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86-9122 IRB School SpecialtyWINTON M. HINKLE, P.A. FINAL DRAFT ORDINANCE NO. 86-9122 OF THE CITY OF SALINA, KANSAS 1 AUI-HORIZING THE ISSUANCE OF $1,200,000 INDUSTRIAL REVENUE BONDS SERIES A, 1986 (SCHOOL SPECIALTY SUPPLY, INC.) DATED AS OF FEBRUARY 1, 1986 1 1 1 (Published in The Salina Journal, March 24, 1986) ORDINANCE NO. 86-912.2 AN ORDINANCE AUTHORIZING THE CITY OF SALINA, KANSAS, 1-0 PURCHASE, CONSTRUCT, IMPROVE AND EQUIP AN ADDITION TO AN EXISTING MANUFACTURING FACILITY LOCATED AND TO BE LOCATED ON CERTAIN REAL PROPERTY OWNED BY THE CITY AND TO BE LEASED TO SCHOOL SPECIALTY SUPPLY, INC., A KANSAS CORPORATION, FOR INDUSTRIAL PURPOSES; AUTHORIZING AND DIRECTING THE ISSUANCE OF $1,200,000 PRINCIPAL AMOUNT OF INDUSTRIAL REVENUE BONDS, :SERIES A, 1986, OF SAID CITY FOR THE PURPOSE OF PROVIDING FUNDS TO PAY THE COST OF PURCHASING, CONSTRUCTING, IMPROVING AND EQUIPPING CERTAIN BUILDINGS, IMPROVEMENTS, AND EQUIPMENT TO BE LEASED TO SCHOOL SPECIALTY SUPPLY, INC., FOR COMMERCIAL PURPOSES; PRESCRIBING THE FORM AND AUTHORIZING THE EXECUTION OF A SUPPLEMENTAL LEASE BY AND BETWEEN SAID CITY AND SCHOOL SPECIALTY SUPPLY, INC.; AND PRESCRIBING THE FORM AND REQUIRING THE EXECUTION OFA SEPARATE. GUARANTY AGREEMENT BY SCHOOL SPECIALTY SUPPLY, INC. AND THE NATIONAL BANK OF AMERICA AT SALINA, SALINA, KANSAS, AS TRUSTEE. WHEREAS, the City of Salina, Kansas, a city of the first class, hereinafter sometimes referred to as the "City" desires to promote, stimulate and develop the general economic welfare and prosperity of the City of Salina, Kansas, and its environs and thereby to further promote, stimulate and develop t e general economic welfare and prosperity of the State of K nsas; and WHEREAS, the City of Salina, Kansas, by Ordinance No. 86, authorized the City to acquire a tract of land in Saline unty, Kansas, for industrial development purposes, and thorized the payment of the cost of acquiring a site and to rchase, construct and equip a manufacturing facility, which nd and facility is hereafter sometimes called the "Facility"; d further authorized and directed the issuance of $950,000 incipal amount of Industrial Revenue Bonds, Series of 1973, ted May 1, 1973 (the "1973 Bonds") of the City to pay such sts; and further authorized the execution of a Lease between e City, as Landlord, and School Specialty Supply, Inc., as nant, hereinafter sometimes called the "Lease"; and WHEREAS, the City of Salina, Kansas did enter into ch Lease, did acquire such tract of land, did issue the 1973 nds and did commence to acquire, purchase, construct and uip the Facility; and WHEREAS, Tenant desires to finance the cost of. acquiring, constructing, improving and equipping certain additions to the Facility, hereinafter referred to as the "1986 Additions" from the proceeds of an additional series of bonds in the principal. amount of $1,200,000. WHEREAS, Ordinance No. 8286 authorizes the issuance of additional bonds to be on a parity with and coequal. with the outstanding 1973 Bonds upon certain conditions; and the City finds that such specified conditions have been and will be met; and WHEREAS, pursuant to the provisions of K.S.A. 12-1740 to 12-1749x, as amended (hereinafter referred to as the "Act"), said City is authorized to issue Industrial. Revenue Bonds of the City, and it is hereby found and determined to be. advisable and in the interest and for the welfare of the City and its inhabitants. that Industrial Revenue Bonds of the City in the principal amount of $1,200,000 be authorized and issued, for the purpose of providing funds to pay the balance of the aforementioned costs; and WHEREAS, School Specialty Supply, Inc. (hereinafter sometimes referred to as "Tenant") is willing to enter into a supplemental lease agreement and that School Specialty Supply, Inc. is willing to enter into a guaranty agreement with respect to additional Industrial Revenue Bonds. NOW, 1-HERLFORE, BE IT ORDAINI-D BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS: SECTION 1: Definitions. In addition to the words, terms and phrases elsewhere defined in this Ordinance, the Following words, terms and phrases as used herein shall have the following meanings unless the context or use indicates another or different meaning or intent: "Act" means K.S.A. 12-1740 to 12-1749a, inclusive, as amended. "Additional Bonds" means any Bonds issued in addition to the Series A, 1986 Bonds pursuant to the provisions of the Ordinance. "Bond Counsel" means the firm of Winton M. Hinkle, P.A. or any other attorney or firm of attorneys acceptable to Trustee and Tenant. "Bondowner" means the registered owner of any fully registered Series A, 1986 Bond. "Bonds" means the fully registered Series A, 1986 Bonds and any Additional Bonds. —2— "Business Day" means a day which is not a Saturday, Sunday or any day designated as a holiday by the Congress of the United States or by the Legislature of the State and on which Banks in the State are not authorized to be closed. "Change in Law" means any event not otherwise included in the definition of the term "Event of Taxability", the effect of which shall be to render the interest on the Bonds includible for any period in the gross income of the Bondowners or former Bondowners or otherwise taxable to the Bondowners (other than a Bondowner who is a Substantial. User or a Related Person thereto) for federal income tax purposes, including, but not limited to, the enactment or adoption (as determined by Bond Counsel) of any provision or change in the Code, or in the laws of the State or the regulations of any agency or instrumentality thereof (regardless of the effective date thereof) subsequent to the date hereof. "Change of Circumstances" means the occurrence of any of the following events: (1) title to, or the temporary use of, all. or any part of the Project shall be condemned by any authority exercising the power of eminent domain; (2) the Project is damaged or destroyed, in whole or in part, by fire, theft or other casualty; or (3) as a result of changes in the Constitution of the State or of legislative or administrative action by the State or any political subdivision thereof, or by the United States, or by reason of any action instituted in any court, the Lease shall become void or unenforceable, or impossible of performance without unreasonable delay, by reason of such changes or circumstances, unreasonable burdens or excessive liabilities are imposed upon Tenant. "City" means the City of Salina, Kansas, a municipal corporation organized and existing under the laws of the State of Kansas, and its successors and assigns. "Code" means the Internal Revenue Code of 1954, as amended, together with the regulations promulgated thereunder by the United States Department of the freasury. "Costs of Issuance" means any and all expenses of whatever nature incurred in connection with the issuance and sale of the Bonds, including but not limited to underwriting fees and expenses, or underwriting discount, bond and other printing expenses, and legal fees and expenses of counsel. "Determination of Taxability" means a determination that an Event of Taxability has occurred, which determination shall be deemed to have been made upon the occurrence of the first to occur of the following: —3— (a) the date on which the Tenant files with the Trustee any statement which discloses that an Event of Taxability has occurred; (b) the date on which the Tenant is advised in writing by the Commissioner or any District Director of the Internal Revenue Service that, based upon any filings of the Tenant, or upon any review or audit of th4_ fenant, or upon any other grounds whatsoever, an Event of Taxability has occur -red; (c) the date on which the Tenant receives notice from the fruste.e in writing that the Trustee has been advised by any Bondholder or.former Bondholder that the Internal Revenue Se.rivice has issued a statutory notice of deficiency or similar notice to such Bondholder or former Bondholder which asserts in effect that an Event of Taxability has occurred; and (d) the date on which the Tenant is advised in writing by the Commissioner or any District Director of the Internal. Revenue Service that there has been issued a public or private ruling of the Internal Revenue Service or a technical. advice memorandum issued bythe national office. of the Internal. Revenue Service that an Event of Taxability has occurred; or (e) the date on which the Tenant is advised in writing that a final determination, from which na further right of appeal. exists, has been made by a court of competent jurisdiction in the United States of America that there is or has been the occurrence of an Event of I-axability; provided, however, no Determination of' Taxability shall. occur under subparagraph (a), (b), (c) or (d) of this paragraph unless the Bondholder involved in such proceeding or action (i) gives the Tenant and the Trustee prompt written notice of the commencement thereof and (ii) if the Tenant agrees to pay all expenses in connection therewith and to indemnify such Bondholder against all liabilities including any additional income taxes in connection therewith, offers the Tenant the opportunity to control the defense thereof, and the Tenant contests such Determination of Taxability to the extent it deems sufficient or until no further right of appeal exists. Notwithstanding the foregoing provisions, if any of the events described in subparagraphs (a), (b), (c), or (d) of this paragraph are still the subject of a contest or a right of appeal still exists with respect thereof, it shall nonetheless be deemed to be final and a Determination of Taxability shall be deemed to have been two (2) years after receipt by Tenant of the notice described herein. —4— (c) Default in the performance or observance of any other of the covenants, agreements or conditions on the part of the Issuer in this Indenture or in the Bonds contained, and the continuance thereof for a period of 30 days after written notice. thereof shall have been given to the Issuer and the Tenant by the Trustee, or to the Trustee, the Issuer and the Tenant by the Owners of not less than 25% in aggregate principal amount of Bonds then Outstanding; provided, however, if any default shall. be such that it cannot be corrected within such 30 -day period, it shall not constitute an Event of Default if corrective action is instituted by the Issuer or the Tenant within such period and diligently pursued until such default is corrected; or (d) Default as defined in the Lease shall. have occurred. "Event of Taxability" means the payment or incurring of capital expenditures, by Tenant or by any other person in excess of those permitted in the Code, or any other action by the Tenant or any other person including, but not limited to, the use of Bond proceeds in violation of the covenants contained in the Lease, which has the effect of causing the interest on the Bonds to become includible for any period in the gross income. For