REIMBURSEMENT AGREEMENT

EXHIBIT 10.63

 

REIMBURSEMENT AGREEMENT

 

Between

 

COMERICA BANK

 

and

 

PROVENA FOODS, INC.,

a California corporation

 

Dated as of December 1, 2003

 

Irrevocable Direct Pay Letter of Credit No. 588223-43

 

$6,378,750.00

 

TABLE OF CONTENTS

 

 

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REIMBURSEMENT AGREEMENT

 

THIS REIMBURSEMENT AGREEMENT (the “ Agreement ”), is dated as of December 1, 2003, by and between PROVENA FOODS, INC., a California corporation (the “ Obligor ”), and COMERICA BANK (the “ Credit Bank ”).

 

WITNESSETH

 

WHEREAS, the Obligor proposes to (a) refinance the cost of acquisition and construction of an approximately 87,850 square foot building in the Crossroads Commercial Industrial Park located in Lathrop, California (collectively, the “ Project ”), (b) refinance existing indebtedness to Credit Bank, and (c) finance the costs of issuance of the Bonds (defined below);

 

WHEREAS, in order to refinance the cost of acquisition and construction of the Project, to refinance the existing indebtedness to Credit Bank and to finance to costs of issuance of the Bonds, the Obligor will issue Provena Foods Inc. Variable/Fixed Rate Demand Bonds, Series 2003A (the “ Bonds ”), in the principal amount of $6,300,000;

 

WHEREAS, in order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured, and to secure the payment of the principal thereof and of the interest and premium, if any, thereon, the Obligor has entered into an Indenture (the “ Indenture ”), dated as of December 1, 2003, between the Obligor and U.S. Bank National Association, a national banking association organized and existing under the laws of the United States of America, having a corporate trust office in the City of San Francisco, California (the “ Trustee ”);

 

WHEREAS, pursuant to the Indenture, the Trustee will make certain disbursements according to the terms more specifically set forth in the Indenture;

 

WHEREAS, the Obligor has requested that the Credit Bank issue in favor of the Trustee, for the account of the Obligor, a direct-pay letter of credit (the “ Letter of Credit ”) in an initial stated amount of $6,378,750.00, which Letter of Credit is to be available to be drawn upon to provide funds for the payment of principal and interest on the Bonds when due and payable;

 

WHEREAS, the Obligor will be responsible for the reimbursement of amounts drawn under the Letter of Credit and for certain fees and amounts due with respect to the Letter of Credit and this Agreement;

 

WHEREAS, the Credit Bank has agreed to issue the Letter of Credit on the terms and subject to the conditions contained herein;

 

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WHEREAS, any Bonds purchased by the Credit Bank by application of amounts drawn under the Letter of Credit pursuant to a Principal Drawing or an Interest Drawing (as defined herein) on the Letter of Credit shall be reflected on the records of the Trustee as being held for the account of the Credit Bank until the Credit Bank has been reimbursed for the amount so drawn and interest accrued thereon in accordance with this Agreement, which reimbursement may be satisfied by the payment of the principal and interest represented by the Bonds so held by or for the account of the Credit Bank, as provided herein and in such Bonds, or the payment to the Credit Bank pursuant to the terms of that certain Offering and Remarketing Agreement dated as of December 1, 2003 (the “ Remarketing Agreement ”), between the Obligor and RBC Dain Rauscher, Inc., a New York corporation, as remarketing agent, following the remarketing of the Bonds.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual promises contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE 1. DEFINITIONS . For purposes of this Agreement, capitalized terms used herein which are not defined herein shall have the meanings set forth in the Indenture. In addition, the following terms shall have the following meanings:

 

“ Agreement ” shall mean this Reimbursement Agreement, including any Exhibits hereto, as the same may be supplemented, amended or amended and restated from time to time.

 

“ Base Rate ” shall mean the per annum rate of interest publicly announced from time to time by the Credit Bank as its “reference rate” or “prime rate.”

