payable payments of principal, interest and fees
for qualified guarantees on the issue and amounts reasonably expected


 


10





















 


to be paid as fees for
qualified guarantees on the issue, produces an amount equal to the present
Value, using the same discount rate, of the aggregate issue price of bonds of
the issue as of the issue date. In the case of obligations purchased or sold at
a substantial discount or premium, the Regulations prescribe certain special
Yield calculation rules. For purposes of determining the Yield on an
Investment, the Yield computed under the Economic Accrual Method, using the
same compounding interval and financial conventions, shall be used to compute
the Yield on the Bonds.


 


The Yield on an Investment
allocated to the Bonds is the discount rate that, when used in computing the
present Value as of the date the Investment is first allocated to the issue of
all unconditionally payable receipts from the Investment, produces an amount
equal to the present Value of all unconditionally payable payments for the
Investment. The Yield on an Investment shall not be adjusted by any hedging
transaction entered into in connection with such Investment unless the Issuer,
the Trustee and the Borrower have received an opinion of Bond Counsel that such
an adjustment is permitted by the Regulations. Yield shall be calculated
separately for each Class of Investments.


 


“YIELD REDUCTION PAYMENT”
means a payment to the United States with respect to an Investment which is
treated as a Payment for that Investment that reduces the Yield on that Investment
in accordance with ss. 1.148-5(c) of the Regulations. Yield Reduction Payments
include Rebate Amounts paid to the United States.


 


“1954 CODE” means the
Internal Revenue Code of 1954, as amended, as in effect on the effective date
of the Code.


 


SECTION 1.02.
RELIANCE ON BORROWER’S INFORMATION. Bond Counsel and the Issuer shall be
permitted to rely upon the contents of any certification, document or
instructions provided pursuant to this Tax Regulatory Agreement and shall not
be responsible or liable in any way for the accuracy of their contents or the
failure of the Borrower to deliver any required information.


 


ARTICLE II


 


CERTAIN REPRESENTATIONS BY THE BORROWER


 


SECTION 2.01.
DESCRIPTION OF THE PROJECT AND DESCRIPTION OF THE FACILITIES. The Borrower
hereby represents and warrants for the benefit of the Issuer, the Trustee and
the registered owners of the Bonds that:


 


(a)
The description of the Project set forth in the preambles hereto and the
description of the Facilities set forth in Exhibit A-2 hereto are true and
accurate.


 


(b)
The Facilities constitute a Manufacturing Facility of roller bearings and
precision components or facilities directly related and ancillary to such
Manufacturing Facility.


 


(c)
The portion of the Facilities which constitutes directly related and ancillary
facilities serves solely the manufacturing portion of the Facilities, is on the
same


 


11





















 


site as the manufacturing
portion of the Facilities and is financed with not more than 25% of the net
Proceeds of the Bonds. In addition, with respect to the portion of the
Facilities to be used for offices, not more than a DE MINIMIS amount of the
functions to be performed at such offices is not directly related to day-to-day
operations of the Facilities (e.g., a salesman’s office is not related to
day-to-day operations of the Facilities).


 


(d)
The Facilities were placed in service no earlier than March, 1998.


 


SECTION 2.02.
CAPITAL EXPENDITURES. The Borrower hereby represents and warrants for the
benefit of the Issuer, the Trustee and the registered owners of the Bonds that:


 


(a)
During the period beginning three years before the Date of Issuance and ending
on the Date of Issuance, the aggregate amount of Capital Expenditures
(including any expenditure that was or could have been treated as a Capital
Expenditure under any rule or election under the Code) paid or incurred,
excluding those to be paid or reimbursed with Proceeds of the Bonds, with
respect to (i) facilities located in the incorporated municipality (or
unincorporated county) in which the Facilities are located and (ii) the
Principal User of which was or is the Borrower, any other Principal User of the
Facilities or any Related Person thereto, was $756,407.


 


(b)
During the period beginning on the Date of Issuance and ending on the date
three years after the Date of Issuance, the aggregate amount of Capital
Expenditures (including any expenditure that was or could have been treated as
a Capital Expenditure under any rule or election under the Code) expected to be
incurred, excluding those to be paid or reimbursed with Proceeds of the Bonds,
with respect to (i) facilities located in the incorporated municipality (or unincorporated
county) in which the Facilities are located and (ii) the Principal User of
which was or is the Borrower, any other Principal User of the Facilities or any
Related Person thereto, is anticipated to be $1,500,000.


 


(c)
The amount of capitalized interest to be paid on all financings for the
Facilities excluding that paid from Proceeds of the Bonds is $0. The amount of
capitalized interest to be paid in connection with the Facilities paid from
Proceeds of the Bonds is $0.


 


(d)
The sum of (i) the Capital Expenditures described in paragraph (a) above plus
(ii) the actual Capital Expenditures to be incurred as described in paragraphs
(b) and (c) plus (iii) the aggregate outstanding amount of all $1 million or
$10 million exempt small issues set forth in Section 2.03(a) below plus (iv)
the greater of the Issue Price or the par amount of the Bonds shall not exceed
$10 million.


 


(e)
The information contained in subsections (a), (b), (c) and (d) above, which has
been provided to the Issuer to enable the Issuer to elect to qualify the Bonds
for the $10,000,000 exemption afforded by Section 144(a)(4) of the Code, is
true, accurate and complete. The Issuer hereby elects to issue the Bonds
pursuant to the exemption afforded by Section 144(a)(4) of the Code.


 


12





















 


(f)
The Facilities will not be sold, leased or the use otherwise transferred to a
person other than the Borrower, any other Principal User of the Facilities or
any Related Person thereto identified as of the Date of Issuance during the
three-year period ending three years after the Date of Issuance, unless the
Borrower has received an approving opinion of Bond Counsel to the effect that
such sale, lease or transfer will not adversely affect the tax-exempt status of
the Bonds.


