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Home My WebLink About11-21-1983 Industrial Development Corporation Board of Directors Meeting e e VINSON & ELKINS ATTORNEYS AT LAW FIRST CITY TOWER HOUSTON, TEXAS 77002 TELEPHONE 713 651-2222 TWX 9108816391 TELEX 762 146 1101 CONNECTICUT AVE. N W..5UITE 900 WASHINGTON, D. C. 20036 TELEPHONE 202 862-6500 CA8LE VINELKINS TELEX 89680 47 CHARLES ST., BERKELEY SQUARE LONDON WIX 7P6. E:NGLAND TELEPHONE 44 01 491-7236 CABLE VINELKINS LONDON W. I..TELEX 24140 AUSTIN NATIONAL BANK TOWER AUSTIN, TE:XAS 78701 TELEPHONE 512 478-2500 December 7, 1983 Ms. Cherie Black City Secretary City Hall 604 W. Fairmont La Porte, Texas Parkway 77571 1.1r. Jerry Dennis Secretary City of La Porte Industrial Development Corporation 604 W. Fairmont Parkway La Porte, Texas 77571 Re: Minutes of Meeting of the City of La Porte Industrial Development Corporation Dear Ms. Black and Mr. Dennis: Enclosed is a copy of the completed minutes of the meeting of the Board of Directors of the City of La Porte Industrial Development Corporation held on November 21, 1983. I apologize for the delay in getting this forwarded. Very truly yours, ~dL/c~ Sheela Rai Legal Assistant 5815/2461 enclosures cc: Knox W. Askins, Esq. e e MINulES OF MEETING OF CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION The City of La Porte Industrial Development Corporation (the "Issuer") convened in special session at 7:00 p.m. on November 21, 1983, in the Council Chamber at City Hall, 604 W. Fairmont Parkway, La Porte, Texas, after posting of written notice of said date, hour and place on a bulletin board convenient to the public in the City Hall of the City of La Porte for at least 72 hours preceding the scheduled time of such meeting, with such place of posting being readily accessible to the general public at all times from such posting until the scheduled time of such meeting (a copy of such notice being attached hereto as Exhibit A) and with such meeting being open to the public at all times except as permitted by law, all as required by the Open Meetings Law, Article 6252-17, Vernon's Annotated Texas Civil Statutes, as amended. .. The following members of the Board of Directors of the Issuer (the "Board") were present Lois Compton, Robert White, John Longley, W. R. Springall and Jerry Dennis and the following members of the Board were absent Virginia Cline and Doug Latimer, Jr., thus constituting a quorum. Whereupon the following business was conducted: 1. The meeting was called to order. e e 2. Minutes of the previous meeting of the Board were presented for approval. Hotion was made by Robert White and seconded by John Longley to approve said minutes as amended. Whereupon said minutes, as amended, were approved by the following vote of 5 Ayes, 0 Noes and 0 Abstentions. 3. A Resolution approving certain amendments to the Bylaws of the Issuer to comply with the 1983 amendments to the Development Corporation Act of 1979, Article 5190.6, Vernon's Annotated Texas Civil Statutes, as amended, was considered. Copies of the proposed amendments and a summary thereof were distributed to the members of the Board of Directors by Bond Counsel. Consideration of such Resolution was tabled until the next regular meeting of the Board. 4. Certain amendments to the Application for Financing of the Issuer were considered by the Board. Motion was made by Robert White and seconded by Lois Compton to amend said Application for Financing. Whereupon, said Application for Financing, as amended, was approved by the vote of 5 Ayes, 0 Noes and 0 Abstentions. -2- e e The Vice President of the Issuer was authorized by the Board to submit the Issuer's bond procedures, including the amended Application for Financing, to the Texas Economic Development Commission. 5. A public hearing was held with respect to the issuance of $3,800,000 City of La Porte Industrial Development Corporation Industrial Development Revenue Bonds, Series 1983 (La Quinta Motor Inns, Inc. Project) (the "Bonds"), to provide financing for the cost of acquisition, construc- tion and equipping of a motor inn of approximately 114 rooms and a related restaurant facility and related parking, fixtures, furnishings and equipment for La Quinta Motor Inns, Inc. Juan Marquez, a corporate attorney of La Quinta Motor Inns, Inc. was present, and described the Project. No one from the public rose to speak in opposition to or in favor of the Bonds and the Project. The public hearing was thereupon declared closed. 6. A Resolution authorizing the issuance of the Bonds and approving the documents related thereto was considered. Carolyn Truesdell of Vinson & Elkins, Bond Counsel, was present, and briefly summarized the financing and the documents being used. -3- e e Motion was made by Lois Compton and seconded by Robert w~ite to adopt said Resolution. Whereupon said Resolution was adopted by the following vote of 5 Ayes, 0 Noes and 0 Abstentions. Whereupon upon motion duly made and seconded the meeting was adjourned. -4- . CERTIFICATE OF SECRETARY e I, the undersigned, Secretary of the City of La Porte Industrial Development Corporation do hereby certify that the above is a true and correct copy of ~Jnc~~X~ the minutes of. the meeting of the City of La Porte Industrial Development Corporation held on November 21, 1983. CITY OF LA PORTE INDUSTRIAL DEVELOPMENT ~RATION Secretary (SEAL) ) " -4- e . THE STATE OF TEXAS x COUNTY OF HARRIS X CITY OF LA PORTE X NOTICE OF MEETING AND PUBLIC HEARING Notice is hereby given that the City of La Porte Industrial Development Corporation will meet in Special Session and Public Hearing on Industrial Revenue Bonds, at 7:00 P.M. on the 21st day of November, 1983, in the Council Chambers of the City Hall, 604 West Fairmont Parkway, La Porte, Texas. A copy of the agenda for said meeting, showing the subjects of such meeting, is at- tached hereto. I hereby certify that I posted this notice on the bulletin board located at a place convenient to the public in the City Hall of the City of La Porte, at 5:00 P.M. on the 15th day of November, 1983, and that said notice was posted for at least the three days preceding the day of the meeting, that such notice was posted before the meeting was convened, or called to order, and that said meeting was called because of an emergency of urgent public necessity. Witness my hand and the Seal of the City of La Porte, Texas, this the 15th day of November, 1983. CITY OF LA PORTE I J, ., 'i ~~/ Cherie Black City Secretary ~ . e AGENDA SPECIAL MEETING OF THE CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION AND PUBLIC HEARING ON INDUSTRIAL REVENUE BONDS TO BE HELD NOVEMBER 21, 1983, IN THE COUNCIL CHAMBERS OF THE CITY HALL, 604 WEST FAIRMONT PARKWAY, LA PORTE, TEXAS, BEGINNING AT 7:00 P.M. 1. CALL TO ORDER 2. CONSIDER APPROVING MINUTES OF PREVIOUS MEETINGS 3. CONSIDER APPROVING AMENDED BY-LAWS OF CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION 4. CONSIDER APPROVING AMENDED APPLICATION FOR FINANCING FOR CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION 5. PUBLIC HEARING REGARDING ISSUANCE OF $3,800,000 CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION INDUSTRIAL REVENUE BONDS, SERIES 1983, FOR LA QUINTA MOTOR INNS, INC., PROJECT PUBLIC INPUT A. THOSE WISHING TO SPEAK IN FAVOR OF THE BOND ISSUANCE B. THOSE WISHING TO SPEAK IN OPPOSITION TO THE BOND ISSUANCE PUBLIC HEARING CLOSED 6. CONSIDER ADOPTING RESOLUTION AUTHORIZING ISSUANCE OF BONDS AND APPROVING DOCUMENTS 7. ADJOURNMENT e e AGENDA SPECIAL MEETING OF THE CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION AND PUBLIC HEARING ON INDUSTRIAL REVENUE BONDS TO BE HELD NOVEMBER 21, 1983, IN THE COUNCIL CHAMBERS OF THE CITY HALL, 604 WEST FAIRMONT PARKWAY, LA PORTE, TEXAS, BEGINNING AT 7:00 P.M. 1. CALL TO ORDER 2. CONSIDER APPROVING MINUTES OF PREVIOUS MEETINGS 3. CONSIDER APPROVING AMENDED BY-LAWS OF CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION 4. CONSIDER APPROVING AMENDED APPLICATION FOR FINANCING FOR CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION 5. PUBLIC HEARING REGARDING ISSUANCE OF $3,800,000 CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION INDUSTRIAL REVENUE BONDS, SERIES 1983, FOR LA QUINTA MOTOR INNS, INC., PROJECT PUBLIC INPUT A. THOSE WISHING TO SPEAK IN FAVOR OF THE BOND ISSUANCE B. THOSE WISHING TO SPEAK IN OPPOSITION TO THE BOND ISSUANCE PUBLIC HEARING CLOSED 6. CONSIDER ADOPTING RESOLUTION AUTHORIZING ISSUANCE OF BONDS AND APPROVING DOCUMENTS 7. ADJOURNMENT e e ...-::::~ . VINSON & ELKINS ATTORNEYS AT LAW FIRST CITY TOWER HOUSTON, TEXAS 77002 TELEPHONE 713 651-2222 TWX 9108816391 TELEX 762 146 1101 CONNECTICUT AVE. N. W..5U ITE 900 WASHINGTON, D. C. 20036 TELEPHONE 202 862 -6500 CABLE VINElKINS.TElEX 89680 47 CHARLES ST.. BERKELEY SQUARE LONDON WIX 7PB, ENGLAND TELEPHONE 44 01 491-7236 CABLE VINELKINS LONDON W. L.TElEX 24140 AUSTIN NATIONAL BANK TOWER AUSTIN, TEXAS 78701 TELEPHONE 512 478-2500 November 9, 1983 r.1r. Knox Askins 702 West Fairmont Parkway La Porte, Texas 77571 Re: City of La Porte Industrial Development Corporation Dear Knox: The Texas Legislature recently passed a bill (S.B. 105) amending the Development Corporation Act of 1979, Vernon's Annotated Texas Civil Statutes, as amended (the "Act"), the enabling legislation for industrial development bond financing in Texas. Among other things, S.B. 105 changes the name of the Texas Industrial Commission to the Texas Economic Development Commission (the "Commission"), revises the definition of "project" contained in the Act and subjects industrial development corporations to the provisions of the Open Meetings Act and the Open Records Act. S.B. 105 will take effect on September 1, 1983. As you may recall, our firm assisted in the creation of the City of La Porte Industrial Development Corporation (the "Corporation"). We have determined that it would be advisable to amend the Corporation's Bylaws to provide that the books and records of the Corporation are open to the public in compliance with the Open Records Act and that meetings of the Board of Directors of the Corporation are open to the public and that notices of such meetings are posted at such times and in such places as to be in compli- ance with the Open Meetings Act. A copy of the Corporation's Bylaws incorporating such amendments is enclosed, together with a blacklined copy of the Bylaws showing the revisions and a brief summary of the revisions. The enclosed summary also lists additional recommended revisions which should be made to the Corporation's Bylaws in compliance 'with the amendments to Section 103 of the Internal Revenue Code relating to public approval of industrial development e e ~-..:::.. revenue bonds. We would suggest that the amended Bylaws be approved at the Corporation's next special meeting on November 21st and then submitted to the City Council of the City of La Porte for approval. For your convenience, we have enclosed suggested forms of resolutions authorizing such actions. In addition, please be reminded that in order for the Commission to approve an application submitted after Septem- ber 1, 1983, an industrial development corporation must file with the Commission its current fee schedule and written bond procedures on or before September 1 for the September 1, 1983 - August 31, 1984 period. In addition to any other amendments to the Corporation's fee schedule, bond procedures or application form that may have been approved in the last year but not yet filed, the Corpora- tion's forms that are submitted to the Commission should reflect the name change of the Commission and provide that the application fee payable to the Commission on behalf of the Corporation is a maximum fee of $1,500. For your convenience, we have enclosed a revised copy of the Corpo- ration's application for financing making such changes. Please feel free to contact the undersigned at (713) 654-4546 if you have any questions concerning this letter, the enclosed documents or the requirements of S.B. 105. We look forward to continuing to work with you. ~erY r. 'i~ yo. r~ ' ..- . ~! ,,/// . /:Z~ V:I ~' t " , ./ Da~iel J. Lye ;- U Enclosures -2- e e ~=-=- . oJ" .; SUMMARY OF AMENDMENTS TO CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION BYLAWS During the recent legislative session, certain amend- ments were made to the Development Corporation Act of 1979 (the "Act"). In addition, certain amendments have been made to Section 103 of the Internal Revenue Code of 1954, as amended (the "Code"). In order to comply with those amend- ments to the Act, which became effective September 1, 1983, and those amendments to the Code, the following revisions should be made to the Bylaws of the City of La Porte Indus- trial Development Corporation: 1. Article I, Section 1 should be revised to delete the words "Industrial Development" from the section heading to conform with the revised definition of "projects" contained in the Act. 2. Article I, Section 2(2) should be revised to change the name of the Texas Industrial Commission to the Texas Economic Development Commission. 3. Article I, Section 3 should be revised to provide that the books and records of the Corporation shall be open to the public in accordance wi th the Open Records Act. 4. Article II, Section 2 should be revised to provide that meetings of the Board of Directors shall be open to the public, except as otherwise permitted by the Texas Constitu- tion or the Open Meetings Act. 5. Article II, Section 3 should be revised to comply with the notice requirements of the Open Meetings Act. 6. Article II, Section 4 should be revised to comply with notice and agenda requirements of the Open Meetings Act. 7. Article I I, Section 5 has been added to provide for posting of notice of the meeting in compliance with the Open Meetings Act.' e e ....-::: =-:.:. ~ 8. Article II, Section 8 has been added to provide for public hearings required under Section 103(k) of the Internal Revenue Code to be held by an officer or director of the Corporation. 9. Article V, Section 4 should be revised to provide that it pertains only to notice given to a director. 10. Article V, Section 6 which permits the Board of Direc- tors to act without a meeting, should be deleted as it conflicts wi th the Open Meetings Act. In addi tion, the following amendments are recommended: 1. Article I I, indemnification Corporation. Section 11 has been added to provide for of the directors or officers of the 2. Article III, Section 1 has been revised to provide for the election or appointment of one or more assistant vice presidents and/or assistant secretaries. 3. Article III, Section 2 has been revised to specify that the president is a member of the Board of Directors of the Corporation. 4. Article III, Section 3 has been revised to specify powers of assistant vice presidents. 5. Article III, Section 5 has been revised to specify powers of assi stant secretaries. e e ....-::: =-.:.. . 4' _\ ,.... BYLAWS OF THE CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION (A~ A~e~ded 0\"\ ) ARTICLE I ..... POWERS AND PURPOSES (I p'~e c..+S II ~ s defi ~eci I V\ Section 1. Financing of I~a~a~Eial De~81e~m8Rt Projects. In order to implement the purposes for which the corporation was formed as set forth in the Articles of Incorporation, the Corporation shall issue obli ations to finance all or part of the cost of one or mor . of the Development Corporation Act of 1979, Article 5190.6, Vernon's Annotated Texas civil statutes, as amended (the " Act II ) . section 2. Conditions Precedent to Issuance of Obli- gations. The corporation shall not issue any obligations unless: 1) The City Council (the "Governing Body") of the City of La Porte (the "unitll) has approved by uritteR resolu- tion, adopted no more than sixty (60) days prior to the date of delivery of the obligations, the resolution of the Corporation providing for the issuance of the obli- gations; and E . b _I .-a.- r c.onOW\\ to e.V~opMe n, 2). . The TexaskIna~a~Eial Commission, or the executive director thereof, has approved the contents of any lease, sale or loan agreement made by the corporation under the Act. in c.onx;ecti(:>n ~i th the issuance. of obligation I ~ -fiRaReea io iR fUEthcraRco sf thc pub1io purpeac6 af the Act. section 3. Books and Records; Approval of Programs and Financial Statements. The corporation shall keep correct and complete books and records of account and shall also keep minutes of the proceedings of its Board of Directors (the "Board of Directorsll) and committees having any of the author- it of the Board of Directors. All books and records of the corporat~on' .' atterRoy fer ~ny proper pU~OC0 at any rea~gn4~le. time; AR~ at all time~ tae C9':erning iQQ;:.' Hill };d vu~ il.C',<=>ee to,..., tr<=> book. 5~l\ b!. kef'" 0.+ ~t. ~~',~t.if4.\ ~c.e. ~ -+he. u"'ro~+i~" w,,",e.I't." +~Q~ S~4\\ \)~ AV6.da.b\e. +c ~e. p....bli, Ir\ Aeco"'do.~,e. WI--Ht +/te Op e.. l'\ R e c..o rd ~ A.c.:t I A-t"'-ti de. ~ ~ S' ~ - Ii 0.. l V e.f'r\O ~ '~ A- jlH1 otz-L ~~ T~~~ Gill\ \ S+..+u.~t 1 o.~ Q.W\~eJ. . e e --". ..............-_-~ ",. ana rcceras af the Car~aratiaR. The Unit shall be entitled to approve all programs and expenditures of the Corporation and annually review any financial statements of the Corpora- tion. " section 4. Nonprofit Corooration. The Corporation ,shall be a nonprofit corporation, and no part of its net earnings remaining after payment of its expenses shall inure to the benefit of any individual, firm or corporation, except that in the event the Board of Directors shall determine that sufficient provision has been made for the full payment of the expenses, bonds and other obligations of the Corporation issued to finance all or part of the cost of a project, then any net earnings of the corporation thereafter accruing with respect to said project'shall be paid to the Unit. ARTICLE II BOARD OF DIRECTORS . ... - section 1. Powers, Number and Term of Office. The property and affairs of the corporation shall be managed and controlled by the Board of Directors and, subject to the restrictions imposed by law, the Articles of Incorporation and these Bylaws, the Board of Directors shall exercise all of the powers of the Corporation. /' '- The Board of Directors shall consist of c::pupn (...1--) directors, each of whom shall be appointed by the Govern~ng Body. The directors constituting the first Board of Directors . shall be thos~ directors named in the Articles of Incorpora- tion, each of 'whom shall serve for six (6) years or until his or her successor is appointed as hereinafter provided. Sub- sequent directors shall hold office for a term of six (6) years or until their successors are appointed as hereinafter provided. Any director may be removed from office, by the Govern- ing Body, for cause or at will. Section 2. Meetings of Directors. The directors may hold their meetings at such place or places in the State of Texas, as the Board of Directors may from time t~ time deter- mine; provided, however, in the absence of any such determin- ation by the Board of Directors, the meetings shall be held " -2- . r '- ~t\e. ( i.') do.y ",. r~~e Y"* Aicle.V" "1\ " e e Eve.~1 re~t).~a.l" ov ~rec.~cJ ~~ ~ ~e. Bco.1 ~ J)i~~-3 $hG.\\ be: ofe.~ -fc #.~ p~ (ic.) t,.)(Uf+ 6.1. C~e."'WI1te. re.(n'l(+~ b~ i'ke.. CD~~+i+c..d';Dt1 .o~ ~ S~+t. c)~ TU4, 0\1" -+he. OpQ.v\ . ~e.e.:'" ~~ S Ac.. + J A r+\ de. (. ~ s- ~ - 'i J V e.r'r\O n I~ A n r\o+~:+e.& \ u ~ ell,) \ \ ~+v.fe.$ I Cl ~ a.J"e.rttle.d I at the registered office of the corporation in the State Texas. o..V\ WN-h S\olc.h Y\o+\c..e. 0.5 Mo.y ~ ~"jve.d +i"",& -W) 4im e. b 1,,\tV. . . section 3. Regula ee ~ngs. egu a ee ~ngs of the Board of Directors shall be held uitl1sli1t. Reees6ity of not.i'-.... at such times and places as shall be designated, from time to time, by resolution of the Board of Director . section 4. Special Meetings. Special Meetings of the Board of Directors shall be held whenever called by the pre- sident, by the secretary, by a majority of the directors for the time being ,in office or upon advice of or request by the Governing Bod . FOY calASe. ~ he. S;,,~ The secretary shall give)notice to each d~rector of each S ecial Meeting in person, or by mail, telephone or telegraph, at leas before the meeting. YRle~B st.~eBrise ineieat.ee in t.k9 net.iee t.keIeer, aRY aRe all mat.t.er~ pert.aiB iR~ t.s t.Re ~M~e6e8 sf the Oe~eEatie~ may B~ eeR8iaeE~a and a€'!t~a 'bl~ell at. a .!;;pesial M8etiR~. .";t aR~. mee1dRS at. ,:kieA ~"<r~:ry ei:r€l6it.er tlBall lie pre&:&R't, &:r."&R tbQll']h Hi "t'qQ'1t :M])l~" netic~, allY matt~:r Jl8:rt.aiRiR~ te tae p~~eQ9 sf ~e Cs~sra tieR may se 8eB~iQerQQ ARQ .~t.ag llPQR section..c-" Quorum. A majority of the directors fixed by the Articles of Incorporation shall constitute a quorum for the consideration of matters p~rtaining to the purposes of the Corporation. The act of a majority of the directors present at a meeting at which a quorum is in attendance shall constitute the act of the Board of Directors, unless the act of a greater number is required bylaw. section .f'.7 Conduct of Business. At the meetings of the Board of Directors, matters pertaining to the purposes of the corporation shall be considered in such order as from time to time the Board of Directors may determine. At all meetings of the Board of Directors, the president shall preside, and in the absence of the president, the vice president shall exercise the powers of the president. The secretary of the Corporation shall act as secretary of all meetings of the Board of Directors, but in the absence of the secretary, the presiding officer may appoint any person to act as secretary of the meeting. \. -3- P"""::':- ". \ e e ~::....:.:. RIDER "A" Section 5. Public Notice. Written notice of the date, hour, place and subject of each mee~ing of the Board of Directors shall be posted at such times and in such places as notice of each meeting of the Governing Body of the Unit is posted, all as prescribed by the Open Meetings Act, Article 6252-17, Vernon's Annotated Texas Civil Statutes, as amended. e e ....-::::.....:. . , D j \" D. 'I Tl'\~~~-t ",io.e..r p IV'~t+ p. iJe( \\ C II section ;::'1 Executive Committee. Thk Board of Direc- tors, by resolution passed by a majority of the directors in office, may designate two or more directors to constitute an executive committee, which committee, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the management of the corporation, except where action of the Board of Directors is specified by law. The executive committee shall act in the manner provided in such resolution. The executive committee so designated shall keep regular minutes of the transactions of its meetings and shall cause such minutes to be recorded in books kept for that purpose in the office of the Corpora- tion, and shall report the same to the Board of Directors from time to time. /'10 - . section Jr. Compensation of Directors. Directors as such shall not receive any salary or compensation for their services, except that they shall be reimbursed for their actual expenses incurred in the performance of their duties hereunder. \he. brA Df bi~c.-ft>~ ARTICLE III fr\O.1 a.l~o e,..(e.c..f ()'I'~poim- (> t'\-t. OY'" mD~ aS~1 ~~ ~ \J i e,,," rt,. itJ. etV\+5 ,,'-'0 r- . o~e. ot' ~O~ OFFICERS section 1. Titles and Term of Office. The officer~ the corporation shall be a pres~dent/W v~ce presiden~a ~ secretary and a treasurer, and such other officers as the Board of Directors may from time to time elect or appoint. One person may hold more than one office, except t the president shall not hold the office of secretary. Terms of office shall not exceed three years. ., All officers shall be subject to removal from office, with or without cause, at any time by a vote of a majority of the entire Board of Directors. A vacancy in the office' of any officer shall be filled by a vote of a ma'orit of the directors. A w\&..., 0 . e. OQ,(i r"S ~ ~e. c....por'cetiOf\) section 2. powers and Dut~es 0 the presiden . president shall be t11~ o111'::f e:xe.emti ve. effic..L of U~'" eO.L!-'v r:ati9n and, E:1:Wj ~o~. to tha BO~. re of :Dire~~-c:r!3, ~~all Be i: S.u~Q..l .aiir9e-e~ ~Q preflert~ec aRQ affa~ro Elf tila-~e~8r.a ! tiOR; shall preside at all meetings of the Board, of Directors; and in furtherance of the purposes of the corporation, may sign and execute all contracts, conveyances, franchises, -4- e e ...-::::.....::. RIDER "B" 2. Section ;t.. Public Hearings. Public hearings required under Section l03(k) of the Internal Revenue Code of 1954, as amended., may be called and conducted by any officer or director of the Corporation, and such officer or director may establish the date, place and time of the hearing and may give notice of the hearing. e e F"":::::"':: . RIDER "e" \ \ . Section io&. Indemnification. The Corporation shall have the power to indemnify any director or officer or former director or officer of the. Co:r:pcratiOIl for expenses and costs (includ.ing a'ttorneys' fees) actually and' necessarily incurred by such director or office%' in connection with any claim asserted against such director or officer by ac'tiOIl in court or otherwise by reason of such director's or officer's being or having been a director or officer, except in relation to matters as to which such director or officer' shall have been guilty of negligence or misconduct in respect of the matter in which indemnity is sought. If the Corporation has not fully indemnified such director or officer, the court in the proceeding in which my claim against such director or officer has been asserted or sny court having the requisite jw:isdiction of an action instituted by such director or officer OIl such director's or officer's claim for indemnity may assess indemnity against the Corporation, its receiver, or trustee for the amount paid by such. director or offieer (incl'un -fT'lg attorneys' fees) in sa.'tisfaction of any judgment or in comPromise of any such claim (exclusive in either ease of sny amount' paid to the Corporation), actually snd necessari.ly inc:m::ed by such director or officer in connection therewith to the extent that the court shall deem reasonable and equitable; pi-ovi-ded, nevertheless, that inde:m.i.ty may be assessed under this Section". on y' if. the co~ finds that the person indemnified was not guil tY pf negligence or m:i.sconduet ~ respect of the matter in which indeug:U? is sought.. II e e ...-.:::=-= . mortgages, notes and other instru- /' ..... \.1\1 ~ ~rv"6 '- section 4. Treasurer. The treasurer shall have custody of all the funds and securities of the corporation which come into such treasurer's hands. When necessary or proper, the treasurer may endorse, on behalf of the corporation, for collection, checks, notes and other obligations and shall deposit the same to the credit of.the corporation in such bank or banks or depositories as shall be designated in the manner prescribed .by the Board of Directors; may sign all receipts and vouchers for payment made to the Corporation, either alone or jointly with such other officer as is desig- nated by the Board of Directors; whenever required by the Board of Directors, shall render a statement of the cash account; shall enter or cause to be entered regularly in the books of the corporation to be kept by the treasurer for that purpose full and accurate accounts pf all monies received and paid out on account of the corporation; shall perform all acts incident to the position of treasurer subject to the control of the Board of Directors; and shall, if required by the Board of Directors, give such bond for the faithful dis- charge of his or her duties in such form as the Board of Directors may require. d A .~ .1.00 tI!I. J..-----.' :' 4" ~s,~o.". ~fC""""'T'Ur.~ S section 5. secreta..-tr~ The secretary shall keep the minutes of all meetings ~1. the Board of Directors in books provided for that purpose; shall attend to the giving and serving of all notices; in furtherance of the purposes of this Corporation, may sign with the president in the name of the Corporation, and/or attest the signature thereto, all contracts, conveyances, franchises, bonds, deeds, assign- ments, mortgages, notes and other instruments of the Corpo- ration; shall.have charge of the corporate books, records, documents and instruments, except the books of account and financial records and securities of which the treasurer shall have custody and charge, and such other books and papers as the Board of Directors may direct, all of which shall at all /' '- , -5- . '- e e F""":::: ::....:.:.. '0 T ,,~u.,.. R.ilu 6- A- reasonable times be open to inspection upon application at the office of the Corporation during business hours; and shall in general perform all duties incident to the office of secretary subject to the control of the Board of Directors. , section 6. Comoensation. Officers as such shall not receive any salary or compensation for their services, except that they shall be reimbursed for their actual expenses in- curred in the performance of their duties hereunder. - ARTICLE IV PROVISIONS REGARDING ARTICLES OF INCORPORATION AND BYLAWS section 1. Effective Date. These Bylaws shall become effective only upon the occurrence of the following events: (1) the approval of these Bylaws by the Governing Body; and (2) the adoption of these Bylaws by the Board of Direc- tors. section 2. Amendments to Articles of Incorporation and Bvlaws. The Articles of Incorporation may at any time and from time to time be amended, provided that the Board of Directors files with the Governing Body a written application requesting that the Governing Body approve such amendment to the Articles of Incorporation, specifying in such application the amendment or amendments proposed to .be made. I f the Governing Body by appropriate resolution finds and determines that it is advisable that the proposed amendment be made, authorizes the" same to be made and approves the form of the proposed amendment, the Board of Directors shall proceed to amend the Articles as provided in the Act. The Articles of Incorporation may also be amended at any time by the Governing Body at its sole discretion by adopting an amendment to. the Articles of Incorporation of the Corpora- . tion by resolution of the Governing Body and delivering the Articles of.Amendment to the Secretary of State as provided in the Act. These Bylaws may be amended by majority vote of the Board of Directors. -6- e e ......-:: :....::: . RIDER ,.....,4- Any assistant secretary shall, at the Board of Directors' direction, exercise the powers of the secretary during that officer's absence or inability to act. Any actions taken by an assistant secretary in the performance of the duties of secretary shall be conclusive evidence of the absence or inability to act of the secretary at the time such action was taken. e e ~::....::. . section 3. Interpretation of Bylaws. These Bylaws and all the terms and provisions hereof shall be liberally con- s.trued to effectuate the purposes set forth herein.. If any word, phrase, clause, sentence, paragraph, section or other part of these Bylaws, or the application thereof to any person or circumstance, shall ever be held to be invalid or unconsti- tutional by any court of competent jurisdiction, the remainder of these Bylaws and the application of such word, phrase, clause, sentence, paragraph, section or other part of these Bylaws to any other person or circumstance shall not be affected thereby. ARTICLE V GENERAL PROVISIONS '-- section 1. Principal Office. The principal office of the Corporation shall be located in La Porte , Texas. The Corporation shall have and continuously maintain in the State of Texas.. (the II State II ) a registered office, and a registered agent whose business office is identical with such registered office, as required by the Act. The registered office may be, but need not be, id~ntical with the principal office in the State, and the address of the registered office may be changed from time to time by the Board of Directors, pursuant to the requirements of the. Act.. section 2. Fiscal Year. The fiscal year of the Corpo- ration shall be as determined by the Board of Directors. section 3. Seal. The seal of the corporation as determined by 'the Board of Directors. " /" -t1:> ~~ a.....d of- D i~e.~tov.s section 4. Notice~and Waiver of Notice. notice whatsoever is required to be give n er the provi- sions of the Act, the Articles of Incorporation or these Bylaws, said notice shall be deemed to be sufficient if given by depositing the same in a post office box in a sealed post- paid wrapper addressed to the person entitled thereto at his post office address, as it appears on the books of the Corpor- ation, and such notice shall be deemed to have been given on the day of such mailing. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened. Neither shall be t+o cL JI'n!d-c~ -7- e e P"'.==-:': . , , /. the business to be tra sacted at nor the purpose of any Regular or Special Meet ng of the Board of Directors need be specified in the notice or waiver of notice of such meeting, unless required by the Board of Directors. A waiver of notice in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. section 5. Resignations. Any. director or officer may resign at any time. Such resignation shall be made in writing and shall taJ).e effect at the time specified therein, or, if no time be specified, at the time of its receipt by the presi- dent or secretary. The acceptance ofa resignation shall not be necessary to make it effective, unless expressly so pro- vided in the resignation. 5~~ ~ a. di rt-ctvv " '--- 1 ou a Mee 1n 0 act10n Wh1Ch may be taken at a m the Board of ctors or of any committee m e taken with- out a meeting if a sent in writin etting forth the action to be taken, shal i y all of the directors, or all of the members of co' tee, as the case may be. Such consent shall the same force effect as a unani- mous vote an be stated as such in any a . les or docu- ment f' with the Secretary of State, the Texas trial C ssion or an other person. section ;::fo Approval or Advice and Consent of the -Governing Body. To the extent that these Bylaws refer to any approval by the Unit or refer to advice and consent by the Unit, such advice and consent shall be evidenced by a certi- fied copy of a resolution, ordinance or motion duly adopted by the Governing Body. section ;;::7 Organizational Control. The unit may, at its sole discretion, and at any time, alter or change the structure, organization, programs or activities of the Corpor- ation (including the power to terminate the corporation), subject to 'any limitation on the impairment of contracts entered into by such Corporation. , /'""<J, I' f h ' d' Sect10n !?f~ D1SS0 ut10n 0 t e Corporat1on. upon 1S- solution of the Corporation, title to or other interests in any real or personal property owned by the Corporation at such time shall vest in the Unit. -8- e e -=-- .' ...........-.-.:...-. .. BYLA\vS OF CITl- OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION (As Amended on ) ARTICLE I POWERS AND PURPOSES Section 1. Financing of Projects. In order to implement the purposes for which the Corporation was formed as set forth in the Articles of Incorporation, the Corporation shall issue obligations to finance all or part of the cost of one or more "projects" as defined in the Development Corporation Act of 1979, Article 5190.6, Vernon's Annotated Texas Civil Statutes, as amended (the "Act"). Section 2. Conditions Precedent to Issuance of Obligations. The Corporation shall not issue any obligations unless: 1) The City Council (the "Governing Body") of the City of La Porte (the "Unit"), has approved by resolution, adopted no more than sixty (60) days prior to the date of delivery of the obliga- tions, the resolution of the Corporation providing for the issuance of the obligations; and 2) The Texas Economic Development Commission, or the executive director thereof, has approved the contents of any lease, sale or loan agreement made by the Corporation under the Act in connection with the issuance of obligations. Section 3. Books and Records; Approval of Programs and Financial S~a~ements. The Corporation shall keep correc~ and complete books and records of account and shall also keep minutes of the proceedings of its Board of Directors (the "Board of Directors") and committ:ees having any of the authority of the Board of Directors. All books and records of the Corporation shall be kept at the principal office of the Corporation where they shall be available to the public in accordance with the Open Records Act, Article 6252-17a, Vernon's Annota~ed Texas Civil Stat:u~es, as amended. The Unit shall be entitled to approve all programs and expendit:ures of the Corporation and annually review any financial statement:s of the Corpora~ion. Section 4. Nonprofit Corporation. The Corporation shall be a nonprofit corporation, and no part of its net earnings remaining after payment of its expenses shall inure to the benefit of any individual, firm or corporation, except that in the event the Board of Directors e e ....-:=::...:.. shall determine that sufficient prOV1S1on has been made for the full payment of the expenses, bonds and other obligations of the Corporation issued to finance all or part of the cost of a project, then any net earnings of the Corporation thereafter accruing with respec~ to said project shall be paid to the Unit. ARTICLE II BOARD OF DIRECTORS Section 1. Powers, Number and Term of Office. The property and affairs of the Corporation shall be managed and controlled by the Board of Directors and, subject to the restrictions imposed by law, the Articles of Incorporation and these Bylaws, the Board of Directors shall exercise all of the powers of the Corporation. The Board of Direc~ors shall consist of seven (7) directors, each of whom shall be appointed by the Governing Body. The directors constituting the first Board of Directors shall be those directors named in the Articles of In~orporation, each of whom shall serve for six (6) years or until his or her successor is appoin~ed as hereinafter provided. Subsequent directors shall hold office for a term of six (6) years or until ~heir successors are appointed as herein- after provided. Any director may be removed from office, by the Governing Body, for cause or at will. Section 2. Meetings of Directors. The directors may hold their meetings a~ such place or places in the State of Texas as the Board of Directors may from time to time determine; provided, however, in the absence of any such determination by the Board of Directors, the meetings shall be held at the registered office of the Corporation in the State of Texas. Every regular or special meeting of the Board of Directors shall be open to the public, except as otherwise permitted by the Constitution of the State of Texas or the Open Meetings Act, Article 6252-17, Vernon's Annotated Texas Civil Statutes, as amended. Section ,3. Regular Meetings. Regular ~leetings of the Board of Directors shall be held a~ such times and places as shall be designated, from time to time, by resolution of the Board of Directors and with such notice as may be required from time to time by law. Section 4. Special Meetings. Special Meetings of the Board of Directors shall be held whenever called by ~he president, by the secre- tary, by a majority of the directors for the time being in office or -2- e e ~=--::: upon advice of or request by the Governing Body and with such notice as may be required from time to time by law. The secretary shall give or cause to be given notice to each director of each Special Meeting in person, or by mail, telephone or telegraph, at least one (1) day before the meeting. Section 5. Public Notice. Written notice of the date, hour, place and subject of each meeting of the Board of Directors shall be posted at such times and in such places as notice of each meeting of the Governing Body of the Unit is posted, all as prescribed by the Open Meetings Act, Article 6252-17, Vernon's Annotated Texas Civil Statutes, as amended. Section 6. Quorum. A majority of the directors fixed by the Articles of Incorporation shall constitute a quorum for the consideration of matters pertaining to the purposes of the Corporation. The act of a majority of the directors presept at a meeting at which a quorum is in attendance shall constitute the act of the Board of Directors, unless the act of a greater number is required by law. Section 7, Conduct of Business. At the meetings of the Board of Directors, matters pertaining to the purposes of the Corporation shall be considered in such order as from time to time the Board of Directors may determine. At all meetings of the Board of Directors, the president shall preside, and in the absence of the president, the vice president shall exercise the powers of the president. The secretary of the Corporation shall act as secretary of all meetings of the Board of Directors, but in the absence of the secretary, the presiding officer may appoint any person to act as secretary of the meeting. Section 8. Public Hearings. Public hearings required under Section 103(k) of the Internal Revenue Code of 1954, as amended, may be called and conducted by any officer or director of the Corporation, and such officer or director may establish the date, place and time of the hearing and may give notice of the hearing. Section 9. Executive Committee. The Board of Directors, by resolution passed by a majority of the directors in office, may desig- nate two or more directors to constitute an executive committee, which committee, to the ,extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the manage- ment of the Corporation, except where action of the Board of. Directors is specified by law. The executive committee shall act in the manner -3- e e .....-::-...:...: : provided in such resolution. The executive committee so designated shall keep regular minutes of the transactions of its meetings and shall cause such minu~es ~o be recorded in books kept for that purpose in the office of ~he Corporation, and shall report the same to the Board of Directors from time to time. Section 10. Compensation of Directors. Directors as such shall not receive any salary or compensation for their services, except that they shall be reimbursed for their actual expenses incurred in the performance of their duties hereunder. Section 11. Indemnification. The Corporation shall have the power to indemnify any director or officer or former director or officer of the Corporation for expenses and costs (including attorneys' fees) actually and necessarily incurred by such director or officer in connection with any claim asserted against such director or officer by action in court or otherwise by reason of ~uch director's or officer's being or having been a director or officer, except in relation to matters as to which such director or officer shall have been guilty of negligence or misconduct in respect of the matter in which indemnity is sought. If the Corporation has not fully indemnified such director or officer, the court in the proceeding in which any claim against such director or officer has been asserted or any court having the requisite jurisdiction of an action instituted by such director or officer on such director's or officer's claim for indemnity may assess indemnity against the Corporation, its receiver, or trustee for the amount paid by such director or officer (including a~torneys' fees) in satisfaction of any judgment or in compromise of any such claim (exclusive in ei~her case of any amount paid to the Corporation), actually and necessarily incurred by such director or officer in connection therewith to the extent that the court shall deem reasonable and equitable; provided, nevertheless, that indemnity may be assessed under this Section 11 only if the court finds that the person indemnified was not guilty of negligence or misconduct in respect of the mat~er in which indemnity is sought. ARTICLE III OFFICERS Section 1. Titles and Term of Office. The officers of the Corporation shall be a president, one or more vice presidents, a secretary and a treasurer, and such other officers as the Board of Directors may from time to time elect or appoint. One person may hold more than one office, except that the president shall not hold the office of secretary. The Board of Directors may also elect or appoint one or more assistant vice presidents and/or assistant secretaries. Terms of office shall not exceed three years. -4- . e e ....-:: =-:.:. All officers shall be subject to removal from office, with or without cause, at any time by a vote of a majority of the entire Board of Directors. A vacancy in the office of any officer shall be filled by a vote of a majority of the directors. Section 2. Powers and Duties of the President. The president shall be a member of the Board of Directors of the Corporation, shall preside at all meetings of the Board of Directors and in furtherance of the purposes of the Corporation, may sign and execute all contracts, conveyances, franchises, bonds, deeds, assignments, mortgages, notes and other instruments in the name of the Corporation. Section 3. Vice Presidents and Assistant Vice Presidents. Vice presidents and assistant vice presidents shall be members of the Board of Directors of the Corporation, shall hav~ such powers and duties as may be assigned by the Board of Directors and any of them shall, at the Board of Directors' direction, exercise the powers of the president during that officer's absence or inability to act. Any action taken by a vice president or assistant vice president in the performance of the duties of the president shall be conclusive evidence of the absence or inability to act of the president at the time such action was taken. Section 4. Treasurer. The treasurer shall have custody of all the funds and securities of the Corporation which come into such treasurer's hands. When necessary or proper, the treasurer may endorse, on behalf of the Corporation, for collection, checks, notes and other obligations and shall deposit the same to the credit of the Corporation in such bank or banks or depositories as shall be designated in the manner prescribed by the Board of Directors; may sign all receipts and vouchers for pay ment made to the Corporation, either alone or jointly with such other officer as is designated by the Board of Directors; whenever required by the Board of Directors, shall render a statement of the cash account; shall enter or cause to be entered regularly in the books of the Corpo- ration to be kept by the treasurer for that purpose full and accurate accounts of all monies received and paid out on account of the Corpora- tion; shall perform all acts incident to the position of treasurer subject to the control of the Board of Directors; and shall, if required by the Board of Directors, give such bond for the faithful discharge of his or her duties in such form as the Board of Directors may require. Section 5. Secretary and Assistant Secretaries. The secretary shall keep the minutes of all meetings of the Board of Directors in books provided for that purpose; shall attend to the giving and serving of all notices; in furtherance of the purposes of this Corporation, may sign with the president in the name of the Corporation, and/or attest the signature thereto, all contracts, conveyances, franchises, bonds, -5- e e .-::::~ deeds, assignments, mortgages, notes and other instruments of the Corporation; shall have charge of the corporate books, records, documents and instruments, except the books of account and financial records and securities of which the treasurer shall have custody and charge, and such other books and papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection upon application at the office of the Corporation during business hours; and shall in general perform all duties incident to the office of secretary subject to the control of the Board of Directors. Any assis- tant secretary shall, at the Board of Directors' direction, exercise the powers of the secretary during that officer's absence or inability to act. Any actions taken by an assistant secretary in the performance of the duties of secretary shall be conclusive evidence of the absence or inability to act of the secretary at the time such action was taken. Section 6. Compensation. Officers as such shall not receive any salary or compensation for their services, ,except that they shall be reimbursed for their actual expenses incurred in the performance of their duties hereunder. ARTICLE IV PROVISIONS REGARDING ARTICLES OF INCORPORATION AND BYLAWS Section 1. Effective Date. These Bylaws shall become effective only upon the occurrence of the following events: (1) the approval of these Bylaws by the Governing Body; and (2) the adoption of these Bylaws by the Board of Directors. Section 2. Amendments to Articles of Incorporation and Bylaws. The Articles of Incorporation may at any time and from time to time be amended, provided that the Board of Directors files with the Governing Body a written application requesting that the Governing Body approve such amendment to the Articles of Incorporation, specifying in such application the amendment or amendments proposed to be made. If the Governing Body by appropriate resolution finds and determines that it is advisable that the proposed amendment be made, authorizes the same to be made and approves the form of the proposed amendment, the Board of Directors shall proceed to amend the Articles as provided in the Act. The Articles, of Incorporation may also be amended at any time by the Governing Body at its sole discretion by adopting an amendment to the Articles of Incorporation of the Corporation by resolution of the Governing Body and delivering the Articles of Amendment to the Secretary of State as provided in the Act. -6- e e .......