LOAN AGREEMENT
between
INDUSTRIAL DEVELOPMENT AUTHORITY
OF MECKLENBURG COUNTY, VIRGINIA
and
SHERWOOD FOODS, INC.
Dated as of May 1, 1997
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF MECKLENBURG COUNTY, VIRGINIA ("THE
"AUTHORITY") HAS ASSIGNED ALL OF ITS INTEREST IN THIS AGREEMENT (EXCEPT CERTAIN
PROVISIONS RELATING TO THE PAYMENT OF EXPENSES, NOTICE AND INDEMNIFICATION
CONTAINED IN SECTIONS 8.5 AND 8.6 HEREOF) TO CRESTAR BANK AS TRUSTEE UNDER AN
INDENTURE OF TRUST, DATED AS OF MAY 1, 1997, BETWEEN THE AUTHORITY AND THE
TRUSTEE. INFORMATION CONCERNING THE ASSIGNMENT MAY BE OBTAINED FROM THE TRUSTEE
AT ITS PRINCIPAL CORPORATE TRUST OFFICE IN RICHMOND, VIRGINIA.
TABLE OF CONTENTS
PAGE
----
ARTICLE I
Definitions
Section 1.1 Definitions 1
Section 1.2 Rules of Construction 1
ARTICLE II
Representations and Covenants
Section 2.1 Representations by Authority 2
Section 2.2 Representations and Covenants by Borrower 3
ARTICLE III
Issuance of the Bonds; Use of Proceeds
Section 3.1 Loan of Proceeds 5
Section 3.2 Acquisition of Project 5
Section 3.3 Agreement to Issue Bonds 5
Section 3.4 Borrower Required to Complete Acquisition of Project 5
Section 3.5 Disclaimer of Warranties 5
Section 3.6 Limitation of Authority's Liability 6
ARTICLE IV
Payment by the Borrower
Section 4.1 Payments by the Borrower 6
Section 4.2 Obligations of Borrower Unconditional 8
Section 4.3 Payments Assigned 8
Section 4.4 Letter of Credit 8
- ii -
PAGE
----
ARTICLE V
Operation and Use of the Project
Section 5.1 Maintenance and Operation of the Project 9
Section 5.2 Inspection of Project and Borrower's Books and Records 9
ARTICLE VI
Governmental Charges and Insurance
Section 6.1 Governmental Charges 10
Section 6.2 Insurance 10
Section 6.3 Requirements of Policies 10
ARTICLE VII
Damages, Destruction or Condemnation
Section 7.1 Parties to Give Notice 10
Section 7.2 Damage and Destruction 10
Section 7.3 Condemnation and Loss of Title 11
Section 7.4 Provisions of Reimbursement Agreement with Letter of
Credit Issuer During Letter of Credit Period 11
ARTICLE VIII
Special Covenants
Section 8.1 Use of Proceeds; Other Matters with Respect to Project, Bonds
and Tax Exemption 12
Section 8.2 Arbitrage and Rebate 14
Section 8.3 Reports 15
Section 8.4 Compliance with Tax Laws 16
Section 8.5 Indemnification by Borrower 16
Section 8.6 Payment of Expenses 17
Section 8.7 Approval of Indenture 19
Section 8.8 Right to Purchase Tendered Bonds 19
Section 8.9 Notice of Act of Bankruptcy 19
- iii -
PAGE
----
ARTICLE IX
Events of Default and Remedies
Section 9.1 Event of Default Defined 20
Section 9.2 Remedies on Default 20
Section 9.3 No Remedy Exclusive 21
Section 9.4 Attorneys' Fees and Other Expenses 21
Section 9.5 No Additional Waiver Implied by One Waiver 21
ARTICLE X
Miscellaneous
Section 10.1 Successors and Assigns 21
Section 10.2 Amendments 22
Section 10.3 Exculpation of Authority 22
Section 10.4 Applicable Law 22
Section 10.5 Severability 22
Section 10.6 Notices 22
Section 10.7 Agreements to Survive 22
Section 10.8 Right to Cure Default 22
Section 10.9 No Joint Venture 23
Section 10.10 Headings 23
Section 10.11 Term of Agreement 23
Section 10.12 Counterparts 23
Section 10.13 Trustee as Assignee and Third Party Beneficiary 23
Testimonium
Signatures
Receipt
Schedule of Definitions - See Tab #11
- iv -
THIS LOAN AGREEMENT is made as of May 1, 1997, between the INDUSTRIAL
DEVELOPMENT AUTHORITY OF MECKLENBURG COUNTY, VIRGINIA, a political subdivision
of the Commonwealth of Virginia (the "Authority"), and SHERWOOD FOODS, INC., a
North Carolina corporation (the "Borrower");
WHEREAS, on April 23, 1997, the Authority adopted a resolution (the
"Resolution") authorizing the issuance and sale of the Authority's Variable Rate
Demand Revenue Bonds (Sherwood Foods, Inc., Project), Series 1997, in the
aggregate principal amount of $580,000 (the "Bonds"), and the loan of the
proceeds of the Bonds to the Borrower to pay off the Interim Note, the proceeds
of which were used to finance the acquisition of equipment (the "Equipment")
owned by the Borrower and used in the Borrower's business of manufacturing food
products at its manufacturing facility located in the Town of Chase City in
Mecklenburg County, Virginia;
WHEREAS, the parties desire to set forth in this Agreement certain of their
agreements and understandings with respect to the loan of the Bond proceeds,
NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. Attached to this Agreement is a Schedule of
Definitions wherein certain words and terms used herein shall have the meaning
set forth in the Schedule (which is incorporated herein by this reference)
unless the context otherwise requires. In addition to, and not as a limitation
upon, the preceding sentence, all terms used herein which are defined within the
body of any of the Basic Documents or the Bonds shall have the same meaning
herein as therein, unless the context in which such terms are used herein
clearly requires that a different meaning be ascribed to such terms.
Section 1.2 Rules of Construction. The following rules shall apply to the
construction of this Agreement unless the context otherwise requires:
(a) Singular words shall connote the plural number as well as the singular
and vice versa.
(b) Words importing the redemption or calling for redemption of Bonds shall
not be deemed to refer to or connote the payment of Bonds at their stated
maturity.
(c) All references herein to particular Articles or Sections are references
to Articles or Sections of this Agreement.
(d) The headings herein are solely for convenience of reference and shall
not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
(e) The masculine, feminine and neuter genders are used solely for
convenience of reference and not as terms of limitation. Accordingly, words of
the masculine, feminine and neuter genders shall be deemed and construed to
include correlative words of the masculine, feminine and neuter gender.
ARTICLE II
Representations and Covenants
Section 2.1 Representations by Authority. The Authority makes the following
representations as the basis for its undertakings under this Agreement:
(a) The Authority has been duly organized and operating under the Act since
its creation, and no dissolution proceedings have been undertaken by it. The
Authority is, on the date of the issuance of the Bonds, a duly created and
validly existing political subdivision of the Commonwealth vested, by the Act,
with the rights and powers conferred upon industrial development authorities
under the Act.
(b) Each director of the Authority has satisfied the residency requirements
of the Act. No director of the Authority is an officer or employee of the County
and each director has taken and subscribed to the oath prescribed by Section
49-1 of the Code of Virginia of 1950, as amended.
(c) The Authority has complied in all respects with the Act and has the
legal right, power and authority to (i) adopt the Resolution and execute and
deliver the Basic Documents to which it is a party and other documents related
thereto; (ii) issue, sell and deliver the Bonds to the initial purchasers
thereof; (iii) to undertake the financing of the Project by lending the proceeds
of the Bonds to the Borrower; and (iv) carry out and consummate all other
transactions to which it is a party and which are contemplated by the
Resolution, the Bonds and the Basic Documents.
