Loading...
HomeMy WebLinkAbout1995-06-27; Industrial Development Authority; 002 Exhibit 2; Loan Agreement1. LOAN AGREEMENT Between INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF CARLSBAD And CIP LIMITED, L.P., A California Limited Partnership Dated as of July 1, 1995 LAOU80249.1 06-01 - 95 TABLE OF CONTENTS Pase LOANAGREEMENT ....................... 1 RECITALS .......................... 1 ARTICLE I: DEFINITIONS ................... 2 SECTION 1.1 Definition Of Terms ........... 2 SECTION 1.2 Number And Gender ............ 2 SECTION 1.3 Articles. Sections. Etc ......... 2 ARTICLE 11: REPRESENTATIONS ............... 2 SECTION 2.1 Representations Of The Authority ..... 2 SECTION 2.2 Representations Of The Borrower ..... 3 ARTICLE 111: COMPLETION OF THE PROJECT. ISSUANCE OF THE BONDS 5 SECTION 3.1 Completion Of Project; Best Efforts ... 5 SECTION 3.2 Issuance Of Bonds ............ 6 SECTION 3.3 Requisition From Construction Fund .... 6 SECTION 3.4 Revisions To Plans And Specifications . . 7 SECTION 3.5 Certificate Of Completion ........ 7 SECTION 3.6 Completion Of Project If Bond Proceeds Insufficient; Surplus Proceeds ..... 7 SECTION 3.7 Investment Of Construction Fund ..... 8 ARTICLE IV: LOANS OF PROCEEDS; REPAYMENT PROVISIONS ... 8 SECTION 4.1 Loan Of Bond Proceeds; Issuance Of Bonds .................. 8 SECTION 4.2 Repayment And Payment Of Other Amounts Payable ................. 8 SECTION 4.3 Unconditional Obligation ......... 10 SECTION 4.4 Assignment Of Authority’s Rights ..... 10 SECTION 4.5 Amounts Remaining In Funds ........ 11 ARTICLE V: SPECIAL COVENANTS AND AGREEMENTS ....... 11 SECTION 5.1 Right Of Access To The Project. Books. And Records ............... 11 SECTION 5.2 Maintenance. Operation And Insuring Of Project; Taxes .............. 11 SECTION 5.3 Maintenance Of Existence; Qualification In The State ............... 12 SECTION 5.4 Financing And Continuation Statements; Cooperation ............... 12 SECTION 5.5 Compliance With Laws ........... 12 SECTION 5.6 Limitations On Disposition Of Assets; Assignment. Sale Or Lease Of Project ... 12 SECTION 5.7 Employment And Other Reports ....... 13 LA01/80249.1 06 -01 . 95 Pase Table of Contents [cont’dl : SECTION 5.8 Borrower Guaranty ............ 13 SECTION 5.9 General Tax Covenant ........... 13 SECTION 5.10 Special Arbitrage Certifications ..... 13 SECTION 5.11 Lease And Loan To User .......... 14 ARTICLE VI: DAMAGE. DESTRUCTION AND CONDEMNATI0N;USE OF PROCEEDS ................... 14 SECTION 6.1 Obligation To Continue Payments ..... 14 SECTION 6.2 Application Of Net Proceeds ....... 14 SECTION 6.3 Insufficiency Of Net Proceeds ...... 15 SECTION 6.4 Damage To Or Condemnation Of Other Property ................. 15 ARTICLE VII: EVENTS OF DEFAULT AND REMEDIES ........ 15 SECTION 7.1 Events Of Default ............ 15 SECTION 7.2 Remedies On Default ........... 16 SECTION 7.3 Agreement To Pay Attorneys‘ Fees And Expenses ................ 18 SECTION 7.4 No Remedy Exclusive ........... 18 SECTION 7.5 No Additional Waiver Implied By One Waiver ................. 18 ARTICLE VIII: PREPAYMENT .................. 19 SECTION 8.1 Redemption Of Bonds With Prepayment Moneys ................. 19 SECTION 8.2 Options To Prepay Installments ...... 19 SECTION 8.3 Mandatory Prepayment ........... 19 SECTION 8.4 Amount Of Prepayment ........... 20 SECTION 8.5 Notice Of Prepayment ........... 20 ARTICLE IX: NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION ............... 21 SECTION 9.1 Non-Liability Of Authority ........ 21 SECTION 9.2 Expenses ................. 21 SECTION 9.3 Indemnification ............. 21 ARTICLE X: MISCELLANEOUS ................ 22 SECTION 10.1 Notices ................. 22 SECTION 10.2 Severability ............... 23 SECTION 10.4 Amendments. Changes And Modifications . . 23 SECTION 10.5 Governing Law .............. 23 SECTION 10.6 Arbitration ............... 23 SECTION 10.7 Authorized Representative ........ 26 SECTION 10.8 Term Of The Agreement .......... 27 SECTION 10.3 Execution Of Counterparts ........ 23 LA01/80249.1 06-01 -95 Table of Contents [cont’dl : Pase SECTION 10.9 Binding Effect ................ 27 SECTION 10.10 Survival Of Fee Obligation .......... 28 EXHIBIT A - THE PROJECT ................. 1 LA01/80249.1 06-01 -95 LOAN AGREEMENT THIS LOAN AGREEMENT, dated as of July 1, 1995, between the INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF CARLSBAD, a public instrumentality of the State of California (the llAuthoritytl), and CIP LIMITED, L.P., a California Limited Partnership the llBorrowerll ) . RECITALS WHEREAS, the California Industrial Development Financing Act of the State of California, California Government Code Section 91500 et seq., as amended (the llmll) permits an industrial development authority to issue revenue bonds for the purpose of financing the acquisition, construction, equipping and/or rehabilitation of facilities, including both real and personal property suitable for industrial uses such as assembling, fabricating, manufacturing or processing activities with respect to any products of agriculture, forestry, mining or manufacture; and WHEREAS, in furtherance of the purposes of the Act and in order to promote the prosperity, health, safety and welfare of the citizens of the State of California (the IlStateIl), the Authority proposes to finance the cost of the acquisition, construction, improving, or equipping of a project (the llProiectll) more particularly described in Exhibit A hereof; and WHEREAS, the Borrower will lease the Project to Aalto Scientific, Ltd. (together with its successors and assigns and any other Lessee of the Project, llUsertl); and WHEREAS, pursuant to and in accordance with the Act, the Authority has authorized and undertaken to issue its Industrial Revenue Bonds (Aalto Project), Series 1995 (the llBondsll) pursuant to an Indenture (the ItIndenture1l) of even date herewith between the Authority and First Interstate Bank of California, as Trustee, in order to provide funds to finance the cost of acquiring, constructing, improving, and equipping the Project; and WHEREAS, the Authority has undertaken to finance the cost of the acquisition, construction, improving and equipping of the Project by loaning the proceeds derived from the sale of the Bonds to the Borrower pursuant to this Loan Agreement, under which the Borrower is required to make loan payments sufficient to pay when due the principal of, premium, if any, and interest on the Bonds and related expenses; and 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: LA01/80249.1 06-01-95 -1- ARTICLE I: DEFINITIONS SECTION 1.1 Definition Of Terms. Unless the context otherwise requires, the terms used in this Agreement shall have the meanings specified in Section 1.01 of the Indenture, as originally executed or as it may from time to time be supplemented or amended as provided therein. SECTION 1.2 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. gender shall include all genders. The use herein of a word of any SECTION 1.3 Articles, Sections. Etc. Unless otherwise specified, references to Articles, Sections and other subdivisions of this Agreement are to the designated Articles, Sections and other subdivisions of this Agreement as amended from time to time. The words llhereof,ll "herein, II Ilhereunderll 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 appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of the provisions hereof. ARTICLE 11: REPRESENTATIONS SECTION 2.1 ReDresentations Of The Authoritv. The Authority makes the following representations as the basis for its undertakings herein contained: (a) The Authority is a public instrumentality of the State of California. 