 


SECTION 2.03.
PRIOR ISSUES AND $40 MILLION LIMIT. The Borrower hereby represents and warrants
for the benefit of the Issuer, the Trustee and the registered owners of the
Bonds that:


 


(a)
The aggregate face amount of all Prior Issues outstanding as of the Date of
Issuance, the proceeds of which were or will be used to any extent with respect
to facilities located in the incorporated municipality (or unincorporated
county) in which the Facilities are located and the Principal Users of such
facilities are the Borrower, any other Principal User of the Facilities or any
Related Person thereto, is $-0-.


 


(b)
The aggregate face amount of all Prior Issues and all exempt facility bonds,
qualified redevelopment bonds and industrial development bonds as defined in
the 1954 Code or the Code outstanding as of the Date of Issuance, the proceeds
of which were used by or were allocated to the Borrower, any other Principal
User of the Facilities or any Related Person thereto as a Test-Period
Beneficiary is $10,700,000.


 


SECTION 2.04.
FEDERAL TAX RETURN INFORMATION. The Facilities have a SIC Code Number of 2013.
The Borrower files its federal income tax return at the Internal Revenue
Service Center in Andover, Maryland. The federal employer identification number
of the Borrower is 13-3426227.


 


SECTION 2.05.
COMPOSITE ISSUES. The Borrower hereby represents and warrants for the benefit
of the Issuer, the Trustee and the registered owners of the Bonds that:


 


(a)
During the period beginning 15 days prior to the sale date of the Bonds and
ending 15 days thereafter none of the Borrower, any other Principal User of the
Facilities or any Related Person thereto sold, guaranteed, arranged,
participated in, assisted with, borrowed the proceeds of, or leased facilities
financed by obligations issued under Section 103 of the 1954 Code or Section
103 of the Code by any state or local governmental unit or any constituted
authority empowered to issue obligations by or on behalf of any state or local
governmental unit.


 


(b)
During the period commencing on the Date of Issuance and ending 15 days
thereafter, there will be no obligations sold or issued under Section 103 of
the 1954 Code or the Code that are guaranteed by the Borrower, any other
Principal User of the Facilities or any Related Person or which are issued with
the assistance or participation of, or by arrangement with, the Borrower, any
other Principal User of the Facilities or any Related Person without the
written opinion of Bond Counsel to the effect that the issuance of such
obligations will not adversely affect their opinion as to the exclusion from
gross income for federal income tax purposes of interest with respect to the
Bonds.


 


13





















 


(c)
Other than the Borrower, any other Principal User of the Facilities or any
Related Person, no person (or Related Person to such other person) has (i)
guaranteed, arranged, participated in, assisted with the issuance of, or paid
any portion of the Costs of Issuance of the Bonds or (ii) provided any property
or any franchise, trademark or trade name (within the meaning of Section 1253
of the Code) which is to be used in connection with the Facilities.


 


SECTION 2.06.
PROHIBITED USES. The Borrower hereby represents and warrants for the benefit of
the Issuer, the Trustee and the registered owners of the Bonds that no portion
of the Proceeds of the Bonds is being used to provide a facility, a purpose of
which is retail food and beverage services, automobile sales or service, or the
provision of recreation or entertainment. No portion of the proceeds of the Bonds
is being used to provide any private or commercial golf course, country club,
health club, massage parlor, tennis club, skating facility (including roller
skating, skateboarding and ice skating), racquet sports facility (including any
handball, squash or racquetball court), hot tub facility, suntan facility,
racetrack, skybox or other luxury box, airplane, store the principal business
of which is the sale of alcoholic beverages for consumption off premises, or
facility used primarily for gambling. No portion of the Proceeds of the Bonds
is being used directly or indirectly to provide residential real property for
single- or multi-family units.


 


SECTION 2.07.
NO COMPOSITE PROJECT. The Borrower hereby represents and warrants for the
benefit of the Issuer, the Trustee and the registered owners of the Bonds that
the Facilities are a stand-alone Manufacturing Facility unconnected to any
other facility and do not share any portion of substantial common facilities
with any other building (other than the Facilities), (b) an enclosed shopping
mall or (c) a strip of offices, stores or warehouses.


 


SECTION 2.08.
ACQUISITION OF EXISTING PROPERTY. The Borrower hereby represents and warrants
for the benefit of the Issuer, the Trustee and the registered owners of the Bonds
that a portion of the Proceeds of the Bonds in the amount of $1,986,000 will be
used to pay the cost of acquisition of real property (other than land or any
interest therein) the first use of which will not be pursuant to the
acquisition with the Proceeds of the Bonds. The Owner will meet the
rehabilitation requirements of Section 147(d)(3) through the rehabilitation and
improvement of the Facilities within the two-year period following the later of
the Date of Issuance or the date the existing property is acquired. An amount
equal to $1,307,137 will be used to accomplish such rehabilitation and
improvement, which amount is greater than the 15% of the amount of Bond
proceeds used to acquire such existing property.


 


SECTION 2.09.
LAND ACQUISITION LIMIT AND NO ACQUISITION OF FARMLAND. The Borrower hereby
represents and warrants for the benefit of the Issuer, the Trustee and the
registered owners of the Bonds that:


 


(a)
The amount of Proceeds of the Bonds expended for land will not exceed $364,000,
which is not greater than 25% of the Proceeds of the Bonds.


 


(b)
No portion of the Proceeds of the Bonds will be used directly or indirectly for
the acquisition of land or any interest therein to be used for the purpose of
farming.


