Exhibit 10.44
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TAX REGULATORY AGREEMENT
by and among
CALIFORNIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee,
and
PROVENA FOODS INC.
Dated as of October 1, 1998
Executed as Part of the Proceedings for the
Authorization and Issuance of:
$4,000,000
California Economic Development Financing Authority
Variable Rate Demand
Industrial Development Revenue Bonds, Series 1998
(Provena Foods Inc. Project)
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TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and is not part of
the Tax Regulatory Agreement.)
Page
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ARTICLE I
DEFINITIONS
Section 1.01. Definitions....................................................................................... 1
Section 1.02. Reliance on Borrower's Information................................................................ 11
ARTICLE II
CERTAIN REPRESENTATIONS BY THE BORROWER
Section 2.01. Description of the Project and Description of the Facilities...................................... 11
Section 2.02. Capital Expenditures.............................................................................. 12
Section 2.03. Prior Issues and $40 Million Limit................................................................ 13
Section 2.04. Federal Tax Return Information.................................................................... 13
Section 2.05. Composite Issues.................................................................................. 13
Section 2.06. Prohibited Uses................................................................................... 14
Section 2.07. No Composite Project.............................................................................. 14
Section 2.08. Acquisition of Existing Property.................................................................. 14
Section 2.09. Land Acquisition Limit and No Acquisition of Farmland............................................. 14
Section 2.10. Representations by the Borrower for Purposes of IRS Form 8038..................................... 15
ARTICLE III
USE OF BOND PROCEEDS
Section 3.01. Anticipated Use of Proceeds....................................................................... 16
Section 3.02. Certification as to Costs of the Project.......................................................... 16
ARTICLE IV
ARBITRAGE
Section 4.01. Arbitrage Representations and Elections........................................................... 16
Section 4.02. Arbitrage Compliance.............................................................................. 18
Section 4.03. Calculation of Rebate Amount...................................................................... 19
Section 4.04. Payment to United States.......................................................................... 21
Section 4.05. Recordkeeping..................................................................................... 22
Section 4.06. Rebate Analyst.................................................................................... 22
ARTICLE V
COMPLIANCE WITH CODE............................................................................................. 23
ARTICLE VI
TERM OF TAX REGULATORY AGREEMENT................................................................................. 24
ARTICLE VII
AMENDMENTS....................................................................................................... 25
ARTICLE VIII
EVENTS OF DEFAULT, REMEDIES
Section 8.01. Events of Default................................................................................. 25
Section 8.02. Remedies for an Event of Default.................................................................. 25
EXHIBIT A-1 SOURCES AND USES OF FUNDS
EXHIBIT A-2 PROPERTY FINANCED OR REFINANCED BY THE BONDS
EXHIBIT B-1 FORM OF PROVIDER CERTIFICATION FOR A CERTIFICATE OF DEPOSIT
EXHIBIT B-2 FORM OF PROVIDER CERTIFICATION FOR AN INVESTMENT CONTRACT
EXHIBIT B-3 FORM OF BORROWER'S CERTIFICATION FOR A CERTIFICATE OF DEPOSIT
INVOLVING THREE BIDS
EXHIBIT C USEFUL LIFE CALCULATION
EXHIBIT D DECLARATION OF OFFICIAL INTENT
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TAX REGULATORY AGREEMENT
THIS TAX REGULATORY AGREEMENT (this "Tax Regulatory Agreement") is made and
dated as of October 1, 1998, by and among CALIFORNIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY and its successors or assigns (the "Authority"), PROVENA
FOODS INC., a corporation duly organized and existing under the laws of the
State of California and its successors or assigns (the "Borrower"), and U.S.
BANK TRUST NATIONAL ASSOCIATION, solely in its capacity as trustee under the
Indenture, as defined below (the "Trustee");
W I T N E S S E T H:
WHEREAS, the Authority has authorized the issuance of $4,000,000 aggregate
principal amount of its Variable Rate Demand Industrial Development Revenue
Bonds, Series 1998 (Provena Foods Inc. Project) (the "Bonds"), the proceeds of
which are being loaned to the Borrower pursuant to a Loan Agreement, dated as of
October 1, 1998, between the Authority and the Borrower (the "Agreement"), to
finance the construction and installation of a manufacturing facility and the
acquisition of certain manufacturing equipment, as more fully set forth in the
Agreement (the "Project") and to pay a portion of the costs of issuance of the
Bonds;
WHEREAS, the Borrower will use the Project in the manufacture of meat
products or for the manufacture of other tangible personal property; and
WHEREAS, the Authority has determined that the issuance, sale and delivery
of the Bonds is needed to finance the Project; and
WHEREAS, this Tax Regulatory Agreement has been entered into by the
Authority, the Borrower and the Trustee to ensure compliance with the provisions
of the Internal Revenue Code of 1986, as amended, and the Regulations thereunder
(the "Code"); and
WHEREAS, to ensure that interest on the Bonds will be and remain excludable
from gross income under the Code, the restrictions listed in this Tax Regulatory
Agreement must be satisfied.
NOW THEREFORE, the Authority, the Borrower and the Trustee hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The following words and phrases shall have
the following meanings. Any capitalized word or term used herein but not defined
herein shall have the same meaning given in the hereinafter defined Indenture.
"Abusive Arbitrage Device" means any action which has the effect of (a)
enabling the Authority or the Borrower to exploit the difference between taxable
and tax-exempt interest rates
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to obtain a material financial advantage; and (b) overburdening the tax-exempt
bond market as defined in (S) 1.148-10 of the Regulations.
"Accounting Method" means both the overall method used to account for the
Gross Proceeds of the Bonds (e.g., the cash method or a modified accrual method)
and the method used to account for or allocate any particular item within that
overall accounting method (e.g., accounting for Investments, Expenditures,
allocations to and from different sources and particular items of the
foregoing).
"Agreement" means the Loan Agreement, dated as of October 1, 1998, between
the Authority and the Borrower, and any amendments and supplements thereto.
"Average Economic Life" means the average reasonably expected economic life
of the Facilities as defined in (S) 147(b) of the Code.
"Average Maturity" means the average maturity of the Bonds as defined in
(S) 147(b) of the Code.
"Bond Counsel" means a law firm of nationally recognized bond counsel who
is requested to deliver its approving opinion with respect to the issuance of
and the exclusion from federal income taxation of interest on the Bonds.
"Bond Year" means the period commencing October 1 of each calendar year and
terminating on September 30 of the immediately succeeding calendar year during
the term of the Bonds, except that the first Bond Year shall commence on the
Date of Issuance and end on September 30, 1999 (unless a different period is
required by the Regulations or selected by the Borrower pursuant to the
Regulations).
"Bond Yield" means the Yield of the Bonds calculated in accordance with
Section 1.148-4 of the Regulations.
"Borrower" means Provena Foods Inc., a corporation duly organized and
existing under the laws of the State of California or any entity which is the
surviving, resulting or transferee entity in any merger, consolidation or
transfer permitted under the Agreement.
"Capital Expenditure" means any cost of a type that is for the acquisition,
construction, reconstruction or improvement of land or property of a character
subject to the allowance for depreciation. For example, costs incurred to
acquire, construct, reconstruct or improve land, buildings and equipment
generally are Capital Expenditures. Whether an expenditure is a capital
expenditure is determined at the time the expenditure is paid with respect to
the property. Future changes in law do not affect whether an expenditure is a
capital expenditure.
"Capital Project" means all Capital Expenditures that carry out the
governmental purpose of the Bonds. For example, a Capital Project may include
Capital Expenditures for one or more building improvements or equipment, plus
related capitalized interest paid or accrued prior to the in-service date for
the Capital Project.
"Class of Investments" means one of the following, each of which represents
a different
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Class of Investments:
(a) Each category of yield restricted Purpose Investment and Program
Investment, as defined in (S) 1.148-1(b), that is subject to a different
definition of materially higher Yield under (S) 1.148-2(d)(2);
(b) Yield restricted Nonpurpose Investments; and
(c) All other Nonpurpose Investments.
"Code" means the Internal Revenue Code of 1986, as amended.
"Computation Date" means the Initial Computation Date, an Installment
Computation Date or the Final Computation Date.
"Computation Date Credit" means on the last day of each Bond Year during
which there are Gross Proceeds subject to the rebate requirement of Article IV
hereof, and on the Final Computation Date, the amount of $1,000.
"Consistently Applied" means applied uniformly within a fiscal period and
between fiscal periods to account for Gross Proceeds of an issue and any amounts
that are in a commingled fund.
"Costs of Issuance" means all costs incurred in connection with the
issuance of the Bonds, other than fees paid to or on behalf of credit enhancers
as fees for "qualified guarantees" as defined in (S) 1.148-4(f) of the
Regulations or to the Authority as a portion of its higher Yield permitted on
the Agreement under (S) 1.148-2(d)(2) of the Regulations. Examples of Costs of
Issuance include (but are not limited to):
(a) underwriter's spread (whether realized directly or derived through
purchase of the Bonds at a discount below the price at which a substantial
number of the Bonds are sold to the public) or placement agent's fee;
(b) counsel fees (including bond counsel, underwriter's counsel,
placement agent's counsel, issuer's counsel, borrower's counsel, trustee's
counsel, and any other specialized counsel fees incurred in connection with
the issuance of the Bonds);
(c) financial advisor fees incurred in connection with the issuance of
the Bonds;
(d) rating agency fees (except for any such fee that is paid in
connection with or as a part of the fee for credit enhancement of the
Bonds);
(e) trustee fees incurred in connection with the issuance of the
Bonds;
(f) accountant fees incurred in connection with the issuance of the
Bonds;
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(g) printing costs (for the Bonds and of the preliminary and final
offering circulars or official statements);
(h) costs incurred in connection with the required public approval
process (e.g., publication costs for public notices generally and costs of
the public hearing); and
(i) Authority fees to cover administrative costs and expenses incurred
in connection with the issuance of the Bonds.
"Costs of Issuance Fund" means the Costs of Issuance Fund established
pursuant to the Indenture.
