Exhibit 10.21


 




 





LOAN
AGREEMENT


 


by
and between


 


CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK


 


and


 


ROLLER
BEARING COMPANY OF AMERICA, INC.


 


Dated
as of April 1, 1999


 


All right, title and interest
of the CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK (the “Issuer”)
in this Loan Agreement has been assigned (except for amounts payable under
Sections 4.02(b), 7.03, 9.02 and 9.03 hereof, its right to receive notices,
opinions and other documents required to be delivered to the Issuer hereunder
and its rights to consent to certain actions) to U.S. Bank Trust National
Association, as trustee (the “Trustee”) pursuant to the Indenture of Trust,
dated as of April 1, 1999, between the Issuer and the Trustee, and is
subject to such assignment.


 




 
























 


TABLE
OF CONTENTS


 


	
  Article I

  
	
   

  	
   

  	
   

  
	
  DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
  Definition
  of Terms

  	
   

  
	
  Section 1.02.

  	
  Number and
  Gender

  	
   

  
	
  Section 1.03.

  	
  Articles,
  Sections, Etc

  	
   

  
	
   

  	
   

  
	
  Article II

  
	
   

  	
   

  
	
  REPRESENTATIONS

  
	
   

  	
   

  
	
  Section 2.01.

  	
  Representations
  of the Issuer

  	
   

  
	
  Section 2.02.

  	
  Representations
  of the Borrower

  	
   

  
	
  Section 2.03.

  	
  Registered
  Owners to Benefit

  	
   

  
	
   

  	
   

  
	
  Article III

  
	
   

  	
   

  
	
  CONSTRUCTION
  OF THE PROJECT; ISSUANCE OF THE BONDS

  
	
   

  	
   

  
	
  Section 3.01.

  	
  Construction
  of the Project

  	
   

  
	
  Section 3.02.

  	
  Disbursements
  from the Project Fund and the Costs of Issuance Fund

  	
   

  
	
  Section 3.03.

  	
  Establishment
  of Completion Date; Obligation of Borrower to Complete

  	
   

  
	
  Section 3.04.

  	
  Investment
  of Moneys in Funds

  	
   

  
	
   

  	
   

  	
   

  
	
  Article IV

  
	
   

  	
   

  
	
  LOAN OF
  PROCEEDS; REPAYMENT PROVISIONS

  
	
   

  	
   

  
	
  Section 4.01.

  	
  Loan of
  Bond Proceeds; Issuance of Bonds

  	
   

  
	
  Section 4.02.

  	
  Loan
  Repayments and Other Amounts Payable

  	
   

  
	
  Section 4.03.

  	
  Purchase
  of Bonds

  	
   

  
	
  Section 4.04.

  	
  Unconditional
  Obligations

  	
   

  
	
  Section 4.05.

  	
  Assignment
  of Issuer’s Rights

  	
   

  
	
  Section 4.06.

  	
  Amounts
  Remaining in Funds

  	
   

  



 





















 


	
  Article V

  
	
   

  	
   

  
	
  SPECIAL
  COVENANTS AND AGREEMENTS

  
	
   

  	
   

  
	
  Section 5.01.

  	
  Right of
  Access to the Project

  	
   

  
	
  Section 5.02.

  	
  The
  Borrower’s Maintenance of its Existence

  	
   

  
	
  Section 5.03.

  	
  Records
  and Financial Statements of Borrower; Employment Practices

  	
   

  
	
  Section 5.04.

  	
  Insurance

  	
   

  
	
  Section 5.05.

  	
  Maintenance
  and Repair; Taxes; Utility and Other Charges

  	
   

  
	
  Section 5.06.

  	
  Incorporation,
  Formation, Organization or Qualification in California

  	
   

  
	
  Section 5.07.

  	
  Alternate
  Credit Facility

  	
   

  
	
  Section 5.08.

  	
  Letter of
  Credit

  	
   

  
	
  Section 5.09.

  	
  Covenants
  of the Borrower

  	
   

  
	
  Section 5.10.

  	
  Capital
  Expenditures

  	
   

  
	
  Section 5.11.

  	
  Special
  Arbitrage Certifications

  	
   

  
	
  Section 5.12.

  	
  Covenant
  to Enter into Agreement or Contract to Provide Ongoing Disclosure

  	
   

  
	
  Section 5.13.

  	
  No
  Purchase of Bonds

  	
   

  
	
   

  	
   

  
	
  Article VI

  
	
   

  	
   

  
	
  DAMAGE,
  DESTRUCTION AND CONDEMNATION; USE OF PROCEEDS

  
	
   

  	
   

  
	
  Section 6.01.

  	
  Obligation
  to Continue Payments

  	
   

  
	
  Section 6.02.

  	
  Application
  of Net Proceeds

  	
   

  
	
  Section 6.03.

  	
  Insufficiency
  of Net Proceeds

  	
   

  
	
  Section 6.04.

  	
  Damage to
  or Condemnation of Other Property

  	
   

  
	
   

  	
   

  
	
  Article VII

  
	
   

  	
   

  
	
  LOAN
  DEFAULT EVENTS AND REMEDIES

  
	
   

  	
   

  
	
  Section 7.01.

  	
  Loan
  Default Events

  	
   

  
	
  Section 7.02.

  	
  Remedies
  on Default

  	
   

  
	
  Section 7.03.

  	
  Agreement
  to Pay Attorneys’ Fees and Expenses

  	
   

  
	
  Section 7.04.

  	
  No Remedy
  Exclusive

  	
   

  
	
  Section 7.05.

  	
  Waivers

  	
   

  



 


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  Article VIII

  
	
   

  	
   

  
	
  PREPAYMENT

  
	
   

  	
   

  
	
  Section 8.01.

  	
  Redemption
  of Bonds with Prepayment Moneys

  	
   

  
	
  Section 8.02.

  	
  Options to
  Prepay Loan

  	
   

  
	
  Section 8.03.

  	
  Mandatory
  Prepayment

  	
   

  
	
  Section 8.04.

  	
  Amount of
  Prepayment

  	
   

  
	
  Section 8.05.

  	
  Notice of
  Prepayment

  	
   

  
	
   

  	
   

  
	
  Article IX

  
	
   

  	
   

  
	
  NON-LIABILITY
  OF ISSUER; EXPENSES; INDEMNIFICATION

  
	
   

  	
   

  
	
  Section 9.01.

  	
  Non-Liability
  of Issuer

  	
   

  
	
  Section 9.02.

  	
  Expenses

  	
   

  
	
  Section 9.03.

  	
  Indemnification

  	
   

  
	
   

  	
   

  
	
  Article X

  
	
   

  	
   

  
	
  MISCELLANEOUS

  
	
   

  	
   

  
	
  Section 10.01.

  	
  Notices

  	
   

  
	
  Section 10.02.

  	
  Severability

  	
   

  
	
  Section 10.03.

  	
  Execution
  of Counterparts

  	
   

  
	
  Section 10.04.

  	
  Amendments,
  Changes and Modifications

  	
   

  
	
  Section 10.05.

  	
  Governing
  Law

  	
   

  
	
  Section 10.06.

  	
  Authorized
  Representative of the Borrower

  	
   

  
	
  Section 10.07.

  	
  Term of
  the Agreement

  	
   

  
	
  Section 10.08.

  	
  Binding
  Effect

  	
   

  
	
  Section 10.09.

  	
  References
  to Bank

  	
   

  
	
  Section 10.10.

  	
  Brokerage
  Confirmations

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  THE PROJECT

  	
   

  



 


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LOAN
AGREEMENT


 


THIS LOAN AGREEMENT, dated as
of April 1, 1999, between the CALIFORNIA INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT BANK, an entity within the Trade and Commerce Agency of the State
of California (the “Issuer”), and ROLLER BEARING COMPANY OF AMERICA, INC., a
corporation duly organized and validly existing under the laws of the State of
Delaware (the “Borrower”).


 


W I T N E S S E T H:


 


WHEREAS, the Issuer was
established for the purpose of financing projects needed to implement economic
development and job creation and growth management strategies within the State
of California (the “State”) and is authorized to issue tax-exempt revenue bonds
to provide financing for private activity economic development projects
pursuant to the provisions of Section 63000 ET SEQ. of the California
Government Code (constituting Division 1 of Title 6.7 of the Government Code of
the State of California, as now in effect) (the “Act”); and


 


WHEREAS, in furtherance of
the purposes of the Issuer set forth above, the Issuer proposes to finance the
acquisition, construction, rehabilitation, equipping, installation, improvement
and/or furnishing of the manufacturing facilities described in Exhibit A
hereto (the “Project”) to be owned and operated by the Borrower; and


 


WHEREAS, pursuant to and in
accordance with the provisions of the Act, the Issuer has authorized and
undertaken the issuance of its California Infrastructure and Economic
Development Bank Variable Rate Demand Industrial Development Revenue Bonds, Series 1999
(Roller Bearing Company of America, Inc. - Santa Ana Project) (the “Bonds”)
in the aggregate principal amount of Four Million Eight Hundred Thousand
Dollars ($4,800,000) to provide funds to pay a portion of the cost of the
Project and a portion of the costs of issuance of the Bonds; and


 


WHEREAS, the Issuer proposes
to loan the proceeds of the Bonds to the Borrower, and the Borrower desires to
borrow the proceeds of the Bonds upon the terms and conditions set forth
herein; and


 


WHEREAS, for and in
consideration of such loan, the Borrower agrees, INTER ALIA, to make loan
payments sufficient to pay on the dates specified in Section 4.02 hereof,
the principal of, premium, if any, and interest on, the Bonds; and


 


WHEREAS, the Issuer and the
Borrower each has duly authorized the execution and delivery of this Agreement;


 


NOW, THEREFORE, for and in
consideration of the premises and the material covenants hereinafter contained,
the parties hereto hereby formally covenant, agree and bind themselves as
follows:


 





















 


ARTICLE I


 


DEFINITIONS


 


SECTION 1.01. DEFINITION OF TERMS. Unless otherwise
defined herein or the context otherwise requires, the terms used in this
Agreement shall have the meanings specified in Section 1.01 of the
Indenture of Trust, dated as of April 1, 1999 (the “Indenture”), by and
between the Issuer and U.S. Bank Trust National Association, as trustee (the “Trustee”),
as originally executed or as it may from time to time be supplemented or
amended as provided therein.


 


SECTION 1.02. NUMBER AND GENDER. The singular form of any
word used herein, including the terms defined in Section 1.01 of the
Indenture, shall include the plural, and vice versa. The use herein of a word
of any gender shall include all genders.


 


SECTION 1.03. ARTICLES, SECTIONS, ETC. Unless otherwise
specified, references to Articles, Sections and other subdivisions in this
Agreement are to the designated Articles, Sections and other subdivisions of
this Agreement as amended from time to time. The words “hereof,” “herein,” “hereunder”
and words of similar import refer to this Agreement as a whole. The headings or
titles of the several Articles and Sections, and the table of contents included
herein, shall be solely for convenience of reference and shall not affect the
meaning, construction or effect of the provisions hereof.