 


14





















 


SECTION 2.10.
REPRESENTATIONS BY THE BORROWER FOR PURPOSES OF IRS FORM 8038. Section 149(e)
of the Code requires as a condition to qualification for tax-exemption that the
Issuer provide to the Secretary of the Treasury certain information with
respect to the Bonds and the application of the proceeds derived therefrom. The
following representations of the Borrower will be relied upon by the Issuer and
Bond Counsel in satisfying this information reporting requirement. Accordingly,
the Borrower hereby represents, covenants and warrants to the best of its
knowledge, for the benefit of the Issuer, Bond Counsel and the registered
owners of the Bonds, the truth and accuracy of (c) through (t) below:


 


	
  (a)

  	
   

  	
  Issuer’s employer
  identification number

  	
   

  	
  68-0304653

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Number of 8038 reports
  previously filed by the Issuer this calendar year

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Issue price of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  Proceeds used for Accrued
  Interest

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  Costs of Issuance
  (including Underwriter’s Discount)

  	
   

  	
  $

  	
  96,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (f)

  	
   

  	
  Reasonably required Reserve
  Fund Deposits

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (g)

  	
   

  	
  Proceeds used for Credit
  Enhancement

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (h)

  	
   

  	
  Proceeds used to refund
  prior issue

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (i)

  	
   

  	
  Nonrefunding Proceeds

  	
   

  	
  $

  	
  4,704,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (j)

  	
   

  	
  Date of final maturity of
  the Bonds

  	
   

  	
  April
  1, 2024

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (k)

  	
   

  	
  Interest Rate on the final
  maturity of the Bonds

  	
   

  	
  VR

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (l)

  	
   

  	
  Issue price of the final
  maturity of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (m)

  	
   

  	
  Issue price on the entire
  issue of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (n)

  	
   

  	
  Stated redemption price at
  maturity of the final maturity of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (o)

  	
   

  	
  Stated redemption price at
  maturity of the entire issue of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (p)

  	
   

  	
  Weighted average maturity
  of the entire issue of the Bonds

  	
   

  	
  24.92
  years

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (q)

  	
   

  	
  Yield on the entire issue
  of the Bonds

  	
   

  	
  VR

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (r)

  	
   

  	
  Net interest cost for the
  entire issue of the Bonds

  	
   

  	
  VR

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (s)

  	
   

  	
  The Standard Industrial
  Classification Code(s) for the Facilities is

  	
   

  	
  3562

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (t)

  	
   

  	
  Type of Property financed
  by Nonrefunding Proceeds of the Bonds:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  364,000

  	
   

  
	
   

  	
   

  	
  Land

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Buildings

  	
   

  	
  $

  	
  1,986,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Equipment with recovery
  period of more than 5 years

  	
   

  	
  $

  	
  1,046,863

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Equipment with recovery period
  of 5 years or less

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Other

  	
   

  	
  $

  	
  1,307,137

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total

  	
   

  	
  $

  	
  4,704,000

  	
   

  



 


15





















 


ARTICLE III


 


USE OF BOND
PROCEEDS


 


SECTION
3.01. ANTICIPATED USE
OF PROCEEDS. The Borrower covenants, represents and warrants for the benefit of
the Issuer, the Trustee and the registered owners of the Bonds that the
Proceeds of the Bonds will be used in the manner set forth in Exhibit A-2
hereto and that the Proceeds of the Bonds will be invested in accordance with
the Investment Instructions.


 


SECTION
3.02. CERTIFICATION AS
TO COSTS OF THE PROJECT. The Borrower hereby certifies, with respect to the
amounts shown in Exhibit A-1, that such amounts consist only of costs which are
directly related to and necessary for the financing of the Project.


 


ARTICLE IV


 


ARBITRAGE


 


SECTION
4.01. ARBITRAGE
REPRESENTATIONS AND ELECTIONS. In connection with the issuance of the Bonds,
the Borrower hereby represents, certifies and warrants as follows:


 


(a)
The Borrower has entered into contracts with third parties for the acquisition,
construction and equipping of the Facilities obligating an expenditure in
excess of 5% of the Net Sale Proceeds of the Bonds and the Borrower will
proceed with due diligence in completing the Facilities and in allocating the
Net Sale Proceeds of the Bonds to such Expenditures.


 


(b)
The Borrower will use a reasonable, Consistently Applied Accounting Method to
account for Gross Proceeds, Investments and Expenditures for the Bonds. The
Borrower shall additionally use a Consistently Applied Accounting Method for
allocating Proceeds of the Bonds to Expenditures, subject to the Current Outlay
of Cash rule.


 


(c)
The Borrower shall not commingle Proceeds of the Bonds with any other funds.


 


16





















 


(d)
In connection with the Bonds, there has not been created or established and the
Borrower does not expect that there will be created or established, any sinking
fund, pledged fund or similar fund (other than as specifically identified in
the Indenture), including without limitation any arrangement under which money,
securities or obligations are pledged directly or indirectly to secure the
Bonds or any contract securing the Bonds or any arrangement providing for compensating
or minimum balances to be maintained by the Borrower with any registered owner
or credit enhancer of the Bonds.


 


(e)
The allocation of Net Proceeds of the Bonds to the reimbursement portion of the
costs of the Facilities will be made as of and completed on the Date of
Issuance. The declaration of official intent required by ss. 1.150-2 of the
Regulations with respect to Net Proceeds of the Bonds used to reimburse the
Borrower for certain Capital Expenditures made in connection with the
Facilities is attached hereto as Exhibit D.


 


(f)
The Borrower reasonably expects that 85% of the Net Sale Proceeds of the Bonds
will be used to complete the Facilities within three years of the Date of
Issuance and not more than 50% of the Proceeds of the Bonds will be invested in
Nonpurpose Investments having a substantially guaranteed Yield for four years
or more. The Borrower reasonably expects that the Net Sale Proceeds of the
Bonds deposited to the Project Fund will be expended in accordance with the
schedule contained in the No Arbitrage Certificate executed and delivered by
the Issuer in connection with the issuance and delivery of the Bonds.


