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HomeMy WebLinkAboutGOLD COAST BAKING COMPANY & CALIFORNIA INFRASTRUCTUREv vv/�' v�"' D C ('q: EMPOWERMENT ZONE FACILITY BOND COMPLIANCE AGREEMENT By and Among . t" GOLD COAST BAKING COMPANY, INC., A California corporation, as Owner and CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK, as Issuer "11 1 CITY OF SANTA ANA, as the Qualified Empowerment Zone Dated as of April 1, 2000 Relating to: $5,000,000 Variable Rate Demand Empowerment Zone Facility Bonds, Series 2000 (Gold Coast Baking Company, Inc. Project) 06-4514.05 TABLE OF CONTENTS (This Table of Contents is not a part of this Compliance Agreement, but is only for convenience of reference.) Page Section 1. General Representations of Owner; Qualified Empowerment Zone and Issuer................................................................................................................ 2 Section 2. Project and Bond Representations of Owner ......................................... Section 3. Term of Compliance Agreement..................................................................... 6 Section 4. Empowerment Zone Business Restrictions..................................................... 6 Section 5. Qualified Zone Property Restrictions..............................................................7 Section 6.Prohibited Activities Restrictions...................................................................... 7 Section 7. Intentionally Omitted....................................................................................... 8 Section8. Initial Testing Date.......................................................................................... 8 Section 9. Compliance Standards and Correction Period ................................................. 8 Section 10. Failure to Comply With Restrictions ............................. Section 11. Transfer Restrictions; Covenants to Run With the Land; Term of Compliance Agreement....................................................................................... 9 Section 12. Certification to Secretary............................................................................... 9 Section13. Enforcement................................................................................................... 9 Section 14, Compliance Agent of the Issuer and the Qualified Empowerment Zone...........................................................................................................11 Section 15. Interpretation................................................................................................11 Section16. Amendment..................................................................................................11 Section 17. Indemnification............................................................................................11 Section 18. Compliance by Owner.................................................................................11 Section 19, Qualified Empowerment Zone Duty to Monitor Compliance..................... 11 Section20. Severability..................................................................................................12 Section21. Notices......................................................................................................... 12 Section 22. Governing Law............................................................................................12 Section23. Definitions....................................................................................................12 06-4514.05 EXHIBIT A EMPOWERMENT ZONE BUSINESS CERTIFICATION EXHIBIT B EMPLOYEE CERTIFICATION EXHIBIT C OWNER EMPLOYEE PERCENTAGE CERTIFICATION EXHIBIT D QUALIFIED ZONE PROPERTY CERTIFICATION EXHIBIT E LEGAL DESCRIPTION OF PROJECT EXHIBIT F EXPECTED WEIGHTED AVERAGE USEFULE LIFE OF PROJECT 06-4514.05 EMPOWERMENT ZONE FACILITY BOND COMPLIANCE AGREEMENT THIS EMPOWERMENT ZONE FACILITY BOND COMPLIANCE AGREEMENT (including the exhibits attached hereto) (this "Compliance Agreement"), made as of April 1, 2000, by and among Gold Coast Baking Company, Inc., a California corporation having its principal place of business at 1590 B East St. Gertrude Place, Santa Ana, California 92705, its successors and assigns (the "Owner'), the California Infrastructure and Economic Development Bank, an entity within the Trade and Commerce Agency of the State of California (the "Issuer") and the City of Santa Ana, a Qualified Empowerment- Zone as hereinafter defined (the "Qualified Empowerment Zone"); WITNESSETH: WHEREAS, the Owner has requested that the Issuer and Qualified Empowerment Zone finance a loan to the Owner pursuant to a Loan Agreement, dated as of April 1, 2000 (the "Loan Agreement"), by and between the Owner and the Issuer, to finance the costs of equipping and rehabilitating a bread production facility located at 1590 B. East St. Gertrude Place, Santa Ana, California 92705 and paying certain costs of issuance related to the financing (the "Project"); and WHEREAS, the Project will be funded in part from Proceeds (as defined herein) of the sale of $5,000,000 of the Issuer's Variable Rate Demand Empowerment Zone Facility Bonds (the "Bonds") to be issued pursuant to an Indenture of Trust, dated as of April 1, 2000, by and between the Issuer and US, Bank Trust National Association (the "Indenture"); and WHEREAS, interest on the Bonds to Bondholders will be excluded from gross income for federal income tax purposes if, among other things, the Project continuously complies during the Compliance Period and the Bond Term (as defined herein) with Section 1394 of the Internal Revenue Code of 1986, as amended (the "Code"), and applicable regulations promulgated thereunder (the "Treasury Regulations"); and WHEREAS, Project compliance with Section 1394 of the Code is within the control of the Owner; and WHEREAS, the Issuer and the Qualified Empowerment Zone are unwilling to provide Bond Proceeds to finance the Project unless the Owner shall, by executing this Compliance Agreement, consent to certain restrictions on the use of Bond Proceeds and the Project necessary to preserve the tax-exempt status of the interest on the Bonds under Section 103(a) and 1394 of the Code; and WHEREAS, terms not defined in this preamble or in Section 23 hereof shall have the meanings given them in the Indenture; NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and of other valuable consideration, the Owner, the Issuer and the Qualified Empowerment Zone agree as follows: 06-45k 4.05 Section 1. General Representations of Owner; Qualified Empowerment Zone and Issuer. (a) Owner Representations. The Owner hereby represents, as of the date hereof, and warrants, covenants and agrees as follows: (i) The Owner is a corporation duly organized and validly existing under the laws of the State of California (the "State") and has duly authorized, by proper action, the execution and delivery of this Compliance Agreement. The Owner is duly authorized by the laws of the State to transact business in the State and to perform all of its duties hereunder. (ii) To the best of its knowledge, neither the execution and deli veiy'of' this Compliance Agreement or any other document in connection with the financing of the Project, the consummation of the transactions contemplated hereby and thereby nor the fulfillment of or compliance with the terms and conditions hereof and thereof conflicts with or results in a breach of any of the terms, conditions or provisions of any agreement or instrument to which the Owner is now a party or by which it is bound or constitutes a default (with due notice or the passage of time or both) under any of the foregoing or results in the creation or imposition of any prohibited lien, charge or encumbrance whatsoever upon any of the property or assets of the Owner under the terms of any instrument or agreement to which the Owner is now a party or by which it is bound. (iii) To the best of its knowledge, the execution, delivery and performance of this Compliance Agreement and all other documents to be delivered by the Owner in connection with the consummation of the transactions contemplated hereby will not conflict with, or constitute a breach of or default under, any indenture, mortgage, deed of trust, lease, note, commitment, agreement