Exhibit 10.70

 

REIMBURSEMENT AGREEMENT

 

Between

 

PROVENA FOODS INC.

 

And

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

 

Dated as of December 1, 2005

 

(Letter of Credit No. NZS558449 for $6,221,813.00)

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REIMBURSEMENT AGREEMENT

 

REIMBURSEMENT AGREEMENT, dated as of December 1, 2005 (the “Agreement”) between
PROVENA FOODS INC. (the “Borrower”) and WELLS FARGO BANK, NATIONAL ASSOCIATION
(the “Bank”)

 

WHEREAS, pursuant to that certain Indenture of Trust dated as of December 1,
2003 between the Borrower and U. S. Bank National Association (the “Trustee”)
(the “Indenture”), the Borrower has issued its Variable/Fixed Rate Demand Bonds
Series 2003A (the “Bonds”) in the aggregate principal amount of $6,300,000.00;
and

 

WHEREAS, as a condition precedent to the issuance of the Bonds, the Trustee
required that the Borrower obtain and deliver to the Trustee, for the benefit of
the holders of the Bonds, an irrevocable letter of credit to secure payment of
the Bonds;

 

WHEREAS, at the time of the issuance of the Bonds, Comerica Bank issued such
irrevocable letter of credit (“Comerica LC”);

 

WHEREAS, the Borrower has requested that the Bank issue an irrevocable
direct-pay letter of credit to the Trustee, in replacement of the Comerica LC,
substantially in the form attached hereto as Exhibit A (the “Letter of Credit”),
and the Bank has agreed to issue such Letter of Credit upon and subject to the
terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the foregoing recitals and the covenants
contained herein, and in order to induce the Bank to issue the Letter of Credit,
the Borrower and the Bank hereby agree as follows. (Capitalized terms used
herein and not otherwise defined have the meaning set forth in Section 17
hereof.)

 

SECTION 1. TERMS AND AMOUNT OF LETTER OF CREDIT.

 

The Bank hereby agrees, on the terms and subject to the conditions set forth in
this Agreement, to issue its irrevocable direct-pay Letter of Credit for the
account of the Borrower in favor of the Trustee in an initial amount not to
exceed the Stated Amount, which amount approximates the aggregate principal
amount of the Bonds plus forty-five (45) days’ interest calculated at ten
percent (10%), based on the actual number of days elapsed in a year of 365 days.
The Letter of Credit shall be issued on the date on which the Bank, in its sole
discretion, shall determine that all of the conditions precedent set forth in
Section 4 of this Agreement shall have been satisfied, and shall expire on the
Expiration Date. Notwithstanding anything herein to the contrary, this Agreement
shall not expire or be otherwise terminated until such time as all payment
obligations to the Bank due or to become due hereunder have been paid.

 

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SECTION 2. REIMBURSEMENT AND OTHER PAYMENTS.

 

(a) Reimbursement Obligations. Except as provided in Section 2(b) hereof, the
Borrower agrees to pay to the Bank (i) on the day that the Bank pays a Drawing
made by the Trustee under the Letter of Credit, all amounts paid by the Bank
pursuant to the Letter of Credit to or on behalf of the Borrower in respect of
such Drawing; and (ii) interest on any and all amounts unpaid by the Borrower
when due under this Agreement from the date such amounts become payable until
payment in full (collectively, the “Reimbursement Obligations”). Except as
provided in Section 2(b) hereof, interest shall accrue on unpaid Reimbursement
Obligations at a rate per annum equal to the Default Rate.

 

(b) Tender Reimbursement Obligations.

 

(i) Each Tender Drawing paid by the Bank under the Letter of Credit shall
constitute a Tender Reimbursement Obligation which obligation shall be due and
payable by the Borrower as set forth below. The Trustee shall use the proceeds
of Tender Drawings only for the purpose of purchasing Bonds tendered or deemed
tendered for purchase pursuant to Article 3.01 of the Indenture.

 

(ii) Upon receiving, or receiving notification of, any Tender Drawing, the Bank
shall notify the Borrower of such Tender Drawing and the amount of the Tender
Drawing. The amount of any Tender Drawing shall be due and payable within five
(5) days of the date the Tender Drawing is paid by the Bank (the “Tender Drawing
Date”), unless within said five (5) day period the Borrower shall execute and
deliver to the Bank a Notice of Intent to Borrow in the form attached hereto as
Exhibit B. Interest shall accrue at the Default Rate on all Tender Drawing
amounts from the Tender Drawing Date to the date such Tender Drawing is
reimbursed in full, unless a Notice of Intent to Borrow with respect to that
Tender Drawing is returned within five (5) days of the Tender Drawing Date, in
which case interest shall accrue from the Tender Drawing Date at the Tender
Drawing Rate; provided, however, that Borrower shall have the option to
reimburse a portion of the Tender Drawing amount, in which case Borrower shall,
within the applicable five (5) day period, pay to the Bank the amount of the
reimbursed portion of the Tender Drawing, together with any accrued interest on
said amount calculated from the Tender Drawing Date at the Tender Drawing Rate,
and deliver the Notice of Intent to Borrow to the Bank specifying the amount of
the Tender Drawing which is reimbursed and unreimbursed.

 

(iii) The Borrower agrees to pay to the Bank, within five (5) Business Days
after the Tender Drawing Date, the amount of any Tender Drawing with respect to
which Borrower has executed and returned a Notice of Intent to Borrow in
accordance with the preceding subsection (ii). The unreimbursed amount of any
such Tender Drawing shall bear interest at the Tender Drawing Rate from the
Tender Drawing Date of such Tender Drawing until the date that payment of the
principal amount of the Tender Drawing becomes due hereunder

 

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and at the Default Rate thereafter. Interest due on such amounts shall be paid
to the Bank on the last day of each month commencing with the month on which
last day occurs at least ten (10) calendar days after the Tender Drawing Date,
and on the date that reimbursement of the principal amount of such Tender
Drawing is due and payable. Borrower shall submit to the Bank, together with
every payment of Tender Drawing amounts and interest due thereon under this
Section 2, a statement specifying the amounts paid, the principal and interest
portions of such payments, and the basis upon which Borrower calculated such
amounts.

 

(iv) The Borrower may, upon at least one (1) Business Day’s notice to the Bank,
prepay the outstanding amount of any Tender Reimbursement Obligation in whole or
in part (but not in sums less than $10,000.00 per prepayment), together with
accrued interest at the Tender Drawing Rate from the Tender Drawing Date related
to such Tender Reimbursement Obligation to the date of such prepayment on the
amount prepaid; provided, however, that prepayments shall be credited first to
interest due and owing on any Reimbursement Obligations outstanding hereunder
other than Tender Reimbursement Obligations, then to interest due and owing on
any Tender Reimbursement Obligations, and finally to principal due and owing on
any Tender Reimbursement Obligations, applied in the order in which Drawings
connected therewith were paid by the Bank; provided, further, that the proceeds
paid to the Bank from any redemption of Bank Bonds pursuant to the Indenture or
from any remarketing of Bank Bonds pursuant to Section 3.02 of the Indenture
will be credited toward the Tender Reimbursement Obligations of the Borrower,
applied in the order in which Drawings connected therewith were paid by the
Bank.

 

(v) All proceeds of the sale by the Remarketing Agent (as provided in
Section 3.02 of the Indenture) of Bank Bonds, shall be remitted by the Tender
Agent to the Bank to prepay any then outstanding Tender Reimbursement
Obligations, applied in the order in which the Drawings connected therewith were
paid by the Bank.

 

(vi) The Trustee shall deliver all Bonds purchased with the proceeds of a Tender
Drawing to the Bank (or its designated nominee) and shall register the Bank (or
its designated nominee) as owner of such Bonds in its registration books, which
Bonds shall evidence the corresponding Tender Reimbursement Obligation. Such
Bonds shall be deemed Bank Bonds and shall be entitled to all of the rights and
privileges of and shall be governed by all of the terms and conditions of the
Bonds and the Indenture; provided, however, that:

 

  a. such Bonds shall be redeemed or purchased and all principal and interest
owing thereon shall be payable to the Bank;

 

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  b. if the Bank receives reimbursement in full of amounts paid by the Bank with
respect to any Tender Drawing by 5:00 p.m. (San Francisco time) on the Tender
Drawing Date of such Tender Drawing, no interest shall be payable by the
Borrower with respect thereto;

 

  c. such Bonds may not be tendered for purchase pursuant to Section 3.01 of the
Indenture;

 

  d. such Bonds shall not be entitled to payment of any premium upon redemption.

 

(c) Initial Fee. The Borrower shall pay to the Bank an initial fee upon the
issuance of the Letter of Credit as set forth in the Credit Agreement.

 

(d) Continuing Letter of Credit Fees. The Borrower agrees to pay to the Bank
continuing nonrefundable letter of credit fees (the “Continuing Fees”) in an
amount equal to one and one-half of one percent (1.5%) per annum of the Stated
Amount less the amounts drawn under the Letter of Credit which are not
reinstated. Said fees shall be payable in advance on a monthly basis, on the
first day of each month. In addition, the Borrower shall pay to Bank upon the
amendment or transfer of the Letter of Credit and upon the negotiation of each
draft presented under the Letter of Credit, fees and charges determined by Bank
in accordance with Bank’s standard fees and charges in effect at the time the
Letter of Credit is amended or transferred or any draft is paid.

 

(e) Computation of Interest and Fees. Interest and Letter of Credit Fees payable
hereunder (including interest at the Default Rate and the Tender Drawing Rate)
shall be computed on the basis of the actual number of days elapsed in a year of
360 days.

 

(f) Payment of Amounts Due From Borrower. The Borrower agrees to pay, in lawful
currency of the United States and in immediately available funds, all amounts
due the Bank under this Agreement directly to the Bank at its address listed on
the signature page hereof until such time as the Borrower is notified in writing
by the Bank of a different address.

 

(g) Method of Payment of Amounts Due. Bank shall, and Borrower hereby authorizes
Bank to, debit any demand deposit account of Borrower with Bank designated by
Borrower in writing, or if no such account is designated by Borrower, any demand
deposit account of Borrower with Bank as Bank shall determine in its sole
discretion, for all payments of principal, interest, fees and other payments
payable under this Agreement, as they become due. Should, for any reason
whatsoever, the good funds in any such demand deposit account be insufficient to
pay all such sums when due, Borrower shall immediately upon demand remit to Bank
the full amount of any such delinquency.

 

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(h) Payments to be made on a Business Day. If any amount payable hereunder shall
fall due on a day that is not a Business Day, then such due date shall be
extended to the next succeeding Business Day, and interest at the rates provided
herein shall continue to accrue during such extension. Nothing contained in this
Agreement shall be deemed to establish or require the payment of a rate of
interest in excess of the maximum rate permitted by applicable law.

 

SECTION 3. AMORTIZATION PAYMENTS; INTEREST PAYMENTS; SECURITY INTEREST IN
COLLATERAL; OPTIONAL REDEMPTION OF BONDS

 

Scheduled Redemptions of Bonds. The Borrower agrees to redeem portions of the
Bonds (the “Scheduled Redemptions”) annually on the Interest Payment Date (as
defined in the Indenture) for January of each year (each a “Scheduled Redemption
Date”), and continuing through the earlier to occur of (x) the date that all
amounts due under the Reimbursement Agreement shall have been paid in full, or
(y) the Expiration Date. The principal amount of each Scheduled Redemption shall
be in an amount equal to the largest integral multiple of the Authorized
Denomination (as defined in the Indenture) for the Bonds that can be paid with
the amounts required to be deposited with the Bank during the twelve months
prior to the applicable January Interest Payment Date under this Section 8.1:

 

Date

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   Quarterly Deposit
Amount

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   Yearly
Amount

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February 1, 2005, and the first day of each quarter thereafter through and
including January 1, 2006

   $ 42,500.01    $ 170,000/year

February 1, 2006, and the first day of each quarter thereafter through and
including January 1, 2007

   $ 45,000.00    $ 180,000/year

February 1, 2007, and the first day of each quarter thereafter through and
including January 1, 2008

   $ 47,500.02    $ 190,000/year

February 1, 2008, and the first day of each quarter thereafter through and
including January 1, 2009

   $ 51,250.02    $ 205,000/year

 

Scheduled Redemptions shall be effected by A Drawings and B Drawings under the
Letter of Credit. Borrower shall provide the Trustee with sixty (60) days prior
written notice of any optional redemption of the Bonds to be made in connection
with the Scheduled Redemptions, and shall provide Bank a copy of any such notice
concurrently therewith. The amounts required to reimburse the Bank for the draws
on the Letter of

 

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Credit made in order to accomplish such Scheduled Redemptions shall be deposited
into the Reimbursement Account (defined below) on a quarterly basis as set forth
in the table above on the first day of each quarter (with each such payment
hereafter referred to as a “Redemption Payment”).