 


ARTICLE II


 


REPRESENTATIONS


 


SECTION 2.01. REPRESENTATIONS OF THE ISSUER. The Issuer
makes the following representations as the basis for its undertakings herein
contained:


 


(a) The
Issuer is an entity within the Trade and Commerce  Agency of the State. Under the provisions of
the Act, the Issuer has the power
to enter into the transactions contemplated by this Agreement and the Indenture and to carry out its
obligations hereunder. By proper action,
the Issuer has been duly authorized to execute, deliver and duly perform its obligations under this
Agreement and the Indenture. 


 


(b) To
finance the Costs of the Project and certain Costs of  Issuance, the Issuer will issue the Bonds,
which will mature, bear interest
and be subject to redemption as set forth in the Indenture.


 


(c) The
Bonds will be issued under and secured by the  Indenture, pursuant to which the Issuer’s
interest in this Agreement (except
certain rights of the Issuer to payment for expenses and indemnification) will be pledged and assigned
to the Trustee as security for
payment of the principal of, premium, if any, and interest on the Bonds and to the Bank, on a basis subordinate
thereto, as security for the
payment of the obligations of the Borrower under the Credit Agreement.


 


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(d) The
Issuer has not pledged and will not pledge its  interest in this Agreement for any purpose
other than to secure the Bonds
under the Indenture and the obligations of the Borrower under the Credit Agreement.


 


(e) The
Issuer is not in default under any of the provisions  of the laws of the State which default would
affect its existence or its powers
referred to in subsection (a) of this Section. 


 


(f) The
Issuer has found and determined and hereby finds and  determines that (i) the Loan to be made
hereunder with the proceeds of the
Bonds will promote the purposes of the Act by providing funds to finance the Construction of the Project; and (ii) said
Loan is in the public interest,
serves the public purposes and meets the requirements of the Act.


 


(g) No
member, officer or other official of the Issuer has any  financial interest whatsoever in the Borrower
or in the transactions contemplated
by this Agreement and the Indenture.


 


(h) Neither
the execution and delivery of this Agreement, the  Indenture, the Purchase Contract or the Tax
Regulatory Agreement, the consummation
of the transactions contemplated hereby or thereby, nor the fulfillment of or compliance with the
terms and conditions of this Agreement,
the Indenture, the Purchase Contract or the Tax Regulatory Agreement, conflict with or result in a breach
of any of the terms, conditions
or provisions of any restriction or any agreement or instrument to which the Issuer is now a party
or by which it is bound or
constitute a default under any of the foregoing or result in the creation or imposition of any prohibited lien,
charge or encumbrance of any
nature whatsoever upon any of the property or assets of the Issuer under the terms of any instrument or
agreement.


 


SECTION 2.02. REPRESENTATIONS OF THE BORROWER. The
Borrower makes the following representations as the basis for its undertakings
herein contained:


 


(a) The
Borrower is a corporation, duly organized, validly  existing and in good standing under the laws
of the State and is duly qualified
to transact business in the State.


 


(b) The
execution, delivery and performance by the Borrower of  this Agreement, the Credit Agreement, the
Remarketing Agreement, the Tax
Regulatory Agreement and all other documents contemplated hereby to be executed by the Borrower are within the
Borrower’s power and have been
duly authorized by all necessary corporate action, and neither the execution and delivery of this Agreement, the
Credit Agreement, the Remarketing
Agreement or the Tax Regulatory Agreement or the consummation of the transactions contemplated hereby and thereby, northe fulfillment of or compliance with the
terms and conditions hereof and
thereof, conflicts with or results in a breach of any of the material terms, conditions or provisions of
any of the


 


3





















 


Borrower’s Organization
Documents, or of any law, statute, rule,  regulation, order, judgment, award, injunction, or decree or of anymaterial agreement or instrument to
which the Borrower is now a party or
by which it is bound or affected, or constitutes a default (or would constitute a default with due notice or the
passage of time or both) under
any of the foregoing, or results in or requires the creation or imposition of any prohibited lien, charge or
encumbrance whatsoever upon any
of the property or assets of the Borrower under the terms of any instrument or agreement to which the
Borrower is now a party or by which
it is bound, except as would not have a material adverse effect on the operations of the Borrower, taken as a
whole.


 


(c) The
estimated Costs of the Project to be paid with the  proceeds of the Bonds are as set forth in the
Tax Regulatory Agreement and have
been determined in accordance with commercially reasonable engineering, construction, and accounting
principles. All the information
and representations in the Tax Regulatory Agreement are true and correct in all material respects as
of the date thereof.


 


(d) The
Project consists and will consist of those facilities  and equipment described in Exhibit A and
the Borrower shall not make any
changes to the Project or to the operation thereof which would affect the qualification of the Project under
the Act or would cause interest
on the Bonds not to be Tax-exempt. The Borrower intends to own and operate the Project. The Borrower
covenants and agrees to operate or
cause the operation of the Project as a facility described by the Act until the principal of, the premium, if
any, and the interest on the
Bonds shall have been paid.


 


(e) The
Borrower has and will have title to the Project sufficient to carry out the
purposes of this Agreement.


 


(f) At
the time of submission of an application to the Issuer  for financial assistance in connection with
the Project and on the dates on
which action was taken on such application, permanent financing for the Project had not otherwise
been obtained or arranged.


 


(g) To
the knowledge of the Borrower, no member, officer or  other official of the Issuer has any financial
interest whatsoever in the
Borrower or in the transactions contemplated by this Agreement.


 


(h) All
certificates, approvals, permits and authorizations  with respect to the Construction of the
Project of the State, the City of
Santa Ana, California, the federal government and other applicable local governmental agencies have been
obtained, or if not yet obtained, are
reasonably expected to be obtained in due course. The Project will be consistent with any existing local or
regional comprehensive plan.


 


(i) No
event has occurred and no condition exists which would  constitute a Loan Default Event or which, with
the passing of time or with the
giving of notice or both, would constitute a Loan Default Event. 


 


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(j)
There is no litigation or proceeding pending or, to the  knowledge of the Borrower, threatened against
the Borrower which could materially
and adversely affect the validity of this Agreement, the Credit Agreement, the Remarketing Agreement or
the Tax Regulatory Agreement or
the ability of the Borrower to comply with the terms of its obligations under this Agreement, the
Credit Agreement, the Remarketing
Agreement or the Tax Regulatory Agreement.


 


(k)
No consent, authorization or approval, except such  consents, authorizations or approvals as have
been obtained prior to the
execution and delivery of this Agreement, from any governmental, public or quasi-public body or authority of
the United States or of the State
or any department or subdivision thereof, is necessary for the due execution
and delivery by the Borrower of this Agreement.


 


SECTION 2.03. REGISTERED OWNERS TO BENEFIT. The Borrower
agrees that this Agreement is executed in part to induce the purchase by others
of the Bonds. Accordingly, all covenants and agreements on the part of the
Borrower set forth in this Agreement are hereby declared to be for the benefit
of the Registered Owners from time to time of such Bonds; provided, however,
that such covenants and agreements shall create no rights in any parties other
than the Issuer and such Registered Owners.


 


ARTICLE III


 


CONSTRUCTION
OF THE PROJECT; ISSUANCE OF THE BONDS


 


SECTION 3.01. CONSTRUCTION OF THE PROJECT. The Borrower
agrees that, utilizing the proceeds of the Bonds loaned pursuant to Section 4.01
hereof and such other funds as may be necessary, it has or will Construct, or
has or will cause the Construction of, the Project, and has or will acquire,
rehabilitate, equip, construct and install all other facilities and real and
personal property necessary for the operation of the Project as described in
the Borrower’s application to the Issuer for assistance in financing the
Project, substantially in accordance with the plans and specifications prepared
therefor by the Borrower, including any and all supplements, amendments,
additions or deletions thereto or therefrom, it being understood that the
approval of the Issuer shall not be required for changes in such plans and
specifications which do not alter the purpose or description of the Project as
set forth in Exhibit A hereto. The Borrower further agrees to proceed with
due diligence to complete the Project within three years from the date hereof.


 


In the event that the
Borrower desires to modify the Project in a manner which alters the purpose or
description of the Project as set forth in Exhibit A hereto, such
modification shall be undertaken only upon an amendment to Exhibit A which
shall accurately set forth the description and purpose of the Project as so
modified and which amendment to Exhibit A shall become effective (without
the written consent of the Registered Owners) upon receipt by the Issuer and
the Trustee of:


 


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(a) a
certificate of the Authorized Representative of the  Borrower describing in detail the proposed
changes and stating that they
will not have the effect of disqualifying the Project as a facility that may be financed pursuant to the
Act nor reduce the employment
benefits described in the Borrower’s application to the Issuer for assistance in financing the
Project;


 


(b) an
Opinion of Bond Counsel that the proposed changes to  the Project will not have the effect of
disqualifying the Project as a facility
that may be financed pursuant to the Act or cause interest on the Bonds not to be Tax-exempt;


 


(c) a
copy of the proposed form of amended or supplemented Exhibit A hereto; and


 


(d) the
written approval of the Bank and the Trustee.


 


SECTION 3.02. DISBURSEMENTS FROM THE PROJECT FUND AND THE
COSTS OF ISSUANCE FUND. The Borrower will authorize and direct the Trustee,
upon compliance with Section 3.03 of the Indenture, to disburse the moneys
in the Project Fund to or on behalf of the Borrower only for payment of Costs
of the Project. Each of the payments from the Project Fund referred to in this Section shall
be made upon receipt by the Trustee of a written Requisition in the form
prescribed by Section 3.03 of the Indenture, signed by the Authorized
Representative of the Borrower accompanied by the written approval of the Bank.


 


Moneys in the Costs of
Issuance Fund shall be disbursed by the Trustee as provided in Section 3.03(e) of
the Indenture to pay Costs of Issuance.


 


SECTION 3.03. ESTABLISHMENT OF COMPLETION DATE; OBLIGATION
OF BORROWER TO COMPLETE. Promptly upon the completion of the Construction of
the Project, the Authorized Representative of the Borrower, on behalf of the
Borrower, shall evidence the completion date by providing a certificate to the
Trustee, with a copy to the Issuer and the Bank, stating the Costs of the
Project and further stating that (a) Construction of the Project has been
completed substantially in accordance with the plans and specifications
therefor, and all labor, services, materials and supplies used in Construction
have been paid for or stating the amount required to be retained in the Project
Fund to fully provide for any disputed amounts, and (b) all other
equipment and facilities for the operation of the Project have been acquired,
constructed and installed in accordance with the plans and specifications
therefor and all costs and expenses incurred in connection therewith have been
paid or provided for. Notwithstanding the foregoing, such certificate may state
that it is given without prejudice to any rights of the Borrower against third
parties.


 


At the time such certificate
is delivered to the Trustee, moneys remaining in the Project Fund, including
any earnings resulting from the investment of such moneys, less an amount
representing a reasonable retainage determined by the Borrower, shall be used
as provided in Section 3.03(d) of the Indenture.