"Current Outlay of Cash" means an outlay reasonably expected to occur not
later than 5 banking days after the date as of which the allocation of Gross
Proceeds to the Expenditure is made.
"Date of Issuance" means October 7, 1998.
"Discharged" means, with respect to any Bond, the date on which all amounts
due with respect to such Bond are actually and unconditionally due, if cash is
available at the place of payment, and no interest accrues with respect to such
Bond after such date.
"Economic Accrual Method" (also known as the constant interest method or
actuarial method) means the method of computing Yield that is based on the
compounding of interest at the end of each compounding period.
"Expenditure" means a book or record entry which allocates Proceeds of the
Bonds in connection with a Current Outlay of Cash.
"Facilities" means the Manufacturing Facility financed or refinanced with
the Proceeds of the Bonds and described in Exhibit A-2 hereto.
"Fair Market Value" means the price at which a willing buyer would purchase
an Investment from a willing seller in a bona fide, arm's-length transaction.
Fair Market Value generally is determined on the date on which a contract to
purchase or sell the Nonpurpose Investment becomes binding (i.e., the trade date
rather than the settlement date). Except as otherwise provided in this
definition, an Investment that is not of a type traded on an established
securities market (within the meaning of (S) 1273 of the Code), is rebuttably
presumed to be acquired or disposed of for a price that is not equal to its Fair
Market Value. The Fair Market Value of a United States Treasury obligation that
is purchased directly from the United States Treasury is its purchase price.
The following guidelines shall apply for purposes of determining the Fair Market
Value of the obligations described below:
(a) Certificates of Deposit. The purchase of certificates of deposit
with fixed interest rates, fixed payment schedules and substantial
penalties for early withdrawal will be deemed to be an Investment purchased
at its Fair Market Value on the purchase date if the Yield on the
certificate of deposit is not less than:
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(i) The Yield on reasonably comparable direct obligations of the
United States; and
(ii) The highest Yield that is published or posted by the provider to
be currently available from the provider on reasonably comparable
certificates of deposit offered to the public.
(b) Guaranteed Investment Contracts. A Guaranteed Investment Contract is a
Nonpurpose Investment that has specifically negotiated withdrawal or
reinvestment provisions and a specifically negotiated interest rate, and also
includes any agreement to supply Investments on two or more future dates (e.g.,
a forward supply contract). The purchase price of a Guaranteed Investment
Contract is treated as its Fair Market Value on the purchase date if:
(i) The Borrower makes a bona fide solicitation for a specified
Guaranteed Investment Contract and receives at least three bona fide bids
from providers that have no material financial interest in the issue (e.g.,
as underwriters or brokers);
(ii) The Borrower purchases the highest-Yielding Guaranteed Investment
Contract for which a qualifying bid is made (determined net of broker's
fees);
(iii) The Yield on the Guaranteed Investment Contract (determined net
of broker's fees) is not less than the Yield then available from the
provider on reasonably comparable Guaranteed Investment Contracts, if any,
offered to other persons from a source of funds other than gross proceeds
of tax-exempt bonds;
(iv) The determination of the terms of the Guaranteed Investment
Contract takes into account as a significant factor the Borrower's
reasonably expected drawdown schedule for the amounts to be invested,
exclusive of amounts deposited in debt service funds and reasonably
required reserve or replacement funds;
(v) The terms of the Guaranteed Investment Contract, including
collateral security requirements, are reasonable; and
(vi) The obligor on the Guaranteed Investment Contract certifies the
administrative costs that it is paying (or expects to pay) to third parties
in connection with the Guaranteed Investment Contract.
"Final Computation Date" means the date the last Bond is Discharged.
"Future Value" means the Value of a Receipt or Payment at the end of any
interval as determined by using the Economic Accrual Method and equals the Value
of that Payment or Receipt when it is paid or received (or treated as paid or
received), plus interest assumed to be
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earned and compounded over the period at a rate equal to the Yield on the Bonds,
using the same compounding interval and financial conventions used to compute
the Yield on the Bonds.
"Gross Proceeds" means any Proceeds or Replacement Proceeds of the Bonds.
"Indenture" means, the Indenture of Trust, dated as of October 1, 1998,
between the Authority and the Trustee, and any amendments and supplements
thereto.
"Initial Computation Date" means the date a rebate calculation is required,
if any, pursuant to Section 3.03(c) of the Indenture.
"Installment Computation Date" means the last day of the fifth Bond Year
and each succeeding fifth Bond Year as stated in Section 4.01 hereof or the last
day of any Bond Year prior to the fifth Bond Year selected by the Borrower.
"Interest Collateral Account" means the interest bearing deposit account
established by the Borrower with the Bank pursuant to Section 2.09 of the
Reimbursement Agreement to reimburse the Bank for draws made by the Trustee
under the letter of credit to the pay the interest on the Bonds and the
principal of the Bonds in connection with the optional redemption of Bonds as
required by the Reimbursement Agreement.
"Investment" means any Purpose Investment or Nonpurpose Investment,
including any other tax-exempt bond.
"Investment Instructions" means the letter of instructions set forth as an
exhibit to the No Arbitrage Certificate of the Authority dated the Date of
Issuance.
"Investment Proceeds" means any amounts actually or constructively received
from investing Proceeds of the Bonds.
"Investment-Type Property" means any property, other than property
described in (S) 148(b)(2)(A), (B), (C) or (E) of the Code that is held
principally as a passive vehicle for the production of income. Except as
otherwise provided, a prepayment for property or services is Investment-Type
Property if a principal purpose for prepaying is to receive an Investment return
from the time the prepayment is made until the time payment otherwise would be
made. A prepayment is not Investment-Type Property if--
(a) The prepayment is made for a substantial business purpose other
than Investment return and the issuer has no commercially reasonable
alternative to the prepayment, or
(b) Prepayments on substantially the same terms are made by a
substantial percentage of persons who are similarly situated to the issuer
but who are not beneficiaries of tax-exempt financing.
"Issue Price" means, except as otherwise provided, issue price as defined
in (S)(S) 1273 and 1274 of the Code. Generally, the Issue Price of bonds that
are publicly offered is the first price at which a substantial amount of the
bonds is sold to the public. Ten percent is a substantial
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amount. The public does not include bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters or wholesalers. The Issue
Price does not change if part of the issue is later sold at a different price.
The Issue Price of bonds that are not substantially identical is determined
separately. The Issue Price of bonds for which a bona fide public offering is
made is determined as of the sale date based upon reasonable expectations
regarding the initial public offering price. If a bond is issued for property,
the applicable Federal tax-exempt rate is used in lieu of the Federal rate in
determining the Issue Price under (S) 1274 of the Code. The issue price of bonds
may not exceed their Fair Market Value as of the sale date. With respect to the
Bonds, the Issue Price is $4,000,000.
"Manufacturing Facility" means a Capital Project that is used in the
manufacturing or production of tangible personal property (including the
processing resulting in a change in the condition of such property) including
facilities that are directly related and ancillary to a Manufacturing Facility
if such directly related and ancillary facilities are located on the same site
as the Manufacturing Facility and not more than 25% of the proceeds of an issue
that finances the Manufacturing Facility are used to provide such directly
related and ancillary facilities.
"Net Sale Proceeds" means Sale Proceeds, less the portion of those Sale
Proceeds invested in a reasonably required reserve or replacement fund under (S)
148(d) of the Code and as part of a minor portion under (S) 148(e) of the Code.
"Nonpurpose Investment" means any security, obligation, annuity contract or
Investment type property as defined in (S) 148(b) of the Code, including
"specified private activity bonds" as defined in (S) 57(a)(5)(c) of the Code,
but excluding all other obligations the interest on which is excludable from
federal gross income. The term "Nonpurpose Investment" does not include the
Borrower's obligations to make payments to the Authority pursuant to the
provisions of the Agreement.
"Payments" means, for purposes of computing the Rebate Amount, (a) amounts
actually or constructively paid to acquire a Nonpurpose Investment (or treated
as paid to a commingled fund); (b) for a Nonpurpose Investment that is allocated
to an issue on a date after it is actually acquired (e.g., an Investment that
becomes allocable to Transferred Proceeds or to Replacement Proceeds) or that
becomes subject to the rebate requirement of the Code on a date after it is
actually acquired (e.g., an Investment allocated to a reasonably required
reserve or replacement fund for a construction issue at the end of the two-year
spending period), the Value of that Investment on that date; (c) for a
Nonpurpose Investment that was allocated to an issue at the end of the preceding
computation period, the Value of that Investment at the beginning of the
computation period; (d) on the last day of each Bond Year during which there are
amounts allocated to Gross Proceeds of an issue that are subject to the rebate
requirement of the Code, and on the final maturity date, a Computation Date
Credit; and (e) Yield Reduction Payments on Nonpurpose Investments made pursuant
to (S) 1.148-5(c) of the Regulations. For purposes of computing the Yield on an
Investment (including the Value of the Investment), Payment means amounts to be
actually or constructively paid to acquire the Investment; provided, however,
that payments made by a conduit borrower, such as the Borrower, are not treated
as paid until the conduit borrower ceases to receive the benefit of earnings on
those amounts. Payments on Investments, including Guaranteed Investment
Contracts, are adjusted for Qualified Administrative Costs of acquiring a
Nonpurpose Investment.
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"Pre-Issuance Accrued Interest" means amounts representing interest that
accrued on an obligation for a period not greater than one year before the Date
of Issuance but only if those amounts are paid within one year after the Date of
Issuance.
"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.
"Prior Issues" means any issue of tax-exempt obligations (whether or not
the issuer of each issue is the same) to which Section 103(b)(6) of the 1954
Code or Section 144(a) of the Code applies.
"Proceeds" means any Sale Proceeds, Investment Proceeds and Transferred
Proceeds of an issue. Proceeds do not include, however, amounts actually or
constructively received with respect to a Purpose Investment that are properly
allocable to the immaterially higher Yield under (S) 1.148-2(d) of the
Regulations or section 143(g) of the Code or to Qualified Administrative Costs
recoverable under (S) 1.148-5(e) of the Regulations.