or other instrument or obligation to which the Owner is a party or by which the Owner or any of its property is bound, or to its knowledge, any law, rule, regulation, judgment, order or decree to which the Owner is subject or by which the Owner or any of its property is bound. (iv) There is no action, suit, proceeding, inquiry or investigation by or before any governmental agency, public board or body pending or to its knowledge threatened against the Owner (nor to the Owner's knowledge is there any basis therefor), which (i) affects or seeks to enjoin, prohibit or restrain the issuance, sale or delivery of the Bonds or the execution and delivery of this Compliance Agreement, the Indenture,'or the Loan Agreement, (ii) affects or questions the validity or enforceability of the Bonds, the use of the Proceeds of the Bonds, this Compliance Agreement, the Indenture, or the Loan Agreement, (iii) questions the tax-exempt status of the Bonds or (iv) questions the power or authority of the Owner to own, acquire, construct, rehabilitate, equip or operate the Project or to execute, deliver or perform the Owner's obligations under this Compliance Agreement, the Indenture and the Loan Agreement. (v) The Project is located wholly within the boundaries of the Qualified Empowerment Zone. 06-4514.05 2 (vi) The Owner has and will have title to the Project sufficient to carry out the purposes of this Compliance Agreement, and such title shall be in and remain in the name of the Owner except as otherwise permitted by this Compliance Agreement. (vii) The Project consists and will consist of those facilities described herein, which generally are described as a facility for the production and distribution of bread products and related facilities situated on the real property described in Exhibit E hereto. (viii) The Owner has obtained, or will obtain on or before the date required therefor, all necessary certificates, approvals, permits and authorizations with respect to the operation of the Project. (ix) The Owner (and any person related to it within the meaning of Section 147(a)(2) of the Code) does not and will not own any of the Bonds. (x) Money on deposit in any farid or account in connection with the Bonds, whether or not such money was derived from other sources, shall not be used by or under the direction of the Owner, in a manner which would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code, and the Owner specifically agrees that the investment of money in any such fund shall be restricted as may be necessary to prevent the Bonds from being "arbitrage bonds" under the Code. (xi) The Owner shall. enter into the Tax Regulatory Agreement and shall comply with all term, conditions, representations and warranties of such Tax Regulatory Agreement (xii) The Owner will not secure the Bonds or permit the use of Proceeds of the Bonds in a manner that results in the Bonds becoming directly or indirectly Federally Guaranteed. (xiii) In addition to the Bonds, the Owner has not previously been the beneficiary of tax-exempt obligations issued pursuant to Section 1394 of the Code. (xiv) The Owner will not knowingly take or omit to take, as is applicable, any action if such action or omission would in any way cause the Proceeds from the sale of the Bonds to be applied in a manner contrary to the requirements of the Indenture or this Compliance Agreement. (b) Empowerment Zone Representations. The Qualified Empowerment Zone hereby represents, as of the date hereof, and warrants, covenants and agrees as follows: (i) The Qualified Empowerment Zone is an empowerment zone designated under Section 1391(g) of the Code. (ii) The Qualified Empowerment Zone hereby designates the Bonds as "empowerment zone facility bonds" pursuant to Section 1394(f)(2) of the Code. 06-4514.05 3 (iii) The Qualified Empowerment Zone has requested that the Issuer issue the Bonds. (iv) The aggregate face amount of empowerment zone facility bonds that may be issued by or on behalf of the Qualified Empowerment Zone is $130,000,000. The aggregate face amount of such bonds previously issued by or on behalf of the Qualified Empowerment Zone is $0. The aggregate face amount of the Bonds is $5,000,000. (v) The Qualified Empowerment Zone will cause the Issuer to file an Internal Revenue Service Form 8038 ("Form 8038") with respect to the Bonds pursuant to Section 149(e) of the Code. The Qualified Empowerment Zone hereby represents that it will review the completed Form 8038 for completeness and accuracy. (vi) The Qualified Empowerment Zone will not secure the Bonds or permit the use of the Proceeds of the Bonds in a manner that results in the Bonds becoming directly or indirectly Federally Guaranteed. (vii) The Bonds are not issued as part a "pooled financing bond program" or a "loan recycling program" described in §§ 1.1394-1(f), (g)(2) or (m)(2) of the Treasury Regulations. (c) Issuer Representations. The Issuer hereby represents, as of the date hereof, and warrants, covenants and agrees as follows: (i) The Issuer is issuing the Bonds pursuant to the request of the Qualified Empowerment Zone. (ii) The Bonds will be sold on April 13, 2000. The Issuer will not sell within the 30-day period beginning 15 days prior to the sale date of the Bonds any other obligations pursuant to a common plan of financing with the Bonds and payable from the same. source of funds or having substantially the same claim to the same source of funds . used to pay the Bonds. (iii) The Issuer will not secure the Bonds or permit the use of the Proceeds of the Bonds in a manner that results in the Bonds becoming directly or indirectly Federally Guaranteed. (iv) The Issuer will prepare and file or cause to be prepared and filed a Form 8038 with respect to the Bonds pursuant to Section 149(e) of the Code. Section 2, Project and Bond Representations of Owner. The Owner represents, warrants and covenants that: (a) The Project is being acquired, installed, constructed or rehabilitated for the purpose of providing an Empowerment Zone Facility. Ninety-five (95) percent of the Net Proceeds of the Bonds will be used to provide the Project. 06-4514.05 4 (b) The Project will consist solely and exclusively of Qualified Zone Property. No portion of the Project will be operated for Prohibited Activities. (c) The Owner reasonably expects as of the Date of Issuance that (i) the Owner will meet the Empowerment Zone Business Restrictions and the Qualified Zone Property Restrictions on or before the Initial Testing Date and (ii) the Owner will exercise due diligence to meet those requirements. (d) The Owner will not knowingly take or permit to be taken any action which would have the effect, directly or indirectly, of subjecting the Owner or the Project to non-compliance with Section 1394 of the Code and applicable Treasury Regulations promulgated thereunder. - If the Owner becomes aware of any situation, event or condition which would -result' in non-compliance of the Project or the Owner with Section 1394 of the Code or applicable Treasury Regulations thereunder, the Owner shall promptly give notice thereof to the Issuer and the Qualified Empowerment Zone (or any Compliance Agent). (e) The Owner shall notify the Qualified Empowerment Zone (or any Compliance Agent) of the date on which the Project is first placed in service and of the date on which substantial completion of the Project occurs, and shall deliver such notice to the Issuer and the Qualified Empowerment Zone (or any Compliance Agent). (f) The Owner will not change or permit a change in the use, ownership, nature or abandonment of any portion of the Project during the Bond Term unless the Owner delivers in a form acceptable to the Issuer and the Qualified Empowerment Zone a written opinion of Bond Counsel that such change will not adversely affect the tax-exempt status of interest on the Bonds; provided, however, that the Owner may dispose of or abandon any personal property portion of the Project to the extent that the Owner replaces the disposed of or abandoned personal property portion of the Project with substantially similar personal property concurrently therewith. (g) The Owner will not expend Proceeds of the Bonds in excess of 2% of the Issue Price for costs of issuance of the Bonds. (h) The Owner will maintain records of the expenditures of Proceeds of the Bonds for the term of this Compliance Agreement. (i) The Owner agrees that any office space financed with Proceeds of the Bonds will be located at the site of the Project and that not more than a de minimis amount of functions to be performed at such office will be directly related other than to the day -today operations of the Proj ect. 0) The Owner will not expend the Proceeds of the Bonds for the cost of any land that is not functionally related and subordinate to the Project. (k) The Original Use of the Project begins with the Owner. (1) The Owner will not lease the Project, and, thus will not be subject to the Real Property Expenditure Limitations. 