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. The Project constitutes and will constitute a llprojectll as that term is defined in the Act. By proper action, the Authority has been duly authorized to execute, deliver and duly perform its obligations under this Agreement and the Indenture. (b) The Bonds will be issued under and secured by an Indenture, pursuant to which the Authority's interest in this Agreement with respect to the Bonds (except certain rights of the Authority to payment for expenses and indemnification) will be pledged to the Trustee as security for payment of the principal of, premium, if any, and interest on the Bonds. LA01/80249.1 06-01 -95 -2- (c) 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. (d) The Authority is not in default under any of the provisions of the laws of the State of California which default would affect its existence or its powers referred to in subsection (a) of this Section 2.1. (e) The Authority has found and determined and hereby finds and determines that all requirements of the Act with respect to the issuance of the Bonds and the execution of this Agreement have been complied with and that issuing the Bonds and entering into this Agreement will be in furtherance of the purposes of the Act. (f) On , the Authority adopted its resolution approving the issuance of the Bonds. (9) No member, officer or other official of the Authority has any interest whatsoever in the Borrower or in the transactions contemplated by this Agreement. (h) The Authority has received an allocation of a share of the State ceiling on private activity bonds in connection with the issuance of the Bonds. SECTION 2.2 Representations Of The Borrower. The Borrower makes the following representations as the basis for its undertakings herein contained: (a) Borrower is a limited partnership duly formed and validly existing under the laws of the State of California. The Borrower has full legal right, power and authority under the laws of the United States and the State of California (i) to enter into this Agreement, the Deed of Trust and the Bond Purchase Agreement (collectively, the "Borrower Loan Documents") , (ii) to be bound by the terms of the Indenture, (iii) to perform its obligations hereunder and thereunder, and (iv) to consummate the transactions contemplated by the Tax Certificate and the Borrower Loan Documents. (b) This Agreement and the other Borrower Loan Documents have been duly authorized, executed and delivered by the Borrower and constitute legal, valid and binding obligations of the Borrower, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws or judicial decisions affecting the rights of creditors generally and by judicial discretion in the exercise of equitable remedies. (c) The execution and delivery of Borrower Loan Documents and the performance by the Borrower of its obligations LA01/80249,1 06-01 -95 -3- thereunder and the consummation of the transactions contemplated thereby will not violate any law, regulation, rule or ordinance or any order, judgment or decree of any federal, state or local court and (with due notice or the passage of time, or both), do not conflict with, or constitute a breach of, or a default under, or result in 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 document, instrument or commitment to which the Borrower is a party or by which the Borrower or any of its property is bound. (d) The Borrower has not been served with and, to the knowledge of the Borrower there is no action, suit, proceeding, inquiry or investigation by or before any court, governmental agency or public board or body pending or threatened against the Borrower which (i) affects or seeks to prohibit, restrain or enjoin the issuance, sale or delivery of the Bonds or the loaning of the proceeds of the Bonds to the Borrower or the execution and delivery of the Borrower Loan Documents or the Indenture, (ii) affects or questions the validity or enforceability of the Borrower Loan Documents, the Bonds or the Indenture, (iii) questions the exclusion of interest on the Bonds from gross income for federal income tax purposes, (iv) questions the power or authority of the Borrower to carry out the transactions contemplated by, or to perform its obligations under, the Borrower Loan Documents, the Bonds or the Indenture, or the powers of the Borrower to own, acquire, equip or operate the Project, or (v) which, if adversely determined, would materially impair its right to carry on business substantially as now conducted or as now contemplated to be conducted, or would materially adversely affect its financial condition. (e) The Borrower is not in default under any document, instrument or commitment to which the Borrower is a party or to which it or any of its property is subject which default would or could affect the ability of the Borrower to carry out its obligations under the Borrower Loan Documents. (f) Any certificate signed by the Borrower or an Authorized Representative of the Borrower and delivered pursuant to the Borrower Loan Documents or the Indenture shall be deemed a representation and warranty by the Borrower to the Authority and the Trustee as to the statements made therein. (9) The Cost of the Project is as set forth in the Borrower’s Tax Certificate dated the Date of Delivery and has been determined in accordance with sound engineering/construction and accounting principles. All the information and representations in the Borrower’s Tax Certificate are true and correct as of the date thereof. (h) 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 LA01/80249.1 06 - 01 - 95 -4- would affect the qualification of the Project under the Act or impair the exemption from federal income taxation of the interest on the Bonds. In particular, the Borrower shall comply with all requirements set forth in the Borrower’s Tax Certificate. The Borrower intends to continue to own and operate the Project as a manufacturing facility described by the Act until the principal of, the premium, if any, and the interest on the Bonds shall have been paid. (i) The Borrower has and will have title to the Project sufficient to carry out the purposes of this Agreement. (j) All certificates, approvals, permits and authorizations with respect to the construction of the Project of applicable local governmental agencies, the State of California and the federal government have been obtained, or if not yet obtained, are expected to be obtained in due course. (k) No event has occurred and no condition exists which would constitute an Event of Default (as defined in the Indenture) or which, with the passing of time or with the giving of notice or both would become such an Event of Default. (1) To the best of the knowledge of the Borrower, no member, officer, or other official of the Authority has any interest whatsoever in the Borrower or in the transactions contemplated by this Agreement. (m) The Borrower will lease the Project to the User for the term of this Agreement. (n) The Borrower will comply with the prevailing wage requirements of Section 91533(1) of the Act. ARTICLE 111: COMPLETION OF THE PROJECT,ISSUANCE OF THE BONDS SECTION 3.1 Completion Of Project; Best Efforts. Except as provided below, the Borrower has or will acquire, construct, install and equip the Project or has or will cause the Project to be acquired, constructed, installed and equipped in accordance with the Plans and Specifications and as herein provided, will use its best efforts to cause the acquisition, construction, installation and equipping thereof to be completed with all reasonable dispatch, but if for any reason such acquisition, construction, installation and equipping shall not be completed there shall be no resulting diminution in or postponement of the loan payments to be paid by the Borrower. The Borrower shall file a copy of the Plans and Specifications with the Trustee prior to requisition for