"Project" has the meaning given to such term in the preambles hereto.
"Project Fund" means the Project Fund established pursuant to the
Indenture.
"Purchase Fund" means the Purchase Fund established pursuant to the
Indenture.
"Purpose Investment" means an Investment that is acquired to carry out the
governmental purpose of an issue. The Agreement constitutes a Purpose
Investment.
"Qualified Administrative Costs" means reasonable, direct administrative
costs, other than carrying costs, such as separately stated brokerage or selling
commissions, but not legal and accounting fees, recordkeeping, custody and
similar costs. General overhead costs and similar indirect costs of the issuer
such as employee salaries and office expenses and costs associated with
computing the Rebate Amount are not Qualified Administrative Costs. In general,
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administrative costs are not reasonable unless they are comparable to
administrative costs that would be charged for the same Investment or a
reasonably comparable Investment if acquired with a source of funds other than
Gross Proceeds of tax-exempt bonds.
"Qualified Hedging Transaction" means a contract which meets the
requirements of (S) 1.148-4(h)(2) of the Regulations.
"Rebate Amount" means the excess of the Future Value of all Receipts on
Nonpurpose Investments over the Future Value of all the Payments on Nonpurpose
Investments. Future Value is computed as of the Computation Date. Rebate
Amount additionally includes any penalties and interest on underpayments reduced
for recoveries of overpayments.
"Rebate Analyst" shall mean the entity chosen by the Borrower and the
Authority in accordance with Section 4.06 hereof to determine the amount of
required deposits to the Rebate Fund, if any.
"Rebate Fund" means the Rebate Fund established pursuant to the Indenture.
"Receipts" means, for purposes of computing the Rebate Amount, (a) amounts
actually or constructively received from a Nonpurpose Investment (including
amounts treated as received from a commingled fund), such as earnings and return
of principal; (b) for a Nonpurpose Investment that ceases to be allocated to an
issue before its disposition or redemption date (e.g., an Investment that
becomes allocable to Transferred Proceeds of another issue or that ceases to be
allocable to the issue pursuant to the universal cap under (S) 1.148-6 of the
Regulations) or that ceases to be subject to the rebate requirement of the Code
on a date earlier than its disposition or redemption date (e.g., an Investment
allocated to a fund initially subject to the rebate requirement of the Code but
that subsequently qualifies as a bona fide debt service fund), the Value of that
Nonpurpose Investment on that date; and (c) for a Nonpurpose Investment that is
held at the end of a computation period, the Value of that Investment at the end
of that period. For purposes of computing Yield on an Investment, Receipts
means amounts to be actually or constructively received from the Investment,
such as earnings and return of principal (including the Value of an Investment).
Receipts on Investments, including Guaranteed Investment Contracts, are adjusted
(reduced) for Qualified Administrative Costs.
"Recomputation Event" means a transfer, waiver, modification or similar
transaction of any right that is part of the terms of the Bonds or a Qualified
Hedging Transaction is entered into, or terminated, in connection with the
Bonds.
"Regulation" or "Regulations" means the temporary, proposed or final Income
Tax Regulations promulgated by the Department of the Treasury and applicable to
the Bonds, including (S)(S) 1.148-0 through 1.148-11, (S) 1.149 and (S)(S)
1.150-1 and 1.150-2 as issued by the Internal Revenue Service on October 18,
1993 for bonds issued after March 1, 1993, including any amendments made
thereto.
"Related Person" means any person if (a) the relationship to such person
would result in a disallowance of loss under Sections 267 or 707(b) of the Code
or (b) such person is a member of the same controlled group of corporations (as
defined in Section 1563(a) of the Code, except
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that "more than 50 percent" shall be substituted for "at least 80 percent" each
place it appears therein).
"Replacement Proceeds" means amounts which have a sufficiently direct nexus
to the Bonds or to the governmental purpose of the Bonds to conclude that the
amounts would have been used for that governmental purpose if the Proceeds of
the Bonds were not used or to be used for that governmental purpose, as more
fully defined in (S) 1.148-1(c) of the Regulations.
"Revenue Fund" means the Revenue Fund established pursuant to the
Indenture.
"Sale Proceeds" means any amounts actually or constructively received from
the sale of the Bonds, including amounts used to pay underwriters' discount or
compensation or placement agent's fee and accrued interest other than Pre-
Issuance Accrued Interest.
"SLGS" means United States Treasury Certificates of Indebtedness, Notes and
Bonds State and Local Government Series.
"Tax Regulatory Agreement" means this Tax Regulatory Agreement.
"Test-Period Beneficiary" means any person who is an owner or a Principal
User of facilities financed by an issue or issues of tax-exempt obligations
issued under the 1954 Code or the Code during the three-year period beginning on
the later of the date such facilities were placed in service or the date of
issuance for such issue or issues of tax-exempt obligations. For purposes of
determining whether a person is a Test-Period Beneficiary, all persons who are
Related Persons shall be treated as one person.
"Transferred Proceeds" means Proceeds of a refunding issue which become
transferred proceeds of a refunding issue and cease to be Proceeds of a prior
issue when Proceeds of the refunding issue discharge any of the outstanding
principal amount of the prior issue. The amount of Proceeds of the prior issue
that become transferred proceeds of the refunding issue is an amount equal to
the Proceeds of the prior issue on the date of that discharge multiplied by a
fraction:
(a) The numerator of which is the principal amount of the prior issue
discharged with Proceeds of the refunding issue on the date of that
discharge; and
(b) The denominator of which is the total outstanding principal amount
of the prior issue on the date immediately before the date of that
discharge.
"Universal Cap" means the Value of all outstanding Bonds.
"Value" means Value as determined under (S) 1.148-4(e) of the Regulations
for a Bond and Value determined under (S) 1.148-5(d) of the Regulations for an
Investment.
"Yield" means, for purposes of determining the Yield on the Bonds, the
Yield computed under the Economic Accrual Method using consistently applied
compounding intervals of not more than one year. A short first compounding
interval and a short last compounding interval may be used. Yield is expressed
as an annual percentage rate that is calculated to at least four
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decimal places (e.g., 5.2525%). Other reasonable, standard financial
conventions, such as the 30 days per month/360 days per year convention, may be
used in computing Yield but must be consistently applied. The Yield on an issue
that would be a Purpose Investment (absent (S) 148(b)(3)(A) of the Code) is
equal to the Yield on the conduit financing issue that financed that Purpose
Investment. The Yield on a fixed yield issue is the discount rate that, when
used in computing the present Value as of the issue date of all unconditionally
payable payments of principal, interest and fees for qualified guarantees on the
issue and amounts reasonably expected to be paid as fees for qualified
guarantees on the issue, produces an amount equal to the present Value, using
the same discount rate, of the aggregate issue price of bonds of the issue as of
the issue date. In the case of obligations purchased or sold at a substantial
discount or premium, the Regulations prescribe certain special Yield calculation
rules. For purposes of determining the Yield on an Investment, the Yield
computed under the Economic Accrual Method, using the same compounding interval
and financial conventions, shall be used to compute the Yield on the Bonds.
The Yield on an Investment allocated to the Bonds is the discount rate
that, when used in computing the present Value as of the date the Investment is
first allocated to the issue of all unconditionally payable receipts from the
Investment, produces an amount equal to the present Value of all unconditionally
payable payments for the Investment. The Yield on an Investment shall not be
adjusted by any hedging transaction entered into in connection with such
Investment unless the Authority, the Trustee and the Borrower have received an
opinion of Bond Counsel that such an adjustment is permitted by the Regulations.
Yield shall be calculated separately for each Class of Investments.
"Yield Reduction Payment" means a payment to the United States with respect
to an Investment which is treated as a Payment for that Investment that reduces
the Yield on that Investment in accordance with (S) 1.148-5(c) of the
Regulations. Yield Reduction Payments include Rebate Amounts paid to the United
States.
"1954 Code" means the Internal Revenue Code of 1954, as amended, as in
effect on the effective date of the Code.
Section 1.02. Reliance on Borrower's Information. Bond Counsel and the
Authority shall be permitted to rely upon the contents of any certification,
document or instructions provided pursuant to this Tax Regulatory Agreement and
shall not be responsible or liable in any way for the accuracy of their contents
or the failure of the Borrower to deliver any required information.
ARTICLE II
CERTAIN REPRESENTATIONS BY THE BORROWER
Section 2.01. Description of the Project and Description of the Facilities.
The Borrower hereby represents and warrants for the benefit of the Authority,
the Trustee and the registered owners of the Bonds that:
11
(a) The description of the Project set forth in the preambles hereto
and the description of the Facilities set forth in Exhibit A-2 hereto are
true and accurate.
(b) The Facilities constitute a Manufacturing Facility of pepperoni,
sausage and other meat products or facilities directly related and
ancillary to such Manufacturing Facility.
(c) The portion of the Facilities which constitutes directly related
and ancillary facilities serves solely the manufacturing portion of the
Facilities, is on the same site as the manufacturing portion of the
Facilities and is financed with not more than 25% of the net Proceeds of
the Bonds. In addition, with respect to the portion of the Facilities to be
used for offices, not more than a de minimis amount of the functions to be
performed at such offices is not directly related to day-to-day operations
of the Facilities (e.g., a salesman's office is not related to day-to-day
operations of the Facilities).
Section 2.02. Capital Expenditures. The Borrower hereby represents and
warrants for the benefit of the Authority, the Trustee and the registered owners
of the Bonds that:
(a) During the period beginning three years before the Date of
Issuance and ending on the Date of Issuance, the aggregate amount of
Capital Expenditures (including any expenditure that was or could have been
treated as a Capital Expenditure under any rule or election under the Code)
paid or incurred, excluding those to be paid or reimbursed with Proceeds of
the Bonds, with respect to (i) facilities located in the incorporated
municipality (or unincorporated county) in which the Facilities are located
and (ii) the Principal User of which was or is the Borrower, any other
Principal User of the Facilities or any Related Person thereto, was
$262,000.
