Exhibit 10.41
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LOAN AGREEMENT
by and between
CALIFORNIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY
and
PROVENA FOODS INC.
Dated as of October 1, 1998
All right, title and interest of the CALIFORNIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY (the "Authority") in this Loan Agreement has been assigned
(except for amounts payable under Sections 4.02(b), 7.03, 9.02 and 9.03 hereof,
its right to receive notices, opinions and other documents required to be
delivered to the Authority hereunder and its rights to consent to certain
actions) to U.S. Bank Trust National Association, as trustee (the "Trustee")
pursuant to the Indenture of Trust, dated as of October 1, 1998, between the
Authority and the Trustee, and is subject to such assignment.
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Definition of Terms.......................................................... 2
Section 1.02. Number and Gender............................................................ 2
Section 1.03. Articles, Sections, Etc...................................................... 2
ARTICLE II
REPRESENTATIONS
Section 2.01. Representations of the Authority............................................. 2
Section 2.02. Representations of the Borrower.............................................. 3
Section 2.03. Registered Owners to Benefit................................................. 5
ARTICLE III
CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE BONDS
Section 3.01. Construction of the Project.................................................. 5
Section 3.02. Disbursements from the Project Fund and Costs of Issuance Fund............... 6
Section 3.03. Establishment of Completion Date; Obligation of Borrower to Complete......... 6
Section 3.04. Investment of Moneys in Funds................................................ 7
ARTICLE IV
LOAN OF PROCEEDS; REPAYMENT PROVISIONS
Section 4.01. Loan of Bond Proceeds; Issuance of Bonds..................................... 7
Section 4.02. Loan Repayments and Other Amounts Payable.................................... 7
Section 4.03. Purchase of Bonds............................................................ 9
Section 4.04. Unconditional Obligations.................................................... 9
Section 4.05. Assignment of Authority's Rights............................................. 10
Section 4.06. Amounts Remaining in Funds................................................... 10
TABLE OF CONTENTS
(continued)
Page
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
Section 5.01. Right of Access to the Project............................................... 10
Section 5.02. The Borrower's Maintenance of its Existence.................................. 10
Section 5.03. Records and Financial Statements of Borrower; Employment Practices........... 11
Section 5.04. Insurance.................................................................... 12
Section 5.05. Maintenance and Repair; Taxes; Utility and Other Charges..................... 12
Section 5.06. Qualification in California.................................................. 12
Section 5.07. Alternate Credit Facility.................................................... 13
Section 5.08. Letter of Credit............................................................. 13
Section 5.09. Covenants of the Borrower.................................................... 14
Section 5.10. Capital Expenditures......................................................... 17
Section 5.11. Special Arbitrage Certifications............................................. 18
Section 5.12. Covenant to Enter into Agreement or Contract to Provide Ongoing Disclosure... 18
Section 5.13. No Purchase of Bonds......................................................... 19
ARTICLE VI
DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF PROCEEDS
Section 6.01. Obligation to Continue Payments.............................................. 19
Section 6.02. Application of Net Proceeds.................................................. 19
Section 6.03. Insufficiency of Net Proceeds................................................ 20
Section 6.04. Damage to or Condemnation of Other Property.................................. 20
ARTICLE VII
LOAN DEFAULT EVENTS AND REMEDIES
Section 7.01. Loan Default Events.......................................................... 20
Section 7.02. Remedies on Default.......................................................... 21
Section 7.03. Agreement to pay Attorneys' Fees and Expenses................................ 23
Section 7.04. No Remedy Exclusive.......................................................... 23
Section 7.05. Waivers...................................................................... 23
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TABLE OF CONTENTS
(continued)
Page
ARTICLE VIII
PREPAYMENT
Section 8.01. Redemption of Bonds with Prepayment Moneys................................... 23
Section 8.02. Options to Prepay Loan....................................................... 24
Section 8.03. Mandatory Prepayment......................................................... 24
Section 8.04. Amount of Prepayment......................................................... 25
Section 8.05. Notice of Prepayment......................................................... 26
ARTICLE IX
NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION
Section 9.01. Non-Liability of Authority................................................... 26
Section 9.02. Expenses..................................................................... 26
Section 9.03. Indemnification.............................................................. 26
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices...................................................................... 27
Section 10.02. Severability................................................................. 28
Section 10.03. Execution of Counterparts.................................................... 28
Section 10.04. Amendments, Changes and Modifications........................................ 29
Section 10.05. Governing Law................................................................ 29
Section 10.06. Authorized Representative of the Borrower.................................... 29
Section 10.07. Term of the Agreement........................................................ 29
Section 10.08. Binding Effect............................................................... 29
Section 10.09. References to Bank........................................................... 29
Section 10.10. Brokerage Confirmations...................................................... 29
EXHIBIT A THE PROJECT
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of October 1, 1998, between the CALIFORNIA
ECONOMIC DEVELOPMENT FINANCING AUTHORITY, a body public and corporate, and a
public instrumentality of the State of California (the "Authority"), and PROVENA
FOODS INC., a corporation duly organized and validly existing under the laws of
the State of California (the "Borrower").
W I T N E S S E T H:
WHEREAS, the Authority was established for the purpose of promoting and
encouraging commerce and industry, and generally to foster economic development
in the State of California (the "State") and is authorized to issue tax-exempt
revenue bonds to provide financing for private activity economic development
projects pursuant to the provisions of Section 15710 et seq. of the California
Government Code (constituting Part 10.2 of Division 3 of Title 2 of the
Government Code of the State of California, as now in effect) (the "Act"); and
WHEREAS, in furtherance of the purposes of the Authority set forth above,
the Authority proposes to finance the acquisition, construction, rehabilitation,
equipping, installation, improvement and/or furnishing of the manufacturing
facilities described in Exhibit A hereto (the "Project") to be owned and
operated by the Borrower; and
WHEREAS, pursuant to and in accordance with the provisions of the Act, the
Authority has authorized and undertaken the issuance of its California Economic
Development Financing Authority Variable Rate Demand Industrial Development
Revenue Bonds, Series 1998 (Provena Foods Inc. Project) (the "Bonds") in the
aggregate principal amount of Four Million Dollars ($4,000,000) to provide funds
to pay a portion of the cost of the Project and a portion of the costs of
issuance of the Bonds; and
WHEREAS, the Authority proposes to loan the proceeds of the Bonds to the
Borrower, and the Borrower desires to borrow the proceeds of the Bonds upon the
terms and conditions set forth herein; and
WHEREAS, for and in consideration of such loan, the Borrower agrees, inter
alia, to make loan payments sufficient to pay on the dates specified in Section
4.02 hereof, the principal of, premium, if any, and interest on, the Bonds; and
WHEREAS, the Authority and the Borrower each has duly authorized the
execution and delivery of this Agreement;
NOW, THEREFORE, for and in consideration of the premises and the material
covenants hereinafter contained, the parties hereto hereby formally covenant,
agree and bind themselves as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definition of Terms. Unless otherwise defined herein or the
context otherwise requires, the terms used in this Agreement shall have the
meanings specified in Section 1.01 of the Indenture of Trust, dated as of
October 1, 1998 (the "Indenture"), by and between the Authority and U.S. Bank
Trust National Association, as trustee (the "Trustee"), as originally executed
or as it may from time to time be supplemented or amended as provided therein.
Section 1.02. Number and Gender. The singular form of any word used
herein, including the terms defined in Section 1.01 of the Indenture, shall
include the plural, and vice versa. The use herein of a word of any gender
shall include all genders.
Section 1.03. Articles, Sections, Etc. Unless otherwise specified,
references to Articles, Sections and other subdivisions in this Agreement are to
the designated Articles, Sections and other subdivisions of this Agreement as
amended from time to time. The words "hereof," "herein," "hereunder" and words
of similar import refer to this Agreement as a whole. The headings or titles of
the several Articles and Sections, and the table of contents included herein,
shall be solely for convenience of reference and shall not affect the meaning,
construction or effect of the provisions hereof.
ARTICLE II
REPRESENTATIONS
Section 2.01. Representations of the Authority. The Authority makes the
following representations as the basis for its undertakings herein contained:
(a) The Authority is a body public and corporate, and a public
instrumentality of the State. Under the provisions of the Act, the
Authority has the power to enter into the transactions contemplated by this
Agreement and the Indenture and to carry out its obligations hereunder. By
proper action, the Authority has been duly authorized to execute, deliver
and duly perform its obligations under this Agreement and the Indenture.
(b) To finance the Costs of the Project and certain Costs of
Issuance, the Authority will issue the Bonds, which will mature, bear
interest and be subject to redemption as set forth in the Indenture.
(c) The Bonds will be issued under and secured by the Indenture,
pursuant to which the Authority's interest in this Agreement (except
certain rights of the Authority to payment for expenses and
indemnification) will be pledged and assigned to the Trustee as security
for payment of the principal of, premium, if any, and interest on the Bonds
and to the Bank, on a basis subordinate thereto, as security for the
payment of the obligations of the Borrower under the Reimbursement
Agreement.
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(d) The Authority has not pledged and will not pledge its interest in
this Agreement for any purpose other than to secure the Bonds under the
Indenture and the obligations of the Borrower under the Reimbursement
Agreement.
(e) The Authority is not in default under any of the provisions of
the laws of the State which default would affect its existence or its
powers referred to in subsection (a) of this Section.
(f) The Authority has found and determined and hereby finds and
determines that (i) the Loan to be made hereunder with the proceeds of the
Bonds will promote the purposes of the Act by providing funds to finance
the Construction of the Project; and (ii) said Loan is in the public
interest, serves the public purposes and meets the requirements of the Act.
(g) No member, officer or other official of the Authority has any
financial interest whatsoever in the Borrower or in the transactions
contemplated by this Agreement and the Indenture.