 


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In the event the moneys in
the Project Fund available for payment of the Costs of the Project should be
insufficient to pay the Costs of the Project in full, the Borrower agrees to
pay directly, or to deposit in the Project Fund moneys sufficient to pay, any
costs of completing the Construction of the Project in excess of the moneys
available for such purpose in the Project Fund, or otherwise cause the
Construction of the Project to be completed. The Issuer makes no express or
implied warranty that the moneys deposited in the Project Fund and available for
payment of the Costs of the Project under the provisions of this Agreement will
be sufficient to pay all the amounts which may be incurred in connection with
the Construction of the Project. The Borrower agrees that if, after exhaustion
of the moneys in the Project Fund, the Borrower should elect to pay, or to
deposit moneys in the Project Fund for the payment of, any portion of the Costs
of the Project pursuant to the provisions of this Section, it shall not be
entitled to any reimbursement therefor from the Issuer, the Trustee or the
Registered Owners of any of the Bonds, nor shall it be entitled to any
diminution of the amounts payable under Section 4.02 hereof.


 


SECTION 3.04. INVESTMENT OF MONEYS IN FUNDS. Any moneys in
any fund held by the Trustee shall, at the written request of the Authorized
Representative of the Borrower, but subject to the restrictions on investments
contained in the Indenture and the Tax Regulatory Agreement in connection with
the Tax-exempt status of interest on the Bonds, be invested or reinvested by
the Trustee as provided in the Indenture. Such investments shall be held by the
Trustee and shall be deemed at all times a part of the fund from which such
investments were made, and the interest accruing thereon, and any profit or loss
realized therefrom, shall be credited or charged as provided in Section 5.05
of the Indenture.


 


ARTICLE IV


 


LOAN
OF PROCEEDS; REPAYMENT PROVISIONS


 


SECTION 4.01. LOAN OF BOND PROCEEDS; ISSUANCE OF BONDS.
The Issuer covenants and agrees, upon the terms and conditions in this
Agreement, to loan the proceeds of the sale of the Bonds to the Borrower for
the purpose of financing the Costs of the Project and the Costs of Issuance to
the extent permitted by the Indenture. Pursuant to said covenant and agreement,
the Issuer will issue the Bonds upon the terms and conditions contained in this
Agreement and the Indenture and will cause the Bond proceeds to be applied as
provided in Article III of the Indenture. Subject to Section 3.02 of
the Indenture, such proceeds shall be disbursed to or on behalf of the Borrower
as provided in Section 3.02 hereof. The Borrower hereby approves the
Indenture and the issuance thereunder by the Issuer of the Bonds.


 


SECTION 4.02. LOAN REPAYMENTS AND OTHER AMOUNTS PAYABLE.


 


(a) On
or before each Bond Payment Date, until the principal of, premium, if any, and
interest on the Bonds shall have been fully paid or provision for such payment
shall have been made as provided in the Indenture, the Borrower covenants and
agrees to pay to the Trustee as a Loan Repayment on the Loan made to the
Borrower from Bond proceeds pursuant to Section 4.01 hereof, a sum equal
to the amount payable on such


 


7





















 


Bond Payment Date as
principal of, and premium, if any, and interest on the Bonds as provided in the
Indenture.


 


The
Loan Repayments made pursuant to this subsection (a) shall  at all times be sufficient to pay the total
amount of interest and principal
(whether at maturity or upon redemption or acceleration) and premium, if any, becoming due and payable on
the Bonds on each Bond Payment
Date; provided that any amount held by the Trustee in the Revenue Fund on the due date for a Loan
Repayment pursuant to the immediately
preceding paragraph shall be credited against the Loan Repayment due on such date to the extent
available for such purpose under
the terms of the Indenture; and provided further that, subject to the provisions of this paragraph, if at any
time the amounts held by the
Trustee in the Revenue Fund are sufficient to pay all of the principal of and interest and premium, if any,
on the Bonds as such payments
become due, the Borrower shall be relieved of any obligation to make any further Loan Repayments under the
provisions of this Section.
Notwithstanding the foregoing, if on any date the amount held by the Trustee in the Revenue Fund is
insufficient to make any required payments
of principal of (whether at maturity or upon redemption or acceleration) and interest and premium, if
any, on the Bonds as such payments
become due, the Borrower, immediately upon receipt of notice of such deficiency from the Trustee, shall
forthwith pay such deficiency as
a Loan Repayment hereunder.


 


The
obligation of the Borrower to make any payment under this  subsection (a) shall be deemed to
have been satisfied to the extent of any corresponding payment made by the Bank to the Trustee as a resultof a drawing under the Letter of Credit.
To the extent the Trustee receives
a Loan Repayment from the Borrower pursuant to this subsection (a) after
any payment obligation hereunder has been satisfied by a drawing under the Letter of Credit, the
Trustee shall promptly use such Loan
Repayment to reimburse the Bank for such drawing or if the Bank has been reimbursed directly by the Borrower
such funds shall be returned to
the Borrower.


 


(b) The
Borrower covenants and agrees to pay until the  principal of, premium, if any, and interest on
the Bonds shall have been fully
paid or provision for such payment shall have been made as provided in the Indenture, (i) the
Trustee’s reasonable annual fee for its ordinary services rendered as trustee, and its reasonable ordinaryexpenses incurred under the Indenture,
as and when the same become due, (ii) the
Trustee’s reasonable fees, charges and expenses, as Bond Registrar, Tender Agent and Paying Agent, and
the reasonable fees of any other
paying agent for the Bonds as provided in the Indenture, as and when the same become due, (iii) the
cost of providing any Bonds required
to be provided pursuant to the Indenture, (iv) the reasonable fees of any rating agency then rating the
Bonds required to maintain the
rating on the Bonds, (v) the reasonable fees of the Remarketing Agent, and (vi) other necessary and
ordinary administrative fees and expenses
of the Issuer. The Borrower covenants and agrees to make all payments for the expenses identified in (i) through
(vi) above. In addition, the
Borrower agrees to pay such extraordinary expenses incurred by the Trustee, the Tender Agent, the
Remarketing Agent and the Issuer
under the Indenture as and when the same become due. The duties


 


8





















 


of
the Borrower under this subsection (b) shall survive the termination of
this Agreement and the termination and discharge of the Indenture.


 


(c) The
Borrower also agrees to pay the fees and expenses of the Bank pursuant to the
Credit Agreement.


 


(d) In
the event the Borrower should fail to make any of the  payments required by subsections (a) through
(c) of this Section, such payments
shall continue as obligations of the Borrower until such amounts shall have been fully paid. The
Borrower agrees to pay all such amounts
required by subsection (b) of this Section, together with interest thereon, from the date such payments
were due until paid, to the
extent permitted by law, at the rate of 10% per annum. Interest on overdue payments required under subsection (a) above
shall be paid to Registered
Owners as provided in Section 2.02(b)(ii) of the Indenture.


 


SECTION 4.03. PURCHASE OF BONDS. The Borrower hereby
recognizes and agrees that the Indenture provides for the creation of an
account or accounts to facilitate the purchase of Bonds by the Tender Agent on
the Mandatory Tender Date and upon the optional tender of Bonds in accordance
with Section 4.06 of the Indenture, and the Borrower agrees to provide or
cause to be provided the Letter of Credit for the payment of amounts necessary
to purchase such Bonds.


 


SECTION 4.04. UNCONDITIONAL OBLIGATIONS. The obligations
of the Borrower to make the payments required by Section 4.02 hereof and
to provide or cause to be provided the Letter of Credit pursuant to Section 4.03
hereof, and to perform and observe the other agreements on its part contained
herein, shall be absolute and unconditional, irrespective of any defense or any
rights of set-off, recoupment or counterclaim it might otherwise have against
the Issuer, and during the term of this Agreement, the Borrower shall pay
absolutely all payments to be made on account of the Loan made to the Borrower
from Bond proceeds pursuant to Section 4.01 hereof, as prescribed in Section 4.02
hereof, the obligation to provide or cause to be provided the Letter of Credit
pursuant to Section 4.03 hereof, and all other payments required
hereunder, free of any deductions and without abatement, diminution or set-off.
Until such time as the principal of, premium, if any, and interest on the Bonds
shall have been fully paid, or provision for the payment thereof shall have
been made as required by the Indenture, the Borrower (a) will not suspend
or discontinue any payments required to be made by the Borrower pursuant to
this Agreement, including, without limitation, the payments provided for in Section 4.02
hereof and the obligation to provide or cause to be provided the Letter of
Credit pursuant to Section 4.03 hereof; (b) will perform and observe
all of its other covenants contained in this Agreement in all material
respects; and (c) except as provided in Article VIII hereof, will not
terminate this Agreement for any cause, including, without limitation, failure
to complete the Project, the occurrence of any act or circumstances that may
constitute failure of consideration, destruction of or damage to the Project,
commercial frustration of purpose, any change in the tax or other laws of the
United States of America or of the State, or any political subdivision of
either of these, or any failure of the Issuer or the Trustee to perform and
observe any covenant, whether express or implied, or any duty, liability or obligation
arising out of or connected with this Agreement or the Indenture.


 


9





















 


SECTION 4.05. ASSIGNMENT OF ISSUER’S RIGHTS. As security
for the payment of the Bonds, the Issuer will assign to the Trustee the Issuer’s
rights, title and interest under this Agreement, including the right to receive
payments hereunder (except the right of the Issuer to receive certain payments,
if any, with respect to expenses and indemnification under Sections 4.02(b),
7.03, 9.02 and 9.03 hereof, the Issuer’s right to receive notices, opinions and
other documents required to be delivered to the Issuer hereunder and the Issuer’s
rights to consent to certain actions taken hereunder), and the Issuer hereby
directs the Borrower to make the payments required hereunder (except such
payments for expenses and indemnification) directly to the Trustee as more
fully set forth in this Agreement. The Borrower hereby assents to such
assignment, agrees to make such payments directly to the Trustee and agrees
that the provisions of Section 4.04 hereof shall apply to its obligation
to make such payments.


 


SECTION 4.06. AMOUNTS REMAINING IN FUNDS. It is agreed by
the parties hereto that after: (a) payment in full of the principal of,
premium, if any, and interest on, the Bonds, or after provision for such
payment shall have been made as provided in the Indenture, (b) payment, or
provision for payment satisfactory to the Trustee and paying agents, of the
fees, charges and expenses of the Trustee and paying agents in accordance with
the Indenture, (c) payment, or provision for payment satisfactory to the
affected parties, of all other amounts required to be paid under this Agreement
and the Indenture by the Borrower and (d) payment to the Bank of any amounts
owed to the Bank by the Borrower under the Credit Agreement with respect to the
Letter of Credit, any amounts remaining in any fund held by the Trustee under
the Indenture shall be paid in accordance with the requirements of Section 10.04
of the Indenture.


 


ARTICLE V


 


SPECIAL
COVENANTS AND AGREEMENTS


 


SECTION 5.01. RIGHT OF ACCESS TO THE PROJECT. The Borrower
agrees that during the term of this Agreement, the Issuer, the Trustee and the
duly authorized agents of any of them shall have the right, after reasonable
notice to the Borrower, at all reasonable times during normal business hours to
enter upon the site of the Project to examine and inspect the Project. The
rights of access hereby reserved to the Issuer, the Trustee, and their
respective agents, may be exercised only after the Person seeking such access
shall have executed such confidentiality or secrecy agreements, if any, as may
be reasonably requested by the Borrower. Nothing contained in this Section or
in any other provision of this Agreement shall be construed to entitle the
Issuer or the Trustee to any information or inspection involving the
confidential knowledge, expertise or know-how of the Borrower.