-::. q '. These Bylaws may be amended by majority vote of the Board of Directors. Section 3. Interpretation of Bvlaws. These Bylaws and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein. If any word, phrase, clause, sentence, paragraph, section or other part of these Bylaws, or the application thereof to any person or circumstance, shall ever be held to be invalid or unconstitutional by any court of competent jurisdiction, the remainder of these Bylaws and the application of such word, phrase, clause, sentence, paragraph, section or other part of these Bylaws to any other person or circumstance shall not be affected thereby. ARTICLE V GENERAL PROVISIONS Section 1. Principal Office. The principal office of the Corpora- tion shall be located in La Porte, Texas. The Corporation shall have and continuously maintain in the State of Texas (the "State") a registered office, and a registered agent whose business office is identical with such registered office, as required by the Act. The registered office may be, but need not be, identical with the principal office in the State, and the address of the registered office may be changed from time to time by the Board of Directors, pursuant to the requirements of the Act. Section 2. Fiscal Year. The fiscal year of the Corporation shall be as determined by the Board of Directors. Section 3. Seal. The seal of the Corporation shall be as deter- mined by the Board of Directors. Section 4. Notice to Board of Directors and Waiver of Notice. Whenever any notice whatsoever is required to be given to a director under the provisions of the Act, the Articles of Incorporation or these Bylaws, said notice shall be deemed to be sufficient if given by depos- iting the same in a post office box in a sealed postpaid wrapper addressed to the person entitled thereto at his post office address, as it appears on the books of the Corporation, and such notice shall be deemed to have been given on the day of such mailing. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any Regular or Special Meeting of the Board of Directors need be specified in the notice given -7- e e ..-.:::=-::. to a director or waiver of notice of such meeting, unless required by the Board of Directors. A waiver of notice in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Section 5, Resignations. Any director or officer may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the president or secretary. The acceptance of a resignation shall not be necessary to make it effective, unless ex- pressly so provided in the resignation. Section 6. Approval or Advice and Consent of the Governing Body. To the extent that these Bylaws refer to any approval by the Unit or refer to advice and consent by the Unit, such advice and consent shall be evidenced by a certified copy of a resolution, order or motion duly adopted by the Governing Body. Section 7. Organizational Control. The Unit may, at its sole discretion, and at any time, alter or change the structure, organization, programs or activities of the Corporation (including the power to terminate the Corporation), subject to any limitation on the impairment of contracts entered into by such Corporation. Section 8. Dissolution of the Corporation. Upon dissolution of the Corporation, title to or other interests in any real or personal property owned by the Corporation at such time shall vest in the Unit. -8- e e ..-:::=- RESOLUTION OF CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION APPROVING AMENDED BYLAWS \vHEREAS, the Development Corporation Act of 1979, Article 5190.6, Vernon's Annotated Texas Civil Statutes, as amended, has been amended by the Texas Legislature and such amendment requires certain changes to the Bylaws of the City of La Porte Industrial Development Corporation (the "Corporation") i and WHEREAS, the Board of Directors (the "Board") of the Corporation has been presented with and has examined proposed forms of certain amendments to the Bylaws of the Corporation, and the Board finds that the form and substance of such Bylaws, as amended, are satisfactory; NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION THAT: The Bylaws of the Corporation, as amended, substan- tially in the form attached hereto as Exhibit A, are hereby adopted and approved. PASSED AND APPROVED thi s _ day of , 1983. e e ....-:-::.., .' . . RESOLUTION OF THE CITY COUNCIL APPROVING AMENDED BYLAWS OF CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION WHEREAS, by resolution the City Council (the "Governing Body") of the City of La Porte, Texas (the "Unit"), autho- rized and approved the creation of the Ci ty of La Porte Industrial Development Corporation (the "Corporation") as a nonprofit industrial development corporation under the provisions of the Development Corporation Act of 1979, Article 5190.6, Vernon's Annotated Texas Civil Statutes, as amended; and WHEREAS, the Board of Directors of the Corporation has adopted or intends to adopt certain amendments to the Bylaws of the Corporation; and WHEREAS, the Governing Body has been presented with and has examined proposed forms of such amendments to the Bylaws of the Corporation and finds that the form and substance of such Bylaws, as amended, are satisfactory; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LA PORTE, TEXAS, THAT: The amended Bylaws of the Corporation, substantially in the form attached hereto as Exhibi t .r:.., are hereby approved. PASSED AND APPROVED thi s _ day of , 1983. ------------------------------------------------------------ ~ e e ....-::: - ., -D t CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION (a nonprofit corporation) APPLICATION FOR FINANCING The purpose of this application is to present to the City of La Porte Industrial Development Corporation (the "Corporation") a reasonably comprehensive outline of the project (the "Project") for which financing is being requested. Fill in all blanks, using "None" or "Not Applicable" where necessary. If additional space is needed, attach separate shee~s as exhibits. The completed application, with supporting documents, is to be submitted in duplicate ~o the City Secretary of the City of La Porte, Texas at the following address: City Secretary, City of La Porte,. Texas, 604 West Fairmont Pkwy., P. O. Box 1115, La Porte, Texas 77571, Re: Application for Industrial Development Revenue Bonds. In addition, one copy of the completed application should be submitted to counsel to the Corporation, Knox W. Askins, J.D., P.C., 702 West Fairmont Pkwy., P. O. Box 1218, La Porte, Texas 77571. At the time this application is submitted, a non-refundable application fee must be paid to the Corporation as follows: if the amount of financing applied for is equal to or less than $500,000, then the fee is 5500; if the amount of financing applied for is greater than $500,000, then the fee is $1,000. All applications for financing must be submitted to the Corporation for review and recommendation at least one (1) week prior to a meeting of the Board of Directors during which action upon said applica~ion will be taken. 1. General Information a. Legal name, address and telephone number of Applicant. b. State of incorporation or other form of organization or association. c. Registered agent for service of process for the Applicant. e e ...-::: :::...:.: CITY OF LA PORTE INDUSTRIAL ~ DEVELOPMENT CORPORATION Application for Financing Page 2 d. Person to whom questions and correspondence should be directed. e. Name, address and telephone number of counsel for Applicant (this does not mean bond counsel). f. Name, address and telephone number of accounting firm. g. Name, address and telephone number for bond counsel (if one has been chosen). 2. Description of Project a. Amount of financing applied for: b. Total cost of Project: c. Brief narrative description of the Project including whether land acquisition is included and the major components of the Project, the estimated number and type of new jobs to be created in City of La Porte, Texas by the Proj ect and the annual payroll of employees working at the Project. e e .. -. .. CITY OF LA PORTE INDUSTRIAL ! DEVELOPMENT CORPORATION Application for Financing Page 3 d. If the Applicant is relying on the "small issue" exemption as the basis for the interest on the bonds being exempt from federal income taxes, complete and attach to this application the Industrial Development Bond Financing Questionnaire attached to this application as Exhibit A. Any questions in this regard should be addressed to bond counsel (if known). 3. Financial Arrangements a, Summarize the financing arrangements as planned as of this date including name and address of the financial institu- tion(s) (bank, investment banking firm, etc.), if determined, which may be interested in purchasing the bonds if and when such bonds may be approved for sale: (It is the responsi- bility of the Applicant to arrange for the marketing of the bonds if the financing is approved, with the Corporation's concurrence.) b. If the Applicant has credit rating, please state the rating and agency: c. Explain how the Project will be financed if all or a portion of the amount of the financing applied for herein is denied: 4. Financial Statements a, Attach most recent Form 10-K to the Securities and Exchange Commission, together with the most recent Form 10-Q. OR 1. A brief description of the form of organization and organizational structure, including parent, subsidiaries and affiliates; and 2. A brief statement of the history and type of business engaged in; and 3. The names and ages of executive or managing officers and directors and a brief account of all business-experience of each such officer or director, including his principal e e P-::::":' ~ CITY OF LA PORTE INDUSTRIAL I DEVELOPHENT CORPORATION Application for Financing Page 4 occupations and employment and the name and principal business of the corporation or other organization in which such occupations and employment were carried on; and, 4. Audited financial statements (or if audited financial statements are not available, unaudited financial statements) for each of the three preceding fiscal years. b. Detail changes or events subsequent to the date of the most recent financial statements (including but not limited to pending or threatened litigation, claims, assessments, commit- ments, subsequent information regarding uncollectibility of receivables, valuation of assets, changes in corporate struc- ture or statements of prior period financial statements) which may have a material effect on the Applicant's financial position: 5. Agreements of Applicant a. Indemnity: By its execution of this Application, the Applicant agrees that it will at all times indemnify and hold harmless the Corporation, the Board of Directors of the Corpo- ration, City of La Porte, Texas (the "Unit"), the City Council of the Unit and any of the officers, directors, employees, agents, servants and any other party acting for or on behalf of the Corporation or the Unit (such parties being hereinafter referred to as the "Indemnified Parties") against any and all losses, costs, damages, expenses and liabilities (collectively herein called "Losses") of whatsoever nature (including, but not limited to, attorneys' fees, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) directly or indirectly resulting from, arising out of or relating to one or more Claims, as hereinafter defined, even if such Losses or Claims, or both, directly or indirectly result from, arise out of or relate to, or are asserted to have resulted from, arisen out of or related to, in whole or in part, one or more negligent acts or omissions of the In- demnified Parties in connection with the issuance of the Bonds or in connection with the Project. The term "Claims" as used herein shall mean all claims, lawsuits, causes of action and e e ......-- .. ~ CITY OF LA PORTE INDUSTRIAL .) DEVELOPMEl'-l7 CORPORATION Application for Financing Page 5 other legal actions and proceedings of whatsoever nature, including but not limited to claims, lawsuits, causes of action and other legal actions and proceedings, involving bodily or personal injury or death of any person or damage to any property (including, but not limited to, persons employed by the Corporation, the Unit, the applicam: or any other person and all property owned or claimed by the Corporation, the Unit, the Applicant, any affiliate of the Applicant or any other person) or involving damages relating to the issuance, offering, sale or delivery of the Corporation's bonds to finance the Project (the "Bonds") brought against any Indemni- fied Party or which any Indemnified Party is a party, even if groundless, false or fraudulent, that directly or indirectly result from, arise out of or relate to the issuance offering, sale or delivery of the Bonds or the design, construction, installation, operation, use, occupancy, maintenance or ownership of the Project or any pa~t thereof. None of the Indemnified Parties shall be liable to the Appli- cant for, and the Applicant hereby releases each of them from all liability to the Applicant for all injuries, damages or destruction of all or any part or parts of any property owned or claimed by the Applicant that directly or indirectly result from, arise out of or relate to the design, construction, operation, use, occupancy, maintenance or ownership of the Project or any part thereof, even if such injuries, damages or destruction directly or indirectly result from, arise out of or relate to, in whole or in part, one or more negligent acts or omissions of the Indemnified Parties in connection with the issuance of the Bonds or in connection with the Project. Each Indemnified Party, as appropriate, shall reimburse the Applicant for payments made by the Applicant to the extent of any proceeds, net of all expenses of collection, actually received by them from any insurance with respect to the Loss sustained. Such Indemnified Party, as appropriate, shall have the duty to claim any such insurance proceeds and the Indemni- fied Party, as appropriate, shall assign its respective rights to such proceeds, to the extent of such required reimburse- ment, to the Applicant. In case any action shall be brought or to the knowledge of any Indemnified Party, threated against any of them in respect of which indemnity may be sought against the Applicant, the Indemnified Party shall promptly notify ~he Applicant in writing and the Applicant shall have the right to assume the investigation and defense thereof, including the employment of counsel and the payment of all expenses. The Indemnified Party shall have the right to e e .-~:..:.;, CITY OF LA PORTE INDVSTRIAL -, DEVELOPMENT CORPORATION Application for Financing Page 6 employ separate counsel in any such action and participate in the investigation and defense thereof, but the fees and ex- penses of such counsel shall be paid by the Indemnified Party unless (a) the employment of such counsel has been specific- ally authorized by the Applicant, in writing, (b) the Appli- cant has failed to assume the defense and to employ counselor (c) the named parties to any such action (including any impleaded parties) include both an Indemnified Party and the Applicant, and said Indemnified Party shall have been advised by such counsel that there may be one or more legal defenses available to it ,,,Thich are different from or additional to those available to the Applicant (in which case, if the In- demnified Party notifies the Applicant in writing that it elects to employ separate counsel at the Applicant's expense, the Applicant shall not have the right to assume the defense of such action on behalf of such Indemnified Party, it being understood, however, that the Applicant shall not, in con- nection with anyone such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for the Indemnified Party, which firm shall be designated in writing by said Indemnified Party) _ The Indemnified Party, as a condition of such in- demnity, shall use its best efforts to cooperate with the Applicant in the defense of any such action or claim. The Applicant shall not be liable for any settlement of any such action without its consent but, if any such action is settled with the consent of the Applicant or if there be final judg- ment for the plaintiff in any such action, the Applicant agrees to indemnify and hold harmless the Indemnified Parties from and against any Loss by reason of such settlement or judgment. b. Fees and Expenses: Applicant agrees to pay all reasonable and necessary costs, expenses and fees incurred by the Corporation in connection with the issuance of the bonds or in connection with the Project, including but not limited to the out-of- pocket expenses incurred by the Corporation's personnel; fees for legal services and out-of-pocket expenses of the Corpo- ration's Counsel fees and out-of-pocket expenses for con- sulting advice of the Corporation's consulting engineers; fees and expenses required in connection with the underwriting or placemeI,lt of the Bonds; fees and out-of-pocket expenses of Bond Counsel; fees and out-of-pocket expenses of the trustee; all recording costs; Blue Sky and legal investment survey costs, rating agencies; fees and printing costs; and all e e ....-::=-.: CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION Application for Financing Page 7 incidental expenses, costs and charges relating to the Project and the issuance of the Bonds not enumerated above. The Corporation will upon request provide or cause to be provided to the trustee under the indenture of trust and/or the Ap- plicant any data or information which may be reasonably re- quired to verify any of the costs and expenses and fees enumerated above. With respect to the costs, expenses and fees enumerated above, the Applicant shall at the Corpo- ration's request advance on a monthly basis the amounts in- curred by the Corporation pending reimbursement out of the proceeds from the sale of the Bonds. To the extent that the costs, expenses and fees enumerated above are not or cannot be paid or reimbursed from the proceeds of the bonds or if bonds are not issued, the Applicant shall pay the same. In addition, at the time the ApplicatiQn is forwarded to the Texas Economic Development Commission, the Applicant will be required to pay to the Texas Economic Development Commission, on behalf of the Corpora- tion, a nonrefundable filing fee in an amount not to exceed $1,500, as required by the Texas Economic Development Commission's Industrial Revenue Bond Program Rules, The undersigned verifies that he foregoing application on behalf of the information is true and correct to the submitted on the _ day of is duly authorized to submit the Applicant and that the foregoing best of his knowledge and belief , 19 Applicant By Title e e " ....-:::=-.:. Exhibit A INDUSTRIAL DEVELOPMENT BOND FINANCING QUESTIQNNAIRE The purpose of this Questionnaire is to elicit information regarding the proposed project (the "Project") which will enable Bond Counsel to make an initial determination regarding the availability of tax-exempt industrial development bond financing for the cost of the Project in accordance with the provisions of Section 103(b)(6) of the Internal Revenue Code of 1954, as amended. Any uncertainty that arises in answering any of the following questions should be specifically noted, regardless. of how you may resolve the issue. The proposed bonds the proceeds of which would be used to finance the Project are hereinafter called the "Bonds". * 1. State the name of the corporation', partnership, trust or individual (hereinafter called the "User") to be treated as the owner of the Project for federal income tax purposes and specify (a) the employer identification number of . such person and (b) the address of the principal place of business of such person. 2. Name any tenant, sublessee, or other occupant (hereinafter called "Other Principal Users") of the Project who possess or will possess for any year a right to occupy or otherwise use at least 10% of the Project measured in terms of fair rental value. Please furnish the computations supporting your decision to include or exclude any lessee or other user of the Project in response- to this question. * In the event the bond issue size is expected to be $1,000,000 or less, questions 17, 19, 20 and 21 need not be answered. e e .....-- - 3. Name any person (hereinafter called the "Manager") other than the User or one of the Other Principal Users (including an employee of the User or one of the Other Principal Users) who will possess any right to manage the Project or any portion thereof and describe the terms of such management arrangement. 4. Identify any purchaser of goods or services produced at the Project (also referred to herein as "Other Principal Users"), who mayor will purchase more than 10% of such output or service and describe any such contractual arrangement wi th respect to each such purchaser. 5. State the name of the common parent ,(if any) of which the User, any other Principal User, or Manager (named above) is a subsidiary (a common parent is determined using the rules of Section 1504 of the Internal Revenue Code of 1954 without regard to the exceptions of Section 1504(b)) and specify (a) the employer identification number and (b) the address of the principal place of business of such common parent ( s) . 6. ,Name any other person not identi fied in paragraphs (1) through (5), who will possess any right to lease, occupy or otherwise use any portion of the Project and describe such use. -2- e e ....-:::: --:;. 7. List the four-digit Standard Industrial Classification (SIC) Code(s) of the project to be financed by the proposed bond issue (for an abbreviated list of those codes, see the introduction to Form 1120/ U.S. Corporation Income Tax Return) . 8. State the address of the Project and the state, county, and incorporated municipality (if any) in which the Project is located. As hereinafter used, the term "jurisdiction" refers to the incorporated municipality (or municipalities) in which the Proj ect is or will be located or / if the Project is not and will not be located in any incorporated municipality, to the unincorporated area of the county (or counties) in which the Project is or will be located. Please indicate whether the Project is or will be located partially in more than one Jurisdiction. Whenever reference is made to facilities located in the jurisdictions contiguous to the Jurisdiction, only those facilities which are located within one-half mile of the Pro j ect should be considered. 9. Identify all persons (hereinafter referred to as "Related Persons") within any of the following relationships with anyone or more of the User, the Other Principal Users or the Manager. a. In the case of brother-sister corporations, two or more corporations if five or fewer persons who are individuals, estates or trusts own, directly or indirectly / more than 50% of the total combined voting power of all classes of stock enti tIed to vote or more than 50% of the total value of shares of all classes of stock of each corporation. For purposes of determining indirect ownership, a person shall be treated as owning stock such person has an -3- e e ....-:: :....: option to acquire and stock owned by his estate, trust, partnership, or corporation, if such person owns more than a 5% interest in such estate, trust, partnership, or corporation, as the case may be. An individual shall also be considered to own stock owned by his or her spouse and any of his or her children who have not attained the age of 21 years, and if the individual has not attained the age of 21 years, stock owned directly or indirectly by or for hi s parents. b. In the case of parent-subsidiary corporations, one or more chains of corporations connected through stock ownership with a common parent corporation if such common parent corporation owns, directly or indirectly, stock possessing more than 50% of the total combined voting power of all classes of stock entitled to vote or more than 50% of the total value of shares of all classes of stock of one of the other corporations. For this purpose, if any person has an option to acquire stock, such stock shall be considered as owned by such person. c. In the case of a partnership and a partner, a partnership and a partner will be treated as Related Persons if such partner owns, directly or indirectly, more than 50% of the capital interest, or the profi ts interest, in such partnership. d. In the case of two partnerships, such partnerships shall be treated as Related Persons if the same persons own, directly or indirectly, more than 50% of the capital interest or profits interest in such partnerships. In the case of individuals, members of a family including brothers, sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. e. In the case of an individual and a corporation, any individual in a corporation more than 50% in value of the outstanding stock which is owned, directly or indirectly, by or for such individual. f. In the case of trusts and fiduciaries, a fiduciary of a trust and (i) a grantor of such trust, (ii) a fiduciary of another trust (if the same person is a grantor of both trusts), (iii) a beneficiary of such -4- e e P*"::::'': trust, (iv) a beneficiary of another trust (if any other person is a grantor of both trusts), or (v) a corporation more than 50% of value of the outstanding stock of which is owned, directly or indirectly, by or for the trust or by or for a person who is a grantor of the trust. g. In the case of tax-exempt organizations, a person and an educational and charitable organization exempt from tax which is controlled directly or indirectly by such person or (if such person is an individual) by members of the family of such individual. For purposes of subparagraph (C:), (i) a partnership interest owned, directly or indirectly, by or for a corporation, partnership, estate or trust, shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries and (ii) an individual shall be considered as owning a partnership interest owned, directly or indirectly, by or for his family (as described in subparagraph (d) above). For purposes of subparagraphs (e), (f) and (g), the foregoing constructive ownership rule applies and, in addition, an individual owning any stock in a corporation shall be considered as owning the stock owned, directly or indirectly, by or for his partner. Stock constructively owned by a person through attribution from his partnership, corporation, estate, or trust shall be treated as actually owned by such person for purposes of further attribution but stock constructively owned by an individual by reason of application of the family or partner attribution rules shall not be treated as owned by him for purposes of further attribution. Please furnish a brief ownership description which supports your conclusion to include or exclude any person as a Related Person for purposes of thi s Questionnaire. -5- e e ....-:::=-:: 10. Identify any other issue (hereinafter called the "Other Issues") of governmental obli gations which has been or will be sold or issued within 31 days of the expected sale or issue date of the Bonds and with respect to which there is common or pooled security for purposes of paying debt service. Security is common or pooled when the same funds are available to, and the same person may, pay debt service on such obligation, or when such obligations are or will be guaranteed by the same person (including the United States of America or an agency or instrumentality thereof) or pledge of the same assets. Please provide the (actual or expected) identity of the issuer, face amount, date of issue, interest rate, and purchaser of the other issues. If there are any Other Issues, state whether each Other Issue and the Bonds will be used with respect to two or more faci Ii ties which have, or wi 11 have, as the same principal user the same person or a Related Person. For purposes of the preceding sentence, a Principal User includes any person (or group of related persons) which (i) guarantees, arranges, participates in or assists with the issuance (or pays any portion of the cost of issuance) of any obligation the proceeds of which are to be used to finance or refinance a facility, and (ii) provides any property or any franchise, trademark, or tradename which is to be used in connection with the facility. 11. State the expected date of issuance of the Bonds. Also, attach an expected debt service schedule with respect to the Bonds. Identify all collateral or security other than operating assets pledged to the Bondholders (eg., Letter of Credi t, U. S. Treasury obligations, stock). -6- e e ....-::::::... .' 12. Describe the Project (number and size of buildings, equipment, expected use, etc.). 13. State (a) whether more than 25% of the proceeds of the Bonds will be used to provide a facility the primary purpose of which is one of the following: retail food and beverage service, automobile sales or service, or the provision of recreation or entertainment; or (b) whether any portion of the proceeds of the Bonds is to be used to provide the following: private or commercial golf course, country club, massage parlor, tennis club, skating facility (including roller skating, skateboard, and ice skating), racquet sports facility (including any handball or racquetball court), hot tub facility, suntan facili ty, or racetrack. With respect to the property described in clause (a), if less than 25% of the proceeds of the Bonds will be used for such property, describe the portion of proceeds so used. 14. List the items of property (e.g., building, machinery and equipment, land, site improvements, etc.), other than interest during construction and issuance costs, the cost of which will be financed out of the proceeds of the Bonds. Also provide the completion dates and the reasonably expected economic life of such property. For purposes of determining or projecting completion dates, in the case of real property, such date is the date on which construction or development work is complete and, in the case of personal property, such date is the date on which the property is first put in use or installed, whichever is later. For purposes of determining the expected economic life of such property, reference should be made to the midpoint lives provided under the ADR system of depreciation, where applicable, and the guideline lives establi shed by the Internal Revenue Service for structures. If, however, facts and -7- e e ...-::::...::.: circumstances (as evidenced by at least one appraisal) establish that a longer economic useful life is justified, please so indicate. ITEM COST COMPLETION DATE ECONOMIC LIFE* $ TOTAL $ 15. Describe any interim financing directly related to the Project. In particular, identify the interest paid with respect to such financing subsequent to commencing the Project and prior to the completion, if completed (see paragraph 14 above), or issuance of the Bonds, if not yet completed. *User may contact Bond Counsel for assistance in determining economic lives of depreci able property. -8- e e ...- -----:...:.:. 16. Attach a projected schedule of monthly drawdowns of bond proceeds from the construction fund and based on this. schedule please compute your best estimate of the amount of investment earnings that you expect to be generated by ~he investment of bond proceeds pending their expenditure on the Project. Please indicate the earnings rate used for purposes of computing this estimate. 17. Were or will any of the utilities for the site of the Project (gas, electricity, water, sewage, telephone) be provided by a public uti Ii ty or a state or local governmental unit? How will they be paid for by the User? 18. Provide the following information regarding previous tax-exempt financing used to finance any part of any facility (including the Project) owned, leased, occupied or otherwi se used by anyone of the User, the Other Principal Users, the Manager, or any Related Person to one or more of the foregoing, any part of which is located wi thin the Jurisdiction. AMOUNT OF ISSUE AMOUNT OUTSTANDING AS OF ESTIMATED DATE OF ISSUE OF THE BONDS DATE OF ISSUE 19. List actual and reasonably expected capital expenditures (not including capital expendi tures funded or to be funded out of the proceeds of the Bonds) paid or incurred during the three year period preceding the expected date of issuance of the Bonds by anyone with respect to the -9- e e ..-::;::..::. Project. Include all capital expenditures whether or not made by the User or a Related Person. ITEM DATE AMOUNT $ TOTAL $ 20. List actual and reasonably expected capital expenditures paid or incurred during the three year period preceding the expected date of issuance of the Bonds by anyone with respect to property other than the Project, which is (a) located in whole or in part within the jurisdiction, and (b) owned, occupied or otherwise used by the User, the Other Principal Users, the Managers or any Related Person to anyone or more of the foregoing. ITEM DATE AMOUNT $ TOTAL $ -10- e e .....-:::~ Expenditures are capital expenditures if they are properly chargeable to the capi tal account or may be capitalized under any provision of the Internal Revenue Code (for example, Gonstruction period interest 'and research and development expenditures). Attached as Exhibit "A" to this Questionnaire is a memorandum which sets forth examples of capital and noncapital expendi tures. 21. If the User, the other Principal Users, the Manager, or a Related Person is the lessee of any oersonal property to be located within the Jurisdiction, please describe such items and describe the lease terms pursuant to which such property is leased. Also, please include a copy of the existing or proposed lease if available. 22. Please state the date on which the issuer of the Bonds adopted its resolution expressing an intent to issue the Bonds. 23. Identify any costs that have been paid or incurred with respect to the property listed in paragraph 12 above prior to the date shown in paragraph 22 above. Please state to whom such expenditures were made and the purpose of such expenditures. For purpose of this question, any down payments, deposits, cancellation penalties, etc. should be treated as an amount "paid or incurred" . -11- e e ...-::=--::.. 24. Identify the date on which contracts were entered into for the fabrication of major components of the Project or for the construction of the buildings included in the Projects. Also, please identify the dates such fabrica- tion, manufacturing or construction commenced. 25. The User should be aware of the fact that the Tax Equity and Fiscal Responsibility Act of 1982 has generally prohibi ted use of the accelerated cost recovery system wi th respect to property financed with II small issue" industrial development bonds. Person Completing This Form: Title: Date: Telephone No.: REVISED: 8/31/83 -12- e e ....-:::- " EXHIBIT A Examoles of Caoi tal Exoendi tures "Capital expenditures" within the meaning of Section 103(b)(6)(D) of the Internal Revenue Code of 1954, as amended (the "Code"), are defined in Treas. Reg. ~ 1.103-10 (b) (2) (ii) . That regulation provides generally that an expendi ture is a "capital expenditure," (a) if it is properly chargeable to the capital account without regard to any rule of the Code which permits the expenditure to be treated as a current expense or (b) if it is able to be capi talized under any rule or election under the Code. However, an expenditure is not counted as a "capital expendi ture" for purposes of the limi tation in Section 103(b)(6)(D) on bond issuance and capital expenditures if it is financed out of the proceeds (excluding investment earnings thereon) of the applicable bond issue or the outstanding principal amount of certain prior exempt small issues. The fOllowing are examples of "capi tal expendi tures": 1. Costs allocable to the acquisition, construction, or erection of buildings, machinery and equipment, furni- ture and fixtures, and similar property having a useful life substantially beyond the taxable year. See Treas. Reg. ~ 1.263(a)-2(a). See also Rev. Rul. 73-580, 1973-2 C. B. 86 (compensation paid by corporation to employees to the extent attributable to corporate acquisitions is chargeable to capital account) Addressograph-Multigraoh Corp., 4 T.C.M. 147 (1945) (legal fees paid to acquire assets in a reorganization must be capitalized); Mississippi Valley Trust Co. v. U.S., 61 F.Supp. 451 (E.D. Mo. 1945), rev'd on other issued sub nom. Bleutermann v. U.S., 155 F.2d 597 (8th Cir. 1946) (appraisal costs must be capitalized); Southeastern Exoress Co., 19 B.T.A. 490 (1930), acq. as to issue I, X-I C.B. 61 (1931) (one-half of corporate general counsel's salary representing time spent in connection with organization of a corporation must be capi talized) . 2. Cost of real property including water rights, easements (see Rev. Rul. 80-100,1980-1 C.B. 25), the ne1; cost of demolition of a building when real property is purchased with the intention of demolishing the e e ~=-.::.: " building situated thereon (LTR 8024079; see Treas. Reg. ~ 1.165-3) and the amount expended for demolition of a certified historic structure, whether 'or not the intent to demolish existed at the time of the purchase of the real property (see IRC ~ 280B). 3. Interest on a construction loan, interest on a loan to purchase real property, interest on a loan to purchase, transport, or install personal property, and interest on a mortgage of unimproved and unproductive real property and other items (including certain taxes and insurance payments) to the extent permitted to be capi talized under Section 266 of the Code and the regulations thereunder, even though deducted as expenses. Rev. Rul. 75-185, 1975-1 C.B. 43; Rev. Rul. 77-262, 1977-2 C.B. 41 (full amount of interest paid on the bond is a capital expenditu~e not offset by income from investing proceeds during the temporary period); Rev. Rul. 82-117, 1982-24 I.R.B.. 4. LTR 8208108 (interest paid by savings and loan association on deposits not interest on a construction loan for the savings and 10an association which may be capitalized under Section 266 and, thus, not a capital expenditure); LTR 8318049 (interest, taxes, etc. allocated between portion of tract already developed and portion undergoing development). See Rev. Rul. 81-23, 1981-4 I.R.B. 8 (interest on the bonds between the issuance date of the bonds and the date of commencement of construction of a factory or the purchase of equipment may be capitalized under Section 266). See also Treas. Reg. ~ 1.266-1(b) (1) (iv) (taxpayer permitted to capitalize "any other taxes and carrying charges with respect to property, which in the opinion of the Commissioner, are, under sound accounting principles, chargeable to capi tal account"). 4. Real property construction period, interest and taxes required to be capitalized under Section 189 of the Code. 5. Issuance costs including underwriting fees, legal fees and printing costs. Rev. Rul. 77-234, 1977-2 C.B. 39. 6. Cost of defending or perfecting title to property. See Treas. Reg. 9 1-263(a)-2(c). -2- e e .....-::::;.::....:.:, .... 7. Amounts expended for architect's services. See Treas. Reg. 9 1.263(a)-2(d). 8. A corporation's acquisition of stock of another corporation followed by a liquidation of the acquired corporation to which Section 334(b)(2) of the Code applies is in substance an acquisition of underlying assets, and, therefore, is a capital expenditure with respect to the acquired corporation's facilities to the extent of the percentage of the corporation's fixed assets located in the county or incorporated municipali ty) . LTR 7916021 (amount of capital expenditure, however, reduced by the amount expended by the acquired corporation from proceeds of an outstanding prior small issue for depreciable tangible assets located in the county or incorporated municipality); LTR 7946049. This same principle probably applies to a corporation's qualified stock purchase with respect to which an election is made under Section 338 of the Code, as added by the Tax Egui ty and Fiscal Responsibili ty Act of 1982. . 9. Commissions paid in purchasing stock as described in "8." above. See Treas. Reg. 9 1.263(a)-2(e). 10. Cost of goodwill or a covenant not to compete in connection with the acquisition of the assets of a going concern. Rev. Rul. 81-56, 1981-8 I.R.B. 7; Rev. Rul. 81-55, 1981-8 I.R.B. 6; LTR 810174 (covenant not to compete allocated based on percentage of principal user's assets in the area covered by the covenant which are located in county or municipali ty) . See Treas. Reg. 9 1.263(a)-2(h). 11. Cost of other intangible assets wi th a useful life substantially beyond the taxable year (~, patents, copyrights, customer lists). See Treas. Reg. S 1.167 (a)-3. 12. Advertising costs which result in the acquisition of an asset having a useful life substantially beyond the taxable year. See A.V. Simonson, 5 T.C.M. 718 (1946) (cost of a promotional fi 1m not currently deductible) . 13. Cost of trucks based at a trucking terminal facility wi th respect to the terminal faci li ty. Trea's. Reg. S 1.103-10(f), Examole (11). Compare Rev. Rul. 80-12, -3- e e ....-::: =-:.:.. 1980-1 C.B. 23, (expenditures for trucks are not capital expenditures because they are not allocable to any specific facility) and LTR 8324053 (expenditures for truck trailers are not capi tal expendi tures) . 14. Expenditures for equipment or machinery moved into the county or municipality wi thin three years after the bonds are issued; however, only if the expenditures for the equipment or machinery are made within the six-year period. Treas. Reg. 9 1.103-10(f), Example (12); Rev. Rul. 82-162, 1982-40 I.R.B. 5. See Rev. Rul. 83-18, 1983-4 I.R.B. 11. 15. Cost of molds used to manufacture custom plastic products with respect to the manufacturing facili ty, regardless of whether the manufacturer or the customers take title to the molds, if the molds have a useful life substantially beyond the end of the taxable year. Rev. Rul. 77-224, 1977-1 C.B. 25. 16. If the principal user of a facility orders equipment for the facility from a manufacturer, expenditures paid or incurred by the manufacturer are considered to have been incurred concurrently by the principal user. The amount which must be taken into account as a capital expenditure is a percentage of the purchase price to be paid by the principal user for the equipment equal to the percentage of the manufacturer's total cost for the equipment paid or incurred by the manufacturer within three years before or after the date of bond issue. Rev. Rul. 78-347, 1978-2 C.B. 101. See also Rev. Rul. 74-485, 1974-2 C.B. 32 (capital expenditures by con- struction contractor attributed to prospective owner of bui lding) . 17. Cost of timber incurred under a pay-as-cut contract when the timber is cut. Rev. Rul. 1976-1 C.B. 16. timber 76-132, 18. Cost of mobile buildings for use as temporary offices even though the mobile buildings later are sold to unrelated parties. Rev. Rul. 75-208, 1975-1 C.B. 46. See Rev. Rul. 80-162, 1980-1 C.B. 26 (same result as to machinery later transferred out of political jurisdic- ti on) . -4- e e .....-:::: :...:.:. 19. Cost of property obtained under a lease which is treated as a purchase for federal income tax purposes. Treas. Reg. S 1.103-10 (b) (iii); Treas. Reg. S 1.103-10(f), Examole (13). Such determination is to be made without regard to the safe harbor leasing rules of Section 168(f)(8) of the Code. Temp. Reg. S 5c.103-1. 20. Cost of property to lessor in county or municipality in which used by lessee if Treas. Reg. S 1.103-10(b)(2) (iv) (b) exception not met. LTR 8325098. 21. Assumption of liabili ties in connection wi th the purchase of property. See Crane v. Commissioner, 331 u. S. 1 (1947). 22. Organization expenditures of .a corporation or a partnership even though amortized under Sections 248 or 709, respectively, of the Code. But see LTR 8014111; LTR 8011070 (organization expenditures not paid or incurred with respect to facilities in the city in which the financed facility is located and, therefore, not capi tal expenditures) . 23. Interest prepayments of a cash (or accrual) basis taxpayer. See IRC S 461 (g) . 24. Origination fees in connection with leases and "rent-up" fees. See Richard C. Goodwin, 75 T.C. No. 37 (1981) and Rev. Rul. 81-161, 1981-1 C.B. 313. 25. Loan commitment fees. See Rev. Rul. 81-160, 1981-1 C.B. 312; Rev. Rul. 81-16~1981-1 C.B. 313. 26. Fair market value of property given up in Section 1031 like kind exchange. Rev. Rul. 83-17,1983-4 LR.B. 9. 27. Expenditures financed with a prior exempt small issue to the extent such issue is no longer outstanding on the date of the applicable bond issue; however, only to the extent paid or incurred within the six-year period. Treas. Reg. S 1.103-10(f) Example 10; Rev. Rul. 76-98, 1976-1 C.B. 31. LTR 8037091 and LTR 8123084 (FIFO rule apparently used for determining whether expenditures paid or incurred wi thin the six-year period) . -5- e e ~=-:.:. , " 28. Expenditures by a ground lessor on the leased groun~ are capital expenditures with respect to a bond-financed facility on the leased ground; but only if the expendi- tures are made within three years before or after the date of the bond issue. LTR 7833014; LTR 7951067; LTR 8011062; LTR 8149042; LTR 8149049. Furthermore, expenditures by tenants of a mall for leasehold improve- ments that are fixtures under local law are capital expenditures with respect to the mall building; but only if made within three years before or after the date of the bond issue. LTR 8149049; LTR 8313074. Contra LTR 8037075. See also LTR 8149042 (not capital expenditures if tenant improvements will be worth less than 10% of their cost when they revert to the land- lord). However, expenditures by tenants of a mall for personal property under local law are not capital expenditures with respect to the mall building. LTR 8037075; LTR 8149049; LTR 8317083. 29. Cost of option with term of more than one year. LTR 8218057. See Zaninovich v. Commissioner, 616 F.2d 429 (9th Cir. 1980). 30. Certain real property construction period interest and taxes required to be capitalized under Section 189 of the Code. 31. Research and experimental expenditures (including computer software, Rev. Proc. 69-21, 1969-2 C.B. 303) allocable to facilities where manufacturing will occur even though deducted as expenses. Rev. Rul. 77-27, 1977-1 C.B. 23; LTR 8052071. See Rev. Rul. 77-253, 1977-2 C.B. 40. See also LTR 8042136 (definition of research and experimental expenditures). However, certain in-house research expenditures (if creditable under Section 44F and deducted under Section 174(a)) made after September 3, 1982, are not capital expendi- tures. IRC ~ 103(b) (6) (F) (iv). 32. Certain expenditures to establish, maintain or increase the circulation of a newspaper, magazine or other periodical even though deductible under Section 173 of the Code. 33. Trademark and tradename expenditures even _ though amortizable under Section 177 of the Code. -6- e e ....-~ 34. Cost of certain depreciable business property even though deductible under Section 179 of the Code. 35. Expenditures by farmers for fertilizer, lime, etc. even though deductible under Section 180 of the Code. 36. Expenditures by farmers for clearing land even though deductible under Section 182 of the Code. 37. Cost of railroad rolling stock even though amortizable under Section 184 of the Code. 38. Intangible drilling costs even though deductible under Section 263 (c) of the Code. 39. Mining development expenditures even though deductible under Section 616 of the Code. 40. Mining exploration expenditures even though deductible under Section 617 of the Code. 41. Expenditures paid or incurred with respect to a facility that are not otherwise taken into account in the acquisition cost or as an outstanding prior exempt small issue. Rev. Rul. 76-427, 1976-2 C.B. 28. But see LTR 8017077 (expenditures by unrelated party prior to offer for acquisition of lot not capital expendi tures) ; LTR 8239051 (expendi tures by former principal user of purchased facilities not capital expenditures); LTR 8304115 (expenditures by purchasing lessee for leasehold improvements not capital expendi tures to extent that fair market value of leasehold improvements reflected in purchase price) . The following are examples of expenditures which should not be "capi tal expendi tures" : 1. Administrative costs, overhead, and wages (unless allocable to the acquisition, construction, or erection of property described in "1." above). 