 

(a) Deposit of Interest Payment Amounts. Borrower shall also deposit into the
Reimbursement Account, at least 10 Business Days prior to each Interest Payment
Date (as defined in the Indenture), an amount sufficient (the “Interest Payment
Amount”) to reimburse Bank for the F Drawing (and, to the extent applicable, the
A Drawing) which shall be made by the Trustee on such Interest Payment Date.

 

(b) Reimbursement Account For Payments. Borrower shall maintain with Bank, and
Borrower hereby grants to Bank a security interest in, an interest bearing
deposit account over which Borrower shall have no control (the “Reimbursement
Account”) and into which Borrower shall deposit the Redemption Payments and the
Interest Payment Amounts. Bank shall, and Borrower hereby authorizes Bank to,
debit the Reimbursement Account on each Redemption Payment Date and on each
Interest Payment Date to fund the A Drawing or the B Drawing pursuant to which
the Scheduled Redemption was effected or the F Drawing pursuant to which the
interest payment was made.

 

(c) Collateral. The Borrower grants to the Bank as security for the performance
by Borrower of its obligations hereunder, a first priority lien on all real
property and improvements constituting the Project (the “Real Property”), and a
first priority security interest in all personal property, fixtures, machinery
and equipment now owned or hereafter acquired by Borrower, located in or on,
related to, or to be used in connection with the Project, the Reimbursement
Account, all funds maintained pursuant to the Indenture (the “Bond Funds”) and
the Pledged Bonds (as defined in the Indenture) and all proceeds of the
foregoing (collectively, the “Collateral”). Borrower hereby represents and
warrants to the Bank that (i) the Real Property and the Collateral are free and
clear of liens and encumbrances and shall continue to remain free and clear of
liens and encumbrances until such time as all amounts due under this Agreement
have been paid in full, and (ii) the Collateral is free and clear of liens and
encumbrances and shall continue to remain free and clear of liens and
encumbrances until such time as all amounts due under this Agreement have been
paid in full.

 

(d) Perfection of Security Interest. Borrower agrees to take any and all action
and to execute any and all documents as the Bank, in its sole discretion, may
deem necessary or desirable in order to perfect a first priority lien and
security interest in the Real Property and Collateral in favor of the Bank as
referenced in Section 3(e) hereof.

 

(e) Optional Redemptions of Bonds. Any optional redemption of the Bonds, other
than the Scheduled Redemptions, shall require prior written consent of Bank, as
well as receipt by Bank of satisfactory evidence of Borrower’s ability to
reimburse Bank for any drawing under the Letter of Credit for such redemption.

 

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SECTION 4. ISSUANCE OF THE LETTER OF CREDIT.

 

(a) Agreement of the Bank. Subject to the terms and conditions of this
Agreement, on the Date of Issuance and subject to satisfaction of the conditions
set forth in Subparagraph (b) below, the Bank shall issue the Letter of Credit
in the Stated Amount effective on the Date of Issuance.

 

(b) Conditions Precedent to Issuance of the Letter of Credit. The obligation of
the Bank to issue the Letter of Credit is subject to the following conditions
precedent:

 

(i) The Bank shall have received on or before the Date of Issuance the
following, each dated such date and in such form and substance as is
satisfactory to the Bank and its counsel:

 

(A) A Deed of Trust with Assignment of Rents, in form and substance satisfactory
to the Bank, duly executed and acknowledged by Borrower, constituting a first
priority lien on the Real Property (the “Deed of Trust”);

 

(B) A Security Agreement: Equipment and Fixtures, in form and substance
satisfactory to Bank, duly executed by Borrower, granting to Bank a first
priority security interest in the Collateral located on the Real Property or
related thereto (the “Security Agreement: Equipment and Fixtures”);

 

(C) Executed copies of security agreements granting to the Bank a security
interest in the Reimbursement Account as security for Borrower’s obligations
hereunder (collectively the “Security Agreement”);

 

(D) Executed copies of a general pledge agreement granting to the Bank a
security interest in the Pledged Bonds and Bond Funds as security for Borrower’s
obligations hereunder (the “Pledge Agreement”);

 

(E) Acknowledgment copies of proper UCC-1 Financing Statements duly filed in the
office of the Secretary of State of the State of California, in the Office of
the County Recorder of San Joaquin County, State of California, and in all other
jurisdictions as may be necessary or, in the opinion of the Bank, desirable to
perfect the security interests in favor of the Bank created by the security
agreements referenced hereinabove;

 

(F) Certified copies of Requests for Information (Form UCC-3 or equivalent
reports) listing the Financing Statements referred to in paragraph (C) above and
all other effective financing statements which name the Borrower (under its
present name and any previous name) as debtor and which are filed in the
jurisdictions referred to in said paragraph (C), together with copies of such
other financing statements (none of

 

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which shall cover the collateral purported to be covered by the Security
Agreements described in B and C above);

 

(G) Evidence that all other actions necessary or, in the opinion of the Bank,
desirable to perfect and protect the security interests and liens created by the
Deed of Trust and the Security Agreement: Equipment and Fixtures have been
taken;

 

(H) An ALTA policy of title insurance, in an amount not less than the Stated
Amount issued by a title insurance company acceptable to Bank and its legal
counsel, naming Bank as an insured lender, containing such endorsements as Bank
or its legal counsel may request, including, without limitation, endorsement
numbers 100, 116 and such other endorsements requested by Bank in its sole
discretion, and insuring Bank against any liens, encumbrances and exceptions,
except only those exceptions Bank has approved in writing;

 

(I) Evidence of all insurance required to be maintained by the terms of the Deed
of Trust;

 

(J) An opinion of Kutak Rock LLP, Bond Counsel, dated the Date of Issuance and
addressed to the Bank, which opinions shall be satisfactory to the Bank and its
counsel in form and substance;

 

(K) Executed copies of this Agreement;

 

(L)Review and approval by Bank and its legal counsel of such leases, regulatory
agreements, and other contracts and agreements as are designated by Bank;

 

(M)Review and approval of a Phase I Environmental Site Assessment;

 

(N) Review and approval of current financial statements and credit reports for
Borrower (collectively, the “Borrower Financial Statements”);

 

(O) An appraisal of the real property legally described in the Deed of Trust
performed by an appraiser acceptable to Bank;

 

(P) Evidence that the Comerica LC has been returned by the Trustee or has
otherwise been terminated;

 

(Q) Issuance of a rating letter, rating the Bonds at a level acceptable tot he
Bank in its sole discretion; and

 

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(R) Such other documents, instruments, approvals (and, if requested by Bank,
certified duplicates of executed copies thereof) or opinions, including, without
limitation, opinions of Borrower’s legal counsel, as Bank may reasonably
request.

 

(ii) The following statements shall be true and correct on the Date of Issuance
as they pertain to the Borrower, and the Bank shall have received a certificate
signed by Borrower dated the Date of Issuance stating that:

 

(A) The representations and warranties contained in Section 7 of this Agreement
or in any instrument delivered pursuant to or in connection with this Agreement
are correct on and as of the Date of Issuance (and after giving effect to the
issuance of the Letter of Credit) as though made on and as of such date;

 

(B) No Default or Event of Default has occurred and is continuing, or would
result from the issuance of the Letter of Credit;

 

(C) No material adverse change has occurred in the operations or condition
(financial or otherwise) of Borrower since the date of the most recent Borrower
Financial Statements, except as disclosed in writing to the Bank, or would
result from the issuance of the Letter of Credit; and

 

(D) All conditions precedent to the issuance of the Bonds to be performed by the
Borrower shall have been satisfied.

 

(iii) On or prior to the Date of Issuance, the Bank shall have received
reimbursement of Bank’s fees and expenses (including, without limitation,
allocated in-house counsel fees) incurred in connection with this Agreement and
the Letter of Credit.

 

(c) Other Obligations of Borrower. As soon as possible following the Date of
Issuance, Borrower shall insure that a complete transcript of proceedings
relating to the issuance of the Bonds is delivered to Bank.

 

SECTION 5. OBLIGATIONS ABSOLUTE.

 

Except as hereinafter provided, the obligations of the Borrower under this
Agreement shall be absolute, unconditional and irrevocable and shall be paid and
performed strictly in accordance with the terms of this Agreement under all
circumstances whatsoever, including, without limitation, the following
circumstances:

 

(a) any lack of validity or enforceability of the Letter of Credit or any of the
Related Documents, except if such lack of validity or enforceability shall be
the result of any action or omission of the Bank;

 

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(b) any amendment or waiver of, or any consent to, this Agreement or any Related
Documents;

 

(c) the existence of any claim, set-off, defense or other rights which the
Borrower may have at any time against the Trustee, any beneficiary, or any
transferee of the Letter of Credit (or any Person for whom the Trustee, any such
beneficiary, or any such transferee may be acting), the Bank or any other
Person, whether in connection with this Agreement, the Related Documents or any
unrelated transaction; provided, however, that nothing in this Section 5 shall
prevent the assertion of any such claim by separate suit or counterclaim;

 

(d) any statement in any certificate or any other document presented under the
Letter of Credit proving to be forged, fraudulent or invalid in any respect or
any statement therein being untrue or inaccurate in any respect whatsoever;

 

(e) payment by the Bank under the Letter of Credit against presentation of a
draft or certificate which does not comply with the terms of the Letter of
Credit except if such payment constitutes the gross negligence or willful
misconduct of the Bank or such draft or certificate does not substantially
comply with the requirements of the Letter of Credit under which it is
presented;

 

(f) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, which results from the Bank’s gross negligence or willful
misconduct;

 

(g) any delay, extension of time, renewal, compromise or other indulgence agreed
to by the Bank without notice to, or approval of, the Borrower in respect to any
of the Borrower’s indebtedness to the Bank under this Agreement;

 

(h) any failure to complete the Project; or

 

(i) any exchange, release or nonperfection of any lien or security interest in
any collateral pledged or otherwise provided to secure any of the obligations
contemplated herein or in any of the other Related Documents.

 

SECTION 6. REPRESENTATIONS AND WARRANTIES.

 

The Borrower represents and warrants as follows:

 

(a) Legal Status. Borrower is a corporation validly existing and in good
standing under the laws of the State of California, and is qualified or licensed
to do business in all jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so licensed could have a
material adverse effect on Borrower.

 

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(b) Business Operations. The Borrower has all powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.

 

(c) Power and Authority. The execution, delivery and performance by the Borrower
of this Agreement and the Related Documents to which it is a party are within
the Borrower’s powers, have been duly authorized by all necessary action, do not
contravene or constitute a default under any provision of applicable law or
regulation or of any agreement, judgment, injunction, order, decree or
contractual restriction binding on the Borrower or its property, and do not
result in or require the creation or imposition of any lien, security interest
or other charge or encumbrance upon or with respect to any of its properties,
except as contemplated by such Related Documents.

 

(d) Approvals. No further approval, authorization, consent, order, notice to or
filing or registration with any governmental authority or any public board or
body (other than in connection or in compliance with the provisions of the
securities or “blue sky” laws of any jurisdiction which were not required on or
prior to the Date of Issuance) is legally required with respect to the
Borrower’s participation in the issuance of the Bonds and the entering into
performance by the Borrower of this Agreement and the Related Documents to which
it is a party.

 

(e) Enforceability. This Agreement and the Related Documents to which the
Borrower is a party have been or will be duly executed and delivered and are, or
upon execution will be, the valid and legally binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws or equitable principles relating to, or
limiting, creditors’ rights generally or the availability of equitable remedies.

 

(f) Disclosure of Information. The statements and information contained in the
official statement issued in connection with the issuance of the Letter of
Credit which relate to the Borrower and/or the Project, and which relate to
information provided by the Borrower in connection with the issuance of the
Letter of Credit are, and at the Date of Issuance will continue to be, true,
correct and complete in all material respects and as to such statements, do not,
and at the Date of Issuance will not, omit any statement or information
necessary to make the statements and information therein, in the light of the
circumstances under which they were made, not misleading in any material
respect.

 

(g) Financial Statements. The financial statements of the Borrower, copies of
which have been delivered to the Bank, fairly present the financial position of
the Borrower as of the date thereof and the results of operations and changes in
financial position for the periods indicated. Since the date of the most recent
financial statements, there have been no material adverse change in the
condition or operations of the Borrower not disclosed in such information, and
no event has occurred which materially adversely affects or is likely to affect
the business, operations, assets or condition (financial or otherwise) of the
Borrower.