(h) Neither the execution and delivery of this Agreement, the
Indenture, the Purchase Contract or the Tax Regulatory Agreement, the
consummation of the transactions contemplated hereby or thereby, nor the
fulfillment of or compliance with the terms and conditions of this
Agreement, the Indenture, the Purchase Contract or the Tax Regulatory
Agreement, conflict with or result in a breach of any of the terms,
conditions or provisions of any restriction or any agreement or instrument
to which the Authority is now a party or by which it is bound or constitute
a default under any of the foregoing or result in the creation or
imposition of any prohibited lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of the Authority under the
terms of any instrument or agreement.
Section 2.02. Representations of the Borrower. The Borrower makes the
following representations as the basis for its undertakings herein contained:
(a) The Borrower is a corporation, duly organized, validly existing
and in good standing under the laws of the State and is duly qualified to
transact business in the State, is not in violation of any provision of any
of the Borrower's Organization Documents, has full power and authority to
enter into this Agreement, and has duly authorized the execution and
delivery of this Agreement by proper action.
(b) The execution, delivery and performance by the Borrower of this
Agreement, the Reimbursement Agreement, the Remarketing Agreement, the Tax
Regulatory Agreement and all other documents contemplated hereby to be
executed by the Borrower are within the Borrower's power and have been duly
authorized by all necessary action, and neither the execution and delivery
of this Agreement, the Reimbursement Agreement, the Remarketing Agreement
or the Tax Regulatory Agreement or 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
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of the Borrower's Organization Documents, or of any law, statute, rule,
regulation, order, judgment, award, injunction, or decree or of any
material agreement or instrument to which the Borrower is now a party or by
which it is bound or affected, or constitutes a default (or would
constitute a default with due notice or the passage of time or both) under
any of the foregoing, or results in or requires the creation or imposition
of any prohibited lien, charge or encumbrance whatsoever upon any of the
property or assets of the Borrower under the terms of any instrument or
agreement to which the Borrower is now a party or by which it is bound.
(c) The estimated Costs of the Project to be paid with the proceeds
of the Bonds are as set forth in the Tax Regulatory Agreement and have been
determined in accordance with sound engineering, construction, and
accounting principles. All the information and representations in the Tax
Regulatory Agreement are true and correct as of the date thereof.
(d) The Project consists and will consist of those facilities
described in Exhibit A and the Borrower shall not make any changes to the
Project or to the operation thereof which would affect the qualification of
the Project under the Act or would cause interest on the Bonds not to be
Tax-exempt. The Borrower intends to own and operate the Project. The
Borrower covenants and agrees to operate or cause the operation of the
Project as a facility described by the Act until the principal of, the
premium, if any, and the interest on the Bonds shall have been paid.
(e) The Borrower has and will have title to the Project sufficient to
carry out the purposes of this Agreement.
(f) At the time of submission of an application to the Authority for
financial assistance in connection with the Project and on the dates on
which action was taken on such application, permanent financing for the
Project had not otherwise been obtained or arranged.
(g) To the best knowledge of the Borrower, no member, officer or
other official of the Authority has any financial interest whatsoever in
the Borrower or in the transactions contemplated by this Agreement.
(h) All certificates, approvals, permits and authorizations with
respect to the Construction of the Project of the State, the City of
Lathrop, California, the federal government and other applicable local
governmental agencies have been obtained, or if not yet obtained, are
reasonably expected to be obtained in due course. The Project will be
consistent with any existing local or regional comprehensive plan.
(i) No event has occurred and no condition exists which would
constitute a Loan Default Event or which, with the passing of time or with
the giving of notice or both, would constitute a Loan Default Event.
(j) There is no litigation or proceeding pending or, to the knowledge
of the Borrower, threatened against the Borrower which could adversely
affect the validity of
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this Agreement, the Reimbursement Agreement, the Remarketing Agreement or
the Tax Regulatory Agreement or the ability of the Borrower to comply with
the terms of its obligations under this Agreement, the Reimbursement
Agreement, the Remarketing Agreement or the Tax Regulatory Agreement.
(k) No consent, authorization or approval, except such consents,
authorizations or approvals as have been obtained prior to the execution
and delivery of this Agreement, from any governmental, public or quasi-
public body or authority of the United States or of the State or any
department or subdivision thereof, is necessary for the due execution and
delivery by the Borrower of this Agreement.
Section 2.03. Registered Owners to Benefit. The Borrower agrees that this
Agreement is executed in part to induce the purchase by others of the Bonds.
Accordingly, all covenants and agreements on the part of the Borrower set forth
in this Agreement are hereby declared to be for the benefit of the Registered
Owners from time to time of such Bonds; provided, however, that such covenants
and agreements shall create no rights in any parties other than the Authority,
the Borrower, the Remarketing Agent, the Bank, the Trustee, the Tender Agent and
such Registered Owners.
ARTICLE III
CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE BONDS
Section 3.01. Construction of the Project. The Borrower agrees that,
utilizing the proceeds of the Bonds loaned pursuant to Section 4.01 hereof and
such other funds as may be necessary, it has or will Construct, or has or will
cause the Construction of, the Project, and has or will acquire, rehabilitate,
equip, construct and install all other facilities and real and personal property
necessary for the operation of the Project as described in the Borrower's
application to the Authority for assistance in financing the Project,
substantially in accordance with the plans and specifications prepared therefor
by the Borrower, including any and all supplements, amendments, additions or
deletions thereto or therefrom, it being understood that the approval of the
Authority shall not be required for changes in such plans and specifications
which do not alter the purpose or description of the Project as set forth in
Exhibit A hereto. The Borrower further agrees to proceed with due diligence to
complete the Project within three years from the date hereof.
In the event that the Borrower desires to modify the Project in a
manner which alters the purpose or description of the Project as set forth in
Exhibit A hereto, such modification shall be undertaken only upon an amendment
to Exhibit A which shall accurately set forth the description and purpose of the
Project as so modified and which amendment to Exhibit A shall become effective
(without the written consent of the Registered Owners) upon receipt by the
Authority and the Trustee of:
(a) a certificate of the Authorized Representative of the Borrower
describing in detail the proposed changes and stating that they will not
have the effect of disqualifying the Project as a facility that may be
financed pursuant to the Act nor
5
reduce the employment benefits described in the Borrower's application to
the Authority for assistance in financing the Project;
(b) an Opinion of Bond Counsel that the proposed changes to the
Project will not have the effect of disqualifying the Project as a facility
that may be financed pursuant to the Act or cause interest on the Bonds not
to be Tax-exempt;
(c) a copy of the proposed form of amended or supplemented Exhibit A
hereto; and
(d) the written approval of the Bank and the Trustee.
Section 3.02. Disbursements from the Project Fund and Costs of Issuance
Fund. The Borrower will authorize and direct the Trustee, upon compliance with
Section 3.03 of the Indenture, to disburse the moneys in the Project Fund to or
on behalf of the Borrower only for payment of Costs of the Project. Each of the
payments from the Project Fund referred to in this Section shall be made upon
receipt by the Trustee of a written Requisition in the form prescribed by
Section 3.03 of the Indenture, signed by an Authorized Representative of the
Borrower accompanied by the written approval of the Bank. The Trustee may, upon
satisfaction by the Borrower of the conditions set forth in Section 3.03(b) of
the Indenture, pay each Requisition without the written approval of the Bank
unless the Trustee has received written notice from the Bank that the payment of
any subsequent Requisition requires the Bank's written approval.
Moneys in the Costs of Issuance Fund shall be disbursed by the Trustee
as provided in Section 3.03(e) of the Indenture to pay Costs of Issuance.
Section 3.03. Establishment of Completion Date; Obligation of Borrower to
Complete. As soon as the Construction of the Project is completed, an
Authorized Representative of the Borrower, on behalf of the Borrower, shall
evidence the completion date by providing a certificate to the Trustee, with a
copy to the Authority and the Bank, stating the Costs of the Project and further
stating that (a) Construction of the Project has been completed substantially in
accordance with the plans and specifications therefor, and all labor, services,
materials and supplies used in Construction have been paid for or stating the
amount required to be retained in the Project Fund to fully provide for any
disputed amounts, and (b) all other equipment and facilities for the operation
of the Project have been acquired, constructed and installed in accordance with
the plans and specifications therefor and all costs and expenses incurred in
connection therewith have been paid or provided for. Notwithstanding the
foregoing, such certificate may state that it is given without prejudice to any
rights of the Borrower against third parties.
At the time such certificate is delivered to the Trustee, moneys
remaining in the Project Fund, including any earnings resulting from the
investment of such moneys, less an amount representing a reasonable retainage
determined by the Borrower, shall be used as provided in Section 3.03(d) of the
Indenture.
6
In the event the moneys in the Project Fund available for payment of the
Costs of the Project should be insufficient to pay the Costs of the Project in
full, the Borrower agrees to pay directly, or to deposit in the Project Fund
moneys sufficient to pay, any costs of completing the Construction of the
Project in excess of the moneys available for such purpose in the Project Fund,
or otherwise cause the Construction of the Project to be completed. The
Authority makes no express or implied warranty that the moneys deposited in the
Project Fund and available for payment of the Costs of the Project under the
provisions of this Agreement will be sufficient to pay all the amounts which may
be incurred in connection with the Construction of the Project. The Borrower
agrees that if, after exhaustion of the moneys in the Project Fund, the Borrower
should pay, or deposit moneys in the Project Fund for the payment of, any
portion of the Costs of the Project pursuant to the provisions of this Section,
it shall not be entitled to any reimbursement therefor from the Authority, the
Trustee or the Registered Owners of any of the Bonds, nor shall it be entitled
to any diminution of the amounts payable under Section 4.02 hereof.
Section 3.04. Investment of Moneys in Funds. Any moneys in any fund held
by the Trustee shall, at the written request of an Authorized Representative of
the Borrower, but subject to the restrictions on investments contained in the
Indenture, the Tax Regulatory Agreement and applicable law in connection with
the Tax-exempt status of interest on the Bonds, be invested or reinvested by the
Trustee as provided in the Indenture. Such investments shall be held by the
Trustee and shall be deemed at all times a part of the fund from which such
investments were made, and the interest accruing thereon, and any profit or loss
realized therefrom, shall be credited or charged as provided in Section 5.05 of
the Indenture.