 

“ Bonds ” shall have the meaning set forth in the second WHEREAS clause hereof.

 

“ Bond Documents ” shall mean, at any time, each of the following as in effect or as outstanding, as the case may be, at such time: (i) the Bonds; (ii) the Indenture; (iii) the Remarketing Agreement; (iv) this Agreement; (v) the Deed of Trust; (vi) the Security Agreement; and (ix) any other agreements, instruments, certificates or other documents executed in connection with the foregoing (other than the Environmental Indemnity).

 

“ Business Day ” shall mean a day other than (i) a Saturday or Sunday, or (ii) a day on which the banking institutions in (a) New York, New York or (b) San Francisco, California or (c) the cities in which the Trustee or the Tender Agent (as defined in the Indenture) have their respective principal offices are authorized or

 

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required by law to close, or (iii) a day on which the New York Stock Exchange is closed.

 

“ Cash Flow Coverage Ratio ” shall mean the ratio, determined as of any applicable date of determination by annualizing amounts determined from the most recently received monthly financial statements, (a) the numerator of which is net income plus depreciation plus amortization, and (b) the denominator of which is the current portion of long term debt for the same period of determination.

 

“ Chino Deed of Trust ” shall mean that certain Deed of Trust, Security Agreement and Fixture Filing (with Assignment of Leases) (Chino), dated as of December 1, 2003, made by the Obligor for the benefit of the Credit Bank, securing the obligations of the Obligor hereunder, and recorded concurrently with the execution of this Agreement in the Official Records of San Bernardino County, California, as the same may be supplemented, amended or amended and restated from time to time.

 

“ Chino Property ” shall mean the real property described in “Exhibit A” attached to the Chino Deed of Trust.

 

“ Code ” shall mean the Internal Revenue Code of 1986, as amended, and the regulations, rulings and proclamations promulgated or issued thereunder.

 

“ Credit Bank ” shall mean Comerica Bank, and its successors and assigns, as issuer of the Letter of Credit or any substitute Letter of Credit.

 

“ Credit Provider Rate ” shall mean one and one-half percent (1.50%) in excess of the Base Rate during any period that interest accrues at such rate pursuant to the terms of this Agreement, each change in such Base Rate to become effective on the date such change is announced by the Credit Bank, such rate to be calculated on the basis of actual number of days elapsed and a 360-day year. In each case, the Credit Provider Rate shall change when and as the Base Rate changes.

 

“ Current Liabilities ” shall mean, as of any applicable date of determination, (i) all liabilities of Obligor and any Person whose financial results are consolidated with those of Obligor that should be classified as current in accordance with GAAP, including without limitation any portion of the principal of the Bonds classified as current, plus (ii) to the extent not otherwise included, all liabilities of Obligor and any such other Person to any of its affiliates (including without limitation officers, directors, shareholders, subsidiaries and commonly held companies), whether or not classified as current in accordance with GAAP, unless the same shall be the long term portion of Subordinated Debt.

 

“ Date of Issuance ” has the meaning set forth in Section 2.1 hereof.

 

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“ Debt ” shall mean, as of any applicable date of determination, all items of indebtedness, obligation of liability of a Person, whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, joint or several, that should be classified as liabilities in accordance with GAAP, excepting such liabilities as shall be Subordinated Debt.

 

“ Deed of Trust ” shall mean, collectively, the Chino Deed of Trust and the Lathrop Deed of Trust.

 

“ Disbursement Fund ” shall mean the fund by that name established pursuant to Section 6.05 of the Indenture.

 

“ Drawing ” shall mean a drawing under the Letter of Credit in accordance with its terms, and shall include a “Purchase Drawing,” a “Principal Drawing” and an “Interest Drawing” under the Letter of Credit.

 

“ Drawing Fee ” shall mean the fee described in Section 2.4 hereof.