2. Cost of incidential repairs or maintenance. See Treas. Reg. 9 1. 263 ( a) -1 (b) . 3. Cost of property which would properly be included in inventory if on hand at the end of the taxable year -7- e e ...-::: ~ [i. e., direct inventory costs]. LTR 8015024; LTR 8239051. See IRC ss 1221(1), l231(b)(1)(A). 4. Purchase expenses. of cash, accounts receivable LTR 8015024; LTR 8239051. and prepaid 5. Cost of property (including real estate) held primarily for sale to customers in the ordinary course of a trade or business if not used in the trade or business or for the production of income until sold. LTR 8147183; LTR 8234037. See IRC ss 1221(1), 1231(b)(1)(B); Rev. Rul. 62-141, 1962-2 C.B. 1982. 6. Cost of supplies (defined as property which does not have a useful life substantially beyond the taxable year when acquired). E.g., LTR 8206117 (expenditures for production and resinking of dies with useful life of less than one year are not capi tal expenditures) . 7. Periodic rent payments under a true lease for federal income tax purposes (Rev. Rul. 77-353, 1977-2 C.B. 44, and LTR 8304115); but lessor's expenditures for the leased item are capital expenditures if made within the six-year period unless the leased item is described in "8. " below. LTR 8152123. 8. Cost to the lessor or personal property leased under a true lease for federal income tax purposes (determined without regard to the safe harbor leasing rules of Section 168(f)(8) of the Code, Temp. Reg. 9 5c.103-1) either from the manufacturer or from a person in the trade or business of leasing similar property provided, pursuant to general business practice, property of this type ordinarily is the subject of a lease. Treas. Reg. S 1.103-10(b)(2)(iv)(b); LTR 7925037; LTR 8317083 (even if not true lease for federal income tax purposes). However, if the principal user of a facility purchases the personal property within three years of the bond issue, sells it to a leasing company, and leases it back, a capital expenditure was incurred on the occa- sion of the purchase in the amount thereof regardless of the subsequent sale and leaseback. Rev. Rul. 79-248, 1979-2 C.B. 41. But see Rev. Rul. 80-162, 1980-1 C.B. 26 (no actual purchase even though purchase order submitted and down payment made) . -8- e e --,'. ........-:--=- / 9. Issuance of stock or securities for property in a tax- free incorporation or other exchange under Section 351(a) of the Code. Treas. Reg. 9 1.103-10(b)(2) (v)(C). If Section 351(a) applies to a transfer during the six-year period surrounding the date of issue, and if, with respect to the property transferred, expendi- tures made within such period would have been Section 103(b)(6)(D) capital expenditures if the transferor and the transferee corporation had been related persons for such period, then such expenditures shall be considered to be Section 103(b)(6)(D) capital expenditures made by the transferee corporation. In addition, if a trans- feror and transferee are related persons immediately following such transfer, such transferor and transferee shall also be treated as having been related persons for the portion of such six-year period preceding the date of such transfer. Treas. Reg. 9 1.103-10(b)(2)- (v)(d). Furthermore, the purchase by the shareholder or security holder of such property is a capi tal expendi ture if made wi thin the six-year period. 10. Exchange of consideration for assets in a tax-free reorganization or liquidation which qualifies under Section 381(a) of the Code (relating to carryover of tax attributes); but the transferor and transferee are treated as related throughout the portion of the six- year period preceding the date of exchange. Treas. Reg. 9 1.103-10(b)(2)(v)(aL (b); Treas. Reg. 9 1.103- 103-10(f) Example 17 ("A" reorganization with boot). 11. Exchange of stock in a tax-free "B" reorganization; but the parent and subsidiary are treated as related throughout the six-year period. Rev. Rul. 75-411, 1975-2 C.B. 41. 12. A corporation's cash purchase of 100 percent of the stock of another corporation (which later finances a facility with tax-exempt bonds) which will not be liquidated within two years, but which will be operated as an autonomous subsidiary of the acquiring corporation. The corporations will, however, be treated as related parties throughout the six-year period at least if they are related on the date of the issue. LTR 8008136; LTR 8103031; LTR 8101074; LTR 814117; LTR 8239051. -9- e e ....-::: =-.:: 13. Issuance of a partnership interest in tax-free exchange under Section 721 of the Code for property, at least where the oartner purchased the property more than 3 years befo~e the issuance of the bonds. Rev. Rul. 77- 146, 1977-1 C.B. 24. 14. A cash purchase of a partnership interest. LTR 8316023 (9.99% interest in joint venture); LTR 8320025 (49% l~mited partnership interest if no plan to liquidate partnership) . 15. If the present owner purchased the facility within the six-year period, the purchase price is a capital expenditure but the prior owner's capital expenditures with respect to the facility may be disregarded to the extent they are reflected in the purchase price. Rev. Rul. 76-427, 1976-2 C.B. 28; LTR 7916021. See LTR 8017077; LTR 8239051. 16. Cost to replace property damaged or destroyed by fire, storm, or other casualty to the extent not in excess of the fair market value (determined immediately before the casualty) of the property replaced. IRC 9 103(b) (6)(c)(F)(i); Treas. Reg. 9 1.103-10(b)(2)(iv)(c); LTR 8124151. 17. Expenditure by a Section SOl(c)(3) charitable organiza- tion for charitable activities are not capital expendi- tures for purposes of a related person's small issue financing of an unrelated facility. Rev. Rul. 74-289, 1974-1 C. B. 32. See L TR 8011062. 18. Expenditures by a state or local governmental unit paid or incurred in carrying out its statutory purposes are not capital expenditures for purposes of a small issue financing of an unrelated facility. LTR 8012090; LTR 8317083 (computer unrelated to building in which it is used) . 19. Expenditures by a public utility which is not the principal user of the bond-financed facility with respect to property of such company or by a State or local governmental unit with respect to the property of such unit,' if the following conditions are met: (i) Such property is used to provide gas, water ,_ sewage disposal services, electric energy, or telephone -10- e e .....-::: ,- ., services; (ii) such property, though installed in or connected to the facility, is not an integral part of the facility such that the cost of such property is ordinarily included as part of the acquisition, con- struction, or reconstruction cost of such facility; and (iii) such property is of a type normally paid for in the form of periodic fees based upon time or use. Treas. Reg. S 1.103-10(b)(2)(iv)(a); LTR 8313074. 20. Cost of moving already owned equipment or machinery (including removal costs) except for taxes and carrying charges which may be capitalized under Section 266 of the Code. See Rev. Rul. 70-392, 1970-2 C.B. 33; Eastern Shoe Manufacturing Co., 8 B.T.A. 1169 (1927), ~, VII-1 C.B. 9; Addressograoh-Multigraoh Corp., 4 T.C.M. 147 (1945); Fowler & Union Horse Nail Co., Inc., 16 B.T.A. 1071 (1929). But see .Clarence E. Baldwin, 14 T.C.M. 794 (1955); Winnett ~Helvering, 68 F.2d 614 (9th Cir. 1934); Darlington Veneer Co., Inc., B.T.A. Memo. Cf. Rev. Rul. 79-135, 1979-1 C.B. 78 (Section 103 "substantially all" test - installation cost of moved equipment is depreciable property); Rev. Rul. 80-356, 1980-2 C.B. 47 (Section 103 "substantially all" test _ moving cost of property purchased from unrelated corporation is depreciable property) . 21. Theoretical interest of a taxpayer using his own funds. See Treas. Reg. 9 1.266-1(b) (1) (iv). 22. Certain in-house research expenditures (if creditable under Section 44F and deducted under Section 174(a)) made after September 3, 1982. IRC S 103(b) (6) (F) (iv). 23. Research, development and testing services performed for unrelated party if no patentable or licensable interests in the technology developed are retained. LTR 8304115. 24. Expenditures required by circumstances which could not be reasonably foreseen on the date of issue or arising out of a mistake or fact (but the aggregate amount of such expenditures with respect to any issue shall not exceed $1,000,000). IRC 9 103(b)(6)(F)(iii). 25. Expenditures required by a change made after the date of issue of the issue in question in a Federal or State law or local ordinance of general application (or rule -11- e e ...-::::.,.,:.:. or regulation of general application thereunder). IRe 9103(b)(6)(F)(ii). 26. Expenditures to replace property destroyed or damaged by fire, storm, or other casualty, to the extent of the fair market value of the property replaced. IRe 9 103(b)(6)(F)(i). 27. Expenditures financed out of the outstanding principal amount of a prior exempt small issue. LTR 7916021 and LTR 8239051 (each of these rulings uses a FIFO assump- tion - the first part of the principal amount of the prior issue reduced by principal payments deemed to have financed the first expendi tures) . 28. Expenditures to redeem an outstanding bond issue. LTR 8123087. 29. Expenditures for equipment that was transferred to the political jurisdiction more than three years after the issuance of the bond even though the expenditures were made within three years of the bond issue. Rev. Rul. 83-18, 1983-4 I.R.B. 11. 30. Payments on purchase money note if title to property obtained, part payment made and liability for balance ("which could be determined with reasonable accuracy") incurred more than three years before bond issuance. LTR 8327019. -12- e e ... ". -- VINSON & ELKINS ATTORNEYS AT LAW FIRST CITY TOWER HOUSTON, TEXAS 77002 TELEPHONE 713 651-2222 TWX 9108816391 TELEX 762 146 1101 CONNECTICUT AVE, N. W..SUITE 900 WASHINGTON, D, C,20036 TELEPHONE 202 862-6500 CABLE VINELKINS.TELEX 89680 47 CHARLES ST., BERKELEY SQUARE LONDON WIX 7PS, ENGLAND TELEPHONE 44 01 491-7236 CABLE VINELKINS LONDON W. I..TELEX 24140 AUSTIN NATIONAL BANK TOWER AUSTIN, TEXAS 78701 TELEPHONE SI2 478-2500 November 7, 1983 TO: Distribution RE: $3,800,000 City of La Porte Industrial Development Corporation Industrial Development Revenue Bonds, Series 1983 (La Quinta Motor Inns, Inc. Project) Enclosed are initial drafts of the Trust Indenture, Loan Agreement, Deed of Trust and Guarantee Agreement for the captioned bond issue. These documents have been prepared without any commitment letter from the purchaser of the Bonds and are based solely on brief conversations with representatives of La Quinta and First City National Bank of , Houston. In order to comply with the time schedule requested by La Quinta, and to close the bond issue by November 29, it is necessary that the sale of the bonds be approved by the City of La Porte Industrial Development Corporation and the La Porte City Council on November 21, and by the Texas Economic Development Commission on November 23. In order to comply with this schedule it is necessary that all of the financing documents, opinions and any documents to be signed by the City or the IDC be in final form by November 18. Because of these time requirements, Vinson & Elkins must concentrate on the preparation of certificates, opinions and other closing documents, as well as the scheduling of the necessary meetings and preparation of the application to the Texas Economic Development Commission. Therefore, I request that ~irst City and La Quinta attempt to reach agreement on the business points at the earliest possible time and that documents revised to comply with those terms be returned to us as quickly as possible. We will process such changes on the master set and distribute revised copies to all of the parties. e e .....-:..:: " ~ Distribution November 7, 1983 Page Two It is also necessary that we have completed our tax due diligence by November 18. Therefore, it is essential that we receive a completed Industrial Development Bond Questionnaire for review by our tax lawyers by Wednesday, November 9. Please telephone me or my legal assistant, Sheela Rai, if you have any comments or questions. Very truly yours, (7 / ~~\ c~ueSdell 0394/2461 enclosures -,' e e r . CITY OF LA PORTE INDUSTRIAL DEVELOPME~7 CORPORATION $3,800,000 Industrial Development Revenue Bonds Series 1983 (La Quinta Motor Inns, Inc. Project) Address and Distribution List LA QUINTA MOTOR INNS, INC. 10010 San Pedro Avenue P. O. Box 10010 San Antonio, Texas 78216 Telephone: (512) 366-6000 Juan A. Marquez, Corporate Attorney Tom Sagehorn, Director of Development Administration BL7LER & BINION Allied Bank Plaza Houston. Texas 77002 Telephone: (713) 237-2072 Ann C. Jacobs VINSON & ELKINS 2700 First City Tower Houston, Texas 77002 Telephone: (713) 651-2056 Carolyn Truesdell Sheela Rai, Legal Assistant CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION City Hall La Porte, Texas 77521 Telephone: (713) 471-5020 Virginia Kline Knox W. Askins, Esq. 702 W. Fairmont Parkway La Porte, Texas 77571 Telephone: (713) 471-1886 FIRST CITY NATIONAL BANK OF HOUSTON Two Houston Center Houston, Texas 77002 Telephone: (713) 658- Alex Baker FIRST CITY NATIONAL BANK OF HOUSTON 1001 Main Street Houston, Texas 77002 Telephone: (713) 658- See Below Gary L. Recer (5272) David Palans (5022) -\ e e ~=-::: II IG&H/LQIO Draft of 11/07/83 TRUST INDENTURE between CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION and FIRST CITY NATIONAL BANK OF HOUSTON As Trustee securing City of La Porte Industrial Development Corporation $3,800,000 Industrial Development Revenue Bonds Series 1983 (La Quinta Motor Inns, Inc. Project) Dated as of November 1, 1983 "\~ j) e e ...-:::- ". TABLE OF CONTENTS Page Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Granting Clauses....................... . . . . . . . . . . . . . . . . . . . . . 2 Section 101 Section 102 Section 201 Section 202 Section 203 Section 204 Section 205 Section 206 Section 207 Section 208 Section 209 Section 210 Section 211 Section 301 Section 302 Section 303 ARTICLE I DEFINITIONS AND INTERPRETATIONS Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-I 1-2 ART I CLE I I AUTHORIZATION OF ORIGINAL BONDS; ISSUANCE AND FORM OF BONDS Terms of Bonds............................... I 1-1 Denomination of Bonds........................ 11-1 Form of Bonds................................ 11-1 Execution of Bonds. . . . . . . . . . . . . .. . . . .. . . . . . . . II-I Authentication and Delivery of Bonds... ...... 11-2 Mutilated, Lost, Stolen or Destroyed Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I I - 3 Registration of Bonds; Transfers.... ......... 11-3 Payment for and Limitations on Replacements and Trans fers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I 1-4 Persons Treated as Owners.................... 11-4 Payment of Bonds; Cancellation of Surrendered Bonds. .. . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 11-4 Additi6nal Bonds. .... .... .... ...... .... ...... 11-5 ARTICLE III FUNDS Establishment of Funds............. ....... ... Construction Fund............................ Debt Service Fund.... .. . . . . . . . . . . . . . . . . . . . . .-. III-l III-l III-l -i- ~. " Section 401 Section 402 Section 403 Section 501 Section 502 Section 503 Section 504 Section 505 Section 506 Section 601 Section 602 Section 701 Section 702 Section 703 Section 704 Section 705 Section 706 Section 707 Section 708 Section 709 Section 710 e e ARTICLE IV INVESTHENTS Investment of Funds..................... . . . . . Investment of Certain Amounts Credited to Special Escrow Account....... ...... ..... ..... Money to be Held in Trust.... ................ ARTICLE V GENERAL COVENANTS AND PROVISIONS p-:::.::...::: Page IV-1 IV-1 IV-1 Payment of Debt Service; Limited Obligations. . . . . .. . . .. .. .. . ',. . .. . . . . . . .. . . . . . V-I Representations and Warranties of Issuer..... V-I Instruments of Further Assurance........ ..... V-I Inspection of Books.... ..... ................. V-2 Rights Under the Bond Documents...... ........ V-2 Additional Covenants of Issuer............... V-2 ARTICLE VI DISCHARGE Discharge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment of Bonds........................ . . . . . ARTICLE VII DEFAULT AND REMEDIES Events of Default.......... . . . . . . . . . . . . . . . . . . Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Remedies.............................. . Intervention by Trustee...................... Remedies Vested in Trustee........ ........... Applications of Money...... . . . . . . . . . . . . . . . . . . Failure to Exercise Remedies................. Rights and Remedies of Bondholders...... ..... Termination of Proceedings........... ........ Waivers of Defaults and Events of Default.... -ii- VI-1 VI-1 VII-1 VII -2 VII -2 VII -3 VII -4 VII -4 VII-5 VII -5 VII-6 VII -6 ,~ Section 801 Section 802 Section 803 Section 804 Section 805 Section 806 Section 807 Section 808 Section 809 Section 810 Section 811 e e ~-". Page VI II-I VIII-2 VIII-2 VIII-3 VIII -3 VIII -4 VI II -4 VIII -4 VIII -5 VIII-6 VIII -6 Section 901 SUPPLEMENTAL INDENTURES AND AMENDMENT OF FINANCING DOCUMENTS Section 902 Section 903 Section 1001 Section 1002 Section 1003 Section 1004 ARTICLE VI II THE TRUSTEE Certain Duties and Responsibilities.......... Notice if Default or Notice of Taxability Occurs.... . . . . . . . . . . . . . . . . . . . . . . . . Certain Rights of Trustee... ...... ........... Not Responsible for Recitals or Issuance of Bonds.... . . . . . . . . . . . . . . . . . . . . . . . . May Hold Bonds.............. . .. . . . . . . . . . . . . . . Money Held in Trust..... ..... ....... ... ...... Corporate Trustee Required; Eligibility...... Resignation and Removal; Appointment of Successor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acceptance of Appointment by Successor.. ..... Merger, Conversion, Consolidation or Succession to Business.. .... ....;. ....... .... Fees, Charges and Expenses of Trustee.. ...... ART I CLE IX Supplemental Indentures and Amendments of Financing Documents Not Requiring Consent of Bondholders.. ..... ..... ........... Supplemental Indentures and Amendments of Financing Documents Requiring Consent of Bondholders.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rights of Trustee and the User....... ........ ARTICLE X MISCELLANEOUS Consents, Etc., of Bondholders..... .......... Limitation of Rights.............. . . . . . . . . . . . Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -iii- IX-l IX-2 IX-2 X-I X-2 X-2 X-2 ., Section 1005 Section 1006 Section 1007 Section 1008 Section 1009 Section 1010 e e ....-::;=-::: Page Payments Due on Business Days.... ....... ..... X-3 Immunity of Certain Persons.. ................ X-4 Return of Moneys from Non-presentment of Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X-4 Performance by the User..... . . . . . . . . . . . . . . . . . X-4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X-4 Governing Law................... . . . . . . . . . . . . . X-4 Testimonium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X-5 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X-5 Exhibit A - Form of Original Bonds Exhibit B - Schedule of Maturity of Original Bonds -iv- e e --.. ......-- -- TRUST INDENTURE between CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION and FIRST CITY NATIONAL BANK OF HOUSTON As Trustee THIS TRUST INDENTURE, dated as of November 1, 1983, is between CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION, a nonprofit industrial development corporation created under the Act, and FIRST CITY NATIONAL BANK OF HOUSTON, a national banking association with its principal corporate trust office in Houston, Texas, as Trustee. WIT N E SSE T H: The Act authorizes the Issuer to issue revenue bonds, payable from the revenues derived from payments made by users of "projects" within the meaning of the Act, on behalf of the Unit to finance the cost of "projects" within the meaning of the Act; The Issuer has entered into the Agreement with the User, providing for a loan from the Issuer to the User to provide financing for the cost of the Project and repayment of such loan by the User; To provide funds for the Issuer to loan to the User, the Issuer now proposes to issue its Industrial Development Revenue Bonds, Series 1983 (La Quinta Motor Inns, Inc. Project), in the aggregate principal amount of $3,800,000, pursuant to this Indenture and in accordance with a resolution duly adopted by the Board; The parties to the Financing Documents have each determined that the execution and delivery of the Financing Documents will benefit the parties, will further the public purposes of the Act, will provide additional security for the performance by the Issuer and the User of their obligations under the Financing Documents, and will induce the Holders of the Bonds to purchase the Bonds; The Issuer also desires to provide for the issuance from time to time in the future of Additional Bonds for the purpose of defraying the costs of completing, enlarging, improving or expanding the Project or e e ...--- refunding any Bonds theretofore issued and outstanding under this Indenture; All things necessary to make the Original Bonds, when issued, executed and delivered by the Issuer and authenticated by the Trustee pursuant to this Indenture, the valid, legal and binding limited obligations of the Issuer, and to constitute this Indenture a valid pledge of certain income and revenues derived from repayment of the loan for the payment of Debt Service have been performed and the creation, execution and delivery of this Indenture, and the creation, execution and issuance of the Original Bonds, subject to the terms hereof, have in all respects been duly authorized. GRANTING CLAUSES The Issuer, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and accep- tance of the Bonds by the Holders and for other good and valuable consideration, the receipt of which is hereby acknowledged, in order to secure the payment of the Debt Service and the performance and obser- vance by the Issuer of all the covenants expressed or implied herein and in the Bonds, does hereby grant, convey, pledge and assign to the Trustee, the following (the "Trust Estate"): FIRST GRANTING CLAUSE All of the Issuer's right, title and interest in and to all amounts required from time to time to be deposited in or credited to the Debt Service Fund in accordance with the Bond Documents, together with all amounts on deposit in the Debt Service Fund created under this Indenture and any investments and reinvestments made with such amounts and the proceeds thereof and SECOND GRANTING CLAUSE Subject to the proviso below, all of the Issuer's right, title and interest in and to the Agreement and the Note, together with all rights, powers, privileges, options and other benefits of the Issuer contained therein, and -all rights, titles, interests, liens, privileges, claims, and demands and equities held by the Issuer existing and to exist -2- e e ...- ---=..:. ~- in connection with or as security for the payment of the Bond Obligations and all amounts, if any, to be received pursuant to the Agreement and the Note and all amounts on deposit in or credited to any Fund created under this Indenture together with any investments and reinvestments made with such amounts and the proceeds thereof, other than (a) those described in the First Granting Clause above, and (b) any money to which the Issuer may be entitled under the Financing Documents for the purposes set forth in Sections 3.1, 7.1 and 9.3 of the Agreement and THIRD GRANTING CLAUSE Subject to the proviso below, any and all property of every kind or description which may hereafter be sold, trans- ferred, conveyed, assigned, hypothecated, endorsed, deposited, pledged, mortgaged, granted or delivered to, or deposited with, the Trustee as additional security hereunder, or which pursuant to any of the provisions of the Bond Documents may come into the possession or control of the Trustee, or of a receiver lawfully appointed pursuant to this Indenture or the Agreement, as such additional security; and the Trustee is hereby authorized to receive all such property as additional security for the payment of the Bonds and to hold and apply all such property subject to the terms of this Indenture; TO HAVE AND TO HOLD the Trust Estate, whether now owned or held or hereafter acquired, unto the Trustee, its successors and assigns, for- ever; IN TRUST NEVERTHELESS, for the equal and proportionate benefit and security of all present and future Bondholders without preference of any Bond over any other, and for enforcement of the payment of the Bonds in accordance with their terms, and all other sums payable hereunder or on the Bonds and for the performance of and compliance with the provisions of this Indenture, as if all the Bonds at any time outstanding had been authenticated, executed and delivered simultaneously with the execution and delivery of this Indenture, all as herein set forth; PROVIDED, HOWEVER, that the grant, conveyance, pledge and assign- ment made in the Second and Third Granting Clauses of this Indenture are intended for the aforesaid security purposes only, and, except as otherwise provided in the remaining provisions of this Indenture, nothing in the Granting Clauses of this Indenture shall prohibit the Issuer from bringing any actions or proceedings for the enforcement of -3- e e ....-:::. .-::.. '. the obligations of the User under the Agreement except the obligations of the User with respect to the amounts referred to in the First Granting Clause of this Indenture and except that nothing in this provision shall prejudice the rights of the Trustee under Articles VII and VIII hereof. IT IS HEREBY COVENANTED, DECLARED AND AGREED that this Indenture creates a continuing lien on the Trust Estate (except as to the items described in the First Granting Clause, as to which an absolute assign- ment is made) equally and ratably to secure the payment in full of the Debt Service on all Bonds which may, from time to time, be Outstanding hereunder, and that the Bonds are to be issued, authenticated and delivered, and that the Trust Estate is to be held, dealt with and disposed of by the Trustee, upon and subject to the terms, covenants, conditions, uses, agreements and trusts set forth in this Indenture. (Next page commences with ~rticle I) -4- e . .....-::=-., ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 101. Definitions. (a) All terms used in this Indenture which are defined in the Agreement have the same meanings in this Indenture which are assigned to such terms in the Agreement. Except where the context otherwise requires, words imparting the singular number shall include the plural number and vice versa. Reference to any Bond Document means that Bond Document as amended or supplemented from time to time. Reference to any party to a Bond Document means that party and its successors and assigns. (b) The following terms have the meanings assigned to them below whenever they are used in this Indenture: "Agreement" means the Loan Agreem,ent, dated as of the date of this Indenture, between the City of La Porte Industrial Development Corporation, a nonprofit industrial development corporation created under the Act, and La Quinta Motor Inns, Inc., a Texas corporation. "Business Day" means any day which is not a Sunday or a legal holiday or a day (including Saturdays) on which banking institutions in the city where the principal corporate trust office of the Trustee is located are authorized by law or executive order to close. ' "Eligible Securities" means the following obligations or securities, maturing (or redeemable at the option of the Trustee) or marketable prior to the maturities thereof, at such time or times as to enable disbursements to be made from the Fund in which such investment is held in accordance with the terms hereof: (a) Government Obligations; (b) interest-bearing deposit accounts (which may be represented by certificates of deposit) and banker's accep- tances (whose maturity value shall not be greater than 1/25 of the capital and surplus of the accepting bank) of one or more national or state banks (which may include the Trustee), each having a combined capital and surplus of not less than $25,000,000; or prime commercial paper rated P-l or P-2 by Moody's Investors Service, Inc. or A-I or A-2 by Standard & Poor's ~orporation; (c) bonds, debentures, notes or other evidences of indebtedness issued by any of the following federal agencies: Bank for Cooperatives; Export-Import Banks of the United I-I e e P""::::- ~ .' " States; Federal Financing Banks; Federal Intermediate Credit Banks; Federal Home Loan Banks; Federal Home Loan Mortgage Corporation; Federal Land Banks; Federal National Mortgage Association; the Government National Mortgage Association; the Tennessee Valley Authority; the United States Postal Service; or any agency or instrumentality of the United States of America which shall be established for the purpose of acquiring the obligations of any of the foregoing or otherwise providing financing therefor; (d) direct and general obligations of any state of the United States of America, to the payment of the principal of and interest on which the full faith and credit of such state is pledged, provided that at the time of their purchase under this Indenture, such obligations are rated in any of the three highest rating categories by Moody's Investors Service, Inc., or Standard & Poor's Corporation; , (e) repurchase agreements (including those issued by the Trustee) fully secured by Government Obligations; and (f) money market funds comprised of prime commercial paper or Government Obligations. "Fund" m'eans any of the funds established with the Trustee under this Indenture. "Trust Estate" is defined in the Granting Clauses of this Indenture. Section 102. Interpretations. The table of contents and article and section headings of this Indenture are for reference purposes only and shall not affect its interpretation in any respect. (End of Article I) 1-2 e e ...--.' ARTICLE II AUTHORIZATION OF ORIGINAL BONDS; ISSUANCE AND FORM OF BONDS Section 201. Terms of Bonds. The Original Bonds shall be issued in the aggregate principal amount of $3,800,000. Thereafter, no Bonds may be issued under this Indenture, except exchange or replacement Bonds or Additional Bonds as provided in this Article. The Original Bonds shall be designated "City of La Porte Industrial Development Corporation Industrial Development Revenue Bonds, Series 1983 (La Quinta Motor Inns, Inc. Project)," and shall be numbered separately from FR-1 upward. The Bonds shall be issued only in fully registered form. Interest on the Original Bonds shall be payable at the rate or rates, on the date or dates and in the manner set forth in Exhibit A to this Indenture. The Original Bonds shall mature in the amounts and on the dates set forth in Exhibit B to this Indenture, but shall be subject to redemption prior to their maturity as provided in Exhibit A. Interest on any Additional Bonds shall be payable at the rate or rates, on the date or dates and in the manner set forth in the supplemental indenture providing for their issuance. Additional Bonds may be issued in principal amounts, be subject to such redemption provisions, and mature on the dates set forth in the supplemental indenture providing for their issuance. Section 202. Denomination of Bonds. The Bonds shall be issued in the denomination of $1,000 or any integral multiple thereof as requested by the Bondho lder . Section 203. Form of Bonds. The Original Bonds and any Bonds issued in exchange or replacement for the Original Bonds shall be substantially in the form set forth in Exhibit A to this Indenture which is part of this Indenture. Additional Bonds, and any Bonds issued in exchange or replacement for Additional Bonds, shall be substantially in the form set forth in the supplemental indenture providing for their issuance. The Bonds shall conform to the forms specified, but may have such appropriate variations, omissions and insertions as are customary, permitted or required by this Indenture and may have such letters, numbers or other marks of identification as may be approved by the officers executing such Bonds, such approval to be conclusively evi- denced by their e~ecution of the Bonds. Section 204. Execution of Bonds. The Bonds shall be,signed by the President or any Vice President and attested by the Secretary or any Assistant Secretary of the Issuer. To the extent permitted by law, such II-1 e e ...-::: ::...:.:. " signatures on the Bonds may be facsimiles with the same force and effect as if said officers had manually signed the Bonds. In case any officer whose signature or whose facsimile signature appears on the Bonds ceases to hold such office before the delivery of such Bonds or did not hold such office on the date of such Bonds but has held such office at or prior to the delivery of the Bonds, such signature or such facsimile shall be valid and sufficient for all purposes, the same as if such officer had remained in office until delivery or held such office on the date of such Bonds, as the case may be. Section 205. Authentication and Delivery of Bonds. The Trustee shall authenticate the Bonds and shall deliver the Bonds on behalf of the Issuer to the purchasers thereof as directed by the Issuer in accordance with the provisions of this Section. The Trustee may note on each Bond the date of its authentication. No Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this Indenture unless the Bond has been duly authenticated by the Trustee. The executed certificate of authentication upon any Bond shall be conclusive evidence that such Bond has been duly authenticated and delivered. The form of such certificate of authentication on the Bonds shall be as prescribed in Exhibit A hereto. The Trustee's certificate of authentication on any Bond shall be deemed to have been executed by it if manually signed by an authorized officer of the Trustee, but it shall not be necessary that the same officer sign the certificate of authenti- cation on all of the Bonds. Prior to the delivery by the Trustee of any of the Original Bonds, there shall be delivered to the Trustee: (a) a copy, duly certified by an officer of the Issuer, of the resolution or resolutions adopted and approved by the Board authorizing the execution and delivery of the Agreement and this Indenture and acceptance of the Guarantee Agreement, and authorizing the issuance, execution and delivery of the Original Bonds; (b) an original executed counterpart of the Note, which shall be endorsed without recourse by the Issuer to the Trustee, a copy of the executed Mortgage as recorded in the Deed of Trust Records of Harris County, Texas, and an original executed counterpart of each of the other Financing Documents; and (c) a written request to the Trustee, signed on behalf of the Issuer by an officer of the Issuer, designating the names in which the Original Bonds are to be registered and requesting and authorizing the Trustee to authenticate and deliver the Original Bonds to the original purchasers upon payment to the Trustee for II-2 e e .. ~, deposit in the Construction Fund of the sum specified in such request. Section 206. Mutilated, Lost, Stolen or Destroyed Bonds. . Muti- lated Bonds may be surrendered to the Trustee and the Trustee shall validate the same or, upon the request of the Person surrendering such Bond or Bonds, the Issuer shall execute and the Trustee shall authenti- cate and deliver in exchange therefor a new Bond or Bonds of like maturity, designation, denomination, interest rate and aggregate principal amount. If there be delivered to the Issuer, the Trustee and the User (i) an affidavit or any other form of evidence satisfactory to them to establish proof of ownership and the circumstances of the destruction, loss or theft of any Bond, and (ii) such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Issuer or the Trustee that such Bond has been acquired by a bona fide purchaser, the Issuer shall execute and upon its request the Trustee shall authenticate and deliver in lieu of any such destroyed, lost or stolen Bond, a replacement Bond of like series, maturity, denomination, interest rate and principal amount. If the Bond in lieu of which a replacement Bond was issued is subsequently presented for payment by a bona fide purchaser, the Issuer and the Trustee shall be entitled to recover such replacement Bond, except from a bona fide purchaser thereof. In case any such mutilated, destroyed, lost or stolen Bond has become or is about to become due and payable, the Issuer in its dis- cretion and after satisfaction of clauses (i) and (ii) of the preceding paragraph may, instead of issuing a replacement Bond, cause the Trustee to pay such Bond when due out of moneys held by the Trustee and available for that purpose. Section 207. Registration of Bonds; Transfers. The Trustee shall be the registrar for the Bonds. So long as any of the Bonds remain outstanding, the Trustee shall maintain and keep at its corporate trust office, books for the registration and transfer of Bonds. The Original Bonds and any Additional Bonds shall be registered as directed by the Issuer. Subject to reasonable regulations of the Trustee, Bonds may be transferred only on the registration books maintained by the Trustee by surrender thereof to the registrar at its principal corporate trust office, duly endorsed for transfer, or accompanied by an assignment duly executed by the registered owner or his attorney duly authorized in writing. Upon the surrender of any Bond, the Issuer shall execute in the name of the transferee and the Trustee shall authenticate and deliver, in authorized denominations, one or more Bonds, bearing numbers not contemporaneous ly then Outstanding of the same unpaid aggregate principal amount, maturity, designation and interest rate as the II-3 e e ....-:::.:....:.:. surrendered Bonds. In transferring a Bond registered in the name of a Person who is a fiduciary or who is described as a fiduciary or in transferring a Bond pursuant to an assignment by a fiduciary who is not the registered owner or on the transfer of a Bond upon or after the death of the registered owner, the Trustee may require the fiduciary or the Person requesting the transfer to furnish to the Trustee, prior to any such transfer, such documents, signature guarantees, tax waivers or information as the Trustee shall reasonably request. Section 208. Payment for and Limitations on Replacements and Transfers. For every replacement or transfer of Bonds provided for in this Indenture, the Issuer and the Trustee may make a charge sufficient to reimburse them for any tax, fee or other governmental charge that may be imposed by others. The cost of preparing each new Bond, and any other expenses (except any applicable tax, fee or other governmental charge) of the Issuer or the Trustee incurred in connection with such replacement or the registration of a transfer, shall be paid by the User pursuant to the Agreement. Neither the Issuer nor the Trustee shall be required (i) to register the transfer of Bonds for a period of fifteen (15) calendar days next preceding the selection of any Bonds to be redeemed or thereafter until after the close of business on the day of mailing of notice of such redemption of Bonds or (ii) to transfer or exchange any Bond selected for redemption in whole or in part. Section 209. Persons Treated as Owners. Any Person may deem and treat the Holder of a Bond as the absolute owner of such Bond, whether or not such Bond is overdue, and no Person shall be affected by any notice to the contrary. Payment made to the Holder of any Bond in accordance with the provisions of this Indenture and the Bonds shall be valid and effectual, to the extent of the sum or sums so paid, to satisfy and discharge the liability upon such Bond in respect of which such payment was made. Section 210. Payment of Bonds; Cancellation of Surrendered Bonds. If any Bonds, or portions thereof, which are payable on presentment are not presented for payment when the principal thereof becomes due, either at maturity or otherwise, or at the date fixed for redemption thereof, or if any check which was mailed to the Bondholder for payment of Debt Service is not presented for payment, all liability of the Issuer to the Holders thereof for the payment of such Bonds, or portions thereof, as the case may be, shall be completely discharged whenever funds sufficient to pay such Bonds, or portions thereof, or such check are held by the Trustee, and such funds shall be segregated by the Trustee and, subject to the other provisions of this Indenture, held in trust for the benefit of the Holders of such Bonds, or portions thereof, as the case may be, who shall thereafter be restricted exclusively to such funds for the satisfaction of any claim of whatever nature on their part II-4 e e ~=-.:. relating to such Bonds, or portions thereof. Such segregated funds shall not be subject to investment. All Bonds paid or redeemed in full or purchased for cancellation or for which replacement or exchange Bonds have been issued as provided herein shall forthwith be cancelled upon the making of proper records as to such payment, redemption or purchase and shall not be reissued. The Trustee shall destroy cancelled Bonds not sooner than two years after cancellation and deliver a certificate of destruction thereof to the Issuer and to the User. Section 211. Additional Bonds. One or more series of Additional Bonds may be authenticated and delivered by the Trustee for the purposes set forth in Section 3.2 of the Agreement; provided, however, that, prior to the authentication and delivery of any series of Additional Bonds, there shall have been de livered to the Trustee: (a) a copy, duly certified by an officer of the Issuer, of the resolution authorizing the issuance of such Additional Bonds and approving such documentation as may be required in connection therewith; (b) executed counterparts of amendments or supplements of each of the Financing Documents, making all modifications thereto which the Trustee, the Issuer and the User deem necessary in connection with the issuance of such Additional Bonds, the payment therefor and the disposition of the proceeds thereof, together with evidence, satisfactory to the Trustee, of approval of such amendment or supplement by the Commission to the extent required by the Act; (c) an Opinion of Counsel to each party to an amendment or supplement to a Financing Document to the effect that each such amendment or supplement has been duly authorized, executed and delivered by that party and that the Financing Document as amended or supplemented constitutes a legal, valid and binding obligation of that party; (d) a written statement signed by an officer of the User (i) approving the issuance and delivery of such Additional Bonds, and (ii) certifying that there then exists no Event of Default under this Indenture; (e) an opinion of nationally recognized bond counsel to the effect that the issuance of the series of Additional Bonds will not adversely affect the tax exemption of the interest on the Original Bonds or any series of Additional Bonds previously issued; II-5 e e ...-:: ::.....:.:. ,. (f) a written request and authorization to the Trustee, signed on behalf of the Issuer by an officer of the Issuer,. to authenticate and deliver such Additional Bonds to the purchaser therein identified upon payment to the Trustee of the sum specified therein; and (g) the written consent of the Applicable Percentage of Bondholders to the issuance of such Additional Bonds. Except as may be provided in a supplement to this Indenture, each of the Additional Bonds shall rank equally and on a parity with the Original Bonds and shall be equally and ratably secured hereunder with the Original Bonds and any other Additional Bonds, without preference, priority or distinction and shall be co-equal as to the lien of this Indenture regardless of the time of delivery thereof. Nothing in this Section shall require (i) that any Additional Bonds bear interest at the same rate, have the same, or an earlier ,or later, maturity, or be subject to redemption prior to maturity on the same basis as the Original Bonds, (ii) that any revenue bonds or other obligations (referred to in this sentence as "related bonds") which may be issued by the Issuer or any other issuer created under the Act (except such related bonds as may be secured by a pledge of revenues derived from the Agreement) must be issued as Additional Bonds, (iii) that the Original Bonds must rank equally and on a parity with any such related bonds not issued as Additional Bonds, or (iv) that the Original Bonds must be secured by a pledge of the revenues derived from any enlargements, improvements or expansions financed with the proceeds of related bonds (except as such revenues are derived from the Agreement). The Issuer shall not incur any indebtedness or issue any bonds or other obligations of any sort (other than the Original Bonds or any Additional Bonds) secured by a pledge of the' revenues and income derived from or in connection with the Agreement. (End of Article II) II-6 e e ....