ARTICLE IV
LOAN OF PROCEEDS; REPAYMENT PROVISIONS
Section 4.01. Loan of Bond Proceeds; Issuance of Bonds. The Authority
covenants and agrees, upon the terms and conditions in this Agreement, to loan
the proceeds of the sale of the Bonds to the Borrower for the purpose of
financing the Costs of the Project and the Costs of Issuance to the extent
permitted by the Indenture. Pursuant to said covenant and agreement, the
Authority will issue the Bonds upon the terms and conditions contained in this
Agreement and the Indenture and will cause the Bond proceeds to be applied as
provided in Article III of the Indenture. Subject to Section 3.02 of the
Indenture, such proceeds shall be disbursed to or on behalf of the Borrower as
provided in Section 3.02 hereof. The Borrower hereby approves the Indenture,
the assignment thereunder to the Trustee of the right, title and interest of the
Authority (with certain exceptions) in this Agreement, and the issuance
thereunder by the Authority of the Bonds.
Section 4.02. Loan Repayments and Other Amounts Payable.
(a) On or before each Bond Payment Date, until the principal of,
premium, if any, and interest on the Bonds shall have been fully paid or
provision for such payment shall have been made as provided in the
Indenture, the Borrower covenants and agrees to pay to the Trustee as a
Loan Repayment on the Loan made to the
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Borrower from Bond proceeds pursuant to Section 4.01 hereof, a sum equal to
the amount payable on such Bond Payment Date as principal of, and premium,
if any, and interest on the Bonds as provided in the Indenture.
The Loan Repayments made pursuant to this subsection (a) shall at all
times be sufficient to pay the total amount of interest and principal
(whether at maturity or upon redemption or acceleration) and premium, if
any, becoming due and payable on the Bonds on each Bond Payment Date;
provided that any amount held by the Trustee in the Revenue Fund on the due
date for a Loan Repayment pursuant to the immediately preceding paragraph
shall be credited against the Loan Repayment due on such date to the extent
available for such purpose under the terms of the Indenture; and provided
further that, subject to the provisions of this paragraph, if at any time
the amounts held by the Trustee in the Revenue Fund are sufficient to pay
all of the principal of and interest and premium, if any, on the Bonds as
such payments become due, the Borrower shall be relieved of any obligation
to make any further Loan Repayments under the provisions of this Section.
Notwithstanding the foregoing, if on any date the amount held by the
Trustee in the Revenue Fund is insufficient to make any required payments
of principal of (whether at maturity or upon redemption or acceleration)
and interest and premium, if any, on the Bonds as such payments become due,
the Borrower, immediately upon receipt of notice of such deficiency from
the Trustee, shall forthwith pay such deficiency as a Loan Repayment
hereunder.
The obligation of the Borrower to make any payment under this
subsection (a) shall be deemed to have been satisfied to the extent of any
corresponding payment made by the Bank to the Trustee as a result of a
drawing under the Letter of Credit. To the extent the Trustee receives a
Loan Repayment from the Borrower pursuant to this subsection (a) after any
payment obligation hereunder has been satisfied by a drawing under the
Letter of Credit, the Trustee shall promptly use such Loan Repayment to
reimburse the Bank for such drawing or if the Bank has been reimbursed
directly by the Borrower such funds shall be returned to the Borrower.
(b) The Borrower covenants and agrees to pay until the principal of,
premium, if any, and interest on the Bonds shall have been fully paid or
provision for such payment shall have been made as provided in the
Indenture, (i) the Trustee's reasonable annual fee for its ordinary
services rendered as trustee, and its reasonable ordinary expenses incurred
under the Indenture, as and when the same become due, (ii) the Trustee's
reasonable fees, charges and expenses, as Bond Registrar, Tender Agent and
Paying Agent, and the reasonable fees of any other paying agent for the
Bonds as provided in the Indenture, as and when the same become due, (iii)
the cost of providing any Bonds required to be provided pursuant to the
Indenture, (iv) the reasonable fees of any rating agency then rating the
Bonds required to maintain the rating on the Bonds, (v) the reasonable fees
of the Remarketing Agent, and (vi) other necessary and ordinary
administrative fees and expenses of the Authority. The Borrower covenants
and agrees to make all payments for the expenses identified in (i) through
(vi) above. In addition, the Borrower agrees to pay such extraordinary
expenses incurred by the Trustee, the Tender Agent, the Remarketing Agent
and the
8
Authority under the Indenture as and when the same become due. The duties
of the Borrower under this subsection (b) shall survive the termination of
this Agreement and the termination and discharge of the Indenture.
(c) The Borrower also agrees to pay the fees and expenses of the Bank
pursuant to the Reimbursement Agreement.
(d) In the event the Borrower should fail to make any of the payments
required by subsections (a) through (c) of this Section, such payments
shall continue as obligations of the Borrower until such amounts shall have
been fully paid. Except as provided in the next sentence, the Borrower
agrees to pay such amounts, together with interest thereon, from the date
such payments were due until paid, to the extent permitted by law, at the
rate of 10% per annum. With respect to amounts due the Bank, the Borrower
agrees to pay such amounts together with interest thereon at the rates and
times established pursuant to the Reimbursement Agreement. Interest on
overdue payments required under subsection (a) above shall be paid to
Registered Owners as provided in Section 2.02(b)(ii) of the Indenture.
Section 4.03. Purchase of Bonds. The Borrower hereby recognizes and
agrees that the Indenture provides for the creation of an account or accounts to
facilitate the purchase of Bonds by the Tender Agent on the Mandatory Tender
Date and upon the optional tender of Bonds in accordance with Section 4.06 of
the Indenture, and the Borrower agrees to provide or cause to be provided the
Letter of Credit for the payment of amounts necessary to purchase such Bonds.
Section 4.04. Unconditional Obligations. The obligations of the Borrower
to make the payments required by Section 4.02 hereof and to provide or cause to
be provided the Letter of Credit pursuant to Section 4.03 hereof, and to perform
and observe the other agreements on its part contained herein, shall be absolute
and unconditional, irrespective of any defense or any rights of set-off,
recoupment or counterclaim it might otherwise have against the Authority, and
during the term of this Agreement, the Borrower shall pay absolutely all
payments to be made on account of the Loan made to the Borrower from Bond
proceeds pursuant to Section 4.01 hereof, as prescribed in Section 4.02 hereof,
the obligation to provide or cause to be provided the Letter of Credit pursuant
to Section 4.03 hereof, and all other payments required hereunder, free of any
deductions and without abatement, diminution or set-off. Until such time as the
principal of, premium, if any, and interest on the Bonds shall have been fully
paid, or provision for the payment thereof shall have been made as required by
the Indenture, the Borrower (a) will not suspend or discontinue any payments
required to be made by the Borrower pursuant to this Agreement, including,
without limitation, the payments provided for in Section 4.02 hereof and the
obligation to provide or cause to be provided the Letter of Credit pursuant to
Section 4.03 hereof; (b) will perform and observe all of its other covenants
contained in this Agreement; and (c) except as provided in Article VIII hereof,
will not terminate this Agreement for any cause, including, without limitation,
failure to complete the Project, the occurrence of any act or circumstances that
may constitute failure of consideration, destruction of or damage to the
Project, commercial frustration of purpose, any change in the tax or other laws
of the United States of America or of the State, or any political subdivision of
either of these, or any failure of the Authority or the Trustee to perform and
9
observe any covenant, whether express or implied, or any duty, liability or
obligation arising out of or connected with this Agreement or the Indenture.
Section 4.05. Assignment of Authority's Rights. As security for the
payment of the Bonds, the Authority will assign to the Trustee the Authority's
rights, title and interest under this Agreement, including the right to receive
payments hereunder (except the right of the Authority to receive certain
payments, if any, with respect to expenses and indemnification under Sections
4.02(b), 7.03, 9.02 and 9.03 hereof, the Authority's right to receive notices,
opinions and other documents required to be delivered to the Authority hereunder
and the Authority's rights to consent to certain actions taken hereunder), and
the Authority hereby directs the Borrower to make the payments required
hereunder (except such payments for expenses and indemnification) directly to
the Trustee as more fully set forth in this Agreement. The Borrower hereby
assents to such assignment, agrees to make such payments directly to the Trustee
and agrees that the provisions of Section 4.04 hereof shall apply to its
obligation to make such payments.
Section 4.06. Amounts Remaining in Funds. It is agreed by the parties
hereto that after: (a) payment in full of the principal of, premium, if any, and
interest on, the Bonds, or after provision for such payment shall have been made
as provided in the Indenture, (b) payment, or provision for payment satisfactory
to the Trustee and paying agents, of the fees, charges and expenses of the
Trustee and paying agents in accordance with the Indenture, (c) payment, or
provision for payment satisfactory to the affected parties, of all other amounts
required to be paid under this Agreement and the Indenture by the Borrower and
(d) payment to the Bank of any amounts owed to the Bank by the Borrower under
the Reimbursement Agreement, any amounts remaining in any fund held by the
Trustee under the Indenture shall be paid in accordance with the requirements of
Section 10.04 of the Indenture.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
Section 5.01. Right of Access to the Project. The Borrower agrees that
during the term of this Agreement, the Authority, the Bank, the Trustee and the
duly authorized agents of any of them shall have the right, after reasonable
notice to the Borrower, at all reasonable times during normal business hours to
enter upon the site of the Project to examine and inspect the Project. The
rights of access hereby reserved to the Trustee, and their respective agents,
may be exercised only after the Person seeking such access shall have executed
such confidentiality or secrecy agreements, if any, as may be requested by the
Borrower and which are in the form required of all visitors to the Project site.
Nothing contained in this Section or in any other provision of this Agreement
shall be construed to entitle the Authority or the Trustee to any information or
inspection involving the confidential knowledge, expertise or know-how of the
Borrower.