 

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(h) Litigation. Except as disclosed to the Bank in the Credit Agreement, there
are no actions, suits or proceedings, including, without limitation, proceedings
before any governmental commission, board, bureau or other administrative
agency, pending, or, to the knowledge of the Borrower, threatened against or
affecting the Borrower which will (to the extent not covered by insurance) in
the opinion of the Borrower have a material adverse effect on the Project, the
business, the financial condition, or the results of operations of the Borrower
or which in any manner questions the validity of this Agreement or any of the
Related Documents to which the Borrower is a party.

 

(i) Filing of Tax Returns. The Borrower has filed all United States federal
income tax returns, State tax returns and all other material tax returns which
are required to be filed by it and has paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Borrower, except for those
which the Borrower is diligently contesting in good faith and with respect to
which adequate provision has been made. The charges, accruals and reserves on
the books of the Borrower, as determined by the Borrower or an independent
certified accountant or firm of accountants, as applicable, in respect of taxes
or other governmental charges are adequate in the opinion of the Borrower or
such independent certified accountant or firm of accountants, as applicable. The
Borrower will promptly notify the Bank of any taxes or assessments that the
Borrower is contesting.

 

(j) Government Regulations. The Borrower is not subject to regulation under the
Investment Company Act of 1940, the Federal Power Act, the Public Utility
Holding Company Act of 1935, or any federal or state statute or regulation
limiting its ability to incur indebtedness for money borrowed.

 

(k) Securities Activities. The Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying any margin stock (as defined within Regulations G, T and
U of the Board of Governors of the Federal Reserve System).

 

(l) Related Documents. The Borrower makes the representations and warranties
made by it in the Related Documents to and for the benefit of the Bank as if the
same were set forth at length in this Agreement.

 

(m) Changes in Law. To the best of the Borrower’s knowledge, there is not
pending any change of law which, if enacted or adopted, could have a material
adverse effect on the Borrower’s ability to perform its obligations under the
Related Documents.

 

(n) Environmental Matters. The Project does not contain or incorporate and is
not threatened with contamination from Hazardous Materials (hereinafter
defined). The Project will not be used and has never been used in connection
with the handling, storage, or disposal of Hazardous Materials. There have been
no releases and there are no threatened releases of Hazardous Materials on,
onto, from, or under the Project. For purposes of this Agreement, the terms
“disposal,” “release,” and “threatened

 

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release” shall have the definitions assigned thereto by the Federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(CERCLA), 42 U.S.C. Section 9601 et seq., as amended. “Hazardous Materials”
means any asbestos, PCB’S, ureaformaldehyde, flammable explosives, chemicals
known to cause cancer or reproductive toxicity, pollutants, contaminants,
hazardous wastes, toxic substances or related materials, radioactive materials,
or materials defined under Federal or California laws and regulations as
“hazardous substances,” “hazardous materials,” or “toxic substances”, 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.; the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901 et seq.; and those substances defined as “hazardous
wastes” or “hazardous substances” in the California Health & Safety Code; and in
the regulations adopted, published and/or promulgated pursuant to said laws. To
the best of Borrower’s knowledge, all past and current uses of the Project
comply with all federal, state, and local laws regulating Hazardous Materials,
owners of the Project have never received notice of a violation of any federal,
state, or local law regulating Hazardous Materials applicable to the Project,
and no actions have been commenced or threatened for non-compliance with such
laws. The Borrower is not required by any law regulating Hazardous Materials to
obtain any permit or license to use the Project. The Project does not contain
and has never contained an underground storage tank (including, without
limitation, a tank for which a permit to operate was obtained under the
Underground Storage of Hazardous Substances Act). No event has occurred which
requires or required any owner of the Project to give any public entity notice
of any spill, release, threatened release, disposal, or existence of Hazardous
Materials on the Project. There has been no litigation brought or threatened
against any owner of the Project nor have any settlements been reached by or
with any party or parties alleging the presence, disposal, release, or
threatened release of any Hazardous Materials on, onto, from, or under the
Project.

 

(o) No Breach. The consummation of the transactions contemplated hereby and the
execution, delivery and performance of this Agreement and the other Related
Documents by the Borrower will not violate or constitute or result in a material
breach of or a default under any mortgage, deed of trust, lease, loan or
security agreement, corporate charter, articles, or bylaws, as applicable, or
any other instrument to which the Borrower is a party or by which it may be
bound or affected.

 

(p) Americans With Disabilities Act Compliance. The Project has been designed
and shall be constructed and completed, and thereafter maintained, in strict
accordance and full compliance with all of the requirements of the Americans
With Disabilities Act of July 26, 1990, Pub. L. No. 101-336, 104 Stat. 327, 42
U.S.C. 12101, et. seq., as amended from time to time (“ADA”). Borrower shall be
responsible for all ADA compliance costs.

 

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SECTION 7. COVENANTS OF THE BORROWER.

 

So long as the Expiration Date has not occurred or any amount is due or owing to
the Bank hereunder, the Borrower agrees that it will comply with the following
covenants:

 

(a) Reporting Requirements. The Borrower will deliver to the Bank the financial
statements and other reports as set forth in the Credit Agreement and such other
information as the Bank may reasonably request.

 

(b) Consolidations, Mergers, Sales of Assets. The Borrower will not dispose of
all or substantially all of its assets and not combine or consolidate with or
merge into any other entity, or sell, lease or otherwise transfer all or any
substantial part of its assets to any entity, without the prior written consent
of the Bank. It is hereby expressly agreed that any disposition of the Project
in violation of this subparagraph (b) shall be deemed an Event of Default
hereunder and shall be ineffective to relieve the Borrower of its obligations
under this Agreement. Nothing in this subparagraph (b) shall affect any
provision of the Related Documents to which the Borrower is a party which
require the consent of the Bank or the Trustee as a precondition to the
disposition of the Project.

 

(c) Maintenance of Property; Insurance. The Borrower will keep all property
useful and necessary in its business in reasonably good working order and
condition and will maintain, with financially sound and reputable insurance
companies, insurance on all its property of the types, in the amounts and
against such risks as are usually insured against in the same general area by
companies of established repute engaged in the same or a similar business,
including but not limited to fire, extended coverage, public liability, property
damage, and worker’s compensation, and will deliver to Bank from time to time at
Bank’s request schedules setting forth all insurance then in effect.

 

(d) [Intentionally Omitted].

 

(e) Conduct of Business and Maintenance of Existence. The Borrower will
preserve, renew and keep in full force and effect all rights, privileges,
contracts and leases necessary or desirable for the normal conduct of Borrower’s
business. The Borrower will also continue to conduct its business in an orderly
manner without voluntary interruption and remain qualified to do business in the
State and in each other jurisdiction where such qualification is required.

 

(f) Compliance with Laws. The Borrower will comply, in all material respects,
with all applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings; provided, however, that the
foregoing shall not require compliance with any such law, ordinance, rule,
regulation and/or requirement so long as failure to comply shall not have a
material adverse effect

 

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on the condition of the Borrower and its ability to perform its obligations
under this Agreement and the Related Documents.

 

(g) Inspection of Property, Books and Records. The Borrower will keep proper
books of record and account in which full, true and correct entries shall be
made of all dealings and transactions in relation to its business and
activities. The Borrower will permit representatives of the Bank at reasonable
times and intervals upon prior written notice to visit and inspect any of
Borrower’s properties, books and records, to examine and make copies of any
books and records (subject to proprietary and confidentiality policies and
agreements binding upon the Borrower), and to discuss its affairs, finances and
accounts with his employees and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.

 

(h) Notices. The Borrower will promptly give signed written notice to the Bank
of the occurrence of any Default or Event of Default at the earliest possible
date after discovery of such Default or Event of Default, but in any event no
later than three (3) Business Days following discovery of a Default or Event of
Default relating to payment obligations of Borrower and five (5) Business Days
following discovery of any other Default or Event of Default, setting forth the
details of, and the actions which the Borrower proposes to take with respect to,
such Default or Event of Default. The Borrower will also promptly give notice to
the Bank of any pending or threatened action, suit or proceeding with a claim
against Borrower in excess of $100,000.00.

 

(i) Related Documents. The Borrower will comply with the terms and covenants of
the Related Documents to which it is a party. The Borrower will not amend,
modify or terminate or agree to amend, modify or terminate any Related
Documents.

 

(j) Taxes and Other Liabilities. Borrower shall pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real and personal
and including federal and state income taxes, except such as the Borrower may in
good faith contest or as to which a bona fide dispute may arise, provided
provision is made to the satisfaction of the Bank for eventual payment thereof
in the event that it is found that the same is an obligation of the Borrower.

 

(k) Other Indebtedness. Regarding the Project, the Borrower shall not create,
incur, assume or permit to exist any indebtedness or liabilities resulting from
borrowings, loans or advances, whether secured or unsecured, matured or
unmatured, liquidated or unliquidated, joint or several, except the liabilities
of the Borrower to the Bank and any other liabilities of the Borrower existing
as of, and disclosed to Bank in writing prior to, the date hereof, and
indebtedness subordinated to Borrower’s obligations to Bank pursuant to a
subordination agreement(s) in form and content acceptable to Bank.

 

(l) Guaranties. The Borrower shall not guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or

 

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collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of the Borrower as security
for, any liabilities or obligations of any person or entity, except in favor of
Bank.

 

(m) Loans, Advances, Investments. The Borrower shall not make any loans or
advances to, or investments in, any person or entity, except as disclosed to the
Bank in writing prior to the date hereof and approved by Bank.

 

(n) Pledge of Assets. The Borrower shall not mortgage, pledge, grant or permit
to exist a security interest in, or a lien upon, any of its assets now owned or
hereafter acquired which are part of, or relate to, the Project, except any of
the foregoing in favor of the Bank.

 

SECTION 8. EVENTS OF DEFAULT.

 

The occurrence of any of the following events shall constitute an Event of
Default under this Agreement (each herein referred to as an “Event of Default”):

 

(a) Misrepresentation. Any representation or warranty made by the Borrower
herein or in any certificate, financial or other statement furnished by the
Borrower pursuant to this Agreement shall prove to have been untrue or
incomplete in any material respect when made;

 

(b) Required Payments. The Borrower shall fail to pay to Bank or deposit with
Bank any amount specified in this Agreement when due to be paid or deposited;

 

(c) Other Covenants. The Borrower shall fail to perform or observe any other
material term, covenant or agreement on its part to be performed or observed
hereunder (other than as specified in (b) above) and any such failure shall
remain unremedied for a period of twenty (20) calendar days.

 

(d) Invalidity. Any material provision of this Agreement or any Related Document
shall at any time for any reason cease to be in full force and effect or valid
and binding on the Borrower, or shall be declared to be null and void, or the
validity or enforceability thereof shall be contested by the Borrower or the
Borrower shall deny that it has any further liability or obligation under this
Agreement, and such event shall have, or be likely to have, a material adverse
effect on the condition of the Borrower and its ability to perform its
obligations under this Agreement or the Related Documents;

 

(e) Voluntary Insolvency. The Borrower shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or the like of
itself or of its property, (ii) admit in writing its inability to pay its debts
generally as they become due, (iii) make a general assignment for the benefit of
creditors, (iv) be adjudicated a bankrupt or insolvent, or (v) commence a
voluntary case under the federal bankruptcy laws of the United States of America
or file a voluntary petition or answer seeking reorganization, an arrangement
with creditors, or an order for relief, or seeking to take advantage of any
insolvency law, or file an answer admitting the material allegations of

 

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a petition filed against it in any bankruptcy, reorganization or insolvency
proceeding; or corporate action shall be taken by it for the purpose of
effecting any of the foregoing;

 

(f) Involuntary Insolvency. If without the application, approval or consent of
the Borrower, an involuntary case or other proceeding shall be instituted in any
court of competent jurisdiction under any law relating to bankruptcy,
insolvency, reorganization, or relief of debtors seeking, in respect of the
Borrower, an order for relief or an adjudication in bankruptcy, reorganization,
dissolution, winding-up, liquidation, a composition or arrangement with
creditors, a readjustment of debts, the appointment of a trustee, receiver,
liquidator or custodian or the like of the Borrower, or of all or any
substantial part of the assets of the Borrower, or other like relief in respect
thereof under any bankruptcy or insolvency law;

 

(g) Other Defaults. The Borrower shall default in the payment or performance of
any tax liability or of any obligation, or the occurrence of any defined event
of default under the terms of any contract or instrument (including but not
limited to the Credit Agreement) pursuant to which Borrower has incurred any
debt or other liability, including, without limitation, the Related Documents,
to any person or entity, including, without limitation, the Bank;

 

(h) Material Adverse Change. A material adverse change, as determined by Bank in
the good faith exercise of its discretion, shall occur in the financial
condition of the Borrower;

 

(i) Death or Incapacity. The death of any owner of Borrower, or the dissolution
or liquidation of Borrower, or Borrower or any of its partners shall take action
seeking to effect the dissolution or liquidation of Borrower, or the withdrawal
from Borrower of any general partner of Borrower;

 

(j) Change in Ownership. Any Change in Control (as defined in the Credit
Agreement) shall occur.