06-4514.05 5 (m) The weighted average maturity of the Bonds (11.964 years) is not greater than 120% of the expected weighted average useful life of the Project (12 years as shown on Exhibit F). In the event of the issuance of any tax-exempt obligations to refund the Bonds, (i) the weighted average maturity shall be measured using the actual weighted average maturity of the combined Bonds and the refunding issue and (ii) the Owner's expected weighted average useful life of the Project shown on Exhibit F. Section 3. Term of Compliance Agreement. The term of this Compliance Agreement shall be from its dated date through the date that is the latest date defined by the following restrictions: (a) Empowerment Zone Business Restrictions. The Empowerment Zone $usiness Restrictions set forth in Section 4 of this Compliance Agreement will remain in effect throughout the Compliance Period. (b) Qualified Zone Property Restrictions. The Qualified Zone Property Restrictions set forth in Section 5 of this Compliance Agreement will remain in effect throughout the Compliance Period. (c) Prohibited Activities Restrictions, The Prohibited Activities Restrictions set forth in Section 6 of this Compliance Agreement will remain in effect throughout the Bond Term. (d) Intentionally Omitted. (e) Refunding Bonds. In the event that tax-exempt obligations are issued to refund the Bonds, the term of this Compliance Agreement shall be increased to take into account any extension of the weighted average maturity or bond term of the refunding issue compared to the remaining weighted average maturity or Bond Term. (f) Miscellaneous. Notwithstanding the provisions of (a), (b), (c) and (.e) of this Section, this Compliance Agreement and all other restrictions hereunder shall terminate in the event of delivery to the Issuer, the Qualified Empowerment Zone and the Owner of an opinion of Bond Counsel acceptable to the Issuer and the Qualified Empowerment Zone to the effect that continued compliance with any Section of this Compliance Agreement is not required in order for interest on the Bonds to remain excludable from the gross income of the Bondholders for purposes of federal income taxation. Section 4. Empowerment Zone Business Restrictions. The Owner represents, warrants and covenants, in addition to the covenants contained in Section 2.02 of the Loan Agreement, that: (a) The Owner shall certify to its status as an Empowerment Zone Business as of the Initial Testing Date. The Owner shall: (i) on the Initial Testing Date deliver to the Qualified Empowerment Zone (or any Compliance Agent) an Empowerment Zone Business Certification in the form set forth in Exhibit A hereto; (ii) maintain on a continuous basis its status as an Empowerment Zone Business throughout the Compliance Period; and (iii) recertify and deliver to the Qualified Empowerment Zone (or any Compliance Agent) an updated Empowerment Zone Business Certification as of each Annual Reporting Date. 06-4514.05 6 (b) As a condition of its status as an Empowerment Zone Business, the Owner shall secure from each employee employed at the Project and shall deliver to the Qualified Empowerment Zone (or any Compliance Agent) an Employee Certification in the form set forth in Exhibit B hereto. In addition, each employee shall be required to provide whatever other information, documents or certification are deemed necessary by the Owner, the Issuer and the Qualified Empowerment Zone (or any Compliance Agent) to substantiate the Employee Certification. During the Compliance Period, the Owner shall have each employee recertify the Employee Certification at least once per taxable year but no later than the Annual Reporting Date. (c) As a condition of its status as an Empowerment Zone Business, the. Owner shall deliver on each Annual Reporting Date during the Compliance Period a Zozi.e 'Resident ' Employee Percentage' Certification in the form set forth in Exhibit C hereto to the Qualified Empowerment Zone (or any Compliance Agent). The Zone Resident Employee Percentage Certification shall be prepared by the Owner solely upon information contained in Employee Certifications, received pursuant to paragraph (b) above, and shall be computed using the Resident Employee Computation Requirements. (d) During the Compliance Period, all certifications required by this Section shall be maintained by the Owner on file at the Project. Copies of all certifications shall be furnished to the Issuer and the Qualified Empowerment Zone (or any Compliance Agent) upon request. Section 5. Qualited Zone Property Restrictions. The Owner represents, covenants and warrants that: (a) The Project will be maintained as Qualified Zone Property on a continuous basis during the Compliance Period. On each Annual Reporting Date, the Owner will deliver a Qualified Zone Property Certification in the form set forth in Exhibit D hereto to the Qualified Empowerment Zone (or any Compliance Agent). (b) The Owner will notify the Issuer and the Qualified Empowerment Zone (or any Compliance Agent) prior to undertaking any change in use, ownership or abandonment of the Project; provided, however, that no notification shall be required under this Section for disposed of or abandoned personal property which is concurrently replaced with substantially similar personal property. Section 6. Prohibited Activities Restrictions. The Owner represents, covenants and warrants that: (a) It will not engage in any trade or business that is one of the Prohibited Activities during the Bond Term. (b) The Owner will notify the Issuer and the Qualified Empowerment Zone (or any Compliance Agent). immediately prior to undertaking any change in its trade or business that results in engaging in any of the Prohibited Activities. Section 7. Intentionally Omitted. 06-4514.05 7 Section 8. Initial Testing Date For purpose of this Compliance Agreement, the parties hereto agree that the Initial Testing Date is the Primary Initial Testing Date. Section 9. Compliance Standards and Correction ]Period. (a) The Qualified Empowerment Zone and the Owner are deemed to comply with the Empowerment Zone Business Restrictions, the Qualified Zone Property Restrictions and the Qualified Empowerment Zone Additional Restrictions only if (i)the Qualified Empowerment Zone and the Owner in good faith attempt to meet such restrictions throughout the periods of compliance described in Section 3 and (ii) any failure to meet such requirements is corrected within the Correction Period. (b) In order to satisfy the good faith requirement, as described in paragraph (a) above; the Owner must annually demonstrate to the Qualified Empowerment Zone (or any Compliance Agent) the Owner's monitoring of compliance with such restrictions as described in Sections 4 through 7 of this Compliance Agreement. (c) Compliance with any of the restrictions in Sections 4 through 7 of this Compliance Agreement may be measured on an average basis, taking into account up to four immediately preceding taxable years plus the current taxable year. The earliest taxable year that may be taken into account is the taxable year that includes the Initial Testing Date. A taxable year is disregarded if the part of the taxable year that falls in a required Compliance Period does not exceed 94 days. Section 10. Failure to Comply With Restrictions. Failure of the Owner to comply (or to be deemed to comply under Section 9 of this Compliance Agreement) with. the Empowerment Zone Business Restrictions, the Qualified Zone Property Restrictions, the Prohibited Activities Restrictions or the Issuer or Qualified Empowerment Zone