such Costs from the Construction Fund; provided that the Trustee shall be under no obligation to review such Plans and Specifications or to determine whether the Project is being acquired, constructed, installed or equipped in compliance therewith. LAO 1 B0249.1 06 - 01 -95 -5- Anything in this Agreement to the contrary notwithstanding, the Borrower shall not be obligated to complete the acquisition, construction, installation and equipping of the Project upon acceleration of the payment of the unpaid portion of the loan payments due pursuant to this Agreement and the making of all payments in the amount required by, and in accordance with the terms of, this Agreement. In order to effectuate the purposes of this Agreement, the Borrower will make, execute, acknowledge and deliver, or cause to be made, executed, acknowledged and delivered, all contracts, orders, receipts, writings and instructions, in the name of the Borrower or otherwise, with or to other persons, firms or corporations, and in general do or cause to be done all such other things as may be required or proper for the acquisition, construction, installation and equipping of the Project and fulfillment of the obligations of the Borrower under this Agreement. The Borrower will maintain such records in connection with the Cost of the acquisition, construction, installation and equipping of the Project as to permit ready identification thereof. SECTION 3.2 Issuance Of Bonds. In order to provide funds for payments of the Cost of the Project, the Authority, concurrent with or as soon as practicable after the execution of this Agreement, will issue the Bonds and deposit or cause to be deposited the proceeds thereof with the Trustee, as provided in the Indenture. SECTION 3.3 Reauisition From Construction Fund. The Authority has, in the Indenture, authorized and directed the Trustee to make payments from the Construction Fund to pay the Cost of the Project and Costs of Issuance. Only two disbursements shall be made from the Construction Fund. The first payment shall be made on the Date of Delivery upon receipt by the Trustee of requisitions (upon which the Authority and the Trustee shall rely and shall be protected in relying) signed by the Authorized Representative of the Borrower and approved by the Bondholder in writing, stating with respect to each payment to be made: (1) the requisition number, (2) the name and address of the Person to whom payment is due or, in the event such payment is to reimburse the Authority or the Borrower, the name and address of the Person to whom payment previously has been made (or, in the case of payments to the Revenue Fund, instructions to make such payments to the Revenue Fund for the payment of interest), (3) the amount to be paid, (4) that there has been no default under this Agreement, (5) a description of each obligation, item of cost or expense to be paid or reimbursed, and that each has been properly incurred, is a proper charge against the Construction Fund and has not been the basis of any previous withdrawal, (6) LA01/80249.1 06-01 - 95 -6- that after payment of such requisition, not less than 97% of the Net Proceeds of the Bonds theretofore and thereupon requisitioned will have been used to pay Exempt Costs, and (7) with respect to Costs of Issuance, that the amount being requisitioned to pay Costs of Issuance does not, when added to all prior requisitions for Costs of Issuance, exceed two percent (2%) of the proceeds of the Bonds as provided in Section 147(g) of the Code. The second payment shall be made upon completion of the Project upon delivery of a requisition meeting the requirements set forth in the preceding sentence with an additional statement that the requirements set forth in Section 9(h) of the Bond Purchase Contract have been met. SECTION 3.4 Revisions To Plans And Specifications. The Borrower may revise the Plans and Specifications at any time and from time to time prior to the completion of the Project. No material revision in the Plans and Specifications shall be made in the course of construction of the Project unless and until such revision shall have been certified by an Authorized Representative of the Borrower and filed with the Trustee. SECTION 3.5 Certificate Of Completion. When the Project is completed and ready to be placed in service, the Trustee and the Authority shall receive a certificate of an Authorized Representative of the Borrower, stating that (i) the Project has been completed substantially in accordance with the Plans and Specifications, (ii) payment, or provision therefor, of the Cost of the Project has been made except for any costs not then due and payable or the liability for payment of which is being contested or disputed by the Borrower, and (iii) no Event of Default exists under this Agreement. Notwithstanding the foregoing, such certificate shall state that it is given without prejudice to any rights against third parties which exist at the date thereof or which may subsequently come into being. The Authority and the Borrower agree to cooperate in causing such certificate to be furnished to the Trustee. SECTION 3.6 Completion Of Project If Bond Proceeds Insufficient; SurDlus Proceeds. If the moneys in the Construction Fund available for payment of the Cost of the Project are not sufficient to pay the Cost of the Project in full, the Borrower will complete or cause to be completed the Project and pay or cause to be paid all of that portion of the Cost of the Project in excess of the moneys available therefor in the Construction Fund. THE AUTHORITY DOES NOT MAKE ANY WARRANTY, EITHER EXPRESS OR IMPLIED, THAT THE MONEYS WHICH WILL BE PAID INTO THE CONSTRUCTION FUND WILL BE SUFFICIENT TO PAY THE COST OF THE PROJECT. If the Borrower shall pay any portion of the Cost of the Project pursuant to the provisions of LA01/80249.1 06-01 -95 -7- this Section 3.6, it shall not be entitled to any reimbursement therefor from the Authority, the Trustee, the Bond Registrar, the Paying Agent, or the Owner of the Bonds, nor shall it be entitled to any diminution in or postponement of the loan payments required to be paid by the Borrower or the Administration Expenses. If, upon the Completion Date, there shall be any surplus funds remaining in the Construction Fund not reserved to pay for the Cost of the Project, such funds shall be deposited in the Surplus Account of the Revenue Fund and invested and used as provided in Section 3.04 of the Indenture. SECTION 3.7 Investment Of Construction Fund. Any moneys held as a part of the Construction Fund or any other fund created pursuant to the Indenture shall be invested or reinvested in the manner and upon the direction of the Borrower, as provided in Section 5.04 of the Indenture. ARTICLE IV: LOANS OF PROCEEDS; REPAYMENT PROVISIONS SECTION 4.1 Loan Of Bond Proceeds; Issuance Of Bonds. The Authority covenants and agrees, upon the terms and conditions in this Agreement, to make a loan to the Borrower for the purpose of financing the costs of the Project. 