(d) The Bonds and the Basic Documents to which the Authority is a party
have been executed and delivered by duly authorized officers of the Authority,
were duly authorized by the Resolution and are in substantially the same form
and text as the copies of such instruments presented to the Authority at its
meeting on April 23, 1997.
(e) The Bonds constitute the only bonds or other obligations of the
Authority in any manner secured by, or payable from, the amounts due under the
Basic Documents and all revenues and receipts derived by the Authority therefrom
or from the security therefor.
-2-
(f) The Authority hereby finds and determines that the issuance of the
Bonds will serve the purposes of the Act and that the Project constitutes an
"authority facility," within the meaning of the Act.
(g) When authenticated and delivered in accordance with the Indenture, the
Bonds will have been duly authorized, executed, issued and delivered and will
constitute legal, valid and binding limited obligations of the Authority
enforceable against the Authority in accordance with their terms.
(h) The adoption of the Resolution, the issuance of the Bonds, the
execution and delivery of the Basic Documents to which the Authority is a party
and the compliance with the provisions thereof do not, and will not, conflict
with or constitute on the part of the Authority a violation or breach of, or
default under, any statute (except that no representation is made as to any
federal tax or securities law), ordinance, bylaw, indenture, mortgage, deed of
trust, resolution, bond, note or other agreement or instrument to which the
Authority is a party or by which it is bound or, to its knowledge, any judgment,
decree, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Authority or any of the Authority's activities or
properties.
(i) To the best of the Authority's knowledge, no litigation or
investigation by any judicial or governmental body or agency is pending or
threatened against the Authority to (i) enjoin, restrain or otherwise affect the
execution, delivery or validity of the Resolution, the Bonds or the Basic
Documents, or (ii) challenge, contest or affect the constitution, existence or
powers of the Authority, the incumbency of the Authority's officers or directors
or the validity or enforceability of any action taken by the Authority with
respect to the Resolution, the Bonds or the Basic Documents or any transactions
authorized thereby or related thereto. To the best of the Authority's knowledge,
no litigation or investigation by any judicial or governmental body or agency is
pending or threatened against the Authority which challenges or contests the
collection of revenues or receipts under the Basic Documents or the payment
thereof to the registered owners of the Bonds. To the best of the Authority's
knowledge, there is no litigation or investigation by any judicial or
governmental body or agency pending or threatened against the Authority or any
of the property or assets under the control of the Authority which involves the
possibility of any judgment or liability which may adversely affect the Project
or the security for the Bonds.
Section 2.2 Representations and Covenants by Borrower. The Borrower makes
the following representations and covenants in connection with its undertakings
hereunder:
(a) The execution and delivery of the Basic Documents to which it is a
party and the performance by the Borrower of its obligations hereunder and
thereunder do not and will not (1) constitute a default under the articles of
incorporation or bylaws of the Borrower or any agreement or other instrument to
which the Borrower is a party or by which it is bound, or (2) result in a
violation of any agreement or other instrument to which the Borrower is a party
or by which it is bound or, to the best of the Borrower's knowledge, any
constitutional or
-3-
statutory provision or order, rule, regulation, decree or ordinance of any
court, government or governmental authority having jurisdiction over the
Borrower or its property.
(b) It has duly authorized, executed and delivered the Basic Documents to
which it is a party, and such Basic Documents, when so executed and delivered by
other parties thereto, will constitute the valid and legally binding obligations
of the Borrower, enforceable in accordance with the provisions thereof.
(c) There are no pending or, to the best of its knowledge, threatened
actions, suits, proceedings, or investigations of a legal, equitable,
regulatory, administrative or legislative nature, the judgment, order or
resolution of which may have a materially adverse effect on the Borrower or its
business, assets, condition (financial or otherwise), operations or prospects or
on its ability to perform its obligations under the Basic Documents.
(d) It is not in default in the payment of the principal of or interest on
any of its indebtedness for borrowed money or any instrument under and subject
to which any indebtedness has been incurred, and, to the best of its knowledge,
no event has occurred and is continuing under the provisions of any such
agreement that with a lapse of time or the giving of notice, or both, would
constitute a default thereunder.
(e) Other than the Authority's $935,000 Variable Rate Demand Revenue Bonds
(Sherwood Foods, Inc. Project), Series 1996 (the "1996 Bonds"), the Bonds are
the only obligations of any state, territory or possession of the United States,
or any political subdivision of the foregoing, or of the District of Columbia,
the proceeds of which have been or are to be used primarily with respect to a
facility located or to be located in Mecklenburg County, Virginia, or in any
contiguous jurisdiction, a principal user of which is or will be the Borrower,
any other principal user(s) of the Project, or any "related persons" of the
Borrower or such other principal users, within the meaning of Section 144(a)(3)
of the Code.
(f) The Borrower has obtained all consents, approvals, authorizations and
orders of any governmental or regulatory authority that are required to be
obtained by the Borrower as a condition precedent to the issuance of the Bonds
or the execution and delivery of the Bond Documents to which it is a party or
the performance by the Borrower of its obligations hereunder or thereunder. The
Borrower has no reason to believe that any and all approvals, certificates and
permits which are required for the acquisition or operation of the Project
cannot be obtained when required.
(g) The Borrower currently intends to operate the facility in which the
Equipment is located as a manufacturing facility and to use the Equipment for
manufacturing purposes until the Indenture is discharged in accordance with its
terms.
(h) No document or instrument executed or delivered by the Borrower, nor
any information (financial or otherwise) furnished by or on behalf of the
Borrower to the Authority or the Remarketing Agent in connection with the
negotiation of the sale of the Bonds, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
-4-
contained herein or therein not misleading. There is no fact that the Borrower
has not disclosed in writing to the Authority and the Letter of Credit Issuer
that materially adversely affects, or so far as it can now foresee, based on
facts known to it, will materially affect adversely the properties, business,
prospects, profits or condition (financial or otherwise) of the Borrower or the
ability of the Borrower to perform its obligations under the Basic Documents.
(j) The Borrower understands that the certifications made herein and in the
Tax Compliance Agreement are to be conclusively relied upon by Bond Counsel in
giving its opinion as to the tax-exempt status of the Bonds.
ARTICLE III
Issuance of the Bonds; Use of Proceeds
Section 3.1. Loan of Proceeds. The Authority hereby lends the proceeds from
the sale of the Bonds pursuant to this Loan Agreement to the Borrower, and the
Borrower hereby borrows the same from the Authority as evidenced by this Loan
Agreement. The Borrower covenants to use such proceeds to pay costs of the
Project.
Section 3.2 Acquisition of Project. The Borrower has acquired the Project
with the proceeds of the Interim Note substantially as described to the
Authority. The Borrower has obtained all licenses, permits and consents required
for the acquisition of the Project, and the Authority has no responsibility
therefor.
Section 3.3 Agreement to Issue Bonds. In order to provide funds for payment
of all or a portion of the cost of the Project, the Authority shall
simultaneously with the execution and delivery hereof proceed with the issuance
and sale of the Bonds bearing interest, maturing and having the other terms and
provisions set forth in the Indenture. The obligation of the Authority to pay
for the cost of the Project shall be limited to the proceeds in the Equipment
Fund derived from the sale of the Bonds in accordance with the Indenture.
Section 3.4. Borrower Required to Complete Acquisition of Project. The
Authority makes no warranty or promise, express or implied, that the proceeds of
the sale of the Bonds will be sufficient to pay the cost of the Project in full.
If the proceeds derived from the sale of the Bonds are not sufficient to pay in
full the cost of the Project, the Borrower shall pay so much of the cost thereof
as may be in excess of the moneys available therefor or shall pay over to the
Trustee such moneys as are necessary to provide for payment of such cost. The
Borrower agrees that if, after exhaustion of the proceeds derived from the sale
of the Bonds, the Borrower should pay any portion of the cost of the Project
pursuant to the provisions of this section, it shall not be entitled to any
reimbursement therefor from the Authority or the Trustee nor shall it be
entitled to any abatement, diminution or postponement of its payments hereunder.