 

“ Effective Tangible Net Worth ” shall mean Tangible Net Worth as of any applicable date of determination, increased by the long term portion of Subordinated Debt, if any, of Obligor and or any Persons whose financial results are consolidated with those of Obligor and decreased by the value of the following, determined in accordance with GAAP: subscription lists, organization expenses, trade accounts receivable converted to notes and money due to Obligor or any Person whose financial results are consolidated with those of Obligor from affiliates (including without limitation officers, directors, subsidiaries and commonly held companies).

 

“ Environmental Indemnity ” shall mean that certain Environmental Indemnity of even date herewith made by the Obligor and relating to the Property, as the same may be supplemented, amended or amended and restated from time to time.

 

“ Environmental Law ” shall mean any federal, state, local or other law, ordinance, statute, directive, rule, order or regulation an object of which is to regulate or improve health, safety or the environment.

 

“ ERISA ” shall mean the Employment Retirement Income Security Act of 1974, as amended from time to time.

 

“ Event of Default ” shall have the meaning set forth in Article 11 hereof.

 

“ Expiration Date ” shall mean the “Expiration Date” as that term is defined in the Letter of Credit.

 

“ GAAP ” shall mean generally accepted accounting principles as in effect in the United States of America from time to time, consistently applied.

 

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“ Hazardous Materials ” shall mean any flammable explosives, radioactive materials, asbestos, petroleum, petroleum by-products, organic compounds known as polychlorinated biphenyls, chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic substances or related materials, including, without limitation, any substances defined as or included in the definition of “hazardous substances,” “hazardous materials,” or “toxic substances” in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq .; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq .; or the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq .; or any applicable law relating to radioactive and/or nuclear materials or substances or any applicable California law; or any other Environmental Law; and in the regulations adopted, published and/or promulgated pursuant to said laws.

 

“ Indenture ” shall have the meaning set forth in the third WHEREAS clause hereof, as the same may be supplemented or amended from time to time.

 

“ Interest Drawing ” shall mean a Drawing under a Letter of Credit to pay interest on the applicable Bonds (other than applicable Bonds registered in the name of the Obligor) when due and payable by the Issuer pursuant to the applicable Indenture.

 

“ Lathrop Deed of Trust ” shall mean that certain Deed of Trust, Security Agreement and Fixture Filing (with Assignment of Leases) (Lathrop), dated as of December 1, 2003, made by the Obligor for the benefit of the Credit Bank, securing the obligations of the Obligor hereunder, and recorded concurrently with the execution of this Agreement in the Official Records of San Joaquin County, California, as the same may be supplemented, amended or amended and restated from time to time.

 

“ Lathrop Property ” shall mean the real property described in “Exhibit A” attached to the Lathrop Deed of Trust.

 

“ Letter of Credit ” shall mean the Letter of Credit issued by the Credit Bank pursuant to this Agreement to support the Bonds, as more particularly described in the fifth WHEREAS clause hereof, and any amended Letter of Credit or any substitute therefor issued to support the Bonds.

 

“ Letter of Credit Fee ” shall have the meaning set forth in Section 2.2 .

 

“ Obligor ” shall mean Provena Foods, Inc., a California corporation.

 

“ Offering Memorandum ” shall mean the Offering Memorandum relating to the delivery and sale of the Bonds, including without limitation any supplement to such Offering Memorandum.

 

“ PBGC ” shall mean Pension Benefit Guaranty Corporation.

 

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“ Person ” shall mean an individual, association, unincorporated organization, corporation, limited liability company, partnership, joint venture, trust, government or any governmental agency or political subdivision or any other entity or organization.

 

“ Plan ” shall mean an employee pension benefit plan that is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by the Obligor for employees of the Obligor or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which the Obligor is then making or accruing an obligation to make contributions or has within the preceding five years made contributions.

 

“ Principal Drawing ” shall mean a Drawing under a Letter of Credit to pay principal of the Bonds (other than Bonds registered in name of the Obligor) required to be made by the Obligor upon the maturity thereof, upon acceleration or upon the optional or mandatory redemption thereof, all pursuant to the Bonds and the Indenture.

 

“ Project ” shall have the meaning set forth in the first WHEREAS clause hereof.