 

(k) Real Estate. The sale, transfer, hypothecation, assignment or encumbrance,
whether voluntary, involuntary or by operation of law, without Bank’s prior
written consent, of all or any part of or interest in any real property
collateral required hereby;

 

(l) Liens, Attachment; Condemnation. (i) The recording of any claim of lien
(except as permitted under the Credit Agreement) against the Project, Real
Property or other Collateral, or the service on Bank of any bonded stop notice
relating to the Project, and the continuance of such claim of lien or bonded
stop notice for twenty (20) calendar days without discharge, satisfaction or
provision for payment being made by Borrower in a manner satisfactory to Bank;
or (ii) the condemnation, seizure or appropriation of, or occurrence of an
uninsured casualty with respect to, any material portion of the Project, Real
Property or other Collateral; or (iii) the sequestration or attachment of, or
any levy or execution upon, any of the Project, Real Property or other

 

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Collateral, or any substantial portion of the other assets of Borrower, which
sequestration, attachment, levy or execution is not released, expunged or
dismissed prior to the earlier of thirty (30) calendar days after the occurrence
thereof or thirty (30) calendar days prior to the sale of the assets affected
thereby;

 

(m) Loss of Priority. The failure at any time of the Deed of Trust to be a valid
first lien upon the Project or Real Property, or any portion thereof; or

 

(n) Possession of Project. Borrower shall for any reason cease to be in
possession of and occupy the Project.

 

SECTION 9. REMEDIES.

 

(a) Declaring Amounts Due and Payable. Upon the occurrence of an Event of
Default, the Bank may, and the Bank shall upon the occurrence of an Event of
Default for which the Bank has received a notice from the Trustee that an event
of default has occurred under the Indenture and such default is not cured by the
Borrower within the applicable time period, declare all amounts payable by the
Borrower under this Agreement at such time or in the future to be immediately
due and payable (and the same shall upon such notice become immediately due and
payable), in each case without any presentment, demand, protest or other notice
or formality of any kind. Upon any such occurrence, the Bank may, in addition,
(a) exercise all of its rights and remedies under any Related Document (to which
the Bank is a party or the Bank is a third party beneficiary) or applicable law,
(b) require the Trustee to redeem all Bonds as provided in Section 3.01 of the
Indenture, or (c) exercise all or any combination of the remedies provided for
in this Section.

 

(b) Right of Set-Off; Waiver of Right of Set-Off. Upon the occurrence and during
the continuance of any Event of Default, the Bank is hereby authorized at any
time and from time to time, without notice to the Borrower (any such notice
being expressly waived by the Borrower), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final, including,
without limitation, indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) at any time held, and
other indebtedness at any time owing, by the Bank to or for the credit or the
account of the Borrower against any and all of the obligations of the Borrower
now or hereafter existing under this Agreement, irrespective of whether or not
the Bank shall have made any demand under this Agreement and although such
obligations may be contingent and unmatured. The Bank agrees promptly to notify
the Borrower after any such set-off and application; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section are in addition to other
rights and remedies which the Bank may have, including, without limitation,
other rights of set-off; provided, however, that the Bank waives any such right,
and any other similar right it may have at law or otherwise, during the pendency
of any bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, dissolution, liquidation, or similar proceedings against the Borrower
under the laws of any jurisdiction, to the extent that the exercise of

 

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such rights during the pendency of such proceedings would result in the Bank’s
being released, prevented or restrained from or delayed in fulfilling the Bank’s
obligations with respect to the Letter of Credit, as provided herein.

 

SECTION 10. AMENDMENTS, ETC.

 

No amendment or waiver of any provision of this Agreement nor consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be in writing and signed by the Bank, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.

 

SECTION 11. NOTICES.

 

Except as expressly provided for herein, all notices and other communications
provided for hereunder shall be in writing (including tested telex, telegraphic
and facsimile communication) and mailed, telegraphed, telexed, faxed or
delivered to each party at the address or telex or facsimile number specified
for such party on the signature page of this Agreement, or at such other address
or telex or facsimile number as shall be designated by such party in a written
notice to the other party. All such notices and other communications shall, if
mailed, telegraphed or faxed, be effective when received addressed as aforesaid,
if telexed, when the appropriate answer back is received, and if faxed, when
confirmation of receipt is received. Communications by the Trustee with the Bank
with respect to the Letter of Credit shall be made as provided in the Letter of
Credit. Any tested telex, telegraphic or facsimile communication provided to the
Bank hereunder shall be promptly followed by a written confirmation thereof.

 

SECTION 12. NO WAIVER; REMEDIES.

 

No failure on the part of the Bank to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.

 

SECTION 13. INDEMNIFICATION.

 

(a) Indemnification. In addition to its other obligations hereunder, the
Borrower hereby agrees, to the fullest extent permitted by law, to indemnify and
hold harmless the Bank, its officers, directors, employees and agents
(collectively, the “Indemnitees”) from and against any and all claims, damages,
losses, liabilities, costs or expenses (collectively “Claim”) (including,
without limitation, reasonable attorneys fees) whatsoever which the Indemnitees
may incur (or which may be claimed against the Indemnitees by any Person) by
reason of or in connection with (a) any failure by the Borrower to comply with
applicable federal and state laws and regulations pertaining to the Bonds;
(b) any breach by the Borrower of any representation, warranty or covenant made
in or pursuant to this Agreement; or (c) any action or proceeding relating to a
court order, injunction or other process or decree restraining or seeking to
restrain the

 

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Bank from paying any amount under the Letter of Credit. Nothing in this
Section 13 is intended to limit any obligation of the Borrower contained in this
Agreement or to include any Claims caused by Bank’s gross negligence or willful
misconduct.

 

(b) Borrower Assuming Bank’s Defense. If any action shall be brought against the
Bank or any other Indemnitee in respect of which indemnity may be sought against
the Borrower, the Bank shall promptly notify the Borrower in writing, and the
Borrower shall promptly assume the defense thereof, including, without
limitation, the employment of counsel (the selection of which shall have been
approved by the Bank, and such approval shall not be unreasonably withheld), the
payment of all expenses, and the right to negotiate and consent to settlement.
In addition, the Bank shall have the right at Borrower’s expense to employ
separate counsel and to participate in the defense of any such action if the
Bank has been advised by counsel of recognized standing in matters of banking or
securities laws that it has defenses or causes of action separate from those of
the Borrower. If the Borrower elects not to defend such action, the Bank shall
have the right to employ counsel to defend such action and to participate in the
defense thereof, and the fees and expenses of such counsel shall be at the
expense of the Borrower. The Borrower shall not be liable for any settlement of
any such action effected without its consent by the Bank, but if settled with
the consent of the Borrower or if there be a final judgment for the plaintiff in
any such action against the Borrower or the Bank, with or without the consent of
the Borrower, the Borrower agrees to indemnify and hold harmless the Bank to the
extent provided herein.

 

SECTION 14. CONTINUING OBLIGATION.

 

The obligation of the Borrower under this Agreement shall continue until the
later of (a) the Expiration Date or (b) the date upon which all amounts due and
owing to the Bank under this Agreement shall have been paid in full and shall
(i) be binding upon the Borrower and the Bank, their successors and assigns, and
(ii) inure to the benefit of and be enforceable by the Bank and the Borrower and
their successors and assigns; provided, however, that the Borrower may not
assign all or any part of this Agreement without the prior written consent of
the Bank. Notwithstanding the foregoing, the indemnity set forth in Section 13
and Section 31 herein shall survive the termination of this Agreement.

 

SECTION 15. TRANSFER OF LETTER OF CREDIT.

 

The Letter of Credit may be transferred in accordance with the provisions set
forth therein and in the Indenture.

 

SECTION 16. LIABILITY OF THE BANK. As between the Borrower and the Bank, the
Borrower assumes all risks of the acts or omissions of the Trustee and any
transferee of the Letter of Credit with respect to its use of the Letter of
Credit; provided, however, that this assumption is not intended to, and shall
not, preclude the Borrower from pursuing such rights and remedies as it may have
against the Trustee at law or in

 

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equity or under any other agreement; unless any such act or omission is the
result of Bank’s willful misconduct or gross negligence.

 

SECTION 17. CERTAIN DEFINED TERMS.

 

As used in this Agreement and unless otherwise expressly indicated, or unless
the context clearly requires otherwise, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):

 

“A Drawing” means any draw in the form of Annex A to the Letter of Credit made
under the Letter of Credit to pay the principal amount upon an optional and/or a
mandatory redemption of a portion of the Bonds in accordance with the Indenture.

 

“Agreement” means this Reimbursement Agreement, as the same may be from time to
time amended or supplemented.

 

“Amortization Payment Date” has the meaning set forth in Section 3(a) of this
Agreement.

 

“Bank” means Wells Fargo Bank, National Association.

 

“Bank Bonds” means the Bonds purchased or deemed to be purchased or otherwise
acquired with Drawings under the Letter of Credit during any period such Bonds
are held by or on behalf of the Bank.

 

“B Drawing” means any draw in the form of Annex B to the Letter of Credit made
under the Letter of Credit to pay unpaid interest upon an optional and/or a
mandatory redemption of a portion of the Bonds.

 

“Bonds” means the Variable/Fixed Rate Demand Bonds Series 2003A, in the original
principal amount of $6,300,000.00.

 

“Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day
on which the Bank’s San Francisco Letter of Credit Operations Office is Closed.

 

“C Drawing” means any draw in the form of Annex C to the Letter of Credit made
under the Letter of Credit to pay the principal amount of those Bonds which the
Remarketing Agent has been unable to remarket within the time limits established
in the Indenture.

 

“Credit Agreement” means that certain Credit and Security Agreement dated as of
December 1, 2005 by and between Borrower and Bank, as may be amended from time
to time.

 

“D Drawing” means any draw in the form of Annex D to the Letter of Credit made
under the Letter of Credit to pay the unpaid interest on those Bonds which the

 

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Remarketing Agent has been unable to remarket within the time limits established
in the Indenture.

 

“Date of Issuance” is the date the Letter of Credit is issued, that date being
December 1, 2005.

 

“Deed of Trust” means the Deed of Trust with Assignment of Rents defined in
Section 4(b)(i)(A) hereof.

 

“Default” means any event or condition specified in Section 9 hereof which, with
the giving of notice or the lapse of time or both would, unless cured or waived,
become an Event of Default.

 

“Default Rate” means a variable rate of interest equal to the Prime Rate in
effect from time to time plus four percent (4%).

 

“Disbursement Plan” has the meaning given to it in Section 5(b).

 

“Drawing” means an A Drawing, B Drawing, C Drawing, D Drawing, E Drawing or F
Drawing, as the context may require.

 

“E Drawing” means any draw in the form of Annex E to the Letter of Credit made
under the Letter of Credit to pay the total unpaid principal and interest on all
of the Bonds outstanding at stated maturity, upon acceleration following an
Event of Default or upon redemption as a whole.

 

“Event of Default” has the meaning set forth in Section 9 hereof.

 

“Expiration Date” has the meaning assigned to that term in the Letter of Credit.

 

“F Drawing” means any draw in the form of Annex F to the Letter of Credit made
under the Letter of Credit to pay unpaid interest with respect to the Bonds on
an Interest Payment Date.

 

“GAAP” shall mean generally accepted accounting principles.

 

“Indenture” means the Indenture dated December 1, 2003 between the Borrower and
the Trustee together with any amendments and supplements thereto.

 

“Interest Payment Amount” has the meaning set forth in Section 3(b) of this
Agreement.

 

“Letter of Credit” means the Bank’s irrevocable direct-pay Letter of Credit No.
NZS558449.

 

“Notice of Intent to Borrow” means the notice in the form attached hereto as
Exhibit B.

 

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“Person” means an individual, a corporation, a partnership, an association, a
trust or any other entity or organization, including a government or political
subdivision or agency or instrumentality thereof.

 

“Prime Rate” means a base rate that the Bank from time to time establishes and
which serves as the basis upon which effective rates of interest are calculated
for those loans making reference thereto.

 

“Project” means the real property and the manufacturing facility located at 251
and 254 D’Arcy Parkway, Lathrop, California 95330, which are more particularly
described in the Deed of Trust, including all fixtures, but excluding equipment
which is personal property, inventory and accounts receivable.