Federal income tax purposes of any Owner or former Owner of the Bonds (other than an Owner who is a Substantial User of the Project or a Related Person thereto). "Federal. Tax Rate Adjustment" means if the maximum federal corporate income tax rate is changed and is less than 46%, the Bonds shall bear interest from the effective date of such change at the per annum rate equal'to the product of the interest rate then borne by the Bonds multiplied by a fraction, the denominator of which is 54% and the numerator of which is 100% minus the maximum federal corporate income tax rate in effect after such change. "Government Securities" means direct obligations of, or obligations the payment of the principal of and interest on which are unconditionally guaranteed by, the United States of America. "Guaranty Agreement" means the separate guaranty agreement dated as of February 1, 1986, of School Specialty —5— "Event of Default" means one of the following events: (a) Default in the due and punctual payment of any interest on any Bond; (b) Default in the due and punctual. payment of the principal of or premium, if any, on any Bond on the stated maturity or accelerated maturity date thereof, or at the redemption date thereof; (c) Default in the performance or observance of any other of the covenants, agreements or conditions on the part of the Issuer in this Indenture or in the Bonds contained, and the continuance thereof for a period of 30 days after written notice. thereof shall have been given to the Issuer and the Tenant by the Trustee, or to the Trustee, the Issuer and the Tenant by the Owners of not less than 25% in aggregate principal amount of Bonds then Outstanding; provided, however, if any default shall. be such that it cannot be corrected within such 30 -day period, it shall not constitute an Event of Default if corrective action is instituted by the Issuer or the Tenant within such period and diligently pursued until such default is corrected; or (d) Default as defined in the Lease shall. have occurred. "Event of Taxability" means the payment or incurring of capital expenditures, by Tenant or by any other person in excess of those permitted in the Code, or any other action by the Tenant or any other person including, but not limited to, the use of Bond proceeds in violation of the covenants contained in the Lease, which has the effect of causing the interest on the Bonds to become includible for any period in the gross income. For Federal income tax purposes of any Owner or former Owner of the Bonds (other than an Owner who is a Substantial User of the Project or a Related Person thereto). "Federal. Tax Rate Adjustment" means if the maximum federal corporate income tax rate is changed and is less than 46%, the Bonds shall bear interest from the effective date of such change at the per annum rate equal'to the product of the interest rate then borne by the Bonds multiplied by a fraction, the denominator of which is 54% and the numerator of which is 100% minus the maximum federal corporate income tax rate in effect after such change. "Government Securities" means direct obligations of, or obligations the payment of the principal of and interest on which are unconditionally guaranteed by, the United States of America. "Guaranty Agreement" means the separate guaranty agreement dated as of February 1, 1986, of School Specialty —5— Supply, Inc., as Guarantor and in favor of the Trustee for the benefit of the owners of the Bonds, required by the Ordinance. ".Improvements" means the buildings, structures, facilities, machinery, equipment and any other property purchased in whole or in part from the proceeds of the Bonds and more specifically described in Schedule I attached hereto and made a part hereof. "Interest Payment Date" means November 1 and May 1, commencing as of November 1, 1986, and terminating when the principal of, redemption premium if any, and interest on the Bonds have been fully paid. "Investment Securities" means any of the following securities, if and to the extent the same are at the time legal for investment of the Issuer's funds: (a) Government Obligations or obligations of the State: (b) Bonds, notes or other evidences of indebtedness of any agency or instrumentality of the State of the United States; and (c) Investment Contracts (permitted under Section 103(c) of the Internal. Revenue Code), savings accounts, time deposits, certificates of deposit and other deposits in any bank, including the Trustee. For purposes of investing the amounts on deposit in the funds established under this Indenture, any deposits or other evidences of indebtedness listed in subsection (c) above may be purchased by the Trustee with any bank within or without the State having a combined capital., surplus and undivided profits of not less than $5,000,000 and which is acceptable to the Trustee. "Land" means the real property described in Schedule I attached hereto and made a part hereof. "Lease" means the Lease Agreement by and between the City and the Tenant, dated May 1, 1973. "Official Action Date" means February 3, 1986, the date on which the Governing Body of the Issuer had adopted a resolution indicating an intent to issue the Bonds. "Original Proceeds" means all proceeds, including accrued interest, derived from the sale of the Bonds to the Original Purchaser. "Original Purchaser" means The National Bank of America at Salina, Salina, Kansas. �� "Owner" means the registered owner of any fully registered bond. "Payment Date" means any date on which the principal of or interest on any Bonds is payable. "Principal. and Interest Account" means the City of Salina, Kansas Principal and Interest Account, Series A, 1986 (School. Specialty Supply, Inc.), dated February 1, 1986 as established in the Ordinance. "Principal Payment Date" means annually commencing as of May 1, 1987 during which the principal of and redemption premium, if any, on the Bonds remains Outstanding and unpaid. "Principal User" means any principal user of the Project within the meaning of the Code. "Project-" means and includes the Issuer's interest in the Land and the Improvements acquired, constructed or installed with proceeds of the 1973 Bonds and the Bonds. "Project Costs" means those costs incurred in connection with the Project, including: (a) all costs and expenses incident or necessary to the acquisition of the Land and such of the improvements as are constructed, installed or in progress at the date of such acquisition; (b) fees and expenses of architects, appraisers, surveyors and engineers for estimates, surveys, soil borings and soil tests and other preliminary investigations and items necessary to the commencement of construction, preparation of plans, drawings and specifications and supervision of construction, as well as for the performance of al.l. other duties of architects, appraisers, surveyors and engineers in relation to the construction, furnishing and equipping of the Project or the issuance of the Bonds; (c) all costs and expenses incurred in constructing, acquiring, installing, furnishing or equipping the Project; (d) payment of interest actually incurred on any interim financing obtained from a lender unrelated to the Tenant for performance of work on the Project prior to the issuance of the Bonds; (e) the cost of the title insurance policies and the cost of any insurance and performance and payment bonds maintained during the Construction Period in accordance with 6.1 and 6.2 of the 1973 Lease, respectively; —7— (f) interest accruing on the Bonds prior to the Completion Date, if and to the extent proceeds of the Bonds set aside and deposited to the credit of the Principal and Interest. Account are insufficient for payment of such interest. (g) Costs of Issuance. "Rehabilitation Expenditures" means any amount Froperly chargeable to capital account which is incurred by the rson acquiring the building for property (or additions or improvements to property) in connection with the rehabilitation cf a building. In the case of an integrated operation ntained in a building before its acquisition, such term includes rehabilitating existing equipment in such building or placing it with equipment having substantially the same function. Any amount incurred by a successor to the person acquiring the building or by the seller under a sales contract .th such person shall be treated as incurred by such person. he term "Rehabiliation Expenditures" does not include any pendi.ture described in Section 4.8(g)(2)(B) (other than clause ) thereof) of the Code. The term "Rehabilitation penditures" shall. not include any amount which is incurred ter the date 2 years after the later of — (I) the date on ich the building was acquired, or (II) the date on which the ligation was issued. "Related Person" means a related person within the raaning of the applicable section of the Code. "Series A, 1986 Bonds" means the City of Salina, nsas, Industrial Revenue Bonds, Series A, 1986 (School ecial.ty Supply, Inc.) dated February 1, 1986, in the gregate principal amount of $1,200,000. "1973 Bonds" means the City of Salina, Kansas, dustrial Revenue .Bonds (School Specialty Supply, Inc.) in the iginal principal. amount of $950,000, dated May 1, 1973. "State" means the State of Kansas. "Substantial User" means a substantial user of the oject within the meaning of the applicable section of the de. "Supplemental Lease" means the Supplemental Lease reement by and between the City and the Tenant, dated bruary 1, 1986, supplementing the Lease dated May 1, 1973. "Taxability Premium" means if a Determination of xabi.li.ty occurs, the Tenant shall also pay (in addition to e redemption price and accrued interest) a premium (the arability Premium") which shall be equal to interest paid or yable on the Bonds from the date on which the interest �comes includable in the gross income of the holder hereof ther than by reason of the fact that such holder is a —8— 'substantial user" or "related person" as aforesaid) to the ext interest payment date or date of redemption established by he trustee, as applicable, plus any interest and penalties assessed against Holder in regard to such Determination of axabi.li.ty. In the event the Bonds shall have been transferred, the aforesaid Taxability Premium shall. nevertheless be made entirely to the then holder of the Bonds, r (if such payment shall be made after payment or redemption f the Bonds) to the holder of the Bonds when it is paid or redeemed in full., and any allocation of such Taxability Premium mong successive holders of the Bonds, if any, shall be overened solely by their agreements in respect thereof, and no prior holder of the Bonds shall have any claim under this paragraph. All. payments due on the Bonds subsequent to such djustment shall be adjusted appropriately to reflect said axabil.i.ty Premium. "Tenant" means School Specialty Supply, Inc., its uccessors and assigns. "Test Period Beneficiary" means any person who was an wrier or principal user of facilities being