 

“ Property ” shall mean, collectively, (i) the Chino Property, and (ii) the Lathrop Property.

 

“ Purchase Drawing ” shall mean a Drawing under the Letter of Credit to pay the purchase price of the Bonds following a failure to remarket any of the Bonds as set forth in Section 6.04 of the Indenture.

 

“ Quick Ratio ” shall mean, as of any applicable date of determination, that aggregate amount of all unrestricted cash, certificates of deposit, marketable securities and non-affiliate accounts receivable divided by Current Liabilities.

 

“ Reimbursement Deposit Account ” shall have the meaning set forth in Section 8.1 hereof.

 

“ Remarketing Agent ” shall mean RBC Dain Rauscher, Inc., a New York corporation, as Remarketing Agent under the Remarketing Agreement, or any successor to it as remarketing agent.

 

“ Remarketing Agreement ” shall mean the Offering and Remarketing Agreement dated as of December 1, 2003, between the Obligor and the Remarketing Agent, and any successor remarketing agreement entered into by the Obligor and a successor remarketing agent in accordance with the provisions of the Indenture.

 

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“ Restrictions ” shall have the meaning set forth in Section 7.4 hereof.

 

“ Security Agreement ” shall mean, that certain Security Agreement dated as of December 1, 2003, executed by the Obligor in favor of the Credit Bank, as the same may be supplemented, amended or amended and restated from time to time.

 

“ Special Counsel ” shall mean Sheppard, Mullin, Richter & Hampton LLP.

 

“ Stated Amount ” shall mean the amount set forth in the Letter of Credit as the “Stated Amount”, as such amount is reduced and reinstated from time to time in accordance with the Letter of Credit.

 

“ Subordinated Debt ” shall mean indebtedness of Obligor to third parties which has been subordinated to all Indebtedness owing by Obligor to the Credit Bank pursuant to a subordination agreement in form and content satisfactory to the Credit Bank.

 

“ Tangible Net Worth ” shall mean, as of any applicable date of determination, the excess of: (i) the net book value of all assets of Obligor and any Persons whose financial results are consolidated with those of Obligor (other than patents, patent rights, trademarks, trade names, franchises, copyrights, licenses, goodwill and similar intangible assets) after all appropriate deductions in accordance with GAAP (including, without limitation, reserves for doubtful receivables, obsolescence, depreciation and amortization), over (ii) Total Liabilities of Obligor and any Persons whose financial results are consolidated with those of Obligor.

 

“ Transfer Certificate ” shall have the meaning assigned to that term in the Letter of Credit.

 

“ Transfer Fee ” shall mean the fee described in Section 2.5 hereof.

 

“ Trustee ” shall mean U.S. Bank National Association, a national banking association organized and existing under the laws of the United States of America, having a corporate trust office in the City of San Francisco, California, in its capacity as trustee under the Indenture, and any other bank or trust company at any time substituted in its place pursuant to and in accordance with the Indenture.

 

“ Uniform Customs and Practice ” means the Uniform Customs and Practice for Documentary Credits approved by the International Chamber of Commerce and in effect and adhered to by the Credit Bank as of the date of issuance of the Letter of Credit.

 

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ARTICLE 2. LETTER OF CREDIT: FEES: REIMBURSEMENT.

 

SECTION 2.1 Amount and Terms of the Letter of Credit . The Credit Bank agrees, upon at least 24 hours’ prior notice from the Obligor to the Credit Bank and on the terms and subject to the conditions hereinafter set forth, including, without limitation, the conditions set forth in Article 4 hereof, to issue the Letter of Credit on the date of delivery specified herein (the “ Date of Issuance ”), provided such date of delivery is not later than December 31, 2003, effective upon such delivery date and expiring on the Expiration Date. The Letter of Credit will be issued in an initial Stated Amount of $6,378,750.00 representing the aggregate principal amount represented by the Bonds as of the Date of Issuance, plus interest on such principal amount for a period of 45 days at a rate of ten percent (10%) per annum based on a 360-day year. The Letter of Credit shall be issued to the Trustee for the account of the Obligor, and shall be substantially in the form of Exhibit A hereto, with such changes to the form set forth in Exhibit A as the Obligor and the Credit Bank shall agree in writing are necessary or advisable.