(b) During the period beginning on the Date of Issuance and ending on
the date three years after the Date of Issuance, the aggregate amount of
Capital Expenditures (including any expenditure that was or could have been
treated as a Capital Expenditure under any rule or election under the Code)
expected to be incurred, excluding those to be paid or reimbursed with
Proceeds of the Bonds, with respect to (i) facilities located in the
incorporated municipality (or unincorporated county) in which the
Facilities are located and (ii) the Principal User of which was or is the
Borrower, any other Principal User of the Facilities or any Related Person
thereto, is anticipated to be $4,630,000.
(c) The amount of capitalized interest to be paid on all financings
for the Facilities excluding that paid from Proceeds of the Bonds is
$200,000. The amount of capitalized interest to be paid in connection with
the Facilities paid from Proceeds of the Bonds is $30,000.
(d) The sum of (i) the Capital Expenditures described in paragraph (a)
above plus (ii) the actual Capital Expenditures to be incurred as described
in paragraphs (b) and (c) plus (iii) the aggregate outstanding amount of
all $1 million or $10 million exempt small issues set forth in Section
2.03(a) below plus (iv) the greater of the Issue Price or the par amount of
the Bonds shall not exceed $10 million.
12
(e) The information contained in subsections (a), (b), (c) and (d)
above, which has been provided to the Authority to enable the Authority to
elect to qualify the Bonds for the $10,000,000 exemption afforded by
Section 144(a)(4) of the Code, is true, accurate and complete. The
Authority hereby elects to issue the Bonds pursuant to the exemption
afforded by Section 144(a)(4) of the Code.
(f) The Facilities will not be sold, leased or the use otherwise
transferred to a person other than the Borrower, any other Principal User
of the Facilities or any Related Person thereto identified as of the Date
of Issuance during the three-year period ending three years after the Date
of Issuance, unless the Borrower has received an approving opinion of Bond
Counsel to the effect that such sale, lease or transfer will not adversely
affect the tax-exempt status of the Bonds.
Section 2.03. Prior Issues and $40 Million Limit. The Borrower hereby
represents and warrants for the benefit of the Authority, the Trustee and the
registered owners of the Bonds that:
(a) The aggregate face amount of all Prior Issues outstanding as of
the Date of Issuance, the proceeds of which were or will be used to any
extent with respect to facilities located in the incorporated municipality
(or unincorporated county) in which the Facilities are located and the
Principal Users of such facilities are the Borrower, any other Principal
User of the Facilities or any Related Person thereto, is $-0-.
(b) The aggregate face amount of all Prior Issues and all exempt
facility bonds, qualified redevelopment bonds and industrial development
bonds as defined in the 1954 Code or the Code outstanding as of the Date of
Issuance, the proceeds of which were used by or were allocated to the
Borrower, any other Principal User of the Facilities or any Related Person
thereto as a Test-Period Beneficiary is $-0-.
Section 2.04. Federal Tax Return Information. The Facilities have a SIC Code
Number of 2013. The Borrower files its federal income tax return at the
Internal Revenue Service Center in Fresno, California. The federal employer
identification number of the Borrower is ▇▇-▇▇▇▇▇▇▇.
Section 2.05. Composite Issues. The Borrower hereby represents and warrants
for the benefit of the Authority, the Trustee and the registered owners of the
Bonds that:
(a) During the period beginning 15 days prior to the sale date of the
Bonds and ending 15 days thereafter none of the Borrower, any other
Principal User of the Facilities or any Related Person thereto sold,
guaranteed, arranged, participated in, assisted with, borrowed the proceeds
of, or leased facilities financed by obligations issued under Section 103
of the 1954 Code or Section 103 of the Code by any state or local
governmental unit or any constituted authority empowered to issue
obligations by or on behalf of any state or local governmental unit.
(b) During the period commencing on the Date of Issuance and ending 15
days thereafter, there will be no obligations sold or issued under Section
103 of the 1954 Code or the Code that are guaranteed by the Borrower, any
other Principal User of the
13
Facilities or any Related Person or which are issued with the assistance or
participation of, or by arrangement with, the Borrower, any other Principal
User of the Facilities or any Related Person without the written opinion of
Bond Counsel to the effect that the issuance of such obligations will not
adversely affect their opinion as to the exclusion from gross income for
federal income tax purposes of interest with respect to the Bonds.
(c) Other than the Borrower, any other Principal User of the
Facilities or any Related Person, no person (or Related Person to such
other person) has (i) guaranteed, arranged, participated in, assisted with
the issuance of, or paid any portion of the Costs of Issuance of the Bonds
or (ii) provided any property or any franchise, trademark or trade name
(within the meaning of Section 1253 of the Code) which is to be used in
connection with the Facilities.
Section 2.06. Prohibited Uses. The Borrower hereby represents and warrants
for the benefit of the Authority, the Trustee and the registered owners of the
Bonds that no portion of the Proceeds of the Bonds is being used to provide a
facility, a purpose of which is retail food and beverage services, automobile
sales or service, or the provision of recreation or entertainment. No portion of
the proceeds of the Bonds is being used to provide any private or commercial
golf course, country club, health club, massage parlor, tennis club, skating
facility (including roller skating, skateboarding and ice skating), racquet
sports facility (including any handball, squash or racquetball court), hot tub
facility, suntan facility, racetrack, skybox or other luxury box, airplane,
store the principal business of which is the sale of alcoholic beverages for
consumption off premises, or facility used primarily for gambling. No portion of
the Proceeds of the Bonds is being used directly or indirectly to provide
residential real property for single- or multi-family units.
Section 2.07. No Composite Project. The Borrower hereby represents and
warrants for the benefit of the Authority, the Trustee and the registered owners
of the Bonds that the Facilities are a stand-alone Manufacturing Facility
unconnected to any other facility and do not share any portion of substantial
common facilities with any other building (other than the Facilities), (b) an
enclosed shopping mall or (c) a strip of offices, stores or warehouses.
Section 2.08. Acquisition of Existing Property. The Borrower hereby
represents and warrants for the benefit of the Authority, the Trustee and the
registered owners of the Bonds that no portion of the Proceeds of the Bonds will
be used to pay the cost of acquisition of real property (other than land or any
interest therein) the first use of which will not be pursuant to the acquisition
with the Proceeds of the Bonds.
Section 2.09. Land Acquisition Limit and No Acquisition of Farmland. The
Borrower hereby represents and warrants for the benefit of the Authority, the
Trustee and the registered owners of the Bonds that:
(a) The amount of Proceeds of the Bonds expended for land will not
exceed $484,000, which is not greater than 25% of the Proceeds of the
Bonds.
(b) No portion of the Proceeds of the Bonds will be used directly or
indirectly for the acquisition of land or any interest therein to be used
for the purpose of farming.
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Section 2.10. Representations by the Borrower for Purposes of IRS Form
8038. Section 149(e) of the Code requires as a condition to qualification for
tax-exemption that the Authority provide to the Secretary of the Treasury
certain information with respect to the Bonds and the application of the
proceeds derived therefrom. The following representations of the Borrower will
be relied upon by the Authority and Bond Counsel in satisfying this information
reporting requirement. Accordingly, the Borrower hereby represents, covenants
and warrants to the best of its knowledge, for the benefit of the Authority,
Bond Counsel and the registered owners of the Bonds, the truth and accuracy of
(c) through (t) below:
(a) Authority's employer identification number....................................... ▇▇-▇▇▇▇▇▇▇
(b) Number of 8038 reports previously filed by the Authority this calendar year.............. 17
(c) Issue price of the Bonds......................................................... $4,000,000
(d) Proceeds used for Accrued Interest....................................................... $0
(e) Costs of Issuance (including Underwriter's Discount)................................ $80,000
(f) Reasonably required Reserve Fund Deposits................................................ $0
(g) Proceeds used for Credit Enhancement..................................................... $0
(h) Proceeds used to refund prior issue...................................................... $0
(i) Nonrefunding Proceeds............................................................ $3,920,000
(j) Date of final maturity of the Bonds......................................... October 1, 2023
(k) Interest Rate on the final maturity of the Bonds......................................... VR
(l) Issue price of the final maturity of the Bonds................................... $4,000,000
(m) Issue price on the entire issue of the Bonds..................................... $4,000,000
(n) Stated redemption price at maturity of the final maturity of the Bonds........... $4,000,000
(o) Stated redemption price at maturity of the entire issue of the Bonds............. $4,000,000
(p) Weighted average maturity of the entire issue of the Bonds.................... 24.9836 years
(q) Yield on the entire issue of the Bonds................................................... VR
(r) Net interest cost for the entire issue of the Bonds...................................... VR
(s) The Standard Industrial Classification Code(s) for the Facilities is................... 2013
(t) Type of Property financed by Nonrefunding Proceeds of the Bonds:
15
Land............................................................................... $484,000
Buildings........................................................................ $3,436,000
Equipment with recovery period of more than 5 years...................................... $0
Equipment with recovery period of 5 years or less........................................ $0
Other.................................................................................... $0
Total....................................................................... $3,920,000
==========
ARTICLE III
USE OF BOND PROCEEDS
Section 3.01. Anticipated Use of Proceeds. The Borrower covenants,
represents and warrants for the benefit of the Authority, the Trustee and the
registered owners of the Bonds that the Proceeds of the Bonds will be used in
the manner set forth in Exhibit A-2 hereto and that the Proceeds of the Bonds
will be invested in accordance with the Investment Instructions.
Section 3.02. Certification as to Costs of the Project. The Borrower
hereby certifies, with respect to the amounts shown in Exhibit A-1, that such
amounts consist only of costs which are directly related to and necessary for
the financing of the Project.
ARTICLE IV
ARBITRAGE
Section 4.01. Arbitrage Representations and Elections. In connection
with the issuance of the Bonds, the Borrower hereby represents, certifies and
warrants as follows:
(a) The Borrower has entered into contracts with third parties for the
acquisition, construction and equipping of the Facilities obligating an
expenditure in excess of 5% of the Net Sale Proceeds of the Bonds and the
Borrower will proceed with due diligence in completing the Facilities and
in allocating the Net Sale Proceeds of the Bonds to such Expenditures.
