UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-21133
SPURLOCK INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Virginia 84-1018956
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
209 West Main Street
Waverly, Virginia 23890
(Address of Principal Executive Offices) (Zip Code)
(804) 834-8980
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained in this form, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. _X_
The aggregate market value of the voting stock of the registrant held
by non-affiliates computed by reference to the average bid and asked prices of
such stock, as of March 24, 1998, was $1,269,100.
The number of shares outstanding of Common Stock as of March 31, 1998,
was 6,726,066.
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TABLE OF CONTENTS
PART I
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Item 1. Business.......................................................................
Item 2. Properties.....................................................................
Item 3. Legal Proceedings..............................................................
Item 4. Submission of Matters to a Vote of Security Holders............................
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................................
Item 6. Selected Financial Data........................................................
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation.......................................................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.....................
Item 8. Financial Statements and Supplementary Data....................................
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.........................................
PART III
Item 10. Directors and Executive Officers of the Registrant.............................
Item 11. Executive Compensation.........................................................
Item 12. Security Ownership of Certain Beneficial Owners and
Management.....................................................................
Item 13. Certain Relationships and Related Transactions.................................
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.......................................................................
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PART I
Item 1. Business
General
Spurlock Industries, Inc. (the "Company") is a Virginia corporation
organized in 1996. The Company is the successor to Air Resources Corporation
("Air Resources"), a Colorado corporation organized in 1986. At a special
meeting of the shareholders of Air Resources held on June 11, 1996, the
shareholders of Air Resources approved the merger of Air Resources into the
Company, in order, among other things, to change the domicile of Air Resources
from Colorado to Virginia. Such merger was consummated on July 26, 1996.
References herein to the "Company" shall include Air Resources as predecessor to
the Company.
Through its wholly owned subsidiary, Spurlock Adhesives, Inc.
("Spurlock Adhesives"), the Company develops, manufactures and markets specialty
thermo-setting resins and formaldehyde for the forest products, building
products and furniture industries. The Company also produces, on a limited
basis, fertilizer products for the agricultural and lawn and garden supply
industries. It operates two manufacturing facilities in the southeastern United
States, one in Waverly, Virginia and the other in Malvern, Arkansas. Products of
Spurlock Adhesives are sold throughout the east, southeast and midwest regions
of the United States. A third manufacturing facility, located in Moreau, New
York, is currently under construction and is expected to begin operations in
mid-1998.
The Company's principal executive offices are located at 209 West Main
Street, Waverly, Virginia 23890, and its telephone number is (804) 834-8980.
History
Development of Gas Technology Businesses. In 1991, Air Resources formed
Landfill Energy Systems, Inc. and ARC Engineering Fabrications, Inc. to develop
the equipment and technology necessary to pursue certain contracts relating to
landfill gas recovery. The equipment and technology to be developed was intended
to collect raw gases at landfill sites and process them into commercially usable
natural gas for resale. Air Resources entered into production agreements with
two landfill sites in 1991 and conducted feasibility tests in 1992 and 1993. Air
Resources sustained substantial expenses and operating losses associated with
the development of this technology during that time and had discontinued its gas
recovery development operations by March 1994.
Acquisition of Spurlock Adhesives. On August 5, 1992, Air Resources
acquired Spurlock Adhesives as a wholly-owned subsidiary. Spurlock Adhesives was
founded in 1973 by Harold N. Spurlock, as sole proprietor, and was incorporated
in the Commonwealth of Virginia in 1989. The early years of operation consisted
solely of the production of urea resins and liquid fertilizer products. The
business evolved primarily around the needs of the growing composite wood
products industry. Mr. Spurlock developed a number of innovative products for
the particleboard and medium density fiberboard industries, including the first
single component resin. This new resin replaced an expensive four component
system that was being used in the medium density fiberboard industry. Also,
Spurlock Adhesives developed one of the first lower formaldehyde resins for the
particleboard industry in response to concerns expressed by the environmental
community in the early 1980s. The process for producing this product was one of
the first processes patented in this area. See "Patents and Trademarks" below.
The Company has maintained its market leadership in the development of resins
with lower levels of formaldehyde for the particleboard and medium density
fiberboard industries.
Over the years, Spurlock Adhesives has continued to diversify its
customer and market base as well as upgrade its manufacturing facilities. In
1980, Spurlock Adhesives serviced less than 10 customers and produced
approximately 70 million pounds of resins at its Waverly plant, as compared to
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55 customers and 248 million pounds of resins and formaldehyde in 1996. In 1987,
Spurlock Adhesives built a new resin production plant adjacent to its existing
one in Waverly, which increased its resin capacity 400%. In a move to vertically
integrate the Waverly facility, Spurlock Adhesives built its first formaldehyde
production plant in Waverly in 1988. This plant allowed Spurlock Adhesives to
internally supply approximately 80% of its formaldehyde needs for resin
production, thus enabling it to become less dependent on outside supply and to
better control its raw material costs. In 1992, Spurlock Adhesives acquired a
resin and formaldehyde production facility in Malvern, Arkansas from BTL
Specialty Resins Corp. of Toronto, Ontario (Canada) at the time that it became a
wholly owned subsidiary of Air Resources. This acquisition gave Spurlock
Adhesives a larger distribution area, thus allowing it to compete for business
in the midwest region of the United States. In 1993, Spurlock Adhesives
completed a state-of-the-art formaldehyde plant in Waverly, which it leased from
D.B. Western, Inc. until July 1996, when Spurlock Adhesives purchased the plant.
This plant fulfills all of the current formaldehyde needs of the Waverly resin
operations and offers Spurlock Adhesives the flexibility of being able to
produce additional marketable products. Additional information regarding
Spurlock Adhesives' two manufacturing facilities and a third currently under
construction is set forth under Item 2., "Properties," below.
Spurlock Adhesives is presently the sole operating asset of the
Company. For additional information, see Item 7., "Management's Discussion and
Analysis of Financial Condition and Results of Operations," below.
Acquisition Strategy. Upon the formation of Air Resources in 1986, the
strategy of management was to seek the acquisition of existing businesses that
offered a potential for profit. This strategy resulted in Air Resources being
engaged in several unrelated lines of business during its brief existence.
Present management of the Company believes that the Company's future
profitability will be enhanced by de-emphasizing the acquisition of unrelated
businesses and experimental technologies and instead concentrating on the
expansion of the businesses that are complimentary to existing operations. In
this regard, management of the Company will from time to time consider
acquisitions of carefully selected businesses that are engaged in the use of
formaldehyde or formaldehyde derivatives.
New York Project. In the fourth quarter of 1996, the Company purchased
property in the Moreau Industrial Park, located in South Glens Falls, New York,
obtained the necessary regulatory approvals and initiated construction of a
manufacturing facility for the production of formaldehyde and resins. The
facility consists of two formaldehyde plants (one purchased and one leased), one
resin plant and ancillary equipment, buildings and tank farms. The total
estimated cost of the project is $8,300,000 for the purchased plants, excluding
soft costs such as interest, environmental permits and legal and administrative
expenses. D.B. Western, Inc. is the general contractor of the project and owns
the leased formaldehyde plant. Payments under the lease are $46,139 per month
over a ten-year term, with a purchase option at the end of three years. The
financing sources for the purchased plants include a term loan for $1,500,000,
amortized for 10 years at an interest rate of LIBOR plus 2.75%, the proceeds
from a tax-exempt bond in the amount of $6,000,000 issued by Saratoga County,
New York, amortized for 10 years at a fixed interest rate of 4.74%, and the
Company's operating cash flow for the remaining $800,000 and the soft costs. As
of December 31, 1997, the unexpended bond fund balance was approximately
$3,890,000. Management believes that construction is proceeding on schedule, and
the Moreau facility is expected to begin operations in mid-1998.
Management believes that the region to be served by the Moreau facility
is a very favorable market. There is currently industry undercapacity for resins
and formaldehyde in this market, and purchasers in this region are currently
having to procure products from outside the region at higher prices due to
freight charges required. Accordingly, the Company should be well-positioned
upon the plants' completion to replace such out-of-region products and to
maintain satisfactory pricing of the plants' output.
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Products and Services
The major products produced by Spurlock Adhesives consist of
formaldehyde and two types of thermosetting resins generally classified as
Urea-Formaldehyde Resins ("Urea Resins") and Phenol-Formaldehyde Resins
("Phenolic Resins"). Within these two general resin types are specifically
designed resins developed for the specific needs of certain industries and
individual customers. Spurlock Adhesives also produces fertilizer products for a
limited number of customers.
Urea Resins. These resins are used as the binder system for interior
grade products such as particleboard, medium density fiberboard, plywood and
coated papers. These products are then used in furniture, cabinets, wall panels
and cabinet components. Spurlock Adhesives also produces Urea Resin binder
systems for roof mat that later is processed into asphalt roofing shingles. Urea
Resins are thermosetting, which means that they cure and adhere with the aid of
heat and sometimes pressure. They are characterized as having a Type II bond,
which indicates that they are strong and have a moderate amount of resistance to
moisture and humidity. The major materials involved in the production of Urea
Resins are formaldehyde, urea, triethanolamine, sodium hydroxide, sodium
chloride and other proprietary ingredients. Spurlock Adhesives currently
manufactures and sells approximately 36 different Urea Resins to the
particleboard, medium density fiberboard, interior plywood, treated and coated
papers and fiberglass roof mat/filter media segments of the forest products,
building products and furniture industries. Sales of Urea Resins accounted for
70.7%, 73.6% and 67.6% of net sales for the three years ended December 31, 1997,
1996 and 1995, respectively.
Phenolic Resins. These resins are used as the binder system for
exterior grade construction materials such as oriented strandboard, exterior
plywood and hardboard, as well as the binder for fiberglass and mineral wool
insulation. Further, these resins are also used in paper impregnating for high
pressure laminates, such as counter tops. Phenolic Resins are also
thermosetting, but are classified as having a Type I bond, indicating that they
provide better resistance to moisture and humidity than Urea Resins. Phenolic
Resins typically are slower curing and more expensive. The major materials
involved in the production of these resins are formaldehyde, phenol, urea,
sodium hydroxide, potassium hydroxide and sulfuric acid. Spurlock Adhesives
presently manufactures and sells approximately 11 different Phenolic Resins to
the oriented strandboard, hardboard, fiberglass insulation and mineral wool
insulation segments of the forest products, building products and furniture
industries. Sales of Phenolic Resins accounted for 3.3%, 5.7% and 9.0% of net
sales for the three years ended December 31, 1997, 1996 and 1995, respectively.
Formaldehyde. Spurlock Adhesives produces formaldehyde for its own
internal consumption, but also selectively markets this product to industrial
accounts and other users. The major material involved in the production of
formaldehyde is methanol. Sales of formaldehyde accounted for 23.4%, 19.2% and
22% of net sales for the three years ended December 31, 1997, 1996 and 1995,
respectively.