 

SECTION 2.2 Letter of Credit Fee . The Obligor shall pay to the Credit Bank an annual, nonrefundable letter of credit fee (the “ Letter of Credit Fee ”) for the Letter of Credit, computed on the basis of a 360-day year for the actual number of days elapsed, due under the terms of this Agreement. The Letter of Credit Fee for the period from the Date of Issuance through March 31, 2004, is payable in advance on the Date of Issuance, and the Letter of Credit Fee is thereafter payable quarterly in advance one (1) Business Day prior to the first day of each April, July, October and January, commencing with the first Business Day prior to April 1, 2004. The Letter of Credit Fee shall be one and one-half percent (1.50%) per annum of the Stated Amount.

 

SECTION 2.3 Intentionally Omitted .

 

SECTION 2.4 Drawing Fee . The Obligor shall pay to the Credit Bank for each drawing on the Letter of Credit on the date thereof a nonrefundable drawing fee (the “ Drawing Fee ”) in an amount equal to the usual and customary fee charged by the Credit Bank to its customers for a draw under a letter of credit.

 

SECTION 2.5 Letter of Credit Transfer Fee . Any transfer of the Letter of Credit by the Trustee or issuance of a substitute Letter of Credit shall be made by, and be only effective upon, (a) in the case of such a transfer, the Trustee providing the Credit Bank with a Transfer Certificate in accordance with the Letter of Credit and (b) in the case of such a transfer or such an issuance, payment to the Credit Bank by the Obligor of a transfer fee (the “ Transfer Fee ”) of $1,500 for each transfer or issuance and of the costs payable to the Credit Bank in respect of each such transfer or issuance. No Transfer Fee shall be due in the event of a transfer or substitution due to: (a) non-renewal of the Letter of Credit; (b) a downgrading of the Letter of Credit; or (c) an increase in costs associated with the Letter of Credit.

 

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SECTION 2.6 Reduction and Reinstatement of the Stated Amount . The Stated Amount shall be automatically reduced and reinstated as specified in the Letter of Credit; provided that the Letter of Credit shall be reinstated to the extent the Credit Bank is paid the full sale price with respect to Bonds (or portions thereof) purchased on its behalf which have been resold pursuant to the terms of the Remarketing Agreement.

 

SECTION 2.7 Reimbursement of Principal Drawings and Interest Drawings under the Letter of Credit .

 

(a) If a Principal Drawing or Interest Drawing under the Letter of Credit is repaid at or prior to 1:00 p.m. (Pacific time) on the same day on which it is made, no interest shall be payable on such Drawing. The Obligor hereby agrees to pay to the Credit Bank the amount of each Principal Drawing and each Interest Drawing under the Letter of Credit after such Drawing has been paid by the Credit Bank, but no later than 1:00 p.m. (Pacific time) on the first Business Day following the date of payment by the Credit Bank.

 

(b) The Credit Bank shall maintain in accordance with sound banking practices an account or accounts evidencing the indebtedness of the Obligor resulting from each Principal Drawing and each Interest Drawing under the Letter of Credit and the interest accruing thereon, and in any legal action or proceeding in respect of this Agreement, the entries made in such account or accounts shall, in the absence of manifest error, be conclusive evidence of the existence and amounts of the obligations of the Obligor therein recorded.

 

SECTION 2.8 Reimbursement of Purchase Drawings under the Letter of Credit .

 

(a) The Obligor’s obligation to reimburse the Credit Bank for any unreimbursed amounts drawn under the Letter of Credit in respect of any Purchase Drawing thereunder shall be secured in part by the purchased Bonds. The obligation of the Obligor under this Agreement and under the Indenture in respect of such Bonds purchased with the proceeds of a Purchase Drawing under the Letter of Credit shall be satisfied by the payment of such Bonds in accordance with their terms and the terms of the Indenture and the subsequent payment to the Credit Bank of all such payments, or the reimbursement of the Credit Bank pursuant to the terms of the Remarketing Agreement following the remarketing of the Bonds.