 


(g)
All funds and accounts established pursuant to the Indenture will be invested
pursuant to the No Arbitrage Certificate executed by the Issuer on the Date of
Issuance and the Investment Instructions delivered to the Issuer and the
Borrower on the Date of Issuance.


 


(h)
The Borrower will not enter into and will not direct the Trustee to engage in
any Abusive Arbitrage Devises. If the Borrower directs the Trustee to invest
any of the Gross Proceeds in certificates of deposit or pursuant to an
investment contract or a certificate of deposit, the Borrower will obtain and
provide to the Trustee certifications in the form attached hereto as Exhibit B.


 


(i)
The Borrower hereby makes, and the Issuer hereby accepts, the following
elections and other choices pursuant to the Regulations with respect to the
Bonds:


 


(i)
The Borrower elects the bond year stated in the definition of the Bond Year.


 


(ii)
The Borrower elects to avail itself of all unrestricted yield investments
granted in the Regulations for temporary period, reasonably required reserve
fund and minor portion investments.


 


(iii)
The Borrower elects to treat the last day of the fifth Bond Year (March 31,
2004) as the initial Installment Computation Date and the initial rebate
payment date. The Borrower elects to treat the last day of each subsequent
fifth


 


17





















 


Bond Year as subsequent
Installment Computation Dates and subsequent rebate payment dates. The Borrower
may change or adjust such dates as permitted by the Regulations.


 


(iv)
With respect to the Universal Cap, the Borrower as of the Date of Issuance does
not expect that the operation of the Universal Cap will result in a reduction
or reallocation of Gross Proceeds of the Bonds and that the Borrower (A) does
not expect to pledge funds (other than those described in the Indenture) to the
payment of the Bonds; (B) expects to expend Sale Proceeds of the Bonds within
the expected temporary periods; and (C) does not expect to retire any of the
Bonds earlier than shown in the Yield computations for the Bonds pursuant to
this Article IV.


 


SECTION
4.02. ARBITRAGE
COMPLIANCE.


 


(a)
The Borrower and the Issuer acknowledge that the continued exclusion of
interest on the Bonds from gross income of the recipients thereof for purposes
of federal income taxation depends, in part, upon compliance with the arbitrage
limitations imposed byss. 148 of the Code, including the rebate requirement
described in Section 4.03 below. The Borrower and the Issuer hereby agree and
covenant that they shall not permit at any time or times any of the Proceeds of
the Bonds or other funds of the Borrower to be used, directly or indirectly, to
acquire any asset or obligation, the acquisition of which would cause the Bonds
to be “arbitrage bonds” for purposes ofss. 148 of the Code. The Borrower
further agrees and covenants that it shall, to the extent that any Proceeds of
the Bonds are invested in any Investment which is not Investment Securities, do
and perform all acts and things necessary in order to ensure that the
requirements ofss. 148 of the Code and the Regulations are met. To the extent
that Proceeds of the Bonds are invested in any Investment which is not an
Investment Security, the Borrower shall retain, at its own expense, a Rebate
Analyst to make such determinations and calculations as may be necessary in
order to ensure that the Borrower takes the actions described in Sections 4.02 through
4.06 hereof with respect to the Investment of Gross Proceeds on deposit in the
funds and accounts established under the Indenture. If the Borrower fails to
retain such a Rebate Analyst, the Issuer shall, upon being notified in writing
of such failure, at the Borrower’s expense, retain such a Rebate Analyst. The
Borrower shall direct the Trustee to make the required transfers and
dispositions described in Sections 4.02, 4.03 and 4.04 hereof, and the Trustee
may rely upon information provided by the Borrower.


 


(b)
The Revenue Fund and the Purchase Fund will be used primarily to achieve a
proper matching of revenues and debt service on the Bonds within each Bond
Year. With respect to the Revenue Fund and the Purchase Fund: (i) to the extent
amounts are deposited therein, the Revenue Fund and the Purchase Fund will be
depleted at least once a year except for a carryover amount not to exceed in
the aggregate the greater of one-twelfth of the principal and interest payments
on the Bonds for the immediately preceding Bond Year or the earnings on the Revenue
Fund and the Purchase Fund for the immediately preceding Bond Year; (ii) any
amounts contributed to the Revenue Fund and the Purchase Fund will be spent
within thirteen (13) months of the


 


18





















 


date of such contribution to
pay debt service on the Bonds; and (iii) any amount received from the
investment or reinvestment of moneys held in the Revenue Fund and the Purchase
Fund will be spent within one year of receipt thereof, all in accordance with
the Indenture. To the extent the provisions of this Section 4.2(b) are
satisfied, amounts in the Revenue Fund and the Purchase Fund will be invested
without regard to yield and no rebate calculations will need to be made with
respect to any moneys in the Revenue Fund or the Purchase Fund during any Bond Year.


 


(c)
In general, no rebate calculations will be required with respect to Sale
Proceeds or Investment Proceeds if (i) 100% of expected Gross Proceeds actually
are spent within six (6) months after the Date of Issuance or (ii) at least 15%
of expected Gross Proceeds actually are spent within six (6) months after the
Date of Issuance, at least 60% of expected Gross Proceeds actually are spent
within twelve (12) months after the Date of Issuance, and 100% of actual Gross
Proceeds actually are spent within eighteen (18) months after the Date of Issuance.
The requirement that 100% of actual Gross Proceeds be spent within eighteen
(18) months after the Date of Issuance will be met if at least 95% of Gross
Proceeds is spent within eighteen (18) months and the remainder is held as a
reasonable retainage and such remainder is spent within thirty months after the
Date of Issuance.