-:::: =-:.:. ARTICLE III FUNDS Section 301; Establishment of Funds. The Issuer hereby establishes with the Trustee the Construction Fund and the Debt Service Fund, including the special escrow account. Section 302. Construction Fund. The proceeds of the sale of the Bonds shall be deposited in the Construction Fund. The Trustee shall apply the money in the Construction Fund only as provided herein and in the Agreement. Upon the acceleration of the maturity of the Bonds, any amounts credited to the Construction Fund shall forthwith be credited to the Debt Service Fund without the necessity of complying with the provisions of the Agreement (other than Section 4.5 thereof) or the other Bond Documents. Section 303. Debt Service Fund. There shall be deposited into the Debt Service Fund (a) the amounts required to be transferred from the Construction Fund upon acceleration of maturity of the Bonds in accordance with the provisions of the Bond Documents, (b) all amounts required to be deposited therein pursuant to Article IV of the Agreement and (c) any other amounts paid to or recovered by the Trustee for deposit in the Debt Service Fund. Except as otherwise provided in this Indenture with respect to excess or unclaimed amounts, the amounts in the Debt Service Fund shall be used solely for the payment of Debt Service, and during the continu- ance of an Event of Default, payment of the fees and expenses of the Trustee, in accordance with the provisions of this Indenture. (End of Article III) III-l e e ~::....::. ARTICLE IV INVESTMENTS Section 401. Investment of Funds. Pending disbursement of the amounts on deposit in any Fund, the Trustee is hereby directed to invest and reinvest such amounts (other than segregated amounts described in Section 210 of this Indenture) in Eligible Securities promptly upon receipt of, and, subject to the limitations set forth in this Article, in accordance with written instructions of the User. All such investments shall be credited to the Fund from which the money used to acquire such investments shall have come, and all income and profits on such investments shall be credited to, and all losses thereon shall be charged against, such Fund. The Trustee may make any investment through its own bond department. As amounts invested are needed for disbursement from any Fund, the Trustee shall cause a sufficient amount of the investments credited to that Fund to be redeemed or sold and converted into cash to the credit of that Fund. The User by its execution of the Agreement covenants to restrict the investment of money in the Funds created under this Indenture in such manner and to such extent, if any, as may be necessary, after taking into account ~easonable expectations at the time the Bonds are delivered to their original purchaser, so that the Bonds will not constitute arbitrage bonds under Section 103(c)(2) of the Code and the Regulations, and the Trustee hereby agrees to comply with the User's written instructions with respect to the investment of money in the Funds created under this Indenture. Section 402. Investment of Certain Amounts Credited to Special Escrow Account. Amounts credited to the special escrow account pursuant to Section 3.5(c) of the Agreement and the proceeds of any investment thereof shall not be invested to produce a yield (computed from the date such amounts were required to be credited to the special escrow account and taking into account investment of such amount during the period from such date to the date of such credit) greater than the yield on the Bonds. Section 403. Money to be Held in Trust. All money in the Debt Service Fund under any provision of this Indenture shall be held in trust for the benefit of the Bondholders but, except as provided in Section 210, 303 or 602 of this Indenture, need not be segregated from other funds held in trust under this Indenture by the Trustee, but shall be segregated at all times from all funds of the Issuer or the Trustee not held by the Trustee under this Indenture. (End of Article IV) IV-1 e e ~=-.:~ ARTICLE V GENERAL COVENANTS AND PROVISIONS Section 501. Payment of Debt Service; Limited Obligations. The Issuer covenants that it will duly and punctually deposit or cause to be deposited with the Trustee amounts sufficient to pay the Debt Service on the dates and in the manner provided in this Indenture and in the Bonds according to the true intent and meaning thereof; provided, however, that the Bonds shall be limited obligations of the Issuer and shall be payable by the Issuer solely out of the Trust Estate and the revenues derived therefrom or in connection with the Bond Documents. The Bonds shall never be payable out of any other funds of the Issuer except the Trust Estate and such revenues. NEITHER THE STATE, THE UNIT NOR ANY POLITICAL CORPORATION, SUBDIVI- SION OR AGENCY OF THE STATE SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE, THE UNIT OR ANY OTHER POLITI- CAL CORPORATION, SUBDIVISION OR AGENCY THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM, IF ANY, OR THE INTEREST ON SUCH BONDS. Section 502. Representations and Warranties of Issuer. The representations and warranties set forth in Article VI of the Agreement are hereby incorporated herein by reference and the Issuer hereby makes such representations and warranties to the Trustee for the benefit of the Bondholders. In addition, the Issuer represents and warrants to the Trustee for the benefit of the Bondholders, that, to the best of its knowledge, except for the security interest and liens in favor of the Trustee: (i) the Issuer owns good and indefeasible title to the Trust Estate (including without limitation the Note and the indebtedness evidenced thereby) free and clear of any other security interests, liens, adverse claims or options; (ii) the Issuer has full right, power and authority to convey, assign, transfer and deliver the Trust Estate and to grant a security interest in or a lien upon the Trust Estate to the Trustee in the manner provided herein, free and clear of any other security interests, liens, adverse claims and options; (iii) no security interest or lien exists with respect to the Trust Estate; and (iv) no financing statement or other security instrument is on file in any jurisdiction covering the Trust Estate. The Issuer makes no other representations or warranties, express or implied, concerning the Trust Estate. Such representations and warranties shall be deemed to have been made as of the date of this Indenture and again as of the date of delivery of the O:dginal Bonds. Section 503. Instruments of Further Assurance. The Issuer cove- nants that it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental V-I e e ~=-- hereto and such further acts, instruments and transfers as the Trustee may reasonably require for the better assigning, pledging and confirming unto the Trustee of the Trust Estate assigned and the revenues pledged hereunder. Section 504. Inspection of Books. The Issuer covenants that all books and documents in its possession relating to the Project and the revenues derived from or in connection with the Agreement will at all reasonable times be open to inspection by such accountants or other agents as the Trustee may from time to time designate. Section 505. Rights Under the Bond Documents. So long as any of the Bonds are Outstanding, the Issuer covenants that it will perform and observe all obligations to be performed by it under the Bond Documents. The Issuer covenants to maintain the validity and effectiveness of the Agreement and, except as permitted hereby, to take no action, to permit no action to be taken by others, and not to omit to take any action which might release any party from its liabilities or obligations under the Bond Documents, or result in the surrender, termination, amendment, or modification of, or impair the validity of, any Bond Document. The Issuer agrees that the Trustee, subject to the conditions thereof, may enforce for and on behalf of the Bondholders all of the covenants and agreements of the parties to the Financing Documents (other than the Trustee and the Issuer) as set forth in the Bond Documents, whether or not the Issuer is in default hereunder. The Issuer further covenants that prior to commencing any action or proceeding on behalf of the Bondholders for the enforcement of the obligations of the parties (other than the Trustee and the Issuer) under the Bond Documents, the Issuer will inform the Trustee and the Trustee shall have the right to join in, and (except for any action or proceeding with respect to the User's obligations to the Issuer under Sections 3.1, 7.1 or 9.3 of the Agreement) if it elects, to control, such action or proceeding for and on behalf of the Bondholders. Section 506. Additional Covenants of Issuer. Each of the cove- nants of the Issuer made in Article VI of the Agreement is hereby made with the Trustee for the benefit of the Bondholders. In addition, except as permitted or contemplated in this Indenture, the Issuer covenants that it will not: (i) create any mortgage, lien, encumbrance, pledge, charge or other exception to title (other than those created by this Indenture) upon or against any of the properties or assets constituting the Trust Estate, or any revenues derived therefrom or any other funds held by the Trustee for the benefit of the Bondholders; (ii) sell, lease, transfer, conveyor otherwise dispose of all or any part of the Trust Estate or its interest therein; (iii) create, incur or assume V-2 e e ...-:::::.....:.:. any debt secured by the Trust Estate or the Issuer's interest therein or the revenues pledged herein; or (iv) take any other action that will impair the lien of this Indenture on the Trust Estate. (End of Article V) V-3 e e ....-::=-= ARTICLE VI DISCHARGE Section 601. Discharge. When all of the Outstanding Bonds shall have been paid or deemed to have been paid, and provision shall also be made for paying all other Bond Obligations, and if at such time no Event of Default shall exist, then this Indenture and the lien created hereby shall be discharged and satisfied and the Issuer shall be released from its obligations under this Indenture. Upon such discharge and satis- faction, the Trustee, at the request of the Issuer, shall execute such documents as may be reasonably requested by the Issuer to evidence such discharge and satisfaction and the release of the Issuer from its obligations hereunder. Notwithstanding the satisfaction and discharge of this Indenture, the trusts created by this Indenture shall survive and the Trustee shall (i) continue to be obligated to hold in trust any money or investments held by the Trustee at the time of such satisfaction or discharge for the payment of Debt Service, to pay to the Bondholders the funds so held by the Trustee as and when such payment becomes due and payable, and to pay over to the User any excess or unclaimed amounts as provided by this Indenture, and (ii) so long as the Bonds have not become due and payable or been paid prior to the respective maturities thereof, be entitled to exercise the rights and remedies contemplated by this Indenture and the provisions of the Agreement which by the terms of the Agreement continue until all of the Bonds have become due and payable or been paid prior to the respective maturities thereof. Section 602. Payment of Bonds. All of the Bonds shall be deemed to have been paid for purposes of this Indenture if (a) there has been deposited with the Trustee in trust either (i) money in an amount, or (ii) Government Obligations the principal of and interest on which will, when due or redeemable at the option of the holder, without further investment or reinvestment of either the principal amount thereof or the interest earnings thereon, provide moneys in an amount, which, together with any money deposited with or held by the Trustee at the same time and available for such purpose pursuant to this Indenture, will be sufficient to pay when due and payable the Debt Service due and payable and to become due and payable on and prior to the respective redemption dates or maturity dates on all of the Bonds, or (iii) a combination of (i) and (ii), and (b) in case any of such Bonds are to be redeemed on any date prior to their maturity, the User has given to the Trustee irrevocable written instructions instructing the Trustee to effect the redemption of such Bonds on such date and to give notice of such redemp- tion to Bondholders prior to said date as provided in Exhibi~ A to this Indenture, and (c) in the event such Bonds are not to be redeemed within the sixty (60) days next succeeding the date of such deposit with the VI-1 e e ~_. Trustee, the Issuer has given irrevocable written instructions to the Trustee to give notice to the Holders of such Bonds advising that the deposit required by clause (a) of this paragraph above has been made with the Trustee and that the Bonds are deemed to have been paid in accordance with this Article and stating such maturity or redemption date or dates upon which money is to be available for the payment of the Debt Service. The Trustee shall not be required to accept any deposit of Government Obligations pursuant to clause (ii) or (iii) during the continuance of an Event of Default. For purposes of this Section, Government Obligations issued or held in the name of the Trustee in book-entry form on the books of the Department of Treasury of the United States of America shall be deemed to be deposited with the Trustee. Any Government Obligations deposited with the Trustee pursuant to this Section shall mature (or be redeemable at the option of the Trustee) on such dates as shall coincide as nearly as practicable with, but not later than, the times at which the money provided upon such maturity will be required for the aforesaid purpose. Such Government Obligations shall not contain provisions permitting the redemption thereof at the option of the issuer thereof. (End of Article VI) VI-2 e e .-::~::....:.:. ARTICLE VII DEFAULT AND REMEDIES Section 701. Events of Default. An "Event of Default" means the occurrence and continuance of anyone of the following events: (a) payment of any installment of principal of any Bond is not made when due; or (b) payment of any installment of interest on any Bond is not made when due; or (c) default (which is material to the Bondholders and other than a default described in Subsections (a) or (b) of this Section) in the due and punctual observance and performance of any covenant, term, condition or agreement of the Issuer contained in the Bond Documents, occurs and continues for a period of thirty (30) days after there has been given, to the other parties to the Financing Documents by the Trustee or to the parties to the Financing Documents by the Holders of the Applicable Percentage of the Outstanding Bonds, notice specifying such default and requiring it to be remedied, and the Issuer and the Trustee shall not have agreed in writing to an extension of such period prior to its expiration; provided, however, that such period shall be extended if corrective action is instituted within the applicable period and so long as such action is diligently pursued until such default is corrected; or (d) default (other than a default in the observance and performance of any covenant, condition or agreement which is contained in Section 7.1 of the Agreement or which results in a default described in Subsections (a) or (b) of this Section) in the due and punctual observance and performance of any covenant, condition or agreement of the User contained in the Bond Documents occurs, and continues for a period of thirty (30) days after there has been given to the other parties to the Financing Documents by the Trustee, or to the parties to the Financing Documents by the Holders of the Applicable Percentage of the Outstanding Bonds, notice specifying such default and requiring the same to be remedied and the Issuer and the Trustee shall not have agreed in writing to an extension of such period prior to its expiration; provided, however, that if the default stated in the notice cannot be corrected within the applicable period, such time shall be extended if corrective action is instituted by the User within the applicable period and so long as such action is diligently pursued until such default is corrected; or VII-1 e e ....-::::.....:.:.. " (e) any warranty, representation or other statement by or on behalf of the parties (other than the Trustee) to any Financing Document contained in any Bond Document is false or misleading in any material respect; or (f) the existence of an Event of Default as defined in the Guarantee Agreement. If the Issuer is prevented by reason of Force Majeure from avoiding default under Subsection 701 (c) above and it gives notice and full particulars of such Force Majeure in writing to the other parties to the Financing Documents, then the obligations of the Issuer under the Bond Documents which are the subject of the Force Majeure shall be suspended during the continuance of the inability then claimed including a reasonable time for removal of the effect thereof. The occurrence of any Force Majeure shall not suspend or otherwise abate, and the Issuer shall not be relieved from, its obligation .to make the payments of Debt Service required to be made by it under this Indenture. If any portion of the Loan Payments payable under Section 4.1 of the Agreement shall not be paid at the time therein specified, the Trustee shall promptly give telephonic or personal notice of such failure to an Authorized Representative of the User and shall immedi- ately thereafter confirm such notice by telegram or by a letter person- ally delivered to the other parties to the Financing Documents. Section 702. Acceleration. If an Event of Default shall have occurred and be continuing, the Trustee may by notice to the other parties to the Financing Documents, declare the principal of all Outstanding Bonds and the interest accrued thereon immediately due and payable. On the day on which such notice is given by the Trustee, subject to the provisions of Section 4.5 of the Agreement, all Bond Obligations shall be due and payable. Section 703. Other Remedies. If an Event of Default shall have occurred and be continuing, the Trustee, or the Issuer with the prior written consent of the Trustee, may pursue any available remedy by action at law or suit in equity to enforce the payment of Debt Service or to enforce the performance of any other term, covenant or condition hereof and such payment and performance may be enforced by the appoint- ment of a receiver in equity with power to charge and collect the Bond Obligations, and to apply the Bond Obligations in accordance with the Agreement and this Indenture. Any such receiver may be a receiver of the Trust Estate, and of the revenues, issues, earnings, income, pro- ducts and profits thereof, with such other powers as the court making such appointment shall confer. Without limiting the generality of the foregoing, if any Even~ of Default shall have occurred and be continuing, the Trustee may, by mandamus, or other suit, action or VII -2 . .. --' ...-::::. ..::.:. proceeding at law or in equity, enforce all rights of the Bondholders and require the other parties to the Financing Documents to carry out any agreements with or for the benefit of the Bondholders and to perform its or their duties under the Bond Documents. No remedy by the terms of the Bond Documents conferred upon or reserved to the Issuer or the Trustee (or to the Bondholders) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Issuer or the Trustee or to the Bondholders hereunder or thereunder or now or hereafter existing at law or in equity or by statute. Section 704. Intervention by Trustee. The Trustee may seek to intervene on behalf of the Bondholders in any judicial proceeding to which any party to a Financing Document is a party and which, in the opinion of the Trustee, has a substantial.bearing on the interests of such Bondholders. Without limiting the generality of the foregoing, in case of the pendency of any bankruptcy or other judicial proceeding involving the other parties to the Financing Documents or their properties, the Trustee may by intervention in such proceeding or otherwise: (a) file and prove a claim for the whole amount of Bond Obligations owing and unpaid in respect of the Bonds and file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Bondholders, if any, allowed in such judicial proceeding; and (b) collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any trustee or other similar official in any such judicial proceeding is hereby authorized by each Bondholder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Bondholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Bondholder any plan of reorganization, arrangement, adjustment or composition affecting the Bonds or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Bondholder in any such proceeding. VII -3 e e --'"- ., ......---- " Section ?05. Remedies Vested in Trustee. All rights of action under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any Bondholders, and any recovery of judgment shall, subject to the ,provisions of Section 706 of this Indenture, be for the equal benefit of all Bondholders. Section 706. Applications of Money. All moneys held in the Debt Service Fund, or deposited in the Debt Service Fund, during the contin- uance of an Event of Default (other than amounts segregated pursuant to Section 210 for the payment of Debt Service due prior to such Event of Default) shall be applied as follows: (a) To the payment of the costs and expenses of the pr6ceedings resulting in the collection of such amounts and of the expenses, liabilities and advances incurred or made by the Trustee; (b) Unless the principal of all the Bonds is then due, all such amounts (other than amounts credited to the Special Redemption Account) shall be applied: First--To the payment to the Bondholders of all interest then due (other 'than interest installments for the payment of which amounts are held in the Debt Service Fund pursuant to Section 210) on the Bonds, and, if the amounts available shall not be sufficient to pay in full all interest then due, then to the payment ratably, according to the amounts then due, to the Holders, without any discrimination or preference except as to any difference in the respective rates of interest specified in the Bonds; and Second--To the payment to the Bondholders of the unpaid principal of and premium, if any, on any of the Bonds which shall have become due (other than Bonds which have matured or otherwise become payable prior to such Event of Default and for the payment of which amounts are held in the Debt Service Fund pursuant to Section 210), and, if the amount available shall not be sufficient to pay in full the amount of principal and premium, if any, due on any particular date, then to the payment ratably, according to the amount of principal and premium, if any, due on such date, to the Persons entitled thereto without any discrimination or preference; I and VII-4 e e -. ... . ~~ .......-:::- .. .. - " , (c) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such amounts shall be applied to the payment of the Debt Service (other than Debt Service relating to Bonds which have matured or otherwise become payable prior to such Event of Default and for the payment of which amounts ar.e held in the Debt Service Fund pursuant to Section 210), without preference or priority of any amount or Bond over any other amount or Bond (except as aforesaid), ratably, according to the a~ounts due respectively for principal, premium, if any, and interest, to the Bondholders without any discrimination or preference except as to any difference in the respective rates of interest specified in the Bonds. Whenever amounts are to be applied pursuant to the prov~s~ons of this Se:ction, such amounts shall be applied at such times, and from time to tim~, as the Trustee shall determine, having due regard for the amounts' available for application and th~ likelihood of additi:onal amounts: becoming available for such application in the future. Whenever the Trustee shall apply such amounts, it shall fix the date upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such amounts and of the fixing of any such date. Se~tion 707. -Failure to Exercise Remedies. No delay or omission to exer,cise any right or power accruing upon any default or Event of Default shall impair any such right or power or shall be construed to be a wai~~r of any such default or Event of Default or acquiescence there- in; and every such right and power may be exercised from time to time and as often as may be deemed expedient. Section 708. Rights and Remedies of Bondholders. (a) Subject to the provisions of Section 803 reg~rding indemnification, the Holders of the Applicable Percentage of the Outstanding Bonds shall have the ,right, at any time, by one or more written instruments executed and delivered to the Trustee to direct the remedies to be pursued by the Trustee, and the method and place of conducting all proce~dings to be taken in connection with the enforcement of the terms df this Indenture or for the appointment of a receiver or any other proceedings hereunder; provided, however, that such direction shall not be contrary to law or the proyisions of this Indenture and provided, further, that the Trustee shall have the right to decline to follow any such direction if the Trustee' in good faith shall determine that the remedy or proceedings so directed would impair the rights of other Bondholders, or would involve it in personal liability. If an Event of Default shall have occurred and be ; continuing, the Holders of the Applicable Percentage of the Outstan~ing Bonds may direct the Trustee to exercise such one or more of the rights, remedies and powers conferred by this Article as the VII -5 e e ~=-.:.: .' ~ Trustee, being advised by counsel, shall deem most expedient in the interest of the Bondholders. (b) No Bondholder shall have any right to institute any proceeding for the enforcement of this Indenture or for any remedy hereunder, unless all of the following conditions are met: (i) an Event of Default exists of which the Trustee has notice pursuant to Subsection 803(h) of this Indenture, (ii) the Holders of the Applicable Percentage of the Outstanding Bonds have made written request to the Trustee and have offered it reasonable opportunity either to proceed to exercise the powers herein granted, or to institute such action, suit or proceeding in its own name, (iv) such Bondholders have offered to the Trustee indemnity as provided in Subsection 803(e) of this Indenture, and (v) the Trustee has failed or refused to exercise the powers h~rein granted, or to institute such action, suit or proceeding. Notwithstanding the preceding sentence, no Bondholder shall have any right to enforce any right hereunder except in the manner herein provided and for the equal benefit of Bondholders. Nothing in this' Indenture shall, however, impair the right of any Bondholder to enforce payment of Debt Service at and after the time when due, or the obligation of the Issuer to pay Debt Service, at the time and place, from the source and in the manner expressed herein and in such Bonds. Section 709. Termination of Proceedings. In case the Trustee proceeds to enforce any right under the Financing Documents, and such proceeding is discontinued or abandoned for any reason, or is determined adverse,ly, then and in every such case the parties to the Financing Documents shall be restored to their former positions and rights hereunder, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. Section 710. Waivers of Defaults and Events of Default. (a) After a declaration of acceleration of maturity of the principal amount of the Bonds but prior to obtaining a final judgment for payment of such amounts, if all amounts which would then be payable hereunder by the Issuer if such default had not occurred and was not continuing shall have been paid by or on behalf of the Issuer, and all other Events of Default under the Financing Documents have been waived or cured, and the reasonable charges and expenses of the Trustee and the Bondholders have been paid, including reasonable attorneys' fees paid or incurred, then the Trustee shall waive any Event of Default and its consequences and rescind any such declaration upon the written request of the Holders of the Applicable Percentage of the Outstanding Bonds in respect of which such Event of Default existed. (b) Upon request of the Holders of the Applicable Percentage of Outstanding Bonds, the Trustee shall waive, on behalf of the Holders of VII-6 e e --.. .........--.~ i' all Outstanding Bonds, any past default and its consequences hereunder; provided, however, that there shall not be so waived without the consent of the Holder of each Bond so affected any existing Event of Default arising from the nonpayment of Debt Service on such Bond or from the nonperformance or breach of any covenant or provision which cannot be amended or modified except pursuant to Section 902(b) or (c). (c) In case of any such waiver or rescission, the parties to the Financing Documents and the Bondholders shall be restored to their former positions and rights hereunder, but no such waiver or rescission shall extend to any other default or Event of Default, or impair any right consequent thereon. (End of Article VII) VII-7 ,- - ...-:::~ ARTICLE VIII THE TRUSTEE Section 80L Certain Duties and Responsibilities. during the continuance of an Event of Default, (a) Except (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of the Bond Documents; b~t in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of the Bond Documents. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by the Financing Documents, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed the Trustee from liability for its own negligent action, its gent failure to act or its own wilful misconduct, except that to relieve own negli- (i) this Subsection shall not be construed to effect of Subsection (a) of this Section; limit the (ii) the Trustee shall not be liable for any error of judgment made in good faith by its officers, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accor- dance with any direction of the Holders of the Applicable Percentage of the Outstanding Bonds permitted to be given by them under this I~denture; and (iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in VIII-l e e ....-:::::;:::...:.. the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 802. Notice if Default or Notice of Taxability Occurs. If an Event of Default described in Section 701(a) or (b) exists, the Trustee shall give notice thereof to the Bondholders and the Commission. In the event of notification of the Trustee by the Internal Revenue Service that the interest on the Bonds is, or may be, subject to federal income taxation, the Trustee shall provide a copy of such notice to the Commission, to the Bondholders and to the other parties to the Financing Documents. Section 803. Certain Rights of Trustee. Except as otherwise provided in Section 801: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Issuer or the User mentioned herein shall be sufficiently evidenced by a writing signed by an Authorized Representative and any resolution of the Board may be sufficiently evidenced by a copy of such resolution certified by an officer of the Issuer; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or estab- lished prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically pre- scribed) may, in the absence of bad faith on its part, rely upon a certificate of an officer of the Issuer or the User; (d) the Trustee may consult with counsel and the written advice of such counselor any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; VIII-2 e e 6JlIII""::: .::..-.:.. (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Bondholders pursuant to this Indenture, unless such Bondholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer and the User personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers here- under or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (h) the Trustee shall not be required to take notice or be deemed to have notice of. any default hereunder unless the Trustee shall be specifically notified of such default in writing by the Issuer, or the User or by the Holders of the Applicable Percentage of the Outstanding Bonds, and in the absence of such notice the Trustee may conclusively assume there is no default; provided, however, that the Trustee shall be required to take and be deemed to have notice of its failure to receive the moneys necessary to make payments when due of Debt Service. Section 804. Not Responsible for Recitals or Issuance of Bonds. The recitals contained herein and in the Bonds, except the certificate of authentication, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Bonds. The Trustee shall not be accountable for the use or application by the Issuer or the User of Bonds or, upon disbursement from the Construction Fund, the proceeds thereof. Section 805. May Hold Bonds. The Trustee or any other agent of the Issuer or the User, in its individual or any other capacity, may become the owner or pledgee of Bonds and may otherwise deal with the VIII -3 e e ...-:::::. ' " Issuer or the User with the same rights it would have if it were not Trustee or such other agent. Section 806. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it, hereunder except as otherwise provided in this Indenture. Section 807. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a corporation orga- nized and doing business under the laws of the United States of America or of any state that is either a trust company or a bank, authorized under such laws to exercise trust powers, having a combined capital and surplus of at least $5,000,000, subject to supervision or examination by federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in' its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 808. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appoint- ment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 809 of this Indenture. (b) The Trustee may resign at any time by g~v~ng written 'notice thereof to the other parties to the Financing Documents. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by the Holders of the Applicable Percentage of the Outstanding Bonds, by a written request for removal delivered to the parties to the Financing Documents. (d) If at any time: VIII -4 e e --.' -- -----......& (i) the Trustee shall cease to be eligible under Sec- tion 807 of this Indenture and shall fail to resign after written request therefor by any party to a Financing Document or by any Bondholder who has been a bona fide Holder of a Bond for at least six (6) months, or (ii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conser- vation or liquidation, then, in any such case, (x) any party to a Financing Document may remove the Trustee, or (y) any Bondholder who has been a bona fide Holder of a Bond for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapa- ble of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Issuer shall promptly appoint a successor Trustee. If, within one (1) year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by the Holders of the Applicable Percentage of the Outstanding Bonds delivered to the parties to the Financing Documents, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Issuer. If no successor Trustee shall have been so appointed by the Issuer or the Bondholders and accepted appointment in the manner hereinafter provided, any Bondholder who has been a bona fide Holder of a Bond fOr at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Issuer shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event to the Holders of the Bonds and to the parties to the Financing Documents. Each notice shall include the name of the successor Trustee and the address of its principal corporate trust office. Section 809. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the parties to the Financing Documents, including the retiring Trustee, an instrument accepting such appointment, and VIII -5 e e .-.::=-.: thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further 'act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Issuer or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article, to the extent operative. Section 810. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resul ting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, to the extent operative, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Bonds shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Bonds, so authenticated with the same effect as if such successor Trustee had itself authenticated such Bonds. Section 811. Fees, Charges and Expenses of Trustee. Pursuant to the provisions of Section 10.2 of the Agreement, the Trustee shall be entitled to be paid by the User reasonable compensation for its services rendered hereunder and to reimbursement for its actual out-of-pocket expenses (included counsel fees) necessarily incurred in connection therewith. The User may, without creating a default hereunder, contest in good faith the necessity for and the reasonableness of any such services and expenses. (End of Article VIII) VIII -6 e e ..-.:::::=-:: ARTICLE IX SUPPLEHENTAL INDE~"TURES AND AMENDHENT OF FINANCING DOCUHENTS Section 901. Supplemental Indentures and Amendments of Financing Documents Not Requiring Consent of Bondholders. With the consent of the Trustee, the appropriate parties to the Financing Documents may, without the consent of, or notice to, any of the Bondholders, enter into an indenture or indentures supplemental to this Indenture or any amendments to the Financing Documents for anyone or more of the following purposes: .(a) to cure any ambiguity, formal defect, omission or incon- sistent provision in the Financing Documents; (b) to grant to or confer upon the Trustee or the Mortgage Trustee for the benefit of the Bondholders any additional revenues, properties or collateral, or any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Bondholders, the Mortgage Trustee or the Trustee; (c) to add to the covenants and agreements of the parties to the Financing Documents (other than the Trustee) contained in any Financing Document other covenants and agreements of, or conditions or restrictions 'upon, the parties to the Financing Documents (other than the Trustee) or to surrender or eliminate any right or power reserved to or conferred upon the parties to the Financing Documents (other than the Trustee) in any Financing Document; Cd) to evidence any succession otherwise permitted under the Financing Documents to any parties to the Financing Documents and the assumption by such successor of the covenants and agreements of its predecessor under the Financing Documents; (e) to increase the payments to be made by the User under the Financing Documents; (f) to modify Section 7.1 of the Agreement; Cg) to modify the Agreement as permitted by Section 2.2 thereof or as otherwise required by the provisions of the Agreement or this Indenture; or (h) to provide for the issuance of uncertificated Bonds; provided, however, that any such action does not, in the opinion of the Trustee, materially and adversely affect the interests of the Bond- holders. When requested by the Issuer, the Trustee shall, subject to IX-1 e e ....-::::....:.:. " Section 903 hereof, join the Issuer in the execution of any supplemental indenture or any amendment to any Financing Document permitted under this Section. Section 902. Supplemental Indentures and Amendments of Financing Documents Requiring Consent of Bondholders. (a) With respect to any Financing Document, the parties to such Financing Document may, at any time, enter into amendments or supplements to the Financing Documents amending, modifying, adding to or eliminating any of the provisions thereof but, if such supplement or amendment is not of the character described in Section 901 of this Indenture, only with the consent of the Holders of the Applicable Percentage of the Outstanding Bonds. (b) Notwithstanding the provisions of Subsection 902(a), no supplement to this Indenture or amendment to the Financing Documents shall, without the consent of the Holder of each Outstanding Bond so affected, (i) extend the maturity date of any Bond, or reduce the rate or extend the time of payment of interes't thereon, or reduce the principal amount thereof, or reduce any premium payable upon the redemption thereof, or extend or reduce the amount of any mandatory redemption requirement, or make the principal thereof or interest or premium thereon payable in any coin or currency other than that provided in the Bond or (ii) deprive such Holder of the lien hereof on the revenues pledged hereunder and on the Trust Estate. (c) Notwithstanding the provisions of Subsection 902(a), no supplement to this Indenture or amendment to the Financing Documents shall, without the consent of the Holder of each Outstanding Bond, (i) decrease the Loan Payments payable under the Agreement or the Note, (ii) reduce the User's or the Issuer's obligations under Sections 4.4, 6.2, 7.2, 7.3 and 7.4 of the Agreement, (iii) reduce the obligations created under Articles II and III of the Guarantee Agreement, (iv) permit the creation of any additional lien on the Trust Estate hereunder equal or prior to the lien hereof, (v) reduce the aggregate principal amount of Bonds the Holders of which are required to approve any such supplement to this Indenture or amendment to the Financing Documents, (vi) increase the percentage of the principal amount of Bonds necessary to require the Trustee to accelerate maturity of the Bonds, or (vii) provide a privilege or priority of any Bond over any other Bond. The preceding sentence shall not be construed as limiting the Issuer's right to issue Additional Bonds in accordance with the provisions of this Indenture. Section 903. Rights of Trustee and the User. The Trustee may, but shall not be required to, enter into any supplement hereto or to consent to or enter into any amendment of the Financing Documents unless it shall have received an Opinion of Counsel, addressed to the Trustee, satisfactory to it, that such supplement or amendment is authorized or permitted by this Article. The Trustee may, but shall not be required IX-2 e e ...-:::: =-~ to, execute any supplement to this Indenture (except a supplement hereto providing for the issuance of Additional Bonds pursuant to Article II of this Indenture entitling the Trustee to the same rights, privileges and immunities in respect of such Additional Bonds as provided hereby in respect of the Bonds), or to consent to or enter into any amendment of the Financing Documents, if such supplement or amendment affects its rights, duties or immunities hereunder or under the Financing Documents. The Trustee shall-not execute any supplement to this Indenture without first having given the User forty-five (45) days' (or such shorter period as the User may agree) notice of its intention to execute such supplement, accompanied by a copy thereof, nor, as long as the User is not in default under the Financing Documents, shall the Trustee execute any such supplement without the prior written consent of the User. (End of Article IX) IX-3 e e ..-::::::.....::. ARTICLE X MISCELLANEOUS Section 1001. Consents, Etc., of Bondholders. Any action or instrument required or permitted by this Indenture to be taken or given by a Bondholder may be evidenced by any number of writings of similar tenor and may be executed by such Bondholder in person or by his duly authorized attorney. Proof of the execution of any such instrument or of the writings appointing any such attorney and of the ownership of Bonds, if made in the-following manner, shall be sufficient for any of the purposes of this Indenture, and shall be conclusive in favor of the Trustee with regard to any action taken, suffered or omitted to be taken by the Trustee under such instrument, namely: (a) The fact and date of the execution by any Person of any such writing may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the person signing such writing acknowledged before him the execution thereof, or by affidavit of any witness to such execution. (b) The fact of ownership by any Person of Bonds shall be proved by the registration books maintained by the Trustee as Bond registrar. In lieu of the foregoing the Trustee may accept such other proofs of the foregoing as it shall deem appropriate. Consents to supplements or amendments to the Financing Documents may be consolidated in a single instrument. Any consent or other action by a Bondholder shall bind every future Holder of the same Bond and the Holder of any Bond issued in exchange therefor or in lieu thereof. Any action taken by the Trustee pursuant to the Financing Documents upon the request or authority or consent of any Bondholder shall be conclusive and binding upon all future owners of the same Bond and upon Bonds issued in exchange therefor or in place thereof. Consent required pursuant to Section 902 of this Indenture shall be valid only if given following the giving of notice by or on behalf of the Issuer requesting such consent and setting forth the substance of the supplement to this Indenture or the amendment, change or modifi- cation of the Financing Documents, in respect of which such consent is sought, and stating that copies thereof are available at the office of the Trustee for inspection, to the Bondholders whose consent is required in accordance with said Section 902. In determining whether the Holders of the Applicable Percentage have given or taken any action or instrument required or permitted by X-I e e P"":::..:": this Indenture, Bonds owned by any party (other than the Trustee) to the Financing Documents, or any Affiliates of such party, shall be deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such action or instrument, only Bonds which the Trustee knows to be so owned shall be so disregarded. Bonds so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right to act with respect to such Bonds and that the pledgee is not a party (other than the Trustee) to the Financing Documents, or an Affiliate of any such party. Section 1002. Limitation of Rights. With the exception of rights conferred upon the User herein or upon the User and the Indemnified Parties in the Agreement, nothing expressed or mentioned in or to be implied from this Indenture or the Bonds is intended or shall be con- strued to give to any Person other than the parties to the Financing Documents and the Bondholders, any legal or equitable right, remedy or claim under or in respect to this Indenture or any covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties to the Financing Documents and the Bondholders as herein provided. Section 1003. Severability. If any prov1s~on of this Indenture shall be invalid, illegal or unenforceable as applied in any particular case in any jurisdiction, such circumstances shall not render the provision in question inoperative or unenforceable in any other case or jurisdiction. The invalidity, illegality or unenforceability of any provision of this Indenture shall not affect the remaining provisions of this Indenture. Section 1004. Notices. Except as otherwise specifically provided all notices, requests, demands, directions and other communications permitted or required under the Financing Documents shall be in writing and shall be deemed to have been made if delivered personally to the person who is to receive the same or when s"ent by registered or certified mail, postage prepaid, return receipt requested, or when sent by telegram confirmed the same day in writing by registered or certified mail, return receipt requested, postage prepaid, addressed in each case as follows: if to the Issuer: CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION 603 West Fairmont Parkway P.O. Box 1115 La Porte, Texas 77571 Attention: President .. X-2 e e ~.:..;.:; if to the Trustee: FIRST CITY NATIONAL BANK OF HOUSTON P. O. Box 2557 Houston, Texas 77252 Attention: Corporate Trust Division if to the User: LA QUINTA MOTOR INNS, INC. P. O. Box 32064 10010 San Pedro San Antonio, Texas 78216 Attention: Treasurer or at such other address as may have been designated most recently in writing with specific reference to this Section by the addressee to the addressor, provided, however, that a duplicate copy of any communication to any party to a Financing Document shall be sent at the same time and in like manner to each of the other parties to the Financing Documents. If certified or registered mail is not then available, notices, re- quests, demands, directions and other communications hereunder shall be given by a method reasonably believed to provide actual notice and approved by the Trustee. Any notice to Bondholders shall be given by first class mail, postage prepaid, addressed to-each Bondholder at the address shown on the registration books maintained by the Trustee, and shall be deemed to have been received by them on the second Business Day following the mailing thereof. No failure to give or defect in the giving of notice to any Bondholder shall affect the validity of any proceedings hereunder with respect to Bondholders to whom notice was properly given. Whenever the giving of notice is required under the Bond Documents, the giving thereof may be waived in writing by the person or persons entitled to receive such notice. Section 1005. Payments Due on Business Days. In any case where the date of maturity of principal of the Bonds, or an interest payment date, or the date fixed for redemption of any Bonds, shall not be on a Business Day, then payment of Debt Service need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or redemption, or the interest payment date, as applicable, and no interest shall accrue for the period after such date and prior to the date of payment as aforesaid. X-3 e e ~ ...-::::..:;; Section 1006. Immunity of Certain Persons. No recourse under or upon any obligation, covenant or agreement of this Indenture, or of any Bond, or for any claim based thereon or otherwise in respect thereof, shall be had against any past, present or future Indemnified Party, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability and all such claims being hereby expressly waived and released as a condition of, and as consideration for, the execution of this Indenture and the issuance of the Bonds. Section 1007. Return of Moneys from Non-presentment of Bonds. In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity, at the date fixed for redemp- tion thereof, or otherwise is not thereafter presented for payment any funds which shall be held for such purpose by the Trustee and which remain unclaimed by the Holder of the Bond not presented for payment for a period of two (2) years after such due date thereof, shall, upon request in writing by the User, and subject to applicable law, be paid to the User as an overpayment of the Loan Payments free of any trust or lien and thereafter the Holder of such Bond shall look only to the User as an unsecured general creditor for payment without any interest thereon, and the Trustee shall have no further responsibility with respect to such moneys. In addition, if at any time after there are no longer any Bonds Outstanding the Trustee determines that the amounts on deposit in the Funds and Accounts created under this Indenture are in excess of the amounts necessary to pay the Bond Obligations, the Trustee shall pay such excess to the User as an overpayment of the Loan Payments free of any trust or lien. Section 1008. Performance by the User. Any requirement imposed by this Indenture or the Agreement on the Issuer may, if not performed by the Issuer, be performed by the User and such performance by the User shall constitute compliance with the requirements of this Indenture or the Agreement as if performed by the Issuer. Section 1009. Counterparts. This Indenture may be executed in any number of counterparts, and each such counterpart shall be, and shall be deemed to be, an original. All such counterparts shall constitute but one and the same instrument. Section 1010. Governing Law. This Indenture shall be governed, in all respects including validity, interpretation and effect by, and shall be enforceable in accordance with, the laws of the United States of America and of the State, except that Article 5069, Chapter 15, Vernon's Annotated Texas 'Civil Statutes, as amended (which regulates certain revolving credit loan accounts and revolving triparty accounts), shall not apply to the Agreement or the Note (except as otherwise provided in the Agreement) . . X-4 e e ~-., .........