Additional Restrictions shall: (a) require that the Qualified Empowerment Zone undertake any of the Remedial Actions, including, if necessary, requesting the Issuer to redeem or defease the Bonds; and (b) result in a disallowance of a deduction by the Owner (or any Principal User) fox interest on the Bonds during the period beginning on the first day of the calendar year which includes the date on which substantially all of the Project (i) ceases to be used in the Qualified Empowerment Zone or (ii) the Principal User of the Project ceases to be an Empowerment Zone Business. Subparagraphs (a) and (b) shall not apply solely by reason of the termination or revocation of the designation of the Qualified Empowerment Zone or to any cessation of the Principal User resulting from bankruptcy. Section 11. Transfer Restrictions; Term of Compliance Agreement. (a) The Owner covenants and agrees that the Owner will cause or require as a condition precedent to any Transfer of the Project prior to the termination of this Compliance Agreement that the transferee of the Project pursuant to the Transfer enter into an Assumption Compliance Agreement. The Owner (and any subsequent transferee) shall deliver an 06-4514.05 8 Assumption Compliance Agreement to the Issuer and the Qualified Empowerment Zone prior to the Transfer. (b) Except - as provided in Sections 3(f) hereof, the covenants contained in this Compliance Agreement shall bind, and the benefits shall inure to, respectively, the Owner and its successors and assigns and all subsequent owners of the Project or any interest therein, and the Issuer and the Qualified Empowerment Zone and their successors and assigns, until the termination of this Compliance Agreement as provided in Section 3 herein. (c) The Owner hereby declares its understanding and intent that the burden of the covenants set forth herein touch and concern the land in that the Owner's legal interest in the Project is rendered less valuable thereby. The Owner hereby further declares its..uriderstanding and intent that the benefit of such covenants touch and concern the land by furthering the public, purposes for which the Bonds were issued. Notwithstanding the foregoing or any other provision of this Compliance Agreement, no person, other than the parties hereto and any intended beneficiaries identified in Section 13(f) hereof, shall have any rights of enforcement of this Compliance Agreement. Section 12. Certification to Secretary. The Owner (or other Principal User) represents, covenants and warrants that it shall submit to the Secretary any certification the Secretary shall prescribe to meet the requirements of Section 1394 of the Code. The Owner shall simultaneously send copies of such certifications to the Issuer and the Qualified Empowerment Zone (or any Compliance Agent). The Owner acknowledges that failure to file such certification shall subject the Owner to any penalties provided by the Secretary. Section 13. Enforcement. (a) Upon the receipt of reasonable notice, the Owner shall permit any duly authorized representative of the Issuer and the Qualified Empowerment Zone (or any Compliance Agent) to inspect any books and records of the Owner regarding the Project and compliance with the provisions of this Compliance Agreement and Section 1394 of the Code and the Treasury Regulations. (b) The Owner agrees to pay all actual and reasonable costs and expenses of the Issuer and the Qualified Empowerment Zone (or any Compliance Agent) in connection with any actions taken pursuant to this Compliance Agreement. (c) In addition to all information provided for elsewhere in this Compliance Agreement, the Owner shall submit any other information, documents or certifications requested by the Issuer and the Qualified Empowerment Zone (or any Compliance Agent) which the Issuer or the Qualified Empowerment Zone (or any Compliance Agent) deem reasonably necessary to substantiate the Owner's continuing compliance with the provisions of this Compliance Agreement and Section 1394 of the Code and the Treasury Regulations. (d) The Issuer, the Qualified Empowerment Zone and the Owner each covenants that it will not knowingly take or permit any action that it knows would adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds. Moreover, the Issuer, the Qualified Empowerment Zone and the Owner each covenants and agrees to cooperate 06-4514.05 9 to take any lawful action including amendment of this Compliance Agreement as may be necessary in the opinion of Bond Counsel to comply fully with all applicable rules, rulings, policies, procedures, regulations or other official statements promulgated or proposed by the Department of the Treasury or the Internal Revenue Service from time to time pertaining to obligations issued under Section 1394 of the Cade and affecting the Project. (e) The Owner covenants and agrees to inform the Issuer and the Qualified Empowerment Zone by written notice of any violation of the Owner's obligations hereunder within 15 days of actual knowledge of any such violation. If any such violation is not corrected to the satisfaction of the Issuer and the Qualified Empowerment Zone within the period of time specified by the Issuer and the Qualified Empowerment Zone in any notice mailed to the Owner specifying a material violation of the Owner's obligations hereunder.(such period of time shall be within the Correction Period or such longer period as may be approved in an opinion of Bond Counsel addressed to the Issuer, the Qualified Empowerment Zone or the Owner as is necessary to correct the violation without loss of the exclusion from gross income for federal income tax purposes of interest on the Bonds, not to exceed any limitations set by applicable Treasury Regulations), without further notice, the Issuer and/or the Qualified Empowerment Zone shall declare a default under this Compliance Agreement effective on the date of such declaration of default, and upon such default, the Owner hereby agrees to pay to the Issuer or the Qualified Empowerment Zone an amount equal to any amounts necessary to fund a Remedial Action at no cost to the Issuer and the Qualified Empowerment Zone. (f) The Owner, the Issuer and the Qualified Empowerment Zone each acknowledge that the primary purpose for requiring compliance by the Owner with the restrictions provided in this Compliance Agreement is to preserve the exclusion from gross income for federal income tax purposes of interest on the Bonds to the Bondholders, and that the Qualified Empowerment Zone on behalf of the Bondholders, who are declared to be third party beneficiaries of this Compliance Agreement, shall be entitled for any breach of the provisions hereof, to all remedies both at law and in equity in the event of any default hereunder. Section 14. Compliance Agent of the Issuer and the Qualified Empowerment Zone. The Qualified Empowerment Zone shall have the right to appoint a Compliance Agent to carry out any of its duties and obligations hereunder, and shall inform the Owner and the Issuer of any such agency appointment by written notice. All reasonable fees and costs of an appointed Compliance Agent shall be paid directly by the Owner. Section 15. Tees The Owner covenants and agrees to pay to the Qualified Empowerment Zone for the duration of the term of this Compliance Agreement the Qualified Empowerment Zone's annual fee in the amount of $1,000 for each July 1 through June 30 during the term of this Compliance Agreement on July 1 of each year, commencing July 1, 2000. Section 16. Interpretation. Any terms not defined in this Compliance Agreement shall have the same meaning as terms defined in relevant sections of the Indenture, the Loan Agreement, the Code and Treasury Regulations thereunder. Section 17. Amendment, This Compliance Agreement may be amended by an instrument in writing duly executed by the Issuer, the Qualified Empowerment Zone and the 06-4514.05 10 Owner, and duly recorded. However, no such amendment of this Compliance Agreement shall be made without receipt of an opinion of Bond Counsel to the effect that such amendment will not adversely affect the exclusion from gross income for federal income tax purposes of the interest paid on the Bonds. Section 18. Indemnification. The Owner shall indemnify, hold harmless and defend