 


SECTION 4.03.
CALCULATION OF REBATE AMOUNT.


 


(a)
ss. 148(f) of the Code requires the payment to the United States of the Rebate
Amount. Except as provided below, the Revenue Fund, the Project Fund, the Costs
of Issuance Fund, the Rebate Fund and all other funds or accounts treated as
containing Gross Proceeds, are subject to this rebate requirement.


 


(b)
In accordance with the requirements set out in the Code and pursuant to the
Indenture, the Issuer has created the Rebate Fund, to be held by the Trustee,
in its capacity as Trustee under the Indenture, and used as provided in this
Section.


 


(i)
On or before 25 days following each Computation Date, upon the Borrower’s
written direction, an amount shall be deposited to the Rebate Fund by the
Trustee from source or sources stated in such direction so that the balance of
the Rebate Fund shall equal the aggregate Rebate Amount as of such determination
date.


 


(ii)
Amounts deposited in the Rebate Fund shall be invested in accordance with the
Investment Instructions by the Trustee at the written direction of the
Borrower.


 


(iii)
All money at any time deposited in the Rebate Fund shall be held by the
Trustee, to the extent required by this Tax Regulatory Agreement and the
Indenture, for payment to the United States of America of the Rebate Amount.
All amounts deposited into or on deposit in the Rebate Fund shall be governed
by this Tax Regulatory Agreement.


 


19





















 


(iv)
For purposes of crediting amounts to the Rebate Fund or withdrawing amounts
from the Rebate Fund, Nonpurpose Investments shall be valued in the manner
provided in this Article.


 


(c)
In order to meet the rebate requirement of ss. 148(f) of the Code, the Borrower
agrees and covenants to take, or cause to be taken by the Trustee or the Rebate
Analyst described in Section 4.06 hereof, as appropriate, the following
actions:


 


(i)
For each Investment of amounts held with respect to the Bonds in (A) the
Revenue Fund, (B) the Purchase Fund, (C) the Project Fund, (D) the Costs of
Issuance Fund and (E) the Rebate Fund, the Trustee shall record the purchase
date of such Investment, its purchase price, accrued interest due on its
purchase date, its face amount, its coupon rate, its Yield, the frequency of
its interest payment, its disposition price, accrued interest due on its
disposition date and its disposition date. The Rebate Analyst retained by the
Borrower shall determine the Fair Market Value for such Investments and the
Yield thereon as may be required by the Regulations. The Yield for an
Investment shall be calculated by using the method set forth in the
Regulations.


 


(ii)
For each Computation Date specified in paragraph (iii) below, the Rebate
Analyst shall compute the Yield on the Bonds as required by the Regulations
based on the definition of issue price contained in Section 148(h) of the Code
and the Regulations. The Bonds are a variable rate issue and accordingly the
yield on the Bonds cannot be determined at this time. The Yield on the Bonds
shall be calculated by the Rebate Analyst at such time in order to comply with
this Tax Regulatory Agreement and the Regulations based on the definitions of
issue price contained in Section 148(h) of the Code using payments or
prepayments of the principal of, premium, if any, and interest on the Bonds
required by the Regulations. For purposes of this Tax Regulatory Agreement the initial
offering price to the public (not including bond houses and brokers, or similar
persons or organizations acting in the capacity of underwriters or wholesalers)
at which a substantial amount of the Bonds were sold is the Issue Price. Any
reasonable amounts paid for credit enhancement have been and may generally be
treated as interest on the Bonds for purposes of Yield computation to the
extent permitted by the Regulations.


 


(iii)
Subject to the special rules set forth in paragraphs (iv) and (v) below, the
Rebate Analyst shall determine the amount of earnings received on all
Nonpurpose Investments described in paragraph (i) above, for each Computation
Date. In addition, where Nonpurpose Investments are retained by the Trustee
after retirement of the Bonds, any unrealized gains or losses as of the date of
retirement of the Bonds must be taken into account in calculating the earnings on
such Nonpurpose Investments to the extent required by the Regulations.


 


(iv)
In determining the Rebate Amount computed pursuant to this Section, (A) all
earnings on any bona fide debt service fund (including the Revenue Fund and the
Purchase Fund) shall not be taken into account for any


 


20





















 


Bond Year during which the
gross earnings of such funds total less than $100,000, (B) the Universal Cap
applicable to the Bonds pursuant to ss. 1.148-6(b)(2) of the Regulations shall be
taken into account, (C) all of the Borrower’s elections and other choices set
forth in Section 4.01 hereof shall be taken into account and (D) all spending
exceptions to rebate met by the Borrower shall be taken into account.


 


(v)
For each Computation Date specified in paragraph (iii) above, the Rebate
Analyst shall calculate for each Investment described in paragraphs (i) and
(iii) above, an amount equal to the earnings which would have been received on such
Investment at an interest rate equal to the Yield on the Bonds as described in
paragraph (ii) above. The method of calculation shall follow that set forth in
the Regulations.


 


(vi)
For each Computation Date, the Rebate Analyst shall determine the amount of
earnings received on all Investments held in the Rebate Fund for the
Computation Date. The method of calculation shall follow that set forth in the
Regulations.


 


(vii)
For each Computation Date, the Rebate Analyst shall calculate the Rebate
Amount, by any appropriate method to be described in the Code and Regulations
applicable or which becomes applicable to the Bonds. The determination of the
Rebate Amount shall account for the amount (to be rounded down to the nearest
multiple of $100) equal to the sum of all amounts determined in paragraph
(iii), all amounts determined in paragraphs (v) and (vi), and less any amount
which has previously been paid to the United States pursuant to Section 4.04
below. The Rebate Analyst shall notify the Trustee of the Rebate Amount.