--_,~ IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Indenture to be signed and sealed on their behalf by their duly authorized representatives as of the date first written above. CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION ATTEST: By President By Secretary (SEAL) FIRST CITY NATIONAL BANK OF HOUSTON as Trustee By Title: ATTEST: By Title: (SEAL) x-s e e ..~ -=~ REGISTERED EXHIBIT A REGISTERED FORM OF ORIGINAL BONDS No. FR- UNITED STATES OF AMERICA $ STATE OF TEXAS CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION INDUSTRIAL DEVELOPMENT REVENUE BOND Series 1983 (La Quinta Motor Inns, Inc. Project) , 1983 CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION (the "Issuer"), a nonprofit industrial development corporation created and existing under the constitution and laws of the State of Texas (the "State"), to act on behalf of City of La Porte, Texas (the "Unit"), for value received, hereby promises to pay to or registered assigns, but solely from the source and in the manner herein provided at the time and in the amounts set forth herein, the principal sum of DOLLARS and to pay interest on the unpaid principal balance of this Bond from the date set forth above or from the most recent date to which interest on this Bond or any Bond in exchange for, or in lieu of, which this Bond was issued, has been paid, semiannually, on the first day of and of each year commencing , 19___ at the rate provided herein until the payment of such principal sum shall have been made or provided for. This Bond shall bear interest at a per annum rate (the "Stated Rate") equivalent to 68% of the Prime Rate (as herein defined); provided, 'however, that at any time the maximum rate of federal income tax (the "Bank Tax Rate") ,imposed on a banking association which is a holder of the Bonds (as herein defined) by Section 11 of the Internal Revenue Code of 1954, as amended, is changed, such rate shall be adjusted- as of the effective date of the change in the Bank Tax Rate by multiplying such rate by a fraction, the demonimator of which is one hundred percent A-I e e ....-:::::-..::. (100%) minus the Bank Tax Rate as of the date of the original authentica- tion, issuance and delivery of the Bonds and the numerator of which is one hundred percent (100%) minus the Bank Tax Rate after such change; and provided further that if the cumulative amount of interest, taking into account any discount paid by the Issuer or premium received by the Issuer with respect to this Bond, paid and accrued from the date of issuance of the Bonds through any subsequent date results in a "net interest cost" (as herein defined) with respect to this Bond that would result in payment of interest at a rate in excess of the Maximum Rate (as herein defined), this Bond shall bear interest at the Maximum Rate from such date until this Bond is paid in full or until such earlier date as the payment of interest at the Maximum Rate results in a "net interest cost" that equals the cumulative amount of interest which would have been paid and accrued from the date of issuance of the Bonds at the Stated Rate, after which the interest rate on this Bond shall revert to the Stated Rate until this proviso again becomes applicable. As used herein, "Prime Rate" means the rate per a~um announced from time to time as its prime commercial lending rate by First City National Bank of Houston at its principal office in Houston, Texas, as in effect from the time during any interest payment period. Any change in the Prime Rate shall automatically and without notice to the Issuer be effective for the purpose of changing the rate of interest which this Bond bears as of the date of any such change, except as otherwise provided herein. As used herein, "Maximum Rate" means fifteen percent (15%) or, to the extent allowed by law, such greater "net effective interest rate" as may be allowed from time to time by law as may hereafter be in effect. As used herein, "net interest cost" and "net effective interest rate" have the meanings given to them, respectively, in Article 717k-2, Vernon's Annotated Texas Civil Statutes, as amended. Notwithstanding any provision of this Bond or the Bond Documents (as herein defined) to the contrary, in no event shall the cumulative amount of interest paid or payable on this Bond (including interest calculated as provided herein, together with all other amounts that constitute interest on this Bond under the laws of the State which are contracted for, charged, reserved, taken or received pursuant to the Bond Documents) through any interest payment date or through the date of payment of this Bond (whether at maturity, by acceleration or upon earlier redemption) exceed the "net interest cost" which will produce a "net effective interest rate" equal to the Maximum Rate. Unless this Bond shall have been duly called for previous redemption and payment of the redemption price shall have been made or provided for in ~ccordance with the Indenture (as herein defined), the principal amount of this Bond shall mature in (_) consecutive annual installments as follows: A-2 e e F":::::""::' Date Principal Amount Principal of, premium, if any, and interest on this Bond accruing prior to the final maturity hereof shall be paid by check or draft mailed to the registered holder hereof, determined as of the close of business on the fifteenth day of the calendar month next preceding the date of payment, at its address as it appears on the registration books of the Trustee (as herein defined). The final payment of principal of and premium, if any, and interest on this Bond shall be payable to the registered holder of this Bond at the principal corporate trust office of the Trustee upon the surrender for cancel~ation of this Bond. The amount of interest on this Bond deemed payable on each interest payment date ("Interest Payment Date") shall be computed in accordance with this paragraph. Seven (7) days before each Interest Payment Date prior to the last Interest Payment Date, the Trustee shall compute the amount of interest to be due and payable on such Interest Payment Date based on the Prime Rate in effect on each day included in the related interest payment period. However, the amount of interest to be due and payable in respect of the rem~ining days of such interest payment period shall be estimated by using the Prime Rate in effect on the date of such calculation. Any difference between the amount of interest due and payable in accordance with the preceding sentence and the amount of interest payable in respect of such remaining days as subsequently computed based on the Prime Rate in effect on each such day, shall be credited or debited, as the case may be, against the amount of interest due and payable on the next succeeding Interest Payment Date. Seven (7) days before each such Interest Payment Date, the Trustee shall send to the User (as herein defined) notice of the amount of interest so computed to be due and payable on such Interest Payment Date. The amount of interest payable on or after the last Interest Payment Date shall be computed by the Trustee when due based on the Prime Rate in effect on each day included in the related period, plus any credit or minus any debit due to the computation of interest due on the next preceding date when interest was paid. Interest shall be computed under this paragraph on the basis of a 360-day year, and the actual number of days elapsed during any interest payment period. The Agreement (as herein defined) provides that notwithstanding any provision of the Bond Documents to the contrary, in no event'(including without limitation the acceleration of maturity of the Bonds, the redemption of the Bonds pursuant to the Bond Documents or any mandatory A-3 e e ..-::::::....: .' purchase of the Bonds pursuant to the Bond Documents) shall the amount of interest contracted for, charged, received, reserved or taken in connection with the loan made thereunder (including interest on the Note [as herein defined] pursuant to Section 4.1 thereof, together with any other costs or considerations that constitute interest under applicable law which are contracted for, charged, received, reserved or taken pursuant to the Bond Documents) (collectively, "Interest") exceed the amount of interest which could have been contracted. for, charged, reserved, received or taken at the Highest Lawful Rate (as herein defined). To the maximum extent permitted by law, the rate of interest on such loan will be determined by: (i) spreading payments over the term of such loan; (ii) if appropriate, characterizing payments as a premium for the privilege of making an optional prepayment of the loan; and (iii) giving effect to the provisions of any other Bond Document which require the cancellation or refunding of Interest. Excess Interest, if any after the application of the foregoing provisions, provided for in the Bond Documents is ~equired to be cancelled automatically as of the date of such acceleration, redemption or purchase or, if theretofore paid, is required to be credited on the principal of the Note or if the principal of the Note has been, or would thereby be, paid in full, refunded to the User (as herein defined). However, in lieu of such cancellation or refund, the Trustee shall (if requested by the Holders of all of the Outstanding Bonds), to the extent permitted by applicable law, delay the date on which any payment is due until the earliest Business Day (as defined in the Indenture) that will result in the payment of Interest at a rate not in excess of the Highest Lawful Rate. As used herein, "Highest Lawful Rate" means the maximum rate of nonusurious interest allowed from time to time by law as in effect on the date of the Agreement, or, to the extent allowed by law, such higher rate as may thereafter be in effect. This Bond is one of the duly authorized issue of the Issuer's Industrial Development Revenue Bonds, Series 1983 (La Quinta Motor Inns, Inc. Project) (the "Bonds"), aggregating in principal amount $3,800,000, authorized by a resolution adopted by the Board of Directors of the Issuer on November 21, 1983 (the "Resolution"), all issued or to be issued under a trust indenture, dated as of November 1, 1983 (the "Indenture"), between the Issuer and First City National Bank of Houston (the "Trustee"), pursuant to and in full conformity with the Constitution and the laws of the State. The Bonds are issued in order to provide funds for the Issuer to lend to LA QUINTA MOTOR INNS, INC. (the "User"), a Texas corporation, to finance the acquisition and construction of certain facilities (together with the User's interest in the site thereof, the "Project") that constitute a "project" under the terms of Article 5190.6, Vernon's Annotated Texas Civil Statutes, as amended. The proceeds of the sale of the Bonds will be lent-to the User pursuant to a loan agreement, dated as of November l, 1983 (the "Agree- ment "), between the Issuer and the User, and the User's obligations A-4 ,. I e e ----- . ---- . under the Agreement will be further evidenced by the User's execution and issuance of a note (the "Note") in an amount equal to the aggregate principal amount of the Bonds. The payment of the principal of and premium, if any, and interest on the Bonds has been unconditionally guaranteed by the User pursuant to a guarantee agreement, dated as of November 1, 1983 (the "Guarantee Agreement"), executed by the User and accepted by the Issuer and the Trustee. In addition, contemporaneously with the execution of the Agreement, the User executed a certain deed of trust, security agreement, assignment of rents and financing statement, dated as of November 1, 1983 (the "Mortgage"), pursuant to which the User bargained, sold, granted, conveyed, mortgaged, pledged and assigned to as mortgage trustee, for the use and benefit of the Trustee (for the benefit of the Bondholders) and further granted unto the Trustee a lien on and security interest in, certain portions of the Project and certain other properties of the User, in order to secure the payment of the "Indebtedness," as defined in the Mortgage, and the performance and observance by the User of all of its covenants contained in the Bond Documents. Reference is hereby made to the Indenture, the Agreement, the Guarantee Agreement, the Mortgage and the Note (collectively, the "Financing Documents"), copies of which are filed with the Trustee, for the full provisions thereof (including, among others, those with respect to the nature and extent of the rights, duties and obligations of the parties to the Financing Documents and the holders of the Bonds, the terms upon which the Bonds are issued and secured and the modification or amendment of the Financing Documents), to all of which the holders of the Bonds assent by the acceptance of the Bonds. Reference is also made to the "Bond Documents," which term shall mean the Financing Documents and all other agreements, certificates, documents and instruments ever delivered in connection with any of the Financing Documents. As provided in the Indenture, the Issuer reserves the right, with the consent of the holders of the percentage in principal amount of Bonds outstanding specified in the Indenture, to issue from time to time additional series of bonds (the "Additional Bonds") for the purpose of defraying the cost of (i) completing the Project, (ii) providing enlargements, improvements or expansions of the Project, or (iii) refunding any Bonds or Additional Bonds theretofore issued and outstanding under the Indenture. Such Additional Bonds may be issued in one or more series in various principal amounts, may mature at different times, may bear interest at different rates and may otherwise vary. The Bonds and any Additional Bonds will rank equally and on a parity with each other and will be equally and ratably secured by the pledge and covenants contained in the Indenture except as otherwise provided or permitted in the Indenture. A-5 e e -.-.. ......--~- Upon a Determination of Taxability (as defined in the Guarantee Agreement), the Bonds are subject to purchase by the User pursuant to the terms of the Guarantee Agreement. The purchase price, including payment of liquidated damages, is set out in the Guarantee Agreement. Subject to the terms of the Indenture permitting or requiring the Trustee to accelerate the maturity of the Bonds upon the occurrence and continuance of certain Events of Default, the Bonds shall not be subject to redemption prior to maturity, except as described in the following numbered paragraphs. (1) The Bonds may be redeemed in whole or in part prior to maturity at any time by the Issuer at the option of the User, upon the written request of the User delivered to the Trustee, at a price equal to the principal amount of the Bonds so redeemed plus accrued interest to the date of redemption. (2) The Bonds shall be redeemed in whole or in part prior to maturity as a result of a deposit of amounts representing unexpended Original Proceeds (as herein defined) in accordance with the Agreement or unexpended proceeds of a disposition, casualty, condemnation or taking of the Project in accordance with the requirements of the Financing Documents, in the Debt Service Fund created by the Indenture in an amount equal to the amount deposited in the Debt Service Fund. Bonds redeemed as described in this paragraph shall be redeemed within thirty (30) days of such deposit and at a redemption price equal to the unpaid principal amount of the Bonds being redeemed, without premium, plus accrued interest to the redemption date. "Original Proceeds" shall mean the proceeds derived by the Issuer from the sale of the Bonds, plus the interest or dividends resulting from the investment of such proceeds in Eligible Secur- ities (as defined in the Indenture), but excluding the amounts disbursed from time to time to pay certain costs of issuance of the Bonds. A notice shall be sent by the Trustee, by first class mail, postage prepaid, not less than thirty (30) days prior to the redemption date, to the Issuer, the User and to each registered holder of Bonds to be redeemed in whole or in part, addressed to such holder at its address appearing on the register maintained by the Trustee. Notice having been so given, the Bonds designated for redemption shall on the redemption date specified in such notice become due and payable at the proper redemption price, and from and after the redemp- tion date (unless there shall be a default in the payment of the redemp- tion price) interest on such Bonds shall cease to accrue. A-6 e e p:=-:::::::....:... lO In the event of redemption of part of the Bonds outstanding, then such partial redemption shall be pro rata among Bondholders and pro rata to each installment of principal. If redemption of the Bonds shall occur other than on an interest payment date, then interest shall be calculated to the date of redemption on the basis of a 360-day year and the actual number of days elapsed in the interest payment period. In the event that a Bond subject to redemption is in a denomination larger than $1,000, a portion of such Bond may be redeemed, but only in a principal amount equal to $1,000 or an integral multiple thereof and only upon the delivery of an exchange Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond so redeemed in part. The Bonds are issuable only as fully registered Bonds. This Bond is transferable by the registered holder hereof in person or by his attorney duly authorized in writing at the principal corporate trust office of the Trustee, upon presentation hereof to the Trustee, all subject to the terms and conditions provided in the Indenture. The Bonds are limited obligations of the Issuer and shall be payable by the Issuer solely out of the revenues derived from or in connection with the Financing Documents, including all sums deposited from time to time pursuant to the Financing Documents in the Debt Service Fund established under the Indenture, and in certain events out of amounts attributable to Bond proceeds or amounts secured through the exercise of the remedies provided in the Financing Documents upon occurrence of an event of default under the Financing Documents. Neither the State, the Unit, nor any political corporation, subdivision or agency of the State shall be obligated to pay the principal of or premium, if any, or interest on the Bonds and neither the faith and credit nor the taxing power of the State, the Unit or any other political corporation, subdivision or agency of the State is pledged to the payment of the principal of or interest on the Bonds. No recourse under this Bond shall be had against any past, present or future officer of the Issuer or of the Unit. The Bonds shall never be paid in whole or in part out of any funds raised or to be raised by taxation or out of any other revenues of the Issuer, the Unit or the State except those revenues pledged by the Indenture. Subject to the restrictions set forth therein, the Indenture per- mits, with certain exceptions as therein provided, the Issuer and the Trustee, with the consent of the holders of the applicable percentage of Bonds specified in the Indenture, to execute supplemental indentures amending, adding to or eliminating any provisions of the Indenture. It is also provided in the Indenture that the holders of the applicable percentage of Bonds specified in the Indenture may on behalf of the holders of all the Bonds and Additional Bonds waive any past default or A-7 e e ..-:::=--::. " event of default under the Indenture and its consequences except a default in the payment of principal of or premium, if any, or interest on any of the Bonds. The holder of this Bond shall have no right to enforce the provi- sions of the Indenture or to institute an action to enforce the cove- nants therein, or to take any action with respect to any event of default under the Indenture, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. The Indenture further provides that if, after a declaration of the acceleration of the maturity of the principal amount of the Bonds, but prior to the entry of a final judgment for such amount, all amounts which would then be payable thereunder by the Issuer if such default had not occurred and were not continuing and certain other amounts shall have been paid by or on behalf of the Issuer and the parties to the Financing Documents shall have also performed all other obligations in respect of which any of them is then in default under the Financing Documents and shall have paid the reasonable charges and expenses of the Trustee and the holders of the Bonds, including reason- able attorneys I fees paid or incurred, then and in every case the Trustee shall waive such event of default and rescind and annul any remedial step theretofore taken by it in respect of such default and its consequences. This Bond shall not be valid or obligatory for any purpose or be entitled to any benefit under the Indenture until the certificate of authentication hereon shall have been executed by the Trustee. IT IS HEREBY CERTIFIED, RECITED AND REPRESENTED that the issuance of this Bond and the Bonds is duly authorized by law; that all acts, conditions and things required .to exist and necessary to be done or performed precedent to and in the issuance of this Bond and the Bonds to render the same lawful, valid and binding have been properly done and performed and have happened in regular and due time, form and manner as required by law; that all acts, conditions and things necessary to be done or performed by the Issuer or to have happened precedent to and in the execution and delivery of the Indenture and the Agreement have been done and performed and have happened in regular and due form as required by law; that due provision has been made for the payment of the princi- pal of and premium, if any, and interest on this Bond and the Bonds by irrevocably pledging the described revenues as provided in the Inden- ture; that payment in full for the Bonds has been received; and that the issuance of the Bonds does not contravene or violate any constitutional or statutory limitation. A-8 e e ~:....:.:.: 1 IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed in its name by its President and to be attested to by its Secretary both by their respective signatures, and the seal of the Issuer to be affixed hereto, all as of the date first set forth above. CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION By President ATTEST: Secretary (SEAL) A-9 e e --", ---- ".. '-.\. (Form of Trustee's Certificate to appear on each Driginal Bond) TRUSTEE'S CERTIFICATE OF Au~NTICATION This is to certify that this Bond is one of the Bonds issued under the provisions of the within-mentioned Indenture. FIRST CITY NATIONAL BANK OF HOUSTON as Trustee By Authorized Signature (Form of Assignment to appear on each Original Bond) FORM OF ASSIGNMENT For value received, transfers unto within Bond and an of the undersigned hereby sells, assigns and the , registration premises. does hereby irrevocably constitute and appoint attorney, to transfer such Bond on the books kept for the within Bond, with full power of substitution in the Dated: In the presence of: A-10 e e ..--~ q', I" t EXHIBIT B Schedule of Maturity of Original Bonds The Original Bonds shall mature, subject to the redemption provi- sions set forth in Exhibit A to the Indenture, on the dates and in the principal amounts set forth below. Date Principal Amount $ 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,666 126,686 B-1 e e ~_.,. , } " 1F/LQ10 Draft of 11/07/83 LOAN AGREEHENT between CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION and LA QUINTA MOTOR INNS, INC. Relating to City of La Porte Industrial Development Corporation $3,800,000 Industrial Development Revenue Bonds Series 1983 (La Quinta Motor Inns, Inc. Project) Dated as of November 1, 1983 .;. e e P"":::::""':':' Page Part ies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.1 Section 1. 2 Section 2.l Section 2.2 Section 2.3 Section 3.1 Section 3.2 Section 3.3 Section 3.4 Section 3.5 Section 3.6 Section 4.1 Section 4.2 TABLE OF CONTENTS ARTICLE I DEFINITIONS AND INTERPRETATIONS Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE II ACQUISITION AND CONSTRUCTION OF THE PROJECT Acquisition and Construction of the Project........ Revision of the Project..... ............ .... ....... Completion of the Project if Bond Proceeds Insufficient. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE III ISSUANCE OF THE ORIGINAL BONDS; ADDITIONAL BONDS; LOAN; DISPOSITION OF LOAN PROCEEDS Issuance of the Original Bonds.... .... ...... ... .... Additional Bonds................................... Loan.............................................. . Security Interests................................. Disbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Completion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE IV LOAN PAYMENTS Loan Payments..... . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . Prepayment of Loan; Redemption of Bonds........ .... -i- 2 9 9 9 9 9 10 10 10 10 11 12 12 ~: \ Section 4.3 Section 4.4 Section 4.5 Section 5.1 Section 5.2 Section 5.3 Section 6.1 Section 6.2 Section 7.1 Section 7.2 Section 7.3 Section 7.4 Section 7.5 Section 7.6 Section 8.1 Section 8.2 Section 9.1 Section 9.2 Section 9.3 e e Excess Funds....................................... Nature of Obligations of the User.............. .... Usury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . '. . ARTICLE V OTHER MATTERS REGARDING THE PROJECT Modifications After the Completion Date... ......... Issuer Relieved from Responsibility With Respect to Project.......... . . . . . . . . . . . . . . . . . . . . . . . Casualty and Condemnation. .................. ....... ARTICLE VI REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER Representations and Warranties of the Issuer.. ..... Covenants of the Issuer............................ ARTICLE VII INDEMNIFICATION; REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE USER Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Filing and Recording. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . Removal of Liens................................... Federal Income Tax Exemption. ... .............. ..... No Conflict of Interest. .......... ................. Representations Regarding Project. ..... ............ ARTICLE VIII ASSIGNMENT Assignment by the User. . . . . . . . .. . . . ... . . . . . . . . .. . . . Issuer's Rights of Assignment...................... ARTICLE IX EVENTS OF DEFAULT AND REMEDIES Events of Default and Remedies. ....... ....... ...... No Remedy Exclusive......................... .'...... Agreement to Pay Attorneys' Fees and Expenses. ..... -ii- P":::=-'::' 13 13 13 14 14 14 15 16 17 19 19 20 20 20 21 21 21 22 22 I.; ~ Section 10.1 Section 10.2 Section 10.3 Section 10.4 Section 10.5 Section 10.6 Section 10.7 Section 10.8 e e ...-.:::=-:.. 22 23 23 24 24 24 24 24 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE X GENERAL Force Maj eure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Trustee.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third Party Beneficiaries..... ..... ...... ..... ..... Communications. . . . . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . Counterparts, Amendments, Governing Law, Etc.. ..... Term of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . User's Approval of Bond Documents. ............ ..... Applicable Rate Ceiling Under Texas Law.... ........ Exhibit A - Description of the Project Exhibit B - Form of Note Exhibit C - Form of Requisition Certificate - User -iii- e e .....-:: ::....:.:. ~ LOAN AGREEMENT between CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION and LA QUINTA MOTOR INNS, INC. THIS LOAN AGREEMENT, dated as of November 1, 1983, is between CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION, a nonprofit industrial development corporation created under the Act, and LA QUINTA MOTOR INNS, INC., a Texas corporation. WIT N E SSE T H: The Act authorizes the Issuer to issue revenue bonds, payable from revenues derived from payments made by users of "projects" within the meaning of the Act, on behalf of the Unit to finance the cost of "pro j ects" wi thin the meaning of the Act; The Issuer has determined, based upon representations of the User, that the Project constitutes a "project" within the meaning of the Act and that the issuance of the Bonds to finance the cost of the Project will be in furtherance of the public purposes of the Act; The Issuer proposes to lend the proceeds of the Bonds to the User and the User desires to borrow the proceeds of the Bonds from the Issuer upon the terms and conditions set forth in this Agreement to finance the Project; The Commission has approved the contents of this Agreement in accordance with the Act and the "applicable elected representative," as defined in Subsection 103(k) of the Code, has approved the Bonds and the Project, as required by the Code; Contemporaneously with the execution and delivery of this Agreement, the parties to the Financing Documents have executed and delivered the other Financing Documents for the purposes of effecting the issuance of the Bonds, furthering the public purposes of the Act, and securing to' the Holders of the Bonds the payment of Bond Obligations; e e ....-:: - ::....:.:. .,. In consideration of the premises and other good and valuable consideration and the mutual benefits, covenants and agreements set forth below, the parties agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1.1. Definitions. The following terms have the meanings assigned to them below whenever they are used in this Agreement. Except where the context otherwise requires, words imparting the singular number shall include the plural number and vice versa. Reference to any Bond Document means that Bond Document as amended or supplemented from time to time. Reference to any party to a Bond Document means that party and its successors and assigns. "Act" means the Development Corporation Act of 1979, Article 5190.6, Vernon's Annotated Texas Civil Statutes, as amended from time to time. "Additional Bonds" means any bonds issued by the Issuer pursuant to Section 3.2 of this Agreement. "Affiliate" of any Person means any Person which controls, is controlled by, or is under common control with, such Person. "Agreement" means this Loan Agreement. "Applicable Percentage" means at least 51~~ in aggregate principal amount of the Bonds then Outstanding. "Authorized Representative" means, with respect to any party to any Financing Document, any person or persons at the time designated to act on behalf of such party by a written certificate, containing a specimen signature of such person or persons, which is duly executed on behalf of such party and is furnished to the other parties to that Financing Document, and to the Issuer and the Trustee. "Board" means the Board of Directors of the Issuer. "Bond Documents" means the Financing Documents and all other agreements, certificates, documents and instru~ents ever delivered in connection with any of the Financing Documents. -2- e . --.. ..........-<~ .. "Bond Obligations" means the Debt Service due and payable and to become due and payable and any other amounts which may be owed by the User to, or on behalf of, the Issuer or the Trustee under the Bond Documents. "Bondholder" or "Holder of a Bond" means the Person appearing on the registration books of the Trustee as the registered holder of such Bond. "Bonds" means the Original Bonds, any Additional Bonds and any Bonds issued in exchange therefor or in replacement thereof. "Claims" means all claims, lawsuits, causes of action and other legal actions and proceedings of whatever nature brought against (whether by way of direct action, counter claim, cross action, or impleader) any Indemnified Party, even if groundless, false or fraudulent, so long as the claim, lawsuit, cause of action or other legal action or proceeding is alleged or determined, directly or indirectly, to arise out of, result from, relate to or be based upon, in whole or in part: (a) the issuance of the Bonds, (b) the duties, activities, acts or omissions of any Person in connection with the issuance of the Bonds, or the obligations of the various parties arising under the Bond Documents, or (c) the duties, activities, acts or omissions of any Person in connection with the design, construction, installation, operation, use, occupancy, maintenance or ownership of the Project or any part thereof. "Code" means the Internal Revenue Code of 1954, as amended. "Commission" means the Texas Economic Development Commission or any successor entity. "Completion Date" means the date the Project has been completed and placed in service. "Construction Fund" means the special fund designated as the "City of La Porte Industrial Development Corporation Industrial Development Revenue Bonds, Series 1983 (La Quinta Motor Inns, Inc. Project) Construction Fund" established with the Trustee pursuant to Section 301 of the Indenture. "Debt Service" means the principal of and premium, if any, and interest on the Bonds. -3- e e ~::-.:.. ~ "Debt Service Fund" means the special fund designated as the "City of La Porte Industrial Development Corporation Industrial Development Revenue Bonds, Series 1983 (La Quinta Motor Inns, Inc. Project) Debt Service Fund" established with the Trustee pursuant to Section 301 of the Indenture. "Event of Default" is defined in Section 701 of the Indenture. "Final Payment Date" means the date on which all amounts of Original Proceeds payable with respect to the acquisition and construction of the Project have been paid and the User is no longer required to maintain amounts in the Construction Fund. "Financing Documents" means this Agreement, the Bonds, the Indenture, the Note, the Mortgage and the Guarantee Agreement. "Force Majeure" means acts of God, strikes, lockouts or other industrial disturbances, acts of the public enemy, orders of any kind of the government of the United States of America, or of any state thereof, or any civil or military authority, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, hurricanes, tornadoes, storms, floods, washouts, droughts, arrests, restraining of govern- ment and people, civil disturbances, explosions, nuclear accidents, wars, breakage or accidents to machinery, trans- mission pipes or canals, partial or entire failure of util- ities, shortages of labor, material. supplies or transporta- tion, or any other cause not reasonably within the control of the party claiming such inability. "Governing Body" means the City Council of the Unit. "Government Obligations" means direct obligations of the United States of America or obligations to the full and prompt payment of which the full faith and credit of the United States of America is pledged. "G A " h . G uarantee greement means t at certa~n uarantee Agreement, dated as of the date of this Agreement, executed by the User and accepted by the Trustee and the Issuer. "Highest Lawful Rate" means the maximum rate of nonusur- ious interest allowed from time to time by law as is now in effect or, to the extent allowed by law, such higher rate as may hereafter be in effect. -4- e e C!!"""""" =-.:.:. .. "Indemnified Parties" means the Issuer, the Board, the Uni t, the Governing Body, the Commis s ion and any of their officers, directors, members, commissioners, employees,. agents, servants and any other Person acting for or on behalf of the Issuer, the Unit or the Commission. "Indenture" means that certain Trust Indenture, dated as of the date of this Agreement, between the Issuer and the Trustee. "Inducement Date" means April 4, 1983. "Insubstantial Amount" means, as of any date, an equal to the quotient derived by dividing the actual of Original Proceeds expended through such date Qualifying Costs by 9. amount amount for "Investment Earnings" means the income derived from the investment of the amounts in the Construction Fund. "Issuance Costs" means costs incurred by or on behalf of the User in connection with the making of the loan by the Issuer to the User. The parties hereby express their under- standing and agreement that the sole purpose for the issuance of the Bonds is to enable the making of the loan to the User in order to effect the public purposes of the Act and that all costs incurred in connection with the issuance of the Bonds are incurred incident to the making of such loan at the request and for the benefit of the User and, therefore, are properly chargeable as costs incurred by or on behalf of the User; therefore, such costs include, among others, payment of financial, legal, accounting and appraisal fees, expenses and disbursements, the Issuer's fees and expenses attributable to the issuance of the Bonds, the cost of printing, engraving and reproduction services, legal fees for bond counsel, Issuer's counsel, counsel to the initial purchaser of the Bonds and Trustee's counsel, the initial or acceptance fee of the Trustee, the fees and disbursements of the Trustee payable in accordance with the Indenture prior to the Comple- tion Date and all other fees, charges and expenses incurred in connection with the issuance of the Bonds (including all costs, fees, expenses and other amounts [other than Debt Service] which may be payable by the Issuer under any bond purchase agreement or agreements pursuant to which the Bonds are sold) and the preparation and filing or recording 0; any Bond Document. -5- . e ....-:::::.....:.:. ~ "Issuer" means City of La Porte Industrial Development Corporation, a nonprofit industrial development corporation organized under the Act. "Loan Payments" means the payments to be made by the User pursuant to Section 4.1 of this Agreement. "Losses" means losses, costs, damages, expenses, judg- ments and liabilities of whatever nature (including, but not limited to, attorneys', accountants' and other professionals' fees, litigation and court costs and expenses, amounts paid in settlement, amounts paid to discharge judgments and amounts payable by an Indemnified Party to any other Person under any arrangement providing for indemnification of that Person) directly or indirectly resulting from, arising out of or relating to one or more Claims. "Mortgage" means that certain Deed of Trust, Security Agreement, Assignment of Rents and Financing Statement, dated as of the date of this Agreement, from the User to the Mortgage Trustee, for the benefit of the Trustee (for the benefit of the Bondholders). "Mortgage Trustee" means the party named as such on page 1 of the Mortgage. "Note" means the note, dated as of the date of the Original Bonds, executed and delivered by the User to the Issuer evidencing the obligation of the User to repay the loan made by the Issuer to the User pursuant to this Agree- ment, substantially in the form of the note attached hereto as Exhibit B, together with any notes given in connection with any renewal, extension or rearrangement of the indebted- ness evidenced by such note. "Opinion of Counsel" means an opinion or op~n~ons in writing, signed by legal counsel who, unless otherwise speci- fied, may be counsel to a party to the Financing Documents. As to any factual matters involved in an Opinion of Counsel, such counsel may rely, to the extent that they deem such reliance proper, upon a certificate or certificates setting forth such matters which have been signed by an official, officer, general partner or authorized representative of a particular Person. "Organizational Documents" means, as to the Issuer", its Articles of Incorporation as filed ""ith the Secretary of State of the State of Texas, and its Byla""s as adopted on and as to the Cser, its Articles of -6- e . ~=-::: ," Incorporation as filed with the Secretary of State of the State of Texas, and its Bylaws as currently in effect. "Original Bonds" means Issuer's $3,800,000 Industrial Development Revenue Bonds, Series 1983 (La Quinta Motor Inns, Inc. Project). "Original Proceeds" means the proceeds derived by the Issuer from the sale of the Bonds plus Investment Earnings but excluding the amounts disbursed from time to time to pay Issuance Costs. "Outstanding" when used with respect to the Bonds means, as of the date of determination, all Bonds authenticated and delivered under the Indenture, except (i) Bonds cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Bonds for whose payment or prepayment money in the necessary amount has been deposited with the Trustee in trust for the Holders of the Bonds pursuant to the Indenture, provided that, if such Bonds are to be prepaid, notice of such prepayment has been duly given pursuant to the Indenture; (iii) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered pursuant to the Indenture; and (iv) Bonds deemed to have been paid within the meaning of Section 602 of the Indenture. "p ". 1 d . t' . d' . d 1 erson 1nc u es any aSSOC1a ~on, ~n ~V1 ua , corpo- ration, governmental entity, partnership, joint venture, business association, estate, or any other organization or entity. "Plans and Specifications" means the plans and specifi- cations prepared for the Project, as the same may be imple- mented and detailed from time to time and as the same may be revised from time to time in accordance with this Agreement, a copy of which is on file with the User. "p ." h d' b d . rOJect means t e property escr1 e 1n attached hereto. Exhibit A "Project Costs" means the cost of acquisition, construc- tion, reconstruction, improvement and expansion of the Project, including the cost of the acquisition of all land, rights-of-way, property rights, easements and interests, the cost of all machinery and equipment, financing charges, interest prior to and during construction and for one year after completion of construction whether or not capitalized, necessary reserve funds, cost of estimates and of engineering and legal services, plans, specifications, surveys, estimates -7- . e ..-:::~' of cost and of revenue, other expenses necessary or incident to determining the feasibility and practicability of acquir- ing, constructing, reconstructing, improving and expanding the Project, administrative expense and such other expense as may be necessary or incident to the acquisition, construc- tion, reconstruction, improvement and expansion thereof, the placing of the same in operation and the financing or refi- nancing of the Project, including the refunding of any outstanding obligations, mortgages or advances issued, made or given by any Person for any of the aforementioned costs, and any other cost permitted to be paid out of proceeds of the Bonds by the Act; provided, however, that Issuance Costs are not Project Costs. "Purchaser" is defined in the Guarantee Agreement. "Qualifying Costs" means the Project Costs that were incurred after the Inducement Date and that are incurred for the acquisition, construction, reconstruction or improvement of land or property of a character subject to the allowance for depreciation under Section l67 of the Code, within the meaning of Section 1.103-l0(b)(I)(ii) of the Regulations, and which for federal income tax purposes are chargeable to the capital account(s) of such items of property included in the Project or would be so chargeable either with a proper election or but for a proper election to deduct such Project Costs. "Regulations" means the applicable proposed, temporary or final Income Tax Regulations promulgated under the Code, as such regulations may be amended or supplemented from time to time. "State" means the State of Texas. "Trust Estate" is defined in the Indenture. "Trustee" means First City National Bank of Houston, a national banking association having its principal corporate trust office in Dallas, Texas, serving as trustee pursuant to the Indenture. "Unit" means City of La Porte, Texas. "User" means La Quinta Motor Inns, Inc., a Texas corporation. -8- e . ....-:::: ::....:.:. Section 1.2. Interpretations. The table of contents and article and section headings of this Agreement are for reference purposes only and shall not affect its interpretation in any respect. ARTICLE II ACQUISITION AND CONSTRUCTION OF THE PROJECT Section 2.1. Acquisition and Construction of the Project. The User agrees to complete the acquisition and construction of the Project substantially in accordance with the Plans and Specifications and to place in service and operate the Project in furtherance of the public purposes of the Act; provided, however, the User shall not be obligated to complete the acquisition and construction of the Project or any part thereof nor to place in service or operate the Project after all Bond Obligations have been paid and all other amounts payable under the Bond Documents have been paid or provision for such payment has been made. Section 2.2. Revision of the Project. The description of the Project set forth in Exhibit A to this Agreement has been prepared on the basis of the Plans and Specifications which exist on the date of the execution of this Agreement. The Plans and Specifications may be revised by the User prior to the Completion Date provided that such revision does not result in a violation of Section 7.4 of this Agreement and provided further that the Project as so revised constitutes a "project" as such term is defined in the Act. Section 2.3. Completion of the Project if Bond Proceeds Insuf- ficient. The User agrees to pay all Issuance Costs and Project Costs which are not, or cannot be, paid or reimbursed from the proceeds of the Bonds and to make such payments in compliance with its covenants in Section 7.4 of this Agreement. The User agrees that if, after exhaustion of the moneys in the Construction Fund, the User should pay any portion of the Issuance Costs or Project Costs, it shall not be entitled to any reimbursement therefor from the Issuer or from any Bondholders other than from the proceeds of any Additional Bonds, nor shall it be entitled, as a consequence of such unreimbursed payment, to any abatement, postponement or diminution of the amounts payable under this Agreement. ARTICLE III ISSUANCE OF THE ORIGINAL BONDS; ADDITIONAL BONDS; LOAN; DISPOSITION OF LOAN PROCEEDS Section 3.1. Issuance of the Original Bonds. The Issuer agrees that immediately following the delivery of this Agreement it will execute and deliver the Indenture and issue, sell and deliver the -9- . e ~-". ----, Original Bonds to the initial purchasers thereof. The Bonds shall be limited obligations of the Issuer and shall be payable by the Issuer solely out of the revenues derived from or in connection with the Bond Documents. The Bonds shall never be payable out of any other funds of the Issuer except such revenues. The User agrees to pay, promptly following demand therefor, all Issuance Costs paid, incurred or charged by the Issuer and the Trustee, including without limitation all fees required to be paid to the Issuer by the User, and all out-of-pocket expenses and costs of issuance reasonably incurred by the Issuer in connection with the Issuance of the Bonds. Section 3.2. Additional Bonds. If the User is not in default under this Agreement, the Issuer shall, at the request of the User and subject to the provisions of the Indenture, cooperate with the User and from time to time use its best efforts to issue such amount or amounts of Additional Bonds as may be requested by the User for the purposes of completing, enlarging, improving or refinancing the Project. Prior to or contemporaneously with the issuance of any Additional Bonds provided for above, (i) the terms, conditions, manner of issuance, purchase price, delivery and disposition of proceeds of the sale of such Additional Bonds shall be approved in writing by the User and the Issuer, and (ii) the conditions specified in the Indenture with respect to the issuance of Additional Bonds shall be satisfied. Section 3.3. Loan. The proceeds of the sale of the Original Bonds which are deposited into the Construction Fund pursuant to the Indenture are hereby lent by the Issuer to the User. The User's obligation to repay such loan shall be evidenced by the Note. Section 3.4. Security Interests. As security for repayment of the Note and performance of the User's obligations under this Agreement, the User hereby pledges, sets over, assigns and grants a security interest to the Issuer in all amounts at any time deposited in the Funds (as defined in the Indenture) created by the Indenture to the extent owned by the User, including all investments and reinvestments made with such amounts and the proceeds thereof, and in all of its rights to and interests in such amounts, investments, reinvestments and proceeds. The User hereby authorizes and directs the Trustee to hold such amounts, investments, reinvestments and proceeds as bailee and custodian for the Issuer in accordance with the provisions of Section 9.305 of the Texas Business and Commerce Code, as . amended , and to invest and disburse such amounts and proceeds in accordance with the Indenture and this Agreement. Section 3.5. Disbursements. (a) Except as provided in the Inden- ture in case of acceleration of maturity of the Bonds, the Trustee shall -10- e . ...