 


SECTION 5.02. THE BORROWER’S MAINTENANCE OF ITS EXISTENCE.
The Borrower covenants and agrees that it will maintain its existence and will
not dissolve, nor will it sell or otherwise transfer the Project or all or
substantially all of its assets, nor will it consolidate with or merge into
another entity or permit one or more other entities to consolidate with or
merge into it. Notwithstanding the foregoing, the Borrower may, without
violating the covenants contained in this Section, consolidate with or merge
into another entity, or permit one or more other entities to


 


10





















 


consolidate with or merge
into it, or sell or otherwise transfer to another entity the Project or all or
substantially all of its assets as an entirety and thereafter dissolve, if:


 


(a) The
surviving, resulting or transferee entity, as the case may be:


 


(i) assumes
in writing, if such entity is not the Borrower, all of the obligations of the
Borrower under this Agreement;


 


(ii) is
not, after such transaction, otherwise in default under any provisions of this
Agreement; and


 


(iii) is
qualified to do business in the State;


 


(b) The
Trustee and the Issuer shall have received an Opinion of Bond Counsel to the
effect that such merger, consolidation, sale or other transfer will not cause
interest on the Bonds not to be Tax-exempt; and


 


 (c) The written acknowledgment of the
Bank has been received by the Trustee, together with an acknowledgment that the
Letter of Credit will remain in effect after such merger, consolidation, sale
or other transfer is effected.


 


If a merger, consolidation,
sale or other transfer is effected, as provided in this Section, the provisions
of this Section shall continue in full force and effect and no further
merger, consolidation, sale or transfer shall be effected except in accordance
with the provisions of this Section.


 


SECTION 5.03. RECORDS AND FINANCIAL STATEMENTS OF
BORROWER; EMPLOYMENT PRACTICES.


 


 (a) The Borrower covenants and agrees at
all times to keep, or  cause
to be kept, proper books of record and account, prepared in accordance with generally accepted accounting
principles, in which complete and
accurate entries shall be made of all transactions of or in relation to the business, properties and
operations of the Borrower. Such
books of record and account shall be available for inspection by the Issuer or the Trustee, and the duly
authorized agents of either of them,
at reasonable hours and under reasonable circumstances.


 


(b) Upon
the receipt of the written request of the Issuer or  the Trustee, the Borrower further covenants
and agrees to furnish the requesting
party, within 120 days after the end of each Fiscal Year, with copies of its complete financial
statements together with a Certificate
of the Authorized Representative of the Borrower stating that no event which constitutes a Loan Default
Event or which with the giving of
notice or the passage of time or both would constitute a Loan Default Event has occurred and is continuing
as of the end of such Fiscal
Year, or specifying the nature of such event and the actions taken and proposed to be taken by the Borrower
to cure such default. 


 


11





















 


(c) The
Borrower shall, within 60 days of the receipt of a  written request from the Issuer or the
Trustee, furnish a written report
to the requesting party, as of the end of the Borrower’s prior Fiscal Year, stating the status of the
Project, the outstanding and unpaid
balance of the Bonds, the number of full-time and part-time employees of the Borrower employed at the
Project during such prior Fiscal
Year, and supplying such current information as the Issuer shall reasonably request regarding other matters
covered in the Borrower’s application
for industrial revenue bond financing.


 


SECTION 5.04. INSURANCE. The Borrower agrees to insure the
Project or cause the Project to be insured during the term of this Agreement
for such amounts and for such occurrences as are customary for similar
facilities within the State, or as may be required by the Bank pursuant to the
Credit Agreement, by means of policies issued by reputable insurance companies
qualified to do business in the State. Upon the written request of the Issuer
or the Trustee, the Borrower shall deliver to the requesting party, within 60
days of the receipt of such request, memorandum copies of the insurance policies
or certificates of insurance which memorandum copies of insurance policies or
certificates of insurance shall evidence that all insurance required to be in
effect under this Section is then currently in full force and effect. The
Trustee and the Issuer are not responsible for the adequacy or sufficiency of
the coverage evidenced by such policies or certificates.


 


SECTION 5.05. MAINTENANCE AND REPAIR; TAXES; UTILITY AND
OTHER CHARGES. The Borrower agrees to maintain the Project, or cause the
Project to be maintained, during the term of this Agreement (a) in a safe
condition and (b) in good repair and in good operating condition, ordinary
wear and tear excepted, making from time to time all necessary repairs thereto
and renewals and replacements thereof.


 


The Borrower agrees to pay or
cause to be paid during the term of this Agreement all taxes, governmental
charges of any kind lawfully assessed or levied upon the Project or any part
thereof, including any taxes levied against the Project which, if not paid,
will become a charge on the Project, all utility and other charges incurred in
the operation, maintenance, use, occupancy and upkeep of the Project and all
assessments and charges lawfully made by any governmental body for public
improvements that may be secured by a lien on the Project; provided that with
respect to special assessments or other governmental charges that may lawfully
be paid in installments over a period of years, the Borrower shall be obligated
to pay only such installments as are required to be paid during the term of
this Agreement. The Borrower may, at the Borrower’s expense and in the Borrower’s
name, in good faith, contest any such taxes, assessments and other charges and,
in the event of any such contest, may permit the taxes, assessments or other
charges so contested to remain unpaid during that period of such contest and
any appeal therefrom unless by such nonpayment the Project or any part thereof
will be subject to loss or forfeiture.


 


SECTION 5.06. INCORPORATION, FORMATION, ORGANIZATION OR
QUALIFICATION IN CALIFORNIA. The Borrower agrees that throughout the term of
this Agreement it and any lessee of the Project, if any, will be incorporated,
formed, organized or qualified to do business in the State.


 


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SECTION 5.07. ALTERNATE CREDIT FACILITY. If the Borrower
exercises its option to convert the interest rate borne by the Bonds from the
Weekly Interest Rate to the Fixed Interest Rate pursuant to the terms and
provisions of the Indenture, the Borrower may cause to be delivered to the
Trustee an Alternate Credit Facility, effective as of the Fixed Rate Date, in
lieu of keeping the Letter of Credit in place as required by Section 5.08
hereof.


 


Such Alternate Credit
Facility must meet the following conditions:


 


(a) the
Alternate Credit Facility must be approved by the Issuer or its successor;


 


(b) the
terms of the Alternate Credit Facility must provide an unconditional obligation
of the issuer of the Alternate Credit Facility to pay all amounts with respect
to the principal of, premium, if any, and interest on the Bonds when the same
shall become due; and


 


(c) the
term of the Alternate Credit Facility must extend to the final maturity of the
Bonds.


 


On or prior to the date of
the delivery of an Alternate Credit Facility to the Trustee, the Borrower shall
cause to be furnished to the Issuer and the Trustee (i) an Opinion of Bond
Counsel stating that the delivery of such Alternate Credit Facility to the
Trustee is authorized under this Agreement and complies with the terms hereof
and will not cause interest on the Bonds not to be Tax-exempt, (ii) such
other opinions regarding the validity of the Alternate Credit Facility as the
Issuer, the Trustee and any rating agency then rating the Bonds may reasonably
require, and (iii) written evidence from Moody’s, if the Bonds are then
rated by Moody’s, and S&P, if the Bonds are then rated by S&P, to the
effect that such rating agency has reviewed the proposed Alternate Credit
Facility and that the substitution of the proposed Alternate Credit Facility
for the Letter of Credit will not, by itself, result in a reduction of its long
term rating of the Bonds below “A” if the Bonds are rated by S&P or below “A2”
if the Bonds are rated by Moody’s.


 


SECTION 5.08. LETTER OF CREDIT. The Borrower shall at all
times throughout the term of this Agreement (but subject to Section 5.07
hereof) maintain or cause to be maintained the Letter of Credit with respect to
the Bonds. The Letter of Credit shall be an obligation of the Bank to pay to
the Trustee, against presentation of sight drafts and certificates required by
the Bank, up to (a) an amount equal to the aggregate principal amount of
the Bonds then Outstanding as necessary to pay the principal of such Bonds, whether
at maturity, redemption, acceleration or otherwise or upon the purchase of such
Bonds upon the optional tender of the Bonds pursuant to Section 4.06 of
the Indenture and on the Mandatory Tender Date, and (b) an amount equal to
50 days (or such other number of days as may be required to obtain a rating on
the Bonds) of interest on the Bonds calculated at an interest rate of 12% per
annum on the basis of a 365- or 366-day year, as applicable, for
the number of days actually elapsed while the Bonds bear interest at the Weekly
Interest Rate and an amount equal to 210 days (or such other number of days as
may be required to obtain a rating on the Bonds if the Bonds are then rated) of
interest on the Bonds calculated at the actual interest rate or rates on the
Bonds on the basis of a 360-day


 


13





















 


year of twelve 30-day
months while the Bonds bear interest at the Fixed Interest Rate to pay interest
on the Bonds when due.


 


On any Business Day, the
Borrower may, at its option, but with the written approval of the Issuer, which
written approval shall not be unreasonably withheld, provide or cause to be
provided to the Trustee an Alternate Letter of Credit and the Borrower shall,
in any event, cause to be delivered to the Trustee an extension of the
Expiration Date of the Letter of Credit or an Alternate Letter of Credit at
least (a) 23 days before the Expiration Date of the then-existing Letter
of Credit while the Bonds bear interest at the Weekly Interest Rate, or (b) 45
days before the Expiration Date of the then existing Letter of Credit while the
Bonds bear interest at the Fixed Interest Rate. At least 30 days prior to the
Letter of Credit Substitution Date, the Borrower shall provide the Issuer, the
Trustee, the Bank, the Tender Agent and the Remarketing Agent with a written
notice of its intention to provide an Alternate Letter of Credit pursuant to
this Section. Such notice shall include the proposed Letter of Credit
Substitution Date, which shall be an Interest Payment Date, and identify the
provider of the Alternate Letter of Credit. An Alternate Letter of Credit shall
be an irrevocable direct-pay letter of credit or other irrevocable credit
facility delivered to the Trustee on or prior to 8:00 a.m. (California time)
on the Letter of Credit Substitution Date, issued by a commercial bank or other
financial institution, the terms of which shall in all material respects be the
same as the Letter of Credit. On or prior to the date of the delivery of an
Alternate Letter of Credit to the Trustee, the Borrower shall cause to be
furnished to the Issuer and the Trustee (i) an Opinion of Bond Counsel
stating that the delivery of such Alternate Letter of Credit to the Trustee is
authorized pursuant to this Agreement, complies with the terms hereof and will
not cause the interest on the Bonds not to be Tax-exempt, (ii) such
opinions regarding the validity of the Alternate Letter of Credit as the
Issuer, the Trustee and any rating agency then rating the Bonds may reasonably
require, and (iii) written evidence from Moody’s, if the Bonds are then
rated by Moody’s, and S&P, if the Bonds are then rated by S&P, to the
effect that such rating agency has reviewed the proposed Alternate Letter of
Credit and that the substitution of the proposed Alternate Letter of Credit
will not, by itself, result in a reduction of its long-term rating of the Bonds
below “A” if the Bonds are rated by S&P or below “A2” if the Bonds are
rated by Moody’s.