 

“Related Documents” means the Bonds, the Indenture, the Deed of Trust, the UCC-1
Financing Statements, and any other agreement or instrument related to the
issuance of the Letter of Credit and pertaining to Borrower.

 

“Remarketing Agent” means the Remarketing Agent appointed pursuant to the
Remarketing Agreement and any successors appointed in accordance with
Section 3.02 of the Indenture.

 

“Reimbursement Account” has the meaning set forth in Section 3(c) of this
Agreement.

 

“Reimbursement Obligations” has the meaning set forth in Section 2(a) of this
Agreement.

 

“Scheduled Redemption” has the meaning set forth in Section 3(a) of this
Agreement.

 

“Scheduled Redemption Date” has the meaning set forth in Section 3(a) of this
Agreement.

 

“Security Agreement: Equipment and Fixtures” has the meaning set forth in
Section 4(b)(i)(B) of this Agreement.

 

“Stated Amount” means $6,221,813.00.

 

“Tender Drawing” means any draw upon the Letter of Credit pursuant to a draft
accompanied by a certificate in the form of Annex C or D to the Letter of Credit
for the purchase price of the Bonds which are tendered for repurchase pursuant
to Article IV of the Indenture.

 

“Tender Drawing Date” has the meaning set forth in Section 2(b) (ii) of this
Agreement.

 

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“Tender Drawing Rate” means a variable rate of interest equal to the Prime Rate
in effect from time to time plus one half of one percent (0.5%).

 

“Tender Reimbursement Obligation” means any obligation of the Borrower to the
Bank resulting from a Tender Drawing.

 

“Trustee” means U.S. Bank National Association, acting under the Indenture, or
any successor to such party as Trustee under the Indenture.

 

“UCP” means the Uniform Customs and Practices for Documentary Credits, an
International Chamber of Commerce publication, current on the date of this
Agreement or any substitution therefor or replacement thereof.

 

SECTION 18. COSTS, EXPENSES AND TAXES; ALLOCATION OF INCREASED COSTS.

 

(a) Costs, Expenses and Taxes. Borrower agrees to pay on demand by Bank all
costs, expenses and fees incurred or assessed by the Bank in connection with the
preparation, execution and delivery of this Agreement, the Letter of Credit
(including, without limitation, any extensions thereof) , the Related Documents
and any other documents which may be delivered in connection with this Agreement
and the Letter of Credit, the granting of any extension of the Letter of Credit,
any waiver or amendment or the giving of any consent under, this Agreement, the
Related Documents and such instruments or any transfer of the Letter of Credit,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Bank (to include outside counsel fees and all allocated costs of
the Bank’s in-house counsel) with respect thereto and with respect to advising
the Bank as to its rights and responsibilities under this Agreement, all
reasonable costs and expenses, including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel for the Bank (to include outside
counsel fees and all allocated costs of the Bank’s in-house counsel), if any, in
connection with the enforcement of this Agreement and such other documents which
may be delivered in connection with this Agreement. In addition, the Borrower
shall pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of this
Agreement, the Letter of Credit (including any extensions thereof), the Related
Documents and such other documents, and agrees to save the Bank harmless from
and against any an all liabilities with respect to or resulting from any delay
by the Borrower in paying or omission to pay such taxes and fees. The Bank
agrees promptly to notify the Borrower of any such taxes and fees which are
incurred by the Bank.

 

(b) Allocation of Increased Costs. If any past, present or future legislative,
administrative or judicial action has the direct or indirect effect of imposing
upon the Bank any requirement or condition regarding this Agreement or the
Letter of Credit that directly or indirectly increases the cost to the Bank of
issuing, maintaining or honoring draws under the Letter of Credit, over the cost
thereof as of the date of this Agreement, the Bank shall so notify the Borrower
and the Borrower shall pay to the Bank on or

 

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before the due date or dates specified in the Bank’s notice all additional
amounts necessary to compensate the Bank for such additional costs. The Bank
shall deliver to the Borrower a certificate showing the amount and manner of
calculation of such increased costs, and stating that the assessment of such
increase in costs is fair and reasonable and has not been arbitrarily applied to
the Borrower. Such certificate shall be conclusive (absent manifest error) as to
such amount. Without limiting the generality of the foregoing, if (a) any
insurance premium is imposed by the Federal Deposit Insurance Corporation or
other similar banking authority in connection with the Letter of Credit, (b) any
reserve requirement is imposed by any banking authority in connection with the
Letter of Credit, or (c) any capital adequacy requirement not currently in
effect is imposed by any banking authority which has the effect of reducing the
anticipated return on capital of the Bank in connection with the Letter of
Credit, then the cost to the Bank of such premium, reserve requirement and/or
capital adequacy requirement shall be payable by the Borrower as an additional
cost in accordance with this Section.

 

SECTION 19. ATTORNEYS’ FEES.

 

In the event that any party hereto shall incur legal fees and costs in
connection with the actual or threatened breach of any provision hereof, or to
enforce any right or remedy hereunder, such party shall be entitled to recover
such reasonable fees and costs from the breaching party. In the event that an
action is brought in connection with this Agreement the prevailing party shall
be entitled to recover from the losing party in addition to any money judgment
or other relief, such reasonable attorneys’ fees, actual disbursements and costs
as may be incurred by the prevailing party instituting or defending such
litigation, together with such reasonable costs and expenses of litigation as
may be allowed by the court. Such attorneys’ fees shall include reasonable
outside counsel fees and all reasonable allocated costs of a party’s in-house
counsel.

 

SECTION 20. SEVERABILITY.

 

Any provision of this Agreement which is prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or nonauthorization without
invalidating the remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other jurisdiction.

 

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SECTION 21. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California applicable to contracts to
be performed in said State. Unless Bank otherwise specifically agrees in
writing, the Letter of Credit, even if it is not a documentary credit, the
opening of the Letter of Credit, the performance by Bank under the Letter of
Credit, and the performance by the beneficiary and any advising, confirming,
negotiating, paying or other bank under the Letter of Credit, shall be governed
by and be construed in accordance with the UCP in force on the Date of Issuance
of the Letter of Credit.

 

SECTION 22. HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.

 

SECTION 23. CONSENT OF JURISDICTION AND VENUE, ETC.

 

The Borrower irrevocably (i) agrees that any suit, action or other legal
proceeding arising out of or relating to this Agreement or such other documents
which may be delivered in connection with this Agreement may be brought in a
court of record in the State of California or in the Courts of the United States
of America located in the State of California, (ii) consents to the jurisdiction
of each such court in any such suit, action or proceeding and (iii) waives any
objection which it may have to the laying of venue of any suit, action or
proceeding in any of such courts and any claim that any such suit, action or
proceeding has been brought in an inconvenient forum. The Borrower irrevocably
consents to the service of any and all process in any such suit, action or
proceeding by mailing of copies of such process to the Borrower at its address
specified in Schedule A hereto by certified mail, return receipt requested. The
Borrower agrees that a final and non-appealable judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Section shall affect the right of the Bank to serve legal process in any other
manner permitted by law or affect the right of the Bank to bring any suit,
action or proceeding against the Borrower or its property in the courts of any
other jurisdictions.

 

SECTION 24. SATISFACTION REQUIREMENT.

 

If any agreement, certificate or other writing, or any action taken or to be
taken, is by the terms of this Agreement required to be satisfactory to the
Bank, the determination of such satisfaction shall be made by the Bank in its
sole and exclusive judgment reasonably exercised in good faith.

 

SECTION 25. CONSENTS.

 

Any time the Bank’s consent is required hereunder, such consent shall not be
unreasonably withheld or delayed.

 

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SECTION 26. ACCOUNTING TERMS AND DEFINITIONS.

 

Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, and all accounting determinations hereunder shall be made, in
accordance with GAAP in effect from time to time, on a basis consistent with the
most recent financial statements of the Borrower delivered to the Bank.

 

SECTION 27. COUNTERPARTS.

 

This Agreement may be signed in any number of counterparts, each of which shall
be an original with the same effect as if the signatures thereto and hereto were
upon the same instrument.

 

SECTION 28. RIGHTS AND REMEDIES CUMULATIVE.

 

All rights and remedies of the Bank under this Agreement are in addition to all
rights and remedies of the Bank as a bondholder under the Indenture.

 

SECTION 29. BANK RELIANCE.

 

It is specifically understood by the Borrower that all statements,
representations and warranties made by the Borrower in this Agreement and any
other Related Document to which the Borrower is a party shall be deemed to have
been relied upon by the Bank as an inducement to enter into this Agreement and
the other agreements contemplated hereby and that if any such statements,
representations and warranties were materially incorrect at the time they were
made, the Bank may consider any such misrepresentation or breach an Event of
Default hereunder. There are no facts that the Borrower has failed to disclose
to the Bank that, individually or in the aggregate, could have a materially
adverse effect on the Borrower’s ability to perform its obligations under any of
the Related Documents. Each of the representations and warranties shall survive
any investigations or inquiries made by the Bank or any of its representatives.

 

SECTION 30. PERMITTED CONTESTS.

 

The Borrower shall have the right, before any delinquency occurs, to contest or
object in good faith to any claim, demand, levy or assessment (other than in
respect of any indebtedness or obligation of the Borrower under any of the
Related Documents), by appropriate legal proceedings which are not prejudicial
to the Bank’s rights, but this shall not be deemed or construed as in any way
relieving, modifying or providing any extension of time with respect to the
Borrower’s covenant to pay and comply with any such claim, demand, levy or
assessment, unless the Borrower shall have given prior written notice to the
Bank of the Borrower’s intent to so contest or object thereto, and unless
(i) the Borrower shall have demonstrated to the Bank’s satisfaction that such
legal proceedings shall conclusively operate to prevent enforcement prior to
final determination of such proceedings, and (ii) the Borrower shall have
furnished such bond, surety, undertaking, or other security in connection
therewith as is requested by and satisfactory to the Bank, in the amount of such
claim plus reasonable sums to pay

 

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costs, interest and penalties, to assure payment of the matters under contest
and to prevent any sale or forfeiture of the Project.

 

SECTION 31. ENVIRONMENTAL INDEMNITY.

 

(a) Indemnity. The Borrower agrees unconditionally and absolutely to defend,
indemnify and hold harmless the Bank and its respective directors, officers,
employees, and agents from and against any and all damages, diminution in value,
penalties, fines, losses, liabilities, causes of actions, suits, claims,
demands, costs and expenses (including, without limitation, all out-of-pocket
litigation costs and the reasonable fees and expenses of counsel) of any nature,
directly or indirectly arising out of or in connection with: (a) the inaccuracy
or incompleteness of any representation or warranty provided by the Borrower in
Section 6(n) of this Agreement (b) the release, or disposal of Hazardous
Materials on, onto, from or under the Project; and (c) any failure by the
Borrower to comply with the terms of any order of any federal, state or
municipal authority having regulatory authority over environmental matters. The
Borrower’s obligations pursuant to the foregoing indemnification and hold
harmless agreement shall survive the closing, disbursement of the loan funds,
judicial or nonjudicial sale under the deed of trust securing the loan to the
Borrower, conveyance by deed in lieu of foreclosure to the Bank and any
subsequent conveyance of the Project.

 

(b) Defense of Environmental Claims. If any claim is made or brought against the
Bank which is subject to the indemnification set forth in this Section 31, the
Borrower shall defend the same, if necessary in the name of the Bank, by
attorneys approved by the Bank. Notwithstanding the foregoing, the Bank may in
its discretion, upon the occurrence of any claim, engage its own attorneys to
defend or assist therein and at the Bank’s option, its counsel shall control the
litigation or resolution of such claim. The resolution and settlement of any
such claim shall require the written consent of Bank. The Borrower shall pay or,
on demand, shall reimburse the Bank for the payment of the reasonable fees and
disbursements of the Bank’s attorneys.

 

(c) General Provisions Concerning the Environmental Indemnity. The Borrower
agrees that its obligations under this Section 31 are not secured by the Deed of
Trust securing the loan referred to herein, that Code of Civil Procedure
Sections 580a, 580b, 580d, and 726 shall not apply to this Agreement, and that
the Bank may enforce the provisions of this Agreement following reconveyance,
extinguishment, judicial or non-judicial foreclosure of the Deed of Trust, or
conveyance by deed in lieu of foreclosure of the Deed of Trust. The indemnity
set forth in this Section 31 shall survive the termination of this Agreement.

 

SECTION 32. ARBITRATION.