financed by roceeds of an industrial development bond issue at any time uring the 3—year period beginning on the later of (i) the date. such facilities were placed in service, or (ii) the date of the slue. "Trustee" means The National Bank of America at alina, in the City of Salina, Kansas, in its capacity as rustne, bond registrar and insurance trustee and its successor lr successors and any other corporation or association which at he time may be substituted in its placepursuant to and at the ime serving as Trustee under the Ordinance. SECTION 2: Description of Facility. As used herein, he term "Facility" shall mean the land, buildings, mprovements, furnishings and equipment described in Schedule I ttached hereto and incorporated herein by reference, financed y the 1973 Bonds and the 1986 Additions financed by the Bonds ereinafter authorized. SECTION 3: Authorization and Security for the Bonds. or the purpose of providing funds to pay the cost of the 1986 dditions to the Facility, there shall. be issued and hereby are uthorized and directed to be issued a series of Industrial evenue Bonds, Series A, 1986 of the City of Salina, Kansas, in he principal amount of $1,200,000 (hereinafter sometimes eferred as the "Bonds"). The Bonds and all interest thereon hall be paid solely from the money and revenue received from he fees charged and rental received for the use of the acility and not from any other fund or source (except to the lxtent paid out of the moneys attributable to Bond proceeds or he income from the temporary investment thereof and, under ertain circumstances as hereinafter and in the Lease provided, roceeds of insurance, sale and condemnation awards) and the ity hereby pledges the Facility and the net earnings therefrom to the payment of the Bonds and the 1973 Bonds and the interest thereon. The Bonds shall be equal in priority and lien to the 1973 Bonds. SECTION 4_. Description and Details of the Bonds, Desiq_nation of Paving Agent. The Bonds shall be dated February 1, 1986, shall. become due on May 1 in each of the following years and shall bear interest as set forth below: PRINCIPAL MATURITY AMOUNT _ MAY 1 $ 80,000 1987 80,000 1988 80,000 1989 80,000 1990 80,000 1991 80,000 1992 80,000 1993 80,000 1994 80,000 1995 80,000 1996 80,000 1997 80,000 1998 80,000 1999 80,000 2000 80,000 2001 The Bonds shall bear interest from their effective date of registration as set forth below payable to the Registered Owner hereto subject to Federal Tax Rate Adjustment semiannually on November 1 and May 1 in each year, commencing November 1, 1986. The Bonds shall carry a variable tax exempt interest rate that is equal to 80% of the Base Rate of The National Bank of America at Salina, Salina, Kansas at the beginning of each semiannual. interest rate. period. The Base Rate shall be defined as the base rate quoted in the most recent Weekly Market Update of The National Bank of America at Salina, Salina, Kansas, as of the above stated Interest Payment Dates. If the term "base rate" is discontinued, the Bank shall choose a substitute rate. If the said Weekly Market Update ceases publication, The National Bank of America at Salina, Salina, Kansas shall choose a new rate source. In the event the deduction for certain financial institution preference items under Section 291(a)(3) of the Code is changed from the present rate of 80%, the Bonds shall also bear interest computed according to the following formula ("Incremental Interest") = (Average Cost of Funds) x (the Exclusion Factor) x (Marginal Rate) x (Average Principal) divided by 360 x the actual number of days in the interest period. For purposes of the formula: "Average Cost of Funds" means the average cost of funds to The National Bank of America at Salina, Salina, Kansas expressed as a decimal for the quarter immediately preceding -10- t1le quarter for which Incremental Interest is payable; Average C st of Funds is determined by dividing Total Interest Expense bir Total Average Assets of The National Bank of America at S Lina as reflected on its most recent quarterly unaudited financial statements; "Exclusion Factor" means the portion of interest a locable to purchasing and carrying the Bonds which is not a lowable as a deduction by The National Bank of America at Salina, Salina, Kansas in determining its taxable income; provided, however,the Exclusion Factor shall include only the e cess of excludable interest over .20 (the percentage of e cluded interest presently provided for by Section 291 of the C de for tax years beginning after December 31, 1984); and. "Average Principal" refers to the daily average tstanding principal balance of the Bond during the calendar arter for which the installment of Incremental Interest is ing computed. The "Marginal Rate" means the maximum Federal c rporate income tax rate under Section 11(b) or any successor P ovisi.on of the Code. The Bonds shall be fully registered bonds in the denomination of $5,00.0 or any integral multiple thereof not exceeding the principal amount of the Bonds maturing on any Principal Payment Date. The principal of and interest on the Bonds .are payable a the principal office of The National Bank of America at Salina, Salina, Kansas, Kansas (the "Trustee"). The Bonds are subject to redemption and payment prior to maturity upon the terms and conditions and at the redemption prices set forth in t iis Ordinance.. The Bonds shall be subject to redemption and payment for to the stated maturity thereof only as provided in ction 5 of this Ordinance. SECTION 5. Redemption and Payment of Bonds Prior to turi_y. The.Bonds shall be subject to redemption and payment for to the stated maturity thereof, after the notice ecified in Section 5 hereof, as follows: (a) Mandatory Redemption Upon a Determination of 4xability. Each of the Bonds then outstanding shall be redeemed and paid on a redemption date established by the City ii the event the interest on the Bonds is includable in the g oss income of the recipients thereof for Federal income tax rposes by reason of failure of the Bonds to qualify for the e emption provided in Section 103(b)(6)(D) of the Internal R venue.Code of 1954, as amended, at the principal amount t ereof, plus accrued interest thereof to the date fixed for demption and payment, together with a premium which shall be Five (5%) percent of the principal amount of such outstanding nds for each full year or fraction of a year which elapsed —11— between the date on which interest on such Bonds became taxable and the date fixed for redemption and payment, but in no event shall the date fixed for redemption and payment be later than One Hundred Twenty (120) days after the Internal Revenue Service, the Tenant or the Trustee hereinafter designated shall g.ve written notice to the City of the failure of the Bonds to q alify for such exemption. (b) Extraordinary Optional Redemption. Each of the B nds shall be subject to redemption and payment at the option o the City upon instructions from the. Tenant at any time upon tie occurrence of any of the following conditions or events, p ovided all of said Bonds are so redeemed and paid according t their.terms: (1) if title to or the permanent use or use f r a limited time of substantially all of the Facility be c ndemned by any authority having the power of eminent domain; o (2) if substantially all. of the Facility be damaged or destroyed by fire or other casualty; or (3) if as a result of a y changes in. the Constitution of the State of Kansas or any p litical subdivision thereof, or by the United States, or by reason of action instituted in any court, the Lease shall. have become void or unenforceable or impossible of performance. without unreasonable delay or in any other way by reason of such change of circumstances, unreasonable burdens or excessive l abilities shall have been imposed on the Tenant, including. w thout limitation, Federal, state or other ad valorem, p operty, income or other taxes not being imposed on the date o the Lease. If called for redemption in any of such events, tie Bonds shall be subject to redemption at the principal a ount thereof, plus accrued interest thereon to the date fixed f r redemption and payment, without premium. (c) Optional Redemption. The Bonds shall be subject redemption and payment prior to maturity, at the option of e City, as directed by the Tenant, as a whole or in part on bruary 1, 1987, or on any date thereafter, at the par value the prinicpal amount of the Bonds called for redemption and yment, plus accrued interest thereon to the date fixed for demption and payment. In the event of a Determination of Taxability which is e result of a Change in Law, the Bonds then Outstanding may called for redemption and payment at the election of the ndholders on a redemption date established by Issuer as ovided in subparagraph (a) of this Section 5 at a redemption ice equal to the par value of the principal amount thereof= us accrued interest to the redemption date, without premium. . SECTION 6. Notice of Redemption. Notice of the call r any redemption as provided for by this Ordinance i entifying the Bonds to be redeemed shall be given by registered or certified mail or actual delivery to the Paying Agent herein designated and to the Original Purchaser of the B nds at least Thirty (30) days prior to the date -fixed for r demption and payment. Notice of any such redemption shall a so be given to any holders of the Bonds who have placed their —12— names on file with the Trustee, upon mailing a copy of the redemption notice in the manner hereinbefore specified at least Thirty (30) days prior to the date fixed for redemption to the owner of each Bond to be redeemed at the address shown on the books maintained by the Trustee; provided, however, that failure to give such notice by mailing as aforesaid, or any defect therein, shall not affect the validity of any proceedings for the redemption of the Bonds. If, because of the temporary or permanent suspension of the publication or general circulation of any newspaper or for any other reason, it is impossible or impractical to publish such notice of call for redemption in the manner herein provided, then such publication in lieu thereof as shall be made with the approval. of the Trustee shall constitute a sufficient publication of notice. Interest shall cease on any of said Bonds so called for redemption and payment as of the redemption date, provided funds are available in the hands of the Paying Agent to pay the same in accordance with their terms. SECTION 7. Registration Provisions, Persons Treated as Owners. The City covenants that it will, as long as any of the Bonds herein authorized remain outstanding, keep at the office of the Bond Registrar, books for the registration of Bonds as herein provided. Each Bond or Bonds shall. be .transferable only upon the books maintained by the Bond Registrar, by the registered owner thereof in person, or by his attorney duly authorized in writing, upon surrender thereof together with a written