 

(b) In the event that any Bonds are registered in the name of the Obligor or the Credit Bank, on the date on which the Letter of Credit expires for any reason, the principal amount of such Bonds and the interest accrued thereon shall thereupon be paid by the Obligor immediately to the Credit Bank; provided that nothing herein contained shall affect any right that the Credit Bank may have

 

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hereunder or under the Indenture or the Bonds upon the occurrence of an Event of Default hereunder or thereunder.

 

SECTION 2.9 Extension of the Term of the Letter of Credit . The term of the Letter of Credit may be extended for up to three (3) periods of five (5) years each at the request of the Obligor and at the option of the Credit Bank. Consideration for extension of the term of the Letter of Credit shall be given during the twelve (12) month period prior the end of each five (5) year period, and in connection with such extension the Credit Bank may review such matters and, at the Obligor’s sole cost and expense, obtain such appraisals and environmental studies of the Project as it deems necessary in its sole and absolute discretion.

 

ARTICLE 3. PROVISIONS RELATING TO THE LETTER OF CREDIT .

 

SECTION 3.1 Interest . The Obligor hereby agrees to pay interest at the Credit Provider Rate on any and all amounts required to be paid by the Obligor under this Agreement from and after the due date thereof until paid in full, whether before or after the expiration of the Letter of Credit or this Agreement, at the stated Expiration Date of the Letter of Credit or otherwise, such interest to be payable on demand. Notwithstanding anything herein to the contrary, to the extent permitted by law, if at any time the Credit Provider Rate exceeds any statutory or constitutional interest rate limitation or restriction and the Credit Bank shall not receive payment at the Credit Provider Rate, any subsequent reduction in the Credit Provider Rate shall not reduce the rate of interest utilized for the calculation of amounts payable to the Credit Bank hereunder until the total amount due if the Credit Provider Rate had at all times been utilized has been paid to the Credit Bank.

 

SECTION 3.2 Increased Costs . If any change in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof shall either (i) impose, modify or deem applicable any reserve, special deposit, capitalization or similar requirement against letters of credit issued by the Credit Bank or (ii) impose on the Credit Bank any other condition relating, directly or indirectly, to this Agreement or the Letter of Credit or the holding or owning of any Bonds by the Credit Bank or the purchasing thereof, and the result of any event referred to in clause (i) or (ii) above shall be to increase the cost to the Credit Bank of issuing or maintaining the Letter of Credit, or of purchasing any Bonds, then, upon demand by the Credit Bank, the Obligor shall, upon not less than ten (10) days’ prior notice from the Credit Bank (which notice shall specify in reasonable detail the circumstances giving rise to the increase and the method of calculating the increase), pay to the Credit Bank, from time to time as specified by the Credit Bank, such additional amounts as shall be demanded by the Credit Bank as sufficient to compensate the Credit Bank for such increased cost, together with interest at the Credit Provider Rate on amounts required to be paid under

 

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this Section 3.2 from the due date of such payment following not less than ten (10) days’ prior notice until payment in full thereof.

 