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 I11 of the Indenture. SECTION 4.2 ReDavment And Pavment Of Other Amounts Pavable. (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 repayment on the loan made to the Borrower from Bond proceeds pursuant to Section 4.1 hereof, a sum equal to the amount payable on the next Bond Payment Date as principal of and premium, if any, and interest on the Bonds as provided in the Indenture. Such Loan Repayments shall be made in federal funds or other immediately available funds at the principal office of the Trustee. Each payment made pursuant to this Section 4.2(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 once per year, in [Month], any amount held by the Trustee in the Revenue Fund on the due date for a Loan Repayment hereunder shall be credited against the installment due on such date to the extent available LA01/80249.1 06-01 -95 -a- 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 payments 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 shall forthwith pay such deficiency as a Loan Repayment hereunder. The Borrower may make payments under this Section 4.2(a) directly to the Bondholder. (b) The Borrower also agrees to pay (i) the annual fee of the Trustee for its ordinary services rendered as trustee, and its ordinary expenses incurred under the Indenture, as and when the same become due, (ii) the reasonable fees, charges and expenses (including reasonable legal fees and expenses) of the Trustee, as bond registrar and paying agent, and the reasonable fees of any other paying agent on the Bonds as provided in the Indenture, as and when the same become due, (iii) the reasonable fees, charges and expenses of the Trustee for the necessary extraordinary services rendered by it and extraordinary expenses incurred by it under the Indenture, as and when the same become due, (iv) the cost of printing any Bonds required to be furnished by the Authority at the expense of the Authority, and (v) any amounts required to be deposited in the Rebate Fund to comply with the provisions of Section 5.10 hereof and Section 6.06 of the Indenture. The Trustee’s compensation shall not be limited by any provision of law regarding the compensation of a Trustee of an express trust. (c) The Borrower also agrees to pay, within 10 days after receipt of a request for payment thereof, all expenses required to be paid by the Borrower under the terms of the Bond Purchase Contract executed by the Borrower and the Authority in connection with the sale of the Bonds, and all reasonable expenses of the Authority related to the Project or the Bonds which are not otherwise required to be paid by the Borrower under the terms of this Agreement. (d) The Borrower also agrees to pay fees and expenses of independent certified public accountants necessary for the preparation of annual or other audits, reports or summaries thereof required by the Indenture or by the Authority, including a report of an independent certified public accountant with respect to any fund established under the Indenture; any other fees and expenses of financial analysts and engineering consultants, appraisers or others reasonably required to be employed by the Authority in connection with the Project or the Bonds. LA01/80249.1 06-01-95 -9- (e) In the event the Borrower should fail to make any of the payments required by Subsections (a) through (d) of this Section, such payments shall continue as obligations of the Borrower until such amounts shall have been fully paid. The Borrower agrees to pay such amounts, together with interest thereon until paid, to the extent permitted by law, at the Maximum Rate following a delinquency of 30 days or longer. Interest on overdue payments required under subsection (a) above shall be paid to Bondholders as provided in Sections 5.02 and 5.03 of the Indenture. SECTION 4.3 Unconditional Oblisation. The obligations of the Borrower to make the payments required by Section 4.2 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 net the payments to be made on account of the loan as prescribed in Section 4.2 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, sinking fund installments, 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 (i) will not suspend or discontinue any payments provided for in Section 4.2 hereof; (ii) will perform and observe all of its other covenants contained in this Agreement; and (iii) except as provided in Article VI11 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 of California or any political subdivision or either of these, or any failure of the Authority or the Trustee to perform and observe any covenant, whether express or implied, or any duty, liability or obligation arising out of or connected with this Agreement or the Indenture, except to the extent permitted by this Agreement. SECTION 4.4 Assisnment Of Authoritv's Rishts. As security for the payment of the Bonds, the Authority will assign to the Trustee the Authority's rights 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, or to enforce its rights, under Sections 4.2(b), 4.2(c), 7.3, 9.2 and 9.3 hereof), and the Authority hereby directs the Borrower to make the payments required hereunder (except such payments for expenses and indemnification) directly to the Trustee. The LA01/80249.1 -10- 06 - 01 - 95 Borrower hereby assents to such assignment and agrees to make payments directly to the Trustee without defense or set-off by reason of any dispute between the Borrower and the Authority or the Trustee. SECTION 4.5 Amounts Remainins In Funds. It is agreed by the parties hereto that after payment in full of (i) the Bonds, or after provision for such payment shall have been made as provided in the Indenture, (ii) the fees, charges and expenses of the Trustee and paying agents in accordance with the Indenture; (iii) all other amounts required to be paid under this Agreement and the Indenture, any amounts remaining in any fund held by the Trustee under the Indenture shall be paid to the Borrower. ARTICLE V: SPECIAL COVENANTS AND AGREEMENTS SECTION 5.1 Risht Of Access To The Project, Books, And Records. The Borrower agrees that during the term of this Agreement the Authority, the Trustee and the duly authorized agents of either of them shall have the right 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 Authority and the Trustee may be exercised only after such agent shall have executed release of liability and secrecy agreements if requested by the Borrower in the form then currently used by the Borrower, and 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. Borrower shall maintain adequate books, accounts and records in compliance with the regulations of any governmental regulatory body having jurisdiction thereof. of Authority or Trustee, at any reasonable time and upon reasonable prior notice, to inspect Borrower’s properties. Borrower shall permit employees or agents SECTION 5.2 Maintenance. Operation And Insurins Of Project; Taxes. The Borrower will, at its expense, maintain and operate the Project or cause the User to do so at its expense. The Borrower will pay, or cause to be paid, all taxes levied with respect to the Project and the income therefrom, including any assessments or other public charges secured by liens upon the Project or Borrower’s interests therein. The Borrower agrees that it will at its expense obtain and maintain insurance coverage with respect to the Project in accordance with the provisions of the Guaranty Agreement, and will cause the Trustee to be named as a loss payee under such coverage. The Borrower shall provide a certificate of insurance to the Trustee annually. LA01/80249,1 06-01-95 -11- SECTION 5.3 Maintenance Of Existence; Oualification In The State. (a) The Borrower agrees that during the term of this Agreement it will remain in good standing and having the capacity to do business in the State and will maintain its existence as a limited partnership, will not dissolve or otherwise dispose of all or substantially all of its assets and will not combine or consolidate with or merge into another entity or permit one or more other entities to consolidate with or merge into it; provided, however, that the Borrower may so combine, consolidate with, or merge into another entity existing under the laws of one of the states of the United States, or permit one or more other entities to consolidate with or merge into it, or sell or otherwise transfer to another entity all or substantially all of its assets as an entirety and thereafter dissolve, provided that (i) the surviving, resulting