Fertilizer. Spurlock Adhesives produces both liquid fertilizers and
intermediate fertilizer products, which are purchased and further processed by
customers engaged in the manufacture and sale of fertilizers for agricultural
and lawn and gardening uses. Spurlock Adhesives' production of fertilizer is
similar to the production of Urea Resins produced by Spurlock Adhesives. There
are no significant barriers to entry into this business for other resin
producers. This production, however, serves to diversify Spurlock Adhesives'
product mix in a manner that may reduce financial exposure stemming from
downturns in the business cycle of the forest products, building products and
furniture industries. Sales of fertilizers accounted for 3.5%, 1.5% and 2.1% of
net sales for the three years ended December 31, 1997, 1996 and 1995,
respectively.
Future Products. Spurlock Adhesives conducts experimental research to
develop new and better Urea and Phenolic resins for its existing markets. Future
research will seek, among other things, to reduce further the potential
environmental impact of such resins. In addition, Spurlock Adhesives is
developing several resins for new markets in which it does not materially
participate, such as Urea Resins
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for the fiberglass roofing mat and fiberglass filter media industries and
Phenolic Resins for the hardboard and high pressure laminates industries.
Sales and Marketing
Spurlock Adhesives sells its resin products to commercial manufacturers
in the forest products, building products and furniture industries. The
customers of Spurlock Adhesives include small, medium and large thermosetting
resin users located principally in the east, southeast and midwest regions of
the United States.
Spurlock Adhesives seeks to attract medium to large users of
thermosetting resins by offering a varied selection of high quality resins at
competitive prices, coupled with the willingness and ability to tailor its
products to the customer's individual needs and specifications. Spurlock
Adhesives emphasizes customer service and the continual improvement and
development of new resins to meet the changing needs of the marketplace,
including resins with lower levels of formaldehyde, phenol and methanol to
reduce their potential environmental impact.
Urea Resins are marketed to manufacturers in the particleboard, medium
density fiberboard and interior plywood segments of the forest products,
building products and furniture industries. In addition, Spurlock Adhesives is
seeking to expand its presence in the fiberglass roof mat and fiberglass filter
media segments of these industries. Phenolic Resins are marketed to different
industry segments, including the fiberglass insulation and oriented strandboard
segments with recent emphasis on development of the hardboard segment.
Spurlock Adhesives has a sales and marketing staff consisting of two
full-time Sales Managers. The Sales Managers call on existing and prospective
customers in their individual geographic territories. In circumstances where the
company seeks to qualify new or existing products in a particular industry
segment, the Sales Managers submit samples to prospective customers for
evaluation and testing. The plant managers of the Waverly facility and the
Malvern facility service accounts and assist in the development of new business.
Spurlock Adhesives also employs two independent sales agents to service specific
markets and accounts. In addition, the Corporate Technical Director interacts
with customers and prepares monthly Quality Control Reports for customers who
request them.
Spurlock Adhesives also markets itself and its products through
advertising and participation in industry associations. Advertising is usually
limited to the placement of special features in trade publications and to
general listings of resin producers in trade publications, annual buyers guides
and other individual directories. Employees of Spurlock Adhesives participate in
various industry trade associations and conferences, including the
Particleboard/Medium Density Fiberboard Institute, the Technical Association of
Pulp and Paper Industries, the Forest Products Research Society, the
International Particleboard/Composite Materials Symposium, the International
Woodworkers Fair and the Amino, Phenolic Wood Adhesive Association.
Customers
The principal customers of Spurlock Adhesives as of December 31, 1997
were Willamette Industries (Malvern, Arkansas), Schenectady International
(Schenectady, New York), Union Camp (Franklin, Virginia) and International Paper
(Waverly and Stuart, Virginia; Spring Hope and Statesville, North Carolina; and
Jefferson and Nacogadoches, Texas). Sales to each of these customers represented
at least 15%, but not more than 19%, of Spurlock Adhesives' total consolidated
net sales for 1997. The loss of any one of these customers could have a material
adverse effect on the financial condition of Spurlock Adhesives.
Raw Materials and Suppliers
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The principal raw materials used in the production of resins and
formaldehyde are methanol, urea and phenol. These materials are generally
available at present, and Spurlock Adhesives does not rely on a single producer
for any of its raw materials. Methanol, urea and phenol are commodity chemicals.
In order to assure a continuous supply of these materials, Spurlock Adhesives
enters into multi-year purchase contracts with certain producers for a minimum
supply of these commodities. Purchase orders for commodities are placed several
weeks or months in advance of delivery. Although prices for these commodities
may fluctuate, Spurlock Adhesives seeks to minimize the risk of such price
fluctuations by including provisions in customer agreements that adjust product
sales prices to reflect changes in Spurlock Adhesives' raw material costs. The
amount of any change in raw material costs for purposes of these price
adjustment provisions is determined by reference to market indices for specific
commodities. By matching increases and decreases in raw material costs with
corresponding increases and decreases in the sales prices for its products,
Spurlock Adhesives is better able to maintain profit margins.
Competition
The business of developing and manufacturing liquid thermosetting
resins is highly competitive. The principal products of Spurlock Adhesives
compete against similar and different products manufactured and sold by numerous
other companies, some of which are substantially larger and have greater
resources than Spurlock Adhesives. The principal competitors of Spurlock
Adhesives are three large well-established manufacturers: Georgia-Pacific
Resins, a division of Georgia-Pacific Corporation; Borden Chemical, a division
of Borden, Inc.; and Neste Resins, a Finnish Company. Spurlock Adhesives
competes on the basis of price, quality, product consistency, service, method of
distribution and the ability to tailor products to meet customer needs.
Patents and Trademarks
Spurlock Adhesives is the owner of a United States patent, no.
4,381,368, on a process for the production of Urea Resins. The patent was
obtained by Harold N. Spurlock on April 26, 1983, and was formally assigned to
Spurlock Adhesives in January 1996 for no consideration. The process described
in the patent has been used as the foundation for several other products
developed by Spurlock Adhesives.
Management of Spurlock Adhesives believes that it has a proprietary
interest in certain processes for the production of resins and that the
competitive advantage provided by maintaining the confidentiality of these
processes outweighs any benefits that might be derived from obtaining patent
protection for the processes. Consequently, Spurlock Adhesives has no plans at
the present time to seek patent protection for any such process. Spurlock
Adhesives is not aware of and has not received any notice or claim that any of
its manufacturing processes infringe the proprietary rights of any third party
in any manner that could materially affect its business or that would prevent
Spurlock Adhesives from using its processes.
Seasonality and Backlog
Sales volume in the thermosetting resins business is closely related to
overall levels of activity in the forest products, building products and
furniture industries. Historically, Spurlock Adhesives' business has been
generally slower in the winter months and more vigorous in the spring and fall
months. In addition, the resins business is cyclical due to the effect of
fluctuations in the economy and overall levels of building and construction
activity. Periods of recession or high interest rates adversely affect building
and construction activity and therefore sales revenues.
Spurlock Adhesives typically has no significant backlog as customers
generally place monthly purchase orders that require delivery as of a specified
date as a condition to placing the order. Spurlock Adhesives from time to time
must turn down orders if necessary to assure that existing orders are timely
delivered.
Employees
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As of December 31, 1997, Spurlock Adhesives had 68 full time employees
and one part time employee. The Company does not employ any personnel. Spurlock
Adhesives' relationship with its employees is good. Approximately sixteen
employees located at the Malvern, Arkansas plant are covered by a three year
collective bargaining agreement between Spurlock Adhesives and the United Steel
Workers of America that expires June 30, 1999.
Government Regulation
The Company is subject to various federal, state and local
environmental laws and regulations that limit the discharge, storage, handling
and disposal of a variety of substances. The Company's operations are also
governed by laws and regulations relating to work-place safety and worker
health, principally the Occupational Safety and Health Administration Act of
1970 and accompanying regulations and various state laws and regulations.
Spurlock Adhesives believes that it presently complies in all material respects
with the foregoing laws and regulations and does not believe that future
compliance with such laws and regulations will have a material adverse effect on
its financial condition or results of operations. See Note 1 to the Consolidated
Financial Statements. Expenditures for environmental compliance, which are
considered by the Company to be a customary and recurring cost of doing business
in its industry, averaged approximately $221,228 for each of the three fiscal
years ended December 31, 1997. See "Management's Discussion and Analysis of
Financial Corporation and Results of Operations - Compliance with Environmental
Regulations."
Item 2. Properties
The Company conducts its business operations primarily from two
manufacturing facilities located in Waverly, Virginia and Malvern, Arkansas. A
third manufacturing facility is currently being constructed in South Glens
Falls, New York. The Company's headquarters and chief executive offices are
located in leased office space in Waverly, Virginia. Management believes the
properties are in good condition and suitable for the Company's purposes. The
Company's three manufacturing facilities are encumbered under existing credit
arrangements.
Executive Offices. Spurlock Adhesives is leasing on a month-to-month
basis office space in the James River Bank building in Waverly, Virginia. This
space consists of five offices and a reception area and is approximately 2,000
square feet. The Company has entered into a contract to purchase a small office
building in Waverly that contains approximately 2,700 square feet of space. The
Company plans to occupy this space on or about August 1, 1998.
Waverly Facility. Spurlock Adhesives owns and operates a facility on a
13-acre industrial site located about three miles northwest of the intersection
of state highways 40 and 460 near Waverly, Virginia. The facility consists of
two resin plants and two formaldehyde plants. The plants produce Urea Resins,
Phenolic Resins and formaldehyde. In 1997, the resin plants were operated at
approximately 43% of capacity and the formaldehyde plants were operated at
approximately 83% of capacity.
Malvern Facility. Spurlock Adhesives owns and operates a facility on 67
acres of land in Gillford, Arkansas, approximately five miles northeast of
Malvern, Arkansas. The facility consists of a resin plant, a formaldehyde plant,
two administrative offices and a research facility. The plants produce Urea
Resins, Phenolic Resins and formaldehyde. In 1997, the resin plant was operated
at approximately 52% of capacity and the formaldehyde plant was operated at
approximately 67% of capacity. The Company's major research activities are
conducted at the Malvern facility.
Moreau Facility. In the fourth quarter of 1996, the Company purchased
property in the Moreau Industrial Park, located in South Glens Falls, New York,
obtained the necessary regulatory approvals and initiated construction of a
manufacturing facility for the production of formaldehyde and resins. The
facility consists of two formaldehyde plants (one purchased and one leased), one
resin plant and ancillary equipment, buildings and tank farms. The total
estimated cost of the project is $8,300,000 for the
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purchased plants, excluding soft costs such as interest, environmental permits
and legal and administrative expenses. D.B. Western, Inc. is the general
contractor of the project and owns the leased formaldehyde plant. Payments under
the lease are $46,139 per month over a ten-year term, with a purchase option at
the end of three years. The financing sources for the purchased plants include a
term loan for $1,500,000, amortized for 10 years at an interest rate of LIBOR
plus 2.75%, the proceeds from a tax-exempt bond in the amount of $6,000,000
issued by Saratoga County, New York, amortized for 10 years at a fixed interest
rate of 4.74%, and the Company's operating cash flow for the remaining $800,000
and the soft costs. As of December 31, 1997, the unexpended bond fund balance
was approximately $3,890,000. Management believes that construction is
proceeding on schedule, and the Moreau facility is expected to begin operations
in mid-1998.