 


It is understood and agreed
that with proper notification to the Trustee and the Borrower, the Bank can
declare that a default has occurred under the Credit Agreement with the
Borrower and such default will cause a mandatory redemption of Bonds pursuant
to Section 4.01(g) of the Indenture.


 


SECTION 5.09. COVENANTS OF THE BORROWER. It is the
intention of the parties hereto that interest on the Bonds shall be and remain
Tax-exempt so long as the Bonds are Outstanding, and to that end the
representations, covenants, and agreements of the Issuer and the Borrower in
this Section and in Sections 5.10 and 5.11 hereof are for the benefit of
the Trustee and each and every Registered Owner of the Bonds. The Borrower
represents, warrants and agrees as follows:


 


(a) The
Project consists, and at all times shall consist, of  land or property which is subject to the
allowance for depreciation provided
in Section 167 of the Code, and substantially all (95% or more) of the proceeds of the Bonds including
proceeds of investment thereof,
shall be used to pay the Costs of the Project which are chargeable to


 


14





















 


the capital account of the
Borrower, and which were paid not earlier  than 60 days before February 20, 1996. The Borrower shall allocate
the proceeds of the Bonds to the
Costs of the Project no later than 18 months after the later of the date the original expenditure is paid orthe date the Project is placed in
service or abandoned, but in no event more than three years after the original
expenditure is paid.


 


(b) No
portion of the proceeds of the Bonds shall be used to  provide for a private or commercial golf
course, country club, massage parlor,
tennis club, skating facility (including roller skating, skate board and ice skating), racquet sports
facility (including any handball or
racquetball court), hot tub facility, suntan facility, race track, automobile sales or service facility, retail
food or beverage facility, entertainment
facility, airplane, gambling establishment, health club, liquor store, skybox
or luxury box.


 


(c) Less
than 25% of the net proceeds of the Bonds (after  Costs of Issuance) shall be used to purchase
land or interests in land. The
Borrower covenants to spend sufficient sums from the Project Fund on Costs of the Project to assure compliance
with this covenant.


 


(d) No
proceeds of the Bonds shall be used to acquire any  personal property or facilities unless the
first use of such property or
facilities shall be pursuant to such acquisition, except that if the Project consists of acquisition of a building,
the Borrower shall, within two
years after the Date of Delivery or the date of acquisition of such building, whichever is earlier, expend
an amount, from proceeds of the
Bonds or otherwise, equal to 15% of the cost of acquiring such building financed with proceeds of the Bonds
on rehabilitation costs of such building as required by Section 147(d) of
the Code.


 


(e) During
the three-year period following the date the  Project is placed in service, the Borrower
shall not allow any other Person
to become a “test-period beneficiary” of the Bonds who is a beneficiary of industrial development bonds in
an amount which would cause the
issuance of the Bonds to exceed such Person’s aggregate per-taxpayer limit under Section 144(a)(10) of
the Code.


 


(f) No
agreement shall be entered into which would result in  the payment of principal or interest on the
Bonds being “federally guaranteed”
within the meaning of Section 149(b) of the Code.


 


(g) There
is no outstanding issue of industrial development  bonds which was used to finance any facilities
which, in relation to the
Project, would constitute (i) a single building, (ii) an enclosedshopping mall, or (iii) a strip of
offices, stores or warehouses using substantial common facilities.


 


(h) Subject
to the provisions of the final paragraph of  Section 5.10 hereof, no actions shall be
taken, or omitted to be taken, by
the Borrower which would have the


 


15





















 


effect, directly or
indirectly, of causing interest on any of the Bonds  to not be Tax-exempt.


 


(i) No
changes shall be made in the Project or the use of the  Project which shall in any way impair the
Tax-exempt status of interest on
the Bonds.


 


(j)
No use or investment of the proceeds of the Bonds or any  acquired obligation shall be made which would
cause the Bonds to become “arbitrage
bonds” within the meaning of Section 148 of the Code and any Regulations thereunder, and the Borrower shall
comply with the requirements of
said Section of the Code and said Regulations, as the same may be amended by amendments applicable
to the Bonds from time to time,
so long as any Bonds remain Outstanding.


 


(k)
To use due diligence to cause the Project to be operated  in all material respects in accordance with
all applicable laws, rulings,
regulations and ordinances.


(l)
To comply in all material respects with all written  conditions imposed by the Issuer and any State
or local agency in its approval
of the Project.


 


(m)
To fully and faithfully perform all the duties and  obligations which the Issuer has covenanted
and agreed in the Indenture to
cause the Borrower to perform and any duties and obligations which the Borrower is required in the Indenture to
perform. The foregoing shall not
apply to any duty or undertaking of the Issuer which by its nature cannot be delegated or assigned.


 


(n)
The rights, duties and obligations imposed on the Borrower  pursuant to the Remarketing Agreement are
hereby acknowledged, approved and
accepted.


 


(o)
To faithfully perform at all times any and all covenants,  undertakings, stipulations and provisions to
be observed or performed by the
Borrower contained in the Indenture, in the Bonds, and in all proceedings of the Issuer pertaining thereto,
or otherwise required of the
Borrower to be observed or performed, whether express or implied.


 


(p)
To use less than 25% of the net proceeds of the Bonds  (after deducting Costs of Issuance) to provide
facilities which are directly
related and ancillary to the manufacturing facility being financed with the proceeds of the Bonds, in
accordance with Section 144(a)(12)(C) of
the Code.


 


(q)
To not become a Registered Owner of the Bonds, and to not  directly or indirectly purchase Bonds from the
Remarketing Agent or permit any
Related Party to directly or indirectly purchase Bonds from the Remarketing Agent.


 


(r)
To the extent Bond proceeds are used for construction  purposes, the Borrower shall certify that the
contractors engaged to construct
the Project are properly licensed by the Contractors’ State License Board.


 


16





















 


(s)
The Project shall be consistent with any existing local or regional
comprehensive plan.


 


Notwithstanding any other
provision of this Agreement or the Indenture, including in particular Article X
of the Indenture, the obligations of the Borrower and the Issuer to comply with
the covenants set forth in this Section and Section 5.10 hereof shall
survive the defeasance or payment in full of the Bonds.


 


SECTION 5.10. CAPITAL EXPENDITURES. For the purpose of
this Section and Section 5.09 hereof the following terms shall have
the following meanings:


 


“FACILITIES” shall mean those
facilities described in Section 144(a)(1) of the Code and Regulations
thereunder, including Section 1.103-10(b)(2)(ii)(e) and Section 1.103-10(d)(2) of
the Regulations, and shall include those facilities any Principal User of which
is the Borrower or a related person, as defined in Section 144(a)(3) of
the Code, located in the Project Location, and any contiguous or integrated
facility treated as being located in the Project Location by reason of the fact
that such facility is located on both sides of a border between the Project
Location and one or more other political jurisdictions.


 


“PRINCIPAL USER” means a
person who is a principal owner, principal lessee, a principal output purchaser
or “other” principal user and any Related Person to a Principal User. A
principal owner is a person who at any time holds more than a 10% ownership
interest (by value) in a facility or, if no person holds more than a 10%
ownership interest, then the person (or persons in the case of multiple equal
owners) who holds the largest ownership interest in the facility. A person is
treated as holding an ownership interest if such person is an owner for federal
income tax purposes generally. A principal lessee is a person who at any time
leases more than 10% of the facility (disregarding portions used by the lessee
under a short-term lease). The portion of a facility leased to a lessee is
generally determined by reference to its fair rental value. A short-term lease
is one which has a term of one year or less, taking into account all options to
renew and reasonably anticipated renewals. A principal output purchaser is any
person who purchases output of a facility, unless the total output purchased by
such person during each one-year period beginning with the date such facility
is placed in service is 10% or less of such facility’s output during each such
period. An “other” principal user is a person who enjoys a use of a facility
(other than a short-term use) in a degree comparable to the enjoyment of a
principal owner or a principal lessee, taking into account all the relevant
facts and circumstances, such as the person’s participation in control over use
of such facility or its remote or proximate geographic location.


 


“PROJECT LOCATION” shall mean
the area within the City of Santa Ana, California.


 


“REGULATIONS” shall mean
those regulations, whether now or hereafter adopted, promulgated by the United
States Department of the Treasury with respect to Section 103 or Part IV
of subchapter B of chapter 1 of the Code.


 


“SECTION 144 CAPITAL
EXPENDITURES” shall mean those expenditures required to be taken into account
with respect to the Bonds pursuant to Section 144(a)(1) and (4) of
the Code and


 


17





















 


Regulations thereunder,
including Section 1.103-10(b)(2)(ii) and (iii) of the
Regulations, including any expenditure with respect to Facilities, no matter by
whom made (regardless of how paid, whether in cash, notes or stock in a taxable
or nontaxable transaction), paid or incurred during the six-year period
beginning 3 years before the date of issuance and delivery of the Bonds, which
may, under any rule or election under the Code, be treated as a capital expenditure
(whether or not such expenditure is so treated), and which is not paid or
reimbursed out of the original principal proceeds (exclusive of investment
income) of the Bonds, but not including excluded expenditures pursuant to Section 144(a)(4)(C) of
the Code and Regulations thereunder, including Section 1.103-10(b)(2)(iv) and
(v) of the Regulations. Such term shall also include research and
development costs properly allocable to the Project no matter where paid or
incurred, unless specifically excluded by Section 144(a)(4)(C).


 


The Borrower represents and
warrants that substantially all of the proceeds of the Bonds are to be used
with respect to the Project to be located in the Project Location; that there
are no other outstanding obligations issued subsequent to September 30,
1968, of any state, territory or possession of the United States of America, or
any political subdivision of the foregoing or of the District of Columbia, the
proceeds of which have been or are to be used primarily with respect to
Facilities; and that the sum of the principal amount of the Bonds plus the
amount of Section 144 Capital Expenditures for the three-year period
ending on the date of issuance and delivery of the Bonds does not exceed
$10,000,000.


 


The Issuer covenants and
agrees that it has not taken and shall not take any action which will cause
interest on the Bonds to not be Tax-exempt.


 


The Issuer hereby elects to
have the provisions of Section 144(a)(4)(A) of the Code apply to the
Bonds. The Borrower covenants that it shall furnish to the Issuer prior to the
issuance and delivery of the Bonds whatever information is necessary for the
Issuer to make such election.


 


The Borrower further
covenants that it shall take, and shall cause any other Principal User to take,
such further actions as are required of a Principal User of property financed
by an issue of obligations which are subject to the $10,000,000 limitation of Section 144(a)(4)(A) of
the Code, which actions are set forth in Section 144(a)(4)(A) of the
Code and in the Regulations, including Section 1.103-10(b) of
the Regulations.