the Issuer and the Qualified Empowerment Zone and the respective officers, members, directors, officials and employees of each of them against all loss, costs (reasonable and customary), damages, expenses (reasonable and customary), suits, judgments, actions and liabilities of whatever nature (including, without limitation, attorneys' fees, litigation and court costs, amounts paid in settlement, and amounts paid to discharge judgments) directly or indirectly resulting from or arising out of or related to (a) the design, .construction, installation,- operation, use,- occupancy, maintenance, or ownership of the Project (including compliance with 'laws; ` ordinances and rules and regulations of public authorities relating thereto); or (b) any written . statements or representations with respect to the Owner, the Project or the Bonds made 'or given to the Issuer or the Qualified Empowerment Zone, or any underwriters or purchasers of any of the Bonds, by the Owner, or any of its members, agents or employees, including, but not limited to, statements or representations of facts or financial information. The Owner also shall pay and discharge and shall indemnify and hold harmless the Issuer and the Qualified Empowerment Zone from any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges in respect of any portion of the Project. If any such taxes, assessments, impositions or other charges, are sought to be imposed, the Issuer or the Qualified Empowerment Zone shall give prompt notice to the Owner, and the Owner shall have the sole right and duty to assume, and will assume, the defense thereof, including the employment of counsel selected by the Owner but subject to the approval of the indemnified party and the payment of all expenses related thereto, with full power to litigate, compromise or settle the same with the approval of the Issuer and the Qualified Empowerment Zone. Section 19. Compliance by Owner. The Owner shall be responsible for monitoring and verifying compliance of the Project with this Compliance Agreement, the Code and the Treasury Regulations. Section 20. Qualified Empowerment Zone Duty to Monitor Compliance. Notwithstanding any provision herein to the contrary, the Owner recognizes and agrees that the Qualified Empowerment Zone and not the Issuer shall have the duty to monitor compliance with the terms and conditions of this Compliance Agreement. Nothing contained in this Compliance Agreement shall prevent the Issuer from requesting any information from the Borrower relating to its compliance with the provisions of this Compliance Agreement. The Borrower shall promptly comply with all such requests by the Issuer. Section 21. Severability. The invalidity of any clause, part or provision of this Compliance Agreement shall not affect the validity of the remaining portions thereof. Section 22. Notices. All notices to be given pursuant to this Compliance Agreement shall be in writing and shall be deemed given when mailed by certified or registered mail, return receipt requested, to the parties hereto at the addresses set forth below, or to such other place as a party may from time to time designate in writing. 06-4514.05 11 The Owner: Gold Coast Baking Company, Inc. 1590B E. St. Gertrude Place Santa Ana, California 95814 Phone: (714) 545-2253 Fax: (714) 751-2253 Attention: Mark Press, President With a copy to Randy Babbush , Esq. Rutan & Tucker, LLP 611 Anton Boulevard, Suite 1400 Costa Mesa, California 92626 Phone: 714/641-5100 p. Fax: 714/546-9035 The Issuer: California Infrastructure and Economic Development Bank 801 K Street, Suite 1700 Sacramento, California 95814 Phone: (916) 324-1299 Fax: (916) 322-6314 Attention: Bond Manager The Qualified City of Santa Ana Empowerment Zone: 20 Civic Center Plaza Santa Ana, California 92701 Phone: (714) 647-5384 Fax: (714) 647-6549 Attention: Lina Echevarria Section 23. Governing Law. This Compliance Agreement shall be governed by the laws of the State and, where applicable, the laws of the United States of America. Section 24. Definitions. The following terms shall have the meanings given them in this Section: "Alternative Initial Testing Date" means. any date selected by the Issuer on the Date of Issuance that is after the Date of Issuance and before the Primary Initial Testing Date. "Annual Reporting Date" means each _ April 1 during the term of the Bonds and shall apply to the previous taxable year of the Owner. The first Annual Reporting Date shall be April 1, 2001. "Assumption Compliance Agreement" means any agreement entered into prior to the termination of this Compliance Agreement in writing in a form acceptable to the Issuer and the Qualified Empowerment Zone by which a transferee of the Project pursuant to a Transfer is required to assume all duties and obligations of and restrictions on the Owner (or subsequent 06A514.05 12 transferee) under this Compliance Agreement. The Assumption Compliance Agreement shall include the requirement that the transferee is subject to the Transfer restrictions described in Section 11 of this Compliance Agreement. "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 Term" means the period from. the Date of Issuance through the last Discharge Date for any Bond. "Bondholders" shall have the meaning given to such term in the Indenture. "Compliance Agent" means any entity appointed by the Qualified Empowerment Zone to act on its behalf to monitor compliance by the Owner with the terms of this Compliance Agreement and to assist with the enforcement of the terms of this Compliance Agreement. Notice of the appointment of a Compliance Agent shall be given by the Qualified Empowerment Zone to the Owner. "Compliance Period" means the greater of (a) the remainder of the period following the Date of Issuance during which the zone designation for the Qualified Empowerment Zone is in effect under Section 1391 of the Code or (b) the period that begins- on the Initial Testing Date and ends on the earlier of (i) the weighted average maturity date of the Bonds or (ii) the last Discharge Date for any Bonds; provided, however, that the Compliance Period shall never be less than the Minimum Compliance Period. "Correction Period" means the one-year period after a failure to comply with any restrictions set forth in this Compliance Agreement is discovered. ".Date oflssuance" means April 14, 2000. "Discharge Date" means for any Band. the date on which the Bond ceases to accrue interest. "Empowerment Zone Business" means (a) any Qualified Business Entity or (b) any Qualified Proprietorship. A business shall not fail to be treated as an Empowerment Zone Business during the Startup Period if (i) as of the beginning of the Startup Period, it is reasonably expected that such business will be an Empowerment Zone Business at the end of the Startup Period and (ii) such business makes bona fide efforts to be an Empowerment Zone Business. In addition, a business shall not fail to be treated as an Empowerment Zone Business for any taxable year beginning after the Testing Period by reason of failing to meet any requirement of a Qualified Business Entity or a Qualified Proprietorship if at least 35 percent of the employees of such business for such year are residents of the Qualified Empowerment Zone. The preceding sentence shall not apply to any business which is not a Qualified Business by reason of its engaging in any Prohibited Activities. 