Item 3. Legal Proceedings
Summary
In late January and early February 1998, the Company discovered that
two of its officers and directors, Irvine R. Spurlock and H. Norman Spurlock,
Jr., had diverted corporate funds for personal use and that, according to a
report of a Special Litigation Committee of the Company's Board of Directors, a
third officer, Warren E. Beam, had colluded in the diversions by Norman
Spurlock. Following these discoveries, Norman Spurlock and Mr. Beam resigned as
officers and employees of the Company and Spurlock Adhesives and Norman Spurlock
also resigned as a director of both companies. Irvine Spurlock resigned as
Chairman of the Board, Chief Executive Officer and a director of both the
Company and Spurlock Adhesives, but was retained by the Board of Directors with
the title of President of both companies because of his current importance to
their operations, but without any check writing or other financial authority.
Irvine Spurlock made restitution for his defalcation, and, effective April 8,
1998, Norman Spurlock entered into a settlement agreement to make restitution
for his defalcation. An investigation by the Special Litigation Committee and
the Company's new independent accounting firm concluded that no other officers
or directors of either the Company or Spurlock Adhesives were involved in the
defalcations.
Shareholders' Derivative Suit
On April 28, 1997, seven shareholders of the Company filed a
shareholders' derivative suit against the Company and certain current and former
officers and directors of the Company in Colorado state court. The lawsuit was
subsequently removed to the United States District Court for the District of
Colorado (the "District Court"). The Company has previously disclosed the
lawsuit to the Securities and Exchange Commission (the "Commission") in the
Company's Quarterly Report on Form 10-Q for the period ended June 30, 1997.
The shareholders' derivative suit, Rasmussen et al. v. Spurlock
Industries, Inc., et al. (Civil Action No. 97-D-2214), alleges that the
defendants named therein engaged in various activities that breached their
fiduciary duties to the plaintiffs and/or violated provisions of Colorado law
applicable to domestic corporations. The activities so alleged include wrongful
payment and wrongful guarantee of debts of one or more defendants, unlawful
loans and distributions to defendants, unfair dealings with one or more
defendants, overcompensation of defendants and other employees, wrongful
depression of the Company's stock price, misrepresentation as to shareholders,
and improper approval of the merger of Air Resources Corporation (the Company's
predecessor) into the Company. The plaintiffs seek a declaratory judgment with
respect to the acts complained of, repayment of certain monies to the Company,
an accounting of all financial transactions of the Company from 1992 to the
present, a constructive trust of shares of common stock held by certain
defendants, injunctive relief and damages.
In May 1997, the Company's Board of Directors, in response to the
lawsuit, appointed a Special Litigation Committee to investigate the allegations
and to determine whether maintenance of the derivative proceeding was in the
best interests of the Company. The members of the Special Litigation
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Committee are Raymond G. Tuttle and Glen S. Whitwer, the Company's two outside
directors, neither of whom is named as a defendant in the lawsuit nor was a
member of the Board of Directors during the time period of the activities
alleged in the lawsuit. The Special Litigation Committee engaged independent
outside counsel to advise it in its investigation, and performed an extensive
investigation including the collection and review of a large number of relevant
corporate and related documents, and interviews of current and former officers
and directors, the Company's independent auditor and its outside legal counsel.
In a report delivered to the District Court in October 1997, the Special
Litigation Committee determined that maintenance of the lawsuit was not in the
best interests of the Company. Based on the findings of the Special Litigation
Committee, the Company filed a Motion for Summary Judgment against the
plaintiffs on November 12, 1997.
As a result of the events summarized under "Summary" above and more
particularly described below, on February 9, 1998 and March 26, 1998, the
Special Litigation Committee requested that the District Court delay ruling on
the Motion for Summary Judgment to allow the Special Litigation Committee to
investigate the facts surrounding these events. The Special Litigation Committee
filed a supplemental report with the District Court on April 13, 1998 (the "SLC
Supplement"), and the Motion for Summary Judgment remains pending.
Creation of Audit Committee
In November 1997, at the request of the Special Litigation Committee,
the Board of Directors created an Audit Committee, which consists of Messrs.
Tuttle and Whitwer. The initial responsibility of the Audit Committee was to
identify a new auditor for the Company. The Company wished to appoint a new
auditor primarily because the auditor at that time, James E. Scheifley &
Associates, P.C. (formerly Winter, Scheifley & Associates, P.C.) ("Scheifley"),
was located in Colorado and recently had one of its two partners leave its
practice. As the Audit Committee considered proposals from other firms, Mr.
Whitwer asked Phillip S. Sumpter, then Executive Vice President and Chief
Financial Officer of the Company, to request that Scheifley examine, in the
course of the audit of the 1997 fiscal year, insider transactions, and
specifically loans to officers, to ensure that such loans were current.
Discovery of Diversion of Corporate Funds by Officers and Directors
On January 9, 1998, Catharine Spurlock, the Company's Administrative
Assistant and wife of Irvine Spurlock, then Chairman of the Board of Directors,
President and Chief Executive Officer of the Company, addressed Irvine Spurlock
with concerns over unusually high charges on the Company's credit card by Norman
Spurlock, then Executive Vice President and Secretary of the Company. Irvine
Spurlock consulted with Mr. Sumpter, who examined the credit card records and
concluded that these charges were a problem. When confronted, Norman Spurlock
admitted to charging personal expenses on the Company's credit card over the
previous two months. Norman Spurlock also revealed that he was in default on an
authorized loan with the Company and asserted that he was pursuing a home equity
loan in order to make restitution for both the unauthorized personal expenses
and the outstanding loan payments.
On January 14, 1998, Scheifley began the 1997 audit at the Company's
principal executive offices. Scheifley met with Mr. Sumpter to discuss the
issues surrounding Norman Spurlock's loan default, but did not receive notice of
any concerns regarding unauthorized credit card transactions by Norman Spurlock,
and was unable to procure certain information requested of Warren Beam,
Controller, with respect to charges on one of the Company's primary corporate
credit cards. Scheifley did not identify any additional problems.
On January 21, 1998, Mr. Whitwer met with Irvine Spurlock, Mr. Sumpter
and the Company's corporate legal counsel to discuss what actions the Board of
Directors should take with respect to Norman Spurlock, and the implications for
the Special Litigation Committee's report. It was decided that, before such
decisions could be made, Mr. Sumpter would review records to ensure an
understanding of the status of officer loans to Norman Spurlock. Mr. Whitwer
expressed the opinion that it would be necessary to conduct a special audit of
officer loans and officer expenses to ensure that the Company reached the bottom
of the problem.
-10-
<PAGE>
On January 22, 1998, Mr. Sumpter discovered $11,000 of unauthorized
advances to Norman Spurlock in 1996 and additional advances in 1995. When
confronted with these findings on January 23, 1998, Norman Spurlock admitted to
the unauthorized advances and, at the demand of Harold Spurlock, Sr., a director
and the founder of the Company and the father of Irvine Spurlock and Norman
Spurlock, resigned as an officer, director and employee of the Company and
Spurlock Adhesives. Further internal investigations by Mr. Sumpter uncovered, in
addition to the unauthorized advances and loan defaults, substantial credit card
abuse by Norman Spurlock, with a total defalcation estimated at $150,000.
In light of the discoveries involving Norman Spurlock, Warren Beam
resigned as Controller-Treasurer of the Company and Spurlock Adhesives on
January 26, 1998. As set forth in the SLC Supplement, the Special Litigation
Committee investigation indicated that, while there was no evidence that Mr.
Beam personally received any of the diverted funds, Mr. Beam had colluded with
Norman Spurlock.
By February 5, 1998, the Audit Committee had engaged Cherry, Bekaert &
Holland, L.L.P. ("Cherry, Bekaert") to conduct a full investigation of all
officer salaries, perquisites, loans and advances and to assess the impact of
any and all misuse of the Company's funds. In addition, the Company determined
to request a postponement in the District Court's ruling on the Motion for
Summary Judgment in order that the Special Litigation Committee could
investigate the newly discovered information and supplement its previous report,
as necessary.
On February 8, 1998, after Cherry, Bekaert's investigation had
commenced, Irvine Spurlock, through his counsel, disclosed to the Company's
outside legal counsel that he had received two unauthorized advances in the
amounts of $42,500 and $9,200, both of which had been fully repaid, and an
additional unauthorized advance in the amount of $73,075.86, which had not been
repaid. Upon this admission, Irvine Spurlock provided the Company with a check
in the amount of $73,075.86 and offered to resign if requested to do so. On
February 9, 1998, Irvine Spurlock disclosed further to Mr. Sumpter that he had
made personal charges on the Company's credit card in an estimated amount of
$7,000 to $8,000.
The Board of Directors met on February 11, 1998 to take action on the
information that had been uncovered to date, including recent disclosures by
Irvine Spurlock. At the meeting, the Board of Directors asked Irvine Spurlock to
resign as Chairman and a member of the Board of Directors and as Chief Executive
Officer of both the Company and Spurlock Adhesives. Following the tendering of
these resignations, the Board of Directors elected Mr. Sumpter to replace Irvine
Spurlock as Chairman of the Board and Chief Executive Officer of the Company and
Spurlock Adhesives.
The Board of Directors decided, nevertheless, to retain Irvine Spurlock
with the title of President of both the Company and Spurlock Adhesives. In
reaching such a decision, the Board of Directors weighed the gravity of his
actions against the possible impact to the Company of his departure. Among other
considerations, the Board of Directors acknowledged the importance of Irvine
Spurlock's role in the critical area of purchasing of raw materials used in the
Company's production process, his long-standing relationships with the Company's
customers and lenders, and his extensive background in the Company's
manufacturing operations where he acts as the Company's final technical
authority. The Board also took into account the strain placed on remaining
management by the recent resignations of two other executive officers, given the
Company's small executive staff. The Board of Directors concluded that, due to
the skills provided by Irvine Spurlock, his departure at that time could result
in substantial adverse consequences to the Company. In connection with his
retention, however, the Board of Directors revoked all of his check-signing and
related financial authority.
Conclusion of Investigation
On February 17, 1998, the Board of Directors approved the replacement
of Scheifley as the independent accountant chosen to audit the Company's
financial statements and approved the appointment of Cherry, Bekaert as the
Company's independent accountant for the 1997 fiscal year. The
-11-
<PAGE>
Company has previously disclosed the appointment to the Commission on a Current
Report on Form 8-K dated February 17, 1998. Cherry, Bekaert is the largest
regional CPA firm in the southeast, with over 300 people in 23 offices. It is
headquartered in Richmond, Virginia.
