ESOP LOAN AGREEMENT NO. 2
This ESOP Loan Agreement No. 2 (the "Second Agreement") dated as of July 21,
2003 is entered into by and between XXXXXX BROS. CO., a California corporation
("Lender"), and XXXXX FARGO BANK, N.A., (the "Trustee") as trustee for the
XXXXXX BROS. CO. EMPLOYEE STOCK OWNERSHIP PLAN (the "Borrower" or the "ESOP").
RECITALS
A. The Lender has adopted an employee stock ownership plan to purchase and
hold XXXXXX BROS. CO. stock on behalf of the eligible employees of Lender.
The ESOP is intended to qualify as an employee stock ownership plan under
section 4975(c)(7) of the Internal Revenue Code of 1986, as amended (the
"Code"), and Section 407(d)(6) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). The ESOP provides that the ESOP may obtain
loans to purchase shares of Lender's stock. It is intended that loans made
under this Agreement shall qualify for an exemption under Section 4975(d) of
the Code from being a prohibited transaction under Section 4975(c) of the
Code.
B. Pursuant to the ESOP Loan Agreement dated March 28, 2000 as amended by
Amendment No. 1 to ESOP Loan Agreement ("First Agreement"), as of the date
hereof the ESOP has acquired 170,426 shares of the 300,000 shares of the
Company's common stock for which a loan was authorized by the First Agreement.
C. The provisions for loan advances under the First Agreement expired on July
31, 2003.
D. On July 21, 2003 Lender's Board of Directors authorized a loan to the ESOP,
without limitation as to amount, to purchase the remainder (129,574 shares) of
the 300,000 originally authorized. Such remaining shares are called "Shares"
herein.
E. The ESOP Plan Committee by action dated October 6, 2003 has authorized the
execution of the Second Agreement.
ARTICLE 1: The ESOP Loan
1.1 Subject to the terms set forth herein, the Lender agrees to lend to the
Borrower the Principal Amount, or such portion of the Principal Amount as the
Borrower elects to receive from time to time under Section 1.2 of this Second
Agreement (the "Loan").
1.2 During the period commencing with the date hereof and ending on July 31,
2005, the Borrower may elect from time to time to receive from Lender an
advance (an "Advance"). Amounts Advanced and repaid may be reborrowed prior to
July 31, 2005. An election to receive an Advance shall be made by the
Borrower in writing to the Lender and shall specify the amount of the Advance
requested and the date on which the Borrower requests that such funds be made
available. Such date shall be no less than three business days prior to the
date the notice of such election is received by the Lender, unless the Lender
in its sole discretion waives such requirement.
1.3 The Borrower hereby agrees that it will use the entire proceeds of each
Advance within a reasonable time after receipt to acquire Shares through open
market purchases or from the Lender or any shareholder of Lender. If for any
reason such purchases cannot be effected within a reasonable time, the
Borrower must make a principal prepayment of the Loan with all such unused
proceeds.
1.4 Borrower's indebtedness is evidenced by a Promissory Note of even date
(the "Note") in the form attached hereto as Exhibit "A". The Lender shall
enter upon the schedule attached to the Note the date and principal amount of
each Advance.
1.5 Interest shall accrue on the balance of unpaid principal from the date of
each Advance until the payment due date as described in the Note.
1.6 To secure payment of the Promissory Note, Borrower grants Lender a
security interest in the Shares purchased with the loan proceeds under the
ESOP Pledge Agreement attached hereto as Exhibit "B".
1.7 The Borrower shall make principal and interest payments to the Lender
according to the terms of the Note. The date and amount of each payment,
principal or interest, shall be entered on the schedule to the Note.
1.8 The Lender agrees to make contributions to the ESOP in cash or by
cancellation of indebtedness from time to time and in amounts sufficient to
permit the Borrower to make timely repayments of principal and interest due
under the terms of the Note. Subject to the preceding sentence, the amount
and timing of such contribution(s) shall be at the sole discretion of the
Lender, after considering the amount of each annual payment of principal and
interest, the amount of any cash dividends received by the ESOP on Lender's
stock and the amount, if any, of non-Lender investments held by the ESOP. The
Lender shall not be required to make contributions to the ESOP in amounts in
excess of the limitations under Sections 404(a) and 415 (c) of the Code. The
Borrower agrees that so long as any interest or principal amount remains
payable on the Loan, Borrower will use all cash contributions, earnings
thereon and cash dividends received by the ESOP to make payments on the Loan.