06-4514.05 13 The term "Empowerment Zone Business" includes any trades or businesses which would qualify as an Empowerment Zone Business if such trades or businesses were separately incorporated. A trade or business may be treated as separately incorporated if allocations of income and activities attributable to the business conducted within the Qualified Empowerment Zone are made using a reasonable allocation method and if that trade or business has evidence of those allocations sufficient to establish compliance with the definition of Empowerment Zone Business. Whether an allocation method is reasonable will depend upon the facts and circumstances, and will not be considered reasonable unless the allocation method is applied consistently by the trade or business and is consistent with the purposes of Section 1394 of the Code. For purposes of the definition of the term "Empowerment Zone'Business";"if (A,) a business entity or proprietorship uses real property located within the Qualified Empowerment Zone, (B) the business entity or proprietorship also uses real property located outside the Qualified Empowerment Zone, (C) the amount of real property within the Qualified Empowerment Zone is substantial compared to the real property located outside the Qualified Empowerment Zone and (D) the real property described in (B) is contiguous to part or all of the real property described in (A), then all the services performed by employees, all business activities, all tangible property and all intangible property of the business entity or proprietorship that occur in or is located on the real property described in (A) and (B) shall be treated as occurring or situated in the Qualified Empowerment Zone. "Empowerment Zone Business Restrictions" means the restrictions set forth in Section 4 of this Compliance Agreement. "Empowerment Zone Facility" means any Qualified Zone Property the Principal User of which is an Empowerment Zone Business and any land which is functionally related and subordinate to such Qualified Zone Property. "Federally Guaranteed" means, unless otherwise excepted under Section 149(b) of the Code, (a) 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), (b) 5% or more of the Proceeds is (i) 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 (ii) to be invested (directly or indirectly) in federally insured deposits or accounts or (c) 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). "Initial .Testing Date" means the date that is selected by the Issuer on the Date of Issuance that is either (a) the Primary Initial Testing Date or (b) an Alternative Initial Testing Date. "Issue Price" means for the Bonds the amount of $5,000,000. "Minimum Compliance Period" means a continuous period of 3 years after the Initial Testing Date. 06A514.05 14 "Net Proceeds" means Proceeds reduced by any amounts deposited in a reasonably required reserve or replacement fund. "Nonqualified Financial Property" means debt, stock, partnership interests, options, futures contracts, forward contracts, warrants, notional principal contracts, annuities and other similar property specified in Treasury Regulations, except that such term shall not include (a) reasonable amounts of working capital held in cash, cash equivalents or debt instruments with a term of 18 months or less, or (b) debt instruments described in Section 1221(4) of the Code (dealing with accounts or notes receivable acquired in the ordinary course of trade or business for services rendered or from the sale of stock in trade or inventory property). "Original Use" means the first use to which property is put within the Qialif ed Empowerment Zone. For the purposes of determining Original Use, if property is vacant for at least a one-year period including the date of designation of the Qualified Empowerment Zone, use prior to that period is disregarded and any de minimis incidental uses of property, such as renting the side of a building for a billboard, are disregarded. "Primary Initial Testing Date" means the date that is 18 months after the later of (a) the Date of Issuance 'or (b) the date on which the Project is placed in service; provided, however, that the Primary Initial Testing Date cannot be later than the date that is three years after the Date of Issuance or the date that is five years after the Date of Issuance if the Bonds finance a construction project for which both the Issuer and a licensed architect or engineer certify on or before the Date of Issuance that more than three years after the Date of Issuance is necessary to complete construction of the Project. "Principal User" means the Owner and any successor owner of the Project. In addition, if the Owner is not at any time an Empowerment Zone Business, but the rental of the Project is a Qualified Business, the term "Principal User" means the lessee or lessees of the Project. "Proceeds" means sale proceeds of tax-exempt obligations (exclusive of accrued interest) and investment earnings on such sale proceeds. "Prohibited Activities" means: (a) any trade or business consisting predominantly of the development or holding of intangibles for sale or license; (b) . any trade or business consisting of the operation of any Prohibited Facilities; and (c) any trade or business the principal activity of which is farming (as defined in Section 2032A(e)(5)(A) or (B)) if, as of the close of the taxable year, the sum of (i) the aggregate unadjusted bases (or, if greater, the fair market value) of the assets owned by the taxpayer which are used in a trade or business and (ii) the aggregate value of assets leased by the taxpayer which are used in a trade or business, exceeds $500,000. For purposes of this subparagraph (c), the taxpayer and all members of a controlled group as defined in Section 1397(b) of the Code will be treated as a single taxpayer. 06-4514.05 15 "Prohibited Activities Restrictions" means those restrictions described in Section 6 of this Compliance Agreement. "Prohibited Facilities" means (a) any airplane, skybox or other private luxury box, health club facility or store the principal business of which is the sale of alcoholic beverages for consumption off premises and (b) any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other facility used for gambling. "Qualified Business" means any trade or business. For purposes the definition of "Qualified Business", the rental to others of real property located in the Qualified Empowerment Zone shall be treated as a Qualified Business, if, and only if, (a) the property is not residential rental property (as defined in Section 168(e)(2) of the Code) and (b) at least 50 percent of the gross rental income from the real property is from Empowerment Zone Businesses. For" purposes of (b), the lessor of the property may rely on a lessee's certification that such lessee is an Empowerment Zone Business. For purposes of the definition of "Qualified. Business", the rental to others of tangible personal property shall be treated as a Qualified Business if and only if at least 50 percent of the rental of such property is by Empowerment Zone Businesses or by residents of the Qualified Empowerment Zone. The term "Qualified Business" shall not include any Prohibited Activities. "Qualified Business Entity" means, with respect to any taxable year, any corporation or partnership if for such year: (a) every trade or business of such entity is the active conduct of a Qualified Business within the Qualified Empowerment Zone; (b) at least 50 percent of the total gross income of such entity is derived from the active conduct of such business; (c) a Substantial Portion of the use of the tangible property of such entity (whether owned or leased) is within the Qualified Empowerment Zone; (d) a Substantial Portion of the intangible property of such entity is used in the active conduct of any such business; (e) a Substantial Portion of the services performed for such entity by its employees are performed in the Qualified Empowerment Zone; (f) at least 35 percent of the entity's employees are residents of the Qualified Empowerment Zone; (g) less than 5 percent of the average of the unadjusted bases of the property of such entity is attributable to collectibles (as defined in Section 408(m)(2) of the Code) other than collectibles that are held primarily for sale to customers in the ordinary course of such entity's business; and 06- 514.os 16 (h) less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to Nonqualified Financial Property. "Qualified Proprietorship" means, with respect to any taxable year, any Qualified Business carried on by an individual as a proprietorship if for such year: (a) at least 50 percent of the total gross income of such individual from such business is derived from the active conduct of such business in the Qualified Empowerment Zone; (b) a Substantial Portion of the use of the. tangible property of such individual in such business (whether owned or leased) is within the Qualified Empowerrrient -Zone; - (c) a Substantial Portion of the intangible property of such business is used in* the active conduct of such business; (d) a Substantial Portion of the services performed for such individual in such business. by