By the end of February 1998, Cherry, Bekaert had concluded much of the
investigation of management-related defalcations, and, by March 18, 1998, had
completed most follow-up tasks in conjunction with the 1997 audit of the
Company. Having performed investigatory procedures on relevant available records
from August 1992 through January 1998, Cherry, Bekaert found diversion of funds
in two areas - unauthorized advances and personal credit card charges paid by
the Company. The following table presents the results of Cherry, Bekaert's
investigation, net of all repayments through January 1998, by the named
individuals, excluding accrued interest:
<TABLE>
<CAPTION>
Unauthorized Personal Charges to
Officer/Director Advances Credit Card Total
---------------- -------- ----------- -----
<S> <C> <C> <C>
Irvine R. Spurlock $ 73,075.86 $ 8,176.03 $ 81,251.89
H. Norman Spurlock, Jr. $ 112,401.78 $ 154,779.37 $ 267,181.15
</TABLE>
Advances and loans to Harold N. Spurlock, Sr. and Irvine Spurlock were also
evaluated. Nothing was noted that required additional investigation. Cherry,
Bekaert found no evidence that either Mr. Sumpter or Harold Spurlock or any
corporate officer or director other than Norman Spurlock, Irvine Spurlock or
Warren Beam was involved in any misuse of the Company's funds.
The SLC Supplement reported that Cherry, Bekaert's investigation had
revealed that the diversion of corporate funds was concealed by the
falsification of records and collusion and that the discovery of such diversion
by the Company's auditors and management would have been difficult. Further, the
SLC Supplement reported that the unauthorized advances to Norman Spurlock were
hidden by false workpapers prepared by Mr. Beam and furnished to Scheifley, as
well as the collusion of Norman Spurlock and Mr. Beam. Pursuant to Cherry,
Bekaert's investigation, these workpapers presented only those loans to officers
that had been approved by the Board of Directors, together with a complex series
of entries indicating that such loans were being repaid, when, in fact, they
were not.
According to the SLC Supplement, with respect to the personal charges
on the Company's credit card, Norman Spurlock was the officer who approved
travel and entertainment expenses for all employees. Cherry, Bekaert discovered
that these charges were allocated to various expense accounts in different cost
centers, at Norman Spurlock's direction, by Catharine Spurlock, who issued the
checks for approved expenses. Cherry, Bekaert believes that Catharine Spurlock
did not see the details of the credit card bills, which were allocated over many
general ledger accounts. Mr. Beam was the individual ultimately responsible for
posting these expenses. Based on Cherry, Bekaert's investigation, the Special
Litigation Committee could not confirm whether or not Mr. Beam was aware of
Norman Spurlock's credit card abuse, but it appeared that the combination of the
amounts involved and the wide array of ledger accounts should have led to Mr.
Beam's discovery of these abuses. According to the SLC Supplement, Mr. Beam
colluded with Norman Spurlock in the diversion of corporate funds, but there was
no indication that Mr. Beam personally received any such funds.
Furthermore, the SLC Supplement concluded, based on Cherry, Bekaert's
investigation, that Irvine Spurlock diverted corporate funds by having the
Company purchase boat motors and charging the amounts to another capital item of
the Company (forklifts). Catharine Spurlock issued two of the three checks
involved, totaling $25,000. While the Special Litigation Committee found
indications that she knew what the checks were for, as the payee was not a
vendor of the Company, Cherry, Bekaert found no evidence of any further
wrongdoing by Catharine Spurlock. Ms. Spurlock was relieved of any check writing
and related financial authority, and is being reassigned from the Company's
corporate offices to a non-financial administrative assistant position in
Spurlock Adhesives' manufacturing plant, located in
-12-
<PAGE>
Waverly, Virginia. According to the SLC Supplement, the personal charges to the
Company's credit card by Irvine Spurlock, amounting to approximately $8,200,
were in numerous travel and entertainment accounts.
Restitution by Officers and Directors
Upon disclosing on February 8, 1998 the unauthorized advances paid to
him, Irvine Spurlock paid the Company $73,075.86 as restitution. By March 18,
1998, Irvine Spurlock had paid $28,867.83 as additional restitution for the
$8,176.03 in personal charges to the Company's credit card, and interest at the
Company's borrowing rate accrued on the unauthorized advances and personal
charges. Irvine Spurlock also provided an additional $1,000 to help defray a
portion of the estimated legal expenses incurred by the Company.
The Special Litigation Committee was informed, however, that Norman
Spurlock probably was financially incapable of making immediate full
restitution. In a settlement between the Company and Norman Spurlock, dated
April 8, 1998, Norman Spurlock agreed to restitution of $385,000, $10,000 of
which has been repaid to Spurlock Adhesives. As a part of such settlement,
Spurlock Family Partnership, which holds the shares of the Company's common
stock owned by Harold, Irvine and Norman Spurlock, has delivered a promissory
note for $375,000, approximately $50,000 of which represents legal and auditing
costs associated with the investigation. Payments on the promissory note of
interest only are due monthly, at 9% per annum, for three years with a balloon
payment for the full amount at the end of the three years. The promissory note
is secured by 2,325,000 unencumbered shares of common stock of the Company held
by the Partnership and is personally guaranteed by Harold Spurlock. Norman
Spurlock has also confessed judgment for $375,000 docketed in the Circuit Court
of Sussex County, Virginia, which, under the terms of the settlement, will not
be enforced or domesticated in other jurisdictions by Spurlock Adhesives so long
as the promissory note is paid as agreed.
In response to the events described above, the Audit Committee and the
Company have taken immediate action to strengthen the Company's internal
accounting controls. Immediately following the discovery of the diversion of
corporate funds, the Company obtained the resignations of the two officers
(Norman Spurlock and Warren Beam) and the two directors (Norman Spurlock and
Irvine Spurlock) involved in such diversion. In addition, all expense reports,
including both reimbursements for expenses and employee advances of salary, were
submitted to Mr. Sumpter for approval. Furthermore, the Company has prepared and
implemented formal procedures with respect to the review and approval of travel
and related expense reimbursement requests. Specifically, all such requests are
now forwarded to Lawrence C. Birkholz, the Company's Controller, for review and
then to Mr. Sumpter for approval. In addition, no advances may be made to any
officers of the Company without satisfactory business justification. Finally,
the Company has changed and limited the signatories on its checking accounts.
Supplemental Report of Special Litigation Committee
On April 13, 1998, the Special Litigation Committee filed with the
District Court a supplement to the report that it had filed in October 1997. The
SLC Supplement presented to the District Court the conclusions of the Special
Litigation Committee as to whether or not maintenance of the shareholders'
derivative suit is in the best interests of the Company in light of the events
described above. First, the Committee stated that the SLC Supplement addressed
only Claim Three of the plaintiffs' complaint, which generally alleged
unauthorized loans to directors and officers. The Committee reiterated its
conclusions and recommendations regarding all claims other than Claim Three
stated in its original report, i.e., that pursuit of such claims would not be in
the best interests of the shareholders of the Company.
Second, the Special Litigation Committee concluded that pursuit of
Claim Three was not in the best interests of the Company given that (i) the
Company has received restitution from Irvine Spurlock and a legally binding
restitution agreement from Norman Spurlock, (ii) the Company immediately
implemented major changes in management, including the resignations of two
officers (Norman Spurlock
-13-
<PAGE>
and Warren Beam) and two directors (Norman Spurlock and Irvine Spurlock)
involved in the diversion of corporate funds, and (iii) the Company has
implemented changes in internal controls to guard against future diversion of
corporate funds. The Special Litigation Committee further identified certain
risks to the Company if the shareholders' derivative suit were maintained. As a
small company with limited resources, the Company is subject to a high level of
scrutiny by, for example, prospective business partners and lenders and could
experience loss of corporate opportunities. In addition to these risks
identified by the Special Litigation Committee, management believes that
continuation of the lawsuit would result in the Company's incurrence of
additional legal and related expenses, which could adversely affect the
profitability of the Company, and would provide distractions to management's
day-to-day operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Market Information. There is no established public trading market for
the Common Stock of the Company. The following table shows high and low bid
prices reported in the National Daily Quotation Sheets, which are quotations
between dealers without adjustment for retail markups, markdowns, or
commissions, and may not represent actual transactions.
<TABLE>
<CAPTION>
Bid Price
High Low
---- ---
Fiscal Year Ended December 31, 1996
<S> <C> <C>
First Quarter.............................. $ 1.0625 $ .3125
Second Quarter............................. 1.4375 .25
Third Quarter.............................. 1.125 .50
Fourth Quarter............................. .75 .375
Fiscal Year Ended December 31, 1997
First Quarter.............................. $ .625 $ .375
Second Quarter............................. .4375 .375
Third Quarter.............................. .38 .375
Fourth Quarter............................. .45 .38
</TABLE>
Approximate Number of Holders of Common Stock. The number of holders of
record of the Company's Common Stock, no par value, on December 31, 1997 was
approximately 227.
Dividends. Holders of the Company's Common Stock are entitled to
receive such dividends as may be declared by its Board of Directors. No cash
dividends have been paid with respect to the Company's Common Stock and no
dividends are anticipated to be paid in the foreseeable future.
Sale of Unregistered Securities. The Company sold no equity securities
of the Company which were not registered under the Securities Act of 1933, as
amended, during the period covered by this report.
-14-
<PAGE>
Item 6. Selected Financial Data
The information set forth below should be read in conjunction with Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto.
The selected consolidated financial information presented below for,
and as of the end of, each of the years in the five-year period ended December
31, 1997, is derived from the consolidated financial statements of the Company.
The financial statements as of December 31, 1997, and for the year ended
December 31, 1997, have been audited by Cherry, Bekaert & Holland, L.L.P.,
independent auditors. The financial statements for the four years ended December
31, 1996, have been audited by James E. Scheifley & Associates, P.C. (formerly
Winter, Scheifley & Associates, P.C.), independent auditors.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------------------
1997 1996 1995 (1) 1994 1993
---- ---- ---- ---- ----
Income Statement Data:
<S> <C> <C> <C> <C> <C>
Net Sales........................... $24,725,077 $28,643,415 $33,243,677 $30,512,704 $23,475,249
Cost of sales....................... 19,597,991 21,129,265 26,092,053 26,269,016 20,268,532
Gross profit........................ 5,127,086 7,514,150 7,151,624 4,243,688 3,206,717
Selling, general and administrative 4,815,638 4,414,422 3,903,371 3,456,356 3,808,775
--------- --------- --------- --------- ---------
expenses............................
Income (Loss) from operations....... 311,448 3,099,728 3,248,253 787,332 (602,058)
Other income and expenses........... - - - - (427,508)
Interest income..................... 139,307 83,376 12,007 2,513 12,849
Interest expense.................... (627,799) (667,942) (663,662) (828,261) (668,670)
--------- --------- --------- --------- ---------
Income (Loss) from continuing (177,044) 2,515,162 2,596,598 (38,416) (1,685,387)
operations..........................