(b) The Borrower will use a reasonable, Consistently Applied
Accounting Method to account for Gross Proceeds, Investments and
Expenditures for the Bonds. The Borrower shall additionally use a
Consistently Applied Accounting Method for allocating Proceeds of the Bonds
to Expenditures, subject to the Current Outlay of Cash rule.
(c) The Borrower shall not commingle Proceeds of the Bonds with any
other funds.
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(d) In connection with the Bonds, there has not been created or
established and the Borrower does not expect that there will be created or
established, any sinking fund, pledged fund or similar fund (other than as
specifically identified in the Indenture), including without limitation any
arrangement under which money, securities or obligations are pledged
directly or indirectly to secure the Bonds or any contract securing the
Bonds or any arrangement providing for compensating or minimum balances to
be maintained by the Borrower with any registered owner or credit enhancer
of the Bonds, except the Interest Collateral Account.
(e) The allocation of Net Proceeds of the Bonds to the reimbursement
portion of the costs of the Facilities will be made as of and completed on
the Date of Issuance. The declaration of official intent required by (S)
1.150-2 of the Regulations with respect to Net Proceeds of the Bonds used
to reimburse the Borrower for certain Capital Expenditures made in
connection with the Facilities is attached hereto as Exhibit D.
(f) The Borrower reasonably expects that 85% of the Net Sale Proceeds
of the Bonds will be used to complete the Facilities within three years of
the Date of Issuance and not more than 50% of the Proceeds of the Bonds
will be invested in Nonpurpose Investments having a substantially
guaranteed Yield for four years or more. The Borrower reasonably expects
that the Net Sale Proceeds of the Bonds deposited to the Project Fund will
be expended in accordance with the schedule contained in the No Arbitrage
Certificate executed and delivered by the Authority in connection with the
issuance and delivery of the Bonds.
(g) All funds and accounts established pursuant to the Indenture will
be invested pursuant to the No Arbitrage Certificate executed by the
Authority on the Date of Issuance and the Investment Instructions delivered
to the Authority and the Borrower on the Date of Issuance.
(h) The Borrower will not enter into and will not direct the Trustee
to engage in any Abusive Arbitrage Devises. If the Borrower directs the
Trustee to invest any of the Gross Proceeds in certificates of deposit or
pursuant to an investment contract or a certificate of deposit, the
Borrower will obtain and provide to the Trustee certifications in the form
attached hereto as Exhibit B.
(i) The Borrower hereby makes, and the Authority hereby accepts, the
following elections and other choices pursuant to the Regulations with
respect to the Bonds:
(i) The Borrower elects the bond year stated in the definition of
the Bond Year.
(ii) The Borrower elects to avail itself of all unrestricted yield
investments granted in the Regulations for temporary period, reasonably
required reserve fund and minor portion investments.
17
(iii) The Borrower elects to treat the last day of the fifth Bond
Year (September 30, 2003) as the initial Installment Computation Date and
the initial rebate payment date. The Borrower elects to treat the last day
of each subsequent fifth Bond Year as subsequent Installment Computation
Dates and subsequent rebate payment dates. The Borrower may change or
adjust such dates as permitted by the Regulations.
(iv) With respect to the Universal Cap, the Borrower as of the
Date of Issuance does not expect that the operation of the Universal Cap
will result in a reduction or reallocation of Gross Proceeds of the Bonds
and that the Borrower (A) does not expect to pledge funds (other than those
described in the Indenture) to the payment of the Bonds; (B) expects to
expend Sale Proceeds of the Bonds within the expected temporary periods;
and (C) does not expect to retire any of the Bonds earlier than shown in
the Yield computations for the Bonds pursuant to this Article IV.
Section 4.02. Arbitrage Compliance.
(a) The Borrower and the Authority acknowledge that the continued
exclusion of interest on the Bonds from gross income of the recipients thereof
for purposes of federal income taxation depends, in part, upon compliance with
the arbitrage limitations imposed by (S) 148 of the Code, including the rebate
requirement described in Section 4.03 below. The Borrower and the Authority
hereby agree and covenant that they shall not permit at any time or times any of
the Proceeds of the Bonds or other funds of the Borrower to be used, directly or
indirectly, to acquire any asset or obligation, the acquisition of which would
cause the Bonds to be "arbitrage bonds" for purposes of (S) 148 of the Code. The
Borrower further agrees and covenants that it shall, to the extent that any
Proceeds of the Bonds are invested in any Investment which is not Investment
Securities, do and perform all acts and things necessary in order to ensure that
the requirements of (S) 148 of the Code and the Regulations are met. To the
extent that Proceeds of the Bonds are invested in any Investment which is not an
Investment Security, the Borrower shall retain, at its own expense, a Rebate
Analyst to make such determinations and calculations as may be necessary in
order to ensure that the Borrower takes the actions described in Sections 4.02
through 4.06 hereof with respect to the Investment of Gross Proceeds on deposit
in the funds and accounts established under the Indenture. If the Borrower fails
to retain such a Rebate Analyst, the Authority shall, upon being notified in
writing of such failure, at the Borrower's expense, retain such a Rebate
Analyst. The Borrower shall direct the Trustee to make the required transfers
and dispositions described in Sections 4.02, 4.03 and 4.04 hereof, and the
Trustee may rely upon information provided by the Borrower.
(b) The Revenue Fund and the Purchase Fund will be used primarily to
achieve a proper matching of revenues and debt service on the Bonds within each
Bond Year. With respect to the Revenue Fund and the Purchase Fund: (i) to the
extent amounts are deposited therein, the Revenue Fund and the Purchase Fund
will be depleted at least once a year except for a carryover amount not to
exceed in the aggregate the greater of one-twelfth of the principal and interest
payments on the Bonds for the
18
immediately preceding Bond Year or the earnings on the Revenue Fund and the
Purchase Fund for the immediately preceding Bond Year; (ii) any amounts
contributed to the Revenue Fund and the Purchase Fund will be spent within
thirteen (13) months of the date of such contribution to pay debt service on the
Bonds; and (iii) any amount received from the investment or reinvestment of
moneys held in the Revenue Fund and the Purchase Fund will be spent within one
year of receipt thereof, all in accordance with the Indenture. To the extent the
provisions of this Section 4.2(b) are satisfied, amounts in the Revenue Fund and
the Purchase Fund will be invested without regard to yield and no rebate
calculations will need to be made with respect to any moneys in the Revenue Fund
or the Purchase Fund during any Bond Year; provided, however, that the total
earnings on Nonpurpose Investments held in the Revenue Fund and the Purchase
Fund do not exceed $100,000.
(c) In general, no rebate calculations will be required with respect to
Sale Proceeds or Investment Proceeds if at least 15% of expected Gross Proceeds
actually are spent within six (6) months after the Date of Issuance, at least
60% of expected Gross Proceeds actually are spent within twelve (12) months
after the Date of Issuance, and 100% of actual Gross Proceeds actually are spent
within eighteen (18) months after the Date of Issuance. The requirement that
100% of actual Gross Proceeds be spent within eighteen (18) months after the
Date of Issuance will be met if at least 95% of Gross Proceeds is spent within
eighteen (18) months and the remainder is held as a reasonable retainage and
such remainder is spent within thirty months after the Date of Issuance.
Section 4.03. Calculation of Rebate Amount.
(a) (S) 148(f) of the Code requires the payment to the United States of
the Rebate Amount. Except as provided below, the Revenue Fund, the Project Fund,
the Costs of Issuance Fund, the Rebate Fund, the Interest Collateral Account and
all other funds or accounts treated as containing Gross Proceeds, are subject to
this rebate requirement.
(b) In accordance with the requirements set out in the Code and pursuant
to the Indenture, the Authority has created the Rebate Fund, to be held by the
Trustee, in its capacity as Trustee under the Indenture, and used as provided in
this Section.
(i) On or before 25 days following each Computation Date, upon the
Borrower's written direction, an amount shall be deposited to the Rebate
Fund by the Trustee from source or sources stated in such direction so that
the balance of the Rebate Fund shall equal the aggregate Rebate Amount as
of such determination date.
(ii) Amounts deposited in the Rebate Fund shall be invested in
accordance with the Investment Instructions by the Trustee at the written
direction of the Borrower.
(iii) All money at any time deposited in the Rebate Fund shall be
held by the Trustee, to the extent required by this Tax Regulatory
Agreement and the
19
Indenture, for payment to the United States of America of the Rebate
Amount. All amounts deposited into or on deposit in the Rebate Fund shall
be governed by this Tax Regulatory Agreement.
(iv) For purposes of crediting amounts to the Rebate Fund or
withdrawing amounts from the Rebate Fund, Nonpurpose Investments shall be
valued in the manner provided in this Article.
(c) In order to meet the rebate requirement of (S) 148(f) of the Code, the
Borrower agrees and covenants to take, or cause to be taken by the Trustee
or the Rebate Analyst described in Section 4.06 hereof, as appropriate, the
following actions:
(i) For each Investment of amounts held with respect to the Bonds in
(A) the Revenue Fund, (B) the Purchase Fund, (C) the Project Fund, (D) the
Costs of Issuance Fund and (E) the Rebate Fund, the Trustee shall record
the purchase date of such Investment, its purchase price, accrued interest
due on its purchase date, its face amount, its coupon rate, its Yield, the
frequency of its interest payment, its disposition price, accrued interest
due on its disposition date and its disposition date. The Rebate Analyst
retained by the Borrower shall determine the Fair Market Value for such
Investments and the Yield thereon as may be required by the Regulations.
The Yield for an Investment shall be calculated by using the method set
forth in the Regulations.
(ii) For each Computation Date specified in paragraph (iii) below, the
Rebate Analyst shall compute the Yield on the Bonds as required by the
Regulations based on the definition of issue price contained in Section
148(h) of the Code and the Regulations. The Bonds are a variable rate issue
and accordingly the yield on the Bonds cannot be determined at this time.