 

(a) Arbitration. Upon the demand of any party, any Dispute shall be resolved by
binding arbitration (except as set forth in (e) below) in accordance with the
terms of this Agreement. A “Dispute” shall mean any action, dispute, claim or
controversy of any kind, whether in contract or tort, statutory or common law,
legal or

 

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equitable, now existing or hereafter arising under or in connection with, or in
any way pertaining to, any of the Related Documents, or any past, present or
future extensions of credit and other activities, transactions or obligations of
any kind related directly or indirectly to any of the Related Documents,
including, without limitation, any of the foregoing arising in connection with
the exercise of any self-help, ancillary or other remedies pursuant to any of
the Related Documents. Any party may by summary proceedings bring an action in
court to compel arbitration of a Dispute. Any party who fails or refuses to
submit to arbitration following a lawful demand by any other party shall bear
all costs and expenses incurred by such other party in compelling arbitration of
any Dispute.

 

(b) Governing Rules. Arbitration proceedings shall be administered by the
American Arbitration Association (“AAA”) or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Related
Documents. The arbitration shall be conducted at a location in California
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided, however, that nothing contained herein shall be deemed
to be a waiver by any party that is a bank of the protections afforded to it
under 12 U.S.C. 91 or any similar applicable state law.

 

(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No provision
hereof shall limit the right of any party to exercise self-help remedies such as
setoff, foreclosure against or sale of any real or personal property collateral
or security, or to obtain provisional or ancillary remedies, including, without
limitation, injunctive relief, sequestration, attachment, garnishment or the
appointment of a receiver, from a court of competent jurisdiction before, after
or during the pendency of any arbitration or other proceeding. The exercise of
any such remedy shall not waive the right of any party to compel arbitration or
reference hereunder.

 

(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be active
members of the California State Bar or retired judges of the state or federal
judiciary of California, with expertise in the substantive laws applicable to
the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes
by summary rulings in response to motions filed prior to the final arbitration
hearing. Arbitrators (i) shall resolve all Disputes in accordance with the
substantive law of the state of California, (ii) may grant any remedy or relief
that a court of the State of California could order or grant within the scope
hereof and such ancillary relief as is necessary to make effective any award,
and (iii) shall have the power to award recovery of all costs and fees, to
impose sanctions and to take such other actions as they deem necessary to the

 

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same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
California Rules of Civil Procedure or other applicable law. Any Dispute in
which the amount in controversy is $5,000,000 or less shall be decided by a
single arbitrator who shall not render an award of greater than $5,000,000
(including damages, costs, fees and expenses). By submission to a single
arbitrator, each party expressly waives any right or claim to recover more than
$5,000,000. Any Dispute in which the amount in controversy exceeds $5,000,000
shall be decided by majority vote of a panel of three arbitrators; provided
however, that all three arbitrators must actively participate in all hearings
and deliberations.

 

(e) Judicial Review. Notwithstanding anything herein to the contrary, in any
arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the State of
California, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the State of
California. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the State of California.

 

(f) Real Property Collateral; Judicial Reference. Notwithstanding anything
herein to the contrary, no Dispute shall be submitted to arbitration if the
Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA’s selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.

 

(g) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators
and the parties shall take all action required to conclude any arbitration
proceeding within 180 days of the filing of the Dispute with the AAA. No
arbitrator or

 

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other party to an arbitration proceeding may disclose the existence, content or
results thereof, except for disclosures of information by a party required in
the ordinary course of its business, by applicable law or regulation, or to the
extent necessary to exercise any judicial review rights set forth herein. If
more than one agreement for arbitration by or between the parties potentially
applies to a Dispute, the arbitration provision most directly related to the
Related Documents or the subject matter of the Dispute shall control. This
arbitration provision shall survive termination, amendment or expiration of any
of the Related Documents or any relationship between the parties.

 

[Signatures on Following Page]

 

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Executed as of the date first written above.

 

PROVENA FOODS, INC.      

WELLS FARGO BANK,

NATIONAL ASSOCIATION

By:

 

/s/ Thomas J. Mulroney

     

By:

 

/s/ Angelo Samperisi

Name:

 

Thomas Mulroney

     

Name:

 

Angelo Samperisi

Title:

 

Chief Financial Officer

     

Title:

 

Vice President

Address for Notices:

 

5010 Eucalyptus Avenue

Chino, California 91710

     

Address for Notices:

 

245 South Los Robles Avenue

Suite 700

Attention:

 

Thomas Mulroney

     

Pasadena, California 91101

Facsimile:

 

(909) 627-7315

     

Attention:

 

Tony S. Lee

           

Facsimile:

 

(626) 844-9063

 

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EXHIBIT A

 

IRREVOCABLE LETTER OF CREDIT

 

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December 1, 2005

Letter of Credit No. NZS558449

 

U.S. Bank National Association

One California Street, Suite 2100

San Francisco, California 94111

Attention: Ms. Karen Lei

Telephone: (415) 273-4540

Facsimile: (415) 273-4590

 

Ladies and Gentlemen:

 

We hereby establish in your favor at the request and for the account of Provena
Foods, Inc., a California corporation, our irrevocable Letter of credit in the
amount of U.S. $6,221,813.00 (Six Million Two Hundred Twenty One Thousand Eight
Hundred Thirteen Dollars and No/100 Cents) in connection with the Bonds (as
defined below) available with ourselves by sight payment against presentation of
one or more signed and dated demands addressed by you to Wells Fargo Bank, N.A.,
Letter of Credit Operations Office, San Francisco, California, each in the form
of Annex A (an “A Drawing”), Annex B (a “B Drawing”), Annex C (a “C Drawing”),
Annex D (a “D Drawing”), Annex E (an “E Drawing”), or Annex F (an “F Drawing”)
hereto, with all instructions in brackets therein being complied with. Each such
demand must be presented to us in its original form or by facsimile transmission
of such original form.

 

Each such presentation must be made at or before 5:00 p.m. San Francisco time on
a Business Day (as hereinafter defined) to our Letter of Credit Operations
Office in San Francisco, California (presently located at One Front Street, 21st
Floor, San Francisco, California 94111).

 

This Letter of Credit expires at our Letter of Credit Operations Office in San
Francisco, California on December 30, 2008 or, if such date is not a Business
Day, then on the first (1st) succeeding Business Day thereafter (the “Expiration
Date”).

 

As used herein the term “Business Day” shall mean a day on which our San
Francisco Letter of Credit Operations Office is open for business.

 

The amount of any demand presented hereunder will be the amount inserted in
numbered Paragraph 4 of said demand. By honoring any such demand we make no
representation as to the correctness of the amount demanded.

 

We hereby agree with you that each demand presented hereunder in full compliance
with the terms hereof will be duly honored by our payment to you of the amount
of such demand, in immediately available funds of Wells Fargo Bank, National
Association:

 

SECTION 33. not later than 9:00 a.m., San Francisco time, on the Business Day
following the Business Day on which such demand is presented to us as

 

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aforesaid if such presentation is made to us at or before 9:00 a.m., San
Francisco time.

 

or

 

SECTION 34. not later than 9:00 a.m., San Francisco time, on the second Business
Day following the Business Day on which such demand is presented to us as
aforesaid, if such presentation is made to us after 9:00 a.m., San Francisco
time.

 

Notwithstanding the foregoing, any demand presented hereunder, in full
compliance with the terms hereof, for a C Drawing or D Drawing will be duly
honored (i) not later than 12:00 noon, San Francisco time, on the Business Day
on which such demand is presented to us as aforesaid if such presentation is
made to us at or before 9:00 a.m., San Francisco time, and (ii) not later than
9:00 a.m., San Francisco time, on the Business Day following the Business Day on
which such demand is presented to us as aforesaid if such presentation is made
to us after 9:00 a.m., San Francisco time.

 

If the remittance instructions included with any demand presented under this
Letter of Credit require that payment is to be made by transfer to an account
with us or with another bank, we and/or such other bank may rely solely on the
account number specified in such instructions even if the account is in the name
of a person or entity different from the intended payee.

 

With respect to any demand that is honored hereunder, the total amount of this
Letter of Credit shall be reduced as follows:

 

  (a) With respect to any A Drawing or B Drawing, the total amount of this
Letter of Credit shall be reduced, as to all demands subsequent to the
applicable demand, by the amount of the applicable demand as of the time of
presentation of such demand and shall not be reinstated;

 

  (b) With respect to any C Drawing or D Drawing, the total amount of this
Letter of Credit shall be reduced, as to all demands subsequent to the
applicable demand, by the amount of the applicable demand as of the time of
presentation of such demand; provided, however, that such amount shall be
reinstated in full or in part if and to the extent, prior to the Expiration
Date, we are reimbursed from remarketing proceeds for all or a portion of such
demand, at which time we shall advise you in writing of such reinstatement and
the amount reinstated; and

 

  (c)

With respect to any F Drawing, the total amount of this Letter of Credit shall
be reduced, as to all demands subsequent to the applicable demand, by the amount
of the applicable demand as of the time of presentation of such demand;
provided, however, that such amount shall be automatically reinstated on the
eighth (8th) Business Day following the date such demand is honored by us,
unless (i) you shall have received notice from

 

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us by express courier, authenticated SWIFT message, facsimile transmission, or
registered mail no later than seven (7) Business Days after such demand is
honored by us that there shall be no such reinstatement, or (ii) such eighth
(8th) Business Day falls after the Expiration Date.

 

Upon presentation to us of an E Drawing in compliance with the terms of this
Letter of Credit, no further demand whatsoever may be presented hereunder.

 

An F Drawing shall not be presented to us (i) more than once during any
twenty-seven (27) calendar day period, or (ii) with respect to any single F
Drawing, for an amount more than U.S. $76,813.00.

 

It is a condition of this Letter of Credit that the amount available for drawing
under this Letter of Credit shall be decreased automatically without amendment
upon our receipt of each reduction authorization in the form of Annex G to this
Letter of Credit (with all instructions therein being complied with) sent to us
as an authenticated SWIFT message or as a signed and dated original form.

 

Except as otherwise provided herein, this Letter of Credit shall be governed by
and construed in accordance with the Uniform Customs and Practice for
Documentary Credits (1993 Revision), Publication No. 500 of the International
Chamber of Commerce (the “UCP”); provided, however, that Article 41, paragraphs
d, e, f, g, h, i and j of Article 48 and the second sentence of Article 17 shall
not apply to this Letter of Credit. Furthermore, as provided in the first
sentence of Article 17 of the UCP, we assume no liability or responsibility for
consequences arising out of the interruption of our business by Acts of God,
riots, civil commotions, insurrections, wars or any other causes beyond our
control, or strikes or lockouts. With respect to matters related to this Letter
of Credit which are not covered by the UCP, such matters shall be governed by
the laws of the State of California, including, without limitation, the Uniform
Commercial Code as in effect in the State of California, except to the extent
such laws are inconsistent with the UCP or made inapplicable by this Letter of
Credit.

 

This Letter of Credit is transferable and may be transferred more than once, but
in each case only in the amount of the full unutilized balance hereof to any
single transferee who you shall have advised us pursuant to Annex H has
succeeded U.S. Bank National Association or a successor trustee as Trustee under
the Indenture of Trust dated as of December 1, 2003 as supplemented from time to
time (the “Indenture”) between Provena Foods, Inc., a California corporation
(the “Issuer”) and U.S. Bank National Association, as Trustee, pursuant to which
U.S. $6,300,000 in aggregate principal amount of the Issuer’s Variable/Fixed
Rate Demand Bonds Series 2003A (the “Bonds”) were issued. Transfers may be
effected without charge to the transferor and only through ourselves and only
upon presentation to us of a duly executed instrument of transfer in the form
attached hereto as Annex H. Any transfer of this Letter of Credit as aforesaid
must be endorsed by us on the reverse hereof and

 

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may not change the place of presentation of demands from our Letter of Credit
Operations Office in San Francisco, California.

 

All payments hereunder shall be made from our own funds.

 

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This Letter of Credit sets forth in full our undertaking, and such undertaking
shall not in any way be modified, amended, amplified or limited by reference to
any document, instrument or agreement referred to herein (including, without
limitation, the Bonds and the Indenture), except the UCP to the extent the UCP
is not inconsistent with or made inapplicable by this Letter of Credit; and any
such reference shall not be deemed to incorporate herein by reference any
document, instrument or agreement except the UCP.

 

WELLS FARGO BANK, NATIONAL ASSOCIATION By:         Authorized Signature

 

Letter of Credit Operations Office

Telephone No.: 1-800-798-2815 (Option 1)

Facsimile No.: (415) 296-8905

 

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Annex A to Wells Fargo Bank, N.A.

Irrevocable Letter of Credit

No. NZS558449

 

WELLS FARGO BANK, N.A.

LETTER OF CREDIT OPERATIONS OFFICE

ONE FRONT STREET, 21ST FLOOR

SAN FRANCISCO, CALIFORNIA 94111

 

FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.