-:::::=-:: disburse the money in the Construction Fund in accordance with this Section. (b) The Trustee shall disburse (or transfer to the Debt Service Fund) amounts in the Construction Fund to pay Project Costs or Issuance Costs upon receipt of a certificate in substantially the form provided in Exhibit C to this Agreement signed by an Authorized Representative of the User stating: (i) the requisition number, amount to be paid and the name of the Person to whom payment is to be made; (ii) that there has been expended, or is being expended concurrently with the delivery of such certificate (or in the case of interest which the Trustee is directed to transfer to the Debt Service Fund after the Completion Date, will be expended within one year following the Completion Date), an amount on account of Project Costs or Issuance Costs at least equal to the amount set forth in such certificate; (iii) that no other certifi- cate in respect of such expenditure is being or previously has been delivered to the Trustee; and (iv) that at least 90% of the total of all amounts previously disbursed plus the amount requested by such certifi- cate to be disbursed from the Construction Fund to pay Project Costs have been and will be used to pay Qualifying Costs. (c) Upon receipt of the certificates required under Section 3.6 of this Agreement, the Trustee shall transfer any amounts then on deposit in the Construction Fund (other than the retainage described in clause (iii) of Section 3.6) to the Debt Service Fund for deposit in a special escrow account. Section 3.6. Completion. Immediately after the Completion Date (and the Final Payment Date if such dates are not the same), and after requesting pursuant to Section 3.5 any amounts then permitted to be disbursed thereunder, the User shall deliver to the Trustee a certificate signed by an Authorized Representative certifying: (i) as appropriate, that as of the Completion Date specified in the certificate the Project has been completed and placed in service, or that as of the Final Payment Date specified in the certificate all amounts payable with respect to the acquisition and construction of the Project have been paid; (ii) the amount of Original Proceeds expended for Qualifying Costs, for Project Costs that were not Qualifying Costs (and that such amount did not exceed the Insubstantial Amount), and for Issuance Costs; and (iii) if such certificate is delivered prior to the Final Payment Date, the amount which the Trustee is to retain in the Construction Fund for payment of amounts then subject to dispute or not then due. -11- . e .-....::::..:. ARTICLE IV LOAN PAYMENTS Section 4.1. Loan Payments. (a) To repay the loan evidenced by the Note, the User shall, subject to the limitations of Section 4.5 of this Agreement, make Loan Payments in immediately available funds directly to the Trustee for deposit in the Debt Service Fund on or before the opening of business on each day on which any payment of Debt Service shall become due (whether at maturity or upon redemption or acceleration or otherwise) in an amount which, together with other money held by the Trustee under the Indenture and available therefor, will enable the Trustee to make such payment in full when due. In furtherance of the foregoing, but subject to the limitations of Section 4.5 of this Agreement, the User shall pay all amounts required to prevent any deficiency or default in any payment of Debt Service, including any deficiency caused by an act or failure to act by the Trustee, the Issuer or any other Person or by any investment of money held under the Indenture. (b) Loan Payments need not be made during the term of this Agree- ment or thereafter when and so long as the amounts in the Debt Service Fund, together with any other amounts then held by the Trustee and available for the purpose, are sufficient to pay all Debt Service due and payable or to become due and payable. However, if, subsequent to a date on which the User is not obligated to pay the Loan Payments pursuant to the preceding sentence (including as a result of deposits in the Defeasance Account pursuant to the Indenture), losses (net of gains) shall be incurred in respect of any investments, or any other event has occurred causing the amounts in the Debt Service Fund, together with any other amounts then held by the Trustee and available for the purpose, to be less than the amount sufficient at the time of such occurrence or other event to pay, in accordance with the provisions of the Indenture, all Debt Service due and payable or to become due and payable, the Trustee shall notify the User of such fact and thereafter the User, as and when required for purposes of such Debt Service Fund, shall pay to the Trustee for deposit in the Debt Service Fund the amount of any such reduction below such sufficient amount. Section 4.2. Prepayment of Loan; Redemption of Bonds. The User may at any time deliver money and Government Obligations to the Trustee with instructions to the Trustee to hold such money and Government Obligations in escrow pursuant to Section 602 of the Indenture in connection with a discharge of the Indenture. The Issuer agrees that, at the request at any time of the User, it will cooperate with the User to cause the Bonds or any portion thereof to be redeemed to the extent permitted by the Indenture. -12- . . po::- .. ) Section 4.3. Excess Funds. After all Bond Obligations have been paid or prOV1.S1.on for such payment has been made, any excess money remaining in the Debt Service Fund shall forthwith be paid by the Trustee to the User (or as directed by a court having jurisdiction) as a refund of Loan Payments. Section 4.4. Nature of Obligations of the User. The User agrees that its obligations under the Bond Documents shall be absolute and unconditional, irrespective of any rights of set-off, diminution, abatement, recoupment or counterclaim the User might otherwise have against any Person, and the User will perform and observe all its obligations under the Bond Documents without suspension and, except in connection with a discharge of the Indenture, the User will not terminate the Bond Documents for any cause. The User covenants not to seek and hereby waives, to the extent permitted by applicable law, the benefits of any rights which it may have at any time to any stay or extension of time for performance or to terminate, cancel or limit its liability under the Bond Documents except through payment of the Bond Obligations as provided in the Bond Documents. The Holders of the Bonds shall be entitled to rely upon the agreements and covenants in this Section 4.4 regardless of the validity of the remainder of this Agreement or any other agreement. The preceding paragraph shall not be construed to release the Issuer from the performance of any of its agreements contained in this Agreement, or except to the extent provided in this Section and Section 7.1, prevent or restrict the User from asserting any rights which it may have against the Issuer, the Trustee or any other person under this Agreement or under any provision of law or prevent or restrict the User, at its own cost and expense, from prosecuting or defending any action or proceeding against or by third parties or taking any other action to secure or protect its rights of purchase, acquisition, possession and use.of the Project and its rights under this Agreement. Section 4.5. Usury. Notwithstanding any provision of the Bond Documents to the contrary, it is hereby agreed by and between the Issuer and the User that in no event (including without limitation the acceleration of maturity of the Bonds or the redemption or mandatory purchase of the Bonds pursuant to the Bond Documents) shall the amount of interest contracted for, charged, received, reserved or taken in connection with the loan made hereunder (including interest on the Note pursuant to Section 4.1 of this Agreement, together with any other costs or considerations that constitute interest under applicable law which are contracted for, charged, received, reserved or taken pursuant to the Bond Documents) (collectively, "Interest") exceed the amount of interest which could have been contracted for, charged, reserved, received or taken at the Highest Lawful Rate. For purposes of this Section, to the maximum extent permitted by law, the rate of interest on such loan shall be determined by: (i) spreading payments over the term of such loan; -13- e . --.' ,..........-- --..... (ii) if appropriate, characterizing payments as a premium for the privilege of making an optional prepayment of the loan; and (iii) giving effect to the provisions of any other Bond Document which require the cancellation or refunding of Interest. Excess Interest, if any after the application of the foregoing provisions, provided for in the Bond Documents shall be cancelled automatically as of the date of such acceleration, redemption or purchase or, if theretofore paid, shall be credited on the principal of the Note or if the principal of the Note has been, or would thereby be, paid in full, refunded to the User. However, in lieu of such cancellation or refund, the Trustee shall (if requested by the Holders of all of the Outstanding Bonds), to the extent permitted by applicable law, delay the date on which any payment is due hereunder or under any of the Bond Documents until the earliest Business Day that will result in the payment of Interest at a rate not in excess of the Highest Lawful Rate. ARTICLE V OTHER MATTERS REGARDING THE PROJECT Section 5.1. Modifications After the Completion Date. After the Completion Date the User shall have the right, except as otherwise provided in the Financing Documents, to remodel or alter the Project, make substitutions, additions and improvements thereto and abandon or remove any part thereof, all as the User, in its discretion, may deem to be desirable. Section 5.2. Issuer Relieved From Responsibility With Respect to Proiect. The User and the Issuer hereby expressly acknowledge and agree that the Issuer is under no responsibility to insure, maintain, operate or repair the Project or to pay taxes with respect thereto and the User expressly relieves the Issuer from any such responsibility. Section 5.3. Casual ty and Condemnat ion. The occurrence of a casualty to or condemnation of the Project or any portion thereof shall not entitle the User to any abatement, postponement or reduction in the amount of the Loan Payments or other amounts payable under this Agreement and the User hereby waives, to the extent permitted by law, the benefits and provisions of all laws and rights which, by reason of such casualty or condemnation, might relieve the User from any of such obligations. -14- e e ...-:::::......:.::: ~ ARTICLE VI REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER Section 6.1; Representations and Warranties of the Issuer. The Issuer represents and warrants that: (a) The Issuer is a nonprofit industrial development corpor- ation duly incorporated, organized and existing under the Act. (b) The Issuer has full corporate power and authority under the Constitution and laws of the State to adopt the resolution authorizing the issuance of the Bonds, to perform the issuance of the Bonds, to execute and deliver the Bond Documents to be executed and delivered by it and to perform its obligations under the Bond Documents. (c) The Issuer has duly adopted the resolution authorizing the issuance of the Bonds, and has duly authorized the execution and delivery of the Bond Documents to be executed and delivered by it. All action required on the part of the Issuer for the authori- zation of the issuance of the Bonds and the execution and delivery of the Bond Documents to be executed and delivered by it has been duly and effectively taken. (d) The Bond Documents to which the Issuer is a party consti- tute valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms (except that (i) the enforceability of such Bond Documents may be limited by bank- ruptcy, reorganization, insolvency, moratorium or other similar laws of general application relating to the enforcement of credi- tors' rights, (ii) certain equitable remedies, including specific performance, may be unavailable and (Hi) the indemnification provisions contained therein may be limited by applicable securi- ties laws and public policy). (e) All filings with, or approvals or consents of, govern- mental authorities (other than approvals or consents required under the Blue Sky or other securities laws of any jurisdiction other than the State) required to be made or obtained by the Issuer for (i) the valid adoption of the resolution authorizing the issuance of the Bonds, (ii) the valid authorization, execution and delivery by the Issuer of the Financing Documents to which it is a party and (iii) the v~lid issuance of the Bonds, have been, or prior to the issuance of the Bonds, will be, duly made or obtained. (f) There.is no action, suit, proceeding or investigation at law or in equity before or by any court, either State or federal, or public board or body pending or, to the Issuer's knowledge, -15- e e ....-:::;:~::. '> threatened, calling into question the creation or existence of the Issuer, the validity of the Bond Documents to be executed and delivered by it, the authority of the Issuer to execute and deliver the Bond Documents to be executed and delivered by it and to perform its obligations under the Bond Documents, or the title of any person to the office held by that person with the Issuer. (g) The execution and delivery by the Issuer of the Bond Documents to be executed and delivered by it, and the performance of its obligations under the Bond Documents, will not violate any provision of law or regulation, or of any judgment, decree, writ, order or injunction, or of the Organizational Documents of the Issuer, and will not contravene the provisions of, or constitute a default under, or result in the creation of a lien, charge or encumbrance under, any agreement (other than the Indenture) to which the Issuer is a party or by which any of its properties constituting a part of the Trust Estate. are bound. (h) No event has occurred, and no condition currently exists, which constitutes or may, with the passage of time or the giving of notice, or both, constitute an Event of Default on the part of the Issuer. Each of the foregoing representations and warranties shall be deemed to have been made as of the date of this Agreement and again as of the date of delivery of the Original Bonds. THE ISSUER MAKES NO EXPRESS OR IMPLIED WARRANTY OF ANY KIND WHATSO- EVER WITH RESPECT TO THE PROJECT, INCLUDING, BUT NOT LIMITED TO: THE MERCHANTABILITY THEREOF OR THE FITNESS THEREOF FOR ANY PARTICULAR PURPOSES; THE DESIGN OR CONDITION THEREOF; THE WORR}~SHIP, QUALITY OR CAPACITY THEREOF; COMPLIANCE THEREOF WITH THE REQUIREMENTS OF ANY LAW, RULE, SPECIFICATION OR CONTRACT PERTAINING THERETO; PATENT INFRINGEMENT; LATENT DEFECTS; OR THAT THE PROCEEDS DERIVED FROM THE SALE OF THE BONDS WILL BE SUFFICIENT TO PAY IN FULL FOR ALL ISSUANCE COSTS AND PROJECT COSTS WHICH MAY BE INCURRED. Section 6.2. Covenants of the Issuer. The Issuer covenants and agrees that: (a) The Issuer will faithfully perform all of its obligations under the Bond Documents and will not voluntarily take any action which would adversely affect its corporate existence. (b) The Issuer will not knowingly take any action, or omit to take any action, which action or omission will adversely affect the exemption from federal income taxa~ion of interest on the Bonds, and in the event of such action or omission will promptly, upon receiving knowledge thereof, take all lawful actions, based on -16- e e ....-:: .:.-::. "> advice of counsel and at the expense of the User, as may rescind or otherwise negate such action or omission. (c) To the extent that it is within its power to do so, the Issuer will maintain the validity and effectiveness of the Bond Documents, and of the Issuer's pledge and assignment to the Trustee thereunder, and (except as expressly permitted by such Bond Docu- ments) will not take or omit to take any action, the taking or omission of which will release the User from its obligations under such Bond Documents or result in the surrender, termination or modification of, or impair the validity of, such Bond Documents. Cd) The Issuer will observe the covenants made by it in the Indenture; it will use its best efforts to cause the User to have and exercise all the rights, powers and benefits stated to be in the User in this Agreement and the Indenture; and so long as no Event of Default exists, it will not ,join in the modification of the Bond Documents in any manner without the prior written consent of the User and the Trustee. ART I CLE VI I INDEMNIFICATION; REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE USER Section 7.1. Indemnification. (a) Agreements to Indemnify. The User agrees that it will at all times indemnify and hold harmless each of the Indemnified Parties against any and all Losses; provided, however, the User shall not be obligated to indemnify an Indemnified Party against Losses resulting from fraud, willful misconduct, or theft on the part of the Indemnified Party claiming indemnification. The User also agrees to indemnify and save harmless the Trustee and the Mortgage Trustee against and from any liability or damages which it may incur or sustain, in good faith, and without negligence or willful misconduct, in the exercise and performance of any of their powers and duties under the Bond Documents. (b) Release. None of the Indemnified Parties shall be liable to the User for, and the User hereby releases each of them from, all liability to the User for, all injuries, damages or destruction to all or any part or parts of any property owned or claimed by the User that directly or indi,rectly result from, arise out of or relate to the design, construction, operation, use, occupancy, maintenance or ownership of the Project or any part thereof, even if such' injuries, damages or destruction directly or indirectly result from, arise out of or relate to, in whole or in part, one or more acts or omissions of the Indemnified Parties (other than fraud, willful misconduct or theft on -17- e e ~=-.::. " the part of the Indemnified Party claiming release) in connection with the issuance of the Bonds or in connection with the Project. (c) Reimbursement. Each Indemnified Party, as appropriate, shall reimburse the User for payments made by the User pursuant to this Section to the extent of any proceeds, net of all expenses of collec- tion, actually received by it from any insurance (but only from the proceeds of any indemnification which may be payable by any other Indemnified Party to the extent that the User has indemnified such other Indemnified Party for such payment) with respect to any Loss. At the request and expense of the User, each Indemnified Party shall have the duty to claim any such insurance proceeds and such Indemnified Party shall assign its rights to such proceeds, to the extent of such required reimbursement, to the User. (d) Notice. In case any Claim shall be brought or, to the knowl- edge of any Indemnified Party, threatened against any Indemnified Party in respect of which indemnity may be sought against the User, such Indemnified Party shall promptly notify the User in writing; provided, however, that any failure so to notify shall not relieve the User of its obligations under this Section. (e) Defense. The User shall have the right to assume the investi- gation and defense of all Claims, including the employment of counsel and the payment of all expenses. Each Indemnified Party shall have the right to employ separate counsel in any such action and participate in the investigation and defense thereof, but the fees and expenses of such counsel shall be paid by such Indemnified Party unless (i) the employ- ment of such counsel has been specifically authorized by the User, in writing, (ii) the User has failed to assume the defense and to employ counsel, or (iii) the named parties to any such action (including any impleaded parties) include both an Indemnified Party and the User, and the Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the User (in which case, if such Indemnified Party notifies the User in writing that it elects to employ separate counsel at the User's expense, the User shall not have the right to assume the defense of the action on behalf of such Indemnified Party; provided, however, that the User shall not, in connection with anyone action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegation or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for the Indemnified Parties, which firm shall be desi,.gnated in writing by the Indemnified Parties). (f) Cooperation; Settlement. Each Indemnified Party. shall use reasonable efforts to cooperate with the User in the defense of any action or Claim. The User shall not be liable for any settlement of any action or Claim without its consent but, if any such action or Claim is -18- e . --~ ~~ ~ settled with the consent of the User or there be final judgment for the plaintiff in any such action or with respect to any such Claim, the User shall indemnify and hold harmless the Indemnified Parties from and against any Loss by reason of such settlement or judgment as provided in Subsection (a) of this Section. (g) Survival; Right to Enforce. The provJ.swns of this Section shall survive the termination of this Agreement, and the obligations of the User hereunder shall apply to Losses or Claims (or losses or claims of the Trustee or the Mortgage Trustee under Subsection (a) of this Section) whether asserted prior to or after the termination of this Agreement. In the event of failure by the User to observe the covenants, conditions and agreements contained in this Section, any Indemnified Party may take any action at law or in equity to collect amounts then due and thereafter to become due, or to enforce performance and observance of any obligation, agreement or covenant of the User under this Section. The obligations of the User under this Section shall not be affected by any assignment or other transfer by the Issuer of its rights, titles or interests under this Agreement to the Trustee pursuant to the Indenture and will continue to inure to the benefit of the Indemnified Parties after any such transfer. The provisions of this Section shall be cumulative with and in addition to any other agreement by the User to indemnify any Indemnified Party. Section 7.2. Filing and Recording. The User covenants that (i) upon the execution and delivery of the Bond Documents and thereafter, from time to time, it will cause any Bond Document and each amendment and supplement thereto (or a memorandum with respect thereto or to such amendment or supplement) to be filed, registered and recorded and to be refiled, reregistered and rerecorded in such manner and in such places as may be required in order to publish notice of and fully to protect the liens, or to perfect or continue the perfection of the security interests, created thereby and (ii) it shall perform or cause to be performed from time to time any other act as required by law, and it will execute or cause to be executed any and all instruments of further assurance that may be necessary for such publication, perfection, continuation and protection. Section 7.3. Removal of Liens. If any lien, encumbrance or charge of any kind based on any claim of any kind (including, without limita- tion, any claim for income, franchise or other taxes, whether federal, state or otherwise) shall be asserted or filed against the Trust Estate, or any amount paid or payable by the User under or pursuant to this Agreement or any order (whether or not valid) of any court shall be entered with respect to the Trust Estate, or any such amount by virtue of any claim of any kind, in either case so as to: (a) interfere with the due payment of such amount to the Trustee or the due application of such amount by the -19- . e ~=-----:. ~ Trustee pursuant to the applicable provisions of the Inden- ture, (b) subject the Bondholders to any obligation to refund any money applied to payment of Debt Service (other than as provided in Section 4.5 of this Agreement), or (c) result in the refusal of the Trustee to make such due application because of its reasonable determination that liability might be incurred if such due application were to be made, then the User will promptly take such action (including, but not limited to, the payment of money) as may be necessary to prevent, or to nullify the cause or result of, such interference, obligation or refusal, as the case may be. Section 7.4. Federal Income Tax Exemption. The User hereby covenants that it will make such use of the proceeds of the Bonds and all other funds held by the Trustee under the Indenture, restrict the investment of such proceeds and other funds and take such other and further action as may be required so that the Bonds will not constitute arbitrage bonds under Section 103(c)(2) of the Code and the Regulations. The User covenants that "substantially all" of the Original Pro- ceeds actually expended will be used to pay Qualifying Costs. The User covenants and agrees to comply with, and to make all filings required by, all effective rules, rulings or regulations promulgated by the' Department of the Treasury or the Internal Revenue Service, with respect to obligations issued under Section 103(b)(6) of the Code as an "exempt small issue" the interest on which is exempt from federal income taxation. Section 7.5. No Conflict of Interest. The User represents and warrants that no elected or appointed public official, employee, agent or representative of the Unit or any of its official boards, commissions or committees or any member of the Board has any direct or indirect interest of any kind, or any right, agreement or arrangement to acquire such an interest in the User, its Affiliates or the Project, as owner, shareholder, general or limited partner, tenant or otherwise which would violate or require disclosure or other action under any law, regulation, charter or ordinance of the State or the Unit. Section 7.6. Representations Regarding Project. The User repre- sents and warrants: (i) that it has no present intention of disposing of or abandoning the Project nor of direc~ing the Project to a' use other than the purposes represented to the Unit and the Commission and that it will not, during the life of the Bonds, direct the Project to a use not authorized within an "eligible blighted area," as defined by the Act and -20- e . r-:::;::.....:.:. 't, the rules of the Commission; (ii) that it intends to cause the Project to be operated as a "project" as defined in Section. 2(10) of the Act; (iii) that it intends to expend the proceeds of the Bonds for "costs" as defined in Section 2(4) of the Act; (iv) that the Project is in furtherance of the public purposes of the Act, to wit: the promotion and development of commercial, industrial and manufacturing enterprises to promote and encourage employment and the public welfare; (v) that it has or will obtain all necessary licenses and permits to acquire, construct, and operate the Project, and that the Project has been approved by all necessary governmental bodies or agencies having juris- diction; and (vi) that, by virtue of the Project being financed under the Act, it has not and will not maintain that it is entitled to an exemption from State sales or use taxes on personal property acquired in connection with the Project. ARTICLE VIII ASSIGNMENT Section 8.1. Assignment by the User. The User may transfer or assign this Agreement or transfer or assign any or all of its rights and delegate any or all of its duties hereunder, but no such transfer, assignment or delegation shall relieve the Person named as "User" in Article I of this Agreement or any successor User of its liability for the payment of the Loan Payments or for the payment of any other amounts to be paid by it under this Agreement or the Note and for the full observance and performance of all of the covenants and conditions to be observed and performed by it which are contained in this Agreement and the Note, unless the User has received the express prior written consent of the Holders of the Applicable Percentage of the Outstanding Bonds. Section 8.2. Issuer's Rights of Assignment. The Issuer may, only in accordance with the Indenture, assign this Agreement, the Loan Payments and the Note and pledge the moneys receivable hereunder to the Trustee as security for payment of Debt Service. The User hereby assents to such assignment and agrees that the Trustee may exercise and enforce in accordance with the Indenture any of such rights of the Issuer under this Agreement or the Note. Any such assignment, however, shall be subject to all of the rights and privileges of the User as provided in this Agreement. ARTICLE IX EVENTS OF DEFAULT AND REMEDIES Section 9.1. Events of Default and Remedies. Whenever any Event of Default shall have occurred and be continuing, the Trustee, or the -21- e e .-::::....:..:. .. Issuer with the prior written consent of the Trustee, or, to the extent permitted by the Inden'j:ure, any Bondholder, may take any action at law or in equity to collect amounts then due and thereafter to become due, or to enforce performance and observance of any obligation, agreement or covenant of the User under this Agreement, and such payment and perfor- mance may be enforced by mandamus or by the appointment of a receiver in equity with power to charge and collect Loan Payments, and to apply such Loan Payments in accordance with this Agreement and the Indenture. Any amounts collected pursuant to action taken under this Section shall be applied in accordance with the provisions of the Indenture. The Issuer may, without the consent of, but with prior written notice to, the Trustee, take such actions as it deems appropriate to enforce the observance and performance of the User's covenants, conditions and agreements contained in Sections 3.1, 7.1 and 9.3 of this Agreement. A waiver by the Trustee of any Event of Default shall also consti- tute a waiver of its consequences hereunder. Section 9.2. No Remedy Exclusive. No remedy conferred upon or reserved to the Issuer or the Trustee by this Agreement is intended to be exclusive of any other available remedies, but each such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing hereunder shall impair any such right or power or shall be construed to be a waiver thereof, nor shall any single or partial exercise of any other right, power or privilege, but every such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice other than such notices as may be herein expressly required. , , Section 9.3. Agreement to Pay Attorneys Fees and Expenses. If the Issuer or the Trustee should employ attorneys or incur other expenses in taking any action described in Section 9.1 of this Agree- ment, the User agrees that it will on demand therefor reimburse the Issuer or the Trustee for the reasonable fees of such attorneys and such other expenses so incurred. ARTICLE X GENERAL Section 10.1. Force Majeure. If by reason of Force Majeure either the Issuer or the User shall be rendered unable wholly or in part to carry out its obligations under this Agreement, and if such party gives -22- e e ~::....:.:. .. ,. notice and full particulars of such Force Majeure in writing to the other party within a reasonable time after failure to carry out its obligations under this Agreement, such obligations (other than the obligations of the User specified in the last sentence of this Section) of the party giving such notice, so far as they are affected by such Force Majeure, shall be suspended during the continuance of the inability then claimed, including a reasonable time for removal of the effect thereof. The requirement that any Force Majeure shall be reasonably beyond the control of the party shall be deemed to be fulfilled even though any existing or impending strike, lockout or other industrial disturbance may not be settled but could have been settled by acceding to the demand of the opposing person or persons. The occurrence of any Force Majeure shall not suspend or otherwise abate, and the User shall not be relieved from, the obligation to pay the Loan Payments and to pay any other payments required to be made by it under this Agreement at the times required. Section 10.2. The Trustee. The User shall pay to the Trustee, when due, reasonable compensation for all its services, together with its actual out-of-pocket expenses necessarily incurred in connection with acting as Trustee including (a) an amount equal to the annual fee of the Trustee for its ordinary services rendered and ordinary expenses (including reasonable attorneys' fees and fees, charges and expenses incurred by the Trustee in connection with the authentication and delivery of the Bonds and for the execution of any Bond Document) incurred as Trustee, (b) the reasonable fees and charges of the Trustee as Bond registrar and p~ying agent under the Indenture, and (c) the reasonable fees and charges of the Trustee for extraordinary services rendered by it and extraordinary expenses (including reasonable attorneys' fees) incurred by it under the Indenture; provided, however, that the User may, without creating a default hereunder or under the Indenture, after paying such fees, charges and expenses, contest in good faith the necessity for any such extraordinary services and extraordi- nary expenses and the reasonableness of any such fees, charges or expenses. The User shall also reimburse the Trustee on demand for all amounts paid by it as permitted by the Indenture, together with interest from the date of payment by the Trustee at the rate specified therein. Section 10.3. Third Party Beneficiaries. This Agreement is entered into in part to induce the purchase of the Bonds, and according- ly, so long as any Bonds are Outstanding, all respective covenants and agreements of the parties herein contained are hereby declared to be for the benefit of any and all Bondholders and may be enforced by or on behalf of the Bondholders only by the Trustee in accordance with the provisions of the Indenture. This Agreement shall not be deemed to create any right of subrogation or otherwise in any person who is not a party hereto (other than the permitted successors and assigns of a party) and shall not be construed in any respect to be a contract in whole or in part for the benefit of any third party (other than the -23- e e ....-::: - . , 'c ~ permitted successors or assigns of a party hereto), except in each case the Bondholders, the Trustee an~ the Indemnified Parties. Section 10.4. Communications. All notices, demands, certificates, requests, consents, submissions or other communications hereunder shall be given as provided in the Indenture. Section 10.5. Counterparts, Amendments, Governing Law, Etc. This Agreement (a) may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same instrument; (b) may be modified or amended only as provided in the Indenture; and (c) shall be governed in all respects including validity, interpretation and effect by, and shall be enforceable in accordance with, the laws of the United States of America and the State, except that Article 5069, Chapter 15, Vernon's Annotated Texas Civil Statutes, as amended (which regulates certain revolving credit loan accounts and revolving triparty accounts)., shall not apply to this Agreement and the Note. The parties agree that, in accordance with the Act and subject to the limitations of Section 4.5, they will amend this Agreement to increase the payments to be made by the User hereunder if for any reason such payments, if made, are not sufficient to pay the Debt Service as the same becomes due. In the event that any clause or provision of this Agreement shall be held to be invalid by any court of competent jurisdiction, the inva- lidity of such clause or provision shall not affect any of the remaining provisions of this Agreement. Section 10.6. Term of Agreement. This Agreement shall remain in full force and effect from the date of execution and delivery hereof until the Indenture has been discharged in accordance with the provi- sions thereof; provided, however, that (a) the provisions of this Section and of Sections 3.1, 4.1, 7.1, 7.3, 7.4, 9.3 and 10.2 of this Agreement shall survive any expiration or termination of this Agreement, and (b) in addition, if the Indenture is discharged prior to the date on which all Bonds shall have matured in accordance with their terms, by redemption or otherwise, the provisions of Sections 2.1, 3.4 and 3.5 of this Agreement shall continue until such date. Section 10.7. User's Approval of Bond Documents. The Bond Docu- ments have been submitted to the User for examination, and the User acknowledges that, by execution of this Agreement, it has approved the Bond Documents and will perform the obligations imposed upon it there- under. Section 10.8. Applicable Rate Ceiling Under Texas Law. Unless changed in accordance with law, the applicable rate ceiling under Texas law shall be the indicated (weekly) rate ceiling from time to time in -24- e e ....-::: =--:. 'c ~ effect, as provided in Article 5069-1.04, Vernon's Annotated Texas Civil Statutes, as amended. IN WITNESS WHEREOF, the Issuer and the User have caused this Agree- ment to be signed and sealed in their behalf by their duly authorized representatives as of the date set forth above. CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION By President ATTEST: Secretary (SEAL) LA QUINTA MOTOR INNS, INC. By Senior Vice President - Finance ATTEST: Assistant Secretary (SEAL) -25- e e ....-:=~ Ie .. Exhibit A LOAN AGREEMENT DESCRIPTION OF THE PROJECT The Project consists of the construction of a motor inn and related facilities, including approximately 114 rooms, with parking facilities for approximately 130 cars and a free standing restaurant to accommodate approximately 150 patrons with on-premises parking facilities for approximately 55 cars. The Project. also includes the acquisition and improvement of the Project site described below, landscaping, and acquisition and installation of various items of furnishings, fixtures, equipment and improvements functionally related and subordinate to the foregoing. The Project will be located on a site of approximately 2 acres, at extreme northeast portion of the southeast quadrant of the intersection of US Highway 146 and Fairmont Parkway in La Porte, Texas, as described by metes and bounds below: [User to provide] A-I e e P":::::::""'::' ,- . Exhibit B LOAN AGREEMENT FORM OF NOTE $3,800,000 November , 1983 FOR VALUE RECEIVED, LA QUINTA MOTOR INNS, INC., a Texas corporation (the "User"), do~s hereby promise to pay to the order of CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION (the "Issuer") at the principal corporate trust office of FIRST CITY NATIONAL BANK OF HOUSTON (the "Trustee"), or any successor trustee acting as such under that certain Trust ,Indenture, dated as of November 1, 1983, between the Issuer and the Trustee (the "Indenture"), in lawful money of the United States of America, the principal sum of THREE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($3,800,000), and to pay interest on the unpaid principal amount hereof, in like money, at such office on the dates, in the amounts and at the rates determined in accordance with Section 4.1 of the Loan Agreement hereinafter referenced. ALL SUMS paid hereon shall be applied first to the satisfaction of accrued interest and the balance to the unpaid principal. THE PRINCIPAL AMOUNT of this Note is due and payable on the dates and in the amounts determined in accordance with Section 4.1 of the Loan Agreement. THIS NOTE is the Note referred to in that certain Loan Agreement, dated as of November 1, 1983, between the User and the Issuer (the "Loan Agreement"), and is subject to, and is executed in accordance with, all of the terms, conditions and provisions thereof, including those respecting prepayment and is further subject to all of the terms, conditions and provisions of the Indenture, all as provided in the Loan Agreement. THIS NOTE is a contract made under and shall be construed in accordance with and governed by the laws of the United States of America and the State of Texas. LA QUINTA MOTOR INNS, INC. By Senior Vice President - Finance ATTEST: Assistant Secretary (SEAL) B-1 e e ..-:::=-:.:. r- " FORM OF ENDORSEMENT (To be set forth on back of Note) Pay to the order of FIRST CITY NATIONAL BANK OF HOUSTON, Trustee, without recourse or warranty, except warranty of good title and warranty that the Issuer has not assigned this Note to a person other than the Trustee and that the principal amount of $ remains unpaid under this Note. CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION By President B-2 e e ....-::;::....:.:. "'J <r Exhibit C LOAN AGREEMENT FORM OF REQUISITION CERTIFICATE - USER Requisition No.: U- _,19 First City National Bank of Houston, Trustee Houston, Texas Corporate Trust Department: This certificate is provided to you pursuant to Section 3.5 of the Loan Agreement, dated as of November 1, 1983 (the "Agreement"), between the City of La Porte Industrial Development Corporation (the "Issuer") and La Quinta Motor Inns, Inc. (the "User"), and in accordance with Section 302 of the Trust Indenture, dated as of November 1, 1983 (the "Indenture"), between the Issuer and First City National Bank of Houston, as Trustee. The capitalized terms used in this certificate have the same meanings given such terms in the Agreement. On u behalf of the User, I, the undersigned Authorized Representative, do hereby certify as follows: (i) There has been expended, or is being expended concurrently with the delivery of this certificate, an amount on account of Project Costs or Issuance Costs at least equal to $ which amount is hereby requisitioned for disbursement; (ii) No other certificate in respect of the expenditures set forth in clause (i) above is being or has previously been delivered to the Trustee; and (iii) At least 90% of all amounts previously disbursed plus the amounts hereby requested to be disbursed from the Construction Fund to pay Project Costs have been and will be used to pay Qualifying Costs. C-1 e e ~-.. ",', '- You are hereby directed to pay the amount of $ (which is the amount requisitioned by clause (i) above) from the Construction Fund to (payee) by (method of payment). LA QUINTA MOTOR INNS, INC. By Authorized Representative C-2 e e ~..:..;,:; lE/LQlO Draft of 11/07/83 GUARANTEE AGREEMENT Relating to City of La Porte Industrial Development Corporation $3,800,000 Industrial Development Revenue Bonds Series 1983 (La Quinta Motor Inns, Inc. Project) Dated as of November 1, 1983 e e .-:::- , Page Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Preliminary Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1. 1. Section 2.1. Section 2.2. Section 2.3. Section 2.4. Section 3.1. Section 3.2. Section 3.3. Section 3.4. Section 3.5. Section 4.1. Section 4.2. TABLE OF CONTEt-.7S ARTICLE I DEFINITIONS Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ART I CLE I I GUARANTEES OF PAYMENT Guarantee of Payment of Bonds................ Guarantee of Payment to Issuer.... ........... Nature of Guarantees.......................... W ai vers . . . . . . . . . . . . -. . . . . . . . . . . . . . . . . . . . . . . . . . . ARTI CLE I II DETERMINATION OF TAXABILITY Covenant and Guarantee of Non-Taxability..... Purchase and Payment. ........................ Requests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . De~ermination or Notice Subsequent to the Payment of Bonds............... ....... Usury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE IV REPRESENTATIONS AND WARRANTIES Representations and Warranties of User....... Other Representations and Warranties......... -i- 1 4 5 5 7 7 7 8 8 8 9 11 Section 5.1. Section 5.2. Section 5.3. Section 5.4. Section 5.5. Section 5.6. Section 5.7. Section 6.1. Section 6.2. Section 6.3. Section 6.4. Section 6.5. Section 7.1. Section 7.2. Section 7.3. Section 7.4. Section 7.5. Section 7.6. Section 7.7. e e ~:.::, 12 13 14 14 14 14 15 15 15 15 15 15 16 16 16 16 16 17 17 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE V BUSINESS COVENANTS Financial Information........................ Merger and Sales of Assets......... .......... Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maintenance of Principal Place of Business... Maintenance of Properties.................... Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE VI DEFAULT AND REMEDIES Enforcement Provisions....................... No Remedy Exclusive. . . . ... . . . ........ ... .. ... Right to Proceed............................. User to Pay Costs of Enforcement............. No Waiver of Rights............... . . . . . . . . . . .' ARTICLE VII GENERAL Guarantee Agreement Independent of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefitted Parties... ....... ............ ..... Trustee May Bring Suit........... ............ Interpretations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Entire Agreement; Counterparts; Amendments; Governing Law; Etc........................... Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -ii- e e ..-:::::....::.. GUARANTEE AGREEMENT THIS GUARANTEE AGREEMENT, dated as of November 1, 1983, is by LA QUINTA MOTOR INNS, INC., a Texas corporation, as guarantor, for the benefit of CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION, a nonprofit industrial development corporation created under the Act, and FIRST CITY NATIONAL BANK OF HOUSTON, Trustee, a national banking asso- ciation. WIT N E SSE T H: The Issuer and the User have entered into a loan agreement, dated as of the date of this Guarantee Agreement, pursuant to which the Issuer agreed to issue its Bonds and to lend the proceeds of the Bonds to the User to finance the acquisition and construction of the Project; The Issuer may issue its additional revenue bonds in the future for the purpose of providing funds for the Issue; to lend to the User to finance the costs of completing, enlarging, improving or expanding the Project or refunding any Bonds; The User desires that the Issuer issue and sell the Bonds and lend the proceeds to the User for the purpose described above and, in order to provide an additional inducement to the Issuer to take such actions and as an additional inducement to the purchase of the Bonds by the Purchaser and all others who shall at any time become Bondholders, the User is willing to enter into this Guarantee Agreement; In consideration of the premises and other good and valuable consideration and mutual benefits, covenants and agreements set forth below, the parties agree as follows: ARTICLE I DEFINITIONS Section 1.1. Definitions. (a) All terms used in this Guarantee Agreement which are defined in the Agreement or ~he Indenture have the same meaning in this Guarantee Agreemen~ which are assigned to such terms in the Agreement or the Indenture. Except where the context otherwise requires, words imparting the singular number shall include the plural number and vice versa. Reference to any Bond Document means that Bond Document as amended or supplemen~ed from time to time. Reference to any party to a Bond Documen~ means tha~ party and its successors and assigns. e e ---.. ......