 


The Borrower further
covenants and agrees, so long as any of the Bonds are Outstanding under the
Indenture, that the aggregate principal of Bonds being issued plus the
aggregate amount of Section 144 Capital Expenditures made or to be made
with respect to Facilities during the six-year period beginning three years
before the date of issuance and delivery of the Bonds shall not exceed
$10,000,000 (or any such larger amount as may be hereafter permitted by law).


 


Notwithstanding anything in Section 5.09(h) hereof
or in this Section to the contrary, neither the Borrower nor the Issuer
shall have violated the covenants contained in Section 5.09(h) hereof
or in this Section if the interest on any of the Bonds becomes taxable to
a Person solely because such Person is a “substantial user” of the Project or a
“related person” within the meaning of Section 147(a) of the Code.
The Issuer shall provide the Borrower with notice and cooperate fully


 


18





















 


with the Borrower in any
administrative, legislative or judicial proceeding in connection with any
actions, proceedings or decisions of any court or administrative agency or
other governmental body affecting the taxation of interest on the Bonds.


 


SECTION 5.11. SPECIAL ARBITRAGE CERTIFICATIONS.


 


(a) The
Issuer hereby certifies to the Borrower (i) that it  has not been notified of any listing or
proposed listing of it by the Internal
Revenue Service as a bond issuer whose arbitrage certifications may not be relied upon and (ii) that issuance of theBonds will not violate any provisions of
Section 103 of the Code, Section 148
of the Code, or the Regulations issued under such Sections of the Code, such that the interest on the
Bonds is not Tax-exempt.


 


(b) The
Borrower and the Issuer agree to comply with the Tax  Regulatory Agreement, as such Tax Regulatory
Agreement shall be amended from
time to time in order that interest on the Bonds remains Tax-exempt. The Borrower further agrees to
cause any other Principal User
(as defined in Section 5.10 hereof) of the Project to comply with the terms of this Loan Agreement and the Tax
Regulatory Agreement to the
extent necessary to insure that interest on the Bonds remains Tax-exempt.


 


SECTION 5.12. COVENANT TO ENTER INTO AGREEMENT OR CONTRACT
TO PROVIDE ONGOING DISCLOSURE. The Borrower hereby covenants and agrees that if
as a result of the conversion of the interest rate borne by the Bonds from the
Weekly Interest Rate to the Fixed Interest Rate or as a result of any amendment
to Paragraph (b)(5)(i) of the Securities and Exchange Commission Rule 15c2-12
under the Securities Exchange Act of 1934, as amended (17 CFR Part 240,
ss. 240.15c2-12) (the “Rule”) or any amendment or supplement to the
Indenture or this Agreement, the Bonds cease to be exempt under the Rule, the
Borrower will enter into an agreement or contract, constituting an undertaking,
to provide ongoing disclosure as may be necessary to comply with the Rule as
then in effect. The covenant and agreement contained in this Section is
for the benefit of the Registered Owners, any Participating Underwriter and the
Beneficial Owners (as defined in the Indenture) as required by the Rule. It is
the Borrower’s express intention that this Section be assigned pursuant to
and in accordance with Section 6.09 of the Indenture to the Trustee for
the benefit of the Registered Owners, any Participating Underwriter and the
Beneficial Owners and that each Registered Owner, Participating Underwriter and
Beneficial Owner be a beneficiary of this Section with the right to
enforce this Section against the Borrower. Notwithstanding any other
provision of this Agreement, failure of the Borrower to comply with the
provisions of this Section shall not be considered a Loan Default Event;
provided, however, the Trustee may (and, at the request of any Participating
Underwriter or the Registered Owners of at least 25% aggregate principal amount
in Outstanding Bonds, shall) or any Beneficial Owner may take such actions as
may be necessary and appropriate, including seeking specific performance by
court order, to cause the Borrower to comply with its obligations under this
Section.


 


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SECTION 5.13. NO PURCHASE OF BONDS. The Issuer covenants
and agrees that it shall not become a Registered Owner of the Bonds and shall
not directly or indirectly purchase Bonds from the Remarketing Agent.


 


ARTICLE VI


 


DAMAGE,
DESTRUCTION AND CONDEMNATION; USE OF PROCEEDS


 


SECTION 6.01. OBLIGATION TO CONTINUE PAYMENTS. If prior to
full payment of the Bonds (or provision for payment thereof in accordance with
the provisions of the Indenture) (a) the Project or any portion thereof is
destroyed (in whole or in part) or is damaged by fire or other casualty, or (b) title
to, or the temporary use of, the Project or any portion thereof shall be taken
under the exercise of the power of eminent domain by any governmental body or
by any Person acting under governmental authority, the Borrower shall
nevertheless be obligated to continue to pay the amounts specified in Article IV
hereof, to the extent not prepaid in accordance with Article VIII hereof.


 


SECTION 6.02. APPLICATION OF NET PROCEEDS. Upon any
damage, destruction or condemnation of the Project or any portion thereof
resulting in Net Proceeds in excess of $250,000, subject to the provisions of
the Credit Agreement, the Borrower may elect, in its discretion and with the
written consent of the Bank, by written notice to the Issuer and the Trustee:


 


(a) to
apply the Net Proceeds of any insurance or condemnation  awards to the prompt repair, restoration,
relocation, modification or improvement
of the damaged, destroyed or condemned portion of the Project to enable such portion of the Project
to accomplish at least the same
function as such portion of the Project was designed to accomplish prior to such damage or destruction
or exercise of such power of
eminent domain. If the Borrower elects to proceed as provided in this subsection (a), it shall give the
Issuer and the Trustee written
notice thereof, and evidence of the Bank’s written consent, within 90 days of the deposit of the Net
Proceeds with the Bank. Any balance
of the Net Proceeds remaining after such work has been completed shall be deposited in the Revenue
Fund to be applied, with the
written consent of the Bank, to the payment of principal of and premium, if any, and interest on the Bonds,
or, if the Bonds have been fully
paid (or provision for payment thereof has been made in accordance with the provisions of the
Indenture), any balance remaining in
the Revenue Fund shall be paid in accordance with the requirements of Section 10.04 of the Indenture; or


 


(b) to
prepay all of the Loan in accordance with Article VIII  hereof by directing the Trustee to draw on the
Letter of Credit to effect a
mandatory redemption of all outstanding Bonds under Section 4.01 of the Indenture.


 


SECTION 6.03. INSUFFICIENCY OF NET PROCEEDS. If the
Project or a portion thereof is to be repaired, restored, relocated, modified
or improved pursuant to Section 6.02(a) hereof, and if the Net
Proceeds are insufficient to pay in full the cost of such repair, restoration,
relocation,


 


20





















 


modification or improvement,
the Borrower will nonetheless complete the work or cause the work to be
completed and will pay or cause to be paid any cost thereof in excess of the
amount of the Net Proceeds held in escrow.


 


SECTION 6.04. DAMAGE TO OR CONDEMNATION OF OTHER PROPERTY.
Subject to the terms and provisions of the Credit Agreement, the Borrower shall
be entitled to the Net Proceeds of any insurance or condemnation award or
portion thereof made for damages to or takings of its property not included in
the Project.


 


ARTICLE VII


 


LOAN
DEFAULT EVENTS AND REMEDIES


 


SECTION 7.01.
LOAN DEFAULT EVENTS. Any one of the following which occurs and continues shall
constitute a Loan Default Event:


 


(a) failure
of the Borrower to pay any Loan Repayment when and as the same shall become due
and payable pursuant to Section 4.02(a) hereof;


 


(b) failure
of the Borrower to pay any amounts payable  hereunder, other than Loan Repayments, when
and as the same shall become due,
which failure continues for a period of 30 days after written notice delivered to the Borrower and
the Bank, which notice shall
specify such failure and request that it be remedied, given by the Issuer or the Trustee, unless the Issuer
and the Trustee shall agree in
writing to an extension of such time;


 


(c) failure
of the Borrower to observe and perform in any  material respect any covenant, condition or
agreement on its part required to
be observed or performed by this Agreement, other than a covenant described in subsection (a) or
subsection (b) above or the failure of the Borrower to strictly comply with the covenants, conditions or agreements contained in Sections
5.09(a) through (k), 5.09(p)
through (s), 5.10, 5.11 and 5.12 hereof, which failure continues for a period of 30 days after
written notice delivered to the Borrower
and the Bank, which notice shall specify such failure and request that it be remedied, given by the
Issuer or the Trustee, unless the
Issuer and the Trustee, with the written approval of the Bank, shall agree in writing to an extension of such
time; provided, however, that if
the failure stated in the notice cannot be corrected within such period, the Issuer and the Trustee will
not unreasonably withhold their
consent to an extension of such time if corrective action is instituted within such period and diligently
pursued until the default is corrected; or


 


(d) existence
of an Event of Default under and as defined in Sections 7.01(a) through (e) of
the Indenture.


 


The provisions of subsection (c) of
this Section are subject to the limitation that the Borrower shall not be
deemed in default if and so long as the Borrower is unable to carry out its
agreements hereunder by reason of strikes, lockouts or other industrial
disturbances; acts of public


 


21





















 


enemies; orders of any kind
of the government of the United States or of the State or any of their
departments, agencies, or officials, or any civil or military authority;
insurrections, riots, epidemics, landslides; lightning; earthquake; fire;
hurricanes; storms; floods; washouts; droughts; arrests; restraint of
government and people; civil disturbances; explosions; breakage or accident to
machinery, transmission pipes or canals; partial or entire failure of
utilities; or any other cause or event (whether similar or dissimilar to the
foregoing) not reasonably within the control of the Borrower; it being agreed
that the settlement of strikes, lockouts and other industrial disturbances
shall be entirely within the discretion of the Borrower, and the Borrower shall
not be required to make settlement of strikes, lockouts and other industrial
disturbances by acceding to the demands of the opposing party or parties when
such course is, in the judgment of the Borrower, unfavorable to the Borrower.
This limitation shall not apply to any default under subsections (a), (b), or (d) of
this Section. Notwithstanding any other provision of this Agreement to the
contrary, so long as the Bank is not in default under the Letter of Credit, the
Trustee shall not without the prior written consent or direction of the Bank
exercise any remedies under this Agreement in the case of any Loan Default
Event described in subsections (a), (b), or (c) above.


 


SECTION 7.02.
REMEDIES ON DEFAULT. Subject to the last sentence of Section 7.01 above,
whenever any Loan Default Event shall have occurred and shall be continuing,


 


(a) The
Trustee, by written notice to the Borrower and the  Bank, shall declare all unpaid amounts payable
under Section 4.02(a) hereof
to be due and payable immediately, provided that concurrently with or prior to such notice the unpaid
principal amount of the Bonds shall
have been declared to be due and payable under the Indenture. Upon any such declaration such amount shall
become and shall be immediately
due and payable in the amount set forth in Section 7.01 of the Indenture.


 


(b) The
Trustee shall have access to and may inspect, examine  and make copies of the books and records and
any and all accounts, data and
federal income tax and other tax returns of the Borrower.


 


(c) The
Issuer or the Trustee may take whatever action at law  or in equity as may be necessary or desirable
to collect the payments and other
amounts then due and thereafter to become due or to enforce performance and observance of any obligation,
agreement or covenant of the
Borrower under this Agreement.