The Yield on the Bonds shall be calculated by the Rebate Analyst at such
time in order to comply with this Tax Regulatory Agreement and the
Regulations based on the definitions of issue price contained in Section
148(h) of the Code using payments or prepayments of the principal of,
premium, if any, and interest on the Bonds required by the Regulations. For
purposes of this Tax Regulatory Agreement the initial offering price to the
public (not including bond houses and brokers, or similar persons or
organizations acting in the capacity of underwriters or wholesalers) at
which a substantial amount of the Bonds were sold is the Issue Price. Any
reasonable amounts paid for credit enhancement have been and may generally
be treated as interest on the Bonds for purposes of Yield computation to
the extent permitted by the Regulations.
(iii) Subject to the special rules set forth in paragraphs (iv) and
(v) below, the Rebate Analyst shall determine the amount of earnings
received on all Nonpurpose Investments described in paragraph (i) above,
for each Computation Date. In addition, where Nonpurpose Investments are
retained by the Trustee after retirement of the Bonds, any unrealized gains
or losses as of the date of retirement of the Bonds must be taken into
account in calculating the earnings on such Nonpurpose Investments to the
extent required by the Regulations.
20
(iv) In determining the Rebate Amount computed pursuant to this
Section, (A) all earnings on any bona fide debt service fund (including the
Revenue Fund, the Purchase Fund and the Interest Collateral Account) shall
not be taken into account for any Bond Year during which the gross earnings
of such funds total less than $100,000, (B) the Universal Cap applicable to
the Bonds pursuant to (S) 1.148-6(b)(2) of the Regulations shall be taken
into account, (C) all of the Borrower's elections and other choices set
forth in Section 4.01 hereof shall be taken into account and (D) all
spending exceptions to rebate met by the Borrower shall be taken into
account.
(v) For each Computation Date specified in paragraph (iii) above, the
Rebate Analyst shall calculate for each Investment described in paragraphs
(i) and (iii) above, an amount equal to the earnings which would have been
received on such Investment at an interest rate equal to the Yield on the
Bonds as described in paragraph (ii) above. The method of calculation shall
follow that set forth in the Regulations.
(vi) For each Computation Date, the Rebate Analyst shall determine the
amount of earnings received on all Investments held in the Rebate Fund for
the Computation Date. The method of calculation shall follow that set forth
in the Regulations.
(vii) For each Computation Date, the Rebate Analyst shall calculate
the Rebate Amount, by any appropriate method to be described in the Code
and Regulations applicable or which becomes applicable to the Bonds. The
determination of the Rebate Amount shall account for the amount (to be
rounded down to the nearest multiple of $100) equal to the sum of all
amounts determined in paragraph (iii), all amounts determined in paragraphs
(v) and (vi), and less any amount which has previously been paid to the
United States pursuant to Section 4.04 below. The Rebate Analyst shall
notify the Trustee of the Rebate Amount.
(viii) If the Rebate Amount exceeds the amount on deposit in the
Rebate Fund, the Borrower shall immediately pay such amount to the Trustee
for deposit into the Rebate Fund.
Section 4.04. Payment to United States.
(a) Not later than sixty (60) days after each Installment Computation Date
(or such longer period as may be permitted by the Regulations), the Trustee
shall pay to the United States an amount that, when added to the Future Value as
of such Computation Date of previous rebate payments made for the Bonds, equals
at least ninety percent (90%) of the Rebate Amount required to be on deposit in
the Rebate Fund as of such
21
payment date. No later than sixty (60) days after the Final Computation
Date the Trustee shall pay to the United States an amount that, when added
to the Future Value as of such Computation Date of previous rebate payments
made for the Bonds, equals at least one hundred percent (100%) of the
balance remaining in the Rebate Fund.
(b) The Trustee shall mail each payment of an installment to the
Internal Revenue Service Center, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Each
payment shall be accompanied by Internal Revenue Form 8038-T, and, if
necessary, a statement summarizing the determination of the Rebate Amount.
(c) If on any Computation Date, the aggregate amount earned on
Nonpurpose Investments in which the Gross Proceeds of the Bonds are
invested is less the amount that would have been earned if the obligations
had been invested at a rate equal to the Yield on the Bonds as determined
in Section 4.03 hereof, such deficit may at the written request of the
Borrower be withdrawn from the Rebate Fund and paid to the Borrower or as
the Borrower shall direct. The Borrower may direct that any overpayment of
rebate may be recovered from any Rebate Amount previously paid to the
United States pursuant to (S) 1.148-3(i) of the Regulations.
(d) The Borrower shall also pay any penalty or interest on
underpayments of Rebate Amount not paid in a timely manner pursuant to this
Tax Regulatory Agreement, the Code and the Regulations.
Section 4.05. Recordkeeping. In connection with the rebate requirement, the
Borrower and the Trustee shall maintain the following records:
(a) The Borrower and the Trustee shall record all amounts paid to the
United States pursuant to Section 4.04 hereof. The Trustee shall furnish to
the Authority and the Borrower copies of any materials filed with the
Internal Revenue Service pertaining thereto and shall provide the Authority
and the Borrower with all records in its possession that the Authority, the
Borrower or the Rebate Analyst may request relating to the calculation of
any Rebate Amount.
(b) The Borrower and the Trustee shall retain records of the rebate
calculations until six years after the retirement of the last obligation of
the Bonds.
Section 4.06. Rebate Analyst.
(a) To the extent required to comply with the provisions of Section
4.02 hereof, the Borrower shall appoint a Rebate Analyst and any successor
Rebate Analyst for the Bonds reasonably acceptable to the Authority,
subject to the conditions set forth in this Section. The Rebate Analyst and
each successor Rebate Analyst shall signify its acceptance of the duties
imposed upon it hereunder by a written instrument of acceptance
22
delivered to the Trustee, the Authority and the Borrower under which such
Rebate Analyst will agree to discharge its duties pursuant to this Tax
Regulatory Agreement in a manner consistent with prudent industry practice.
(b) The Rebate Analyst may at any time resign and be discharged of
the duties and obligations created by this Tax Regulatory Agreement by
giving notice to the Trustee, the Authority and the Borrower. The Rebate
Analyst may be removed at any time by an instrument signed by the Authority
and the Borrower and filed with the Authority, the Borrower and the
Trustee. The Borrower and the Authority shall, upon the resignation or
removal of the Rebate Analyst, appoint a successor Rebate Analyst.
(c) Each successor Rebate Analyst appointed pursuant to this Section
shall be either a firm of independent accountants or Bond Counsel or
another entity experienced in calculating rebate payments required by (S)
148(f) of the Code.
(d) In order to provide for the administration of the matters
pertaining to arbitrage rebate calculations set forth herein, and in the
Investment Instructions and No Arbitrage Certificate, the Trustee, the
Borrower and the Authority may provide for the employment of the Rebate
Analyst on or prior to September 30, 2003. The Trustee and the Authority
may rely conclusively upon and shall be fully protected from all liability
in relying upon the opinions, calculations, determinations, directions and
advice of the Rebate Analyst. The charges and fees for such Rebate Analyst
shall be paid by the Borrower upon presentation of an invoice for services
rendered in connection therewith.
ARTICLE V
COMPLIANCE WITH CODE
In order to ensure that interest on the Bonds is excludable from the gross
income of the recipients thereof for purposes of federal income taxation, the
Borrower hereby represents and covenants as follows:
(a) The Average Maturity of the Bonds does not exceed 120% of the
Average Economic Life of the Facilities within the meaning of (S) 147(b) of
the Code as set forth in Exhibit C hereto.
(b) The Bonds are not and shall not become directly or indirectly
"federally guaranteed." Unless otherwise excepted under (S) 149(b) of the
Code, the Bonds will be considered "federally guaranteed" if (i) the
payment of principal and interest with respect to the Bonds is guaranteed
(in whole or in part) by the United States (or any agency or
instrumentality thereof), (ii) 5% or more of the Proceeds of the Bonds is
(A) to be used in making loans, the payment of principal or interest with
respect to which are to be guaranteed (in whole or in part) by the United
States (or any agency or instrumentality thereof) or (B) to be invested
(directly or indirectly) in federally insured deposits or accounts or (iii)
the payment of principal or interest on the Bonds is otherwise indirectly
guaranteed (in whole or in part) by the United States (or any agency or
instrumentality thereof).
23
(c) The Borrower will provide to the Authority all information
necessary to enable the Authority to complete and file Internal Revenue
Forms 8038 and 8038-T pursuant to (S) 149(e) of the Code.
(d) As required by (S) 147(f) of the Code, the Bonds and the Project
were the subject of a public hearing held on March 20, 1998, which was
preceded by reasonable public notice.
(e) The Borrower will comply with, and make all filings required by,
all effective rules, rulings or regulations promulgated by the Department
of the Treasury or IRS with respect to obligations described in (S)(S) 103
and 144 of the Code, such as the Bonds.
(f) The Borrower agrees to rebate all amounts required to be rebated
to the United States of America pursuant to (S) 148(f) of the Code. The
Borrower agrees to provide any instructions to the Trustee that are
necessary to satisfy the requirements of (S) 148(f) of the Code. The
Borrower will not deposit or instruct the Trustee to deposit amounts in the
Rebate Fund in excess of the amounts reasonably expected to be needed to
make the payments to the United States as required by (S) 148(f) of the
Code.
(g) The Sale Proceeds of the Bonds and any Investment Proceeds will
be expended for the purposes set forth in the Agreement and in the
Indenture and no amount of such Proceeds of the Bonds in excess of 2% of
the Sale Proceeds of the Bonds will be expended to pay the costs of issuing
the Bonds within the meaning of (S) 147(g) of the Code.
(h) The Authority shall not sell any other tax-exempt obligations
within 15 days of the sale date of the Bonds pursuant to the same plan of
financing with the Bonds and payable from substantially the same source of
funds, determined without regard to qualified guaranties from unrelated
parties and used to pay the Bonds.
(i) The Bonds were approved by the Governor of the State of
California following the public hearing referred to in (d) above.