Section 3.5. Disclaimer of Warranties. The Borrower recognizes that since
the Project has been or will be acquired by the Borrower from suppliers selected
by the Borrower, THE
-5-
AUTHORITY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT
TO THE MERCHANTABILITY, CONDITION OR WORKMANSHIP OF ANY PART OF THE PROJECT OR
ITS SUITABILITY FOR THE BORROWER'S PURPOSES OR THE EXTENT TO WHICH PROCEEDS
DERIVED FROM THE SALE OF THE BONDS WILL PAY THE COST TO BE INCURRED IN
CONNECTION THEREWITH.
Section 3.6. Limitation of Authority's Liability. THE BONDS AND THE
REDEMPTION PRICE THEREOF, AND INTEREST THEREON AND THE PURCHASE PRICE THEREOF
SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF
THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE COUNTY.
NEITHER THE COMMONWEALTH OF VIRGINIA NOR ANY POLITICAL SUBDIVISION THEREOF,
INCLUDING THE AUTHORITY AND THE COUNTY, SHALL BE OBLIGATED TO PAY THE PRINCIPAL
OR REDEMPTION PRICE OF, OR INTEREST ON, OR THE PURCHASE PRICE OF, THE BONDS OR
OTHER COSTS INCIDENT THERETO, EXCEPT FROM THE REVENUES AND MONEYS PLEDGED
THEREFOR, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE
COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE AUTHORITY AND
THE COUNTY, IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OR REDEMPTION PRICE OF,
OR INTEREST ON, OR THE PURCHASE PRICE OF, THE BONDS OR OTHER COSTS INCIDENT
THERETO.
ARTICLE IV
Payment by the Borrower
Section 4.1 Payments by the Borrower. In consideration of the Authority's
issuance of the Bonds to finance the Project, the Borrower agrees to pay, at the
times hereinafter specified, amounts sufficient to pay in Eligible Funds on each
date when due the principal or redemption price of, and interest on, and
purchase price of the Bonds, whether at maturity, upon redemption, including
mandatory redemption as provided in Section 405(c) of the Indenture, on
acceleration, on tender for purchase or otherwise.
(a) Until Payment of the Bonds, the Borrower agrees to deposit on each
Interest Payment Date into the Payments Account the amount, if any, necessary to
make the amount then on deposit in the Payments Account equal to the amount
needed for the payment of interest on the Bonds on such Interest Payment Date.
(b) Commencing on July 1, 1997, and continuing on the first day of each
month thereafter until Payment of the Bonds, the Borrower agrees to make monthly
deposits into the Payments Account (such monthly payments to be approximately
equal during the year preceding each June 1) so that on June 1 of each year
thereafter an amount equal to the aggregate principal amount of the Bonds which
is scheduled to be redeemed pursuant to Section
-6-
405(c) of the Indenture on such June 1 will be on deposit in the Payments
Account prior to such June 1.
(c) The Borrower agrees to pay to the Trustee for deposit into the Payments
Account an amount sufficient to pay 100% of the principal of the Bonds and
interest accrued thereon to the redemption date due as a result of (i) the
mandatory redemption of the Bonds upon taxability in accordance with Section
405(a) of the Indenture or (ii) the mandatory redemption of the Bonds upon the
expiration of the Letter of Credit in accordance with Section 405(d) of the
Indenture. Such payment shall not relieve the Borrower of its continuing
obligation to make payments with respect to the interest due on the Bonds until
there is on deposit with the Trustee sufficient Eligible Funds to pay the
principal of and all interest accrued on the Bonds to the redemption date.
(d) In the event of an acceleration of the Bonds under Section 1002 of the
Indenture, the Borrower agrees immediately to pay to the Trustee for deposit
into the Payments Account an amount sufficient to pay in full the principal of
and interest on the Bonds.
(e) The Borrower shall be entitled to a credit in full against the amounts
required to be paid pursuant to subsections (a), (b), (c) and (d) above so long
as there is in force a Letter of Credit meeting the requirements of Section 4.4
and the issuer of such Letter of Credit has not failed or refused to honor any
drawing thereunder.
(f) The Borrower may exercise its right to direct the optional redemption
of Bonds in accordance with Section 405(b) of the Indenture, provided that, (i)
on or prior to the date of the proposed redemption, the Borrower shall have paid
or caused to be paid to the Trustee for deposit in the Payments Account amounts
(which will be Eligible Funds on the redemption date) or caused to be paid to
the Trustee for deposit in the Letter of Credit Account amounts drawn under the
Letter of Credit, in either case in an amount equal to the principal of the
Bonds to be redeemed plus interest accrued thereon to the redemption date, which
funds will be available to pay the principal of, and interest accrued on, the
Bonds to be redeemed on the redemption date and (ii) the Borrower shall have
given the Trustee and the Authority at least 30 days' notice of the exercise of
its optional redemption right.
(g) Subject to a credit in the aggregate amount of Eligible Funds or
proceeds of the remarketing of Bonds (pursuant to Section 404(a) of the
Indenture) on deposit in the Bond Purchase Account on a Tender Date, the
Borrower shall pay the Trustee all amounts necessary to pay in Eligible Funds
the purchase price of Bonds tendered on any Tender Date.
(h) The Borrower shall receive a credit against its obligation to make the
next succeeding payment due with respect to the principal or redemption price
of, or interest on, or the purchase price of, the Bonds, whether at maturity,
upon redemption, on acceleration, on purchase or otherwise, in an amount equal
to any interest or income derived from the investment of money in the Payments
Account or the Bond Purchase Account and amounts on deposit from the investment
thereof, provided such interest, income or amounts have not previously been
applied as a credit with respect to any payment and will be available to make
-7-
the corresponding payment on the Bonds; and provided, further, that whenever
this Agreement, the Indenture or the Bonds requires payment of the principal or
redemption price of, or interest on, or the purchase price of, the Bonds in
Eligible Funds, such credit will not be effective until such time as such
interest or income has become Eligible Funds.
Section 4.2 Obligations of Borrower Unconditional. The obligations of the
Borrower to make all payments pursuant to this Agreement and to observe and
perform all other covenants, conditions and agreements under the Basic Documents
shall be absolute and unconditional, irrespective of any rights of setoff,
recoupment or counterclaim the Borrower might otherwise have against the
Authority or the Trustee. Subject to prepayment as provided in this Agreement,
the Borrower shall not suspend or discontinue any such payment or fail to
observe and perform any of its other covenants, conditions and agreements under
the Basic Documents for any cause, including without limitation any acts or
circumstances that may constitute an eviction or constructive eviction, failure
of consideration, failure of title to any part or all of the Project, or
commercial frustration of purpose, or any damage to or destruction or
condemnation of all or any part of the Project or any change in the tax or other
laws of the United States, the Commonwealth or any political subdivision of
either or any failure of the Authority or any other person to observe and
perform any covenant, condition or agreement, whether express or implied, or any
duty, liability or obligation arising out of or in connection with the Basic
Documents.
Section 4.3 Payments Assigned. The Borrower consents to the assignment of
the rights of the Authority assigned under this Agreement to the Trustee and
agrees to pay to the Trustee all amounts payable by the Borrower pursuant to the
Basic Documents, except for amounts payable directly to the Authority and others
pursuant to Sections 8.5 and 8.6 of this Agreement.
Section 4.4 Letter of Credit. At all times while the Bonds are Outstanding,
the Borrower shall cause a Letter of Credit to be in effect. On the Closing
Date, in order to commence the Letter of Credit Period, the Borrower shall
deliver to the Trustee a Letter of Credit having a stated expiration date no
earlier than June 10, 2002. Any replacement Letter of Credit must be delivered
to the Trustee on or before a date which is at least 40 days prior to the date
that the then existing Letter of Credit is being replaced and having an
effective date no later than June 1 in the year in which it is delivered and an
expiration date which is the earlier of June 10 in the next succeeding year or
June 10, 2002.