Section 5.02. The Borrower's Maintenance of its Existence. The Borrower
covenants and agrees that it will maintain its existence and will not dissolve,
nor will it sell or otherwise transfer the Project or all or substantially all
of its assets, nor will it consolidate with or merge into another entity or
permit one or more other entities to consolidate with or merge
10
into it. Notwithstanding the foregoing, the Borrower may, without violating the
covenants contained in this Section, consolidate with or merge into another
entity, or permit one or more other entities to consolidate with or merge into
it, or sell or otherwise transfer to another entity the Project or all or
substantially all of its assets as an entirety and thereafter dissolve, if:
(a) The surviving, resulting or transferee entity, as the case may
be:
(i) assumes in writing, if such entity is not the Borrower,
all of the obligations of the Borrower under this Agreement;
(ii) is not, after such transaction, otherwise in default under
any provisions of this Agreement; and
(iii) is qualified to do business in the State;
(b) The Trustee and the Authority shall have received an Opinion of
Bond Counsel to the effect that such merger, consolidation, sale or other
transfer will not cause interest on the Bonds not to be Tax-exempt; and
(c) The written consent of the Bank has been received by the Trustee,
together with an acknowledgment that the Letter of Credit will remain in
effect.
If a merger, consolidation, sale or other transfer is effected, as provided
in this Section, the provisions of this Section shall continue in full force and
effect and no further merger, consolidation, sale or transfer shall be effected
except in accordance with the provisions of this Section.
Section 5.03. Records and Financial Statements of Borrower; Employment
Practices.
(a) The Borrower covenants and agrees at all times to keep, or cause
to be kept, proper books of record and account, prepared in accordance with
generally accepted accounting principles, in which complete and accurate
entries shall be made of all transactions of or in relation to the
business, properties and operations of the Borrower. Such books of record
and account shall be available for inspection by the Authority or the
Trustee, and the duly authorized agents of either of them, at reasonable
hours and under reasonable circumstances.
(b) Upon the receipt of the written request of the Authority or the
Trustee, the Borrower further covenants and agrees to furnish the
requesting party, within 120 days after the end of each Fiscal Year, with
copies of its complete financial statements together with a Certificate of
an Authorized Representative of the Borrower stating that no event which
constitutes a Loan Default Event or which with the giving of notice or the
passage of time or both would constitute a Loan Default Event has occurred
and is continuing as of the end of such Fiscal Year, or specifying the
nature of such event and the actions taken and proposed to be taken by the
Borrower to cure such default.
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(c) The Borrower shall, within 60 days of the receipt of a written
request from the Authority or the Trustee, furnish a written report to the
requesting party, as of the end of the Borrower's prior Fiscal Year,
stating the status of the Project, the outstanding and unpaid balance of
the Bonds, the number of full-time and part-time employees of the Borrower
employed at the Project during such prior Fiscal Year, and supplying such
current information as the Authority shall reasonably request regarding
other matters covered in the Borrower's application for industrial revenue
bond financing.
Section 5.04. Insurance. The Borrower agrees to insure the Project or
cause the Project to be insured during the term of this Agreement for such
amounts and for such occurrences as are customary for similar facilities within
the State, or as may be required by the Bank, by means of policies issued by
reputable insurance companies qualified to do business in the State. Upon the
written request of the Authority or the Trustee, the Borrower shall deliver to
the requesting party, within 60 days of the receipt of such request, memorandum
copies of the insurance policies or certificates of insurance which memorandum
copies of insurance policies or certificates of insurance shall evidence that
all insurance required to be in effect under this Section is then currently in
full force and effect. The Trustee and the Authority are not responsible for
the adequacy or sufficiency of the coverage evidenced by such policies or
certificates.
Section 5.05. Maintenance and Repair; Taxes; Utility and Other Charges.
The Borrower agrees to maintain the Project, or cause the Project to be
maintained, during the term of this Agreement (a) in a safe condition and (b) in
good repair and in good operating condition, ordinary wear and tear excepted,
making from time to time all necessary repairs thereto and renewals and
replacements thereof.
The Borrower agrees to pay or cause to be paid during the term of this
Agreement all taxes, governmental charges of any kind lawfully assessed or
levied upon the Project or any part thereof, including any taxes levied against
the Project which, if not paid, will become a charge on the Project, all utility
and other charges incurred in the operation, maintenance, use, occupancy and
upkeep of the Project and all assessments and charges lawfully made by any
governmental body for public improvements that may be secured by a lien on the
Project; provided that with respect to special assessments or other governmental
charges that may lawfully be paid in installments over a period of years, the
Borrower shall be obligated to pay only such installments as are required to be
paid during the term of this Agreement. The Borrower may, at the Borrower's
expense and in the Borrower's name, in good faith, contest any such taxes,
assessments and other charges and, in the event of any such contest, may permit
the taxes, assessments or other charges so contested to remain unpaid during
that period of such contest and any appeal therefrom unless by such nonpayment
the Project or any part thereof will be subject to loss or forfeiture.
Section 5.06. Qualification in California. The Borrower agrees that
throughout the term of this Agreement it and any lessee of the Project, if any,
will be qualified to do business in the State.
12
Section 5.07. Alternate Credit Facility. If the Borrower exercises its
option to convert the interest rate borne by the Bonds from the Weekly Interest
Rate to the Fixed Interest Rate pursuant to the terms and provisions of the
Indenture, the Borrower may cause to be delivered to the Trustee an Alternate
Credit Facility, effective as of the Fixed Rate Date, in lieu of keeping the
Letter of Credit in place as required by Section 5.08 hereof.
Such Alternate Credit Facility must meet the following conditions:
(a) the Alternate Credit Facility must be approved by the Authority
or any successors;
(b) the terms of the Alternate Credit Facility must provide an
unconditional obligation of the issuer of the Alternate Credit Facility to
pay all amounts with respect to the principal of, premium, if any, and
interest on the Bonds when the same shall become due; and
(c) the term of the Alternate Credit Facility must extend to the
final maturity of the Bonds.
On or prior to the date of the delivery of an Alternate Credit Facility to
the Trustee, the Borrower shall cause to be furnished to the Authority and the
Trustee (i) an Opinion of Bond Counsel stating that the delivery of such
Alternate Credit Facility to the Trustee is authorized under this Agreement and
complies with the terms hereof and will not cause interest on the Bonds not to
be Tax-exempt, (ii) such opinions regarding the validity of the Alternate Credit
Facility as the Authority, the Trustee and any rating agency then rating the
Bonds may reasonably require, and (iii) written evidence from Moody's, if the
Bonds are then rated by Moody's, and S&P, if the Bonds are then rated by S&P, to
the effect that such rating agency has reviewed the proposed Alternate Credit
Facility and that the substitution of the proposed Alternate Credit Facility for
the Letter of Credit will not, by itself, result in a reduction of its long term
rating of the Bonds below "A" if the Bonds are rated by S&P or below "A2" if the
Bonds are rated by Moody's.
Section 5.08. Letter of Credit. The Borrower shall at all times
throughout the term of this Agreement (but subject to Section 5.07 hereof)
maintain or cause to be maintained the Letter of Credit with respect to the
Bonds. The Letter of Credit shall be an obligation of the Bank to pay to the
Trustee, against presentation of sight drafts and certificates required by the
Bank, up to (a) an amount equal to the aggregate principal amount of the Bonds
then Outstanding as necessary to pay the principal of such Bonds, whether at
maturity, redemption, acceleration or otherwise or upon the purchase of such
Bonds upon the optional tender of the Bonds pursuant to Section 4.06 of the
Indenture and on the Mandatory Tender Date, and (b) an amount equal to 45 days
(or such other number of days as may be required to obtain a rating on the
Bonds) of interest on the Bonds calculated at an interest rate of 12% per annum
on the basis of a 365- or 366-day year, as applicable, for the number of days
actually elapsed while the Bonds bear interest at the Weekly Interest Rate and
an amount equal to 210 days (or such other number of days as may be required to
obtain a rating on the Bonds if the Bonds are then rated) of interest on the
Bonds calculated at the actual interest rate or rates on the Bonds on the basis
of a 360-day year of twelve 30-day months while the Bonds bear interest at the
Fixed Interest Rate to pay interest on the Bonds when due.
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On any Interest Payment Date, the Borrower may, at its option, but with the
written approval of the Authority, which written approval shall not be
unreasonably withheld, provide or cause to be provided to the Trustee an
Alternate Letter of Credit and the Borrower shall, in any event, cause to be
delivered to the Trustee an extension of the Expiration Date of the Letter of
Credit or an Alternate Letter of Credit at least (a) 23 days before the
Expiration Date of the then-existing Letter of Credit while the Bonds bear
interest at the Weekly Interest Rate, or (b) 45 days before the Expiration Date
of the then existing Letter of Credit while the Bonds bear interest at the Fixed
Interest Rate. At least 30 days prior to the Letter of Credit Substitution
Date, the Borrower shall provide the Authority, the Trustee, the Bank, the
Tender Agent and the Remarketing Agent with a written notice of its intention to
provide an Alternate Letter of Credit pursuant to this Section. Such notice
shall include the proposed Letter of Credit Substitution Date, which shall be an
Interest Payment Date, and identify the provider of the Alternate Letter of
Credit. An Alternate Letter of Credit shall be an irrevocable direct-pay letter
of credit or other irrevocable credit facility delivered to the Trustee on or
prior to 8:00 a.m. (California time) on the Letter of Credit Substitution Date,
issued by a commercial bank or other financial institution, the terms of which
shall in all material respects be the same as the Letter of Credit. On or prior
to the date of the delivery of an Alternate Letter of Credit to the Trustee, the
Borrower shall cause to be furnished to the Authority and the Trustee (i) an
Opinion of Bond Counsel stating that the delivery of such Alternate Letter of
Credit to the Trustee is authorized pursuant to this Agreement, complies with
the terms hereof and will not cause the interest on the Bonds not to be Tax-
exempt, (ii) such opinions regarding the validity of the Alternate Letter of
Credit as the Authority, the Trustee and any rating agency then rating the Bonds
may reasonably require, and (iii) written evidence from Moody's, if the Bonds
are then rated by Moody's, and S&P, if the Bonds are then rated by S&P, to the
effect that such rating agency has reviewed the proposed Alternate Letter of
Credit and that the substitution of the proposed Alternate Letter of Credit will
not, by itself, result in a reduction of its long-term rating of the Bonds below
"A" if the Bonds are rated by S&P or below "A2" if the Bonds are rated by
Moody's.