 

[INSERT NAME OF BENEFICIARY] (THE “TRUSTEE”) HEREBY CERTIFIES TO WELLS FARGO
BANK, N.A. (THE “BANK”) WITH REFERENCE TO IRREVOCABLE LETTER OF CREDIT NO.
NZS558449 (THE “LETTER OF CREDIT”; THE TERMS THE “BONDS”, “BUSINESS DAY” AND THE
“INDENTURE” USED HEREIN SHALL HAVE THEIR RESPECTIVE MEANINGS SET FORTH IN THE
LETTER OF CREDIT) THAT:

 

  (i) THE TRUSTEE IS THE TRUSTEE OR A SUCCESSOR TRUSTEE UNDER THE INDENTURE.

 

  (ii) THE TRUSTEE IS MAKING A DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT
WITH RESPECT TO THE PAYMENT OF PRINCIPAL UPON AN OPTIONAL AND/OR MANDATORY
REDEMPTION OF LESS THAN ALL OF THE BONDS CURRENTLY OUTSTANDING.

 

  (iii) THE AMOUNT OF THIS DEMAND FOR PAYMENT WAS COMPUTED IN ACCORDANCE WITH
THE TERMS AND CONDITIONS OF THE BONDS AND THE INDENTURE AND IS DEMANDED IN
ACCORDANCE WITH THE INDENTURE, WHICH AMOUNT PLEASE REMIT TO THE UNDERSIGNED AS
FOLLOWS:

 

[INSERT REMITTANCE INSTRUCTIONS].

 

  (iv) THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT IS $[INSERT
AMOUNT].

 

  (v) THE TRUSTEE HAS CONTACTED OR ATTEMPTED TO CONTACT BY TELEPHONE AN OFFICER
OF THE BANK’S LETTER OF CREDIT OFFICE IN SAN FRANCISCO, CALIFORNIA REGARDING THE
AMOUNT OF THIS DEMAND AND THE DATE AND TIME BY WHICH PAYMENT IS DEMANDED.

 

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[CONTINUED ON FOLLOWING PAGE]

 

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  (vi) IF THIS DEMAND IS RECEIVED BY YOU AT OR BEFORE 9:00 A.M., SAN FRANCISCO
TIME ON A BUSINESS DAY, YOU MUST MAKE PAYMENT ON THIS DEMAND AT OR BEFORE 9:00
A.M., SAN FRANCISCO TIME, ON THE NEXT BUSINESS DAY. IF THIS DEMAND IS RECEIVED
BY YOU AFTER 9:00 A.M., SAN FRANCISCO TIME, ON A BUSINESS DAY, YOU MUST MAKE
PAYMENT ON THIS DEMAND AT OR BEFORE 9:00 A.M., SAN FRANCISCO TIME, ON THE SECOND
BUSINESS DAY FOLLOWING SUCH BUSINESS DAY.

 

[INSERT NAME OF BENEFICIARY]

 

[INSERT SIGNATURE AND DATE]

 

A-9

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Annex B to Wells Fargo Bank, N.A.

Irrevocable Letter of Credit

No. NZS558449

 

WELLS FARGO BANK, N.A.

LETTER OF CREDIT OPERATIONS OFFICE

ONE FRONT STREET, 21ST FLOOR

SAN FRANCISCO, CALIFORNIA 94111

 

FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.

 

[INSERT NAME OF BENEFICIARY] (THE “TRUSTEE”) HEREBY CERTIFIES TO WELLS FARGO
BANK, N.A. (THE “BANK”) WITH REFERENCE TO IRREVOCABLE LETTER OF CREDIT NO.
NZS558449 (THE “LETTER OF CREDIT”; THE TERMS THE “BONDS”, “BUSINESS DAY” AND THE
“INDENTURE” USED HEREIN SHALL HAVE THEIR RESPECTIVE MEANINGS SET FORTH IN THE
LETTER OF CREDIT) THAT:

 

  (i) THE TRUSTEE IS THE TRUSTEE OR A SUCCESSOR TRUSTEE UNDER THE INDENTURE.

 

  (ii) THE TRUSTEE IS MAKING A DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT
WITH RESPECT TO THE PAYMENT OF UNPAID INTEREST UPON AN OPTIONAL AND/OR MANDATORY
REDEMPTION OF LESS THAN ALL OF THE BONDS CURRENTLY OUTSTANDING.

 

  (iii) THE AMOUNT OF THIS DEMAND FOR PAYMENT WAS COMPUTED IN ACCORDANCE WITH
THE TERMS AND CONDITIONS OF THE BONDS AND THE INDENTURE AND IS DEMANDED IN
ACCORDANCE WITH THE INDENTURE, WHICH AMOUNT PLEASE REMIT TO THE UNDERSIGNED AS
FOLLOWS:

 

[INSERT REMITTANCE INSTRUCTIONS].

 

  (iv) THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT IS $[INSERT
AMOUNT].

 

  (v) THE TRUSTEE HAS CONTACTED OR ATTEMPTED TO CONTACT BY TELEPHONE AN OFFICER
OF THE BANK’S LETTER OF CREDIT OFFICE IN SAN FRANCISCO, CALIFORNIA REGARDING THE
AMOUNT OF THIS DEMAND AND THE DATE AND TIME BY WHICH PAYMENT IS DEMANDED.

 

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[CONTINUED ON FOLLOWING PAGE]

 

A-11

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  (vi) IF THIS DEMAND IS RECEIVED BY YOU AT OR BEFORE 9:00 A.M., SAN FRANCISCO
TIME ON A BUSINESS DAY, YOU MUST MAKE PAYMENT ON THIS DEMAND AT OR BEFORE 9:00
A.M., SAN FRANCISCO TIME, ON THE NEXT BUSINESS DAY. IF THIS DEMAND IS RECEIVED
BY YOU AFTER 9:00 A.M., SAN FRANCISCO TIME, ON A BUSINESS DAY, YOU MUST MAKE
PAYMENT ON THIS DEMAND AT OR BEFORE 9:00 A.M., SAN FRANCISCO TIME, ON THE SECOND
BUSINESS DAY FOLLOWING SUCH BUSINESS DAY.

 

[INSERT NAME OF BENEFICIARY]

 

[INSERT SIGNATURE AND DATE]

 

A-12

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Annex C to Wells Fargo Bank, N.A.

Irrevocable Letter of Credit

No. NZS558449

 

WELLS FARGO BANK, N.A.

LETTER OF CREDIT OPERATIONS OFFICE

ONE FRONT STREET, 21ST FLOOR

SAN FRANCISCO, CALIFORNIA 94111

 

FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.

 

[INSERT NAME OF BENEFICIARY] (THE “TRUSTEE”) HEREBY CERTIFIES TO WELLS FARGO
BANK, N.A. (THE “BANK”) WITH REFERENCE TO IRREVOCABLE LETTER OF CREDIT NO.
NZS558449 (THE “LETTER OF CREDIT”; THE TERMS THE “BONDS”, “BUSINESS DAY” AND THE
“INDENTURE” USED HEREIN SHALL HAVE THEIR RESPECTIVE MEANINGS SET FORTH IN THE
LETTER OF CREDIT) THAT:

 

  (vii) THE TRUSTEE IS THE TRUSTEE OR A SUCCESSOR TRUSTEE UNDER THE INDENTURE.

 

  (viii) THE TRUSTEE IS MAKING A DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT
WITH RESPECT TO THE PAYMENT OF THE PRINCIPAL AMOUNT OF THOSE BONDS WHICH THE
REMARKETING AGENT (AS DEFINED IN THE INDENTURE) HAS BEEN UNABLE TO REMARKET
WITHIN THE TIME LIMITS ESTABLISHED IN THE INDENTURE.

 

  (ix) THE AMOUNT OF THIS DEMAND FOR PAYMENT WAS COMPUTED IN ACCORDANCE WITH THE
TERMS AND CONDITIONS OF THE BONDS AND THE INDENTURE AND IS DEMANDED IN
ACCORDANCE WITH THE INDENTURE, WHICH AMOUNT PLEASE REMIT TO THE UNDERSIGNED AS
FOLLOWS:

 

[INSERT REMITTANCE INSTRUCTIONS].

 

  (x) THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT IS $[INSERT AMOUNT].

 

  (xi) THE TRUSTEE HAS CONTACTED OR ATTEMPTED TO CONTACT BY TELEPHONE AND
TELEFACSIMILE AN OFFICER OF THE BANK’S LETTER OF CREDIT OFFICE IN SAN FRANCISCO,
CALIFORNIA REGARDING THE AMOUNT OF THIS DEMAND AND THE DATE AND TIME BY WHICH
PAYMENT IS DEMANDED.

 

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[CONTINUED ON FOLLOWING PAGE]

 

A-14

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  (xii) IF THIS DEMAND IS RECEIVED BY YOU AT OR BEFORE 9:00 A.M., SAN FRANCISCO
TIME ON A BUSINESS DAY, YOU MUST MAKE PAYMENT ON THIS DEMAND AT OR BEFORE 12:00
NOON, SAN FRANCISCO TIME, ON SAID BUSINESS DAY. IF THIS DEMAND IS RECEIVED BY
YOU AFTER 9:00 A.M., SAN FRANCISCO TIME, ON A BUSINESS DAY, YOU MUST MAKE
PAYMENT ON THIS DEMAND AT OR BEFORE 9:00 A.M., SAN FRANCISCO TIME, ON THE
BUSINESS DAY FOLLOWING SAID BUSINESS DAY.

 

[INSERT NAME OF BENEFICIARY]

 

[INSERT SIGNATURE AND DATE]

 

A-15

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Annex D to Wells Fargo Bank, N.A.

Irrevocable Letter of Credit

No. NZS558449

 

WELLS FARGO BANK, N.A.

LETTER OF CREDIT OPERATIONS OFFICE

ONE FRONT STREET, 21ST FLOOR

SAN FRANCISCO, CALIFORNIA 94111

 

FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.

 

[INSERT NAME OF BENEFICIARY] (THE “TRUSTEE”) HEREBY CERTIFIES TO WELLS FARGO
BANK, N.A. (THE “BANK”) WITH REFERENCE TO IRREVOCABLE LETTER OF CREDIT NO.
NZS558449 (THE “LETTER OF CREDIT”; THE TERMS THE “BONDS”, “BUSINESS DAY” AND THE
“INDENTURE” USED HEREIN SHALL HAVE THEIR RESPECTIVE MEANINGS SET FORTH IN THE
LETTER OF CREDIT) THAT:

 

  (xiii) THE TRUSTEE IS THE TRUSTEE OR A SUCCESSOR TRUSTEE UNDER THE INDENTURE.

 

  (xiv) THE TRUSTEE IS MAKING A DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT
WITH RESPECT TO THE PAYMENT OF THE UNPAID INTEREST ON THOSE BONDS WHICH THE
REMARKETING AGENT (AS DEFINED IN THE INDENTURE) HAS BEEN UNABLE TO REMARKET
WITHIN THE TIME LIMITS ESTABLISHED IN THE INDENTURE.

 

  (xv) THE AMOUNT OF THIS DEMAND FOR PAYMENT WAS COMPUTED IN ACCORDANCE WITH THE
TERMS AND CONDITIONS OF THE BONDS AND THE INDENTURE AND IS DEMANDED IN
ACCORDANCE WITH THE INDENTURE, WHICH AMOUNT PLEASE REMIT TO THE UNDERSIGNED AS
FOLLOWS:

 

[INSERT REMITTANCE INSTRUCTIONS].

 

  (xvi) THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT IS $[INSERT
AMOUNT].

 

  (xvii)  THE TRUSTEE HAS CONTACTED OR ATTEMPTED TO CONTACT BY TELEPHONE AND
TELEFACSIMILE AN OFFICER OF THE BANK’S LETTER OF CREDIT OFFICE IN SAN FRANCISCO,
CALIFORNIA REGARDING THE AMOUNT OF THIS DEMAND AND THE DATE AND TIME BY WHICH
PAYMENT IS DEMANDED.

 

A-16

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[CONTINUED ON FOLLOWING PAGE]

 

A-17

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  (xviii)  IF THIS DEMAND IS RECEIVED BY YOU AT OR BEFORE 9:00 A.M., SAN
FRANCISCO TIME ON A BUSINESS DAY, YOU MUST MAKE PAYMENT ON THIS DEMAND AT OR
BEFORE 12:00 NOON, SAN FRANCISCO TIME, ON SAID BUSINESS DAY. IF THIS DEMAND IS
RECEIVED BY YOU AFTER 9:00 A.M., SAN FRANCISCO TIME, ON A BUSINESS DAY, YOU MUST
MAKE PAYMENT ON THIS DEMAND AT OR BEFORE 9:00 A.M., SAN FRANCISCO TIME, ON THE
BUSINESS DAY FOLLOWING SAID BUSINESS DAY.