or transferee entity, as the case may be, (1) assumes and agrees in writing to pay and perform all of the obligations of the Borrower hereunder, and (2) qualifies to do business in the State; (ii) the Bondholder has agreed to such consolidation, merger or transfer. SECTION 5.4 Financins And Continuation Statements; Cooperation. The Borrower hereby agrees to file all Financing and Continuation Statements required to be filed, if any and will provide a copy to the Trustee. The Borrower agrees that it will perform, on request of Authority, the Trustee or the Bondholder, such reasonable acts as may be necessary or advisable to carry out the intent of this Agreement or of the Indenture. SECTION 5.5 Compliance With Laws. The Borrower agrees that it will at all times comply with, or cause to be complied with, all laws, statutes, rules, regulations, orders and directions of any governmental authority having jurisdiction over the Borrower or its business, including without limitation, any laws, statutes, ordinances, rules or regulations governing Hazardous Substances, if a breach of any such law, statute, rule, regulation, order, or direction would materially and adversely affect the Project, except where contested in good faith and by proper proceedings. SECTION 5.6 Limitations On Disposition Of Assets; Assiqnment, Sale Or Lease Of Proiect . Except for the lease of the Project to the User, the Borrower covenants and agrees that it shall not, or allow the User to, sell, transfer, assign or otherwise dispose of any asset of the Borrower or the User subject to any Deed of Trust other than in accordance with the terms of such Deed of Trust. as provided in Section 5.3 of this Agreement, the Borrower’s rights hereunder, the proceeds of the Loan and the use thereof Except LA01/80249.1 -12- 06-01 -95 may not be assigned by the Borrower, nor will the Borrower allow such rights or proceeds to be assigned by the User, without the prior written consent of Authority or the Bondholder. Any such assignment by the Borrower shall not, without the consent of the Bondholder, relieve the Borrower of primary liability for payments due under this Agreement and of the performance of all other obligations required under this Agreement. In addition, any assignee or transferee shall assume the obligations of the Borrower hereunder to the extent of the interest assigned or transferred, and the Borrower shall forthwith furnish or cause to be furnished to the Authority and the Trustee a true and complete copy of all documents evidencing such assignment or transfer and assumption of obligations. SECTION 5.7 EmDlovment And Other ReDorts. Within thirty (30) days following the end of the Borrower’s fiscal year, the Borrower shall furnish a written report to the Authority, and upon request, to the California Industrial Development Financing Advisory Commission, stating the number of full-time and part-time employees of the User employed at the Project during such fiscal year, and supplying such current information as the Authority shall reasonably request regarding other matters covered in its application for industrial revenue bond financing except financial information confidential in nature. SECTION 5.8 Borrower Guarantv. The Borrower shall maintain the Guaranty Agreement in full force and effect for the term of this Agreement. SECTION 5.9 General Tax Covenant. It is the intention of the parties hereto that interest on the Bonds shall be and remain Tax-exempt, and to that end the Borrower covenants to comply with all requirements in the Tax Certificate, in this Section, in Section 5.10 and in Section 5.11 and that such covenants are for the benefit of the Trustee and each and every holder of the Bonds. SECTION 5.10 Special Arbitrase Certifications. 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, and in particular Section 148 of the Code or Treasury Regulations issued under that Section of the Code, such that the interest on the Bonds is not Tax-exempt. To that end, the Borrower acknowledges that it has read Sections 5.07 and 6.06 of the Indenture and that it will comply with the requirements of those sections as if they were set forth in full in this Agreement. LA01/80249.1 06 - 01 - 95 -13- SECTION 5.11 Lease And Loan To User. The Borrower covenants that throughout the term of this Agreement it will lease the Project to the User and that it will cause the User to comply with all covenants contained in this Agreement relating to the Tax-exempt status of the Bonds and the qualification of the Project under the Act. ARTICLE VI: DAMAGE, DESTRUCTION AND CONDEMNATI0N;USE OF PROCEEDS SECTION 6.1 Oblisation To Continue Pavments. If prior to full payment of the Bonds (or provision for payment thereof in accordance with the provisions of the Indenture) (i) the Project or any portion thereof is destroyed (in whole or in part) or is damaged by fire or other casualty, or (ii) 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, firm or corporation 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 VI11 hereof. SECTION 6.2 Armlication Of Net Proceeds. Subject to the provisions of the Deed of Trust, which shall have first priority, 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. All Net Proceeds shall be deposited by the Borrower in an escrow account and shall be applied in one or more of the following ways at the election of the Borrower, and by written notice to Authority and the Trustee: (a) The prompt repair, restoration, relocation, modification or improvement of the stage of completion of construction of the damaged, destroyed or condemned portion of the Project to enable such portion 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. Any balance of the Net Proceeds remaining after such work has been completed shall be deposited in the Revenue Fund to be applied 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 to the Borrower. (b) Prepayment of all or a portion of the amounts payable hereunder, in accordance with Article VI11 hereof, and LA01/80249.1 06- 01 -95 -14- redemption of Bonds; provided that no part of the Net Proceeds may be applied for such purpose unless (1) all of the amounts payable under this Agreement are so prepaid and all Outstanding Bonds are to be redeemed in accordance with the Indenture, or (2) in the event that less than all of the amounts payable hereunder are so prepaid, the Borrower shall furnish to the Authority and the Trustee a certificate of the Authorized Representative acceptable to the Authority and the Trustee (upon which certificate the Trustee may conclusively rely) stating (i) that the property forming part of the portion of the Project that was damaged or destroyed by such casualty or was taken by such condemnation proceedings is not essential to the Borrower's use or possession of such portion of the Project or (ii) that such part of the portion of the Project theretofore completed has been repaired, replaced, restored, relocated, modified or improved to enable such portion 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 the taking by such condemnation proceedings. SECTION 6.3 Insufficiency Of Net Proceeds. If the Project or a portion thereof is to be repaired, restored, relocated, modified or improved pursuant to Section 6.2 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 in excess of the amount of the Net Proceeds held in escrow. SECTION 6.4 Damase To Or Condemnation Of Other Property. 