It is understood and agreed that with proper notification to the Trustee
and the Borrower, the Bank can declare that a default has occurred under the
Reimbursement Agreement with the Borrower and such default will cause a
mandatory redemption of Bonds pursuant to Section 4.01(g) of the Indenture.
Section 5.09. Covenants of the Borrower. It is the intention of the
parties hereto that interest on the Bonds shall be and remain Tax-exempt so long
as the Bonds are Outstanding, and to that end the representations, covenants,
and agreements of the Authority and the Borrower in this Section and in Sections
5.10 and 5.11 hereof are for the benefit of the Trustee and each and every
Registered Owner of the Bonds. The Borrower represents, warrants and agrees as
follows:
(a) The Project consists, and at all times shall consist, of land or
property which is subject to the allowance for depreciation provided in
Section 167 of the Code, and substantially all (95% or more) of the
proceeds of the Bonds including proceeds of investment thereof, shall be
used to pay the Costs of the Project which are chargeable to the capital
account of the Borrower, and which were paid not earlier than 60 days
before January 28, 1998. The Borrower shall allocate the proceeds of the
Bonds to the
14
Costs of the Project no later than 18 months after the later of the date
the original expenditure is paid or the date the Project is placed in
service or abandoned, but in no event more than three years after the
original expenditure is paid.
(b) No portion of the proceeds of the Bonds shall be used to provide
for a private or commercial golf course, country club, massage parlor,
tennis club, skating facility (including roller skating, skate board and
ice skating), racquet sports facility (including any handball or
racquetball court), hot tub facility, suntan facility, race track,
automobile sales or service facility, retail food or beverage facility,
entertainment facility, airplane, gambling establishment, health club,
liquor store, skybox or luxury box.
(c) Less than 25% of the net proceeds of the Bonds (after Costs of
Issuance) shall be used to purchase land or interests in land. The Borrower
covenants to spend sufficient sums from the Project Fund on Costs of the
Project to assure compliance with this covenant.
(d) No proceeds of the Bonds shall be used to acquire any personal
property or facilities unless the first use of such property or facilities
shall be pursuant to such acquisition, except that if the Project consists
of acquisition of a building, the Borrower shall, within two years after
the Date of Delivery or the date of acquisition of such building, whichever
is earlier, expend an amount, from proceeds of the Bonds or otherwise,
equal to 15% of the cost of acquiring such building financed with proceeds
of the Bonds on rehabilitation costs of such building as required by
Section 147(d) of the Code.
(e) During the three-year period following the date the Project is
placed in service, the Borrower shall not allow any other Person to become
a "test-period beneficiary" of the Bonds who is a beneficiary of industrial
development bonds in an amount which would cause the issuance of the Bonds
to exceed such Person's aggregate per-taxpayer limit under Section
144(a)(10) of the Code.
(f) No agreement shall be entered into which would result in the
payment of principal or interest on the Bonds being "federally guaranteed"
within the meaning of Section 149(b) of the Code.
(g) There is no outstanding issue of industrial development bonds
which was used to finance any facilities which, in relation to the Project,
would constitute (i) a single building, (ii) an enclosed shopping mall, or
(iii) a strip of offices, stores or warehouses using substantial common
facilities.
(h) Subject to the provisions of the final paragraph of Section 5.10
hereof, no actions shall be taken, or omitted to be taken, by the Borrower
which would have the effect, directly or indirectly, of causing interest on
any of the Bonds to not be Tax-exempt.
15
(i) No changes shall be made in the Project or the use of the Project
which shall in any way impair the Tax-exempt status of interest on the
Bonds.
(j) No use or investment of the proceeds of the Bonds or any acquired
obligation shall be made which would cause the Bonds to become "arbitrage
bonds" within the meaning of Section 148 of the Code and any Regulations
thereunder, and the Borrower shall comply with the requirements of said
Section of the Code and said Regulations, as the same may be amended from
time to time, so long as any Bonds remain Outstanding.
(k) To use due diligence to cause the Project to be operated in all
material respects in accordance with all applicable laws, rulings,
regulations and ordinances.
(l) To comply in all material respects with all written conditions
imposed by the Authority and any State or local agency in its approval of
the Project.
(m) To fully and faithfully perform all the duties and obligations
which the Authority has covenanted and agreed in the Indenture to cause the
Borrower to perform and any duties and obligations which the Borrower is
required in the Indenture to perform. The foregoing shall not apply to any
duty or undertaking of the Authority which by its nature cannot be
delegated or assigned.
(n) The rights, duties and obligations imposed on the Borrower
pursuant to the Remarketing Agreement are hereby acknowledged, approved and
accepted.
(o) To faithfully perform at all times any and all covenants,
undertakings, stipulations and provisions to be observed or performed by
the Borrower contained in the Indenture, in the Bonds, and in all
proceedings of the Authority pertaining thereto, or otherwise required of
the Borrower to be observed or performed, whether express or implied.
(p) To comply with the covenants and obligations of the Borrower
contained in the Reimbursement Agreement.
(q) To use less than 25% of the net proceeds of the Bonds (after
deducting Costs of Issuance) to provide facilities which are directly
related and ancillary to the manufacturing facility being financed with the
proceeds of the Bonds, in accordance with Section 144(a)(12)(C) of the
Code.
(r) To not become a Registered Owner of the Bonds, and to not
directly or indirectly purchase Bonds from the Remarketing Agent or permit
any Related Party to directly or indirectly purchase Bonds from the
Remarketing Agent.
Notwithstanding any other provision of this Agreement or the Indenture,
including in particular Article X of the Indenture, the obligations of the
Borrower and the Authority to comply with the covenants set forth in this
Section and Section 5.10 hereof shall survive the defeasance or payment in full
of the Bonds.
16
Section 5.10. Capital Expenditures. For the purpose of this Section and
Section 5.09 hereof the following terms shall have the following meanings:
"Facilities" shall mean those facilities described in Section 144(a)(1) of
the Code and Regulations thereunder, including Section 1.103-10(b)(2)(ii)(e) and
Section 1.103-10(d)(2) of the Regulations, and shall include those facilities
any Principal User of which is the Borrower or a related person, as defined in
Section 144(a)(3) of the Code, located in the Project Location, and any
contiguous or integrated facility treated as being located in the Project
Location by reason of the fact that such facility is located on both sides of a
border between the Project Location and one or more other political
jurisdictions.
"Principal User" means any principal user of the Project as defined in
Proposed Treasury Regulations Section 1.103-10(h).
"Project Location" shall mean the area within the City of Lathrop,
California.
"Regulations" shall mean those regulations, whether now or hereafter
adopted, prepared by the United States Department of the Treasury with respect
to Section 103 or Part IV of subchapter B of chapter 1 of the Code.
"Section 144 Capital Expenditures" shall mean those expenditures required
to be taken into account with respect to the Bonds pursuant to Section 144(a)(1)
and (4) of the Code and Regulations thereunder, including Section 1.103-
10(b)(2)(ii) and (iii) of the Regulations, including any expenditure with
respect to Facilities, no matter by whom made (regardless of how paid, whether
in cash, notes or stock in a taxable or nontaxable transaction), paid or
incurred during the six-year period beginning 3 years before the date of
issuance and delivery of the Bonds, which may, under any rule or election under
the Code, be treated as a capital expenditure (whether or not such expenditure
is so treated), and which is not paid or reimbursed out of the original
principal proceeds (exclusive of investment income) of the Bonds, but not
including excluded expenditures pursuant to Section 144(a)(4)(C) of the Code and
Regulations thereunder, including Section 1.103-10(b)(2)(iv) and (v) of the
Regulations. Such term shall also include research and development costs
properly allocable to the Project no matter where paid or incurred, unless
specifically excluded by Section 144(a)(4)(C).
The Borrower represents and warrants that substantially all of the proceeds
of the Bonds are to be used with respect to the Project to be located in the
Project Location; that there are no other outstanding obligations issued
subsequent to September 30, 1968, of any state, territory or possession of the
United States of America, or any political subdivision of the foregoing or of
the District of Columbia, the proceeds of which have been or are to be used
primarily with respect to Facilities; and that the sum of the principal amount
of the Bonds plus the amount of Section 144 Capital Expenditures for the three-
year period ending on the date of issuance and delivery of the Bonds does not
exceed $10,000,000.
The Authority covenants and agrees that it has not taken and shall not take
any action which will cause interest on the Bonds to not be Tax-exempt.
The Authority hereby elects to have the provisions of Section 144(a)(4)(A)
of the Code apply to the Bonds. The Borrower covenants that it shall furnish to
the Authority prior to the
17
issuance and delivery of the Bonds whatever information is necessary for the
Authority to make such election.
The Borrower further covenants that it shall take, and shall cause any
other Principal User to take, such further actions as are required of a
Principal User of property financed by an issue of obligations which are subject
to the $10,000,000 limitation of Section 144(a)(4)(A) of the Code, which actions
are set forth in Section 144(a)(4)(A) of the Code and in the Regulations,
including Section 1.103-10(b) of the Regulations.
The Borrower further covenants and agrees, so long as any of the Bonds are
Outstanding under the Indenture, that the aggregate principal of Bonds being
issued plus the aggregate amount of Section 144 Capital Expenditures made or to
be made with respect to Facilities during the six-year period beginning three
years before the date of issuance and delivery of the Bonds shall not exceed
$10,000,000 (or any such larger amount as may be hereafter permitted by law).
Notwithstanding anything in Section 5.09(h) hereof or in this Section to
the contrary, neither the Borrower nor the Authority shall have violated the
covenants contained in Section 5.09(h) hereof or in this Section if the interest
on any of the Bonds becomes taxable to a Person solely because such Person is a
"substantial user" of the Project or a "related person" within the meaning of
Section 147(a) of the Code; and none of the covenants and agreements herein
contained shall require either the Borrower or the Authority to enter an
appearance or intervene in any administrative, legislative or judicial
proceeding in connection with any changes in applicable laws, rules or
regulations or in connection with any decisions of any court or administrative
agency or other governmental body affecting the taxation of interest on the
Bonds.