 

[INSERT NAME OF BENEFICIARY]

 

[INSERT SIGNATURE AND DATE]

 

A-18

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Annex E to Wells Fargo Bank, N.A.

Irrevocable Letter of Credit

No. NZS558449

 

WELLS FARGO BANK, N. A.

LETTER OF CREDIT OPERATIONS OFFICE

ONE FRONT STREET, 21ST FLOOR

SAN FRANCISCO, CALIFORNIA 94111

 

FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.

 

[INSERT NAME OF BENEFICIARY] (THE “TRUSTEE”) HEREBY CERTIFIES TO WELLS FARGO
BANK, N.A. (THE “BANK”) WITH REFERENCE TO IRREVOCABLE LETTER OF CREDIT NO.
NZS558449 (THE “LETTER OF CREDIT”; THE TERMS THE “BONDS”, “BUSINESS DAY” AND THE
“INDENTURE” USED HEREIN SHALL HAVE THEIR RESPECTIVE MEANINGS SET FORTH IN THE
LETTER OF CREDIT) THAT:

 

  (xix) THE TRUSTEE IS THE TRUSTEE OR A SUCCESSOR TRUSTEE UNDER THE INDENTURE.

 

  (xx) THE TRUSTEE IS MAKING A DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT
WITH RESPECT TO THE PAYMENT, AT STATED MATURITY, UPON ACCELERATION FOLLOWING AN
EVENT OF DEFAULT, OR UPON REDEMPTION AS A WHOLE, OF THE TOTAL UNPAID PRINCIPAL
OF, AND UNPAID INTEREST ON, ALL OF THE BONDS WHICH ARE PRESENTLY OUTSTANDING.

 

  (xxi) THE AMOUNT OF THIS DEMAND FOR PAYMENT WAS COMPUTED IN ACCORDANCE WITH
THE TERMS AND CONDITIONS OF THE BONDS AND THE INDENTURE AND IS DEMANDED IN
ACCORDANCE WITH THE INDENTURE, WHICH AMOUNT PLEASE REMIT TO THE UNDERSIGNED AS
FOLLOWS:

 

[INSERT REMITTANCE INSTRUCTIONS].

 

  (xxii)  THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT IS $[INSERT
AMOUNT WHICH IS THE SUM OF THE TWO AMOUNTS SET FORTH IN PARAGRAPH 5, BELOW].

 

  (xxiii)  THE AMOUNT OF THIS DEMAND IS EQUAL TO THE SUM OF (A) $[INSERT AMOUNT]
BEING DRAWN IN RESPECT OF THE PAYMENT OF UNPAID PRINCIPAL OF THE BONDS AND
(B) $[INSERT AMOUNT] BEING DRAWN IN RESPECT OF THE PAYMENT OF UNPAID INTEREST ON
THE BONDS.

 

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[CONTINUED ON FOLLOWING PAGE]

 

A-20

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  (xxiv)  THE TRUSTEE HAS CONTACTED OR ATTEMPTED TO CONTACT BY TELEPHONE AN
OFFICER OF THE BANK’S LETTER OF CREDIT OFFICE IN SAN FRANCISCO, CALIFORNIA
REGARDING THE AMOUNT OF THIS DEMAND AND THE DATE AND TIME BY WHICH PAYMENT IS
DEMANDED.

 

  (xxv)  IF THIS DEMAND IS RECEIVED BY YOU AT OR BEFORE 9:00 A.M., SAN FRANCISCO
TIME ON A BUSINESS DAY, YOU MUST MAKE PAYMENT ON THIS DEMAND AT OR BEFORE 9:00
A.M., SAN FRANCISCO TIME, ON THE NEXT BUSINESS DAY. IF THIS DEMAND IS RECEIVED
BY YOU AFTER 9:00 A.M., SAN FRANCISCO TIME, ON A BUSINESS DAY, YOU MUST MAKE
PAYMENT ON THIS DEMAND AT OR BEFORE 9:00 A.M., SAN FRANCISCO TIME, ON THE SECOND
BUSINESS DAY FOLLOWING SUCH BUSINESS DAY.

 

[INSERT NAME OF BENEFICIARY]

 

[INSERT SIGNATURE AND DATE]

 

A-21

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Annex F to Wells Fargo Bank, N.A.

Irrevocable Letter of Credit

No. NZS558449

 

WELLS FARGO BANK, N.A.

LETTER OF CREDIT OPERATIONS OFFICE

ONE FRONT STREET, 21ST FLOOR

SAN FRANCISCO, CALIFORNIA 94111

 

FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.

 

[INSERT NAME OF BENEFICIARY] (THE “TRUSTEE”) HEREBY CERTIFIES TO WELLS FARGO
BANK, N.A. (THE “BANK”) WITH REFERENCE TO IRREVOCABLE LETTER OF CREDIT NO.
NZS558449 (THE “LETTER OF CREDIT”; THE TERMS THE “BONDS”, “BUSINESS DAY” AND THE
“INDENTURE” USED HEREIN SHALL HAVE THEIR RESPECTIVE MEANINGS SET FORTH IN THE
LETTER OF CREDIT) THAT:

 

  (xxvi)  THE TRUSTEE IS THE TRUSTEE OR A SUCCESSOR TRUSTEE UNDER THE INDENTURE.

 

  (xxvii)  THE TRUSTEE IS MAKING A DEMAND FOR PAYMENT UNDER THE LETTER OF CREDIT
WITH RESPECT TO THE PAYMENT, ON AN INTEREST PAYMENT DATE (AS DEFINED IN THE
INDENTURE), OF UNPAID INTEREST WITH RESPECT TO THE BONDS.

 

  (xxviii)  THE AMOUNT OF THIS DEMAND FOR PAYMENT WAS COMPUTED IN ACCORDANCE
WITH THE TERMS AND CONDITIONS OF THE BONDS AND THE INDENTURE AND IS DEMANDED IN
ACCORDANCE WITH THE INDENTURE, WHICH AMOUNT PLEASE REMIT TO THE UNDERSIGNED AS
FOLLOWS:

 

[INSERT REMITTANCE INSTRUCTIONS].

 

  (xxix)  THE AMOUNT HEREBY DEMANDED UNDER THE LETTER OF CREDIT IS $[INSERT
AMOUNT].

 

  (xxx)  THE TRUSTEE HAS CONTACTED OR ATTEMPTED TO CONTACT BY TELEPHONE AN
OFFICER OF THE BANK’S LETTER OF CREDIT OFFICE IN SAN FRANCISCO, CALIFORNIA
REGARDING THE AMOUNT OF THIS DEMAND AND THE DATE AND TIME BY WHICH PAYMENT IS
DEMANDED.

 

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[CONTINUED ON FOLLOWING PAGE]

 

A-23

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  (xxxi)  IF THIS DEMAND IS RECEIVED BY YOU AT OR BEFORE 9:00 A.M., SAN
FRANCISCO TIME ON A BUSINESS DAY, YOU MUST MAKE PAYMENT ON THIS DEMAND AT OR
BEFORE 9:00 A.M., SAN FRANCISCO TIME, ON THE NEXT BUSINESS DAY. IF THIS DEMAND
IS RECEIVED BY YOU AFTER 9:00 A.M., SAN FRANCISCO TIME, ON A BUSINESS DAY, YOU
MUST MAKE PAYMENT ON THIS DEMAND AT OR BEFORE 9:00 A.M., SAN FRANCISCO TIME, ON
THE SECOND BUSINESS DAY FOLLOWING SUCH BUSINESS DAY.

 

[INSERT NAME OF BENEFICIARY]

 

[INSERT SIGNATURE AND DATE]

 

A-24

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Annex G to Wells Fargo Bank, N. A.

Irrevocable Letter of Credit

No. NZS558449

 

WELLS FARGO BANK, N. A.

LETTER OF CREDIT OPERATIONS OFFICE

ONE FRONT STREET, 21ST FLOOR

SAN FRANCISCO, CALIFORNIA 94111

 

LETTER OF CREDIT REDUCTION AUTHORIZATION

 

FOR THE URGENT ATTENTION OF LETTER OF CREDIT MANAGER.

 

[INSERT NAME OF BENEFICIARY], WITH REFERENCE TO LETTER OF CREDIT NO. NZS558449
ISSUED BY WELLS FARGO BANK, N. A. (THE “BANK”), HEREBY UNCONDITIONALLY AND
IRREVOCABLY REQUESTS THAT THE BANK DECREASE THE AMOUNT AVAILABLE FOR DRAWING
UNDER THE LETTER OF CREDIT BY $[INSERT AMOUNT].

 

[FOR SIGNED REDUCTION AUTHORIZATIONS ONLY]

 

[INSERT NAME OF BENEFICIARY] By:   [INSERT SIGNATURE] TITLE:   [INSERT TITLE]
DATE:   [INSERT DAY AND YEAR]

 

SIGNATURE GUARANTEED BY

[INSERT NAME OF BANK]

By:         [INSERT NAME AND TITLE]

 

A-25

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Annex H to Wells Fargo Bank, N.A.

Irrevocable Letter of Credit

No. NZS558449

 

WELLS FARGO BANK, N.A.

LETTER OF CREDIT OPERATIONS OFFICE

ONE FRONT STREET, 21ST FLOOR,

SAN FRANCISCO, CALIFORNIA, 94111

 

Subject: Your Letter of Credit No.

 

Ladies and Gentlemen:

 

For value received, we hereby irrevocably assign and transfer all of our rights
under the above-captioned Letter of Credit, as heretofore and hereafter amended,
extended, increased or reduced to:

 

___________________________________________

[Name of Transferee]

 

___________________________________________

 

___________________________________________

 

___________________________________________

[Address of Transferee]

 

By this transfer, all of our rights in the Letter of Credit are transferred to
the transferee, and the transferee shall have sole rights as beneficiary under
the Letter of Credit, including sole rights relating to any amendments, whether
increases or extensions or other amendments, and whether now existing or
hereafter made. You are hereby irrevocably instructed to advise future
amendment(s) of the Letter of Credit to the transferee without our consent or
notice to us.

 

The original Letter of Credit is returned with all amendments to this date.
Please notify the transferee in such form as you deem advisable of this transfer
and of the terms and conditions to this Letter of Credit, including amendments
as transferred.

 

You are hereby advised that the transferee named above has succeeded U.S. Bank
National Association or a successor trustee, as Trustee under the Indenture of
Trust dated as of December 1, 2003 as supplemented from time to time (the
“Indenture”) between Provena Foods, Inc., a California corporation (the
“Issuer”) and U.S. Bank National Association, as Trustee, pursuant to which U.
S. $6,300,000 in aggregate principal amount of Issuer’s Variable/Fixed Rate
Demand Bonds Series 2003A were issued.

 

A-26

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Very truly yours,

 

U.S. BANK NATIONAL ASSOCIATION

By:

        [Insert Name and Title]

TRANSFEROR’S SIGNATURE

GUARANTEED

By:

        [Bank Name]

By:

        [Insert Name and Title]

 

By its signature below, the undersigned transferee acknowledges that it has duly
succeeded U.S. Bank National Association or a successor trustee as Trustee under
the Indenture.

 

[Insert Name of Transferee]

By:

        [Insert Name and Title]

 

A-27

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EXHIBIT B

 

NOTICE OF INTENT TO BORROW

 

Pursuant to that certain Reimbursement Agreement dated as of
                    , 2005 (the “Reimbursement Agreement”; capitalized terms
used herein without definition shall have the meanings set forth in the
Reimbursement Agreement) between PROVENA FOODS INC. (the “Borrower”) and WELLS
FARGO BANK, NATIONAL ASSOCIATION (the “Bank”), this represents the Borrower’s
notice to Bank of its intention to borrow from the Bank, at the Tender Drawing
Rate.

 

[the full amount of the Tender Drawing made on                     , 20     in
the amount of                     ]

 

or

 

[a portion of the Tender Drawing made on                     ,              in
the amount of $                    ; the portion borrowed being
$                    , with the remainder of $                    paid in full
herewith together with interest thereon at the Tender Drawing Rate.]

 

The proceeds of such borrowing are to be used to reimburse the Bank for
unreimbursed Tender Drawings in accordance with Section 2(b) of the
Reimbursement Agreement.

 

The Borrower certifies that (i) the representations and warranties contained in
Section 6 of the Reimbursement Agreement are correct on and as of the date
hereof to the same extent as though made on and as of the date hereof (except to
the extent that any such representation and warranty expressly relates to an
earlier date); and (ii) no Event of Default has occurred nor is continuing.

 

PROVENA FOODS INC.

By:

   

Name:

   

Title:

   

 

B-1