instrument satisfactory to the Bond Registrar duly executed by the registered owner or his duly authorized attorney. Upon the transfer of any such Bond and the payment of any fee, tax or governmental charge, the Bond Registrar shall issue in the name of the transferee a new Bond or Bonds. The City, the Trustee, the Bond Registrar, the Paying Agent and the Tenant may deem and treat the person in whose name any Bond shall be registered as the absolute owner of such Bond, whether such Bond shall. be overdue or not, for the purpose of receiving payment of, or on account of, the principal and redemption price, if any, of and interest on such Bond and for all other purposes, and all such payments so made to any such registered owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid, and neither the City, nor the Trustee, nor the Bond Registrar, nor the Paying Agent nor the Tenant shall be affected by any notice to the contrary, but such registration may be changed as herein provided. In all cases in which the privilege of transferring Bonds is exercised, the Bond Registrar shall authenticate and deliver Bonds in accordance with the provisions of this —13— 1 Ordinance. For every such transfer of Bonds, the Bond Registrar may make a charge to the registered owner thereof sufficient to reimburse it for any tax or other governmental charge required to be paid with respect to such exchange or transfer. The fees and charges of the Bond Registrar for making any exchange or transfer provided for by this Ordinance and the expense of any Bond printing necessary to effect the subsequent exchange or transfer of any Bond shall be paid by the Tenant. Neither the City nor the Bond Registrar shall be required (a) to register, transfer or exchange 1986 Bonds for a period of Ten (10) days next preceding an interest payment date on the Bonds or next preceding any selection by lot of Bonds to be redeemed or thereafter until after the mailing of any notice of reale+mption; or (b) to register, transfer or exchange any Bonds called for redemption. SECTION 8. Method of Execution and Authentication of the Bonds. The Bonds, including any Bonds issued in exchange or as substitution for the Bonds initially delivered, shall be executed for and on behalf of the City by the manual or facsimile signature of the Mayor or Vice Mayor and the manual. or facsimile signature of the City Clerk or Deputy.City Clerk, and the seal. of said City shall be affixed thereto or imprinted thereon. The Bonds. shall not be valid obligations under the provisions of this Ordinance until authenticated by the Bond Registrar by the execution of an appropriate certificate appearing on each such Bond: SECTION 9. Form of Bonds. The Bonds and the certificates relating thereto shall be in substantially the following form: —14— FACE OF THE BOND No. $ United States of America State of Kansas City of Salina, Kansas Industrial. Revenue Bond Series A', 1986 (School Specialty Supply, Inc'.) Maturity Date: Dated Date: February 1, 1986 Registered Owner:_ v Principal Amount: Dollars rhe City of Salina, Kansas, a municipal corporation of the State of Kansas (the "City"), for value received, proinises to pay, but solely from the sources hereinafter referred to, to the registered owner identified above, or registered assigns, upon the presentation and surrender of this Bond, the principal sum identified above on the maturity date shown, in any coin or currency of the United States of America which on the date of payment thereof is legal tender for the payment of public and private debts, at the principal offices of The National Bank of America at Salina, in the City of Salina, Kansas (the "Paying Agent" and "Trustee"), and in like manner to pay to the registered owner ("Owner") hereof, by check or draft mailed to the Owner at his address as it appears on the bond registration books of the City kept by the Trustee under the within mentioned Ordinance, interest on said principal sum from the effective date of registration of this Bond (which date is set forth on this Bond) at the rate of interest shown below until. said principal sum is paid. The Bonds shall bear interest from their effective date of registration as set forth below payable to the Registered Owner hereto subject to Federal Tax Rate Adjustment semiannually on November 1 and May 1 in each year, commencing November 1, 1986. The Bonds shall carry a variable tax exempt interest rate that is equal to 80% of the Base Rate of The National Bank of America at Salina, Salina, Kansas, at the beginning of each semiannual interest rate period. The Base Rate shall be defined as the base rate quoted in the most recent Weekly Market Update of The National Bank of America at Salina, Salina, Kansas, as of the above stated Interest Payment Dates. If the term "base rate" is discontinued, the Bank shall choose a substitute rate. If the said Weekly Market Update ceases —15— blicati.on, The National Bank of America at Salina, Salina, nsas shall choose a new rate source. In the event the deduction for certain financial stitution preference items under Section 291(a)(3) of the de is changed from the present rate of 80°,x, the Bonds.shall so bear interest computed according to the following formula ('Incremental. Interest") = (Average. Cost of Funds) x (the Exclusion Factor) x (Marginal Rate) x (Average Principal) vided by 360 x the actual. number of days in the interest riod. For purposes of the formula: "Average Cost of Funds" means the average .cost of nds to The National Bank of America at Salina, Salina, Kansas pressed as a decimal for the quarter immediately preceding e quarter for which Incremental Interest is payable; Average st of Funds is determined by dividing Total Interest Expense Total Average Assets of The National Bank of America at lina as reflected on its most recent quarterly unaudited nanc.ial statements; "Exclusion Factor" means the portion of interest allocable to purchasing and carrying the Bonds which is not allowable as a deduction by The National Bank of America at Lina, Salina, Kansas in determining its taxable income; ovi.ded, however,the Exclusion Factor shall include only the cess of excludable interest over .20 (the percentage of eluded interest presently provided for by Section 291 of the de for tax years beginning after December 31, 1984); and "Average Principal" refers to the daily average tstanding principal balance of the Bond during the calendar arter for which the installment of Incremental Interest is ing computed. The "Margi.nal. Rate" means the maximum Federal rporate income tax rate under Section 11(b) or any successor ovi.si.on of the Code. Reference is hereby made to the further provisions of is Series A, 1986 Bond set forth on the reverse side hereof d such further provisions shall. for all purposes have the me effect as if set forth on the face hereof. It is hereby certified and declared that all acts, onditions and things required to exist, happen and be erformed precedent to and in the execution and delivery of the rdinance and the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law. In witness whereof, the City has caused this Bond to e executed in its name by the manual or facsimile signature of —16— the Mayor and attested by the manual or Facsimile signature of its City Clerk and its official seal to be affixed hereto or imprinted hereon, and has caused this Bond to be dated as of February 1, 1986. City of Salina, Kansas, (Facsimile Seal) By__ _ Merle A. Hodges, Mayor ATTEST: D. L. Harrison, City Clerk r. 11 —17— 1 THE NATIONAL BANK OF AMERICA AT SALINA Trustee By Authorized Officer —18— (FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION) This Bond is one of the City of Salina, Kansas, Industrial Revenue Bonds, Series A, 1986 (School Specialty Supply, Inc.), described in the within mentioned Ordinance. the effective date of registration of this Bond is 1 THE NATIONAL BANK OF AMERICA AT SALINA Trustee By Authorized Officer —18— REDEMPTION OF BONDS Mandatory Redemption Upon a Determination of REVERSE OF THE BOND This Bond i.s one of a duly authorized series of Bonds redeemed and paid on a redemption date established by the City of the City designated "City of Salina, Kansas, Industrial in the event the interest on the Bonds is includable in the Revenue Bonds, Series A, 1986 (School Specialty Supply, Inc.)", purposes by reason of failure of the Bonds to qualify for the in the aggregate principal amount of $1,200,000 (the "Series A, exemption provided in Section 103(b)(6)(D) of the Internal 1986 Bonds"), issued for the purpose of providing funds to pay thereof, plus accrued interest thereof to the date fixed for the cost of acquiring, constructing, equipping and remodeling redemption and payment, together with a premium which shall be certain facilities (the "Project"), to be leased by the City to Bonds for each full year or fraction of a year which elapsed School Specialty Supply, Inc., a Kansas corporation (the between the date on which interest on such Bonds became taxable "Tenant"), under the terms of a Supplemental. Lease dated as of shall the date fixed for redemption and payment be later than February 1, 1986, between the City and the Tenant (said Lease Agreement, as amended and supplemented from time to time in accordance with the provisions thereof, being herein called the "Lease"), all pursuant to the authority of and in with the provisions, restrictions and limitations of the Constitution and statutes of the State of Kansas, including particularly K.S.A. 12-1740 to 12-1749a, inclusive, as amended, and pursuant to proceedings duly had by the Governing Body of the City. The Series A, 1986 Bonds are issued under and are equally and ratably secured and entitled to the same protection and security of Ordinance No. 8286, dated as of May 1, 1973 (said Ordinance, as supplemented by Ordinance No. 86-9122 and as further supplemented from time to time in accordance with the provisions thereof). Subject to the terms and conditions set forth therein, the Ordinances permit the City to issue Additional Bonds (as defined therein) secured by the Ordinances ratably secured and on a parity with the Series of 1973 Bonds and the. Series A, 1986 Bonds (the Series of 1973 and Series A, 1986 Bonds together with such Additional. Bonds being herein referred to collectively as the. "Bonds"). Reference is hereby made to the Ordinances for a description of the provisions, among others, with respect to the nature and extent of the security for the Bonds, the rights, duties and obligations of the City, the Trustee and the owners of the Bonds, and the terms upon which the Bonds are issued and secured. REDEMPTION OF BONDS -19- Mandatory Redemption Upon a Determination of Taxability. Each of the Bonds then outstanding shall be redeemed and paid on a redemption date established by the City in the event the interest on the Bonds is includable in the gross income of the.,recipients thereof for Federal income tax purposes by reason of failure of the Bonds to