Section 5.11. Special Arbitrage Certifications.
(a) The Authority hereby certifies to the Borrower (i) that it has
not been notified of any listing or proposed listing of it by the Internal
Revenue Service as a bond issuer whose arbitrage certifications may not be
relied upon and (ii) that issuance of the Bonds will not violate any
provisions of Section 103 of the Code, Section 148 of the Code, or the
Regulations issued under such Sections of the Code, such that the interest
on the Bonds is not Tax-exempt.
(b) The Borrower and the Authority agree to comply with the Tax
Regulatory Agreement, as such Tax Regulatory Agreement shall be amended
from time to time in order that interest on the Bonds remains Tax-exempt.
The Borrower further agrees to cause any other Principal User (as defined
in Section 5.10 hereof) of the Project to comply with the terms of this
Loan Agreement and the Tax Regulatory Agreement to the extent necessary to
insure that interest on the Bonds remains Tax-exempt.
Section 5.12. Covenant to Enter into Agreement or Contract to Provide
Ongoing Disclosure.The Borrower and the Authority hereby agree that the initial
offering and sale of the Bonds is exempt from the requirements of Paragraph
(b)(5)(i) of the Securities and Exchange Commission Rule 15c2-12 under the
Securities Exchange Act of 1934, as amended (17 CFR Part 240, (S) 240.15c2-12)
(the "Rule"). The Borrower hereby covenants and agrees
18
that if as a result of the conversion of the interest rate borne by the Bonds
from the Weekly Interest Rate to the Fixed Interest Rate or as a result of any
amendment to the Rule or any amendment or supplement to the Indenture or this
Agreement, the Bonds cease to be exempt under the Rule, the Borrower will enter
into an agreement or contract, constituting an undertaking, to provide ongoing
disclosure as may be necessary to comply with the Rule as then in effect. The
covenant and agreement contained in this Section is for the benefit of the
Registered Owners, any Participating Underwriter and the Beneficial Owners (as
defined in the Indenture) as required by the Rule. It is the Borrower's express
intention that this Section be assigned pursuant to and in accordance with
Section 6.09 of the Indenture to the Trustee for the benefit of the Registered
Owners, any Participating Underwriter and the Beneficial Owners and that each
Registered Owner, Participating Underwriter and Beneficial Owner be a
beneficiary of this Section with the right to enforce this Section against the
Borrower. Notwithstanding any other provision of this Agreement, failure of the
Borrower to comply with the provisions of this Section shall not be considered a
Loan Default Event; provided, however, the Trustee may (and, at the request of
any Participating Underwriter or the Registered Owners of at least 25% aggregate
principal amount in Outstanding Bonds, shall) or any Beneficial Owner may take
such actions as may be necessary and appropriate, including seeking specific
performance by court order, to cause the Borrower to comply with its obligations
under this Section.
Section 5.13. No Purchase of Bonds. The Authority covenants and agrees
that it shall not become a Registered Owner of the Bonds and shall not directly
or indirectly purchase Bonds from the Remarketing Agent.
ARTICLE VI
DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF PROCEEDS
Section 6.01. Obligation to Continue Payments. If prior to full payment of
the Bonds (or provision for payment thereof in accordance with the provisions of
the Indenture) (a) the Project or any portion thereof is destroyed (in whole or
in part) or is damaged by fire or other casualty, or (b) title to, or the
temporary use of, the Project or any portion thereof shall be taken under the
exercise of the power of eminent domain by any governmental body or by any
Person acting under governmental authority, the Borrower shall nevertheless be
obligated to continue to pay the amounts specified in Article IV hereof, to the
extent not prepaid in accordance with Article VIII hereof.
Section 6.02. Application of Net Proceeds. The Borrower shall be entitled
to the Net Proceeds, if any, of any insurance or condemnation awards resulting
from the damage, destruction or condemnation of the Project or any portion
thereof for application as provided in this Section and in the Reimbursement
Agreement. All Net Proceeds shall be deposited by the Borrower in an escrow
account with the Bank pursuant to the Reimbursement Agreement and shall be
applied in one or more of the following ways at the election of the Borrower,
with the written consent of the Bank, by written notice to the Authority and the
Trustee:
(a) The prompt repair, restoration, relocation, modification or
improvement of the damaged, destroyed or condemned portion of the Project
to enable such portion
19
of the Project to accomplish at least the same function as such portion of
the Project was designed to accomplish prior to such damage or destruction
or exercise of such power of eminent domain. If the Borrower elects to
proceed as provided in this subsection (a), it shall give the Authority and
the Trustee written notice thereof, and evidence of the Bank's written
consent, within 90 days of the deposit of the Net Proceeds with the Bank.
Any balance of the Net Proceeds remaining after such work has been
completed shall be deposited in the Revenue Fund to be applied, with the
written consent of the Bank, to the payment of principal of and premium, if
any, and interest on the Bonds, or, if the Bonds have been fully paid (or
provision for payment thereof has been made in accordance with the
provisions of the Indenture), any balance remaining in the Revenue Fund
shall be paid in accordance with the requirements of Section 10.04 of the
Indenture.
(b) The prepayment of all or a portion of the Loan in accordance with
Article VIII hereof and redemption of Bonds. If the Borrower fails to give
the notice and evidence of the Bank's written consent required by Section
6.02(a) above within 90 days of the deposit of the Net Proceeds with the
Bank, the Borrower shall be deemed to have elected to apply the Net
Proceeds to the prepayment of all or a portion of the Loan as provided in
this subsection (b) in accordance with Section 8.02(a) hereof, the Bank
shall be deemed to have consented to such application, and the Authority
and the Trustee shall be deemed to have received written notice thereof for
purposes of this Section.
Section 6.03. Insufficiency of Net Proceeds. If the Project or a portion
thereof is to be repaired, restored, relocated, modified or improved pursuant to
Section 6.02(a) hereof, and if the Net Proceeds are insufficient to pay in full
the cost of such repair, restoration, relocation, modification or improvement,
the Borrower will nonetheless complete the work or cause the work to be
completed and will pay or cause to be paid any cost thereof in excess of the
amount of the Net Proceeds held in escrow.
Section 6.04. Damage to or Condemnation of Other Property. Subject to the
terms and provisions of the Reimbursement Agreement, the Borrower shall be
entitled to the Net Proceeds of any insurance or condemnation award or portion
thereof made for damages to or takings of its property not included in the
Project.
ARTICLE VII
LOAN DEFAULT EVENTS AND REMEDIES
Section 7.01. Loan Default Events. Any one of the following which occurs
and continues shall constitute a Loan Default Event:
(a) failure of the Borrower to pay any Loan Repayment when and as the
same shall become due and payable pursuant to Section 4.02(a) hereof;
(b) failure of the Borrower to pay any amounts payable hereunder,
other than Loan Repayments, when and as the same shall become due, which
failure
20
continues for a period of 30 days after written notice delivered to the
Borrower and the Bank, which notice shall specify such failure and request
that it be remedied, given by the Authority or the Trustee, unless the
Authority and the Trustee shall agree in writing to an extension of such
time;
(c) failure of the Borrower to observe and perform any covenant,
condition or agreement on its part required to be observed or performed by
this Agreement, other than a covenant described in subsection (a) or
subsection (b) above or in Section 5.12 hereof, which failure continues for
a period of 30 days after written notice delivered to the Borrower and the
Bank, which notice shall specify such failure and request that it be
remedied, given by the Authority or the Trustee, unless the Authority and
the Trustee, with the written approval of the Bank, shall agree in writing
to an extension of such time; provided, however, that if the failure stated
in the notice cannot be corrected within such period, the Authority and the
Trustee will not unreasonably withhold their consent to an extension of
such time if corrective action is instituted within such period and
diligently pursued until the default is corrected; or
(d) existence of an Event of Default under and as defined in Sections
7.01(a) through (e) of the Indenture.
The provisions of subsection (c) of this Section are subject to the
limitation that the Borrower shall not be deemed in default if and so long as
the Borrower is unable to carry out its agreements hereunder by reason of
strikes, lockouts or other industrial disturbances; acts of public enemies;
orders of any kind of the government of the United States or of the State or any
of their departments, agencies, or officials, or any civil or military
authority; insurrections, riots, epidemics, landslides; lightning; earthquake;
fire; hurricanes; storms; floods; washouts; droughts; arrests; restraint of
government and people; civil disturbances; explosions; breakage or accident to
machinery, transmission pipes or canals; partial or entire failure of utilities;
or any other cause or event (whether similar or dissimilar to the foregoing) not
reasonably within the control of the Borrower; it being agreed that the
settlement of strikes, lockouts and other industrial disturbances shall be
entirely within the discretion of the Borrower, and the Borrower shall not be
required to make settlement of strikes, lockouts and other industrial
disturbances by acceding to the demands of the opposing party or parties when
such course is, in the judgment of the Borrower, unfavorable to the Borrower.
This limitation shall not apply to any default under subsections (a), (b), or
(d) of this Section. Notwithstanding any other provision of this Agreement to
the contrary, so long as the Bank is not in default under the Letter of Credit,
the Trustee shall not without the prior written consent or direction of the Bank
exercise any remedies under this Agreement in the case of any Loan Default Event
described in subsections (a), (b), or (c) above.
Section 7.02. Remedies on Default. Subject to the last sentence of Section
7.01 above, whenever any Loan Default Event shall have occurred and shall be
continuing,
(a) The Trustee, by written notice to the Borrower and the Bank,
shall declare all unpaid amounts payable under Section 4.02(a) hereof to be
due and payable immediately, provided that concurrently with or prior to
such notice the unpaid principal amount of the Bonds shall have been
declared to be due and payable under the
Indenture. Upon any such declaration such amount shall become and shall be
immediately due and payable in the amount set forth in Section 7.01 of the
Indenture.
(b) The Trustee shall have access to and may inspect, examine and
make copies of the books and records and any and all accounts, data and
federal income tax and other tax returns of the Borrower.