 


(viii)
If the Rebate Amount exceeds the amount on deposit in the Rebate Fund, the
Borrower shall immediately pay such amount to the Trustee for deposit into the
Rebate Fund.


 


SECTION 4.04.
PAYMENT TO UNITED STATES.


 


(a)
Not later than sixty (60) days after each Installment Computation Date (or such
longer period as may be permitted by the Regulations), the Trustee shall pay to
the United States an amount that, when added to the Future Value as of such
Computation Date of previous rebate payments made for the Bonds, equals at
least ninety percent (90%) of the Rebate Amount required to be on deposit in
the Rebate Fund as of such payment date. No later than sixty (60) days after
the Final Computation Date the Trustee shall pay to the United States an amount
that, when added to the Future Value as of such Computation Date of previous
rebate payments made for the Bonds, equals at least one hundred percent (100%)
of the balance remaining in the Rebate Fund.


 


(b)
The Trustee shall mail each payment of an installment to the Internal Revenue
Service Center, Philadelphia, Pennsylvania 19255. Each payment shall be


 


21





















 


accompanied by Internal
Revenue Form 8038-T, and, if necessary, a statement summarizing the
determination of the Rebate Amount.


 


(c)
If on any Computation Date, the aggregate amount earned on Nonpurpose
Investments in which the Gross Proceeds of the Bonds are invested is less than
the amount that would have been earned if the obligations had been invested at
a rate equal to the Yield on the Bonds as determined in Section 4.03 hereof,
such deficit may at the written request of the Borrower be withdrawn from the
Rebate Fund and paid to the Borrower or as the Borrower shall direct. The
Borrower may direct that any overpayment of rebate may be recovered from any
Rebate Amount previously paid to the United States pursuant to ss. 1.148-3(i)
of the Regulations.


 


(d)
The Borrower shall also pay any penalty or interest on underpayments of Rebate
Amount not paid in a timely manner pursuant to this Tax Regulatory Agreement,
the Code and the Regulations.


 


SECTION 4.05.
RECORDKEEPING. In connection with the rebate requirement, the Borrower and the
Trustee shall maintain the following records:


 


(a)
The Borrower and the Trustee shall record all amounts paid to the United States
pursuant to Section 4.04 hereof. The Trustee shall furnish to the Issuer and
the Borrower copies of any materials filed with the Internal Revenue Service
pertaining thereto and shall provide the Issuer and the Borrower with all
records in its possession that the Issuer, the Borrower or the Rebate Analyst
may request relating to the calculation of any Rebate Amount.


 


(b)
The Borrower and the Trustee shall retain records of the rebate calculations
until six years after the retirement of the last obligation of the Bonds.


 


SECTION 4.06.
REBATE ANALYST


 


(a)
To the extent required to comply with the provisions of Section 4.02 hereof,
the Borrower shall appoint a Rebate Analyst and any successor Rebate Analyst
for the Bonds reasonably acceptable to the Issuer, subject to the conditions
set forth in this Section. The Rebate Analyst and each successor Rebate Analyst
shall signify its acceptance of the duties imposed upon it hereunder by a
written instrument of acceptance delivered to the Trustee, the Issuer and the
Borrower under which such Rebate Analyst will agree to discharge its duties
pursuant to this Tax Regulatory Agreement in a manner consistent with prudent industry
practice.


 


(b)
The Rebate Analyst may at any time resign and be discharged of the duties and
obligations created by this Tax Regulatory Agreement by giving notice to the
Trustee, the Issuer and the Borrower. The Rebate Analyst may be removed at any
time by an instrument signed by the Issuer and the Borrower and filed with the
Issuer, the Borrower and the Trustee. The Borrower and the Issuer shall, upon
the resignation or removal of the Rebate Analyst, appoint a successor Rebate
Analyst.


 


22





















 


(c)
Each successor Rebate Analyst appointed pursuant to this Section shall be either
a firm of independent accountants or Bond Counsel or another entity experienced
in calculating rebate payments required by ss. 148(f) of the Code.


 


(d)
In order to provide for the administration of the matters pertaining to
arbitrage rebate calculations set forth herein, and in the Investment
Instructions and No Arbitrage Certificate, the Trustee, the Borrower and the
Issuer may provide for the employment of the Rebate Analyst on or prior to
March 31, 2004. The Trustee and the Issuer may rely conclusively upon and shall
be fully protected from all liability in relying upon the opinions,
calculations, determinations, directions and advice of the Rebate Analyst. The
charges and fees for such Rebate Analyst shall be paid by the Borrower upon
presentation of an invoice for services rendered in connection therewith.


 


ARTICLE V


 


COMPLIANCE
WITH CODE


 


In order to ensure that
interest on the Bonds is excludable from the gross income of the recipients
thereof for purposes of federal income taxation, the Borrower hereby represents
and covenants as follows:


 


(a)
The Average Maturity of the Bonds does not exceed 120% of the Average Economic
Life of the Facilities within the meaning of ss. 147(b) of the Code as set
forth in Exhibit C hereto.


 


(b)
The Bonds are not and shall not become directly or indirectly “federally
guaranteed.” Unless otherwise excepted underss. 149(b) of the Code, the Bonds
will be considered “federally guaranteed” if (i) the payment of principal and
interest with respect to the Bonds is guaranteed (in whole or in part) by the
United States (or any agency or instrumentality thereof), (ii) 5% or more of
the Proceeds of the Bonds is (A) to be used in making loans, the payment of
principal or interest with respect to which are to be guaranteed (in whole or
in part) by the United States (or any agency or instrumentality thereof) or (B)
to be invested (directly or indirectly) in federally insured deposits or
accounts or (iii) the payment of principal or interest on the Bonds is
otherwise indirectly guaranteed (in whole or in part) by the United States (or
any agency or instrumentality thereof).