qualify for the exemption provided in Section 103(b)(6)(D) of the Internal Revenue Code of 1954, as amended, at the principal amount thereof, plus accrued interest thereof to the date fixed for redemption and payment, together with a premium which shall be Five (5%) percent of the principal amount of such outstanding Bonds for each full year or fraction of a year which elapsed between the date on which interest on such Bonds became taxable and the date fixed for redemption and payment, but in no event shall the date fixed for redemption and payment be later than -19- e Hundred Twenty (120) days after the Internal Revenue rvice, the Tenant or the Trustee hereinafter designated shall give written notice to the City of the failure of the Bonds to q alify for such exemption. Extraordinary Optional Redemption. Each of the Bonds scall be subject to redemption and payment at the option of the City upon instructions from the Tenant at any time upon the c.urrence of any of the following conditions or events, ovided all of said Bonds are so redeemed and paid according I-) their terms: (1) if title to or the permanent use or use r a limited time of substantially all. of the Facility be c ndemned by any authority having the power of eminent domain; o (2) if substantially all. of the Facility be damaged or d.stroyed by fire or other casualty; or (3) if as a result of y changes in the Constitution of the State of Kansas or any litical subdivision thereof, or by the United States, or by Cason of action instituted in any court, the Lease shall have ,come void or unenforceable or impossible of performance .thout unreasonable delay or in any other way by reason of s ch change of circumstances, unreasonable burdens or excessive liabilities shal.1. have been imposed on the Tenant, including without limitation, Federal, state or other ad valorem, operty, income or other taxes not being imposed on the date o- the Lease. If called for redemption in any of such events, tie Bonds shall be subject to redemption at the principal ..anount thereof, plus accrued interest thereon to the date fixed r redemption and payment, without premium. Optional Redetion. The Bonds shall be subject to demption and payment prior to maturity, at the option of the ty, as directed by the Tenant, as a whole or in part on bruary 1, 1987, or on any date thereafter, at the par value the prinicpal amount of the Bonds called for redemption and yment, plus accrued interest thereon to the date fixed for demption and payment. In the event of a Determination of Taxability which is e result of a Change in Law, the Bonds then Outstanding may called for redemption and payment at the election of the ndholde.rs on a redemption date established by Issuer in the me manner as provided under Mandatory Redemption Upon a termination of taxability at a redemption price equal to the r value of the principal amount thereof plus accrued interest the redemption date, without premium. In the event any of the Bonds are called for demption as aforesaid, notice thereof identifying the Bonds be redeemed will be given by mailing a copy of the demption notice at least 30 days prior to the date fixed for demption to the Owner of each Bond to be redeemed at the dress shown on the registration books maintained by the ustee; provided, however, that failure to give such notice by fling as aforesaid, or any defect therein, shall not affect tie validity of any proceedings for the redemption of Bonds. A 1 Bonds so called for redemption will cease to bear interest —20— on the specified redemption date and shall no longer be secured by the Ordinance and shall not be deemed to be Outstanding under the provisions of the Ordinance. The Series A, 1986 Bonds and the interest thereon are limited obligations of the City payable exclusively out of the revenues derived by the City from the Project, including but not limited to the rents, revenues and receipts under the Lease, and are secured by a pledge of the Project and a pledge and assignment of such rents, revenues and receipts, including all rentals and other amounts to be received by the City under and pursuant to the Lease, all as provided in the Ordinance. The Bonds and the interest thereon do not constitute a debt or general obligation of the City, the State of Kansas or any municipal corporation thereof, and are not payable in an.y manner by taxation. The Bonds shall not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. Pursuant to the provisions of the Lease, Rental Payments are to be paid by the Tenant directly to the Trustee for the account of the City and deposited in a special trust account created by the City and designated "City of Salina, Kansas, Principal and Interest Account for Industrial Revenue Bonds (School. Specialty Supply, Inc.)". The full and prompt payment of the principal of, redemption premium, if any, and interest on the Bonds is unconditionally guaranteed by the Tenant and Additional Guarantors to the Trustee for the benefit of the Owners of the Bonds, under the terms of separate Guaranty Agreements dated as of February 1, 1986. The Owner of this Bond shall have no right to enforce the provisions of the Ordinance or to institute action to enforce the convenants therein, or to take any action with respect to any event of default under the Ordinance, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Ordinance. In certain events, on the conditions, in the manner and with the e.ffect.se.t Forth in the Ordinance, the principal of all the Bonds issued under the Ordinance and then Outstanding may become or may be declared due and payable prior to the stated maturity thereof, together with interest accrued thereon. Modifications or alterations of this Bond or the Ordinance may be made} only to the extent and under the circumstances permitted by the Ordinance. This Bond is transferable, as provided in the Ordinance, only upon the registration books of the City kept for that purpose at the above mentioned office of the Trustee by the Owner hereof in person or by his duly authorized attorney, upon surrender of this Bond together with a written instrument of transfer satisfactory to the Trustee duly executed by the Owner or his duly authorized attorney, and thereupon a new Bond or Bonds and in the same aggregate principal amount, shall be issued to the transferee in exchange therefor as provided in the Ordinance, and upon payment of the charges therein prescribed. The Tenant has agreed to pay as —21— J Additional Rent under the Lease all costs incurred in connection with the issuance, transfer, exchange, registration, redemption or payment of the Bonds except (a) the reasonable fees and expenses in connectioogAjith the replacement of the Bond or Bonds mutilated, stolen, lost or destroyed or (b) any tax or other governmental charge imposed in relation to the transfer, exchange, registration, redemption or payment of the Bonds. rhe City, the Trustee and any Paying Agent may deem and treat the person in whose name this Bond is registered as the absolute Owner hereof for the purpose of receiving payment of, or on account of, the principal or redemption price hereof and interest due hereon and for all other purposes. This Bond shall not be valid or becomeobligatory for any purpose or be entitled to any security or benefit under the Ordinance until the Certificate of Authentication hereon shall. have been executed by the Trustee. —22— J (FORM OF' ASSIGNMENT) For value received, the undersigned hereby sells, assigns and transfers unto Print or Type Name and Address of Transferee the within Bond and all rights thereunder, and hereby authorizes the transfer of the within Bond on the books kept by the l-rustee for the registration and transfer of Bonds. Dated: NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular. Signature Guaranteed By: By__ Title: -- _ - _ - —23— • Form of Bond Counsel's Approving Opinion AMOUNT Bond Counsel's approving opinion with respect to the 1987 authorization and issuance of the Bonds shall be substantially in the following form, with such modifications, amendments or 80,000 additional provisions as Bond Counsel shall approve: I, the undersigned, City Clerk of the City of Salina, Kansas hereby certify that the following is a true and correct copy of the complete final. legal opinion of Winton M. Hinkle, P.A., Wichita, Kansas, Bond Counsel, on the within Bond and the series of which said Bond is a part, except that it omits the date of such opinion, that said legal opinion was manually executed and was dated and issued as of the date of delivery of and payment for such Bonds, and is on file with The National Bank of America at Salina, Salina, Kansas. (facsimile signatures_ _ City Clerk of the City of Salina, Kansas WINTON M. HINKLE, P.A. Attorney at Law 450 Century Plaza Wichita, Kansas 67202 I have acted as Bond Counsel in connection with the issuance by the City of Salina, Kansas (the "City"), of its Industrial Revenue Bonds, Series A, 1986 (School Specialty Supply, Inc.), dated February 1, 1986 in the aggregate principal amount of $1,200,000 (the "Bonds"). The Bonds are issuable in the form of fully registered bonds in the denomination of $5,000 or any integral multiple thereof, not exceeding the principal amount of the Bonds maturing on any Principal Payment Date. The Bonds will mature on May 1 of each year in the respective principal amounts, and will bear interest as set forth below: —24— PRINCIPAL MATURITY AMOUNT MAY 1 $ 80,000 1987 80,000 1988 80,000 1989 80,000 1990 80,000 1991 80,000 1992 80,000 1993 80,000 1994 80,000 1995 80,000 1996 80,000 1997 —24— he Bonds shall. bear interest from their effective date of egistration as set forth below payable to the Registered Owner ereto subject to Federal Tax Rate Adjustment semiannually on ovember 1 and May 1 in each year, commencing November 1, 986. The Bonds shall carry a variable tax exempt interest ate that is equal to 80% of the Base Rate of The National Bank f America at Salina, Salina, Kansas, at the beginning of each emiannual interest rate period. The Base Rate shall be efined as the base rate quoted in the most recent Weekly arket Update of The National Bank of America at Salina, alina, Kansas, as of the above stated Interest Payment Dates.: f the term "base rate" is discontinued, the Bank shall choose substitute rate. If the said Weekly Market Update ceases ublication., The National Bank of America at Salina, Salina, ansas shall choose a new rate source. In the event the deduction for certain financial nstitution preference items under Section 291(a)(3) of the ode is changed from the present rate of 80%, the Bonds shall also bear interest computed according to the following formula "Incremental Interest") _ (Average Cost of Funds) x (the xclusi.on Factor) x (Margi.nal. Rate) x (Average Principal) ivided by 360 x the actual number of days in the interest eriod. For purposes of the formula: "Auerage Cost of Funds" means the average cost of unds to The National. Bank of America at Salina, Salina, Kansas