SECTION 3.3 Net Payments . All payments under this Agreement shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments (after deduction or withholding for or on account of a proportionate share, attributable to the transactions contemplated by this Agreement, of any future taxes, levies, imposts, duties or other charges of whatsoever nature imposed by any government, any political subdivision or any taxing authority other than any tax on or measured by the overall net income of the Credit Bank pursuant to the income tax laws of the United States or the jurisdiction where the Credit Bank’s principal office is located (collectively, the “ Taxes ”)) shall not be less than the amounts otherwise specified to be paid under this Agreement. A certificate as to any additional amounts payable to the Credit Bank under this Section 3.3 submitted to the Obligor by the Credit Bank shall show in reasonable detail the amount payable and the calculations used to determine in good faith such amount and shall be conclusive absent manifest error. Any amounts payable by the Obligor under this Section 3.3 with respect to past payments shall be due within ten (10) days following receipt by the Obligor of such certificate from the Credit Bank; any such amounts payable with respect to future payments shall be due concurrently with such future payments. With respect to each deduction or withholding for or on account of any Taxes, the Obligor shall promptly furnish to the Credit Bank such certificates, receipts and other documents as may be required (in the reasonable judgment of the Credit Bank) to establish any tax credit to which the Credit Bank may be entitled. Without in any way affecting any of its rights under this Section 3.3 , the Credit Bank agrees that, upon its becoming aware that any of the present or future payments due to it under this Agreement would be subject to deduction for Taxes, it will notify the Obligor in writing and the Credit Bank further agrees that it will use reasonable efforts not disadvantageous to it (in its sole determination) in order to avoid or minimize, as the case may be, the payment by the Obligor of any additional amounts for Taxes pursuant to this Section 3.3 .

 

SECTION 3.4 Security .

 

(a) The Obligor, in order to secure its obligations to make payments to the Credit Bank pursuant to the terms of this Agreement and to perform all of its other covenants and agreements under this Agreement, has pledged, assigned and granted to the Credit Bank (and hereby pledges, assigns and grants to the Credit Bank to secure such obligations) a lien on and security interest in the trust estate created by the Indenture, subordinate only to the lien granted under the Indenture to the owners of the Bonds and to the Trustee for its reasonable compensation, expenses, charges, counsel fees and other disbursements incurred in the performance of its powers and duties under the Indenture.

 

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(b) As additional security for the Obligor’s performance of its obligations to the Credit Bank under this Agreement (but excluding any obligations under the Environmental Indemnity), the Obligor agrees to grant to the Credit Bank first priority deeds of trust (collectively, the “ Deed of Trust ”), encumbering the Property and all improvements now existing or hereafter constructed thereon.

 

(c) As additional security for the Obligor’s performance of its obligations to the Credit Bank under this Agreement, the Obligor agrees to grant to the Credit Bank a first priority security interest in all of the following property owned by the Obligor (the “ Collateral ”): all accounts, chattel paper, deposit accounts, documents, equipment, general intangibles, goods (including fixtures), instruments (including promissory notes), inventory, investment property (including securities and securities entitlements), letter of credit rights, money, and all of the Obligor’s books and records with respect to any of the foregoing, and the computers and equipment containing said books and records, including without limitation any of the foregoing located in or on, related to, or to be used in connection with, the Property and any of the property and facilities comprising the Project; and any proceeds of the foregoing, all pursuant to a Security Agreement in form and substance satisfactory to the Credit Bank. The Obligor shall execute and deliver to the Credit Bank all such documents and instruments, including without limitation the Security Agreement referred to in the preceding sentence, and do all such other acts and things, as may be necessary or required by the Credit Bank to perfect or otherwise enable the Credit Bank to exercise and enforce its rights in the personal property of the Obligor encumbered for the benefit of the Credit Bank.

 

SECTION 3.5 Place and Manner of Payment; Computation of Interest . All payments by the Obligor to the Credit Bank hereunder, including without limitation reimbursement of Principal Drawings and Interest Drawings pursuant to Sections 2.7 hereof and reimbursement of Purchase Drawings pursuant to Sections 2.8 hereof, shall be made to the Credit Bank at its International Trade Services Department, 201 Spear Street, Suite 200, San Francisco, CA 94105, in lawful currency of the United States in immediately available funds not later than 1:00 p.m. (Pacific time) on the date due, without set-off, counterclaim or deduction of any kind. In the event that the date specified for any such payment hereunder is not a Business Day, such payment shall be made not later than the next following Business Day. The Obligor shall pay interest on any such payment not made on the due date, at the Credit Provider Rate, to the Business Day on which such payment is made. Computations of interest hereunder shall be made by the Credit Bank and the Obligor on the basis of actual days elapsed and a 360-day year.