 


(c)
The Borrower will provide to the Issuer all information necessary to enable the
Issuer to complete and file Internal Revenue Forms 8038 and 8038-T pursuant to
ss. 149(e) of the Code.


 


(d)
As required by ss. 147(f) of the Code, the Bonds and the Project were the
subject of a public hearing held on January 28, 1999, which was preceded by
reasonable public notice.


 


(e)
The Borrower will comply with, and make all filings required by, all effective
rules, rulings or regulations promulgated by the Department of the Treasury or


 


23





















 


IRS with respect to
obligations described in ss.ss. 103 and 144 of the Code, such as the Bonds.


 


(f)
The Borrower agrees to rebate all amounts required to be rebated to the United
States of America pursuant to ss. 148(f) of the Code. The Borrower agrees to
provide any instructions to the Trustee that are necessary to satisfy the
requirements of ss. 148(f) of the Code. The Borrower will not deposit or
instruct the Trustee to deposit amounts in the Rebate Fund in excess of the
amounts reasonably expected to be needed to make the payments to the United
States as required by ss. 148(f) of the Code.


 


(g)
The Sale Proceeds of the Bonds and any Investment Proceeds will be expended for
the purposes set forth in the Agreement and in the Indenture and no amount of
such Proceeds of the Bonds in excess of 2% of the Sale Proceeds of the Bonds
will be expended to pay the costs of issuing the Bonds within the meaning of
ss. 147(g) of the Code.


 


(h)
The Issuer shall not sell any other tax-exempt obligations within 15 days of
the sale date of the Bonds pursuant to the same plan of financing with the
Bonds and payable from substantially the same source of funds, determined
without regard to qualified guaranties from unrelated parties and used to pay
the Bonds.


 


(i)
The Bonds were approved by the Treasurer of the State of California following
the public hearing referred to in (d) above.


 


ARTICLE VI


 


TERM OF TAX REGULATORY AGREEMENT


 


This Tax Regulatory Agreement
shall be effective from the Date of Issuance through the date that the last
Bond is redeemed, paid or deemed paid pursuant to the terms of the Indenture,
except that the requirements of Section 4.05 hereof shall survive until six
years after the retirement of the last obligations of the Bonds.


 


ARTICLE VII


 


AMENDMENTS


 


Notwithstanding any other
provision hereof, any provision of this Tax Regulatory Agreement may be deleted
or modified at any time at the option of the Borrower, with the consent of the
Issuer, if the Borrower has provided to the Trustee and the Issuer an opinion,
in form and substance satisfactory to the Trustee and the Issuer, of Bond
Counsel that such deletion or modification will not adversely affect the
exclusion of interest on the Bonds from the gross income of the recipients
thereof for purposes of federal income taxation.


 


24





















 


ARTICLE VIII


 


EVENTS OF
DEFAULT, REMEDIES


 


SECTION 8.01.
EVENTS OF DEFAULT. The failure of any party to this Tax Regulatory Agreement to
perform any of its required duties under any provision hereof shall constitute
an Event of Default under this Tax Regulatory Agreement and under the
Indenture.


 


SECTION 8.02.
REMEDIES FOR AN EVENT OF DEFAULT. Upon an occurrence of an Event of Default
under Section 8.01 hereof, the Issuer or the Trustee may in their discretion,
proceed to protect and enforce their rights and the rights of the registered
owners of the Bonds by pursuing any available remedy under the Indenture or by
pursuing any other available remedy, including, but not limited to, a suit at
law or in equity.


 


25





















 


IN WITNESS WHEREOF, the
Issuer, the Borrower and the Trustee have caused this Tax Regulatory Agreement
to be executed in their respective names and by their proper officers thereunto
duly authorized, all as of the day and year first written above.


 


	
   

  	
  CALIFORNIA INFRASTRUCTURE
  AND

  
	
   

  	
  DEVELOPMENT BANK

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Lon S. Hatamiya, Chair

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  Blake Fowler, Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
  ROLLER BEARING COMPANY OF
  AMERICA, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
  U.S. BANK TRUST NATIONAL
  ASSOCIATION,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
  [Signature
  Page to Tax Regulatory Agreement]

  
						



 





















 


EXHIBIT A-1


 


SOURCES AND USES OF FUNDS


 


1. Amount received from the
sale of the Bonds (exclusive of accrued interest) is as follows:


 


	
  Face amount of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
  Less: Underwriters’
  discount

  	
   

  	
  $

  	
  0

  	
   

  
	
  Total amount received from
  the sale of the Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  



 


2. Proceeds of the Bonds
totaling $4,704,000, representing 100% of the Net Sale Proceeds of the Bonds
after deduction of the amounts described in 3 below will be deposited to the
Project Fund


 


3. $96,000 of the Bond
proceeds will be deposited in the Costs of Issuance Fund to pay a portion of
the Costs of Issuance of the Bonds.


Estimated Use of Substantially all


of the Proceeds of the


Bonds


 


	
  (1)

  	
   

  	
  Issue price
  of Bonds

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
  (2)

  	
   

  	
  Substantially
  All Factor

  	
   

  	
  .95

  	
  %

  
	
  (3)

  	
   

  	
  Total

  	
   

  	
  $

  	
  4,560,000

  	
   

  
	
  (4)

  	
   

  	
  Amount paid
  for qualified Project Costs* (including interest during construction, if any)

  	
   

  	
  $

  	
  4,704,000

  	
   

  



 


Note:      All investment earnings, if any, on the
Bond proceeds will be used for qualified Project Costs (including interest
during construction, if any).