xpressed as a decimal for the quarter immediately preceding he quarter for which Incremental. Interest is payable; Average ost of Funds is de:ter•mine.d by dividing Total Interest Expense. y Total. Average Assets of The National Bank of America at alina as reflected on its most recent quarterly unaudited inancial sta.ternents; "Exclusion Factor" means the portion of interest llocable to purchasing and carrying the Bonds which is not l.l.owable as a deduction by The National Bank of America at alina, Salina, Kansas in determining its taxable income; rovide:d, however,the Exclusion Factor shall include only the xcess of excludable interest over .20 (the percentage of xcluded interest presently provided for by Section 291 of the ode for tax years beginning after December 31, 1984); and "Average Principal" refers to the daily average utstanding principal balance of the Bond during the calendar uarter for which the installment of Incremental Interest is eing computed. The "Marginal Rate" means the maximum Federal orporate income tax rate under Section 11(b) or any successor rovision of the Code. —25— 80,000 1998 80,000 1999 80,000 2000 80,000 2001 he Bonds shall. bear interest from their effective date of egistration as set forth below payable to the Registered Owner ereto subject to Federal Tax Rate Adjustment semiannually on ovember 1 and May 1 in each year, commencing November 1, 986. The Bonds shall carry a variable tax exempt interest ate that is equal to 80% of the Base Rate of The National Bank f America at Salina, Salina, Kansas, at the beginning of each emiannual interest rate period. The Base Rate shall be efined as the base rate quoted in the most recent Weekly arket Update of The National Bank of America at Salina, alina, Kansas, as of the above stated Interest Payment Dates.: f the term "base rate" is discontinued, the Bank shall choose substitute rate. If the said Weekly Market Update ceases ublication., The National Bank of America at Salina, Salina, ansas shall choose a new rate source. In the event the deduction for certain financial nstitution preference items under Section 291(a)(3) of the ode is changed from the present rate of 80%, the Bonds shall also bear interest computed according to the following formula "Incremental Interest") _ (Average Cost of Funds) x (the xclusi.on Factor) x (Margi.nal. Rate) x (Average Principal) ivided by 360 x the actual number of days in the interest eriod. For purposes of the formula: "Auerage Cost of Funds" means the average cost of unds to The National. Bank of America at Salina, Salina, Kansas xpressed as a decimal for the quarter immediately preceding he quarter for which Incremental. Interest is payable; Average ost of Funds is de:ter•mine.d by dividing Total Interest Expense. y Total. Average Assets of The National Bank of America at alina as reflected on its most recent quarterly unaudited inancial sta.ternents; "Exclusion Factor" means the portion of interest llocable to purchasing and carrying the Bonds which is not l.l.owable as a deduction by The National Bank of America at alina, Salina, Kansas in determining its taxable income; rovide:d, however,the Exclusion Factor shall include only the xcess of excludable interest over .20 (the percentage of xcluded interest presently provided for by Section 291 of the ode for tax years beginning after December 31, 1984); and "Average Principal" refers to the daily average utstanding principal balance of the Bond during the calendar uarter for which the installment of Incremental Interest is eing computed. The "Marginal Rate" means the maximum Federal orporate income tax rate under Section 11(b) or any successor rovision of the Code. —25— low The principal of and interest on the Bonds are payable at the principal office of The National Bank of America at Salina, in the City of Salina, Kansas (the "Trustee"). The Bonds are subject to redemption and payment prior to maturity upon the terms and conditions and at the redemption prices set forth in the Ordinance. The Bonds have been authorized and issued under and pursuant to K.S.A. 12-1740 et seq., as amended (the "Act") and the Ordinance hereinafter referred for the purpose of providing Funds to pay the costs of acquiring, constructing, equipping and remodeling the Project described in the Ordinance (the "Project"). I have examined a certified transcript of proceedings relating to the authorization and issuance of the Bonds, which transcript includes, among other documents and proceedings, the following: (i) Ordinance No. 86-9122 adopted by the governing body of the City on March 3, 1986. (ii) Supplemental. Lease dated as of February 1, I also have examined the Constitution and statutes of the State of Kansas, insofar as the same relate to the authorization and issuance of the Bonds and the authorization, execution and delivery of the Ordinance, the Supplemental Lease and the Guaranty Agreement, and an executed and authenticated Bond of the issue so authorized. As of the date hereof, additional restrictions on the issuance of tax exempt bonds by or on behalf of states and local governments would be imposed by H.R. 3838, the Tax Reform Act of 1985 (the "Bill") now pending in the Congress of the United States. If the Bill becomes law in its present form, the Bonds will be subject to the new restrictions contained in the Bill. The City has convenanted to take all actions necessary to comply with the provisions of the Bill in order to maintain the Federal tax exempt status of the interest on the Bonds. I have assumed continuing compliance by the City with such covenant in rendering my opinion that interest on the Bonds is exempt from Federal income taxation. Based upon such examination, I am of the opinion, as of the date hereof, as follows: -26- 1986 (the "Lease"), between the City and School Specialty Supply, Inc., a Kansas corporation (the "Tenant"). (iii.) Guaranty Agreement dated as of February 1, 1986 (the "Guaranty Agreement"), between the School Specialty Supply, Inc. (the "Guarantor") and the Trustee for the benefit of the owners of the Bonds. I also have examined the Constitution and statutes of the State of Kansas, insofar as the same relate to the authorization and issuance of the Bonds and the authorization, execution and delivery of the Ordinance, the Supplemental Lease and the Guaranty Agreement, and an executed and authenticated Bond of the issue so authorized. As of the date hereof, additional restrictions on the issuance of tax exempt bonds by or on behalf of states and local governments would be imposed by H.R. 3838, the Tax Reform Act of 1985 (the "Bill") now pending in the Congress of the United States. If the Bill becomes law in its present form, the Bonds will be subject to the new restrictions contained in the Bill. The City has convenanted to take all actions necessary to comply with the provisions of the Bill in order to maintain the Federal tax exempt status of the interest on the Bonds. I have assumed continuing compliance by the City with such covenant in rendering my opinion that interest on the Bonds is exempt from Federal income taxation. Based upon such examination, I am of the opinion, as of the date hereof, as follows: -26- 1. The City is a municipal corporation duly and legally organized and validly existing under the laws of the State of Kansas, and has lawful power and authority to issue the Bonds and to enter into the Ordinance and the Supplemental Lease and to perform its obligations thereunder. 2. The Bonds are in proper form and have been duly authorized and issued in accordance with the Constitution and statutes of the State of Kansas, including the Act. 4. The. Ordinance has been duly adopted by the City and the Supplemental Lease and.the Guaranty Agreement have been duly authorized, executed and delivered by the parties thereto, and constitute valid and legally binding agreements of the parties thereto, enforceable in accordance with the respective provisions thereof. 5. Under existing law, the interest on the Bonds is exempt from Federal income taxation, except for interest on any Bond for any period during which it is held by a person who is a "substantial user" of the. Project or a "related person" as those terms are used in Section 103(b)(13) of the Internal Revenue Code. I call your attention to the fact that interest. on the Bonds may become subject to Federal income taxation in the event that (i) the Tenant or another person takes action within three years after the date hereof which causes the $10,000,000 limitation contained in Section 103(b)(6)(D) of the. Internal Revenue Code to be exceeded; (ii) more than 25 percent of the proceeds of the Bonds is used to provide a facility the primary purpose of which is one of the following: retail food and beverage services, automobile sales or service, or the provision of recreation or entertainment; or.(iii) any portion of the proceeds of the Bonds is used to provide the following: any private or commercial golf course, country club, massage parlor, tennis club, skating facility (including roller skating, skateboard and ice skating), racquet sports facility (including any handball or racquetball court), hot tub —27— 3. The Bonds are valid and legally binding limited obligations of the City according to the terms thereof, payable as to principal, redemption premium, if any, and.interest solely from, and secured by a valid and enforceable pledge and assignment of the rents, revenues and receipts derived by the. City under the Supplemental Lease (except to the extent payable from proceeds of the Bonds, insurance proceeds, sale or condemnation awards or payments, if any, received pursuant to the Guaranty Agreement), all in the manner provided in the Ordinance. The Bonds are issued on a parity as to lien and security with the City's Industrial Revenue Bonds, Series of 1973, dated May 1, 1973, in the original principal amount of $950,000, issued under authority of Ordinance No. 8286 of the. City. The Bonds do not constitute a debt of the City, the State of Kansas or any political subdivision thereof and do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction, and are not payable in any manner by taxation. 4. The. Ordinance has been duly adopted by the City and the Supplemental Lease and.the Guaranty Agreement have been duly authorized, executed and delivered by the parties thereto, and constitute valid and legally binding agreements of the parties thereto, enforceable in accordance with the respective provisions thereof. 5. Under existing law, the interest on the Bonds is exempt from Federal income taxation, except for interest on any Bond for any period during which it is held by a person who is a "substantial user" of the. Project or a "related person" as those terms are used in Section 103(b)(13) of the Internal Revenue Code. I call your attention to the fact that interest. on the Bonds may become subject to Federal income taxation in the event that (i) the Tenant or another person takes action within three years after the date hereof which causes the $10,000,000 limitation contained in Section 103(b)(6)(D) of the. Internal Revenue Code to be exceeded; (ii) more than 25 percent of the proceeds of the Bonds is used to provide a facility the primary purpose of which is one of the following: retail food and beverage services, automobile sales or service, or the provision of recreation or entertainment; or.