 

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ARTICLE 4. CONDITIONS PRECEDENT TO ISSUANCE OF THE LETTER OF CREDIT .

 

SECTION 4.1 Documents to be Received . The Credit Bank’s obligation to issue the Letter of Credit as set forth in Section 2.1 hereof is subject to the conditions precedent that, on or prior to the Date of Issuance, the Credit Bank shall receive the following documents, all in form and substance satisfactory to the Credit Bank and its Special Counsel:

 

(a) a copy of the resolution or resolutions of Obligor, certified as of the date of the delivery of the Bonds by an authorized officer of Obligor, authorizing, among other things, the execution, delivery and performance by Obligor of this Agreement and the Bond Documents to which Obligor is a party and authorizing Obligor to obtain the issuance of the Letter of Credit and certified copies of all other documents evidencing any other action of Obligor taken with respect thereto;

 

(b) a certificate, signed by a duly authorized officer of Obligor, dated the date of the delivery of the Bonds, to the effect that:

 

(i) The representations and agreements of Obligor contained in this Agreement and each of the Bond Documents to which it is a party are true, complete and correct in all material respects as of the Date of Issuance;

 

(ii) To such officer’s knowledge, the Obligor has complied with all agreements, covenants and conditions to be complied with by the Obligor at or prior to the Date of Issuance under this Agreement and each of the other Bond Documents to which it is a party;

 

(iii) To such officer’s knowledge, no event affecting the Obligor has occurred since the date of the Offering Memorandum which either makes untrue or incorrect in any material respect, as of the Date of Issuance, the statements or information contained in Offering Memorandum concerning the Obligor or is not reflected in the Offering Memorandum but should be reflected therein in order to make the statements and information therein concerning the Obligor not misleading in any material respect;

 

(iv) The information concerning the Obligor, the Project and the Property contained in the Offering Memorandum and the appendices thereto do not contain any untrue statement of a material fact or omit to state any fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; and

 

(v) No Event of Default has occurred and is continuing, or would result from the issuance of the Letter of Credit or the execution, delivery or performance of this Agreement or any of the other Bond Documents to which the

 

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Obligor is a party, and no event has occurred and is continuing which would constitute an Event of Default but for the requirement that notice be given or time elapse or both;

 

(c) a certificate of a duly authorized officer of Obligor certifying the names and true signatures of the officers of Obligor authorized to sign this Agreement and the Bond Documents to which Obligor is a party,

 

(d) evidence of the status of Obligor as a California corporation, duly incorporated, validly existing and in good standing under the laws of the State of California and fully authorized to operate the Project and a copy of the Articles of Incorporation, certified by the Secretary of State;

 

(e) a certified copy of the bylaws of Obligor;

 

(f) updated financial .statements and copies of the latest filed income tax returns for Obligor;

 

(g) this Agreement, the Deed of Trust, the Security Agreement, the Environmental Indemnity and all required UCC financing statements, in each case duly executed or authorized and acknowledged, as appropriate, by each party thereto;

 

(h) an ALTA policy of title insurance, with such endorsements as the Credit Bank may require, issued by a title insurer and in form and substance satisfactory to the Credit Bank, in such amount as the Credit Bank shall require, insuring the Credit Bank’s lien on the Property to be of first priority, subject only to such exceptions as the Credit Bank shall approve in its discretion, with all costs thereof to be paid by the Obligor;

 

(i) such tax service contract as the Credit Bank shall require for any real property collateral required hereby, to remain in effect as long as such real property secures any obligations of the Obligor to the Credit Bank as required hereby, with the costs thereof to be paid by the Obligor; and

 

(j) all Bond Documents and all other documents, certificates, title policies, construction contracts, plans and specifications, environmental reports, opinions, approvals or filings with respect to the Bond Documents, this Agreement or the transactions contemplated thereby or hereby as the Credit Bank or its Special Counsel shall reasonabl