ARTICLE VI
TERM OF TAX REGULATORY AGREEMENT
This Tax Regulatory Agreement shall be effective from the Date of Issuance
through the date that the last Bond is redeemed, paid or deemed paid pursuant to
the terms of the Indenture, except that the requirements of Section 4.05 hereof
shall survive until six years after the retirement of the last obligations of
the Bonds.
24
ARTICLE VII
AMENDMENTS
Notwithstanding any other provision hereof, any provision of this Tax
Regulatory Agreement may be deleted or modified at any time at the option of the
Borrower, with the consent of the Authority, if the Borrower has provided to the
Trustee and the Authority an opinion, in form and substance satisfactory to the
Trustee and the Authority, of Bond Counsel that such deletion or modification
will not adversely affect the exclusion of interest on the Bonds from the gross
income of the recipients thereof for purposes of federal income taxation.
ARTICLE VIII
EVENTS OF DEFAULT, REMEDIES
Section 8.01. Events of Default. The failure of any party to this Tax
Regulatory Agreement to perform any of its required duties under any provision
hereof shall constitute an Event of Default under this Tax Regulatory Agreement
and under the Indenture.
Section 8.02. Remedies for an Event of Default. Upon an occurrence of an
Event of Default under Section 8.01 hereof, the Authority or the Trustee may in
their discretion, proceed to protect and enforce their rights and the rights of
the registered owners of the Bonds by pursuing any available remedy under the
Indenture or by pursuing any other available remedy, including, but not limited
to, a suit at law or in equity.
25
IN WITNESS WHEREOF, the Authority, the Borrower and the Trustee have caused
this Tax Regulatory Agreement to be executed in their respective names and by
their proper officers thereunto duly authorized, all as of the day and year
first written above.
CALIFORNIA ECONOMIC
DEVELOPMENT FINANCING
AUTHORITY
Attest:
By /s/ Illegible Signature
____________________________
Chair
By ▇▇▇▇▇ ▇▇▇▇▇▇
_____________________
Secretary
PROVENA FOODS INC.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
____________________________
Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
__________________________
Title CFO
_________________________
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Trustee
By ▇▇▇▇▇ ▇▇▇▇
____________________________
Name ▇▇▇▇▇ ▇▇▇▇
__________________________
Title Trust Officer
_________________________
[Signature Page to Tax Regulatory Agreement]
EXHIBIT A-1
SOURCES AND USES OF FUNDS
1. Amount received from the sale of the Bonds (exclusive of accrued
interest) is as follows:
Face amount of the Bonds........................... $4,000,000
Less: Underwriters' discount...................... $ 0
Total amount received from the sale of the Bonds... $4,000,000
2. Proceeds of the Bonds totaling $3,920,000, representing 100% of the Net
Sale Proceeds of the Bonds after deduction of the amounts described in 3 below
will be deposited to the Project Fund
3. $80,000 of the Bond proceeds will be deposited in the Costs of Issuance
Fund to pay a portion of the Costs of Issuance of the Bonds.
Estimated Use of Substantially all
of the Proceeds of the
Bonds
(1) Issue price of Bonds................................. $4,000,000
(2) Substantially All Factor.................................. .95%
(3) Total................................................ $3,800,000
==========
(4) Amount paid for qualified Project Costs*
(including interest during construction, if any) $3,920,000
Note: All investment earnings, if any, on the Bond proceeds will be used for
qualified Project Costs (including interest during construction, if
any).
*Qualified Project Costs:
Land $484,000
Building $3,920,000
▇-▇
▇▇▇▇▇▇▇ ▇-▇
PROPERTY FINANCED OR REFINANCED BY THE BONDS
1. Acquisition of the real property located in the Crossroads Commercial
Industrial Park, Lathrop, California $484,000.
2. Construction of meat processing facility $3,436,000.
▇-▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF PROVIDER CERTIFICATION
FOR A CERTIFICATE OF DEPOSIT
I, [Name], [Position], of [Entity Providing the Certificate of Deposit]
(the "Provider") HEREBY CERTIFY that the yield on the Certificate of Deposit
entered into on [DATE] is not less than the highest yield that the Provider
publishes or posts for comparable certificates of deposit offered to the public
and that the yield on the Certificate of Deposit is not less than the yield
available on reasonably comparable direct obligations offered by the United
States Treasury.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
____________ 19___.
By_____________________________
Name___________________________
Title__________________________
B-1
EXHIBIT B-2
FORM OF PROVIDER CERTIFICATION
FOR AN INVESTMENT CONTRACT
I, [Name], [Position], of [Entity Providing Investment Contract] (the
"Provider") HEREBY CERTIFY in connection with the Investment Contract between
[NAME] and the Provider dated as of [DATE] (the "Investment Contract") that the
yield on the Investment Contract is at least equal to the yield offered on
reasonably comparable Investment contracts offered to other persons, if any,
from a source of funds other than gross proceeds of an issue of tax-exempt bonds
and that the amount of administrative costs that are reasonably expected to be
paid by the Provider to third parties in connection with the Investment Contract
is $____________. For purposes of this certification, administrative costs
include all brokerage or selling commissions paid by the Provider to third
parties in connection with the Investment Contract, legal or accounting fees,
investment advisory fees, recordkeeping, safekeeping, custody and other similar
costs or expenses.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
____________ 19___.
By__________________________________
Name________________________________
Title_______________________________
B-2
EXHIBIT B-3
FORM OF BORROWER'S CERTIFICATION FOR AN
INVESTMENT CONTRACT INVOLVING THREE BIDS
I, [[Name], [Position], of Provena Foods Inc., a California corporation
(the "Borrower"), HEREBY CERTIFY in connection with the Investment contract
between the Borrower and [Entity Providing Investment Contract] (the "Provider")
dated as of __________ ___, ______ the "Investment Contract") that (i) at least
three bids on the Investment Contract were received from persons other than
those with a material financial advantage in the California Economic Development
Financing Authority Variable Rate Demand Industrial Development Revenue Bonds,
Series 1998 (Provena Foods Inc. Project), (ii) the yield on the Investment
Contract purchased is at least equal to the yield offered under the highest bid
received from an uninterested party, (iii) the price of the Investment Contract
takes into account as a significant factor the Borrower's expected drawdown for
the funds to be invested (other than float funds or reasonably required reserve
or replacement funds) and (iv) any collateral security requirements for the
Investment Contract are reasonable.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of
____________ 19___ .
PROVENA FOODS INC.
By________________________________
Name______________________________
Title_____________________________
B-3
EXHIBIT C
USEFUL LIFE OF THE PROPERTY FINANCED
OR REFINANCED BY THE BONDS
Cost Useful Life*
Land $ 484,000 X n/a
Building 3,436,000 X 40.5 $139,158,000
---------- ---- ------------
$3,920,000 $139,158,000
========== ============
Less: cost of land 484,000
----------
$3,436,000
==========
Average life of Project = $139,158,000 divided by $3,436,000 = 40.5 years.
Useful life of Project for purposes of Section 147(b) of the Code =
40.5 years x 1.20 = 48.6 years
Average life of Bonds = 24.9836 years
=============
The information contained in this schedule, attached as an exhibit hereto,
setting forth the respective cost, economic life, ADR midpoint life, if any,
under Revenue Procedure 87-56, 1987-42 I.R.B. 4, and Revenue Procedure 83-35,
1983-2 C.B. 745, as supplemented and amended from time to time, and guideline
life, if any, under Revenue Procedure 62-21, 1962-2 C.B. 118, as supplemented
and amended from time to time, of each asset of the Facilities financed with the
Proceeds of the Bonds, is true, accurate and complete.
*Includes time from date of issuance until property is placed in service.
C-1
EXHIBIT D
DECLARATION OF OFFICIAL INTENT
[See Attached]
[LETTERHEAD OF COMERICA]
Letter of Credit Division
IRREVOCABLE DIRECT PAY LETTER OF CREDIT
COMERICA BANK CALIFORNIA
INTERNATIONAL BANKING DEPARTMENT
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
October 6, 1998
U.S. Bank Trust National Association
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs:
We hereby issue in your favor, as trustee ("Trustee") under the Indenture
of Trust ("Indenture") dated as of October 1, 1998, by and between you and the
California Economic Development Financing Authority ("Issuer") this Irrevocable
Direct Pay Letter of Credit (this "Credit") No. 548144 for the account of
Provena Foods Inc., a California corporation ("Account Party"), in an amount not
exceeding Four Million Sixty Thousand Dollars ($4,060,000) (the "Stated Amount")
of which amount not exceeding $4,000,000 ("Principal Amount") may be drawn upon
with respect to the payment of principal and $60,000 ("Interest Amount") may be
drawn upon with respect to the payment of interest of California Economic
Development Financing Authority Variable Rate Demand Industrial Development
Revenue Bonds. Series 1998 (Provena Foods Inc. Project) (the "Bonds"). Funds
under this Credit are available to you against drawing certificate(s) ("Drawing
Certificate(s)"), duly signed and presented to us at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ as follows:
1) If a drawing is being made with respect to the payment of interest on the
Bonds, or with respect to the payment of principal on the Bonds, your request
for payment shall be presented in the form of a certificate, with the blanks
appropriately filled in, as attached to this Credit as Annex A ("Annex A Drawing
Certificate").
2) If a drawing is made with respect to the payment of interest and principal
in connection with the purchase of tendered Bonds or Bonds deemed tendered, your
request shall be presented in the form of a certificate, with the appropriate
blanks filled in, as attached to this Credit as Annex B ("Annex B Drawing
Certificate).
Any Drawing Certificate may be presented in person or by telecopier at
▇▇▇-▇▇▇-▇▇▇▇ to the attention of Manager, Operations, provided the drawing by
telecopy is confirmed by telephone at ▇▇▇-▇▇▇-▇▇▇▇ and the original certificates
have been sent by overnight mail to us as herein provided. In the event that any
telecopied certificate shall differ from the corresponding original certificate
received, and we shall have acted upon or in reliance upon such telecopied
certificate,
Comerica
such telecopied certificate shall govern and control. The certificate shall
have all blanks appropriately filled in and shall be duly executed by your
authorized officer.