(iii) any portion of the proceeds of the Bonds is used to provide the following: any private or commercial golf course, country club, massage parlor, tennis club, skating facility (including roller skating, skateboard and ice skating), racquet sports facility (including any handball or racquetball court), hot tub —27— acility, suntan facility or racetrack; (iv) more than 5 ercent of the proceeds of the Bonds is used to provide esidential real property for family units, in any which event he Ordinance requires that the Bonds be called for redemption nd payment; (v) the amount of industrial development bonds including the Bonds) allocable to either the Tenant or a elated Person (as defined in Section 103 (b)(6)(C) of the ode) thereto as a Test Period Beneficiary (as defined in the ,ode) exceeds $40,000,000; (vi) any portion of the proceeds of .he Bonds is used to provide any airplane, skybox, or other rivate luxury box, any health club facility, any facility rimarily used for gambling, or any store the principal usiness of which is the sale of alcoholic beverages for onsumpti.on off premises; (vii) the Project is connected with ny other facility financed with the proceeds of industrial evelopment bonds issued in accordance with Section 03(b)(6)(D) or Section 103(b)(6)(A) of the Code through the se of substantial common facilities; (viii) more than 25% of the proceeds of the Bonds is used for the acquisition of land of to be used for farming purposes; or (ix) any portion of the roceeds of the Bonds is used for the acquisition of any roperty (or on interest thereon) unless (a) the first use of such property is pursuant to such acquisition, or (b) the. Rehabilitation Expenditures (as. defined in the Code) with espect to a building (and the equipment therefor) equals or -.xceeds 15% of the portion of the cost of acquiring such uilding (and equipment) financed with the proceeds of the issuer, or (c) the Rehabilitation Expenditures (as defined in the. Code) with respect to facilities other than a building qual.s or exceeds 100% of the portion of the cost of acquiring uch facilities. 6. Under existing law the interest on the Bonds is xempt from income taxation by the State of Kansas and the onds aro exempt from intangible personal. property taxes levied y Kansas counties, cities and townships. 7. Assuming compliance with the above—described, ovenants, interest on the Bonds will be exempt from Federal ncome taxes if H.R. 3838 becomes law in the form passed by the .S. House of Representatives. However, for taxable years eginni.ng after 1987, the interest on the Bonds may be included n adjusted net gain for purposes of the minimum tax imposed on roperty and casualty insurors under 1023 of the Bill. The rights of the owners of the Bonds and the enforceability of the Bonds, the Ordinance, the Supplemental Lease and the Guaranty Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditor's rights heretofore or hereafter enacted and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. This opinion does not extend to documents, agreements, representations or other materials of any kind concerning the Bonds not specifically mentioned hereinand should not be —28— 1 considered as inclusioe of any matters which are not set forth herein. WINTON M. HINKLE, P.A. —29— SECTION 10, Authentication, Execution and Delivery of the Bonds. The Mayor and City Clerk are hereby authorized and directed to prepare and execute the Bonds herein authorized, in the manner hereinbefore specified, and to obtain their authentication by the. Trustee and to cause said Trustee to deliver said Bonds to The National Bank of America at Salina, Salina, Kansas, the Original Purchaser thereof (the "Original Purchaser"), on payment of the purchase price therefor. rhe Trustee shall authenticate said Bonds in the principal amount of $1,200,000 and deliver the same as provided above. SECTION 11. Designation of Trustee, Creation of Construction Fund. The National Bank of America at Salina, Salina, Kansas, is hereby designated as the City's Trustee under the provisions of this Ordinance and of said Lease and the proceeds of the said Bonds shall. be deposited with said Trustee. There is hereby authorized and ordered to be established in the custody of said Trustee a separate fund or account designated "City of Salina, Kansas School Specialty Supply, Inc. 1986 Construction Fund" (hereinafter referred to as the "1986 Construction Fund"), which the Trustee shall hold in trust pursuant to the terms hereof. SECTION 12. Creation of the Principal and Interest Payment Account. There is hereby created and ordered established in the custody of the Trustee a special trust fund in the name of the Issuer to be designated the "City of Salina, Kansas, Principal and Interest Payment Account for Industrial Revenue Bonds, Series A, 1986 (School Specialty Supply, Inc.), dated February 1, 1986" (herein called the "Principal and Interest Payment Account"). The Trustee shall deposit into the Principal and Interest Payment Account, as and when received all Rental Payments payable by the Tenant to the Issuer specified in Section 4 of the Supplemental Lease and all interest and other income derived from investments of Principal and Interest Payment Account moneys as provided in Section 12 of Ordinance. No. 8286, dated May 1, 1973. The balance of the proceeds of the sale of the Bonds shall be deposited in the 1986 Construction Fund. Except as provided above, moneys in the Principal and Interest Payment Account shall be expended solely for the payment of the principal of, premium, if any, and interest on the Bonds as the same mature and become due or upon the redemption thereof prior to maturity. The Issuer hereby authorizes and directs the Trustee to withdraw sufficient funds from the Principal and Interest Payment Account to pay the principal of, premium, if any, and interest on the Bonds as the same become due and payable and to make said funds so withdrawn available to the Paying Agents for the purpose of paying said principal, premium, if any, and interest. SECTION 13. Acquisition, Purchase, Construction and Equipping of Facility, Use of 1986 Construction Fund. The —30— Trustee shall make disbursements from the 1986 Construction Fund for the acquisition, purchase and construction of the Facility as provided in the Lease and Supplemental Lease. Any amount remaining in the 1986 Construction Fund after the 1986 Additions to the Facility has been fully completed and paid for, lien free, as provided in Section 3 of the Lease, shall. be deposited by the Trustee in the Principal and Interest Payment Account created by Section 12 hereof. The City covenants and agrees that it will neither snake nor permit the Trustee or the Tenant to make any use of the proceeds of the Bonds which, if such use had been reasonably expected on the date of issuance of the Bonds, would have caused the Bonds to be arbitrage bonds within the meaning of Section 103(c) of the -Internal Revenue Code of 1954, as amended, and the City will. comply with, and will take all necessary action to cause the Trustee and the Tenant to comply with, all. applicable requirements of said Section 103(c) and the rules and regulations of the United States Treasury Department thereunder for so long as any of the Bonds remain outstanding and unpaid. SECTION 14. Certain Covenants of the City. The City covenants and agrees that From and after the delivery of any of the Bonds herein authorized and continuing so long as any of said Bonds shall remain outstanding, said City will direct the Trustee: to maintain the Accounts created in Ordinance No. 8286 and this Ordinance with the Trustee. All moneys due under the Lease and Supplemental Lease shall be paid to and deposited with said Trustee and shall be applied and allocated by said Trustee when received so long as any of the Bonds herein authorized remain outstanding and unpaid as follows: (a) Basic Rent due under the Lease and Supplemental Basic Rent due under the Supplemental Lease shall be credited to and deposited in said Principal and Interest Account upon receipt. The moneys in the. Principal and Interest Account shall. be used solely and only to pay interest and principal on the Bonds and the 1973 Bonds when due or to retire the Bonds and the 1973 Bonds prior to maturity when property subject to call and when cash funds are available to pay all outstanding Bonds and 1973 Bonds in full plus interest and call premium, if any. SECTION 15., Investments. Except as hereinafter set forth, moneys in all of the accounts or funds created or recognized by this Ordinance shall be invested by the Trustee as provided in, and subject to the provisions of, Section 12 Ordinance No. 8286. Interest earned on all other accounts shall accrue to and earnings. of become a part of the account generating the SECTION 16. Bonds Equally Secured Under Ordinance No. 8286. The Bonds authorized herein shall be on a parity with and shall be entitled to the same benefit and security of —31— _ Ordinance No. 8286 and the 1973 Bonds issued thereunder. Except as specifically provided herein and to the extent permitted by Ordinance No. 8286, the Bonds herein authorized are and shall be governed by all of the provisions of Ordinance No. 82.86 including, without limitation, the provisions with respect to the collection and disposition of revenues, the covenants of the City, the nature and extent of the security for the bonds, the City's right to issue additional bonds, the rights, duties and obligations of the City, the rights of the holders of the bonds, and the provisions relating to amendments, events of default, enforcement, acceleration in the event of default and defeasance. In case any provisions, covenant, stipulation, obligation or agreement contained in the Bonds or in this Ordinance shall for any reason be held to be in violation of, or contrary to or in conflict with the provision of Ordinance No. 8286 of the City, then the provisions of Ordinance No. 8286 shall be deemed to control and this Ordinance and the Bonds herein authorized shall be construed and enforced as if such contrary or conflicting provision had not been contained herein. SECTION 17. Authorization of Supplemental Lease. The 1986 Additions to be acquired, constructed, equipped and remodel pursuant to this Ordinance and said Lease and Supplemental Lease shall be leased to the Tenant under and pursuant to the Lease dated as of May 1, 1973 and the Supplemental Lease dated as of February 1, 1986, substantially in the form attached to this Ordinance, which Supplemental Lease, including any changes necessary to correct