--- (b) The following terms have the meanings assigned to them below whenever they are used in this Guarantee Agreement: "A " h greement means t e this Guarantee Agreement, Development Corporation, corporation created under a Texas corporation. Loan Agreement, dated as of the date of between City of La Porte Industrial a nonprofit industrial development the Act, and La Quinta Motor Inns, Inc., "Determination of Taxability" means the occurrence of any of the following: (a) the filing by the User of a statement, supplemental statement or other tax schedule, return or document which dis- closes that an Event of TaxabiHty shall have in fact occurred; or (b) the receipt by the User of any written notice of deficiency, proposed notice of deficiency or assessment by the Commissioner or any District Director of Internal Revenue indicating that an Event of Taxability has occurred; or (c) the receipt by-the User of a written notice from the Trustee that, due to the occurrence of an Event of Taxability, the Trustee has been advised by any Bondholder or the Commis- sioner or any District Director of Internal Revenue that the Internal Revenue Service has: (i) assessed as includable in the gross income of any Bondholder the interest on its Bonds or (ii) disallowed any deduction of such Holder or (iii) otherwise imposed or asserted a tax on such Holder attributable to the purchase of, the receipt of interest on, or the holding of the Bonds; provided, however, that no Determination of Taxability shall occur under subparagraph (b) or (c) above unless the User has been given written notice thereof and has been afforded the opportunity, at its expense, to contest (including, without limitation, any contest or objection that does not involve litigation) any such advice or assessment either directly or through any Bondholder and, further, no Determination of Taxability shall occur until such contest, if made, has been finally determined, so long as the Bondholders have received an opinion of nationally recognized bond counsel selected and employed by the User, and reasonably acceptable to the Trustee, that there is reasonable basis for such contest. "Event of Default" means the occurrence and continuation of any of the following: -2- e e P""::: =-:.:. (a) : the User fails to perform or observe any covenant contained in or make any payment required by Articles II or III of this Guarantee Agreement; (b) the User fails. to comply with any other provision (other than those named in (a) above) of this Guarantee Agreement, and such failure continues for more than thirty (30) days after notice of such failure is given by the Trustee to the User; provided, however, that such period shall be extended if corrective action is instituted within the applicable period and so long as such action is diligently pursued until such default is corrected; (c) a receiver, liquidator, custodian or trustee of the User or of any of its property is appointed by court order and such order remains in effect for more than sixty (60) days; or the User is adjudicated bankrupt or insolvent, or any of its property is sequestered by court order and such order remains in effect for more than sixty (60) days; or a petition is filed against the User under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and is not dismissed within sixty (60) days after such filing; (d) the User files a petition in voluntary bankruptcy or seeking relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or consents to the filing of any petition against it under any such law; (e) the User makes an assignment for the benefit of its creditors, or admits in writing its inability to pay its debts generally as they become due, or consents to the appointment of a receiver, trustee or liquidator of the User or of all or any part of its property; Cf) final judgment or judgments for the payment of money is or are outstanding against the User and any such judgment has been outstanding for more than thirty (30) days from the date of its entry and has not been discharged in full or stayed; or Cg) the User fails to make any payment due on any indebtedness or any event shall occur (other than the mere passage of ~ime) or any condition shall exist in the respect of any indebtedness of the User, or under any agreement -3- e e P""'::=-':':: securing or relating to such indebtedness, the effect of which is to cause (or permit any holder of such indebtedness or a trustee to cause) such indebtedness, or a portion thereof, to become due prior to its stated maturity or prior to its regularly scheduled dates of payment. "Event of Taxability" means any event which has the effect of causing the interest payable on the Bonds to become includable for federal income tax purposes in the gross income of the Holders of the Bonds (other than a Holder who is a "substantial user" of the Project or a "related person" as such terms are defined in Section 103(b) of the Code). "Financial Information" means the User's audited financial reports for the fiscal years ending May 31, 1981, May 31, 1982, and May 31, 1983. "Inclusion Period" means, as to any Bondholder or former Bondholder, the period (A) which begins on the later of (i) the date of an Event of Taxability or (ii) the date on which such Holder or former holder of a Bond acquired such Bond and (B) which ends on the earlier of the date on which such Bond was paid at maturity (either stated or by acceleration), redeemed prior to maturity or otherwise disposed of by such Holder or former holder. "Prime Rate" is defined in the Bonds. "Purchaser" means First City National Bank of Houston, the initial purchaser of the Bonds, and any subsequent institutional holder of at least 25% in principal amount of the Outstanding Bonds. ARTI CLE II GUARANTEES OF PAYMENT Section 2.1. Guarantee of Payment of Bonds. The User hereby guarantees to the Trustee for the benefit of the Bondholders, the payment in full of the Debt Service on the Bonds when due. If the Trustee shall fail or be unable to pay in full such amounts when they become due and payable and whether or not such failure shall constitute, result in or have resulted from the occurrence of an event of default under the Indentute, the User shall payor cause to be paid to the Trustee for deposit in the Debt Service Fund such amounts as may be -4- e e P"'::: =-..::: required in order to enable the Trustee to make payment of Debt Service when due. The foregoing guarantee is an unconditional present and continuing guarantee of payment and not of collectibility. Section 2.2.' Guarantee of Payment to Issuer. The User hereby unconditionally guarantees to the Issuer payment of the amounts to be paid to the Issuer or on behalf of the Issuer which may be payable pursuant to Sections 3.1, 7.1 and 9.3 of the Agreement. The foregoing guarantee is an unconditional present and continuing guarantee of payment and not of collectibility. Section 2.3. Nature of Guarantees. The obligations of the User under this Guarantee Agreement shall be irrevocable and unconditional, shall remain in effect until payment in full of all Bond Obligations and, to the fullest extent permitted by applicable law, shall in no way be affected or impaired by the happening (with or without notice to or consent of the User) of any other event, including, without limitation, the following: (a) the waiver, compromise, settlement, termination or other release of the performance or observance by the parties to the Financing Documents of, or the modification or amend- ment of, any or all of their ~greements, covenants, terms or conditions contained in Financing Documents (other than the preceding Sections of this Article) or the performance by the Issuer of any or all of its agreements, covenants, terms or conditions contained in the Agreement, the Indenture or the Bonds; (b) the extension of the time for payment of any Debt Service on any Bond owing or payable on such Bond or of the time for performance of any obligations, covenants or agree- ments under or arising out of the Bond Documents or the exten- sion or the renewal of any of them; (c) any failure, omission, delay or lack on the part of the Issuer or the Trustee to enforce, assert or exercise any right, power or remedy conferred on the Issuer or the Trustee in the Financing Documents, or the inability of the parties to the Financing Documents to enforce any provision of the Financing Documents for any reason, or the taking or omission of any other action on the part of the Issuer, the Trustee or any of the Bondholders (other than an amendment or release of the preceding'Sections of this Article); -5- e e .....-::::....:.:. (d) the transfer, assignment or mortgaging, or the pur- ported transfer, assignment or mortgaging, of all or any part of the interest of the User in the Project or any failure of title with respect to the interest of the User in the Project or the invalidity, unenforceability or termination of the Agreement; (e) the voluntary or involuntary liquidation, dissolu- tion, sale of all or substantially all of the assets, mar- shalling of assets and liabilities, receivership, conserva- torship, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or read- justment of, or other similar proceeding affecting the Issuer or the User or any of their respective assets or any allega- tion or contest of the validity of the Bond Documents in any such proceeding; (f) the exchange, substitution, surrender or impairment of any security for the performance or observance of any of the agreements, covenants, terms and conditions contained in the Bonds, the Agreement or the Indenture; (g) any failure of the issuer to perform and observe any agreement or covenant, or to discharge any duty or obligation, arising out of or connected with the Agreement, this Guarantee Agreement or any other agreement between the Issuer and the User or the occurrence or pendency of any default or event of default thereunder or any proceedings or actions as a result of, or attendant upon, such default; or (h) the failure to give notice to the User of the occurrence of an Event of Default under this Guarantee Agreement or of a default under the terms and provisions of the other F~nancing Documents. No set-off, counterclaim, reduction or diminution of any obliga- tion, or any defense of any kind or nature (other than performance by the User of its obligations hereunder), which the Issuer may have or assert against the Trustee or any Bondholder or which the User may have or assert against the Issuer, the Trustee or any Bondholder shall be available hereunder to the User against the Trustee or the Issuer. The preceding sentence shall not be construed to prevent or restrict the User from asserting (other than by way of set-off, counterclaim or defense) any rights which it may have against the Issuer, the Trustee or any other person or prevent or restrict the User, at its own cost and expense, from prosecuting or defending any action or proceeding against or by third parties. -6- e e ~::....:.:. Section 2.4. Waivers. The User hereby expressly waives notice of the issuance of the Bonds and notice from the Trustee, the Bondholders or the Issuer of their acceptance of and reliance on this Guarantee Agreement. ARTI CLE II I DETERMINATION OF TAXABILITY Section 3.1. Covenant and Guarantee of Non-Taxability. The User covenants and agrees that neither it nor any "substantial user" nor any "related person" (as those terms are defined in Section 103(b) of the Code) will take or permit to be taken, or omit to take or permit to be omitted the taking of any action, the taking or omission of which would result in the occurrence of an Event of Taxability. Section 3.2. Purchase and Payment. The User agrees that upon a Determination of Taxability, the User will purchase the Outstanding Bonds and will pay to the Holders and former holders of the Bonds amounts hereby deemed adequate to pay the Holders all unpaid principal of and accrued interest on the Bonds and to compensate the Holders and former holders for all damages suffered by them as a result of the Determination of Taxability. Such payments shall be made as follows: (a) any Outstanding Bonds held by a requesting Holder will be purchased by the User in whole, within thirty (30) days after receipt by it of such Holder's written request, at a price equal to the sum of: (x) the principal amount thereof, plus (y) unpaid interest accrued thereon to the date of purchase; and (b) to compensate each Holder and former holder of a Bond for damages, liquidated damages in an amount equal to the sum of: (i) the difference between (A) the amount of interest actually paid to such Holder or former holder during the Inclusion Period, and (B) the amount of interest which would have been payable on such Bonds to such Holder or former holder during the Inclusion Period, if the Stated Rate set forth in the Bonds had been equal to the Prime Rate plus 1/2 of 1%; plus (ii) the reasonable costs and expenses, if any, incurred by any Holder or former holder in connection with any Determination of Taxability. The User agrees to pay, in addition, the reasonable fees and expenses of the Trustee incurred in connection with the Determination of Taxability, and any other amounts for which the User may be responsible under this Guarantee Agreement. Amounts payable in respect of any request under this Subsection shall be paid within ten (10) days after the receipt of such request. -7- e e --. ........--.._~ Section 3.3. Requests. Requests by any Holder for amounts due to it under this Article in respec~ of any Bond may be made in part on more than one occasion, it being understood, for example, that a request as to amounts due under paragraph (b) of Section 3.2 of this Guarantee Agreement may be submitted at another time. Section 3.4. Determination or Notice Subsequent to the Payment of Bonds. (a) Upon the occurrence of a Determination of Taxability subse- quent to the payment in full of any or all of the Bonds, the User agrees to pay: (i) each Holder and former holder of any Bonds the damages provided for in paragraph (b) of Section 3.2 of this Guarantee Agreement and (ii) the Trustee the other amounts to be paid to the Trustee as provided for in such Section 3.2. Payments provided for in this Section shall be made at the times provided in such Section 3.2. (b) The obligation to purchase any Bonds and make other payments pursuant to this Article shall apply even though such Bonds may have been called for redemption and even after the date set for redemption (except that the obligation to purchase any Bond shall not apply after such Bond shall have actually been ~edeemed upon being surrendered by the Holder thereof to the Trustee) . Section 3.5. Usury. Notwithstanding any prov~s~on of the Bond Documents to the contrary, it is hereby agreed that in no event (includ- ing, without limitation, the acceleration of maturity of the Bonds or the redemption or mandatory purchase of the Bonds pursuant to the Bond Documents) shall the amount of interest contracted for, charged, received, reserved or taken in connection with the loan made under the Agreement (including interest on the Note, together with any other costs or considerations that constitute interest under applicable law which are contracted for, charged, received, reserved or taken pursuant to the Bond Documents) ("Interest") exceed the amount of interest which could have been contracted for, charged, reserved, received or taken at the Highest Lawful Rate. For purposes of this Section, to the maximum extent permitted by law, the rate of interest on such loan shall be determined by: (i) spreading payments over the term of such loan; and (ii) if appropriate, characterizing payments as a premium for the privilege of making an optional prepayment of the loan. Excess Interest, if any after the application of the foregoing provisions, provided for in the Bond Documents shall be cancelled automatically as of the date of such acceleration, redemption or purchase or, if thereto- fore paid, shall be credited on the principal of the Note or if the principal of the Note has been, or would thereby be, paid in full, refunded to the User. However, in lieu of such cancellation or refund, the Trustee shall (if requested by the Holders of all of the, aggregate principal amount of Outstanding Bonds), to the extent permitted by applicable law, delay the date on which any payment is due hereunder or -8- e e ....-:::.::.-::. under any of the Bond Documents until the earliest Business Day that will result, in the payment of Interest at a rate not in excess of the Highest Lawful Rate. ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.1. Representations and Warranties of User. The User represents and warrants as follows: Ca) The User is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and is duly qualified, authorized and licensed to transact business in the State of Texas; the User is duly qualified, authorized and licensed to transact business in each jurisdiction wherein failure to qualify would have a material adverse effect on the conduct of its business or the ownership of its properties; the User has full corpo- rate power and authority to own its properties and to conduct its business as now being conducted; and the User has been duly authorized to act in all matters relating to the Bonds and hereby approves, ratifies and confirms all such actions heretofore and concurrently herewith taken by it or on its behalf. (b) All of the documents, instruments and written information furnished by or on behalf of the User to the Issuer, the Purchaser and the Commission in connection with the issuance of the Bonds, including, without limitation, the Financial Information, is true and correct in all material respects and does not omit or fail to state any material facts necessary or required to be stated therein to make the information provided not misleading. (c) The financial information with respect to the User contained in the Financial Information presents fairly the financial position of the User as of the dates indicated and the results of its operations for the periods specified, and there has been no material adverse change in the condition, financial or otherwise, of the User from that set forth in the Financial Information. Cd) No event of default or e~ent ~hich, with notice or lapse of time or both, would constitute an event of default or a default under any agreement or instrument to which the User -9- e e ....-:::: =-::. is a party or by which the User is or may be bound or to which any of the property ,or assets of the User is or may be sub- ject, and which would have a material adverse effect on the User has occurred and is continuing; neither the execution nor the delivery by the User of the Financing Documents to which it is party, nor the consummation of any of the transactions herein and therein contemplated nor the fulfillment of, or compliance with, the terms and provisions hereof or thereof, will contravene the User's Organizational Documents or will conflict with, in any way which is ma~erial to the User, or result in a breach of, any of the terms, conditions or provisions of, or constitute a default under, any corporate or limited partnership restriction or any bond, debenture, note, mortgage, indenture, agreement or other instrument to which the User is a party or by which the User is or may be bound or to which any of the property or assets of the User is or may be subject, or any law or any order, rule or regulation applicable to the User of any court, or regulatory body, administrative agency or other governmental body having jurisdiction over the User or its properties or operations, or will result in the creation or imposition of a prohibited lien, charge or other security interest or encumbrance of any nature upon any property or asset of the User under the terms of any such restriction, bond, debenture, note, mortgage, indenture, agreement, instrument, law, order, rule or regu- lation. (e) There is no action, suit, proceeding or investi- gation at law or in equity before or by any court or govern- mental agency or body pending or threatened, wherein an adverse decision, ruling or finding (i) would result in any material adverse change in the condition (financial or other- wise), results of operations, business or prospects of the User or which would materially and adversely affect the properties of the User, and which has not been disclosed to the Purchaser and the Issuer, or (ii) would materially and adversely affect the transactions contemplated by, or the validity or enforceability of, the Financing Documents. (f) The User has full corporate power and authority to execute and deliver the Bond Documents to which the User is a party and has full power and authority to perform its obliga- tions hereunder and thereunder and engage in the transactions contemplated by the Bond Documents to which it is party. The Bond Documents to which the User is a party have been duly authorized, executed and delivered by the User and each constitutes a legal, valid and binding obligation of the User, enforceable in accordance with their respective terms. -10- . e ~=-..::. (g) All of the documents, instruments and written information supplied by or on behalf of the User, which have been reasonably relied upon by Vinson & Elkins in rendering their opinion with respect to the exemption from federal income taxation of the interest on the Bonds, are true and correct in all material respects and do not omit or fail to state any material fact necessary or required to be stated therein to make the information provided not misleading. (h) No consents, approvals, authorizations or any other actions by any governmental or regulatory authority that have not been obtained or taken are or will be required for the issuance and sale of the Bonds or the consummation of the other transactions contemplated by the Bond Documents (except for such licenses, certificates, approvals or permits necessary for the construction or operation of the Project for which the User either has applied or shall apply with due diligence and which the User expects to receive). (i) The User has neither t.aken any action, nor knows of any action that any other Person has taken, which would cause interest on the Bonds to be includable in the gross income of the recipients thereof for -federal income tax purposes; provided that no such representation or warranty is made with respect to any Bond for any period during which it is held by a "substantial user" or a "related person" as those terms are used in Section l03(b) of the Code. Each representation and warranty made by the User shall be deemed to have been made as of the date of this Guarantee Agreement and again as of the date of delivery of the Original Bonds. The representations, warranties and covenants c.ontained in this Guaran'tee Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Issuer or the Purchaser. Section 4.2. Other Representations and Warranties. Any certificate with respect to factual or financial matters signed by an officer of the User and delivered to the Issuer or the Purchaser shall be deemed a representation and warranty by the User to the Issuer and the Purchaser as to the statements made therein. ART I CLE V BUSINESS COVESA.\'TS Section 5.1. Financial Information. The User will deliver to the Trustee and to the Purchaser: -11- ... e e ....- ~ -t (a) Quarterly Statements. As soon as practicable after the end of each of the first three (3) quarterly fiscal periods in each fiscal year of the User, and in any event within ninety (90) days thereafter, duplicate copies of: (1) a balance sheet of the User as of the end of such quar- ter, and (2) statements of income and of surplus of the User for such quarter and (in the case of the second and third quar- ters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figure for the corresponding periods in the previous fiscal year, all in reasonable detail and prepared by nationally recognized, independent certified public accountants selected by the User; (b) Annual Statements. As soon as practicable after the end of each fiscal year of the U~er, and in any event within one hundred twenty (120) days thereafter, duplicate copies of: (1) a balance sheet of the User at the end of such year, and (2) statements of income and of surplus of the User for such year, and (3) a statement of source and application of funds of the Us er for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and accom- panied by an opinion of nationally recognized, independent certified public accountants selected by the User, which opinion shall state that such financial statements fairly present the financial condition of the User and have been prepared in accordance with generally accepted accounting principles consistently applied (except for changes in appli- cation in which such accountants concur), and that the exami- nation of such account.ants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances; and (c) Notice of Default or Event of Default. Immediately upon becoming aware of the existence of any condition or event -12- e e which constitutes a default or an event of default under the Bond Documents, a written notice specifying the nature and period of existence thereof and what action the User is taking or proposes to take with respect thereto. Section 5.2. Merger and Sales of Assets. (a) The User shall not consolidate with or merge into any other corporation or conveyor transfer its properties and assets substantially as an entirety to any Person, unless: (1) the corporation formed by such consolidation or into which the User is merged or the Person which acquires by conveyance or transfer the properties and assets of the User substantially as an entirety shan be a corporation organized and existing under the laws of the United States of America or any state or the District of Columbia, and shall expressly assume, by an amendment hereto, executed and delivered to the Trustee and the Issuer, in form satisfactory to the Trustee, the due and punctual payment of the amounts which may become due hereunder and the performance of every covenant of this Guarantee Agraement on the part of the User to be performed or observed; and (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have hap- pened and be continuing. (b) Upon any consolidation or merger, or any conveyance or trans- fer of the properties and assets of the User substantially as an entirety in accordance with this Section, the successor corporation formed by such consolidation or into which the User is merged or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the User under this Guarantee Agreement with the same effect as if such successor corporation had been named as the User herein; provided, however, that no such conveyance or transfer shall have the effect of releasing the Person named as the "User" in the first paragraph of this Guarantee Agreement or any successor which shall theretofore have become such in the manner prescribed in this Article from its obligations hereunder. (c) The User shall not lease its properties and assets substantially as an entirety to any Person. Section 5.3. 'Taxes. The User shall oav and discharge, before the same become delinquent, (a) all taxes. assessments and gov.ernmental charges or levies imposed on it or on i~s income or profits or on any of \ -13- .. ~-:..-.::. ,. e e ..-::::::....:.. t its property and (b) all lawful claims for labor, materials and supplies which, j.f unpaid, might by law become a lien upon its property, except that no corporation will be required hereby to pay any such tax, assess- ment, charge or levy, the payment of which is being contested in good faith and by proper proceedings. Section 5.4. Maintenance of Principal Place of Business. The User will not change or relocate its place of business (or its chief execu- tive office if it has more than one place of business) unless it has taken all actions, and made all filings necessary to continue the effec- tiveness and perfection of all security interests created by the Bond Documents. Section 5.5. Maintenance of Properties. The User will cause all its properties used or useful in the conduct of its businesses to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the User may be necessary so that the businesses carried on in connection. therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the User from discontinuing the operation and maintenance of any of its properties if such discontinuance is, in the judgment of the User, desirable in the conduct of their businesses and not disadvantageous in any material respect to the Bondholders. Section 5.6. Corporate Existence. Subject to Section 5.2 of this Guarantee Agreement, the User will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that the User shall not be required to preserve any right or franchise if the board of directors of the User shall determine that the preservation thereof is no longer desirable in the conduct of their businesses and that the loss thereof is not disadvantageous in any material respect to the Bondholders. Section 5.7. Insurance. The User shall purchase and maintain insurance with respect to its properties against such risks and in such amounts as are customarily insured against by operations of like size, type and character. -14- e e ...-::: ::.....:.:. ARTICLE VI DEFAULT AND REMEDIES Section 6.1. Enforcement Provisions. The Trustee, or if the Indenture has been discharged, the Bondholders, shall have the right, power and authority to do all things, including instituting or appearing in any suit or proceeding, not inconsistent with the express provisions of the Indenture or this Guarantee Agreement, which it may deem neces- sary or advisable to enforce the provisions of this Guarantee Agreement and protect the interests of the Bondholders. Each and every default in payment of Debt Service on any Bond shall give rise to a separate cause of action hereunder, and separate suits may be brought hereunder as each cause of action arises. Section 6.2. No Remedy Exclusive. No remedy conferred upon or reserved to the Trustee herein or in the Indenture is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Bond Documents or now or hereafter existing at law or in equity. Section 6.3. Right to Proceed. Upon the occurrence of any Event of Default, the Trustee may proceed to enforce its rights hereunder and the Trustee shall have the right to proceed first and directly under this Guarantee Agreement without proceeding against any other Person or exhausting any other remedies which it may have and without resorting to any other security held by the Issuer or the Trustee. This guarantee shall be an absolute, irrevocable and continuing guarantee of payment of the Bonds. Section 6.4. User to Pay Costs of Enforcement. The User agrees to pay all costs, expenses and fees, including, without limitation, all reasonable attorneys' fees which may be incurred by the Trustee in enforcing or attempting to enforce this Guarantee Agreement or protecting the rights of the Trustee or the Holders of Bonds hereunder following any Event of Default, whether the same shall be enforced by suit or otherwise. Section 6.5. No Waiver of Rights. No delay or omission to exer- cise any right or power accruing upon any default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. -15- e e .. . - ., . ARTICLE VII GENERAL Section 7.1. Guarantee Agreement Independent of Agreement. The obligations of the User under this Guarantee Agreement shall arise absolutely and unconditionally upon the issuance of the Bonds. This Guarantee Agreement is separate and independent of the Agreement. Section 7.2. Benefitted Parties. This Guarantee Agreement is entered into by the User for the benefit of the Issuer, the Trustee and the Bondholders, and may be enforced by or on behalf of the Issuer or the Bondholders by the Trustee in accordance with the provisions of this Guarantee Agreement and the Indenture. This Guarantee Agreement shall not be deemed to create any right in, or to be in whole or in part for the benefit of, any Person other than the Trustee, the Issuer and the Bondholders. Except as provided in Section 5.2 of this Guarantee Agreement, the User may not assign any of its rights or obligations hereunder except with consent of the Trustee. Section 7.3. Trustee May Bring Suit. If the Trustee shall bring any legal action or proceeding against the User for the enforcement of any provisions of this Guarantee Agreement, it shall not be necessary in any such action or proceeding to make the Issuer a party thereto. Section 7.4. Interpretations. The table of contents, article and section headings of this Guarantee Agreement are for reference purposes only and shall not affect its interpretation in any respect. Section 7.5. Entire Agreement; Counterparts; Amendments; Governing Law; Etc. This Guarantee Agreement (a) constitutes the entire agree- ment, and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof; (b) may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument; (c) may be modified or amended only as provided in the Indenture; and (d) shall be governed in all respects, including validity, interpretation and effect by, and shall be enforceable in accordance with, the law of the State of Texas. Upon payment in full of all Bond Obligations, this Guarantee Agreement shall terminate except the obligations of the User under Article III and the rights of the Trustee under Section 6.2, each of this Guarantee Agreement. If any provision of this Guarantee Agreement shall be held to be invalid by any court of competent jurisdiction, the invalidity of such provision shall not affect any of the remaining provisions. -16- e e p"":::: =-:0 . Section 7.6. Further Assurances. The User will execute and deliver all such instruments and take all such action as the Trustee may from time to time reasonably request in order fully to effectuate the purposes of this Guarantee Agreement. Section 7.7. Notices. All notices and 'other communications in respect of this Guarantee Agreement shall be given as provided in the applicable provisions of the Indenture. IN WITNESS WHEREOF, the User has caused this Guarantee Agreement to be executed in its name and behalf and its corporate seal to be affixed hereto and attested by its duly authorized officers, and the Trustee and the Issuer have accepted the same, as of the date first above written. LA QUINTA MOTOR INNS, INC. ATTEST: By Senior Vice President - Finance Assistant Secretary (SEAL) Accepted: FIRST CITY NATIONAL BANK OF HOUSTON as Trustee By Title: CITY OF LA PORTE INDUSTRIAL DEVELOPMENT CORPORATION By President -17- e .~ , e ...-.::: ::.....:.. lD/LQI0 Draft of 11/07/83 LA QUINTA MOTOR INNS, INC. TO As Mortg~ge Trustee DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FINANCING STATEMENT Dated as of November 1, 1983 e e .-:::~ TABLE OF CONTENTS Page Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Preliminary Recitals.................................... 1 Granting Clauses....................... . . . . . . . . . . . . . . . . . 2 Section 101 Section 102 Section 201 Section 202 Section 203 Section 204 Section 205 Section 206 Section 207 Section 208 Section 209 Section 210 Section 301 Section 302 Section 303 Section 304 Section 305 Section 306 Section 307 Section 308 Section 309 ARTICLE I DEFINITIONS AND INTERPRETATIONS Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretations. . . . . . . . . . . . . . . . . . . . . . . . . . 3 5 ARTICLE II GENERAL COVENANTS AND PROVISIONS Instruments of Further Assurance; Filing and Recording............. ........ 5 Warranties of Title...................... 5 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Taxes; Other Liens... ................ .... 7 Maintenance; Disposition of Collateral... 8 Disposition of Real Property............. 9 Performance of User's Obligations........ 9 Casualty; Condemnation................... 10 Effect of Casualty or Condemnation....... 10 ARTICLE III FORECLOSURE PROCEEDINGS Right to Foreclose............... ........ 11 Hethod of Sale........................... 11 Application of Proceeds; Effect of Sale........................... 12 Abandonment of Sale...................... 12 Non-Extinguishment of Lien............... 12 Right to Purchase........................ 13 Successor Mortgage Trustee............... 13 Waiver of Marshalling, Etc.. ......... .... 13 Remedies Not Exclusive....... ............ 13 -i- Section 401 Section 402 Section 403 Section 501 Section 502 Section 503 Section 504 Section 601 Section 602 Section 603 Section 604 Section 605 Section 606 Section 607 Section 608 Section 609 Section 610 Section 611 e e ~:.......: ARTICLE IV ASSIGNMENT OF RENTS Assignment of Rents........ ........ ...... Modification or Cancellation of Leases; No Assumption. . . . . . . . . . . . . . . . . . . . . . . . . . . . Collections. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 14 14 14 ARTICLE V SECURITY AGREEMENT Security Interest....... .............. ... Additional Covenants............. ........ Additional Warranty of Title... .......... Names and Addresses.... .... ... ........ ... 15 15 17 18 ARTICLE VI GENERAL Discharge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 No Waiver.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Extension, Rearrangement or Renewal of Indebtedness ................. 19 Tenants at Will.......................... 19 Waiver of Stay or Extension........ ...... 19 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Application of Payments.................. 20 Governing Law..................... . . . . . . . 20 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Construction Mortgage. . . . , . . . . . . . . . . . . . . . 20 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Acknowledgment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Exhibit A - Description of Facilities Exhibit B - Encumbrances Exhibit C - Description of Site -ii- e e ) ....-.:::::.-::. DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FINANCING STATEMENT CO~~Y OF HARRIS 9 9 9 KNOW ALL MEN BY THESE PRESENTS THE STATE OF TEXAS THIS DEED OF TRUST, SECURITY AGREEr1ENT, ASSIGNMENT OF RENTS AND FINANCING STATEMENT, dated as of November 1, 1983, by LA QUINTA MOTOR INNS, INC., a Texas corporation, to as mortgage trustee, for the use and benefit of FIRST CITY NATIONAL BANK OF HOUSTON, a national banking association, as Trustee under the Indenture, for the benefit of the Bondholders; WIT N E SSE T H: Pursuant to the terms and provisions of the Indenture, the Issuer has authorized the issuance of the Original Bonds and has agreed to lend the proceeds thereof to the User pursuant to the provis ions of the Agreement, to finance the cost of the Project which comprises land, buildings, equipment, facilities and improvements required or suitable for the promotion of the public purposes of the Act; and As additional security for the Bonds, the User is executing and delivering this Mortgage for the use and benefit of the Trustee; NOW, THEREFORE: The User, in consideration of the premises and of the purchase of the Original Bonds by the purchasers thereof and of the debts, covenants and agreements hereinafter mentioned and the sum of One Dollar ($1.00), in lawful money of the United States of America, to it duly paid at or before the execution and delivery of these presents and for other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, in order to secure the payment of the Indebted- ness and the performance and observance by the User of all of the covenants contained in the Bond Documents which are to be performed by it, does hereby bargain, sell, grant, convey, transfer, mortgage, pledge and assign to the Mortgage Trustee and his successors and substitutes in trust hereunder, the following described real and personal property, rights, titles, interests and estates (herein collectively called the "Mortgage Trust Estate"), to-wit: e - ..-:: =-:.: I. All of the real property constituting the Site and all tenements, hereditaments, servitudes, appurtenances, rights, privileges and immuni- ties belonging or appertaining to the Site which may from time to time be owned by the User, and all claims or demands whatsoever of the User either at law or in equity, in possession or expectancy, of, in and to the Site, together with any after acquired rights, titles, interests or estates of the User in and to the Site. II. All Facilities, it being the intention of the parties hereto that, so far as may be permitted by law, all property constituting Facilities, which is now owned or is hereafter acquired by the User, and is affixed or attached or annexed to the Site, shall be and remain or become and constitute a portion of the Site, and the security covered by and subject to the lien of this Mortgage. III. All leases and rentals and oil and gas or other mineral royalties, bonuses and rental income from the Site and Facilities, if any, and all proceeds from the sale or other disposition thereof. TO HAVE AND TO HOLD the said Mortgage Trust Estate, whether now owned or held or hereafter acquired, unto the Mortgage Trustee, his successors and assigns, forever. IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth to secure the payment of the Indebtedness, present and future, owing and to become owing, and to secure the performance of and compliance with the obligations, covenants and conditions of the User set forth in the Bond Documents, all as herein set forth. IT IS HEREBY COVENANTED, DECLARED AND AGREED that the lien or interest created by this Mortgage to secure the payment of any of the Indebtedness, both present and future, shall be first, prior and super- ior to any lien, reservation of title or other interest heretofore, contemporaneously or subsequently suffered or granted by User, its legal representatives, successors or assigns, except only those (if any) expressly hereinafter referred to or described and that the Mortgage Trust Estate is to be held, dealt with and disposed of by the Mortgage Trustee, upon and subject to the terms, covenants, conditions, uses, agreements and trusts set forth in this Mortgage as follows: -2- e e ~:::...:... ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 10l. Definitions. (a) All terms used in this Mortgage which are defined in the Agreement or the Indenture have the same meanings in this Mortgage which are assigned to such terms in the Agreement or the Indenture. Except where the context otherwise re- quires, words imparting the singular number shall include the plural number and vice versa. Reference to any Bond Document means that Bond Document as amended or supplemented from time to time. Reference to any party to a Bond Document means that party and its successors and as- signs. (b) The following terms have the meanings assigned to them below whenever they are used in this Mortgage: "Agreement" means the Loan Agreement, dated as of the date of this Mortgage, between the City of La Porte Industrial Development Corpora- tion, a nonprofit industrial development corporation created under the Act, and La Quinta Motor Inns, Inc., a Texas corporation. "Collateral" means the portion of the Mortgage Trust Estate described in Granting Clause II of this Mortgage which is subject to the Uniform Commercial Code. "Facilities" means (i) all buildings, structures and fixtures situated on the Site, (ii) the facilities which are described in Exhibit A to this Mortgage which are acquired with the proceeds of the Bonds and (iii) all additions and accessions to, substitutions for, or replacements, enlargements, extensions, improvements, modifications or repairs of any item described in (i) or (ii). "Indebtedness" means: (a) all Bond Obligations; (b) any and all sums, together with interest accruing thereon as herein provided, which may hereafter be advanced by or on behalf of the Trustee or the Mortgage Trustee under the terms of this Mortgage on account of the failure of the User to keep, observe or perform the User's covenants under this Mortgage, as hereinafter provided; (c) any other amounts now payable or subsequently becoming payable by the User pursuant to the Financing Documents; and (d) any renewals, extensions and rearrangements of any of the amounts described in (a), (b) or (c), above. -3- e e ....-::. - :-=: "Mortgage Trust Estate" is defined in the granting clauses of this Mortgage. "Mortgage Trustee" means the party named as such on page 1 of this Mortgage together with any successor or substitute in such capacity. "Permitted Encumbrances" means (i) liens for taxes, assessments or governmental charges or levies not yet delinquent or being contested in good faith by appropriate proceedings diligently conducted as provided herein; (ii) liens of landlords and liens of mechanics, materialmen, suppliers and vendors, and rights in respect thereof, incurred in the ordinary course of business for sums not yet due or being contested in good faith by appropriate proceedings diligently conducted as provided herein; (iii) liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance and other similar types of compensation, or to secure the performance of or compliance with statutory obligations, excise tax laws and other similar obligations (exclusive of obligations for the payment of borrowed money); (iv) any judgment lien, unless the judgment it secures shall not, within 90 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 90 days after the expiration of any such stay; (v) leases or subleases granted to others for restaurant operations in the ordinary course of business; (vi) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and not interfering with the ordinary conduct of the business of the User; (vii) any lien for the satisfaction and discharge of which a sum of money deemed adequate by the Trustee is on deposit with the Trustee; (viii) liens for the sole purpose of extending, renewing or replacing in whole or in part the indebtedness secured by any lien referred to in the foregoing clauses (ii) to (vii), inclusive, or in this clause (viii), provided that the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of such extension, renewal or replacement, and that such lien shall be limited to all or a part of the property which secured the lien so extended, renewed or replaced (plus improvements on such property); (ix) zoning ordinances and similar regulatory laws and regulations; (x) such defects, irregularities, encumbrances, easements, rights-of-way and clouds on title, if any, described in Exhibit B hereto, as normally exist with respect to properties similar in character to the Project and as do not in the aggregate, in the opinion of the User, materially impair the property affected thereby for the purpose for which it was acquired or is held by the Trustee; and (xi) the Indenture and this Mortgage. "Project" means the Facilities and the Site. -4- e e ~:.