Borrower's obligation to make payments on the Loan is limited to the excess of
the aggregate of such contributions, earnings and dividends over prior Loan
payments. Lender shall have no recourse against Borrower's assets other than
such excess contributions, earnings and dividends and the Shares then pledged
under the ESOP Pledge Agreement.
1.9 The Borrower may prepay principal or interest without premium or penalty,
any such prepayment shall be applied to the principal installments in the
inverse order of maturities.
1.10 The ESOP may elect to apply the proceeds from the sale of any Shares
remaining subject to pledge to pay principal and interest due on the Loan in
the event of the termination of the ESOP or if the ESOP ceases to be an
employee stock ownership plan under Section 4975(e)(7) of the Code.
ARTICLE 2: The Borrower Represents And Warrants As Follows:
2.1 The Borrower has duly authorized the execution, delivery and performance
of this Agreement, the Note and the ESOP Pledge Agreement and any other
documents in connection with the Loan. These documents that have been or will
be executed and delivered pursuant to this Agreement constitute valid, binding
obligations of the ESOP, each enforceable according to its terms.
2.2 The Borrower is an employee stock ownership plan established by the Lender
and has all requisite power and authority, as described in the ESOP plan
document, to execute, deliver and perform its obligations under this
Agreement.
2.3 All of the proceeds of the Loan will be used by the Trustee to purchase
for the ESOP shares of "employer securities" as defined in Section 409(l) of
the Code, subject to Section1.3 above.
2.4 This Agreement is executed by Xxxxx Fargo Bank, N.A. solely in its
capacity as Trustee of the Xxxxxx Bros. Co. Employee Stock Ownership Plan
pursuant to directions from the ESOP.
ARTICLE 3: The Lender Represents And Warrants As Follows:
3.1 The Lender is a corporation duly incorporated and validly existing and in
good standing under the laws of the State of California.
3.2 The Lender has all requisite power and authority to deliver and perform
its obligations under this Agreement. The Lender has taken all corporate
action to establish the ESOP and to authorize this Agreement. This Agreement
has been duly executed and delivered by the Lender and is a legal, valid and
binding obligation of the Lender.
3.3 Neither the execution of this Agreement nor the fulfillment of any of the
Lender's obligations under this Agreement will conflict with or result in a
breach or violation of or constitute any default under any known rule, law,
regulation, order contract or agreement of the Lender.
ARTICLE 4: Miscellaneous
4.1 No amendment or waiver of any provision of the Agreement shall be
effective unless set forth in an instrument in writing and signed by both
parties to this Agreement.
4.2 No delay or omission of Lender in exercising any right or remedy under
this Agreement shall impair such right or remedy or be construed to be a
waiver of any default of an acquiescence therein, and any single or partial
exercise of any such right or remedy shall not preclude other or further
exercise thereof or the exercise of any other right or remedy; and no waiver,
amendment or other variation of the terms, conditions or provisions of this
Agreement whatsoever shall be valid unless in writing signed by the Lender,
and then only to the extend such writing specifically set forth. All rights
and remedies described in this Agreement, the Note or other Loan documents
shall be cumulative and all shall be available to the Lender until all terms
and conditions of the debt have been satisfied.
4.3 This instrument, including the Exhibits hereto, is the entire agreement
between the parties hereto with respect to the loan and all representations,
warranties, agreements or undertakings heretofore or contemporaneously made,
which are not set forth herein, are superceded hereby.
4.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors or assigns.
4.5 Any notice, consent, approval or directions required or permitted to be
given hereunder shall be in writing and shall be deemed duly given and
received upon personal delivery to the addressee stated below or if mailed,
forty-eight (48) hours after deposit in the United States Mail, first class
postage and addressed as required below:
"LENDER"
Treasurer's Office
Xxxxxx Bros. Co.
00000 Xxxxx Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
"BORROWER"
Administrative Committee
Xxxxxx Bros. Co. Employee Stock Ownership Plan
00000 Xxxxx Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
With a copy to "TRUSTEE"
Xxxxx Fargo Bank, N.A.
Employee Benefit Trust
000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
4.6 All Exhibits are incorporated herein.
4.7 The Trustee's personal assets shall not be liable for any act or omission
of the Trustee except in the case of gross negligence or willful misconduct.
IN WITNESS WHEREOF, the parties have executed this Second Agreement as of the
date first above written.
"LENDER"
Xxxxxx Bros. Co.