Any Letter of Credit shall be an irrevocable Letter of Credit or other
irrevocable and unconditional credit facility, and it shall permit drawings
thereunder by the Trustee in accordance with the Indenture of amounts not less
than (i) the aggregate principal amount of the Bonds outstanding and (ii)
sixty-two (62) days interest (at an assumed rate of 10% per annum) on the Bonds
Outstanding. On or before the date of delivery of any replacement Letter of
Credit to the Trustee, the Borrower shall cause to be delivered to the Trustee
(i) an Opinion of Counsel stating that the delivery of the Letter of Credit to
the Trustee is authorized under and complies in all respects with the provisions
of this Agreement and the Indenture, (ii) an Opinion of Counsel stating that the
Letter of Credit constitutes a legal, valid and binding obligation of
-8-
the Letter of Credit Issuer to pay the amounts provided therein and is
enforceable in accordance with its terms, subject to customary exceptions and
qualifications, and (iii) if delivery of the Letter of Credit will commence a
Rated Period, or if a replacement Letter of Credit is being delivered during a
Rated Period, written evidence that the Rating Agency has received a true copy
of the Letter of Credit and that it will not, by itself, result in a rating on
the Bonds lower than the Rating Agency's prevailing rating on the Bonds at the
time such replacement Letter of Credit is delivered to the Trustee, or (iv) if
not commencing or during a Rated Period, written evidence satisfactory to the
Trustee that the proposed Letter of Credit Issuer has a rating by a Rating
Agency of either its long-term or short-term senior debt obligations at least
equal to the corresponding rating of the Letter of Credit Issuer whose Letter of
Credit is then outstanding.
ARTICLE V
Operation and Use of the Project
Section 5.1 Maintenance and Operation of the Project. The Borrower shall,
at its expense, keep the Project in good repair and operating condition and free
and clear of all encumbrances except Permitted Encumbrances, as defined in the
Reimbursement Agreement, making from time to time all necessary repairs,
renewals and replacements. The Borrower may, at its expense, make any additions,
modifications or improvements to the Project that it may deem desirable for the
efficient operation of the facility as a manufacturing facility and that do not
substantially impair the revenue producing capability of the facility, provided
that all such additions, modifications or improvements are located wholly on the
Land and comply with all Federal, state and local codes as applied to the
Project. All such renewals, replacements, additions, modifications and
improvements shall become part of the Project.
The Borrower shall (a) use, maintain and operate the Project for
manufacturing purposes; (b) comply with all laws, rules and regulations of any
governmental body applicable to the condition and operation of the Project,
whether existing or later enacted or foreseen or unforeseen and whether
involving any change in governmental policy or requiring structural or other
changes to the buildings at the facility; (c) neither commit nor suffer others
to commit a nuisance in or about the facility site at which the Project is
located; and (d) provide at its own cost and expense, to the extent not included
at the facility site at which the Project is located, the other personal
property required for the proper use, maintenance and operation of the Project
in an economical and efficient manner.
Section 5.2 Inspection of Project and Borrower's Books and Records. The
Authority and its duly authorized representatives and agents shall have such
reasonable rights of access to the facility site at which the Project is located
during normal business hours as may be necessary to determine whether the
Borrower is in compliance with the requirements of the Basic Documents and shall
have the right at all reasonable times and upon reasonable prior notice to the
Borrower to examine and copy the books and records of the Borrower insofar as
such books and records relate to the Project. The Authority shall not be deemed
to have any
-9-
duty to inspect the Project and the books and records related thereto or to have
any obligation to take any actions with respect to any of its findings upon such
inspection.
ARTICLE VI
Governmental Charges and Insurance
Section 6.1 Governmental Charges. The Borrower shall pay when due
Governmental Charges. The Borrower, however, at its expense and in its name, may
contest in good faith any Governmental Charges. In the event of such a contest,
the Borrower may permit the same to remain unpaid during the period of the
contest and any subsequent appeal, so long as such nonpayment is otherwise
permitted by applicable law.
Section 6.2 Insurance. The Borrower shall continuously maintain such
insurance (if any) for the Project as is customarily maintained by businesses
for similar Projects, paying when due all premiums with respect thereto;
provided, however, that during any Letter of Credit Period, compliance with the
insurance requirements of the Reimbursement Agreement then in effect shall be
deemed compliance with this Section and Section 6.3.
Section 6.3 Requirements of Policies. All insurance required by Section 6.2
shall be maintained with generally recognized responsible insurance companies
qualified to do business in the Commonwealth of Virginia and selected by the
Borrower. Such insurance may be written with deductible amounts comparable to
those on similar policies carried by other businesses with respect to Projects
of like size and character. In each policy, other than policies of worker's
compensation insurance, the Authority and the Trustee shall be named as
insureds, additional insureds or loss payees, as appropriate, as their interests
may appear.
ARTICLE VII
Damage, Destruction or Condemnation
Section 7.1 Parties to Give Notice. In case of (i) any damage to, or
destruction of, any material part of the Project, (ii) a taking of all or any
material part of the Project or any right thereunder under the exercise of the
power of eminent domain, (iii) any loss of all or any material part of the
Project because of failure of title or (iv) the commencement of any proceedings
or negotiations which might result in such a taking or loss, the Borrower shall
give prompt notice thereof to the Authority, the Letter of Credit Issuer, if
any, and the Trustee describing generally the nature and extent of such damage,
destruction, taking, loss, proceedings or negotiations.
Section 7.2 Damage and Destruction. Unless Payment of the Bonds has
occurred or the Borrower has provided for the redemption of all of the Bonds
pursuant to an optional redemption, in accordance with Section 405(b) of the
Indenture, if all or any part of the Project
-10-
is destroyed or damaged by fire or other casualty, then the Borrower shall
restore promptly the property damaged or destroyed to substantially the same
condition as before such damage or destruction, with such alterations and
additions as the Borrower may determine and which will not impair the capacity
or character of the Project for the purpose for which it then is being used or
is intended to be used. Any Net Proceeds paid to the Trustee shall be deposited
in a sub-account of the Bond Fund created for this purpose. The Borrower may
apply so much as may be necessary of the Net Proceeds of insurance received on
account of any such damage or destruction to payment of the cost of such
restoration, either on completion or as the work progresses but only after
delivery to the Trustee and the Letter of Credit Issuer of a certificate or
certificates from the Borrower containing such information regarding the
restoration as the Trustee and the Letter of Credit Issuer may reasonably
require. If such Net Proceeds are not sufficient to pay in full the cost of such
restoration, then the Borrower shall pay so much of the cost as may be in excess
of such Net Proceeds. Any balance of Net Proceeds held by the Trustee, after
payment of the cost of such restoration shall be deposited in a separate
segregated sub-account in the Bond Fund, invested in accordance with Section 801
of the Indenture and used by the Trustee to redeem Bonds in accordance with
Section 405(b) of the Indenture. The Borrower hereby agrees that it will direct
the optional redemption required by the preceding sentence.
Section 7.3 Condemnation and Loss of Title. Unless Payment of the Bonds has
occurred or the Borrower has provided for the redemption of all of the Bonds
pursuant to an optional redemption in accordance with Section 405(b) of the
Indenture, if title to, or the temporary use of, all or any part of the Project
shall be taken under the power of eminent domain or lost because of failure of
title, then the Borrower shall cause the Net Proceeds from any such condemnation
award or from title insurance to be paid over to the Trustee to be held by it in
a sub-account of the Bond Fund to be created for such purpose and applied to the
restoration of the Project to substantially its condition before the exercise of
such power of eminent domain or failure of title but only upon delivery to the
Trustee and the Letter of Credit Issuer of a certificate or certificates from
the Borrower to contain such information as the Trustee and the Letter of Credit
Issuer may reasonably require. Any balance of Net Proceeds remaining after
payment of the cost of such restoration shall be deposited in a separate
segregated sub-account in the Bond Fund, invested in accordance with Section 801
of the Indenture and used by the Trustee to redeem Bonds in accordance with
Section 405(b) of the Indenture. The Borrower hereby agrees that it will direct
the optional redemption required by the preceding sentence.