Provision for income taxes (benefit) (152,304) 1,021,487 115,600 - -
--------- --------- --------- --------- ---------
Net Income (Loss)................... (24,740) 1,493,675 2,480,998 (38,416) (1,685,387)
============= ========= ========= === ======== ===========
Net Income (Loss) per common share:
From continuing operations....... $0.00 $0.22 $0.37 ($0.01) ($0.42)
----- ----- ----- ------- -------
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Current assets...................... 2,726,167 $2,288,914 $3,099,414 $3,715,917 $1,748,663
Current liabilities................. 5,365,116 4,388,860 5,330,308 8,133,204 5,978,068
Total assets........................ 19,401,431 12,270,407 9,342,968 9,996,870 8,305,184
Long-term debt...................... 9,598,315 3,402,621 983,652 1,354,556 1,779,592
Stockholders' equity(2)............. 4,268,043 4,292,783 2,919,108 509,110 547,524
Number of common shareholders....... 227 242 249 245 240
Weighted average number of common
shares 6,573,639 6,711,733 6,717,667 4,266,066 3,999,566
outstanding......................
Cash dividends declared ............ 0 0 0 0 0
Book value per share (3)............ $0.66 $0.64 $0.43 $0.08 $0.08
</TABLE>
(1) Assumes the conversion of 1,200,000 preferred shares into 2,400,000 common
shares, which conversion was subsequently effected on January 5, 1996.
Absent the pro forma addition of 2,400,000 common shares, the historical
number of weighted average shares outstanding for the fiscal year ended
December 31, 1995 was 4,317,667.
(2) For the three fiscal years ended December 31, 1995, stockholders equity
included 1,200,000 shares of preferred stock, par value $2 per share,
totaling $2,400,000.
(3) Assuming the conversion of 1,200,000 preferred shares into 2,400,000 common
shares, which conversion was subsequently effected on January 5, 1996, the
weighted average shares outstanding for the five fiscal years ending
December 31, 1997 were: 6,573,639, 6,711,733, 6,717,667, 6,626,066 and
6,399,566.
-15-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion and analysis provides information which
management believes is relevant to understanding the Company's operations and
financial condition. This discussion should be read in conjunction with the
financial statements and accompanying notes. The financial statements of the
Company have been prepared in conformity with generally accepted accounting
principles.
Forward-Looking Statements
The following discussion contains certain forward-looking statements,
generally identified by phrases such as "the Company expects" or "Management
believes" or words of similar effect. The Company wishes to caution readers that
certain important factors set forth within such discussion, among others, in
some cases have affected, and in the future could affect, the Company's actual
results and could cause the Company's actual results for 1997 and beyond to
differ materially from those expressed in any forward-looking statements made
herein. For a further discussion of such factors and forward-looking statements,
please see "Forward-Looking and Cautionary Statements" below.
General
Overview. The Company's operating results declined substantially in the
fiscal year ended December 31, 1997 primarily due to a significant reduction in
the gross margin, which reduction was caused by price deterioration relating to
oversupplies of the Company's primary products in two of its three regions of
operation. Also, during 1997 the Company elected to expense approximately
$533,927 of startup and pre-operating costs relating to the new Moreau, New York
manufacturing facility, which is scheduled to come on line in mid-1998. As a
result, the Company experienced a loss of ($24,740) in 1997, compared to net
income of $1,493,675 and $2,480,998 in 1996 and 1995, respectively. Management
attributed the record 1995 profits primarily to a refocusing by the Company on
its core resin/adhesives business and the termination of non-profitable gas
generation operations and increased control over raw materials prices and
improved product margins. The lower net profit in 1996 was largely due to the
effect of income taxes, as loss carry/forwards were substantially utilized in
1995.
Dependence on Construction and Related Industries. Demand for Spurlock
Industries' products and the Company's financial performance are closely tied to
the fortunes of construction, forest products and related industries. See "Item
1. Business - Seasonality and Backlog."
Price of Raw Materials. Raw materials costs comprised approximately
60%, 57% and 62% of net sales in 1997, 1996 and 1995, respectively. Raw
materials are by far the largest component of cost of goods sold. Therefore, the
Company's operating performance is sensitive to price movements in its basic raw
materials, particularly methanol and urea. Management strives to ameliorate
these commodity risks by maintaining diverse supply relationships and by closely
matching increases and decreases in product prices to increases and decreases in
raw material costs. This was not possible during 1997, as product prices dropped
in the face of generally stable raw material prices throughout much of the year.
Both methanol and urea prices started to decline in the fourth quarter, which
decline continued into the first quarter of 1998, resulting in even lower
selling prices for the Company's products. Management believes that raw
materials prices may decline further in 1998, then expect them to firm up as
some production facilities for such raw materials are taken off-line. See "Item
1.
Business - Raw Materials and Suppliers."
Freight Costs. A substantial portion of Spurlock Industries' products
are priced on an "as delivered basis." For 1997, 1996, and 1995, freight costs
relating to delivery of the Company's products comprised approximately 3.6%,
3.9%, and 4.2%, respectively, of net sales. Accordingly, the Company's operating
performance is sensitive to movements in freight costs.
New Credit Facilities. In July 1996, in order to reduce interest costs
and increase credit availability, the Company terminated a $3,500,000 line of
credit with its primary working capital lender and obtained a line of credit in
a like amount with a new lender. Such new credit facility is secured by accounts
receivable and inventory, among other assets, and provides for credit
availability based upon the level of accounts receivable and inventory. In
conjunction with this new line of credit, the Company borrowed an additional
$3,600,000 under a term loan to purchase a formerly leased formaldehyde plant,
which term loan is secured by all assets.
New York Project. In the fourth quarter of 1996, the Company purchased
property in the Moreau Industrial Park, located in South Glens Falls, New York,
obtained the necessary regulatory approvals and initiated construction of a
manufacturing facility for the production of formaldehyde and resins. The
facility consists of two formaldehyde plants (one purchased and one leased), one
resin plant and ancillary equipment, buildings and tank farms. The total
estimated cost of the project is $8,300,000 for the purchased plants, excluding
soft costs such as interest, environmental permits and legal and administrative
expenses. D.B. Western, Inc. is the general contractor of the project and owns
the leased formaldehyde plant. Payments under the lease are $46,139 per month
over a ten-year term, with a purchase option at the end of three years. The
financing sources for the purchased plants include a term loan for $1,500,000,
amortized for 10 years at an interest rate of LIBOR plus 2.75%, the proceeds
from a tax-exempt bond in the amount of $6,000,000 issued by Saratoga County,
New York, amortized for 10 years at a fixed interest rate of 4.74%, and the
Company's operating cash flow for the remaining $800,000 and the soft costs. As
of December 31, 1997, the unexpended bond fund balance was approximately
$3,890,000. Management believes that construction is proceeding on schedule, and
the Moreau facility is expected to begin operations in mid-1998.
Write Off of Start-up Costs. In 1997, the Company elected to expense
certain start-up and pre-operating costs relating to the New York manufacturing
facility. Such costs aggregated $533,927. The American Institute of Certified
Public Accountants ("AICPA") Accounting Standards Executive Committee (AsSEC) is
anticipated to require the expensing of all start-up and pre-operating costs
effective with years starting after December 15, 1997. While the Company could
elect to capitalize these costs for the New York facility, it seems reasonable
that implementation of the requirement will take place. The Company has elected
the most conservative treatment, under the circumstances.
Purchase of Waverly Formaldehyde Plant. In July 1996, the Company
consummated an agreement with D. B. Western, Inc. whereby the Company purchased
a formaldehyde plant located in Waverly, Virginia formerly leased from D. B.
Western, Inc. Such agreement terminated the lease and settled all operational
performance and rent disputes with respect to the facility for $3,675,000.
Compliance with Environmental Regulations. Environmental costs charged
to operations aggregated $184,259, $202,076 and $277,349 for the years ended
December 31, 1997, 1996 and 1995, respectively. As a percentage of net sales,
such expenditures totaled .75%, .71% and .83%, respectively over such three
years. In such years, over 80% of such expenditures related to testing at the
Company's manufacturing facilities to ensure compliance with environmental laws
and regulations. Other expenditures included obtaining required permits,
purchase and maintenance of safety equipment, trash and waste removal and
training. All such expenses are viewed by the Company as customary, recurring
costs of doing business in its particular industry.
Capacity Utilization. In 1997, the Waverly, Virginia formaldehyde plant
ran at approximately 83% of capacity as compared to 83% in 1996 and 85% in 1995.
The Malvern, Arkansas formaldehyde plant ran at approximately 67% in 1997, as
compared to 84% and 90% in 1996 and 1995, respectively. The decrease was due to
an oversupply of formaldehyde in the regional market served by such plant. In
1997, resin capacity utilization at the Waverly facility was 53% compared to 55%
and 60% in 1996 and 1995, respectively. With respect to resin capacity
utilization, the Malvern facility produced at a 52% utilization rate for 1997,
compared to 65% for both 1996 and 1995. The decline at Malvern was due to
regional oversupplies of product.
Inflation. Although Spurlock Industries' operations are influenced by
general economic trends, the Company does not believe that inflation had a
material impact on its operations during the three-year period ended December
31, 1997.
Results of Operations
Fiscal 1997 Compared to 1996. Spurlock Industries' net sales for the
year ended December 31, 1997 were $24,725,077, a decrease of 13.7% compared to
$28,643,415 in 1996. This decrease resulted from lower average selling prices on
Spurlock Adhesives' resin and formaldehyde products due to an oversupply of
product in two of the Company's operating regions. Such oversupply was
particularly acute in the region served by the Company's Malvern, Arkansas
facility. Also, although production volume for formaldehyde remained relatively
stable in 1997 at 71,051,940 pounds as compared to 72,211,660 in 1996, resin
shipments declined 14.4% to 151,742,035 pounds, primarily due to reduced volume
sales from the Malvern plant. All sales in 1997 were generated by Spurlock
Adhesives.
Cost of goods sold for 1997 totaled $19,597,991 or 79.3% of net sales,
compared to $21,129,265 or 73.8% of net sales in fiscal 1996. This translated
into a decrease in the Company's gross margin to 20.7% in 1997 from 26.2% in
1996. Such margin deterioration resulted from the above described downward
pressure on prices exerted by customers purchasing in the competitive,
oversupplied regional markets served by the Company's two existing plants.
Management believes that the extremely competitive pricing environment
experienced in 1997 will continue through 1998, but that formaldehyde and resin
prices will begin to firm up in the Malvern and Waverly markets as current
overcapacity is eliminated. However, management believes that the markets served
by the New York facility to be completed in mid-1998 will be much more
favorable, due to industry under-capacity in that region.