/s/Xxx X. Xxxxxx
By: _____________________________________
Xxx X. Xxxxxx, President
/s/Xxxx X. Xxxxxxx
By: _____________________________________
Xxxx X. Xxxxxxx, Treasurer
"BORROWER"
Xxxxxx Bros. Co. Employee Stock Ownership Plan
by Xxxxx Fargo Bank, N.A., Trustee
/s/ X. Xxxxxx
By: ______________________________________
Title: Vice President
/s/ E.L. Xxxxx
By: ______________________________________
Title: Vice President
PROMISSORY NOTE
For value received, the XXXXXX BROS. CO. EMPLOYEE STOCK OWNERSHIP PLAN
("Borrower') promises to pay to the order of XXXXXX BROS. CO., a California
corporation ("Lender"), at 00000 Xxxxx Xxxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx
or at such other place as the holder of this Note may designate, such amount
as has been advanced by Lender as may be set forth on the attached schedule
(the "Schedule"), with interest thereon as follows:
Each advance shall bear interest from the date made at the interest rate then
applicable under this Note. The interest rate shall be an annual rate equal to
1.5% per annum over the "90-day Commercial Paper Rate" determined initially on
the date of the first advance and thereafter adjusted quarterly on the first
business day of each calendar quarter. The 90-day Commercial Paper Rate is
the United States commercial paper rate for said number of days as last
published in The Wall Street Journal as of the date of the first advance or as
of an adjustment date, as applicable. Interest shall be computed and paid on
the basis of a 360-day year for the actual number of days elapsed. Unpaid
interest shall bear interest as principal.
Principal is payable in annual installments on December 15 of each year
beginning December 15, 2003 in an amount equal to the unpaid principal balance
divided by the number of years remaining until maturity of this Note on
December 15, 2018 when the entire unpaid principal balance shall be due and
payable. Interest on unpaid principal shall be paid annually on December 15
concurrently with principal installments.
Payments shall be applied first to interest then accrued and the remainder to
principal whereupon interest shall cease on principal so paid. Principal and
interest shall be payable in lawful money of the United States of America.
This Note evidences the indebtedness incurred by Borrower to the Lender under
the ESOP Loan Agreement No. 2 dated as of July 21, 2003 by and between the
Borrower and the Lender (the "Agreement") the terms of which are made a part
hereof.
This Note may be prepaid in whole or in part at any time, without premium or
penalty. Partial prepayments shall be applied in inverse order of maturity.
Except as otherwise provided in the Agreement, payments of principal and
interest hereunder shall be made by the Borrower only from cash contributions
(or contributions in the form of cancellation of indebtedness), from any
earnings attributable to such contributions and from any cash dividends paid
on the shares of XXXXXX BROS. CO. common stock purchased with the proceeds of
the loan evidenced hereby. Lender's recourse is limited as provided in
Section 1.8 of the Agreement.
This Note is not subject to acceleration. In the event of default in payment
of any installment of principal or interest due under this Note (which will
not be deemed to have occurred if such default occurs as a result of a default
by Lender under Section 1.8 of the Agreement), the liability of Borrower is
limited to the amount of such installment.
This Note is collateralized by a pledge of stock under an ESOP Pledge
Agreement of even date herewith.
This Note is governed by the laws of the State of California, except to the
extent preempted by federal laws.
Dated: July 21, 2003 Xxxxxx Bros. Co. Employee Stock Ownership Plan
by Xxxxx Fargo Bank, N.A,. as Trustee
By: ________________________________________
Title: _______________________________________
By: ________________________________________
Title: _______________________________________
SCHEDULE TO PROMISSORY NOTE
Amount of Amount of Unpaid
Date Borrowing Repayment Principal Balance
Principal Interest
ESOP PLEDGE AGREEMENT
This ESOP Pledge Agreement (the "Pledge Agreement") dated as of July 21, 2003
is entered into by and between XXXXXX BROS. CO., a California corporation (the
"Lender") and the XXXXXX BROS. CO. EMPLOYEE STOCK OWNERSHIP PLAN (the
"Borrower" or the "ESOP") and XXXXX FARGO BANK, N.A. (the "Pledge Holder").
In accordance with the terms and conditions of the ESOP Loan Agreement No. 2
dated as of July 21, 2003 (the "Agreement) and the Promissory Note (the
"Note") of even date herewith, the Borrower desires to purchase securities
with the proceeds of loan advances from the Lender (the "Loan"). Under the
Agreement, Borrower agrees to borrow and Lender agrees to lend funds to enable
the ESOP to purchase up to 129,574 shares of the Company's common stock
("Shares") over and above the 170,426 shares purchased under the original ESOP
Loan Agreed dated March 28, 2000.
In consideration of Lender making loan advances to Borrower for purchase of
Shares, and as security for the Note and for good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, Borrower hereby
pledges and grants to lender a first priority security interest in all Shares
now or hereafter acquired by Borrower with Loan proceeds as continuing
security for the full performance and payment of the Secured Obligation.