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: EVENTS OF DEFAULT AND REMEDIES SECTION 7.1 Events Of Default. Any one of the following which occurs and continues shall constitute an Event of Default: (a) Failure of the Borrower to make any payment required by Section 4.2(a) hereof when due; (b) 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 as provided in (a), which continues for a period of 30 days after written notice delivered to the Borrower which notice shall specify such failure and request that it be remedied, given to the Borrower by the LA01/80249.1 06-01-95 -15- Authority, the Bondholder or the Trustee, unless the Authority, the Bondholder and the Trustee 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, the Bondholder 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: (c) existence of an Event of Default under and as defined in Section 7.01 of the Indenture; or (d) existence and continuance of an event of default under the Guaranty Agreement, the Deed of Trust or any other Loan Document. The provisions of subsection (b) 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 of California 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 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), (c) or (d) of this Section as well as to an Event of Default under Section 7.01(d) of the Indenture to the extent it relates to a default under subsections (a), (c) or (d) of this Section. SECTION 7.2 Remedies On Default. Whenever any Event of Default shall have occurred and shall be continuing, (a) Upon receipt of written notice from Bondholder the Trustee, by written notice to the Authority and the Borrower (with copy to the Bondholder) shall declare the unpaid balance of the loan payable under Section 4.2(a) of this Agreement 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. LA01/80249.1 -16- 06 - 01 - 95 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 may 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 an Event of Default shall occur with respect to the payment of any Loan Repayment payable under Section 4.2(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 Maximum Rate 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 LA01/80249.1 06-01-95 -17- 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 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 7.3 Asreement To Pav Attornevs’ Fees And Expenses. In the event the Borrower should default under any of the provisions of this Agreement 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 of such attorneys and such other reasonable expenses so incurred by the Authority or the Trustee. SECTION 7.4 No Remedv 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. In order 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, which may exercise the Authority’s rights as assignee or its own rights, and the Trustee and the holders of the Bonds shall be deemed third party beneficiaries of all covenants and agreements herein contained. SECTION 7.5 No Additional Waiver Implied Bv One Waiver. 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 LA01/80249.1 06-01-95 -18- limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. ARTICLE VIII: PREPAYMENT SECTION 8.1 Redemption Of Bonds With Prepayment Monevs. By virtue of the assignment of the rights of the Authority under this Agreement to the Trustee as is provided in Section 4.5 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 VIII. paid to it by the Borrower to redeem the Bonds on the date set for such redemption pursuant to Section 8.5 hereof. The Authority shall call Bonds for redemption as required by Article IV of the Indenture or as requested by the Borrower pursuant to the Indenture or this Agreement. The Trustee shall use the moneys so SECTION 8.2 Options To Prepav Installments. The Borrower shall have the option to prepay the amounts payable under Section 4.2(a) hereof, in whole or in part, by paying to the Trustee, for deposit in the Revenue Fund, the amount set forth in Section 8.4 hereof, and to cause all or any part of the Bonds to be redeemed at the prices set forth in Section 4.01(3) of the Indenture. To exercise such right of prepayment, the Borrower shall give at least forty-five (45) days written notice to the Trustee and the Bondholder. Should such prepayment occur on the last day of any Interest Period, Borrower shall not be obligated to pay a prepayment fee. Should such prepayment occur on any date other than the last day of any Interest Period, Borrower shall pay to the Trustee all of the Trustee's costs associated with such prepayment by delivering the total amount of said costs to the Trustee with Borrower's deposit of funds to be used for the prepayment. SECTION 8.3 Mandatorv PreDavment. The Borrower shall have and hereby accepts the obligation to prepay in whole or in part the Loan Repayments required by Section 4.2(a) of this Agreement, together with interest accrued, but unpaid, thereon, to be used to redeem all or a part of the Outstanding Bonds under the following circumstances: (a) 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; LA01/80249.1 06-01-95 -19- (b) if there occurs a Determination of Taxability; or (c) to provide for mandatory sinking fund redemption as required by Section 4.01(1) of the Indenture or to provide for mandatory redemption as required by Section 4.01(4) 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 8.4 and shall be deposited in the Revenue Fund. SECTION 8.4 Amount Of Prepavment. In the case of a prepayment of the entire amount due hereunder pursuant to Section 8.2 or 8.3 hereof, the amount to be paid shall be a sum sufficient, together with other funds and the yield on any securities deposited with the Trustee and available for such purpose, to pay (1) the principal of all Bonds Outstanding on the redemption date specified in the notice of redemption, plus interest accrued and to accrue to the payment or redemption date of the Bonds, plus premium, if any, pursuant to the Indenture, (2) all reasonable and necessary fees and expenses of the Authority, the Trustee and any paying agent accrued and to accrue through final payment of the Bonds and (3) all other liabilities of the Borrower accrued and to accrue under this Agreement. In the case of partial prepayment of the Loan Repayments, the amount payable shall be a sum sufficient, together with other funds deposited with the Trustee and available for such purpose, to pay the principal amount of and premium, if any, and accrued interest on the Bonds to be redeemed, as provided in the Indenture, and to pay expenses of redemption of such Bonds. All partial prepayments of the Loan Repayments shall be applied in inverse order of the due dates thereof. SECTION 8.5 Notice Of Prepavment. To exercise an option granted in or to perform an obligation required by this Article VIII, the Borrower shall give written notice at least fifteen (15) days prior to the last day by which the Trustee is permitted to give notice of redemption pursuant to Section 4.03 of the Indenture, to the Authority, and the Trustee specifying the date upon which any prepayment will be made. If the Borrower fails to give such notice of a prepayment in connection with a mandatory redemption under this Loan Agreement, such notice may be given by the Authority, by the Trustee or by any holder or holders of 10% or more in aggregate principal amount of the Bonds outstanding. The Authority and the Trustee, at the request of the Borrower or any such Bondholder, shall forthwith take all steps necessary under the applicable provisions of the Indenture (except that the Authority shall not be required to make Payment of any money required for such LA01/80249.1 06- 01 -95 -20- redemption) to effect redemption of all or part of the then Outstanding Bonds, as the case may be, on the earliest practicable date thereafter on which such redemption may be made under applicable provisions of the Indenture. ARTICLE IX: NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION SECTION 9.1 Non-Liabilitv Of Authoritv. The Authority shall not be obligated to pay the principal of, or 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 9.2 