Selling, general and administrative expenses totaled $4,815,638 or
19.5% of net sales in 1997, versus $4,414,422 or 15.4% of net sales in 1996. The
$401,216 increase in these expenses was due primarily to the write off of
start-up and pre-operating costs of the Moreau, New York project aggregating
$533,927. Excluding such start-up and related expenses, in 1997 selling, general
and administrative expenses fell by $132,711. Due to the contraction in net
sales, however, selling, general and administrative expenses increased, as a
percent of net sales, from 15.4% in 1996 to 19.5% in 1997.
Interest expense (which excludes interest on debt obligations related
to the New York Project, which is capitalized) declined 6.0% in 1997. Such
decline resulted primarily from lower average outstandings under the Company's
working capital facility, which resulted in turn from reduced sales and working
capital requirements.
The Company reported a pre-tax loss of ($177,044) in 1997, a
significant decline from $2,515,162 in pre-tax profits reported in the previous
year. The 1997 loss reflects primarily the decline in the gross margin and the
write-off of start-up and pre-operating costs for the Moreau project, as
described above.
The Company utilized tax benefits totalling $152,304 in 1997,
consisting of differences between the accelerated methods of depreciation for
income tax purposes and the deferred tax assets created by the post retirement
funding and the net operating loss carryforward resulting from the operating
loss in 1997. The provision for income tax in 1996 totaled $1,021,487, which
consisted of $149,415 in state income tax and $846,091 in federal income tax.
The Company reported a net loss in 1997 of ($24,740), a significant
decline from net income of $1,493,675 reported in the prior year.
Fiscal 1996 Compared to 1995. Spurlock Industries' net sales for the
year ended December 31, 1996 were $28,643,415, a decrease of 13.8% compared to
$33,243,677 in 1995. This decrease resulted from lower average selling prices on
all of Spurlock Adhesives' resin and formaldehyde products due to: (i) lower
prices for raw materials, and (ii) several customers' decreased demand for the
Company's products due to a change to a more efficient manufacturing process.
Shipments of resin/adhesive products - which comprised approximately 67% of all
1996 shipments - declined by 4.3% from 1995. All sales in 1996 were generated by
Spurlock Adhesives.
Cost of goods sold for 1996 totaled $21,129,265 or 73.8% of net sales
versus $26,092,053 or 78.5% in 1995. The decrease was mainly in raw material
costs which represented 57.1% of net sales in 1996 versus 62.4% in 1995.
Management was successful in holding most categories of other costs of goods
sold to 1995 levels. Accordingly, the gross margin improved in 1996 to 26.2%
from 21.5% in 1995, on gross profit of $7,514,150 versus $7,151,624 in 1995.
Selling, general and administrative expenses totaled $4,414,422 or
15.41% of net sales in 1996 as compared to $3,903,371 or 11.74% of sales in
1995. The dollar increase in this category in 1996 resulted from salary and wage
increases to middle management and increased professional fees associated with
the merger that took place July 26, 1996. The lower volume of net sales
significantly contributed to the increase as a percentage of net sales.
Interest expense in 1996, although increasing as a percentage of net
sales to 2.33% from 2.00% in 1995, increased only .6% in absolute terms to
$667,942 from $663,662 in 1995. This increase resulted from the term loan
borrowing for the purchase of the leased formaldehyde plant and lower interest
rates on the line of credit.
Pretax earnings in 1996 of $2,515,162 substantially mirrored the
$2,596,598 reported in 1995, despite lower sales. This was due to an improvement
in the pretax margin, which was 8.7% in 1996 versus 7.8% in 1995.
The provision for income taxes totaled $1,021,487 for 1996 as compared
to $115,600 for 1995. The provision for income tax in 1996 consisted of $149,415
in state income tax and $846,091 in federal income tax, as compared to $104,000
and $11,400, respectively, for 1995. The 1995 figures are net of loss
carryforwards aggregating $801,532. Absent such carryforwards in 1996, net
earnings after taxes for 1996 of $1,493,675 declined from $2,480,998 in 1995.
Liquidity and Capital Resources
General. For many years, the Company has relied heavily on its
institutional working capital lenders and its trade creditors to finance its
working capital requirements. The Company traditionally has operated, and
continues to operate, with a negative working capital position, as Spurlock
Industries takes advantage of supplier payment terms which exceed those granted
to the Company's customers.
Cash Flow. In 1997, Spurlock Industries reported a cash flow from net
income (loss) and depreciation and amortization of $948,837, which represented a
significant reduction from the $2,244,732 reported in 1996. The Company
supplemented such cash flow with a $224,653 reduction in trade receivables,
reflecting lower net sales, and an $805,337 increase in accounts payable and
accrued expenses. Working capital decreased by $619,003 to ($2,718,949) at
December 31, 1997. Net cash provided by operating activities of $1,700,697
effectively permitted the Company to repay notes and loans in the amount of
$1,133,388 and increase other assets(which represent deferred IRB financing fees
aggregating $492,423) by $503,539. New borrowings of $7,500,000 funded fixed
asset additions of $3,488,587 and restricted cash of $3,889,567. Such restricted
cash represents proceeds of the New York industrial development bond financing
which are being held in escrow pending disbursement for project costs. Overall,
cash and cash equivalents at the end of 1997 increased by $256,613 to $362,685.
In 1996, Spurlock Industries reported a cash flow from net income and
depreciation and amortization of $2,244,732 compared to the $3,181,238 reported
in 1995. This cash flow, supplemented by reductions in receivables and inventory
of $420,306 and $54,133, respectively, permitted the Company to reduce accounts
payable by $380,584, fund fixed asset additions of $1,184,369 and reduce notes
and loans by $1,351,511. Working capital increased $130,948 or approximately
5.9% to ($2,099,946) from ($2,230,894) in 1995.
Credit Facility. As described above, in July 1996 the Company entered
into a new $3,500,000 revolving credit facility with a new lender, which
facility matures in July 1999. Outstanding loans under the facility totaled
$1,341,622 and $1,420,801 at December 31, 1997 and 1996, respectively, which
were substantially the total amounts available at such times based on levels of
accounts receivable and inventory on which borrowing availability is based. The
credit facility provides the Company with an important source of liquidity in
addition to its cash account and cash generated from operations. Management
believes that this credit facility and internally generated cash will be
sufficient to fund the Company's working capital needs in 1998.
The credit facility contains a number of financial and restrictive
covenants limiting, among other things, the redemption of capital stock, the
payment of dividends, the incurrence of additional indebtedness, certain mergers
and acquisitions, and the acquisition of fixed assets, as well as the
maintenance of certain financial ratios. During 1997, technical violations of
certain of such covenants resulted, for which the Company has received, or
expects shortly to receive, a waiver from the lender.
<PAGE>
Long Term Debt. In addition to its working capital credit facility, the
Company had outstanding at year end 1997 long term debt totalling $9,598,315
(excluding current maturities of $1,279,188), a substantial increase from the
$3,402,621 (excluding current maturities of $1,029,090) outstanding at year end
1996. Such increase relates to borrowings totalling $7,500,000 relating to the
Moreau, New York project, consisting of a term loan in the amount of $1,500,000
and a $6,000,000 industrial revenue bond, described above. In 1996, the Company
entered into a term loan in the amount of $3,639,000 with a bank in order to
purchase a formerly leased formaldehyde plant. Outstandings under such term loan
totaled $2,830,328 at year end 1997. Primarily as a result of the significant
increase in funded debt by the Company in 1997, the ratio of total liabilities
to total net worth, a measure of leverage, increased at year end 1997 to 3.55
from 1.86 at year end 1996.
Moreau Facility. As described above, the total estimated cost of the
New York project is $8,300,000 for the purchased plants, excluding soft costs
such as interest, environmental permits and legal and administrative expenses
estimated at $600,000. D.B. Western, Inc. is the general contractor of the
project and owns the leased formaldehyde plant. Payments under the `lease are
$46,139 per month over a 10-year term, with a purchase option at the end of
three years. The financing sources for the purchased plant include a term loan
for $1,500,000, amortized over 10 years at an interest rate of LIBOR plus 2.75%,
the proceeds from a tax exempt bond in the amount of $6,000,000 issued by
Saratoga County, New York, amortized for 10 years at a fixed interest rate of
4.74%, and the Company's operating cash flow for the remaining $800,000 and the
soft costs. As of December 31, 1997, the unexpended bond fund balance was
approximately $3,890,000. Management believes that the above-described sources
of funds shall be adequate to fully fund the project, as well as meet any
additional long term funding needs, in 1998.
Emerging Issues
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or in the
year 2000. The potential costs and uncertainties to companies in addressing this
issue (the "Year 2000 issue") will depend on a number of factors, including
their software and hardware and the nature of their industries. Companies must
also coordinate with other entities with which they electronically interact,
both domestically and globally, including suppliers, customers, creditors,
borrowers and financial service organizations.
The Company has closely examined the Year 2000 issue and the potential
costs and consequences to the Company in addressing this issue. As a periodic
improvement to its day-to-day operations, the Company is currently in the
process of upgrading its computer systems, including the software necessary to
maintain inventory controls, all of which are "Year 2000" compliant.
Implementation of these systems is expected to be completed by December 1998.
Management estimates that the Company's investment in hardware and software for
this upgrade will total approximately $20,000 over the next seven months.
The Company is further communicating with third parties with which it
does business to coordinate further action with respect to the Year 2000 issue.
The Company has recognized, in
-16-
<PAGE>
particular, that the Year 2000 issue may affect machinery and other equipment
that use processing chips. The Company has received preliminary indications from
the manufacturers of its equipment that the equipment at issue is "Year 2000"
compliant and will continue to maintain communications relating to such
compliance. As a result, management believes that, with the implementation of
the systems as described above, the Year 2000 issue is not expected to have a
material impact on the Company's operations and that the cost of the Company's
addressing the Year 2000 issue is not a material event or uncertainty that would
cause its reported financial information not to be necessarily indicative of
future operating results or financial condition.
Forward-Looking and Cautionary Statements
The Company and its representatives may from time to time make written
or oral forward-looking statements, including statements contained in the
Company's filings with the Securities and Exchange Commission in its reports to
shareholders. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company is hereby identifying
important factors that could cause actual results to differ materially from
those contained in any forward-looking statement made by or on behalf of the
Company. Any such statement is qualified by reference to the following
cautionary statements.
The Company's formaldehyde and resin business is closely tied to the
construction and forest products industries, and is influenced by housing starts
and construction activity generally. The Company's operating performance is
sensitive to price movements in its basic raw materials, particularly methanol
and urea. The Company's operating performance is also sensitive to movements in
freight costs. The Company's raw materials, products and manufacturing processes
are subject to environmental laws and regulations and the costs associated
therewith. The availability of credit from institutional asset based lenders and
suppliers is very important to the Company. Developments in any of these areas,
which are more fully described elsewhere in Parts I and II hereof, each of which
is incorporated into this section by reference, could cause the Company's
results to differ materially from the results that have been or may be projected
by or on behalf of the Company. The Company cautions that the foregoing list of
important factors is not exclusive. The Company does not undertake to update any
forward-looking statement that may be made from time to time by or on behalf of
the Company.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's market capitalization on January 28, 1997 was less than
$2.5 billion, and therefore, pursuant to General Instruction 1 to Item 305 of
Regulation S-K, the information otherwise required by this Item 7A. has not been
included in this report.