Section 7.4 Provisions of Reimbursement Agreement with Letter of Credit
Issuer During Letter of Credit Period. If, during the Letter of Credit Period,
the provisions of this Article VII and the provisions of the Reimbursement
Agreement are in conflict, then the provisions of the Reimbursement Agreement
shall control.
-11-
ARTICLE VIII
Special Covenants
Section 8.1. Use of Proceeds; Other Matters with Respect to Project, Bonds
and Tax Exemption. (a) Use of Proceeds; Prohibited Uses of Project, etc. Neither
the Authority knowingly nor the Borrower shall cause any proceeds of the Bonds
to be expended except pursuant to the Indenture. The Borrower shall not (i)
allow any payment out of proceeds of the Bonds (A) if such payment is to be used
for the acquisition of any property (or an interest therein) unless the first
use of such property is pursuant to such acquisition, provided that this clause
(A) shall not apply to any building if the "rehabilitation expenditures", as
defined in Section 147(d) of the Code, with respect to the building equal or
exceed 15% of the portion of the cost of acquiring the building financed with
the proceeds of the Bonds, (B) if as a result of such payment, 25% or more of
the proceeds of the Bonds would be considered as having been used directly or
indirectly for the acquisition of land (or an interest therein), (C) if, as a
result of such payment, less than 95% of the net proceeds of the Bonds, expended
at the time of such payment would be considered as having been used for costs of
the acquisition, construction or improvement of land or property of a character
subject to the allowance for depreciation and for a "manufacturing facility,"
all within the meaning of Section 144(a)(1)(A) of the Code or (D) if such
payment is used to pay issuance costs (including counsel fees and placement
fees) in excess of an amount equal to 2% of the principal amount of the Bonds;
(ii) take or omit, or permit to be taken or omitted, any other action with
respect to the use of such proceeds the taking or omission of which would result
in the loss of exemption of interest on the Bonds from Federal income taxation
under Section 103(a) of the Code; or (iii) take or omit, or permit to be taken
or omitted, any other action the taking or omission of which would cause the
loss of such exemption. Without limiting the generality of the foregoing,
neither the Authority knowingly nor the Borrower shall use the proceeds of the
Bonds, or permit such proceeds to be used directly or indirectly, for the
acquisition of land (or an interest therein) to be used for farming purposes, or
to provide (x) any facility the primary purpose of which is retail food and
beverage services, automobile sales and service, the provision of recreation or
entertainment, or banks, savings and loan institutions or mortgage companies,
(y) any airplane, skybox or other private luxury box, any health club facility,
any facility primarily used for gambling, any store the principal business of
which is the sale of alcoholic beverages for consumption off premises, any
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 hand ball or racquet ball court), hot tub
facility, suntan facility, or race track, or (z) single or multi-family
residences. None of the proceeds is to be used for office space. None of the net
proceeds of the Bonds is to be used to provide facilities that are "directly
related and ancillary" to the manufacturing operations conducted at the facility
site.
(b) Average Maturity and Economic Life. The Borrower shall not request,
approve or permit to be approved on its behalf any payment of Bond Proceeds if,
as a result of such payment, the "average maturity" of the Bonds would exceed
120 percent of the "average
-12-
reasonably expected economic life" of the Project, within the meaning of Section
147(b) of the Code.
(c) Use by United States or its Agencies. The Borrower shall not permit the
Project to be used or occupied, other than as a member of the general public, in
any manner for compensation by the United States or an agency or instrumentality
thereof, including any entity with statutory authority to borrow from the United
States (in any case within the meaning of Section 149(b) of the Code) unless the
Borrower shall deliver to the Trustee and the Letter of Credit Issuer, if any,
an opinion of Bond Counsel in form and substance satisfactory to the Trustee and
the Letter of Credit Issuer to the effect that such use will not impair the
exemption of interest on the Bonds from Federal income taxation.
(d) Other Bonds to be Issued. During the period commencing on the Closing
Date and ending 15 days thereafter, there shall be issued no "private activity
bonds", as defined in Section 141 of the Code, which are guaranteed or otherwise
secured by payments to be made by the Borrower or any "related person" (or
groups of "related persons") unless the Borrower shall deliver to the Trustee
and the Letter of Credit Issuer, if any, an opinion of Bond Counsel in form and
substance satisfactory to the Trustee and the Letter of Credit Issuer to the
effect that the issuance of such "private activity bonds" will not impair the
exemption of interest on the Bonds from federal income taxation. Except for the
Borrower, the Letter of Credit Issuer and the Remarketing Agent, or any "related
person" (or group of "related persons"), no person has (i) guaranteed, arranged,
participated in, assisted with or paid any portion of the cost of the issuance
of, the Bonds, or (ii) provided any property or any franchise, trademark or
trade name (within the meaning of Section 1253 of the Code) which is to be used
in connection with the Project.
(e) Limit on Amount of Bonds. The Borrower represents that on the date of
issuance of the Bonds, (i) obligations have not been assumed, capital
expenditures have not been made and outstanding obligations do not exist that
will cause the "aggregate face amount" of the Bonds as computed under the
provisions of Section 144(a) and related sections of the Code to exceed
$10,000,000, and (ii) outstanding obligations do not exist that will cause the
"aggregate face amount" of the Bonds allocated to any "test-period beneficiary,"
as defined in Section 144(a)(10) of the Code, when increased by such
obligations, to exceed $40,000,000. The "aggregate authorized face amount" of
the Bonds allocated to any "test period beneficiary" (as defined in Section
144(a)(10) of the Code) of the Project, when increased by the outstanding
"tax-exempt facility related" bonds allocated to such test period beneficiary,
does not exceed $40,000,000. The Borrower covenants that the Borrower will not
allow (i) any person or entity to become a test period beneficiary of the
facilities financed by the Bonds, if such act would cause such $40,000,000 limit
to be exceeded, as provided in Section 144(a)(10) of the Code and (ii) make
capital expenditures in amounts within the three years after the date of the
issuance of the Bonds that would cause the $10,000,000 limitation set forth in
Section 144(a)(4) of the Code to be exceeded.
(f) Tax Information; 8038 Form. The Borrower hereby represents and warrants
that the information that is provided by the Borrower that is contained in the
-13-
certificates, agreements or letters of representation of the Borrower with
respect to the compliance with the requirements of Section 103 of the Code,
including the information in Form 8038 (excluding the issue number and the
employer identification number of the Authority), filed by the Authority with
respect to the Bonds and the Project, is true and correct in all material
respects.
Section 8.2 Arbitrage and Rebate.
(a) The Borrower hereby covenants with, and certifies to, and for the
benefit of, the holders of the Bonds and the Authority that so long as the Bonds
remain Outstanding, moneys on deposit in any fund or account established,
maintained or permitted to be established or maintained under the Indenture or
under any of the Basic Documents in connection with the Bonds, whether or not
such moneys were derived from the proceeds of the sale of the Bonds or from any
other source, will not be used or invested in a manner which will cause the
Bonds to be classified as "arbitrage bonds" within the meaning of Section 148(a)
of the Code. The Borrower obligates itself to comply with the requirements of
Section 148 of the Code and any regulations, whether temporary or final,
promulgated thereunder or relating thereto, including but not limited to
Treasury Regulation Sections 1.148-0 through 1.148-11 (such Section 148 and such
regulations hereinafter referred to as the "Arbitrage Rules").