omissions or ambiguities therein, which the officers executing the same are hereby authorized to make, the Mayor and City Clerk are hereby authorized and directed to execute for and on behalf of as as the act and deed of the City. The Mayor and City Clerk are further• authorized and directed to execute and acknowledge a notice or memorandum of said Supplemental Lease in such form as they may deem adequate and to cause the same to be recorded in the Office of the. Register of Deeds of Saline County, Kansas. The Mayor and City Clerk are further authorized and directed to execute and acknowledge an assignment by the City to the. Trustee of the City's interest in the Supplemental Lease which assignment shall be effective to assign to the Trustee all of the City's rights, duties, responsibilities and obligations under this Ordinance and the Supplemental Lease excepting only those rights, duties, responsibilities and obligations which may only be properly and lawfully exercised by or imposed upon the City. SECTION 18. Guaranty Agreement. As and for an express condition precedent to the issuance and delivery of the Bonds, there shall be executed and delivered by Tenant to the Trustee a Guaranty. Agreement dated as of February 1, 1986, substantially in the form attached to this Ordinance. SECTION 19. Agreements of the City. All covenants, stipulations and obligations of the City contained in this Ordinance and contained in the Lease shall be deemed to be the —32— . + covenants, stipulations, obligations and agreements of the City to the full extent authorized or permitted by the Act, and all such covenants, stipulations, obligations and agreements shall be binding upon the City and its successors from time to time and upon any board, body or agency to which any powers or duties, affecting such covenants, stipulations, obligations and agreements, shall be transferred by or in accordance with law. Nothing contained in this Ordinance shall, however, be construed to impose on said City any duty or obligation to levy any taxes either contained herein or in the Lease either to meet any contractual obligation contained herein or to pay any judgment for damages or to pay the principal of or interest on the Bonds of the City herein authorized. Except as otherwise provided in this Ordinance, all rights, powers and priviledges conferred and duties and liabilities imposed upon the City or any official thereof by the provisions of this Ordinance or the Lease shall be exercised or performed by the City or by such officers as may be required by law to exercise such powers and to perform such duties. No covenant, stipulation, obligation or agreement herein contained or contained in the Supplemental. Lease shall be deemed to be a covenant, stipulation, obligation or agreement of any official, officer, agent or employee of the City in his individual capacity, and neither the officials of the City nor any officer executing the Bonds shall be liable personally on the Bonds or incur any personal liability or accountability by reason of the issuance thereof. SECTION 20. Peformance. of Acts. All acts, conditions and things required by the Constitution and laws of the State of Kansas, relating to the passage of this Ordinance, to the issuance of the Bonds or to the execution of the Lease, to happen, exist and be performed precedent to and in the enactment of this Ordinance, and precedent to the issuance of the Bonds and precedent to the execution of the Supplemental. Lease have happened, exist and have been performed as so required by law. SECTION 21. Ad. Valorem Tax. Exemption. Pursuant to the provisions of K.S.A. 79-201(a), as amended, Tenant shall waive any ad valorem property tax exemption, which would be available for the Project, or will agree to a satisfactory payment in lieu of taxes. SECTION 22. Election Pursuant to I.R.C. Section 103(b)(6)(D). The City hereby elects to have the provisions of Section 103(b)(6)(D) of the Internal Revenue Code of 1954, as amended, apply to the Bonds. The Mayor is hereby authorized and directed to sign the Statement of Election and to take such other action as may be necessary to make effective the election made herein. SECTION 23. Further Authority. The officials of the City, its attorneys, engineers and other agents or employees are hereby authorized to do all acts and things required of them by this Ordinance and the Supplemental Lease for the full, punctual and complete performance of all of the terms, —33— covenants and agreements contained in the Bonds, the Supplemental Lease and this Ordinance. SECTION 24. Additional Bonds. The City may issue from time to time additional industrial revenue bonds to pay for all or a portion of the cost of purchasing, constructing, reconstructing, remodeling and equipping improvements, additions or extensions to the Facility, or for refunding bonds of this issue and the 1973 Bonds to the extent permitted by law, which additional bonds shall be in all respects on a parity with the Bonds herein authorized and the 1973 Bonds, and all such bonds shall be equally and ratably secured by the pledge and covenants contained in this Ordinance and Ordinance No. 8286 of the City, provided the following terms and conditions are met: (a) The City shall have entered into a lease or agreement with the Tenant with rentals or payments at least sufficient to pay the principal of and interest on such additional bonds as the same become due, on substantially the same terms and conditions as the Lease and Supplemental Lease herein authorized; and , (b) The City and the Tenant shall have pledged the Facility, including the additions, improvements and extensions thereto to be financed by said additional. bonds, to the payment of the Bonds herein authorized and the 1973 Bonds and the interest thereon; and (c) The Tenant is not in default (i) in the payment of Basic Rent, Supplemental Basic Rent or Additional Rent due under the Lease or Supplemental Lease, or (ii) in performance of any other duty or covenant under the Lease or Supplemental Lease; and . (d) The issuance of the additional bonds shall not affect the exemption from Federal income taxation of the interest on the Bonds herein authorized or the 1973 Bonds; and (e) The obligations of the Tenant assumed in connection with the issuance of the additional bonds do not violate any provisions of the Lease. or Supplemental Lease; and (f) The Trustee and the Original Purchaser of the Bonds herein authorized and the 1973 Bonds, shall have given express written consent to the issuance of such additional bonds, which consent shall not be unreasonably withheld. SECTION 25. Pending Federal Legislation. As of the date hereof, additional restrictions on the issuance of tax exempt bonds by or on behalf of States and local governments would be imposed by H.B. 3838, the Tax Reform Act of 1985 (the "Bill") now pending in the Congress of the United States. If the Bill becomes law in its present form, the bonds will be subject to the new restrictions contained in the Bill. The City consents to take all actions which it can legally do —34— necessary to comply with the provisions of the Bill in order to maintain the Federal tax exempt status of the interest on the bonds. SECTION 26. Effective Date. This Ordinance shall take effect and be in Force from and after its passage, approval and publication once in the official city paper. PASSED by the Governing Body of the City of Salina., 'i Kansas, this 3rd day of March, 1986. CITY OF SALINA, KANSAS AT TEST: By Merle A. Hodges, M or _ ell cj t-4 i �ylu y D. L. Harrison, City Clerk (Seal) r —35— SCHEDULE I SCHEDULE I TO ORDINANCE NO. 86-9122 OF THE CITY OF SALINA, KANSAS, AND TO THE SUPPLEMENTAL LEASE DATED FEBRUARY 1, 1986, BY AND BETWEEN SAID CITY AND SCHOOL SPECALI:TY SUPPLY, INC. AUTHORIZED BY SAID ORDINANCE. PROPERTY SUBJECT TO LEASE (a) The following described real estate located in Saline County, to wit: A TRACT OF LAND IN THE SOUTHWEST QUARTER (SW 1/4) THENCE N 05 DEGREES 44'25"E PARALLEL WITH SAID EAST RIGHT-OF-WAY LINE A DISTANCE OF FIVE HUNDRED (500.00) FEET; THENCE S 89 degrees 40'52"E PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER A DISTANCE OF EIGHT HUNDRED FIFTY AND FIFTY-SIX HUNDREDTHS (850.56) FEET; THENCE S 00 DEGREES 03'57"W PARALLEL WITH THE WEST LINE OF THE UNION PACIFIC RAILROAD RIGHT-OF-WAY A DISTANCE OF FOUR HUNDRED NINETY-SEVEN AND SEVENTY-SEVEN HUNDREDTHS (497.77) FEET; THENCE N 89 DEGREES 40'52W PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER (SW 1/4-) A DISTANCE OF NINE HUNDRED (900.00) FEET TO THE POINT OF BEGINNING. SAID TRACT OF LAND CONTAINING TEN (10.00) ACRES. said.real property constituting the "Land" as referred to in said Lease (b) The following described buildings and improvements now or hereafter constructed, reconstructed, remodeled or equipped, -36- OF SECTION ONE (1), -TOWNSHIP FIFTEEN (15) SOUTH, RANGE THREE (3) WEST OF THE SIXTH PRINCIPAL MERIDIAN IN SALINE COUNTY, KANSAS, MORE PARTICULARLY DESCRIBED AS FOLLOWS: STARTING FROM THE SOUTHWEST CORNER OF SAID SOUTHWEST QUARTER (SW 1/4), THENCE N 00 DEGREES 07'06" E ALONG THE WEST LINE OF SAID SOUTHWEST QUARTER (SW 1/4) A DISTANCE OF THIRTEEN HUNDRED FIFTY-NINE AND NINETY-EIGHT HUNDREDTHS (1359.98) FEET; 'THENCE S 89 degrees 4-0'52" E PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER (SW 1/4) A DISTANCE OF ONE HUNDRED SIXTY-FOUR AND FIFTY-SEUEN HUNDREDTHS (164.57) FEET TO THE POINT OF BEGINNING; SAID POINT OF BEGINNING BEING A POINT ON THE NORTH LINE OF AN EXISTING PUBLIC RIGHT-OF-WAY EIGHTY AND THIRTY-SEVEN HUNDREDTHS (80,37) FEET EAST OF ITS INTERSECTION WITH THE EAST RIGHT-OF-WAY LINE OF U.S. HIGHWAY EIGHTY-ONE (81): THENCE N 05 DEGREES 44'25"E PARALLEL WITH SAID EAST RIGHT-OF-WAY LINE A DISTANCE OF FIVE HUNDRED (500.00) FEET; THENCE S 89 degrees 40'52"E PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER A DISTANCE OF EIGHT HUNDRED FIFTY AND FIFTY-SIX HUNDREDTHS (850.56) FEET; THENCE S 00 DEGREES 03'57"W PARALLEL WITH THE WEST LINE OF THE UNION PACIFIC RAILROAD RIGHT-OF-WAY A DISTANCE OF FOUR HUNDRED NINETY-SEVEN AND SEVENTY-SEVEN HUNDREDTHS (497.77) FEET; THENCE N 89 DEGREES 40'52W PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER (SW 1/4-) A DISTANCE OF NINE HUNDRED (900.00) FEET TO THE POINT OF BEGINNING. SAID TRACT OF LAND CONTAINING TEN (10.00) ACRES. said.real property constituting the "Land" as referred to in said Lease (b) The following described buildings and improvements now or hereafter constructed, reconstructed, remodeled or equipped, -36- 7� said improvements constituting the 1986 Additions to the Facility. Certain expansion and improvement to the existing facility, including improvement to the parking area and surrounding grounds. Certain printing plant equipment together with miscellaneous computer equipment For use in the expanded facility . the property described in paragraphs (a) and (b) of this Schedule I together constituting the "Project" as referred to in said Supplemental. Lease and said Ordinance. —37—