-17-
<PAGE>
Item 8. Financial Statements and Supplementary Data
Independent Auditors' Report
Board of Directors and
Shareholders
Spurlock Industries, Inc.
and Subsidiary
Waverly, Virginia
We have audited the accompanying consolidated balance sheet of Spurlock
Industries, Inc. as of December 31, 1997, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Spurlock Industries,
Inc. as of December 31, 1997, and the results of its operations, and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
/s/ Cherry, Bekaert & Holland L.L.P.
Richmond, Virginia
March 13, 1998
April 10, 1998 (with respect to Note 2)
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Spurlock Industries, Inc.
We have audited the accompanying consolidated balance sheets of Spurlock
Industries, Inc. as of December 31, 1996 and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the two years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Spurlock Industries, Inc. as of
December 31, 1996 and the results of its operations, and its cash flows for each
of the two years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Winter, Scheifley & Associates, P.C.
Winter, Scheifley & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
January 17, 1997
(Except for Note 2, for which
the date is March 13, 1998.)
<PAGE>
SPURLOCK INDUSTRIES, INC.
Consolidated Balance Sheets
December 31, 1997 and 1996
<TABLE>
<CAPTION>
Assets
1997 1996
------------- -------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 362,685 $ 106,072
Accounts receivable, trade, net 1,222,277 1,446,930
Other accounts receivable - 8,718
State income tax receivable 40,713 -
Federal income tax receivable 151,000 -
Accounts and notes receivable
- officers current portion 101,944 38,595
Inventories 530,183 541,632
Deferred tax asset 92,908 -
Prepaid income taxes - 72,477
Prepaid expenses 144,457 74,490
------------- ------------
Total current assets 2,646,167 2,288,914
------------- ------------
Property, plant and equipment,
net of accumulated depreciation
of $4,890,414 and $4,305,767 12,043,300 9,528,290
------------- -------------
Other assets
Cash, restricted 3,889,567 -
Accounts and notes receivable - officers 59,122 193,467
Cash value of annuity 171,995 40,000
Other 591,280 219,736
------------- -------------
Total other assets 4,711,964 453,203
------------- -------------
Total assets $ 19,401,431 $ 12,270,407
============= =============
Liabilities and Stockholders' Equity
Current liabilities
Notes payable, line-of-credit $ 1,341,622 $ 1,420,801
Current portion of long-term debt 1,279,188 1,029,090
Accounts payable, trade 2,378,597 1,678,442
Accrued expenses 281,629 260,527
Accrued taxes 84,080 -
------------- -------------
Total current liabilities 5,365,116 4,388,860
------------- -------------
Long-term liabilities
Long-term debt 9,598,315 3,402,621
Deferred tax liability - 143,476
Post retirement benefit liability 166,956 42,667
Other liabilities 3,001 -
------------- -------------
Total long-term liabilities 9,768,272 3,588,764
------------- -------------
Stockholders' equity
Preferred stock, $0 par value
5,000,000 shares authorized
no shares issued and outstanding - -
Common stock, no par value
500,000,000 shares authorized
6,573,639 shares issued and outstanding - -
Paid in capital 4,808,814 4,808,814
Accumulated deficit (540,771) (516,031)
------------- -------------
4,268,043 4,292,783
------------- -------------
Total liabilities and stockholders' equity $ 19,401,431 $ 12,270,407
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Consolidated Statements of Operations
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenue
Net sales $ 24,725,077 $ 28,643,415 $ 33,243,677
Cost of sales 19,597,991 21,129,265 26,092,053
------------ ------------ ------------
5,127,086 7,514,150 7,151,624
------------ ------------ ------------
Selling, general and administrative expenses 4,815,638 4,414,422 3,903,371
------------ ------------ ------------
Other income and (expense)
Other income 139,307 83,376 12,007
Interest expense (627,799) (667,942) (663,662)
------------ ------------ ------------
(488,492) (584,566) (651,655)
------------ ------------ ------------
Income (loss) before taxes (177,044) 2,515,162 2,596,598
Income tax expense (benefit) (152,304) 1,021,487 115,600
------------ ------------ ------------
Net income (loss) $ (24,740) $ 1,493,675 $ 2,480,998
============ ============ ============
Per share information:
Basic earnings per share $ 0.00 $ 0.22 $ 0.37
============ ============ ============
Diluted earnings per share $ 0.00 $ 0.22 $ 0.37
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Common Paid in Preferred Preferred Accumulated
Shares Capital Shares Stock Deficit
<S> <C> <C> <C> <C> <C>
Balance December 31, 1994 4,226,066 $ 2,599,814 1,200,000 $ 2,400,000 $ (4,490,704)
Issuance of common shares for
services 100,000 5,000 - - -
Share repurchase agreement (1,000) (76,000) - - -
Net income for the year - - - - 2,480,998
-------------- ------------ ------------ ------------- --------------
Balance December 31, 1995 4,325,066 2,528,814 1,200,000 2,400,000 (2,009,706)
Conversion of preferred shares 2,400,000 2,400,000 (1,200,000) (2,400,000) -
Acquisition and cancellation of shares (151,427) (120,000) - - -
Net income for the year - - - - 1,493,675
-------------- ------------ ------------ ------------- --------------
Balance December 31, 1996 6,573,639 4,808,814 - - (516,031)
Net loss for the year - - - - (24,740)
-------------- ------------ ------------ ------------- --------------
Balance December 31, 1997 6,573,639 $ 4,808,814 - $ - $ (540,771)
============== ============ ============ ============= ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ (24,740) $ 1,493,675 $ 2,480,998
Adjustments to reconcile net income
(loss) to net cash:
Depreciation and amortization 973,577 751,057 700,240
Issuance of common stock for services - - 5,000
Write off of intangible assets - - -
Abandonment of fixed assets - - -
Decrease in trade receivables 224,653 420,306 473,202
(Increase) in other receivables (182,995) - -
(Increase) decrease in trading securities - 200,000 (200,000)
Decrease in inventory 11,449 54,133 566,152
(Increase) decrease in prepaid expenses 2,510 (108,843) 6,001
(Increase) in deferred tax asset (92,908) - -
Increase (decrease) in deferred tax liability (143,476) 131,946 11,600
Increase (decrease) in accounts payable
and accrued expenses 805,337 (380,584) (2,187,581)
Increase in other liabilities 3,001 - -
Increase in post retirement benefit liability 124,289 42,667 -
----------- ----------- -----------
Total adjustments 1,725,437 1,110,682 (625,386)
----------- ----------- -----------
Net cash provided by (used in)
operating activities 1,700,697 2,604,357 1,855,612
Investing activities:
Purchase of fixed assets (3,488,587) (1,184,369) (352,694)
Increase in cash restricted for capital expenditures (3,889,567) - -
----------- ----------- -----------
Net cash provided by (used in)
investing activities (7,378,154) (1,184,369) (352,694)
Financing activities:
(Increase) decrease in other assets (503,539) 2,814 (79,381)
Acquisition of common shares - (120,000) (1,000)
Proceeds of new borrowings 7,500,000 - -
Repayment of loans to principal holders of equity securities 65,816 30,000 -
Loans to principal holders of equity securities (46,176) (125,970) (236,461)
Write-off of advances to a principal holder of equity securities 51,357 - -
Repayment of notes and loans (1,133,388) (1,351,511) (1,012,309)
----------- ----------- -----------
Net cash provided by (used in)
financing activities 5,934,070 (1,564,667) (1,329,151)
Net increase in cash and cash equivalents 256,613 (144,679) 173,767
Beginning cash 106,072 250,751 76,984
----------- ----------- -----------
Ending Cash $ 362,685 $ 106,072 $ 250,751
=========== =========== ===========
Supplemental cash flow information:
Cash paid for: Interest expense $ 621,149 $ 667,942 $ 605,825
=========== =========== ===========
Income taxes $ 84,080 $ 658,577 $ 104,000
=========== =========== ===========
Non-cash financing and investing activities:
Acquisition of fixed assets with note payable $ - $ 3,305,168 $ 50,818
=========== =========== ===========
Conversion of accounts payable to note $ - $ - $ 839,500
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 1 - Summary of significant accounting policies
Organization and operations
Spurlock Industries, Inc. (the "Company") was originally incorporated on March
17, 1986 in Colorado as Air Resources Corporation. On January 27, 1996, Spurlock
Industries, Inc. was formed in Virginia. A merger of the two corporations was
completed on July 26, 1996. The merger was accounted for as a recapitalization
and no adjustments were made to the carrying amounts of assets and liabilities
of the combined companies. Shares of the combining companies were exchanged on a
one for one basis. The Company is engaged in the development, production, and
distribution of resins, liquid fertilizers and formaldehyde.
Principles of consolidation
The consolidated financial statements include the accounts of its wholly owned
subsidiary Spurlock Adhesives, Inc. All significant intercompany transactions
have been eliminated. Substantially all of the Company's revenues have been
derived from the operations of Spurlock Adhesives, Inc.
Restricted cash
Undisbursed funds generated by the Industrial Revenue Bonds are restricted to
the construction of the new formaldehyde manufacturing facility in New York
State. Disbursements are executed by the trustees upon the presentation of
approved construction draws. The company has no other access to these funds.
Inventories
Inventory is stated at the lower of cost or market using the first in, first out
method. Finished goods include raw materials, direct labor and overhead. Raw
materials include purchase and delivery costs. Inventory consists of the
following at December 31.
1997 1996
- ------------------------------------------------------------------------
Raw materials $ 467,319 $ 397,511
Work in process 8,028 9,493
Finished goods 54,836 134,628
--------------------------
$ 530,183 $ 541,632
========== ==========
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 1 - Summary of significant accounting policies (continued)
Property and equipment
Property and equipment are carried at cost. Depreciation is computed using the
straight line method over the estimated useful lives of the assets. When assets
are retired or otherwise disposed of, the cost and the related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
recognized in operations for the period. The cost of repairs and maintenance is
charged to operations as incurred and significant renewals or betterments are
capitalized.
Useful lives for property and equipment are as follows:
Building 20-30 years
Machinery and equipment 5-25 years
Office equipment 7 years
Vehicles 4-8 years
Start-up and pre-operating costs
Start-up and pre-operating costs include all nonrecurring, non-capital
manufacturing and other costs, such as promotional expenses incurred in
preparing for the operation of a new facility are expensed as incurred.
Deferred financing costs
Costs associated with obtaining Industrial Revenue Bond financing to construct
the new manufacturing facility in New York State, were capitalized. These costs
are to be amortized, utilizing the interest method, over the life of the
Industrial Revenue Bond, as an adjustment to interest expense.
Revenue recognition
The Company recognizes revenue on the sales of its products at the time of
shipment.