(b) Except with respect to earnings on funds and accounts qualifying for an
exception to the rebate requirement of Section 148 of the Code, the Borrower
will compute and pay to the United States of America the amount, if any,
required by Section 148(f)(2) of the Code (the "Rebate Amount"), as provided in
the following subsections of this section.
(c) The Authority, at the direction of the Borrower, selects June 1 as the
end of each bond year with respect to the Bonds. The fifth June 1 following the
issuance of the Bonds will be the initial installment computation date for the
Bonds pursuant to Treasury Regulations Section 1.148-3(e) (the "Initial
Installment Computation Date"), unless the Authority, at the direction of the
Borrower, delivers to the Trustee a certificate, signed by an authorized
Authority officer, selecting another date to be the installment computation date
prior to the date on which any amount with respect to the Bonds is paid or
required to be paid to the United States of America as required by Section 148
of the Code.
(d) Within 30 days after the Initial Installment Computation Date, unless
such date is changed by the Authority pursuant to paragraph (c), and at least
once every five years thereafter, the Borrower will cause the Rebate Amount with
respect to the Bonds to be computed and will deliver a copy of such computation
(the "Rebate Amount Certificate") to the Authority and to the Trustee. Prior to
any payment of the Rebate Amount with respect to the Bonds to the United States
of America as required by Section 148 of the Code, the Rebate Amount Certificate
setting forth such Rebate Amount shall be prepared or approved by (i) an
independent certified public accountant, (ii) any recognized, independent
arbitrage rebate calculation service acceptable to the Trustee or the Authority
or (iii) Bond Counsel. The
-14-
Borrower agrees to keep a record of such determinations until at least six years
after the payment of the Bonds in full.
(e) Not later than 55 days after the Initial Installment Computation Date,
the Borrower, on behalf of the Authority, shall pay to the Trustee for deposit
in the Rebate Fund and payment to the United States of America 90% of the Rebate
Amount with respect to the Bonds as set forth in the Rebate Amount Certificate
prepared with respect to the Initial Installment Computation Date. At least once
on or before 55 days after the installment computation date that is the fifth
anniversary of the Initial Installment Computation Date and on or before 55 days
after every fifth anniversary date thereafter until payment in full of the
Bonds, the Borrower, on behalf of the Authority, shall pay to the Trustee for
deposit in the Rebate Fund and payment to the United States of America the
amount, if any, by which 90% of the Rebate Amount with respect to the Bonds set
forth in the most recent Rebate Amount Certificate exceeds the aggregate of all
such payments theretofore made to the United States of America pursuant to this
section. On or before 55 days after payment in full of the Bonds, the Borrower,
on behalf of the Authority, shall pay to the Trustee for deposit in the Rebate
Fund and payment to the United States of America the amount, if any, by which
100% of the Rebate Amount with respect to the Bonds set forth in the Rebate
Amount Certificate for the date of payment of the Bonds exceeds the aggregate of
all payments theretofore made pursuant to this Section. The Borrower shall file
such forms in connection with such rebate payments as may be required by the
Internal Revenue Service.
(f) Notwithstanding anything contained herein to the contrary, no such
payment will be made if the Borrower receives and delivers to the Authority and
the Trustee an opinion of Bond Counsel that such payment is not required under
the Code to prevent the Bonds from becoming "arbitrage bonds" within the meaning
of Section 148 of the Code.
(g) The Authority shall not be liable to the Borrower by way of
contribution, indemnification, counterclaim, set-off or otherwise for any
payment made or expense incurred by the Borrower pursuant to this Section,
notwithstanding that payments to the Authority pursuant to this Section or
investment by the Trustee of such payments may result in whole or in part in the
Borrower's liability for such payment or expense.
NOTHING CONTAINED HEREIN SHALL BE INTERPRETED OR CONSTRUED TO REQUIRE THE
AUTHORITY OR THE TRUSTEE TO CALCULATE OR TO PAY THE "REBATE AMOUNT," SAME BEING
THE SOLE AND EXCLUSIVE RESPONSIBILITY AND OBLIGATION OF THE BORROWER.
Section 8.3 Reports. The Borrower agrees that the Authority shall not be
required to prepare any documents or reports that may be required to be prepared
under the Basic Documents and that the Authority shall not be responsible for
the content thereof or any costs associated therewith. The Authority agrees that
it will execute such reports as needed and file with the Internal Revenue
Service any forms or other documents that are required to be filed with the
Internal Revenue Service.
-15-
Section 8.4 Compliance with Tax Laws. The Borrower will at its sole expense
take all action required under the Code, including but not limited to Section
148 of the Code, to prevent loss of the exclusion of interest on the Bonds from
gross income for federal income tax purposes under federal income tax law,
including but not limited to paying on behalf of the Authority the Rebate Amount
to the United States of America in accordance with the "rebate requirement"
described in Section 1.148-2 of the Treasury Regulations, and complying with the
requirements of Section 708 of the Indenture, including making the calculations
and deposits required therein. The Borrower agrees that it will comply with all
provisions of the Tax Compliance Agreement. The Borrower and the Authority agree
that the representations, warranties and covenants contained in the Tax
Compliance Agreement are hereby incorporated into this Agreement by reference
and made a part hereof. The Borrower agrees that the Letter of Credit Account
and the Payments Account of the Bond Fund and the Reimbursement Account in the
Reimbursement Agreement will be used primarily to achieve a proper matching of
revenues and debt service within each Bond Year and will be depleted at least
once a year, except for a reasonable carryover not to exceed the greater of (A)
one year's earnings on such accounts or (B) one-twelfth (1/12th) of the most
recent annual debt service on the Bonds.
Section 8.5 Indemnification by Borrower. The Borrower shall indemnify and
save harmless the Authority and the Trustee and their respective officers,
directors, employees and agents (hereinafter the "Indemnitees") from and against
all liabilities, obligations, claims, damages, penalties, fines, losses, costs
and expenses (hereinafter referred to as "Damages"), including without
limitation:
(a) all amounts paid in settlement of any litigation commenced or
threatened against the Indemnitees, if such settlement is effected with the
written consent of the Borrower;
(b) all expenses reasonably incurred in the investigation of, preparation
for or defense of any litigation, proceeding or investigation of any nature
whatsoever, commenced or threatened against the Borrower, the Project or the
Indemnitees;
(c) any judgments, penalties, fines, damages, assessments, indemnities or
contributions; and
(d) the reasonable fees of attorneys, auditors, and consultants; provided
that in all cases (a) through (d) the Damages arise out of:
(i) failure by the Borrower, or its officers, directors, employees or
agents, to comply with the terms of the Basic Documents and any agreements,
covenants, obligations, or prohibitions set forth therein;
(ii) any action, suit, claim or demand contesting or affecting the
title of the Project;
(iii) any breach by the Borrower of any representation or warranty set
forth in the Basic Documents or any certificate delivered pursuant thereto,
and any claim that any
-16-
representation or warranty of the Borrower contains or contained any untrue
or misleading statement of fact or omits or omitted to state any material
facts necessary to make the statements made therein not misleading in light
of the circumstances under which they were made;
(iv) any action, suit, claim, proceeding or investigation of a
judicial, legislative, administrative or regulatory nature arising from or
in connection with the acquisition, operation or use of the Project; or
(v) any suit, action, administrative proceeding, enforcement action,
or governmental or private action of any kind whatsoever commenced against
the Borrower, the Project or the Indemnitees which might adversely affect
the validity or enforceability of the Bonds, the Basic Documents, or the
performance by the Borrower or any Indemnitee of any of their respective
obligations thereunder.