(c) The Authority or the Trustee may take whatever action at law or
in equity as may be necessary or desirable to collect the payments and
other amounts then due and thereafter to become due or to enforce
performance and observance of any obligation, agreement or covenant of the
Borrower under this Agreement.
In case the Trustee or the Authority shall have proceeded to enforce its
rights under this Agreement and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Trustee
or the Authority, then, and in every such case, the Borrower, the Trustee and
the Authority shall be restored respectively to their several positions and
rights hereunder, and all rights, remedies and powers of the Borrower, the
Trustee and the Authority shall continue as though no such action had been
taken.
The Borrower covenants that, in case a Loan Default Event shall occur and
all unpaid amounts payable under Section 4.02(a) hereof shall have been declared
due and payable immediately pursuant to Section 7.02(a) hereof, then, upon
demand of the Trustee, the Borrower will pay to the Trustee the whole amount
that then shall have become due and payable under said Section, with interest on
the amount then overdue at the rate of 10% per annum until such amount has been
paid or, if ten percent is greater than the rate then permitted by law, at the
greatest rate then permitted.
In case the Borrower shall fail forthwith to pay such amounts upon such
demand, the Trustee shall be entitled and empowered to institute any action or
proceeding at law or in equity for the collection of the sums so due and unpaid,
and may prosecute any such action or proceeding to judgment or final decree, and
may enforce any such judgment or final decree against the Borrower and collect
in the manner provided by law the moneys adjudged or decreed to be payable.
In case proceedings shall be pending for the bankruptcy or for the
reorganization of the Borrower under the federal bankruptcy laws or any other
applicable law, or in case a receiver or trustee shall have been appointed for
the property of the Borrower or in the case of any other similar judicial
proceedings relative to the Borrower, or the creditors or property of the
Borrower, then the Trustee shall be entitled and empowered, by intervention in
such proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Agreement and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee allowed in
such judicial proceedings relative to the Borrower, its creditors or its
property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute such amounts as provided in
the Indenture after the deduction of its reasonable charges and expenses. Any
receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized to make such payments to the Trustee, and to pay to the
22
Trustee any amount due it for reasonable compensation and expenses, including
reasonable expenses and fees of counsel incurred by it up to the date of such
distribution.
Section 7.03. Agreement to pay Attorneys' Fees and Expenses. In the event
the Borrower should default under any of the provisions of this Agreement,
whether or not such default constitutes a Loan Default Event hereunder, and the
Authority or the Trustee should employ attorneys or incur other expenses for the
collection of the payments due under this Agreement or the enforcement of
performance or observance of any obligation or agreement on the part of the
Borrower herein contained, the Borrower agrees to pay to the Authority or the
Trustee the reasonable fees and expenses of such attorneys and such other
reasonable expenses so incurred by the Authority or the Trustee.
Section 7.04. No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Authority or the Trustee is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon any default
shall impair any such right or power or shall be construed to be a waiver
thereof, but any such right and power may be exercised from time to time and as
often as may be deemed expedient. To entitle the Authority or the Trustee to
exercise any remedy reserved to it in this Article, it shall not be necessary to
give any notice, other than such notice as may be herein expressly required.
Such rights and remedies as are given the Authority hereunder shall also extend
to the Trustee, and the Trustee and the Registered Owners of the Bonds shall be
deemed third party beneficiaries of all covenants and agreements herein
contained.
Section 7.05. Waivers. No delay or omission of the Authority or the
Trustee to exercise any right or power arising upon the occurrence of any
default shall impair any such right or power or shall be construed to be a
waiver of any such default or an acquiescence therein; and every power and
remedy given by this Agreement to the Authority or the Trustee may be exercised
from time to time and as often as may be deemed expedient. In the event any
agreement or covenant contained in this Agreement should be breached by the
Borrower and thereafter waived by the Authority or the Trustee, such waiver
shall be limited to the particular breach so waived and shall not be deemed to
waive any other breach hereunder.
ARTICLE VIII
PREPAYMENT
Section 8.01. Redemption of Bonds with Prepayment Moneys. By virtue of the
assignment of the rights of the Authority under this Agreement to the Trustee as
is provided in Section 4.05 hereof, the Borrower agrees to and shall pay
directly to the Trustee any amount permitted or required to be paid by it under
this Article. The Indenture provides that the Trustee shall use the moneys so
paid to it by the Borrower, pursuant to the written instructions of the
Borrower, to redeem the Bonds on the date set for such redemption pursuant to
Section 8.05 hereof.
23
Section 8.02. Options to Prepay Loan. The Borrower shall have the option
to prepay the Loan by paying to the Trustee the amount set forth in Section 8.04
hereof, for deposit in the Revenue Fund, to be applied to the redemption of
Bonds as set forth below on the earliest date such Bonds are subject to
redemption pursuant to the Indenture and as to which notice of redemption can be
given in accordance with the Indenture, at the redemption prices set forth
below, under the following circumstances:
(a) The Borrower may prepay such amounts in whole, and cause all of
the Outstanding Bonds to be redeemed at the redemption price set forth in
Section 4.01(e) of the Indenture, if any of the following shall have
occurred:
(i) The Project shall have been damaged or destroyed, in whole
or in part, by fire or other casualty and the Authority and the
Trustee receive a Certificate of the Authorized Representative of the
Borrower to the effect that: (A) it is not practicable or desirable to
rebuild, repair or restore the Project within a period of six
consecutive months following such damage or destruction, (B) the
Borrower is or will be thereby prevented from carrying on its normal
operations at the Project for a period of at least six consecutive
months, or (C) the cost of restoration of the Project would
substantially exceed the Net Proceeds of insurance carried thereon; or
(ii) Title to, or the temporary use of, all or substantially
all of the Project shall have been taken by any governmental
authority, or any Person acting under governmental authority,
exercising the power of eminent domain and the Authority and the
Trustee receive a Certificate of the Authorized Representative of the
Borrower to the effect that: (A) the Borrower is thereby prevented
from carrying on its normal operations at the Project for a period of
at least six consecutive months or (B) the Project is unsuitable for
use by the Borrower;
(b) The Borrower may prepay all or any part of the Loan from any
available funds and cause all or any part of the Outstanding Bonds to be
redeemed at the redemption prices set forth in Section 4.01(b) or 4.01(f)
of the Indenture, as applicable, but subject to any additional requirements
of the Reimbursement Agreement.
Section 8.03. Mandatory Prepayment.
(a) The Borrower shall have and hereby accepts the obligation to
prepay in full the Loan by paying to the Trustee the amount set forth in
Section 8.04 hereof for deposit to the Revenue Fund to be used to redeem
all the Outstanding Bonds on the earliest date such Bonds are subject to
redemption pursuant to the Indenture and as to which notice of the
redemption can be given in accordance with the Indenture, at the redemption
prices set forth in Section 4.01(e) of the Indenture with respect to
subsection (i) below, Section 4.01(c) of the Indenture with respect to
subsections (ii) and (iii) below, and in the Indenture Sections noted with
respect to subsection (iv) below:
24
(i) if and when as a result of any changes in the Constitution
of the United States of America or the California Constitution or as a
result of any legislative, judicial or administrative action, this
Agreement shall have become void or unenforceable or impossible of
performance in accordance with the intention and purposes of the
parties hereto, or shall have been declared unlawful;
(ii) if, due to the untruth or inaccuracy of any representation
or warranty made by the Borrower herein or in connection with the
offer and sale of the Bonds, or the breach of any covenant or warranty
of the Borrower contained in this Agreement, interest on the Bonds, or
any of them, is determined not to be Tax-exempt to the Registered
Owners thereof (other than a Registered Owner who is a "substantial
user" of the Project or a "related person" within the meaning of
Section 147(a) of the Code) by a final administrative determination of
the Internal Revenue Service or final judicial decision of a court of
competent jurisdiction in a proceeding of which the Borrower received
notice and was afforded an opportunity to participate in to the full
extent permitted by law. A determination or decision will be
considered final for this purpose when all periods for administrative
and judicial review have expired;
(iii) if either: (A) the Borrower or any other Principal User of
the Project files a notice with the Authority and the Trustee to the
effect that the capital expenditure limitation of Section 144(a)(4) of
the Code has been exceeded, or will be exceeded, within a period of 60
days; or (B) there is a final determination (as defined in subsection
(ii) above) by the Internal Revenue Service or a court of competent
jurisdiction that such capital expenditures limitation has been
exceeded; and
(iv) if mandatory redemption is required by any of Sections
4.01(d), (g), or (h) of the Indenture.
The amount payable by the Borrower in the event of a prepayment required by
this Section shall be determined as set forth in Section 8.04 hereof and
shall be deposited in the Revenue Fund upon demand by the Authority or the
Trustee.
(b) The Borrower shall prepay all or any part of the Loan from Net
Proceeds under the circumstances described in Section 6.02(b) hereof, and
cause all or any part of the Outstanding Bonds to be redeemed at the
redemption price set forth in Section 4.01(e) of the Indenture.
Section 8.04. Amount of Prepayment. In the case of a prepayment in full
of the Loan by the Borrower under this Agreement pursuant to Section 8.02 or
8.03 hereof, the amount to be paid shall be a sum sufficient, together with
other funds deposited with the Trustee and available for such purpose, to pay
(a) the redemption price specified in the applicable subsections of Section 8.02
or 8.03 hereof, for all Outstanding Bonds, plus all interest accrued and to
accrue to the redemption date, (b) all reasonable and necessary fees and
25
expenses of the Authority, the Trustee and any paying agent allowable pursuant
to this Agreement and the Indenture accrued and to accrue through final payment
of the Bonds and (c) all other liabilities of the Borrower accrued and to accrue
under this Agreement.
In the case of partial prepayment of the Loan by the Borrower under this
Agreement pursuant to Section 8.02 or 8.03 hereof, the amount to be paid shall
be a sum sufficient, together with other funds deposited with the Trustee and
available for such purpose, to pay the redemption price specified in the
applicable subsections of Section 8.02 or 8.03 hereof, for the Bonds to be
redeemed, plus all interest accrued and to accrue to the redemption date, and to
pay expenses of redemption of such Bonds. All partial prepayments of the Loan
made by the Borrower under this Agreement shall be applied in inverse order of
the due dates thereof, or as otherwise provided in the Indenture.