 


In case the Trustee or the
Issuer shall have proceeded to enforce its rights under this Agreement and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Trustee or the Issuer, then, and in every
such case, the Borrower, the Trustee and the Issuer shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Borrower, the Trustee and the Issuer shall continue
as though no such action had been taken.


 


The Borrower covenants that,
in case a Loan Default Event shall occur and all unpaid amounts payable under Section 4.02(a) hereof
shall have been declared due and payable immediately pursuant to Section 7.02(a) hereof,
then, upon demand of the Trustee, the Borrower


 


22





















 


will pay to the Trustee the
whole amount that then shall have become due and payable under said Section,
with interest on the amount then overdue at the rate of 10% per annum until
such amount has been paid or, if ten percent is greater than the rate then
permitted by law, at the greatest rate then permitted.


 


In case the Borrower shall
fail forthwith to pay such amounts upon such demand, the Trustee shall be
entitled and empowered to institute any action or proceeding at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Borrower and collect in the manner
provided by law the moneys adjudged or decreed to be payable.


 


In case proceedings shall be
pending for the bankruptcy or for the reorganization of the Borrower under the
federal bankruptcy laws or any other applicable law, or in case a receiver or
trustee shall have been appointed for the property of the Borrower or in the
case of any other similar judicial proceedings relative to the Borrower, or the
creditors or property of the Borrower, then the Trustee shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove
a claim or claims for the whole amount owing and unpaid pursuant to this
Agreement and, in case of any judicial proceedings, to file such proofs of
claim and other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee allowed in such judicial proceedings relative
to the Borrower, its creditors or its property, and to collect and receive any
moneys or other property payable or deliverable on any such claims, and to
distribute such amounts as provided in the Indenture after the deduction of its
reasonable charges and expenses. Any receiver, assignee or trustee in
bankruptcy or reorganization is hereby authorized to make such payments to the
Trustee, and to pay to the Trustee any amount due it for reasonable
compensation and expenses, including reasonable expenses and fees of counsel
incurred by it up to the date of such distribution.


 


SECTION 7.03.
AGREEMENT TO PAY ATTORNEYS’ FEES AND EXPENSES. In the event the Borrower should
default under any of the provisions of this Agreement, whether or not such
default constitutes a Loan Default Event hereunder, and the Issuer or the
Trustee should employ attorneys or incur other expenses for the collection of
the payments due under this Agreement or the enforcement of performance or
observance of any obligation or agreement on the part of the Borrower herein
contained, the Borrower agrees to pay to the Issuer or the Trustee the
reasonable fees and expenses of such attorneys and such other reasonable
expenses so incurred by the Issuer or the Trustee.


 


SECTION 7.04.
NO REMEDY EXCLUSIVE. No remedy herein conferred upon or reserved to the Issuer
or the Trustee is intended to be exclusive of any other available remedy or
remedies, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement or now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise
any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and
power may be exercised from time to time and as often as may be deemed expedient.
To entitle the Issuer or the Trustee to exercise any remedy reserved to it in
this Article, it shall not be necessary to give any notice, other than such
notice as may be herein expressly required. Such rights and


 


23





















 


remedies as are given the
Issuer hereunder shall also extend to the Trustee, and the Trustee and the
Registered Owners of the Bonds shall be deemed third party beneficiaries of all
covenants and agreements herein contained.


 


SECTION 7.05.
WAIVERS. No delay or omission of the Issuer or the Trustee to exercise any
right or power arising upon the occurrence of any default shall impair any such
right or power or shall be construed to be a waiver of any such default or an
acquiescence therein; and every power and remedy given by this Agreement to the
Issuer or the Trustee may be exercised from time to time and as often as may be
deemed expedient. In the event any agreement or covenant contained in this
Agreement should be breached by the Borrower and thereafter waived by the
Issuer or the Trustee, such waiver shall be limited to the particular breach so
waived and shall not be deemed to waive any other breach hereunder.


 


ARTICLE VIII


 


PREPAYMENT


 


SECTION 8.01.
REDEMPTION OF BONDS WITH PREPAYMENT MONEYS. By virtue of the assignment of the
rights of the Issuer under this Agreement to the Trustee as is provided in Section 4.05
hereof, the Borrower agrees to and shall pay directly to the Trustee any amount
permitted or required to be paid by it under this Article VIII. The
Indenture provides that the Trustee shall use the moneys so paid to it by the
Borrower, pursuant to the written instructions of the Borrower, to redeem the
Bonds on the date set for such redemption pursuant to Section 8.05 hereof.


 


SECTION 8.02.
OPTIONS TO PREPAY LOAN. The Borrower shall have the option to prepay the Loan
by paying to the Trustee the amount set forth in Section 8.04 hereof, for
deposit in the Revenue Fund, to be applied to the redemption of Bonds as set
forth below on the earliest date such Bonds are subject to redemption pursuant
to the Indenture and as to which notice of redemption can be given in
accordance with the Indenture, at the redemption prices set forth below, under
the following circumstances:


 


(a) the
Borrower may prepay such amounts in whole, and cause  all of the Outstanding Bonds to be redeemed at
the redemption price set forth in
Section 4.01(e) of the Indenture, if any of the following shall have occurred:


 


(i) the
Project shall have been damaged or destroyed,  in whole or in part, by fire or other casualty
and the Issuer and the Trustee
receive a Certificate of the Authorized Representative of the Borrower to the effect that: (A) it isnot practicable or desirable to rebuild,
repair or restore the Project
within a period of six consecutive months following such damage or destruction, (B) the
Borrower is or will be thereby
prevented from carrying on its normal operations at the Project for a period of at least six
consecutive months, or (C) the
cost of restoration of the Project would substantially exceed the Net Proceeds of insurance carried thereon; or


 


24





















 


(ii) title
to, or the temporary use of, all or  substantially all of the Project shall have been taken by any governmental authority, or any Person acting
under governmental authority,
exercising the power of eminent domain and the Issuer and the Trustee receive a Certificate of the Authorized Representative of the Borrower to
the effect that:(A) the Borrower is thereby prevented from carrying on itsnormal operations at the Project for a
period of at least six consecutive
months or (B) the Project is unsuitable for use by the Borrower;


 


(b) with
the prior written consent of the Bank, the Borrower  may prepay all or any part of the Loan from
any available funds and cause all
or any part of the Outstanding Bonds to be redeemed at the redemption prices set forth in Section 4.01(b) or
4.01(f) of the Indenture, as applicable.


 


SECTION 8.03.
MANDATORY PREPAYMENT.


 


(a) The
Borrower shall have and hereby accepts the obligation to prepay in full the
Loan by paying to the Trustee the amount set  forth in Section 8.04 hereof for deposit
to the Revenue Fund to be used to
redeem all the Outstanding Bonds on the earliest date such Bonds are subject to redemption pursuant to the
Indenture and as to which notice of
the redemption can be given in accordance with the Indenture, at the redemption prices set forth in Section 4.01(e) of
the Indenture with respect to subsection (i) below,
Section 4.01(c) of the Indenture with respect to subsections (ii) and (iii) below, and in the
Indenture Sections noted with respect to subsection (iv) below:


 


(i) if
and when as a result of any changes in the  Constitution of the United States of America
or the California Constitution or
as a result of any legislative, judicial or administrative action, this Agreement shall have become void or unenforceable or impossible of performance
in accordance with the intention
and purposes of the parties hereto, or shall have been declared unlawful;


 


(ii) if,
due to the untruth or inaccuracy of any  representation or warranty made by the Borrower herein or in connection with the offer and sale of the
Bonds, or the breach of any
covenant or warranty of the Borrower contained in this Agreement, interest on the Bonds, or any of
them, is determined not to be
Tax-exempt to the Registered Owners thereof (other than a Registered Owner who is a “substantial user” of the Project or a “related person”
within the meaning of Section 147(a) of
the Code) by a final administrative determination of the Internal Revenue Service or final judicial decision of a court of competent
jurisdiction in a proceeding of
which the Borrower received notice and was afforded an opportunity to participate in to the full extent permitted by law. A determination or decision
will be considered final for this
purpose when all periods for administrative
and judicial review have expired;


 


(iii) if
either: (A) the Borrower or any other  Principal User of the Project files a notice
with the Issuer and the Trustee
to the effect that the capital 


 


25





















 


expenditure limitation of Section 144(a)(4) of
the Code has  been
exceeded, or will be exceeded, within a period of 60 days; or (B) there is a final
determination (as defined in subsection (ii) above)
by the Internal Revenue Service or a court of competent jurisdiction that such capital expenditures limitation
has been exceeded; and


 


(iv) if
mandatory redemption is required by any of Sections 4.01(d), (g), or (h) of
the Indenture.


 


(b) If
the Borrower elects not to apply any Net Proceeds in excess of $250,000 under
the circumstances described in Section 6.02 hereof, the Borrower shall
prepay all of the Loan and cause all of the Outstanding Bonds to be redeemed at
the redemption price set forth in Section 4.01(e) of the Indenture.


 


SECTION 8.04.
AMOUNT OF PREPAYMENT. In the case of a prepayment in full of the Loan by the
Borrower under this Agreement pursuant to Section 8.02 or 8.03 hereof, the
amount to be paid shall be a sum sufficient, together with other funds
deposited with the Trustee and available for such purpose, to pay (a) the
redemption price specified in the applicable subsections of Section 8.02
or 8.03 hereof, for all Outstanding Bonds, plus all interest accrued and to
accrue to the redemption date, (b) all reasonable and necessary fees and
expenses of the Issuer, the Trustee and any paying agent allowable pursuant to
this Agreement and the Indenture accrued and to accrue through final payment of
the Bonds and (c) all other liabilities of the Borrower accrued and to
accrue under this Agreement.


 


In the case of partial
prepayment of the Loan by the Borrower under this Agreement pursuant to Section 8.02
or 8.03 hereof, the amount to be paid shall be a sum sufficient, together with
other funds deposited with the Trustee and available for such purpose, to pay
the redemption price specified in the applicable subsections of Section 8.02
or 8.03 hereof, for the Bonds to be redeemed, plus all interest accrued and to
accrue to the redemption date, and to pay expenses of redemption of such Bonds.
All partial prepayments of the Loan made by the Borrower under this Agreement
shall be applied in inverse order of the due dates thereof, or as otherwise
provided in the Indenture.


 


SECTION 8.05.
NOTICE OF PREPAYMENT. The Borrower shall give written notice to the Issuer, the
Bank and the Trustee (a) while the Bonds bear interest at the Weekly
Interest Rate, not less than 20 days prior to the date of any prepayment of a
Loan Repayment and (b) while the Bonds bear interest at the Fixed Interest
Rate, not less than 40 days prior to the date of any prepayment of a Loan
Repayment, in each case specifying the date upon which any prepayment will be
made, the basis for such prepayment and the amount of such prepayment. If the
Borrower fails to give such notice of a prepayment of Loan Repayments, the
Indenture provides that the Trustee shall hold such prepayment in the
Redemption Fund.