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 9.3 Indemnification. The Borrower releases the Authority and the Trustee from, and covenants and agrees that neither the Authority nor the Trustee shall be liable for, and covenants and agrees, to the extent permitted by law, to indemnify and hold harmless the Authority 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 (1) 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; (2) the issuance of any Bonds or any certifications or representations made in connection therewith and the carrying out of any of the transactions contemplated by the Bonds and this Agreement; (3) LA01/80249.1 06- 01 -95 -21- 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 this Agreement; or (4) 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 any official statement or other offering circular utilized by the Authority or any placement agent in connection with the sale or remarketing of any Bonds; provided that such indemnity shall not be required for damages that result from negligence or willful misconduct 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 with respect to the loss sustained. The Borrower further covenants and agrees, to the extent permitted by law, to pay or to reimburse the Authority 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 negligence or willful misconduct of the party claiming such payment or reimbursement. The Authority shall promptly notify the Borrower of any action or proceeding brought in connection with any of the above, and the Authority agrees that it will not settle any such action or proceeding without the prior written consent of the Borrower. The Borrower shall, in its own name or the name of the Authority, be responsible for and control the defense of the Authority, its partners, agents and employees in any such action or proceeding, and the Authority agrees to cooperate fully with the Borrower and to take all action necessary, to the extent it might lawfully do so, to effect the substitution of the Borrower for the Authority in such action or proceeding. The provisions of this Section shall survive any resignation or removal of the Trustee and the retirement of the Bonds. ARTICLE X: MISCELLANEOUS SECTION 10.1 Notices. All notices, certificates or other communications shall be deemed sufficiently given on the second day following the day on which the same have been mailed by certified mail, postage prepaid, addressed to the Authority, the Borrower or the Trustee, as the case may be, as follows: LA01/80249.1 06-01-95 -22- To the Authority: The Industrial Development Authority of the City of Carlsbad 2075 Las Palmas Drive Carlsbad, California 92009 Attention: Cynthia Haas To the Borrower: CIP Limited, L.P 475 W. Bradley Avenue El Cajon, California 92020 Attention: Jeffrey C. Hamann To the Trustee: First Interstate Bank of California 707 Wilshire Blvd., W11-1 Los Angeles, California 90017 Attention: Corporate Trust Department 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 Authority, the Borrower and the Trustee may, by notice given hereunder, designate any different addresses to which subsequent notices, certificates or other communications shall he sent. SECTION 10.2 Severabilitv. 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 10.3 Execution Of Countemarts. This Agreement may be simultaneously 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 under Article 9 of the California Uniform Commercial Code, only the counterpart delivered, pledged, and assigned to the Trustee shall be deemed the original. SECTION 10.4 Amendments, Chanses 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 LA01/80249.1 06 - 01 - 95 -23- effectively amended, changed, modified, altered or terminated without the written consent of the Trustee and the Bondholder. SECTION 10.5 Governins Law. This Agreement shall be governed exclusively by and construed in accordance with the applicable laws of the State of California. SECTION 10.6 Arbitration. (a) Bindins Arbitration. Upon the demand of any party ( llParty/Partiesll) , to a Document (as defined below) , whether made before the institution of any judicial proceeding or not more than 60 days after service of a complaint, third party complaint, cross-claim or counterclaim or any answer thereto or any amendment to any of the above, any Dispute (as defined below) shall be resolved by binding arbitration in accordance with the terms of this arbitration program ("Arbitration Program"). A I1Disputel1 shall include any action, dispute, claim or controversy of any kind, whether founded in contract, tort, statutory or common law, equity, or otherwise, now existing or hereafter arising between any of the Parties arising out of, pertaining to or in connection with any agreement, document or instrument to which this Arbitration Program is attached or in which it appears or is referenced or any related agreements, documents, or instruments (llDocumentsll). Any Party who fails to submit to binding arbitration following a lawful demand by another Party shall bear all costs and expenses, including reasonable attorneys' fees (including those incurred in any trial, bankruptcy proceeding or on appeal), incurred by the other Party in obtaining a stay of any pending judicial proceeding and compelling arbitration of any Dispute. The Parties agree that any agreement, document or instrument which includes, attaches to or incorporates this Arbitration Program represents a transaction involving commerce as that term is used in the Federal Arbitration Act, Title 9 United States Code (llFAA1l). THE PARTIES UNDERSTAND THAT BY THIS AGREEMENT THEY HAVE DECIDED THAT THEIR DISPUTES SHALL BE RESOLVED BY BINDING ARBITRATION RATHER THAN IN COURT, AND ONCE DECIDED BY ARBITRATION NO DISPUTE CAN LATER BE BROUGHT, FILED OR PURSUED IN COURT. (b) Governins Rules. Arbitrations conducted pursuant to this Arbitration Program shall be administered by the American Arbitration Association (llAAA1l) , or other mutually agreeable administrator (I1Administratorl1) in accordance with the terms of this Arbitration Program and the Commercial Arbitration Rules of the AAA. Proceedings hereunder shall be governed by the provisions of the FAA. The arbitrator(s) shall resolve all Disputes in accordance with the applicable substantive law designated in the Documents. Judgment upon any award rendered hereunder may be entered in any court having jurisdiction; provided, however, that nothing herein shall be construed to be a LA01/80249.1 06-01-95 -24- waiver by any Party that is a bank of the protections afforded pursuant to 12 U.S.C. 91 or any similar applicable state law. (c) Arbitrator Powers and Qualifications; Awards. The Parties agree to select a neutral qualified arbitrator or a panel of three qualified arbitrators to resolve any Dispute hereunder. llQualifiedl1 means a retired judge or practicing attorney, with not less than 10 years practice in commercial law, licensed to practice in the state of the applicable substantive law designated in the Documents. A Dispute in which the claims or amounts in controversy do not exceed $1,000,000, shall be decided by a single arbitrator. A single arbitrator shall have authority to render an award up to but not to exceed $1,000,000.00 including all damages of any kind whatsoever, costs, fees, attorneys' fees and expenses. Submission to a single arbitrator shall be a waiver of all Parties' claims to recover more than $1,000,000.00. A Dispute involving claims or amounts in controversy exceeding $1,000,000.00 shall be decided by a majority vote of a panel of three qualified arbitrators. All three arbitrators on the arbitration panel must actively participate in all hearings and deliberations. The arbitrator(s) shall be empowered to, at the written request of any Party in any