 










*Qualified Project Costs:


 


	
  Land

  	
   

  	
  $

  	
  364,000

  	
   

  
	
  Building

  	
   

  	
  $

  	
  1,986,000

  	
   

  
	
  Equipment

  	
   

  	
  $

  	
  1,046,863

  	
   

  
	
  Improvements

  	
   

  	
  $

  	
  1,307,137

  	
   

  



 


A-1





















 


EXHIBIT A-2


 


PROPERTY FINANCED OR REFINANCED BY THE BONDS


 


1.             Acquisition of the real property located at 3131 West
Segerstrom Avenue, Santa Ana, California 92702 $2,350,000.


 


2.             Rehabilitation of manufacturing facility $1,307,137.


 


3.             Acquisition and installation of manufacturing equipment
$1,046,863.


 


A-2





















 


EXHIBIT B-1


 


FORM OF PROVIDER CERTIFICATION


FOR A CERTIFICATE OF DEPOSIT


 


I, [Name], [Position], of
[Entity Providing the Certificate of Deposit] (the “Provider”) HEREBY CERTIFY
that the yield on the Certificate of Deposit entered into on [DATE] is not less
than the highest yield that the Provider publishes or posts for comparable
certificates of deposit offered to the public and that the yield on the
Certificate of Deposit is not less than the yield available on reasonably
comparable direct obligations offered by the United States Treasury.


 


IN WITNESS WHEREOF, I have
hereunto set my hand this    day of                      
19    .


 


	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
   

  
						



 


B-1





















 


EXHIBIT B-2


 


FORM OF PROVIDER CERTIFICATION


FOR AN INVESTMENT CONTRACT


 


I, [Name], [Position], of
[Entity Providing Investment Contract] (the “Provider”) HEREBY CERTIFY in
connection with the Investment Contract between [NAME] and the Provider dated
as of [DATE] (the “Investment Contract”) that the yield on the Investment
Contract is at least equal to the yield offered on reasonably comparable
Investment contracts offered to other persons, if any, from a source of funds
other than gross proceeds of an issue of tax-exempt bonds and that the amount
of administrative costs that are reasonably expected to be paid by the Provider
to third parties in connection with the Investment Contract is
$               .
For purposes of this certification, administrative costs include all brokerage
or selling commissions paid by the Provider to third parties in connection with
the Investment Contract, legal or accounting fees, investment advisory fees,
recordkeeping, safekeeping, custody and other similar costs or expenses.


 


IN WITNESS WHEREOF, I have
hereunto set my hand this      day of                      
19    .


 


	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
   

  
						



 


B-2





















 


EXHIBIT B-3


 


FORM OF BORROWER’S CERTIFICATION FOR AN


 


INVESTMENT CONTRACT INVOLVING THREE BIDS


 


I, [[Name], [Position], of
Roller Bearing Company of America, Inc., a Delaware corporation (the “Borrower”),
HEREBY CERTIFY in connection with the Investment contract between the Borrower
and [Entity Providing Investment Contract] (the “Provider”) dated as of               
         ,             
the “Investment Contract”) that (i) at least three bids on the Investment
Contract were received from persons other than those with a material financial
advantage in the California Infrastructure and Economic Development Bank
Variable Rate Demand Industrial Development Revenue Bonds, Series 1999 (Roller
Bearing Company of America, Inc. - Santa Ana Project), (ii) the yield on the
Investment Contract purchased is at least equal to the yield offered under the
highest bid received from an uninterested party, (iii) the price of the
Investment Contract takes into account as a significant factor the Borrower’s
expected drawdown for the funds to be invested (other than float funds or
reasonably required reserve or replacement funds) and (iv) any collateral
security requirements for the Investment Contract are reasonable.


 


IN WITNESS WHEREOF, I have
hereunto set my hand this        day of                     
19       .


 


	
   

  	
  ROLLER BEARING COMPANY OF

  
	
   

  	
  AMERICA, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
   

  
						



 


B-3





















 


EXHIBIT C


 


USEFUL LIFE OF THE PROPERTY FINANCED


OR REFINANCED BY THE BONDS


 


	
   

  	
   

  	
  COST

  	
   

  	
   

  	
   

  	
  USEFUL LIFE*

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Land

  	
   

  	
  $

  	
  364,000

  	
   

  	
  X

  	
   

  	
  n/a

  	
   

  	
   

  	
   

  
	
  Building

  	
   

  	
  1,986,000

  	
   

  	
  X

  	
   

  	
  35

  	
   

  	
  $

  	
  69,510,000

  	
   

  
	
  Equipment

  	
   

  	
  1,046,863

  	
   

  	
  X

  	
   

  	
  10

  	
   

  	
  $

  	
  10,468,630

  	
   

  
	
  Improvements

  	
   

  	
  $

  	
  1,307,137

  	
   

  	
   

  	
   

  	
  20

  	
   

  	
  $

  	
  26,142,740

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4,704,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  106,121,370

  	
   

  
	
  Less:    cost of land

  	
   

  	
  364,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  4,340,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average life of Project = $106,121,370 /
  $4,340,000 = 24.45 years.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Useful life of Project for purposes of
  Section 147(b) of the Code = 24.45 years x 1.20 = 29.34 years

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average life of Bonds =

  	
   

  	
  24.92 years

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


The information contained in
this schedule, attached as an exhibit hereto, setting forth the respective
cost, economic life, ADR midpoint life, if any, under Revenue Procedure 87-56,
1987-42 I.R.B. 4, and Revenue Procedure 83-35, 1983-2 C.B. 745, as supplemented
and amended from time to time, and guideline life, if any, under Revenue
Procedure 62-21, 1962-2 C.B. 118, as supplemented and amended from time to time,
of each asset of the Facilities financed with the Proceeds of the Bonds, is
true, accurate and complete.


 










*Includes time from date of
issuance until property is placed in service.


 


C-1





















 


EXHIBIT D


 


DECLARATION OF OFFICIAL INTENT


 


[See Attached]


 


D-1