Section 8.05. Notice of Prepayment. The Borrower shall give written
notice to the Authority, the Bank and the Trustee (a) while the Bonds bear
interest at the Weekly Interest Rate, not less than 20 days prior to the date of
any prepayment of a Loan Repayment and (b) while the Bonds bear interest at the
Fixed Interest Rate, not less than 40 days prior to the date of any prepayment
of a Loan Repayment, in each case specifying the date upon which any prepayment
will be made, the basis for such prepayment and the amount of such prepayment.
If the Borrower fails to give such notice of a prepayment of Loan Repayments,
the Indenture provides that the Trustee shall hold such prepayment in the
Redemption Fund.
ARTICLE IX
NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION
Section 9.01. Non-Liability of Authority. The Authority shall not be
obligated to pay the principal of, premium, if any, or interest on the Bonds,
except from Revenues. The Borrower hereby acknowledges that the Authority's
sole source of moneys to repay the Bonds will be provided by the payments made
by the Borrower pursuant to this Agreement, together with other Revenues,
including investment income on certain funds and accounts held by the Trustee
under the Indenture, and hereby agrees that if the payments to be made hereunder
shall ever prove insufficient to pay all principal of, and premium, if any, and
interest on the Bonds as the same shall become due (whether by maturity,
redemption, acceleration or otherwise), then upon notice from the Trustee, the
Borrower shall pay such amounts as are required from time to time to prevent any
deficiency or default in the payment of such principal, premium or interest,
including, but not limited to, any deficiency caused by acts, omissions,
nonfeasance or malfeasance on the part of the Trustee, the Borrower, the
Authority or any third party.
Section 9.02. Expenses. The Borrower covenants and agrees to pay, and to
indemnify the Authority and the Trustee against, all costs and charges,
including reasonable fees and disbursements of attorneys, accountants,
consultants and other experts, incurred in good faith in connection with this
Agreement, the Bonds or the Indenture.
Section 9.03. Indemnification. The Borrower releases the Authority, the
State, the Treasurer of the State and the Trustee from, and covenants and agrees
that none of the Authority, the State, the Treasurer of the State or the Trustee
shall be liable for, and covenants
26
and agrees to indemnify and hold harmless the Authority, the State, the
Treasurer of the State and the Trustee and their officers, employees and agents
from and against any and all losses, claims, damages, liabilities or expenses,
of every conceivable kind, character and nature whatsoever arising out of,
resulting from, or in any way connected with (a) the Project, or the conditions,
occupancy, use, possession, conduct or management of, or work done in or about,
or from the planning, design, acquisition, installation or construction of, the
Project or any part thereof; (b) the issuance of any Bonds or any certifications
or representations made in connection therewith by the Borrower and the carrying
out of any of the transactions contemplated by the Bonds, the Indenture, or this
Agreement; (c) the Trustee's acceptance or administration of the trusts under
the Indenture, or the exercise or performance of any of its powers or duties
under the Indenture; or (d) any untrue statement or alleged untrue statement of
any material fact or omission or alleged omission to state a material fact
necessary to make the statements made, in light of the circumstances under which
they were made, not misleading, in the official statement utilized by any
underwriter in connection with the sale or offering of any Bonds; provided that
in each case such indemnity shall not be required for damages that result from
the willful misconduct or negligence on the part of the party seeking such
indemnity. The indemnity required by this Section shall be only to the extent
that any loss sustained by the Authority or the Trustee exceeds the Net Proceeds
the Authority or the Trustee receives from any insurance carried by the Borrower
with respect to the loss sustained. The Borrower further covenants and agrees to
pay or to reimburse the Authority, the State, the Treasurer of the State and the
Trustee and their officers, employees and agents for any and all costs,
reasonable attorneys fees, liabilities or expenses incurred in connection with
investigating, defending against or otherwise in connection with any such
losses, claims, damages, liabilities, expenses or actions, except to the extent
that the same arise out of the willful misconduct or negligence of the party
claiming such payment or reimbursement. The provisions of this Section shall
survive the payment and retirement of the Bonds and the termination of this
Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. All notices, certificates, or other
communications given hereunder shall be deemed sufficiently given on (a) the day
such notices, certificates or other communications are received when sent by
personal delivery, including tested telex or facsimile communication, or (b) the
third day following the day on which the same have been mailed by first class,
postage prepaid, addressed to the Authority, the Borrower, the Trustee, the
Tender Agent or the Bank, as the case may be, at the address set forth for such
party below. A duplicate copy of each notice, certificate, or other
communication given hereunder by either the Authority or the Borrower to the
other shall also be given to the Trustee, the Tender Agent, Borrower's counsel
and the Bank. The Authority, the Borrower, the Trustee, the Tender Agent and the
Bank may, by notice given hereunder, designate any different addresses to which
subsequent notices, certificates, or other communications shall be sent.
27
If to the Authority: California Economic Development Financing Authority c/o
California Trade and Commerce Agency
801 K Street, Suite 1700
Sacramento, California 95814
Attention: Bond Manager
Phone: (916) 322-8520
Fax: (916) 322-7214
If to the Borrower: Provena Foods Inc.
5010 Eucalyptus Avenue
Chino, California 91710
Attention: Chief Financial Officer
Phone: (909) 627-1082
Fax: (909) 627-7315
If to the Trustee U.S. Bank Trust National Association
or Tender Agent: One California Street, 4th Floor
San Francisco, California 94111
Attention: Corporate Trust Department
Phone: (415) 273-4500
Fax: (415) 273-4590
If to the Bank: Comerica Bank-California
333 West Santa Clara Street
San Jose, California 95113
Attention: Michael Archer
Phone: (408) 556-5361
Fax: (408) 556-5395
If to the Remarketing Dain Rauscher Incorporated
Agent: 2711 N. Haskell Avenue, Suite 2400
Dallas, Texas 75204
Attention: Fixed Income Banking
Phone: (214) 989-1834
Fax: (214) 989-1842
Section 10.02. Severability. If any provision of this Agreement shall be
held or deemed to be, or shall in fact be, illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative, or unenforceable to
any extent whatever.
Section 10.03. Execution of Counterparts. This Agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument; provided, however, that for
purposes of perfecting a security interest in this Agreement by the Trustee and
the Bank under Article 9 of the California
28
Uniform Commercial Code, only the counterpart delivered, pledged, and assigned
to the Trustee shall be deemed the original.
Section 10.04. Amendments, Changes and Modifications. Except as otherwise
provided in this Agreement or the Indenture, subsequent to the initial issuance
of Bonds and prior to their payment in full, or provision for such payment
having been made as provided in the Indenture, this Agreement may not be
effectively amended, changed, modified, altered or terminated without the
written consent of the Trustee and the Bank.
Section 10.05. Governing Law. This Agreement shall be governed
exclusively by and construed in accordance with the applicable laws of the State
as a contract executed and delivered within the State to be fully performed
within the State.
Section 10.06. Authorized Representative of the Borrower. Whenever under
the provisions of this Agreement the approval of the Borrower is required or the
Authority or the Trustee is required to take some action at the request of the
Borrower, such approval or such request shall be given on behalf of the Borrower
by the Authorized Representative of the Borrower, and the Authority and the
Trustee shall be authorized to act on any such approval or request and neither
party hereto shall have any complaint against the other or against the Trustee
as a result of any such action taken.
Section 10.07. Term of the Agreement. This Agreement shall be in full
force and effect from the date hereof and shall continue in effect as long as
any of the Bonds remain Outstanding or the Letter of Credit remains in effect,
whichever is later. All representations and certifications by the Borrower as
to all matters affecting the Tax-exempt status of interest on the Bonds and all
indemnifications by the Borrower to the Authority, the State, the Treasurer of
the State or the Trustee shall survive the termination of this Agreement.
Section 10.08. Binding Effect. This Agreement shall inure to the benefit
of and shall be binding upon the Authority, the Borrower and their respective
successors and assigns; subject, however, to the limitations contained in
Section 5.02 hereof.
Section 10.09. References to Bank. Notwithstanding any provisions
contained herein to the contrary, the Bank shall be entitled to take all actions
and exercise all rights hereunder for its own account so long as the Bank has
not wrongfully dishonored any drawings under the Letter of Credit and the Bank
is not in liquidation, bankruptcy or receivership proceedings. After the
expiration or termination of the Letter of Credit and after all obligations owed
to the Bank pursuant to the Reimbursement Agreement have been paid in full or
discharged, all references to the Bank contained herein shall be null and void
and of no further force and effect.
Section 10.10. Brokerage Confirmations. The Borrower acknowledges that to
the extent regulations of the Comptroller of the Currency or other applicable
regulatory entity grant the Borrower the right to receive brokerage
confirmations of security transactions under the Indenture, the Borrower
specifically waives receipt of such confirmations to the extent permitted by
law. The Trustee is required under the Indenture to furnish the Borrower with
29
periodic cash transaction statements which include detail for all securities
transactions made by the Trustee on behalf of the Borrower thereunder.
[End of the Loan Agreement]
30
IN WITNESS WHEREOF, the California Economic Development Financing
Authority has caused this Agreement to be executed in its name and the Borrower
has caused this Agreement to be executed in its name, all as of the date first
above written.
CALIFORNIA ECONOMIC
DEVELOPMENT FINANCING
AUTHORITY
By /s/ Christopher S. Holben
----------------------------
Christopher S. Holben, Chair
ATTEST
By /s/ Blake Fowler
-------------------------
Blake Fowler, Secretary
PROVENA FOODS INC.
By /s/ Illegible Signature
----------------------------
Authorized Signatory
[Signature Page to Loan Agreement]
EXHIBIT A
THE PROJECT
The Project consists of (a) the acquisition of real property located at the
Crossroads Commercial Industrial Park, Lathrop, California (the "Project Site")
and (b) the construction of an approximately 85,000-square-foot meat processing
facility at the Project Site.