If any action or proceeding (including any governmental investigation)
shall be brought or asserted against any Indemnitee, then such Indemnitee shall
promptly notify the Borrower in writing, and the Borrower shall assume the
defense thereof, including the employment of counsel satisfactory to such
Indemnitee and the payment of all expenses. Such Indemnitee shall have the right
to employ separate counsel in any such action and to participate in the defense
thereof, but the reasonable fees and expenses of its counsel shall be the
expense of such Indemnitee unless (i) the Borrower has agreed to pay such
reasonable fees and expenses, (ii) the Borrower shall have failed to assume the
defense of such action or proceeding and employed counsel satisfactory to such
Indemnitee in any such action or proceeding, or (iii) the Indemnitee shall have
been advised by counsel that there may be one or more legal defenses available
to him or it which are different from, or additional to, those available to the
Borrower, in which case, if the Indemnitee notifies the Borrower in writing that
such person elects to employ separate counsel at the expense of the Borrower,
the Borrower shall not have the right to assume the defense of the action or
proceeding on behalf of such Indemnitee, it being understood, however, that the
Borrower shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings 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 at any time for any Indemnitee. The Borrower shall not be liable for
any settlement of such action or proceeding effected without its written
consent, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding, the Borrower agrees
to indemnify and hold harmless the Indemnitee from and against any loss or
liability by reason of such settlement or judgment.
Nothing contained herein shall require the Borrower to indemnify any
Indemnitee for any claim or liability resulting from its or their gross
negligence (as to the Trustee and its officers, directors employees and agents,
under the standard of care set forth in the Indenture and as to the Authority
and its officers, directors, employees and agents, gross negligence) or its or
their willful, wrongful acts.
Section 8.6 Payment of Expenses. The Borrower covenants to pay, either from
the proceeds of the Bonds (subject to the limitation on issuance costs set forth
in Section 601(b) of
-17-
the Indenture) or from its own funds, within thirty (30) days after receiving
written demand therefor, an amount sufficient to pay the following costs and
expenses, including counsel fees, incurred by the Authority, the Trustee and
other parties described below as a result of actions taken pursuant to the
financing contemplated by this Agreement:
(a) All costs, fees and expenses incurred by the Authority (including
attorney's fees) in connection with:
(i) the authorization, issuance and sale of the Bonds;
(ii) the ownership, operation or use of the Project, whether owned by
the Authority or the Borrower; and
(iii) prepayment or redemption of the Bonds.
(b) Administrative costs and expenses of the Authority, including the fees
of attorneys, accountants, engineers, appraisers or consultants, paid or
incurred by the Authority by reason of the Bonds being Outstanding or pursuant
to requirements of the Basic Documents.
(c) Such other fees and expenses of the Authority, not directly related to
the Project, but attributable to the Authority's financing of industrial or
commercial projects, including without limitation, a share of costs of the
Authority's annual audit as required by the Act, determined as follows:
(i) All costs and fees relating to the annual audit and directly
attributable to a particular applicant or project shall be charged to such
applicant; and
(ii) Any costs and fees of such audit not directly attributable to any
applicant or project shall be allocated among all applicants having bonds
outstanding, pro rata, as the amount of bonds originally issued for such
applicant bears to the total face amount of bonds issued by the Authority
of which any portion of any issue remains outstanding and unpaid.
(d) Such other of the Authority's ordinary and extraordinary general,
administrative and operating costs and expenses incurred during each year. The
Borrower's proportionate share of said costs will be the percentage which the
unpaid principal amount of the Bonds outstanding bears to the aggregate unpaid
principal amount of all notes and bonds issued by the Authority and outstanding
at the time the costs and expenses are billed or incurred, as the case may be.
(e) All costs, fees and expenses of the Remarketing Agent and its counsel,
the Trustee and its counsel, and Bond Counsel, and all other costs, fees and
expenses incident to the issuance of the Bonds and the financing of the Project.
(f) All costs, fees and expenses of surveyors, engineers, architects,
appraisers and accountants employed to make examinations or reports or to render
opinions required by the Basic Documents.
-18-
(g) All costs, fees and other costs payable to the Trustee for services or
indemnity under the Indenture.
(h) All costs incurred in connection with the redemption or purchase of the
Bonds.
(i) All amounts which are advanced by the Authority or the Trustee under
the authority of this Agreement or the Indenture for the benefit of the
Borrower.
(j) All costs of collection and enforcement, including reasonable
attorneys' fees, incurred by the Authority or the Trustee in connection with
obtaining payment of the Bonds or payment of any other amounts or performance by
the Borrower under the Basic Documents.
(k) Any other payments required to be made pursuant to the Basic Documents.
Payments pursuant to this Section shall be made by the Borrower directly to
the persons, firms or governmental agencies entitled to such payments, or, at
the direction of the Authority or the Trustee, to the Authority or the Trustee
as reimbursement therefor. Notwithstanding anything to the contrary herein, the
aggregate amounts paid to the Authority shall not equal or exceed an amount that
would cause the "yield" on this Agreement to be "materially higher" than the
yield on the Bonds, as such terms are used in the Code.
Section 8.7 Approval of Indenture. The Borrower approves the terms and
conditions of the Indenture and agrees to perform all obligations to be
performed by it under the Indenture.
Section 8.8 Right to Purchase Tendered Bonds. On any Tender Date, the
Borrower shall have the right to elect to purchase Bonds tendered on a Tender
Date by paying to the Trustee for deposit in the Bond Purchase Account Eligible
Funds (or funds which will be Eligible Funds on the Tender Date in question) to
be used and applied to the purchase of Bonds on a Tender Date in accordance with
Section 404 of the Indenture. Notwithstanding any purchase of Bonds pursuant to
this Section, the Borrower shall continue to be obligated to make deposits into
the Bond Fund of amounts sufficient to pay when due the principal and redemption
price of, and interest on, and purchase price of, the Bonds in accordance with
Section 4.1.
Section 8.9 Notice of Act of Bankruptcy. The Borrower agrees promptly to
notify the Authority, the Trustee and, during the Letter of Credit Period, the
Letter of Credit Issuer of the occurrence of an Act of Bankruptcy with respect
to it or if it becomes aware of an Act of Bankruptcy with respect to the
Authority.
-19-
ARTICLE IX
Events of Default and Remedies
Section 9.1 Event of Default Defined. Each of the following events, upon
its occurrence and the expiration of the applicable grace period, is hereby
declared an Event of Default:
(a) Failure of the Borrower to make any payment under Section 4.1 when the
same becomes due and payable, and the continuation of such failure for ten (10)
days;
(b) Failure of the Borrower to observe or perform any of its other
covenants, conditions or agreements hereunder for a period of thirty (30) days
after notice specifying such failure and requesting that it be remedied, given
by the Authority, the Trustee or the Letter of Credit Issuer, if any, to the
Borrower; provided, however, that in the instance of any default which by its
nature can be cured but is not susceptible of being cured within such thirty
(30) day period, then it shall not constitute an Event of Default if the
Borrower commences the cure within such thirty (30) day period and thereafter
prosecutes the same with due diligence to conclusion;
(c) The occurrence of an Act of Bankruptcy;
(d) An Event of Default under the Indenture; or
(e) If during the Letter of Credit Period, receipt by the Authority and the
Trustee of written notice from the Letter of Credit Issuer stating that an Event
of Default has occurred under the Reimbursement Agreement and demanding that the
Bonds be declared immediately due and payable.
Section 9.2 Remedies on Default. Upon the occurrence of an Event of Default
under the Agreement, the Authority or the Trustee, as assignee of the Authority,
but only if acceleration of the principal amount of the Bonds has been declared
pursuant to the Indenture, shall take any one or more of the following remedial
steps:
(a) Declare all payments hereunder to be immediately due and payable in the
amount sufficient to pay all the principal of and interest on, and all other
amounts payable under the terms of the Bonds, whereupon the same shall become
immediately due and payable without notice or demand of any kind;
(b) Take whatever action at law or in equity as may appear necessary or
desirable to collect the amounts then due and thereafter to become due or to
enforce observance, or performance of any covenants, conditions or agreements of
the Borrower in this Agreement or any of the Basic Documents;
-20-
(c) Exercise any remedy afforded a secured party under the UCC then in
effect, to the extent that property subject to this Agreement or any other Basic
Document is property subject to the UCC;
(d) Exercise any remedy provided in the Basic Documents; or
(e) Draw upon the Letter of Credit, if any.