-: "Site" means the tract(s) of land which are described in Exhibit C hereto together with any other real property hereafter made subject to this Mortgage by supplemental mortgage or otherwise. Section 102. Interpretations. The table of contents and article and section headings of this Mortgage are for reference purposes only and shall not affect its interpretation in any respect. ARTI CLE II GENERAL COVENA~~S AND PROVISIONS Section 201. Instruments of Further Assurance; Filing and Record- ing. (a) The User covenants that it will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, such amendments or supplements hereto and such further acts, instruments and transfers as the Trustee or the Mortgage Trustee may require for the curing of any defect in the execution or acknowledgment hereof or in the description of the Mortgage Trust Estate or for the better conveying, assigning, pledging and confirming unto the Mortgage Trustee of the Mortgage Trust Estate conveyed, assigned and pledged hereunder or for the properly evidencing or giving notice of the Indebtedness or of each lien and security interest securing payment of the Indebtedness. (b) The User covenants that (i) upon the execution and delivery of this Mortgage and thereafter, from time to time, it shall cause this Mortgage and each amendment and supplement hereto (or a memorandum with respect hereto or to such amendment or supplement) to be filed, regis- tered and recorded and to be refiled, reregistered and rerecorded in such manner and in such places as may be required by the Trustee in order to publish notice of and fully to protect the lien of this Mort- gage upon, and to perfect or continue the perfection of the security interests created by this Mortgage in, the Mortgage Trust Estate and Cii) it shall perform or cause to be performed from time to time any other act as required by law, and it will execute or cause to be executed any and all instruments of further assurance that may be necessary for such publication, perfection, continuation and protection. Section 202. Warranties of Title. (a) The User warrants (i) that it has good and marketable title to the Site, and to the Facilities, described and mortgaged pursuant hereto free and clear of every mortgage, lien, encumbrance or charge, other than Permitted Encumbrances and (ii) that it.is the legal and equitable owner and holder of the Collateral free of any adverse claim and free of any security interest or encumbrance except only Permitted Encumbrances. The User has acquired or will acquire lawfully and own the Project and, subject to the provisions of this Mortgage concerning release of property, will forever warrant and defend the title to the Project, including the Collateral, unto the Mortgage Trustee, for the benefit of the Trustee -5- e e F""'::=-': (for the benefit of the Bondholders) against the claims and demands of all persons whomsoever, except those claiming under Permitted Encum- brances. (b) The User will proceed with reasonable diligence to correct any defect in title to the Mortgage T~ust Estate should any such defect be found to exist after the execution and delivery of this instrument, and in this connection, should it be found after the execution and delivery of this instrument that there exists upon the Mortgage Trust Estate any lien, security interest or encumbrance, other than a Permitted Encum- brance, equal or superior in rank or priority to the lien and security interest created by this Mortgage, or should any such hereafter arise, then, unless the Trustee is the only holder of such other lien, security interest or encumbrance, or the Trustee shall have given specific prior written consent to the creation or continuation thereof, the User will promptly discharge and remove any such lien, security interest or encum- brancefrom the Mortgage Trust Estate. Se~tion 203. General. For the purpose of better securing payment of the Indebtedness, the User covenants and agrees with the Mortgage Trustee, for the use and benefit of the Trustee (for the benefit of the Bondholders), that: (a) the User will pay all Indebtedness on the dates and in the manner provided in the Financing Documents, in accordance with the terms and provisions thereof and hereof; (b) the User will faithfully perform at all times all cove- nants, undertakings, stipulations and provisions which are to be performed by it pursuant to the terms of the Bond Documents; (c) the User will permit the Trustee and its agents, representatives and employees at all reasonable times and upon reasonable prior notice to go upon, examine, inspect and remain on the Mortgag~ Trust Estate, and will furnish to the Trustee on request all pertinent information in regard to the development and operation of the Mortgage Trust Estate. The rights of access hereby granted to the Trustee and its agents may be exercised only after any such agent has executed a release of liability and secrecy agreement in the form reasonably requested by the User; (d) the User will notify the Trustee in writing promptly of the commencement of any legal proceedings affecting title to, or the lien of this Mortgage upon, the Mortgage Trust Estate or any part thereof and will take such action as may be necessary to preserve the Trustee's rights affected thereby; and (e) promptly upon demand by the Trustee, the User will pay all costs and expenses heretofore or hereafter incurred by the -6- e e P""::::=-': Trustee for legal services rendered to or for the benefit of the Trustee in connection with the enforcement of any of the Trustee's rights or the Bondholders' rights or remedies hereunder. Section 204. Insurance. During the term hereof, the User shall at its own cost and expense provide and maintain the following insurance policies: all forms of insurance, customarily maintained in the ownership and operation of a motor inn, including, but not limited to: "3D" crime insurance; Twenty Million Dollars ($20,000,000) umbrella liability insurance; comprehensive general liability insurance endorsements for products and liquor liability, with policy limits of at least Three Hundred Thousand Dollars ($300,000) bodily injury and One Hundred Thousand Dollars (5100,000) property damage; comprehensive automobile liability insurance with bodily injury policy limits of at least Two Hundred Fifty Thousand Dollars ($250,000) per person and Five Hundred Thousand Dollars ($500,000) for each occurrence and property damage coverage with policy limits of at least One Hundred Thousand Dollars ($100,000) each occurrence. Automobile liability policies shall afford coverage for owned, hired, and nonowned vehicles. The User agrees to maintain or have maintained and keep in force workmen's compensation and employer's liability coverages in such amounts and upon such terms as required by the law of the State and to maintain and keep in force fire and extended coverage insurance in an amount equal to the replacement cost of the building and actual cash value for the contents. Liability policies shall show the User and the Trustee as named insureds and shall provide that such coverage cannot be reduced or cancelled without at least ten (10) days written notice to the User and the Trustee. All policies of insurance and fidelity bonds shall be issued by financially sound, reputable and responsible insurance or fidelity bonding companies, acceptable to the Trustee, qualified to do business in the State and qualified under the laws of such State to assume risks covered by such policy or policies or bond or bonds and shall be nonassessable. The User shall provide the certificates of insurance in a form satisfactory to the Trustee. All policies of insurance required to be maintained hereunder by the User shall be renewed and the policies and certificates evidencing such policies, delivered to the Trustee at least thirty (30) days prior to the respective expiration dates of existing policies of insurance. In the event the User fails to obtain and/or maintain any such insurance coverage required of the User hereunder, the Trustee may, at its option and on behalf of and at the expense of the User, obtain and maintain such insurance. -7- e e .....-:::=-.: All policies of insurance required above shall be for the benefit of the User and the Trustee (for the benefit of the Bondholders), as their respective interests may appear. Except as set forth above and noted in Section 209 of this Mortgage, the Trustee shall have the exclusive right to receive the proceeds from such insurance and in the event the User fails to do so, settle and receipt for claims thereunder. The User shall have the right to settle for and receive payments due and to receipt for claims under policies of insurance and fidelity bonds required by this section, and proceeds from insurance required above not to exceed $ for anyone claim. The original or a copy of each policy or fidelity bond or a certificate that the same has been issued and is currently in effect, shall be delivered to the Trustee. The Company shall provide the Trustee with certificates from the insurers at such times as may be necessary to show that insurance is being maintained as required by this Section 204. Section 205. Taxes; Other Liens. (a) The User will pay and discharge all taxes, assessments and charges or levies which, if unpaid, may become a lien or charge against the Mortgage Trust Estate, or any part thereof, as the same become payable, and before they become delin- quent, and upon request of the Trustee, shall furnish due proof of such payment to the Trustee promptly after payment. (b) The User will promptly pay, or cause to be paid, all bills for labor and materials incurred in connection with the Mortgage Trust Estate and shall never permit to be fixed against the Mortgage Trust Estate, or any part thereof, any lien, even though inferior to the lien hereof, for any such bill which may be legally due and payable. Due proof of payment before delinquency of all such bills shall be furnished by the User to the Trustee upon request. (c) The User shall have the right, however, to contest in good faith the validity or amount of any such tax, assessment, charge, levy or bill by proper proceedings timely instituted, and may permit the taxes, assessments, charges, levies or bills so contested to remain unpaid during the period of such contest if: (i) the User diligently prosecutes such contest, (ii) during the period of such contest the enforcement of any contested item is effectively stayed and (iii) security satisfactory to the Trustee is provided for the payment of the contested items by the User. The User will promptly pay any valid, final judgment enforcing any such tax, assessment, charge, levy or bill and cause the same to be satisfied of record. Section 206. Maintenance; Disposition of Collateral. The User will keep and maintain, or cause to be kept and maintained, the Mortgage Trust Estate, including all improvements and all other parts thereof, and all personal property now or hereafter situated in or on the Site and used or obtained for use in connection therewith in good repair, -8- e e ...-:::=-.: condition and working order, and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements of the Mortgage Trust Estate as may be necessary so that the businesses carried on in connection therewith may be properly and advantageously conducted at all times. The User will not tear down, damage or attempt to remove any substantial part of the Project, with a combined value in excess of $ , or permit the same to be torn down or removed, unless it first either (i) pays over to the Trustee for deposit in the Debt Service Fund to be used to retire Bonds as described in numbered paragraph (2) of the Bonds an amount equal to the greater of the value of such Facilities as shown on the books of the User (taking into account any allowances for depreciation, but not any charges resulting from the tearing down, damage or removal) or the proceeds of any dispo- sition of the Facilities so removed, torn down or damaged, or (ii) delivers to the Trustee evidence that it has substituted and installed on the Site and made subject to the liens and security interests created by this Mortgage other improvements or items of personal property, free and clear of all liens and encumbrances except Permitted Encumbrances, of at least equal fair market value, though not necessarily of like kind or having the same function. Section 207. Disposition of Real Property. The User shall not dispose (by sale, exchange, condemnation or otherwise) of any real estate constituting part of the Project, or any interest or estate, other than a leasehold estate, unless it has first received the consent of the Trustee (on behalf of the Bondholders), which consent will not be unreasonably withheld so long as the User continues to serve as guarantor under the Guarantee Agreement, such disposition does not affect the tax-exempt status of the Bonds and the Trustee approves the creditworthiness of the Person to which the Project is to be disposed to. . If the Trustee, but without the necessity of the consent of the Issuer, the Trustee shall cause to be released from the lien of this Mortgage the real estate to be disposed of, but only after the real estate or improvements, if any, which are to be substituted therefor have become part of the Project and have been subjected to the lien of this Mortgage. Section 208. Performance of User's Obligations. If the User should fail to comply with any of the agreements, covenants or obliga- tions of the User under this or any other Bond Document, then the Trustee may perform the same for the account and at the expense of the User but shall not be obligated to do so; any and all expenses incurred or paid in so doing shall become a part of the Indebtedness and shall bear interest at the Highest Lawful Rate (as defined in the Agreement), from the date when any such expense was incurred or paid; the amount thereof and accrued interest thereon shall be due and payable on demand and shall be secured by and under this instrument; and the amount and -9- e e ~=-:.:. nature of such expense and the time when paid shall be fully established by the affidavit of the Trustee or any officer or agent thereof, or by the affidavit of the Mortgage Trustee. Section 209. Casualty; Condemnation. If, prior to the Completion Date (a) any material damage or destruction of the Project or any portion thereof shall occur, or (b) title to or the temporary use of any portion of the Project shall be taken in any condemnation proceedings or by the exercise of the power of eminent domain by any governmental body or by any person acting under governmental authority, the User shall with reasonable promptness notify the Trustee as to the nature and extent of such damage, destruction or taking. If the User shall determine that restoration is practicable, the User or any designee of the User shall proceed to restore and complete such portion of the Project in accordance with this Section 209. Otherwise the amount equal to the net proceeds of any insurance or condemnation award shall be paid by the User to the Trustee for deposit into the Debt Service Fund for application by the Trustee, at the User's written direction (i) to the redemption of all or any portion of the Bonds as described in numbered paragraph (2) of the Bonds, on the earliest date upon which redemption can be made, at the principal amount thereof plus accrued interest to the redemption date, (ii) for the purchase of Bonds for the purpose of cancellation or a combination of (i) and (ii); provided that if such net proceeds exceed the amount required to discharge the Bonds and the Indenture, as provided therein, such excess shall be paid to the User pursuant to Section of If any such damage, destruction or condemnation occurs after the Completion Date, and if either the proceeds of insurance paid in respect of any damage or destruction or the condemnation award do not exceed $ , such proceeds shall be paid to the User, and the User covenants to apply such proceeds to the prompt restoration or repair of the damaged portion of the Project. In the event of the occurrence of any of the events described in the preceding sentence and said proceeds or award are equal to or greater than $ , such amounts shall be paid to the Trustee for deposit in the Construction Fund and applied to the prompt repair or restoration of the portion of the Project which is the subject of such damage or destruction, or which remains after such condemnation. To the extent insurance proceeds or condemnation awards so deposited with the Trustee are not needed or used for such repair or restoration within one year following the loss, the Trustee shall deposit such proceeds or awards in the Debt Service Fund and apply them to the purchase or redemption of Bonds with a corresponding credit against amounts due under this Mortgage. Section 210. Effect of Casualty or Condemnation. The 'occurrence of a casualty or condemnation shall not entitle the User to any abate- ment, postponement or reduction in the amounts payable under this Mortgage and the User hereby waives the benefits and provisions of all -10- e e ~_.. laws and rights which, by reason of the casualty or condemnation, might relieve the User from any of its obligations under this Mortgage. ARTICLE III FORECLOSURE PROCEEDINGS Section 301. Right to Foreclose. If an "Event of Default" shall have occurred and be continuing, within the meaning of Section 701 of the Indenture, the Trustee (for the benefit of the Bondholders) shall have the right and option to direct the Mortgage Trustee, or his succes- sor or substitute in trust as hereinafter provided, to enforce this trust by selling the Mortgage Trust Estate, as provided in this Article and, in the case of Collateral, in Article V. Section 302. Method of Sale. The sale shall be made in the county in which the Site is situated. If the Site is situated in more than one county, then notices as hereinafter provided shall be given in both or all of such counties, said Mortgage Trust Estate (including the Site) may be sold in either county, and such notices shall designate the county where said Mortgage Trust Estate (including the Site) will be sold. Notice of such sale shall be given by posting written notice of the sale at the courthouse door, and, if such sale is to be made on or after January 1, 1984, by filing a copy of the notice in the office of the county clerk, of the county in which the sale is to be made at least twenty-one (21) days preceding the date of the sale. If the Site is in more than one county, a notice shall be posted at the courthouse door, and, if the sale is to occur on or after January 1, 1984, filed with the county clerk, of each county in which the Site is situated. In addition to the notices provided for above, the holder of the Note or any other evidence of any portion of the Indebtedness (or any part thereof) shall at least twenty-one (21) days preceding the date of such sale serve written notice of the proposed sale by certified mail on each debtor obligated to pay the Indebtedness (or any part thereof) according to the records of a holder thereof. Service of such notice upon each debtor shall be completed upon deposit of the notice, enclosed in a postpaid wrapper, properly addressed to such debtor at his, her or its most recent address as shown by the records of such holder of the Note or any other evidence of any portion of the Indebtedness (or any part thereof) in a post office or official depository under the care and custody of the United States Postal Service. The affidavit of any person having knowledge of the facts to the effect that such service was completed shall be prima facie evidence of the fact of service. After such written notice shall have been posted, as aforesaid, and such notice shall have been served upon such debtor or debtors, as aforesaid, the Mortgage Trustee acting shall perform his duty to enforce this trust by selling the Mortgage Trust Estate, either as an entirety or in parcels as the Mortgage Trustee acting may elect at public vendue, in front of -11- e e p-::=-.: the door of the courthouse of the county designated in such notice on the first Tuesday in any month between the hours of 10: 00 a. m. and 4: 00 p. m., to the highest bidder or bidders for cash, and make due conveyance to the purchaser or purchasers, with general warranty, and the title to such purchaser or purchasers, when so made by the Mortgage Trustee acting, the User binds himself, his heirs, legal representatives, successors and assigns, to warrant and forever defend. The provisions hereof with respect to posting, filing and giving notices of sale are intended to comply with the provisions of Article 3810, Vernon's Annotated Texas Civil Statutes, as amended, effective January 1, 1976, until January 1, 1984, and as amended January 1, 1984, thereafter, and in the event the requirement for any notice under such Article 3810 shall be eliminated or the prescribed manner of giving same modified by future amendment to, or adoption of any statute superseding such Article 3810, the requirement for such particular notice shall be deemed stricken from or modified in this Mortgage in conformity with such amendment or superseding statute, eff.ective as of the effective date of same. The manner herein prescribed for serving or giving any notice, other than that to be posted or filed or caused to be posted or filed by the Mortgage Trustee, shall not be deemed exclusive but such notice or notices may be given in any other manner which may be permitted by applicable law. Section 303. Application of Proceeds; Effect of Sale. The Mort- gage Trustee acting shall pay, distribute and apply the proceeds of any such sale for deposit in the Debt Service Fund and for disposition as provided in the Indenture. Said sale shall forever be a bar against the User, its legal representatives, successors and assigns, and all other persons claiming under any of them. It is expressly agreed that the recitals in each conveyance to the purchaser shall be full evidence of the truth of the matters therein stated, and all lawful prerequisites to said sale shall be conclusively presumed to have been performed. Section 304. Abandonment of Sale. If foreclosure should be com- menced by the Mortgage Trustee, the Trustee may at any time before the sale direct the Mortgage Trustee to abandon the sale, and may at any time or times thereafter direct the Mortgage Trustee to again commence foreclosure; or, irrespective of whether foreclosure is commenced by the Mortgage Trustee, the Trustee may at any time after an Event of Default as described in Section 301 of this Mortgage institute suit for collec- tion of all or any part of the Indebtedness or foreclosure of the lien of this Mortgage or both. If the Trustee should institute suit for collection of the Indebtedness and foreclosure of the lien of this Mortgage, the Trustee may at any time before the entry of final judgment dismiss the same, and require the Mortgage Trustee to sell the Mortgage Trust Estate in accordance with the provisions of this Mortgage. Section 305. Non-Extinguishment of Lien. No single sale or series of sales by the Mortgage Trustee or by any substitute or successor -12- e e ...-:::::....:..:. . Hortgage Trustee under this instrument, and no judicial foreclosure shall extinguish the lien or exhaust the power of sale under this Mort- gage except with respect to the items of property sold, but such lien and power shall exist for so long as, and may be exercised in any manner by law or in this instrument provided as often as, the circumstances require to give the Trustee full relief hereunder. Section 306. Right to Purchase. The Trustee shall have the right to become the purchaser at any sale made hereunder, by being the highest bidder, and credit upon all or any part of the Indebtedness shall be deemed cash paid for the purposes of this Article. Section 307. Successor Hortgage Trustee. In case of absence, death, inability, refusal or failure of the Mortgage Trustee herein named to act, or in case he should resign (and he is hereby authorized to resign without notice to the User), or if the Trustee shall desire, with or without cause, to replace the Mortgage Trustee herein named, successor and substitute mortgage trustees may be named, constituted and appointed by the Trustee without other formality than an appointment and designation by a written instrument (which instrument may be executed on behalf of the Trustee by the President or any Vice President and attested by the Secretary or any Assistant Secretary or by the Cashier or any Assistant Cashier, without the necessity of any action by the Board of Directors of the Trustee authorizing such appointment) appointing and designating such successor and substitute mortgage trustee whereupon this conveyance shall vest in such successor and substitute mortgage trustee, as Mortgage Trustee, the estate in and title to all of the Hortgage Trust Estate, and such successor and substitute mortgage trustee so appointed and designated shall thereupon hold, possess and exercise all the title, rights, powers and duties herein conferred on the ~lortgage Trustee named and any previous successor or substitute mortgage trustee, and his conveyance to a purchaser at any sale shall be equally valid and effective as if made by the Hortgage Trustee named herein, and such right to appoint a successor and substitute mortgage trustee shall exist and may be exercised as often as and whenever from any of said causes, or without cause, as aforesaid, any Hortgage Trustee, original or substitute, cannot or will not act or has been removed as herein provided. Section 308. Waiver of Marshalling, Etc. All rights of marshal- ling of assets or sale in inverse order of alienation, including any such rights with respect to the Mortgage Trust Estate in the event of foreclosure of any lien or security interest at any time securing the Indebtedness or any part thereof (including, but not limited to, the lien and security interests hereby created) are hereby waived. Section 309. right or remedy in holders) granted in Remedies Not Exclusive. No lien, security interest, favor of the Trustee (for the benefit of the Bond- or secured by this Mortgage shall be considered as -13- " ., e e .....-::;=-::. exclusive, but all liens, security interests, rights and remedies under this Mortgage shall be cumulative of each other, and of all other which the Trustee (for the benefit of the Bondholders) may now or hereafter have as security for or in respect of the Indebtedness or any part thereof. ARTICLE IV ASSIGNHENT OF RENTS Section 401. Assignment of Rents. The User hereby assigns and transfers to the Trustee (for the benefit of the Bondholders) all rents from the Mortgage Trust Estate, including all rents now due and which may hereafter become due under all leases thereof, whether written or oral, now existing or hereafter made, as additional security for the Indebtedness, and the Trustee (for the benefit of the Bondholders) is given a prior and continuing lien thereon and security interest therein. Section 402. Modification or Cancellation of Leases; No Assumption. The User shall not modify or cancel or suffer or permit the modification or cancellation of any of the leases assigned hereunder without the prior written consent of the Trustee. The Trustee does not assume and shall not be liable in respect of any obligation of the landlord or lessor under any of said leases. Section 403. Collections. The transfer of the rents from the Mortgage Trust Estate made in this Article is specific in nature and irrevocable, and the User hereby appoints the Trustee as the User's attorney to collect said rents with or without suit, and apply same in the manner provided in the Indenture; provided, however, that so long as no Event of Default has occurred and is continuing, the User may collect and retain the currently accruing rents from the Mortgage Trust Estate but in no event may the User collect any such rents more than one (1) month in advance of the time that same will be earned. However, should any Event of De:fault occur and be continuing, the Trustee may, personally or through an agent selected by the Trustee, take, or have the Mortgage Trustee take, possession and control of the Mortgage Trust Estate, or any part thereof, and receive and collect all rents theretofore accrued and all thereafter accruing therefrom so long as any of the Indebtedness remains unpaid or until the foreclosure of the lien hereof, depositing so much thereof as may be collected prior to the sale of the Mortgage Trust Estate by the Mortgage Trustee or judicial foreclosure of the lien hereof, to the Debt Service Fund. The Trustee, the Trustee's agent or the Mortgage Trustee may use against the User or any other person such lawful or peaceable means as the person acting may see fit to enforce the collection of any such rents and to secure possession of the Mortgage Trust Estate, or any part thereof and may settle or compromise, on any terms as the Trustee, the Trustee's agent or the Mortgage Trustee sees fit, the liability of any person or persons -14- e tit ....-::::- .. for any such rents; and particularly, the Trustee, the Trustee's agent or the Hortgage Trustee may institute and prosecute to final conclusion actions of iorcible entry and detainer, or actions of trespass to try title, or actions for damages, or any other appropriate actions, in the name of the Trustee or in the name of the User or the Mortgage Trustee, and may settle, compromise or abandon any such actions as the Trustee, the Trustee's agent or the Mortgage Trustee may see fit; and the User binds itself and all persons and concerns claiming by, through or under the User to take whatever lawful or peaceful steps the Trustee, the Trustee's agent or the Mortgage Trustee may ask the User or any such person or concern so claiming to take for such purposes, including the institution and prosecution of actions of the character above stated; provided, however, that neither the Trustee nor the Mortgage Trustee shall be required to collect any such rents or income or be liable or chargeable for failure so to do. ARTICLE V SECURITY AGREEMENT Section 501. Security Interest. Without limiting any of the provisions of this Mortgage, the User, as Debtor, and referred to in this Article as "Debtor" (whether one or more), expressly grants unto the Trustee (for the benefit of the Bondholders), as Secured Party, and referred to in this Article as "Secured Party" (whether one or more), a security interest in all of the Mortgage Trust Estate (including both that now and that hereafter existing) to the full extent that the Mortgage Trust Estate may be subject to the Uniform Commercial Code of the State or other states where the Mortgage Trust Estate is situated. Section 502. Additional Covenants. Debtor covenants and agrees with Secured Party that: (a) In addition to and cumulative of any other remedies granted in this instrument to Secured Party or the Mortgage Trust- ee, Secured Party or the Mortgage Trustee may, upon or at any time after an Event of Default, proceed under the Uniform Commercial Code as to all or any part of the Collateral and shall have and may exercise with respect to the Collateral all the rights, remedies and powers of a secured party under the Uniform Commercial Code, including, without limitation, the right and power to sell, at public or private sale or sales, or otherwise dispose of, lease or utilize, the Collateral and any part or parts thereof in any manner authorized or permitted under the Uniform Commercial Code after default by a debtor, and to deposit the proceeds thereof into the Debt Service Fund for application toward payment of any costs, expenses, attorneys' fees and legal expenses thereby incurred by Secured Party, and toward payment of the Indebtedness. Among the -15- ., e e P"""::::::"":: rights of Secured Party upon and after the occurrence of such an Event of Default, and without limitation, Secured Party shall have the right to take possession of the Collateral and to enter upon any premises where the same may be situated for such purpose without being deemed guilty of trespass and without liability for damages thereby occasioned, and to take any action deemed necessary, appropriate or desirable by Secured Party, at its option and in its discretion, to repair, refurbish or otherwise prepare the Collateral for sale, lease or other use or disposition as herein authorized. To the extent permitted by law, Debtor express- ly waives any notice of sale or other disposition of the Collateral and any other rights or remedies of a debtor or formalities pre- scribed by law relative to sale or disposition of the Collateral or exercise of any other right or remedy of Secured Party existing after default hereunder; and to the extent any such notice is required and cannot be waived, Debtor agrees that if such notice is mailed, postage prepaid, to Debtor at. the address designated in Section 504 of this Mortgage (or if no address is so designated, at Debtor's most recent address as shown by the records of Secured Party) at least ten (10) days before the time of any public sale or disposition, or the date after which the Collateral will be sold or disposed of by private sale, such notice shall be deemed reasonable and shall fully satisfy any requirement for giving of any such notice. (b) Secured Party is expressly granted the right, at its option after an Event of Default as described in Section 301 of this Mortgage, to transfer at any time to itself or its nominee the Collateral, or any part thereof, and to receive the moneys, income, proceeds or benefits attributable or accruing thereto and to hold the same as security for the Indebtedness or to apply it as is prescribed by the Indenture. (c) All recitals in any instrument of assignment or any other instrument executed by Secured Party incident to sale, transfer, assignment, lease or other disposition or utilization of the Col- lateral or any part thereof hereunder shall be full proof of the matters stated therein, and no other proof shall be required to establish full legal propriety of the sale or other action or of any fact, condition or thing incident thereto, and all prerequi- sites of such sale or other action and of the fact, condition or thing incident thereto shall be presumed conclusively to have been performed or to have occurred. (d) Upon the occurrence of an Event of Default, Secured Party may require Debtor to assemble the Collateral and make {t available to Secured Party at a place to be designated by Secured Party that is reasonably convenient to both parties. All expenses of retaking, holding, ~reparing for sale, lease or other use or -16- e e disposition, selling, leasing or otherwise using or disposing of the Collateral and the like which are incurred or paid by Secured Party as authorized or permitted hereunder, including also all attorneys' fees, legal expenses and costs, shall be added to the Indebtedness secured by this Mortgage and Debtor shall be liable therefor. (e) Should Secured Party elect to exercise its rights under the Uniform Commercial Code as to part of the personal property or fixtures described herein, this election shall not preclude Secured Party or the ~10rtgage Trustee from exercising any or all of the rights and remedies granted by the other Articles of this Mortgage as to the remaining personal property or fixtures. (f) Secured Party may, at its election, at any time after delivery of this Mortgage, sign one or more copies hereof in order that such copies may be used as a firrancing statement under the Uniform Commercial Code. Said signature by Secured Party may be placed between the last sentence of this Mortgage and Debtor's acknowledgment or may follow Debtor's acknowledgment. Secured Party's signature need not be acknowledged and is not necessary to the effectiveness hereof as a deed of trust, mortgage, assignment, pledge, security agreement or (unless otherwise required by appli- cable law) as a financing statement. (g) Secured Party is authorized to file in any jurisdiction where Secured Party deems it necessary, a financing statement or statements and one or more continuation statements, and at the request of Secured Party, Debtor will join Secured Party in execut- ing one or more financing statements, continuation statements or both, pursuant to the Uniform Commercial Code in form satisfactory to Secured Party, and will pay the cost of filing or recording this Mortgage as a financing statement, in all public offices at any time and from time to time whenever filing or recording of any financing statement, continuation statement or this Mortgage is deemed by Secured Party to be necessary or desirable. (h) Certain of the Collateral is or will become "fixtures" (as that term is defined in the Uniform Commercial Code) on the Site described or referred to in this Mortgage, and this Mortgage upon being filed for record in the real estate records of the county wherein such fixtures are situated shall operate also as a financing statement filed as a fixture filing in accordance with Section 9.40'2 (f) of the Uniform Commercial Code upon such of the Collateral which is or may become fixtures. Section 503. Additional Warranty of Title. Debtor further warrants and represents that Debtor has not heretofore signed any financing statement directly or indirectly affecting the Collateral or -17- <" .....-::- .. <; e e ....-:::;::.....:..:. . any part thereof and no such financing statement signed by Debtor is now on file in any public office, except only those statements (if any) true and correct copies of which have been delivered to Secured Party. Section 504. Debtor is: Names and Addresses. The name and address of the La Quinta Motor Inns, Inc. P. O. Box 32064 10010 San Pedro San Antonio, Texas 78216 Attention: Treasurer The name and address of the Secured Party is: First City National Bank of Houston P. O. Box 2557 Houston, Texas 77252 Attention: Corporate Trust Division ARTICLE VI GENERAL Section 601. Discharge. When all of the Indebtedness shall have been paid or deemed to have been paid pursuant to the provisions of the Indenture, and provision shall also be made for paying all other sums payable under the Bond Documents, and if, at the time of such payment, the User shall have kept, performed and observed all and singular the covenants and promises in the Bond Documents required or contemplated to be kept, performed and observed by it or on its part on or prior to that time, then this Mortgage and the lien and security interest created hereby shall be null and void and the Mortgage Trust Estate shall revert to the User and the User shall be released from the covenants, agreements and obligations of the User contained in this Mortgage, and the Mortgage Trustee, at the request and the expense of the User, shall execute such documents as may be reasonably requested by the User to evidence the discharge and satisfaction of this Mortgage and the release of the User from its obligations hereunder. Otherwise, this Mortgage shall remain and continue in full force and effect. Section 602. No Waiver. The exercise of the privileges granted in this Mortgage to perform the User's obligations under the Bond Documents shall in no event be considered or constitute a waiver of the right of the Trustee at any time after default hereunder to declare the Indebtedness to be at once due and payable, but is cumulative of such right and of all other rights given by this instrument and other Bond Documents, and of all rights given the Trustee by law. No delay or -18- e e omission to exercise any right or power accruing upon any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Uefaul t or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient. Section 603. Extension, Rearrangement or Renewal of Indebtedness. It is expressly agreed that any of the Indebtedness at any time secured hereby may be from time to time extended for any period, rearranged or renewed, and that any part of the security herein described, or any other security for the Indebtedness, may be waived or released without in anywise altering, varying or diminishing the force, effect or lien of this Mortgage; and the lien and security interest granted by this Mort- gage shall continue as a prior li~n and security interest on all of the Mortgage Trust Estate not expressly so released, until all sums with interest and charges hereby secured are fully paid; and no other security now existing or hereafter taken to secure the payment of the Indebtedness or any part thereof or the performance of any obligation or liability whatever shall in any manner impair or affect the security given by this Mortgage; and all security for the payment of the Indebtedness or any part thereof and the performance of any obligation or liability shall be taken, considered and held as cumulative. Section 604. Tenants at Will. The User agrees for itself and any and all persons or concerns claiming by, through or under the User, that if the User shall hold possession of the Mortgage Trust Estate or any part thereof subsequent to foreclosure hereunder, the User, or the parties so holding possession, shall become and be considered as tenants at will of the purchaser or purchasers at such foreclosure sale; and any such tenant failing or refusing to surrender possession upon demand shall be guilty of forcible detainer and shall be liable to such pur- chaser or purchasers for reasonable rental on said premises, and shall be subject to eviction and removal, forcible or othenllise, with or without process of law, all damages which may be sustained by any such tenant as a result thereof being hereby expressly waived. Section 605. Waiver of Stay or Extension. To the extent permitted to be waived by law, the User will not at any time insist upon or plead or in any manner whatever, claim or take the benefit or advantage of any stay or extension law now or at any time hereafter in force in any locality where the Mortgage Trust Estate or any part thereof mayor shall be situated, nor will the User claim, take or insist on any benefit or advantage from any law now or hereafter in force providing for the valuation' or appraisement of the Mortgage Trust Estate or any part thereof prior to any sale or sales thereof to be made p~rsuant to any provision of this Mortgage, or to decree of any court of competent jurisdiction, nor after any such sale or sales will the User claim or exercise any right conferred by any law now or at any time hereafter in force to redeem the property so sold or any part thereof, and the User -19- '" ~:::.....:.. ... ~. ~ e tit ~-.. hereby expressly waives all benefit and advantage of any such law or laws and waives the appraisement of the Mortgage Trust Estate or any part thereof and covenants that the User will not hinder, delay or impede the execution of any power herein granted and delegated to the Mortgage Trustee, but that the User will suffer and permit the execution of every such power as though no such law or laws had been made or enacted. Section 606. Notice. Except where certified or registered mail notice is required by applicable law, any notice to the User required or permitted hereunder shall be deemed to be given when given in the manner prescribed in the Indenture, and the affidavit of any person having knowledge of the facts concerning such mailing shall be conclusive evidence of the fact of such service. Provided, that such method of giving notice shall not be exclusive, but instead any notice may be given to the User in any manner permitted or recognized by law. Section 607. Severability. In the event any item, term or pro- vision contained in this Mortgage is in conflict, or may hereafter be held to be in conflict, with the laws of the State or of the United States, this Mortgage shall be affected only as to such particular item, term or provision, and shall in all other respects remain in full force and effect. Section 608. Application of Payments. In the event that any part of the Indebtedness cannot lawfully be secured hereby, or in the event that the lien and security interest hereof cannot be lawfully enforced to pay any part of the Indebtedness, or in the event that the lien or security interest created by this Mortgage shall be invalid or unen- forceable as to any part of the Indebtedness, then, and in any such event, all payments on the Indebtedness shall be deemed to have been first applied to the complete payment and liquidation of that part of the Indebtedness which is not secured by this Mortgage and the unsecured portion of the Indebtedness shall be completely paid and liquidated prior to the payment and liquidation of the remaining and secured por- tion of the Indebtedness. Section 609. Governing Law. This Mortgage shall be governed, in all respects including validity, interpretation and effect by, and shall be enforceable in accordance with, the laws of the State and of the United States of America. Section 610. Amendments. This Mortgage may be amended only by an instrument in writing signed by the duly authorized representatives of the User and the Trustee (or their respective successors or assigns), and then only as provided in Article IX of the Indenture. Section 611. Construction Mortgage. This is a "construction mortgage" within the meaning of Section 9.105 and 9.313(a)(3) of the -20- e e ~=-:.:. Uniform Commercial Code of the State. This instrument secures an obligation for the construction of an improvement on land. IN WITNESS WHEREOF, the User has caused this Mortgage to be executed on its behalf by its duly authorized representatives as of the date first written above. LA QUINTA MOTOR INNS, INC. ATTEST: By Senior Vice President - Finance By Assistant Secretary (SEAL) -21- /' e e ~=--.::. STATE OF TEXAS ~ ~ COUNTY OF BEXAR ~ This instrument was acknowledged before me on November __, 1983, by Walter J. Biegler, Senior Vice President - Finance of LA QUINTA MOTOR INNS, INC., a Texas corporation, on behalf of said corporation. Notary Public in and for the State of Texas My Commission Expires: 19 (NOTARIAL SEAL) -22- e e EXHIBIT A DESCRIPTION OF THE FACILITIES The Facilities consist of a motor inn containing approximately 114 rooms, a free standing restaurant and related parking, together with any other structures on the Site and all furniture, fixtures, machinery and equipment located on or in such motor inn or structures or upon the Site. A-1 " ~=--.:.. . I' EXHIBIT B ENCUHBRANCES [To be supplied by User] B-1 . .,.--- ---. . . EXHIBIT C DESCRIPT10N OF THE SITE The Site is approximately 2 acres located in the extreme northwest portion of the southeast quadrant of the intersection of US Highway 146 and Fairmont Parkway in La Porte, Texas, as described in metes and bounds below: [To be supplied by User] C-1 ---". .-.............- --.--.~ , e e ( ~ !. AGENDA SPECIAL MEETING OF THE LA PORTE INDUSTRIAL DEVELOPHENT CORPORATION TO BE HELD DECEMBER 14, 1983, IN THE COUNCIL CHAMBERS OF THE CITY HALL, 604 WEST FAIRMONT PARKWAY, LA PORTE, TEXAS, BEGINNING AT 5:45 P,.M. M-~. WJ~2. CALL TO ORDER q l?- CONSIDER ISSUANCE OF INDUSTRIAL DEVELOPMENT REVENUE BONDS FOR FAIRMONT PLAZA JOINT VENTURE 3. CONSIDER RESOLUTION AUTHORIZ'ING ISSUANCE OF BONDS AND APPROVING DOCUMENTS FOR FAIRMONT PLAZA JOINT VENTURE 4. CONSIDER PAYMENT OF LEGAL FEES 5 . ADJOURNMENT ~ ,. JJ~ oJ - ~ - ~:wJ-a..1- 1- 7~ - A ?- ~,- S 1~ if ~ (JOIJ, ~ '(}1- - r 5.' 07 ..-.. ~ ~~ KNOX W. ASKINS, J. D., P. C. ATTORNEY AT LAW 702 W. ,.AIRMONT fOARKWAV fO. O. BOX 1218 ..JOHN D. ARMSTRONG. ..J.D. ASSOCIATE LA PORTE, TEXAS 77571 TELEPHONE 713 471'1666 November 1, 1983 I Industrial Development Corporation c/o CITY OF LA PORTE P. O. Box 1115 La Porte, Texas 77571 FOR PROFESSIONAL SERVICES RENDERED: , For legal services rendered during the month of October, 1983, as itemized on the attached time- sheet (4.50 hours at $95.00/hour) $427.50 ~ KWA : j h e - .J ATTORNEY DATE TIME SPENT CITY DEPARTMENT TASK PERFORMED - - KWA 10-10-83 1.8 hours Industrial Development Preparation for and attendance at Board regular meeting of Board of Di rectors of City of La Porte Industrial Develop- ment Corporation, in connection with Inducement Resolution of Bay Ridge, Joint Venture, for its office building on New Highway 146; revise Bond Resolu- tion as prepared by bond attorney. K~vA 10-10-83 .8 hours Industrial Development Prepare certified copies of Inducement Board Resolution for CKG Investment Bond Issue, and forward to bond attorney in Houston; conference with bond attorney for review of file; KWA 10-11-83 .8 hours Industrial Development Prepare certified copies of Bond Reso- Board lutions pe nd i ng bond i s s ue (Walter Nichols) and letter to bond attorney; KWA 10-12-83 .8 hours Industrial Development Examination of transcript for final Board issuance of bonds for CKG Investment Project. KWA 10-26-83 .3 hours Industrial Development Te lephone conversation with Allen Rainer re: CKG Investment property hearing prepare transcript for final sale. TOTAL HOURS FOR KNOX W ASKINS FOR THE MONTH OF OCTOBER, 1983 4.50 hours e e r:::: .-...:~ KNOX W. ASKI NS, ..J. D., P. C. ATTORNEY AT LAW 702 W. F"AIRMONT PARKWAY P, O. BOX 1218 JOHN D. ARMSTRONG, J.D. ASSOCIATE LA PORTE, TEXAS 77571 TELEPHONE 7/3 471'1886 ~cember 6, 1983 I Industrial ~veloprent Corp:>ration c/o CI'IY OF LA roRI'E P. O. Box 1115 La R>rte, Texas 77571 FOR PROFESSIONAL S'ERVICES RENDERED: Fbr legal services rendered during the rronth of N::>vernber, 1983, as itenized on the attached time- sheet (16'.10 hours at $95.00/hour) $1,529.50 ~ KWA:jh ~, ) ~ ATIDRNEY DA.TE TIME SPENr CITY DEPAR'IMENI' TASK PERFORMED KWA 11--04-83 1.5 hours Industrial ~veloprent Board letter fran Carol Truesdale; telephone conference with her, re: final pwlic hearing, publication of notice and details of closir~ of born sale; KWA 11-11-83 2.5 hours Industrial ~veloprent Board Extensive \\Ork on pending Industrial ~velq:ment Corporation born issues for La Quinta and Bay Ridge Joint Ven- ture Project; am work on file of amemed By-Laws and Application for Financing of the Corporation, including review of e material by ran Lyons of Vinson & Elkins; phone calls curl coordination with born attorneys; KWA 11-16-83 1.5 hours Industrial ~veloprent Board Numerous telephone calls, examination of documents am preparation for hear- ings am closings on Industrial ~velop- .",~ l,. ment bom issues for La Quinta, am for Bay Ridge Joint Venture; KWA 11-17-83 1.5 hours Industrial ~veloprent Board Telephone conferences, further examina- tion of documents, am preparation for closing on born issue for La Quinta; KWA 11-20-83 1.2 hours Industrial ~veloprent Board Conferences with Carol Truesdale, Bond Attorney for La Quinta, Ann Jacobs, Attorney for Born Purchaser, re: details e of bom closing am review of reviSed draft of instruments; KWA 11-21-83 1.4 hours Industrial ~veloprent Board Preparation for am attendance at meeting am public hearing of City of La :R:>rte Industrial ~velo~nt Corp;:>ration Board on La Quinta boms. KWA 11-28-83 6.5 hours Industrial ~ve1oprent Board Preparation for am attemance at La Q..1inta closing at Vinson & Elkins law finn in Houston; review all documents. " . OTAL HOURS FOR KNOX W. ASKINS FOR THE M:>Nl'H OF NOVEMBER, 1983: 16.10 hours