employees of such business are performed in the Qualified Empowerment Zone; (e) at least 35 percent of such employees are residents of the Qualified Empowerment Zone; (f) less than 5 percent of the average of the aggregate unadjusted bases of the property of such individual which is used in such business is attributable to collectibles (as defined in Section 408(m)(2) of the Code) other than collectibles that are held primarily for sale to customers in the ordinary course of such business; and (g) less than 5 percent of the average of the aggregate unadjusted bases of the property of such individual which is used in the such business is attributable to Nonqualified Financial Property. For these purposes, the term "employee" includes the proprietor. "Qualified Zone Property" means any property to which Section 168 of the Code applies (or would apply but for Section 179 of the Code) if (a) such property was acquired by the Owner by purchase (as defined in Section 179(d)(2) of the Code) after the date on which the designation of the Qualified Empowerment Zone took effect; (b) the Original Use of which in the Qualified Empowerment Zone commences with the Owner; and (c) Substantially All of the use of which is in the Qualified Empowerment Zone and is in the active conduct of a Qualified Business by the Owner in the Qualified Empowerment Zone. 06-4514.05 17 In the case of any property which is substantially constructed or renovated by the Owner, the requirements of (a) and (b) above shall be treated as satisfied. For purposes of the preceding sentence, property shall be treated as substantially constructed or renovated by the Owner if, during any 24-month period beginning after the date on which the designation of the Qualified Empowerment Zone took effect, additions to the basis with respect to such property in the hands of the Owner exceed the greater of (i) an amount equal to 15 percent of the adjusted basis at the beginning of such 24-month period in the hands of the Owner or (ii) $5,000. For purposes of the requirements set forth in (b) above, if property is sold . and leased back by the Owner within 3 months after the date such property was originally placed in service, such property shall be treated as originally placed in service not earlier than the date on which . such property is used under the leaseback. "Qualified Zone Property Restrictions" means the restrictions described in Section 5 of this Compliance Agreement. "Real Property Expenditure Limitations" means the restrictions imposed by § 1.1394- 10)(2)(ii) of the Treasury Regulations that states if a lessee is the Principal User of real property financed with Bond Proceeds, the Proceeds of the Bonds may be allocated to expenditures for real property only to the extent of the property allocable to the lessee's leased space, including expenditures for common areas. "Remedial Actions" means any of the remedial actions defined in § 1.142-2 of the Treasury Regulations. "Resident Employee Computation Requirements" means the following computational requirements for purposes of determining whether at least 35 percent of the employees of an Empowerment Zone Business are residents of the Qualified Empowerment Zone; (a) The term "employee" includes a self-employed individual within the meaning of Section 401(c) of the Code; (b) The resident employee percentage is determined on any reasonable basis consistently applied throughout the Compliance Period. The "per -employee fraction" described in (c) below and the "employee actual work hour fraction" described in (d) below are both reasonable methods. (c) The term "per -employee fraction" means the fraction, (i) the numerator of which is, during the taxable year, the number of employees (A) who work at least 15 hours a week for the Principal User, (B) who reside in the Qualified Empowerment Zone and (C) who are employed for at least 90 days and (ii) the denominator of which is, during the same taxable year, the aggregate number of all employees (A) who at least 15 hours a week for the Principal User and (B) who are employed for at least 90 days. (d) The term "employee actual work hour fraction" means the fraction, (i) the numerator of which is the aggregate total actual hours of work for the Principal User of employees who reside in the Qualified Empowerment Zone during the taxable year and 06-4514.05 18 (ii) the denominator of which is the aggregate total actual hours of work for the Principal User of all employees during the same taxable year. (e) For purposes of these requirements, the Principal User may not rely on the initial Employee Certification of any employee who is actually known by the Principal User not to be a resident of the Qualified Empowerment Zone at the time of execution of the certification. (f) For purposes of these requirements, any employee who at the time of their initial Employee Certification was a bona fide resident of the Qualified Empowerment Zone and who later moves out of the Qualified Empowerment Zone is treated. as still residing in the Qualified Empowerment Zone if. (i) the employee continues to perform Substantially All of the employee's services for the Principal User in the Qualified Empowerment Zone; and (ii) a resident of the Qualified Empowerment Zone is hired by the Principal User for the next comparable (or lesser) position. "Startup Period' means, with respect to any property being provided for any business, the period before the first taxable year beginning more than 2 years after the later of (a) the Date of Issuance or (b) the date such property is first placed in service (or if earlier, the date which is 3 years after the Date of Issuance). "Secretary" means the Secretary of the Treasury. "Substantially All" means 85% or such other percentage as may later be specified in § 1.1394-1(1) of the Treasury Regulations. "Substantial Portion" means (a) 85%, (b) such other percentage as may later be specified in § 1397B of the Code or the related Treasury Regulations, or (c) such other percentage as.may be approved by a written opinion of Bond Counsel. "Tax Regulatory Agreement" means the Tax Regulatory Agreement for the Bonds, dated as of the date hereof by and between the Owner, the Issuer and U.S. Bank Trust, National Association. "Testing Period' means the first 3 taxable years beginning after the Startup Period. "Transfer" means any conveyance, transfer, assignment or any other disposition of the Project. 06-4514.05 19 IN WITNESS WHEREOF, tl1e Parties have caused this Compliance Agreement to be signed by their respective, duly authorized representatives, as of the day and year first written above. GOLD COAST BAKIN PANY, INC, I3y ark Press, President CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPWMNT BANK By Attest: Lan S. Hatamiya, Chair By Make Fowler, Secretary CITY OF SANTA ANA, CALIF,ORNIA Um mayor [Signature Page to Complimce Agmemont] IN WITNESS WHEREOF, the parties have caused this CoaYrpiiazzcc Agreement to be signed by their respective, duly authorized representatives, as of the day and year fmt written above. GOLD COAST BAK1NGr COMpANy, INC, By 4 Mark press, Fresident ' CALIFORNIA. INFRASTRUCTURE AND ECONOAGC DEVELOPMENT BAN) By Attest: Lon S. Iia ya, iar By -&L2A Bbke Fowler, Secretary Cn Y OF SANTA ANA, CALIFORNIA Mayor [Sign tune Page to Compliance Agreement] IN WITNESS WHEREOF, the parties have caused this Compliance Agreement to be signed by their respective, duly authorized representatives, as of the day and year first written above. GOLD COAST BAKING COMPANY, INC. By Mark Press, President CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK' By Attest: Lon S. Hatamiya, Chair. By Blake Fowler, Secretary CITY OF By ATTEST: Patricia E. Healy Clerk of the Council APPROVED AS TO FORM: Joseph W. Fletchcr�� ANA, CALIFORNIA [Signature Page to Compliance Agreement] EXHIBIT A EMPOWERMENT ZONE BUSINESS CERTIFICATION The undersigned for Gold Coast Baking Company, Inc. (the "Owner") hereby certifies that as of.