An Annex A Drawing Certificate complying with the terms of this Credit and
presented prior to 10:00 a.m. Pacific time, on any Business Day (as defined
herein) shall be honored and the amount shall be paid in immediately available
funds by 4:30 p.m. Pacific time on the same Business Day or such later Business
Day as specified in the Annex A Drawing Certificate. An Annex A Drawing
Certificate complying with the terms of this Credit and presented at or after
10:00 a.m., Pacific time on any Business Day shall be honored and the amount of
the draft paid in immediately available funds on the following Business Day by
10:00 a.m. Pacific time or such later Business Day as specified in the Annex A
Drawing Certificate. An Annex B Drawing Certificate presented hereunder, and
complying with the terms of this Credit will be duly honored and the amount
shall be paid in immediately available funds (i) not later than 11:30 a.m.,
Pacific time, on the Business Day on which such Annex B Drawing Certificate is
presented to us as aforesaid if such presentation is made to us at or before
8:30 a.m., Pacific time, and (ii) not later than 11:30 a.m., Pacific time, on
the Business Day following the business day on which such demand is presented to
us as aforesaid if such presentation is made to us after 8:30 a.m., Pacific
time. Payment under this Credit shall be made in accordance with the payment
instructions set forth in the completed Drawing Certificate accompanying each
draft. Business Day for purposes hereof means any day other than (i) a day on
which the banking institutions in (a) New York, New York, (b) the City of San
Jose, California or (c) the cities in which the Trustee or the Paying Agent (as
defined in the Indenture) have their respective principal offices are authorized
to close or (ii) a day on which the New York Stock Exchange is closed.
This Credit is transferable in its entirety, but not in part, to any
transferee who has succeeded you as Trustee under the Indenture and may be
successively so transferred. Transfer of this Credit to such transferee shall
be affected by the presentation to us of this Credit accompanied by a
Certificate substantially in the form of Annex C ("Transfer Certificate").
Each payment of a Drawing with respect to the payment of interest on or
principal of the Bonds honored by us shall reduce the portion of the Principal
Amount and the Interest Amount available under this Credit, subject to
reinstatement as provided below. The Stated Amount of this Credit shall also be
reduced by the amount stated in a written notice of reduction executed by the
Trustee. A reduction of the Stated Amount through the use of such a written
notice of reduction shall be effective as of the actual date of receipt by us of
such notice at our above stated address.
Following the honoring of a Drawing hereunder to pay interest on the Bonds
(other than interest in connection with redemption, maturity, acceleration or
purchase upon tender of the Bonds in whole or in part), the available Interest
Amount shall be automatically and immediately reinstated following such drawing
to the original amount.
Page 2 of 7 all of which constitute an
integral part of this Letter of Credit
[LOGO APPEARS HERE]
Letter of Credit Division
Following the honoring of a Drawing hereunder to pay principal and interest
of the Bonds in order to purchase the Bonds on behalf of the Account Party, the
available Principal and Interest Amount shall not be reinstated to the original
amount, unless you shall have received our notice to you by hand delivery or
telecopier transmission at (▇▇▇) ▇▇▇-▇▇▇▇ receipt of which has been confirmed by
you to us in writing via return telecopy at (▇▇▇) ▇▇▇-▇▇▇▇, followed by the
delivery of the original notice by overnight delivery, that there has been
reinstatement of the Principal Amount and Interest Amount.
This Credit is subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision) International Chamber of Commerce, Publication No. 500
(the "Uniform Customs"): provided, however, that Article 48(g) shall not apply
to this Credit. As to matters not covered by the Uniform Customs, this Credit
shall be governed by the internal laws of the State of California.
Notwithstanding anything to the contrary contained in Article 17 of the Uniform
Customs, if this Credit expires during an interruption of business as described
in Article 17, we will honor otherwise complying draws under this Credit that
are made within ten (10) days after the resumption of business by us.
Notwithstanding anything to the contrary contained in Article 41 of the Uniform
Customs, this Credit will not terminate because of any failure to make any
permitted drawing under this Credit.
This Credit, unless extended, shall expire on the earliest of (i) 5:00 p.m.
Pacific Time October 15, 2003, (ii) the date of receipt by us of notice from the
Trustee and the Account Party that the issuance of an alternate credit facility
in substitution for this Credit has occurred, (iii) the date following the
payment under this Credit as a result of the acceleration of the Bonds under the
Indenture, (iv) five (5) days following the Fixed Rate Date as stipulated in the
notice delivered to us pursuant to the terms of the Indenture, or (v) the date
that we receive notice from the Trustee that none of the Bonds are outstanding
under the Indenture.
All payments hereunder will be made with our own funds and not with any
funds received directly or indirectly from the Account Party, Issuer or any
party related to the Account Party, Issuer or any party related to the Account
Party or Issuer.
We undertake that your Drawing Certificate(s), drawn and presented on or
before the expiration of this Credit in conformity with the terms of this
Credit, will be duly honored.
Very truly yours,
COMERICA BANK - CALIFORNIA
By: /s/ Illegible Signature
----------------------------
Page 3 of 7 all of which constitute an
integral part of this Letter of Credit
[LETTERHEAD OF COMERICA]
Letter of Credit Division
ANNEX A
Regular Drawing Certificate
Comerica Bank-California
International Department
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager, Operations
We refer to your Letter of Credit No. 548144 issued in support of the
California Economic Development Financing Authority Variable Rate Demand
Industrial Development Revenue Bonds, Series 1998 (Provena Foods Inc. Project)
(the "Credit"). Terms defined in the Credit not otherwise defined herein shall
have the same meaning herein as therein.
1. As Trustee pursuant to the Indenture, we hereby make demand for payment
under the Credit to pay or provide for the payment of interest on such Bonds in
the amount of $____________ and principal in the amount of $__________. This
Drawing is made as [a regularly scheduled interest payment] [an extraordinary
redemption] [an optional redemption] [a mandatory redemption] [maturity of the
Bonds] [in connection with acceleration], under the provisions of Section ___ of
the Indenture. (Delete inappropriate clauses)
2. The amount demanded for the payment of principal and/or interest does not
exceed the amount available on the date hereof to be drawn under the Credit in
respect to the payment of principal and interest on the Bonds and the stated
amount of the Credit will be permanently reduced by the amount demanded herein
in respect to the payment of principal.
3. Upon receipt of the amount demanded under this Credit, we will apply the
same directly to payment when due in respect to interest and/or principal on
account of such Bonds.
4. Please remit your payments on [insert date] as follows:
_________________, 199__
U.S. Bank Trust National Association,
as Trustee
By:______________________________
Its: Authorized Officer
Page 4 of 7 all of which constitute an
integral part of this Letter of Credit
[LETTERHEAD OF COMERICA]
ANNEX B
Purchase Drawing
Comerica Bank-California
International Department
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager, Operations
We refer to your Letter of Credit No. 548144 issued in support of the
California Economic Development Financing Authority Variable Rate Demand
Industrial Development Revenue Bonds, Series 1998 (Provena Foods Inc. Project)
(the "Credit"). Terms defined in the Credit not otherwise defined herein shall
have the same meaning herein as therein.
1. As Trustee pursuant to the Indenture, we hereby make demand for
payment under the Credit to pay or provide for the payment of interest in the
amount of $________ and for payment of principal in the amount of $_____ for the
purchase of tendered Bonds under the provisions of Section(s) ____ of the
Indenture. If the Bonds are book-entry bonds deposited with The Depository
Trust Company or any successor thereto ("Depository"), we certify to you that we
have directed the Depository to reflect beneficial ownership in Bonds for your
benefit as a secured party, and the aggregate amount of such Bonds is equal to
the amount of the drawing for principal under this paragraph.
2. The amount demanded for the payment of principal and/or interest does
not exceed the amount available on the date hereof to be drawn under the Credit
with respect to the payment of principal and interest on the Bonds.
3. The stated amount of the Credit will be permanently reduced by the
amount demanded herein in respect to the payment of principal and interest,
unless you otherwise advise us as provided in the Credit.
4. Upon receipt of the amount demanded under this Credit, we will apply
the same directly to payment when due with respect to interest and/or principal
on account of such Bonds.
5. Please remit your payment on [insert date] as follows:
______________________________
______________________________
___________, 199__
U.S. Bank Trust National Association
as Trustee
By:_______________
Its: Authorized Officer
Page 5 of 7 all of which constitute an
integral part of this Letter of Credit
[LETTERHEAD OF COMERICA]
Letter of Credit Division
ANNEX C
Instructions for Transfer
Comerica Bank-California
International Department
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager, Operations
We refer to your Letter of Credit No. 548144 issued in support of the
California Economic Development Financing Authority Variable Rate Demand
Industrial Development Revenue Bonds, Series 1998 (Provena Foods Inc. Project)
(the "Credit"). The undersigned, as Trustee, is named as beneficiary of the
Credit. The Transferee named below has succeeded the undersigned as Trustee
under the Indenture defined in the Credit:
Name of Transferee
Address
Therefore, for value received, the undersigned hereby irrevocably
instructs you to transfer to such Transferee all rights of the undersigned to
draw under the Credit. By this transfer, all rights of the undersigned in the
Credit are transferred to Transferee and Transferee shall have the sole rights
as beneficiary thereof, including sole rights relating to any amendments,
whether increases or extensions or other amendments and whether now existing or
hereafter made. All amendments are to be advised directly to Transferee without
necessity of any consent of or notice to the undersigned.
U.S. Bank Trust National Association,
as Trustee
By:
Its: Authorized Officer
Page 6 of 7 all of which constitute an
integral part of this Letter of Credit
[LETTERHEAD OF COMERICA]
The undersigned (Name of Transferee) hereby accepts the foregoing transfer
of rights under the Credit and has accepted the obligations of the Trustee under
the Indenture.
(Name of Transferee)
By:
Title
Address of Principal Corporate Trust Office
Telephone
Fax
Page 7 of 7 all of which constitute an
integral part of this Letter of Credit