The Authority or the Trustee shall give notice to the Borrower, the
Remarketing Agent and the Letter of Credit Issuer, if any, of the exercise of
any of the rights or remedies under this Section.
Any balance of the moneys collected pursuant to action taken under this
Section remaining after payment of all costs and expenses of collection and
amounts due hereunder shall be used for the Payment of the Bonds; provided that
after Payment of the Bonds any such balance shall be paid to the Borrower or to
the Letter of Credit Issuer, if any, if at the time the Letter of Credit Issuer
is entitled to the benefits of the Indenture inasmuch as it has been subrogated
to the rights of the Trustee thereunder.
Section 9.3 No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Authority or the Trustee is intended to be exclusive of any
other remedy, and every remedy shall be cumulative and in addition to every
other remedy herein or now or hereafter existing at law, in equity or by
statute. No delay or failure to exercise any right or power accruing upon an
Event of Default shall impair any such right or power or shall be construed to
be a waiver thereof, and any such right or power may be exercised from time to
time and as often as may be deemed expedient.
Section 9.4 Attorneys' Fees and Other Expenses. The Borrower shall on
demand pay to the Authority and the Trustee the reasonable fees of attorneys and
other reasonable expenses incurred by any of them in the collection of payments
hereunder or the enforcement of any other obligations of the Borrower upon an
Event of Default.
Section 9.5 No Additional Waiver Implied by One Waiver. If either party or
its assignee waives a default by the other party under any covenant, condition
or agreement herein, such waiver shall be limited to the particular breach
hereunder.
ARTICLE X
Miscellaneous
Section 10.1 Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns. No assignment by the Borrower shall relieve it of its
obligations under this Agreement.
-21-
Section 10.2 Amendments. This Agreement may not be amended except by an
instrument in writing signed by the parties and consented to by the Trustee
pursuant to Article XIII of the Indenture. The Borrower agrees that no amendment
to any of the Basic Documents shall be effective without the prior written
consent of the Trustee in accordance with the terms of the Indenture and, during
the Letter of Credit Period, the Letter of Credit Issuer.
Section 10.3 Exculpation of Authority. Notwithstanding anything in the
Bonds or the Basic Documents to the contrary, the obligations of the Authority
are not general obligations of the Authority, but are limited obligations
payable solely from the Revenues which are specifically pledged for such
purpose. Neither the Bonds nor the Basic Documents shall be deemed to create or
constitute a debt or a pledge of the faith and credit of the Commonwealth of
Virginia or any political subdivision thereof, including the County and the
Authority. Neither the Commonwealth of Virginia nor any political subdivision
thereof, including the County and the Authority is obligated to pay the Bonds or
the redemption price or purchase price thereof or the interest or premium, if
any, thereon or other costs incident thereto except from the special funds
pledged therefor and the property pledged or mortgaged therefor. No present or
future director, member, officer, employee or agent of the Authority, or any
successor or assignee of any of the foregoing, shall be liable personally with
respect to this Agreement or for any other action taken by such individual
pursuant to or in connection with the financing provided for in this Agreement.
The Authority shall be protected in acting upon any notice, request,
requisition, consent, certificate or other writing reasonably believed by it to
be genuine and correct and to have been signed or sent by the proper person or
persons.
Section 10.4 Applicable Law. This Agreement shall be governed by the
applicable laws of the Commonwealth.
Section 10.5 Severability. If any clause, provision or section of this
Agreement shall be held illegal or invalid by any court, the illegality or
invalidity of such clause, provision or section shall not affect the remainder
of this Agreement which shall be construed and enforced as if such illegal or
invalid clause, provision or section had not been contained in this Agreement.
If any agreement or obligation contained in this Agreement is held to be in
violation of law, then such agreement or obligation shall be deemed to be the
agreement or obligation of the Authority and the Borrower, as the case may be,
only to the extent permitted by law.
Section 10.6 Notices. Unless otherwise provided for herein, all demands,
notices, approvals, consents, requests, opinions, and other communications
hereunder shall be in writing and shall be deemed to have been given if given in
accordance with the provisions of Section 1405 of the Indenture.
Section 10.7 Agreements to Survive. The representations, warranties,
covenants, terms and agreements contained in this Agreement shall survive the
execution and delivery of the Bonds and the Basic Documents.
Section 10.8 Right to Cure Default. If the Borrower shall fail to make any
payment or to perform any act required of it under the Bonds or the Basic
Documents, the Authority, the
-22-
Letter of Credit Issuer, if any, or the Trustee, without prior notice to or
demand upon the Borrower and without waiving or releasing any obligation or
default, may (but shall be under no obligation to) make such payment or perform
such act. All amounts so paid by the Authority, the Letter of Credit Issuer or
the Trustee and all costs, fees and expenses, including but not limited to
attorneys' fees, so incurred shall be secured by the Basic Documents and shall
be payable by the Borrower to the party making the payment or incurring the
cost, fee or expense as an additional obligation under the Basic Documents,
together with interest thereon at a per annum rate equal to the Prime Rate as in
effect from time to time plus one percent (1%) until paid. The Borrower's
obligation under this Section shall survive Payment of the Bonds.
Section 10.9 No Joint Venture. Nothing in this Agreement shall be construed
as making any party a partner or joint venturer with any other party.
Section 10.10 Headings. The headings of the several articles and sections
of this Agreement are inserted for convenience only and do not comprise a part
of this Agreement.
Section 10.11 Term of Agreement. This Agreement shall be effective upon its
execution and delivery, provided that the Bonds and the other Basic Documents
previously or simultaneously have been executed and delivered. Except as
otherwise specified, the Borrower's obligations under the Bonds and the Basic
Documents shall expire upon Payment of the Bonds and all other amounts payable
by the Borrower under the Basic Documents.
Section 10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which together shall
constitute but one and the same instrument, except that to the extent, if any,
that this Agreement shall constitute personal property under the UCC, no
security interest in this Agreement may be created or perfected through the
transfer or possession of any counterpart other than an original counterpart,
which shall be the counterpart containing the receipt therefor, executed by the
Trustee following the signatures to this Agreement.
Section 10.13 Trustee as Assignee and Third Party Beneficiary. The
rights of the Authority under this Agreement (except for certain rights to
notices and to payment of fees and expenses and indemnification contained in
Section 8.5 and 8.6) are to be assigned to the Trustee. The Borrower consents to
such assignment and agrees that the Trustee shall be entitled to enforce this
Agreement directly against the Borrower as a third party beneficiary hereof.
-23-
IN WITNESS WHEREOF, the Authority and the Borrower have caused this
Agreement to be executed in their respective names by their duly authorized
representatives, all as of the date first above written.
INDUSTRIAL DEVELOPMENT AUTHORITY
OF MECKLENBURG COUNTY, VIRGINIA
By _______________________________
Chairman
SHERWOOD FOODS, INC.
By /s/ Xxxx Xxxxxxxx
--------------------------------
Vice President
[Seal]
ATTEST:
By________________________________
Secretary
-24-
RECEIPT
Receipt of the foregoing original counterpart of the Loan Agreement, dated
as of May 1, 1997, between the Industrial Development Authority of Mecklenburg
County, Virginia, and Sherwood Foods, Inc., is hereby acknowledged.
CRESTAR BANK, as Trustee
May __, 1997 By _______________________________
Authorized Officer
-25-