 


26





















 


ARTICLE IX


 


NON-LIABILITY
OF ISSUER; EXPENSES; INDEMNIFICATION


 


SECTION 9.01.
NON-LIABILITY OF ISSUER. The Issuer shall not be obligated to pay the principal
of, premium, if any, or interest on the Bonds, except from Revenues. The
Borrower hereby acknowledges that the Issuer’s sole source of moneys to repay
the Bonds will be provided by the payments made by the Borrower pursuant to
this Agreement, together with other Revenues, including investment income on
certain funds and accounts held by the Trustee under the Indenture, and hereby
agrees that if the payments to be made hereunder shall ever prove insufficient
to pay all principal of, and premium, if any, and interest on the Bonds as the
same shall become due (whether by maturity, redemption, acceleration or
otherwise), then upon notice from the Trustee, the Borrower shall pay such
amounts as are required from time to time to prevent any deficiency or default
in the payment of such principal, premium or interest, including, but not
limited to, any deficiency caused by acts, omissions, nonfeasance or
malfeasance on the part of the Trustee, the Borrower, the Issuer or any third
party.


 


SECTION 9.02.
EXPENSES. The Borrower covenants and agrees to pay, and to indemnify the Issuer
and the Trustee against, all reasonable costs and charges, including reasonable
fees and disbursements of attorneys, accountants, consultants and other
experts, incurred in good faith in connection with this Agreement, the Bonds or
the Indenture.


 


SECTION 9.03.
INDEMNIFICATION. The Borrower releases the Issuer, the State, the Treasurer of
the State and the Trustee from, and covenants and agrees that none of the
Issuer, the State, the Treasurer of the State or the Trustee shall be liable for,
and covenants and agrees to indemnify and hold harmless the Issuer, the State,
the Treasurer of the State and the Trustee and their officers, employees and
agents from and against any and all losses, claims, damages, liabilities or
expenses, of every conceivable kind, character and nature whatsoever arising
out of, resulting from, or in any way connected with (a) the Project, or
the conditions, occupancy, use, possession, conduct or management of, or work
done in or about, or from the planning, design, acquisition, installation or
construction of, the Project or any part thereof; (b) the issuance of any
Bonds or any certifications or representations made in connection therewith by
the Borrower and the carrying out of any of the transactions contemplated by
the Bonds, the Indenture, or this Agreement; (c) the Trustee’s acceptance
or administration of the trusts under the Indenture, or the exercise or
performance of any of its powers or duties under the Indenture; or (d) any
untrue statement or alleged untrue statement of any material fact or omission
or alleged omission to state a material fact necessary to make the statements
made, in light of the circumstances under which they were made, not misleading,
in the official statement utilized by any underwriter in connection with the
sale or offering of any Bonds; provided that in each case such indemnity shall
not be required for damages that result from the willful misconduct or
negligence on the part of the party seeking such indemnity. The indemnity required
by this Section shall be only to the extent that any loss sustained by the
Issuer or the Trustee exceeds the Net Proceeds the Issuer or the Trustee
receives from any insurance carried by the Borrower with respect to the loss
sustained. The Borrower further covenants and agrees to pay or to reimburse the
Issuer, the State, the Treasurer of the State and the Trustee and their
officers, employees and agents for any


 


27





















 


and all costs, reasonable
attorneys fees, liabilities or reasonable expenses incurred in connection with
investigating, defending against or otherwise in connection with any such
losses, claims, damages, liabilities, expenses or actions, except to the extent
that the same arise out of the willful misconduct or negligence of the party
claiming such payment or reimbursement. The provisions of this Section shall
survive the payment and retirement of the Bonds and the termination of this
Agreement.


 


ARTICLE X


 


MISCELLANEOUS


 


SECTION 10.01. NOTICES. All notices, certificates, or other communications given
hereunder shall be deemed sufficiently given on (a) the day such notices,
certificates or other communications are received when sent by personal
delivery, including tested telex or facsimile communication, or (b) the
third day following the day on which the same have been mailed by first class,
postage prepaid, addressed to the Issuer, the Borrower, the Trustee, the Tender
Agent or the Bank, as the case may be, at the address set forth for such party
below. A duplicate copy of each notice, certificate, or other communication
given hereunder by either the Issuer or the Borrower to the other shall also be
given to the Trustee, the Tender Agent, Borrower’s counsel and the Bank. The
Issuer, the Borrower, the Trustee, the Tender Agent and the Bank may, by notice
given hereunder, designate any different addresses to which subsequent notices,
certificates, or other communications shall be sent.


 


	
  If
  to the Issuer:

  	
  California
  Infrastructure and Economic

  
	
   

  	
  Development Bank

  
	
   

  	
  801 K Street,
  Suite 1700

  
	
   

  	
  Sacramento, California
  95814

  
	
   

  	
  Attention: Bond Manager

  
	
   

  	
  Phone: (916) 322-8520

  
	
   

  	
  Fax: (916) 322-7214

  
	
   

  	
   

  
	
  If to the Borrower:

  	
  Roller
  Bearing Company of America, Inc.

  
	
   

  	
  60 Round Hill Road

  
	
   

  	
  Fairfield, Connecticut
  06430

  
	
   

  	
  Attention: Michael S.
  Gostomski

  
	
   

  	
  Phone: (203) 255-1511

  
	
   

  	
  Fax: (203) 255-3862

  
	
   

  	
   

  
	
  If to the Trustee

  	
  U.S.Bank Trust National
  Association

  
	
  or
  Tender Agent:

  	
  One California Street, 4th
  Floor

  
	
   

  	
  San Francisco, California
  94111

  
	
   

  	
  Attention: Corporate Trust
  Department

  
	
   

  	
  Phone: (415) 273-4500

  
	
   

  	
  Fax: (415) 273-4590

  



 


28





















 


	
  If to the Bank:

  	
  First Union National Bank

  
	
   

  	
  1345 Chestnut Street

  
	
   

  	
  Philadelphia, Pennsylvania
  19107

  
	
   

  	
  Attention: Robert A. Brown

  
	
   

  	
  Phone: (215) 973-1259

  
	
   

  	
  Fax: (215) 786-2877

  
	
   

  	
   

  
	
   

  	
  Credit Suisse First Boston

  
	
   

  	
  11 Madison Avenue, 13th
  Floor

  
	
   

  	
  New York, New York 10010

  
	
   

  	
  Attention: Mark Callahan

  
	
   

  	
  Phone: (212) 325-9940

  
	
   

  	
  Fax: (212) 325-8304

  
	
   

  	
   

  
	
  If to the Remarketing

  	
  The Chapman Company

  
	
  Agent:

  	
  115 Sansome Street,
  Suite 520

  
	
   

  	
  San Francisco, California
  94104

  
	
   

  	
  Attention: Director of
  Public Finance

  
	
   

  	
  Phone: (415) 392-5505

  
	
   

  	
  Fax: (415) 392-5276

  



 


SECTION 10.02. SEVERABILITY. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, illegal, inoperative or unenforceable, the
same shall not affect any other provision or provisions herein contained or
render the same invalid, inoperative, or unenforceable to any extent whatever.


 


SECTION 10.03. EXECUTION OF COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument; provided, however, that for
purposes of perfecting a security interest in this Agreement by the Trustee and
the Bank under Article 9 of the California Uniform Commercial Code, only
the counterpart delivered, pledged, and assigned to the Trustee shall be deemed
the original.


 


SECTION 10.04. AMENDMENTS, CHANGES AND MODIFICATIONS. Except as otherwise provided in
this Agreement or the Indenture, subsequent to the initial issuance of Bonds
and prior to their payment in full, or provision for such payment having been
made as provided in the Indenture, this Agreement may not be effectively
amended, changed, modified, altered or terminated without the written consent
of the Trustee and the Bank.


 


SECTION 10.05. GOVERNING LAW. This Agreement shall be governed exclusively by and
construed in accordance with the applicable laws of the State as a contract
executed and delivered within the State to be fully performed within the State.


 


SECTION 10.06. AUTHORIZED REPRESENTATIVE OF THE BORROWER. Whenever under the
provisions of this Agreement the approval of the Borrower is required or the
Issuer or the Trustee


 


29





















 


is required to take some
action at the request of the Borrower, such approval or such request shall be
given on behalf of the Borrower by the Authorized Representative of the
Borrower, and the Issuer and the Trustee shall be authorized to act on any such
approval or request and neither party hereto shall have any complaint against
the other or against the Trustee as a result of any such action taken.


 


SECTION 10.07. TERM OF THE AGREEMENT. This Agreement shall be in full force and
effect from the date hereof and shall continue in effect as long as any of the
Bonds remain Outstanding or the Letter of Credit remains in effect, whichever
is later. All representations and certifications by the Borrower as to all
matters affecting the Tax-exempt status of interest on the Bonds and all
indemnifications by the Borrower to the Issuer, the State, the Treasurer of the
State or the Trustee shall survive the termination of this Agreement.


 


SECTION 10.08. BINDING EFFECT. This Agreement shall inure to the benefit of and shall
be binding upon the Issuer, the Borrower and their respective successors and
assigns; subject, however, to the limitations contained in Section 5.02
hereof.


 


SECTION 10.09. REFERENCES TO BANK. Notwithstanding any provisions contained herein to
the contrary, the Bank shall be entitled to take all actions and exercise its
rights hereunder in accordance with the Credit Agreement so long as the Bank
has not wrongfully dishonored any drawings under the Letter of Credit and the Bank
is not in liquidation, bankruptcy or receivership proceedings. After the
expiration or termination of the Letter of Credit and after all obligations
owed to the Bank pursuant to the Credit Agreement with respect to the Letter of
Credit have been paid in full or discharged, all references to the Bank
contained herein shall be null and void and of no further force and effect.


 


SECTION 10.10. BROKERAGE CONFIRMATIONS. The Borrower acknowledges that to the extent
regulations of the Comptroller of the Currency or other applicable regulatory
entity grant the Borrower the right to receive brokerage confirmations of
security transactions under the Indenture, the Borrower specifically waives
receipt of such confirmations to the extent permitted by law. The Trustee is
required under the Indenture to furnish the Borrower with periodic cash
transaction statements which include detail for all securities transactions
made by the Trustee on behalf of the Borrower thereunder.


 


[End
of the Loan Agreement]


 


30





















 


IN WITNESS WHEREOF, the
California Infrastructure and Economic Development Bank has caused this
Agreement to be executed in its name and the Borrower has caused this Agreement
to be executed in its name, all as of the date first above written.


 


	
   

  	
  CALIFORNIA INFRASTRUCTURE
  AND

  ECONOMIC DEVELOPMENT BANK

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Lon S. Hatamiya, Chair
  ATTEST

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  Blake Fowler, Secretary

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROLLER BEARING COMPANY OF
  AMERICA, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Michael S. Gostomski,
  Executive

  	
   

  
	
   

  	
   

  	
  Vice President

  	
   

  
							



 


[Signature
Page to Loan Agreement]


 


31





















 


 


EXHIBIT A


 


THE
PROJECT


 


The Project consists of (a) the
acquisition of real property and improvements located at 3131 West Segerstrom
Avenue, Santa Ana, California 92702 (the “Project Site”), (b) the
rehabilitation of a manufacturing facility at the Project Site, and (c) the
acquisition and installation of manufacturing equipment at the Project Site.