Borrower transfers to the Lender all of Borrower's right, title and interest
in and to the pledged Shares, to be held in the physical possession of the
Pledge Holder upon the terms and conditions set forth in this Agreement.
The Secured Obligation consists of payment of all of Borrower's indebtedness
to Lender Note and all renewals, extensions, modifications and novations
thereof.
1. Until this Agreement is termination, Borrower shall:
1.1 Deliver to Pledge Holder all Shares purchased with Loan proceeds.
1.2 Not create, incur or suffer to exist any lien, encumbrance or security
interest against the Shares except the security interest created by this
Pledge Agreement.
2. Lender agrees as follows:
2.1 Except upon the occurrence of an Event of Default, as defined below,
Lender shall not sell, exchange or otherwise dispose of any of the Shares
without the prior consent of the Borrower, which shall not be withheld
unreasonably.
2.2 Within ten (10) days after each payment of principal under the Loan,
Lender shall cause the Pledge Holder to release a number of the Shares held
hereunder. The number of Shares to be released shall be calculated by
multiplying the number of Shares held by the Pledge Holder immediately before
the release by a fraction the numerator of which is the amount of the latest
principal and interest payment and denominator of which is the sum of the
numerator and the remaining unpaid principal and interest payments of the
Loan.
3. So long as no Event of Default, as defined below, has occurred and is
continuing:
3.1 Borrower shall have the right to vote the Shares, grant or withhold
consent, or exercise any other right or privilege with respect to the Shares
allowed under Article 8 of the XXXXXX BROS. CO. EMPLOYEE STOCK OWNERSHIP PLAN
(the "Plan Document").
4. The Pledge Holder agrees as follows:
4.1 Lender hereby appoints XXXXX FARGO BANK, N.A., to act as Pledge Holder and
Pledge Holder accepts such appointment.
4.2 Borrower will deliver to the Pledge Holder the Shares acquired with the
proceeds of the Loan advances.
4.3 The Shares will be held in a segregated account by the Pledge Holder for
the benefit of the Lender in accordance with the terms and conditions of this
Pledge Agreement.
4.4 The Pledge Holder shall release from the pledge the number of Shares
required by Section 2.2.
4.5 The Lender may remove the Pledge Holder and substitute another entity or
person to function as Pledge Holder. Upon receipt by a Pledge Holder of any
such notice of removal and substitution, said Pledge Holder shall transfer to
the successor Pledge Holder Shares, documents of title, and related books and
records.
5. Event of Default:
5.1 If the Borrower fails to make any installment of principal or interest due
under the Note within ten (10) days after receipt of written notice of non-
payment from Lender, an Event of Default shall have occurred.
6. Upon Occurrence of an Event of Default:
6.1 Lender shall have all rights and remedies afforded a secured party and all
other rights and remedies available under applicable law, all of which shall
be cumulative, but subject to all limitations set forth herein, or in the
Agreement, or Note, or under Section 4975 of the Internal Revenue Code of
1986, as amended, or under the Employee Retirement Income Security Act of
1974, as amended.
6.2 The Lender shall have the right at any time after the occurrence of an
Event of Default to repurchase, sell or otherwise convert to cash all or any
portion of the Shares remaining subject to pledge, provided that such Shares
may be so applied only in an amount necessary to cure the Event of Default.
The proceeds of any sale of Shares shall be applied first to the payment of
the Lender's reasonable expenses incurred in effecting such sale or other
disposition, including but not limited to attorneys' fees, and thereafter to
Borrower's liabilities under the Note, Any surplus remaining with the Lender
after payment of such expenses and liabilities shall be returned to the
Borrower.
IN WITNESS WHEREOF, the parties hereto have executed this Pledge Agreement as
of the date first above written.
"PLEDGEE"
XXXXXX BROS. CO., a California corporation
/s/Xxx X. Xxxxxx
By: _____________________________________
Xxx X. Xxxxxx, President
/s/Xxxx X. Xxxxxxx
By: _____________________________________
Xxxx X. Xxxxxxx, Treasurer
"PLEDGOR"
XXXXXX BROS. CO. EMPLOYEE STOCK OWNERSHIP PLAN
by XXXXX FARGO BANK, N.A., as Trustee
By: _____________________________________
Title: ___________________________________
By: _____________________________________
Title: ____________________________________
"PLEDGE HOLDER"
XXXXX FARGO BANK, N.A.
By: ____________________________________
Title: ___________________________________
By: ____________________________________
Title: ___________________________________