Dispute, 1) to consolidate in a single proceeding any multiple party claims that are substantially identical or based upon the same underlying transaction; 2) to consolidate any claims and Disputes between other Parties which arise out of or relate to the subject matter hereof, including all claims by or against borrowers, guarantors, sureties and/or owners of collateral; and 3) to administer multiple arbitration claims as class actions in accordance with Rule 23 of the Federal Rules of Civil Procedure. In any consolidated proceeding the first arbitrator(s) selected in any proceeding shall conduct the consolidated proceeding unless disqualified due to conflict of interest. The arbitrators(s) shall be empowered to resolve any dispute regarding the terms of this arbitration clause, including questions about the arbitrability of any Dispute, but shall have no power to change or alter the terms of the Arbitration Program. The prevailing Party in any Dispute shall be entitled to recover its reasonable attorneys' fees in any arbitration, and the arbitrator(s) shall have the power to award such fees. The award of the arbitrator(s) shall be in writing and shall set forth the factual and legal basis for the award. (d) Real ProPertv Collateral. Notwithstanding the provisions of subparagraphs (a) through (c), no Dispute shall be submitted to arbitration without the consent of all Parties if, at the time of the proposed submission, such Dispute arises from or relates to an obligation which is secured directly or indirectly and in whole or in part by real property collateral. If all Parties do not consent to submission of such a Dispute to arbitration, the Dispute shall be determined as provided in Paragraph 5. LAO 1 /80249.1 06-01-95 -25- (e) Judicial Reference. At the request of any Party, a Dispute which is not submitted to arbitration as provided and limited in subparagraphs (a) through (d) shall be determined by a reference in accordance with California Code of Civil Procedure Section 638 et seq. If such an election is made, the Parties shall designate to the court a referee or referees selected under the auspices of the AAA, unless otherwise agreed to in writing by all parties. With respect to a Dispute in which the amounts in controversy do not exceed $1,000,000, a single referee shall be chosen and shall resolve the Dispute. The referee shall have authority to render an award up to but not to exceed $1,000,000, including all damages of any kind whatsoever, including costs, fees and expenses. A Dispute involving amounts in controversy exceeding $1,000,000 shall be decided by a majority vote of a panel of three referees (a "Referee Panel"), provided, however, that all three referees on the Referee Panel must actively participate in all hearings and deliberations. Referees, including any Referee Panel, may grant any remedy of relief deemed just and equitable and within the scope of this Arbitration Program and may also grant such ancillary relief as is necessary to make effective any award. The presiding referee of the Referee Panel, or the referee if there is a single referee, shall be a retired judge. Judgment upon the award rendered by such referee(s) shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645. Determinations and awards by a referee or Referee Panel shall be binding on all Parties and shall not be subject to further review or appeal except as allowed by applicable law. (f) Preservation of Remedies. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party to: (1) foreclose against and/or sale of any real or personal property collateral or other security, or obtain a personal or deficiency award; (2) exercise self-help remedies (including repossession and setoff rights); or (3) obtain provisional or ancillary remedies such as injunctive relief, sequestration, attachment, replevin, garnishment, or the appointment of a receiver from a court having jurisdiction. Such rights can be exercised at any time except to the extent such action is contrary to a final award or decision in any arbitration proceeding. The institution and maintenance of an action as described above shall not constitute a waiver of the right of any Party to submit the Dispute to arbitration, nor render inapplicable the compulsory exercise of any self-help, auxiliary or other rights under this paragraph shall be a Dispute hereunder. (9) Miscellaneous. All statutes of limitation applicable to any Dispute shall apply to any proceeding in accordance with this Arbitration Program. The Parties agree, to the maximum extent practicable, to take any action necessary to conclude an arbitration hereunder within 180 days of the filing of a Dispute with the Administrator. The arbitrator(s1 shall be LA01/80249.1 06-01-95 -26- empowered to impose sanctions for any Party’s failure to proceed within the times established herein. Arbitrations shall be conducted in the state of the applicable substantive law designated in the Documents. The provisions of this Arbitration Program shall survive a termination, amendment, or expiration hereof or of the Documents unless the Parties otherwise expressly agree in writing. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or as required by applicable law or regulation. If any provision of this Arbitration Program is declared invalid by any court, the remaining provisions shall not be affected thereby and shall remain fully enforceable. SECTION 10.7 Authorized ReDresentative. Whenever under the provisions of this Agreement the approval of the Borrower is required or the Borrower is required to take some action at the request of the Authority, such approval or such request shall be given on behalf of the Borrower by the Authorized Representative, 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 10.8 Term Of The Aqreement. This Agreement shall be in full force and effect from the date hereof and shall continue in effect as long as the Bond is outstanding or the Trustee holds any moneys under the Indenture, whichever is later. All representations and certifications by the Borrower as to all matters affecting the Tax-exempt status of the Bonds shall survive the termination of this Agreement. SECTION 10.9 Bindins 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 5.3 hereof. LA01/80249.1 06-01 -95 -27- SECTION 10.10 Survival Of Fee Oblisation. The right of the Authority and the Trustee to receive any fees or be reimbursed for any expenses incurred pursuant to this Agreement, and the right of the Trustee to be protected from any liability as provided in this Agreement shall survive the retirement of the Bonds or the resignation or removal of the Trustee. IN WITNESS WHEREOF, the INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF CARLSBAD has caused this Agreement to be executed in its name and its seal to be hereunto affixed and attested by its duly authorized officers, and the Borrower has caused this Agreement to be executed in its name, all as of the date first written. INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF CARLSBAD BY Title: Chairman [seal I Attest: By : Title: Secretary (signatures continued on next page) LA01/80249.1 06-01 -95 -28- CIP LIMITED, L.P. A California Limited Partnership BY its General Partner: Whammy, Inc. A California corporation By : By : By : By : By : By : Jeffrey C. Hamann, President Daniel M. Whitaker, Secretary Jeffrey C. Hamann, as an individual and as Trustee of the J.C. Hamann Family Trust, UTD 4/25/86 Gregg Hamann, as an individual and as Trustee of the Gregg Hamann Family Trust, UTD 4/25/86 Daniel M. Whitaker as an individual Daniel M. Whitaker and/or Dona C. Whitaker, Co- Trustees of the Whitaker Family Trust, UTD 10/22/79, as Amended and Restated 12/22/83 LA01/80249.1 06-01-95 -29- . LA01/80249.1 06-01-95 EXHIBIT A THE PROJECT A- 1