[DATE] that the Owner meets each of the criteria of an Empowerment Zone Business described below. Terns not defined herein shall have the meanings given them in the Empowerment Zone Facility Bond Compliance Agreement, dated as of April 1, 2000, by and among Owner, California Infrastructure and Economic Development Bank and the City of Santa Ana. [The Owner was a corporation or partnership which for. the taxable year to. which this certificate applies actually did (or during the Startup Period expected and made bona fide efforts to): (a) conduct every trade or business of such entity as a Qualified Business within the Qualified Empowerment Zone; (b) derive at least 50 percent of the total gross income of such entity from the active conduct of such business; (c) use a Substantial Portion of the tangible property of such entity (whether owned or leased) within the Qualified Empowerment Zone; (d) use a Substantial Portion of the intangible property of such entity in the active conduct of any such business; (e) have a ,Substantial Portion of the services for such entity performed by its employees in the Qualified Empowerment Zone; (f) establish that at least 35 percent of the entity's employees were residents of the Qualified Empowerment Zone; (g) have less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity attributable to collectibles (as defined in Section 408(m)(2) of the Code) other than collectibles that are held primarily for sale to customers in the ordinary course of such entity's business; and (h) have less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity attributable to Nonqualified Financial Property.] [The Owner was an individual proprietor which for the taxable year to which this certificate applies actually did (or during the Startup Period expected and made bona fide efforts to): (a) derive at least 50 percent of its total gross income from such business from the active conduct of such business in the Qualified Empowerment Zone; 0G-4514.05 (b) use a Substantial Portion of its tangible property in such business (whether owned or leased) within the Qualified Empowerment Zone; (c) use a Substantial Portion of its intangible property in the active conduct of such business; (d) have a Substantial Portion of the services performed for such individual in such business by employees performed in the Qualified Empowerment Zone; (e) establish that at least 35 percent of such employees were residents of the Qualified Empowerment Zone; (f) have less than 5 percent of the average of the aggregate unadjusted bases.. of the property of such individual which is used in such business attributable to collectibles (as defined in Section 408(m)(2) of the Code) other than collectibles that are held primarily for sale to customers in the ordinary course of such business; and (g) have less than 5 percent of the average of the aggregate unadjusted bases of the property of such individual which is used in the such business attributable to Nonqualified Financial Property. For these purposes, the term "employee" includes the proprietor.] The Owner shall not fail to be treated as an Empowerment Zone Business for any taxable year beginning after the Testing Period by reason of failing to meet any requirement of a Qualified Business Entity or a Qualified Proprietorship if at least 35 percent of the employees of such"business for such year are residents of the Qualified Empowerment Zone. The preceding sentence shall not apply to any business which is not a Qualified Business by reason of its engaging in any Prohibited Activities. GOLD COAST BAKING COMPANY; INC. Printed Name Title 06-4514.05 EXHIBIT B EMPLOYEE CERTIFICATION The undersigned employee ("Employee") of Gold Coast Baking Company, Inc, (the "Owner") under penalty of perjury certifies to the Owner that the address of the Employee's principal residence is located at: Street Apt or Unit # City State Zip Code Employee hereby acknowledges that Employee is required by this certification to notify the Owner of a change of Employee's principal residence. By Printed Name SSN 06-4514.05 EXHIBIT C ZONE RESIDENT EMPLOYEE PERCENTAGE CERTIFICATION The undersigned for Gold Coast Baking Company, Inc. (the "Owner") hereby certifies that as of [DATE] that the percentage of employees of the Owner that are residents of the Qualified Empowerment Zone has been computed for the Annual Reporting Date to be: 1. Per -Employee Fraction Method %; or 2. Employee Actual Work Hour Fraction Method %. Terms not defined herein shall have the meanings given them in the Empowerment Zone Facility Bond Compliance Agreement, dated as of April 1, 2000, by and among Owner; the California Infrastructure and Economic Development Bank and the City of Santa Ana. GOLD COAST BAKING COMPANY, INC. By Printed Name Title 06-4514.05 QUALIFIED ZONE PROPERTY CERTIFICATION The undersigned for Gold Coast Baking Company, Inc. (the "Owner") hereby certifies that as of [DATE] that the Project meets each of the criteria for Qualified Zone Property described below. . Terms not defined herein shall have the meanings given them in the Empowerment Zone Facility Bond Compliance Agreement, dated as of April 1, 2000, by and among Owner, the California Infrastructure and Economic Development Bank and the City of -Santa Ana.'. - The Project consists of property to which Section 168 of the Code applies (or would apply but for Section 179 of the Code) if: (a) such property was acquired by the Owner by purchase (as defined in Section 179(d)(2) of the Code after the date on which the designation of the Qualified Empowerment Zone took effect; (b) the Original Use of the Project commenced in the Qualified Empowerment Zone with the Owner; and (c) substantially all of the use of the Project is in the Qualified Empowerment Zone and is in the active conduct of a Qualified Business by the Owner in the Qualified Empowerment Zone. In the case of any property which is substantially constructed or renovated by the Owner,. the requirements of (a) and (b) shall be treated as satisfied. For purposes of the preceding sentence, property shall be treated as substantially constructed or renovated by the Owner if, during any 24-month period beginning after the date on which the designation of the Qualified Empowerment Zone took effect, additions to the basis with respect to such. property in the hands of the Owner exceed the greater of (i) an amount equal to 15 percent of the adjusted basis at the beginning of such 24-month period in the hands of the Owner or (ii) $5,000. For purposes of the requirements set forth in (b) above, if property is sold and leased back by the Owner within 3 months of the date such property was originally placed in service, such property shall be treated as originally placed in service not earlier than the date on which such property is used under the leaseback. GOLD COAST BAKING COMPANY, INC. Lo Printed Name Title 06-4514.05 EXHIBIT E DESCRIPTION OF REAL PROPERTY The Project is located at 1590-B East St. Gertrude Place, Santa Ana, California 92705. 06-4514.05 EXHIBIT F EXPECTED WEIGHTED AVERAGE USEFUL LIFE OF PROJECT Cost Useful Life* Total Equipment $4,900,000 X 10* $49,000,000 Average Useful Life of Project $49,000,000 _ $4,900,000 $ =10 years. Useful life of Project for purposes of Section 147(b) of the Code =10 years x 1.20 = 12 years * A useful life of 10 years has been conservatively assigned to the equipment solely for purposes of this calculation. 06 4514.05 CERTIFICATE PURSUANT TO SECTION 1394(f) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDMED The undersigned hereby certifies as follows: 1. I am Mayor of the City of Santa Ana, California (the "City). 2. This certification is based on information filed with the City and information compiled by the City. 3. The private activity bond issue identified in Exhibit A to this certificate: meets.the requirements of § 1394(f) of the Internal Revenue Code of 1986, as, ar"rianded' (lhe "Code'), including'the applicable volume cap requirement under 1394(0(2)(B)(ii). Dated: April 14, 2000 iwayor EXHIBIT A $5,000,000 California Infrastructure and Economic Development Bank Variable Rate Demand Empowerment Zone Facility Bonds, Series 2000 (Gold Coast Baking Company, Inc. Project) Address of Issuer: California infrastructure and Economic Development Bank 801K Street, Suite 1600 Sacramento, California 95814 Issuer Identification No.: 68-0304653 Report No.: PA-2000-2 Date of Issue: April 14, 2000 CUSIP No.: Attached hereto is Resolution No. 2000-006 of the City Council of the City of Santa Ana transferring a portion of the Santa Ana Empowerment Zone Ceiling for private activity bonds.