Cash and cash equivalents
Cash and cash equivalents, consist of deposits and highly liquid debt
instruments with original maturities of less than 90 days.
Environmental costs
The Company's business activities are monitored by state and federal
environmental agencies and the Company is required to obtain permits for the
operation of its facilities. Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Liabilities are recorded
when environmental assessments and or remedial efforts are probable, and the
costs can be reasonably estimated. Generally, the timing of these accruals
coincides with the completion of a feasibility study or commitment to a formal
plan of action. Environmental costs charged to operations aggregated $184,259,
$202,076 and $277,349 for the years ended December 31, 1997, 1996 and 1995,
respectively.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 1 - Summary of significant accounting policies (continued)
Advertising
Advertising costs are charged to expense when incurred. Amounts charged to
expense were $8,291, $28,101 and $27,880 for the years ended December 31, 1997,
1996 and 1995, respectively.
Estimates
The preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates. At December 31, 1997, the allowance for doubtful accounts receivable
was $12,981. There was no recorded allowance for doubtful allowance at December
31, 1996.
Income taxes
Deferred income taxes arise from temporary differences resulting from income and
expense items (principally net operating losses, postretirement benefits, and
accelerated depreciation) reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current,
depending on the classification of assets and liabilities to which they relate.
Deferred taxes arising from temporary differences that are not related to an
asset or liability are classified as current or non-current depending on the
periods in which the temporary differences are expected to reverse.
Reclassifications
Certain 1996 and 1995 amounts have been reclassified to conform with the 1997
presentation.
Earnings per share
Effective December 31, 1997, the Company adopted SFAS No. 128, Earnings per
Share. This statement replaces primary and fully diluted earnings per share with
basic and diluted earnings per share. Basic earnings per share excludes dilution
and is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if all stock
options and other stock-based awards, as well as convertible securities, were
exercised and converted into common stock. All net income per share amounts for
all periods have been presented and, where appropriate, restated to conform to
SFAS No. 128 requirements.
Concentration of credit risk
The Company's short-term financial instruments consist of cash and cash
equivalents, accounts and loans receivable, and payables and accruals. The
carrying amounts of these financial instruments approximates fair value because
of their short-term maturities. Financial instruments that potentially subject
the Company to a concentration of credit risk consist principally of cash and
accounts receivable, trade. During the year the Company did maintain cash
deposits at financial institutions in excess of the $100,000 limit covered by
the Federal Deposit Insurance Corporation. The uninsured amount to $248,640. The
Company has several major customers, the loss of any one of which could have a
material negative impact upon the Company. Additionally, the Company maintains a
line of credit and a significant portion of its long-term debt with one
financial institution. The maintenance of a satisfactory relationship with this
institution is of significant importance to the Company.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 1 - Summary of significant accounting policies (concluded)
Stock-based compensation
The Company applies Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations in accounting for its
stock-based compensation plans. Accordingly, no compensation expense has been
recognized for the stock options granted and employee stock purchases. The
Company has adopted the disclosure-only provisions of SFAS No. 123, Accounting
for Stock-Based Compensation.
Recently issued accounting pronouncements
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130) and
SFAS 131, "Disclosures about Segments of an Enterprise and Related Information"
(SFAS 131). SFAS 130 establishes standards for the reporting and displaying of
comprehensive income and its components in financial statements. SFAS 131
supersedes SFAS 14, "Financial Reporting for Segments of a Business Enterprise,"
and specifies new disclosure requirements for operating segment financial
information. In February 1998, SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" (SFAS 132) was issued. SFAS 132
revises and standardizes employers' disclosures about pension and other
postretirement benefit plans. These standards are effective for fiscal years
beginning after December 15, 1997. The Company will adopt the provisions of
these standards during the first quarter of 1998 and does not anticipate their
adoption to have a material effect on the financial statements.
Note 2 - Misappropriation of assets and restatement of financial statements
In January 1998, the Company discovered that financial information regarding
payments to a note receivable for an executive officer of the Company and the
payment of travel and related expenses of this individual had been falsified to
intentionally mislead management concerning their propriety. Subsequent to this
discovery, another executive officer admitted to the payment of personal
expenses by the Company recorded as equipment. An independent investigation
concluded that these acts were apparently conducted through collusion of two
other employees of the Company. Accordingly, records of the Company, and its
predecessor companies, were apparently falsified in 1992.
In total, the independent investigation revealed approximately $275,000 in
personal expenses paid by the Company and charged to selling, general and
administrative expense. Additional personal expenses of approximately $73,000
were capitalized as equipment.
In February 1998, the Company received full restitution for the $73,000 in
personal expenses capitalized and approximately $8,000 in personal expense
charged to selling, general and administrative expenses. The $73,000 has been
reclassified as a note receivable and interest income has been accrued at the
cost of funds to the Company. Total restitution, including accrued interest,
aggregated $101,944.
On April 10, 1998, settlement was reached regarding the remaining personal
expenses paid by the Company, aggregating approximately $267,000. Restitution
will include interest, at the cost of funds to the Company to settlement date,
as well as partial reimbursement of professional expenses. The aggregate
principal amount of restitution, at April 10, 1998, was $375,000. The principal
amount of restitution will bear interest at 9.00%, payable monthly in advance,
with the entire principal amount due April 8, 2003. Although collateral and
guarantees were obtained, it is management's opinion that sufficient uncertainty
exists to recognize income as received.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 2 - Misappropriation of assets and restatement of financial statements
(concluded)
The effect of the restatement on the December 31, 1996 Consolidated Balance
Sheet resulted in a decrease of $73,075 in fixed assets, with a corresponding
increase to notes receivable, and an increase of $26,656 in retained earnings
compared to December 31, 1996 amounts previously reported.
After restatement, the pretax effect of the overstatement of selling, general
and administrative expenses related to the misappropriation amounted to $15,484,
and the understatement of interest income of $11,182, all of which is deemed
immaterial. The amounts of the restatements were mitigated by the initial
recognition of the personal expense as travel and entertainment expenses and the
full restitution of the amounts capitalized. Since learning of the
misappropriation, the Company has taken actions intended to prevent a recurrence
of this situation.
Note 3 - Investments
Securities that are bought and held principally for the purpose of selling them
in the near term are classified as trading securities. Trading securities are
recorded at fair value as a current asset with the change in fair value during
the period included in earnings. These were no investments held as trading
securities as of December 31, 1997 and 1996 or for the year ended December 31,
1997.
The Company purchased trading securities during the year ended December 31, 1996
for cash aggregating $397,500. The Company had sales proceeds from trading
securities during the year ended December 31, 1996, amounting to $581,167 and
realized a (loss) for this period aggregating $(16,333).
The Company had no sales proceeds from trading securities during the year ended
December 31, 1995. The Company had no unrealized gains (losses) at December 31,
1995.
Note 4 - Property and equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
Land $ 219,233 $ 219,233
Building 5,440,321 547,041
Machinery and equipment 7,358,963 12,326,041
Construction in progress 2,932 305,913
Vehicles 273,596 285,189
Furniture and fixtures 161,101 150,640
New York project 3,477,568 -
----------------------------
16,933,714 13,834,057
Less: Accumulated depreciation and amortization 4,890,414 4,305,767
----------------------------
$ 12,043,300 $ 9,528,290
============ ===========
</TABLE>
Depreciation charged to operations was $973,577, $751,057 and $700,240 for the
years ended December 31, 1997, 1996 and 1995, respectively.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 5 - Line of credit
The Company utilizes a line of credit secured by accounts receivable and
inventories to provide working capital. Advances under this line of credit bear
interest at the lesser of prime + 1/2% or LIBOR + 2.75%, and are limited to the
lesser of $3,500,000, or 85% of eligible accounts receivable and 60% of the
inventory value. At December 31, 1997 and 1996, advances outstanding totaled
$1,341,622 and $1,420,801, respectively.
Note 6 - Advances and notes receivable for principal holders of equity
securities
Accounts and notes receivable for principal holders of equity securities
consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
-------------------------------
<S> <C> <C>
Notes receivable and advances
with various interest rates $ 161,066 $ 232,062
Less: current portion 101,944 38,595
-------------------------------
$ 59,122 $ 193,467
========== ==========
</TABLE>
During 1997, the Company wrote off $51,357 in advances and notes receivable for
a principal holder of equity securities. See Note 2.
Note 7 - Long-term debt
<TABLE>
<CAPTION>
Long-term debt consists of the following at December 31:
1997 1996
-------------------------------
<S> <C> <C>
Note payable bank, payable in monthly installments
of $6,250 plus interest at 8.0% through May 2003 $ 1,500,000 $ -
Industrial revenue bonds, payable in quarterly installments
of $150,000 with interest at 4.74% on December 31, 1997 6,000,000 -
Note payable bank, payable in monthly installments of
$50,542 with interest at prime plus .5% or LIBOR plus
2.75% (8.42% at December 31, 1997) secured by
plant and equipment due July, 2002 2,830,328 3,436,832
Note payable bank, payable in monthly installments
of $1,832 at 12% interest, secured by real property due in
August, 2004 99,934 109,295
Note payable vendor, payable in monthly installments
of $23,320 with interest at prime plus 1.5% (10% at
December 31, 1997) due March, 1998 69,940 349,780
Note payable, supplier, payable in monthly installments
of $14,814, with interest at 8.25%, through August 1999 263,185 400,504
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 7 - Long-term debt (concluded)
1997 1996
-------------------------------
Note payable, bank, payable in monthly installments of
$390 including interest of 8.88% through July 1999 6,904 10,786
Note payable, vendor, payable in monthly installments of
$784 including interest of 13.4% through October 1999 15,552 -
Various notes payable, payable in monthly installments
of $4,634 with interest from 8% to 10% due December 1997
to October 2000 secured by personal property 91,660 135,300
------------------------------
10,877,503 4,431,711
Less current portion 1,279,188 1,029,090
------------------------------
$ 9,598,315 $ 3,402,621
============ ===========
Maturities of long-term debt are as follows:
December 31, 1998 $ 1,279,188
December 31, 1999 1,446,368
December 31, 2000 1,301,145
December 31, 2001 1,296,647
December 31, 2002 1,096,647
Later years 4,456,780
-----------
$10,877,527
===========
</TABLE>
At December 31, 1997, the outstanding principal balance of the industrial
revenue bonds was $6,000,000. The issue is at $6,000,000 with quarterly payments
of $150,000 beginning January 31, 1998 at 4.74% interest rate. The bond issue is
collateralized by property, plant, and equipment.
The Company had an outstanding irrevocable letter of credit in the amount of
$6.0 million as of December 31, 1997. This letter of credit, which has a term of
five years, collateralizes the Company's obligations under the Industrial
Revenue Bond financing for the New York State manufacturing facility. The fair
value of this letter of credit approximates the contract value based on the
nature of the fee arrangement with the issuing banks.
Amortization of deferred financing costs aggregated $51,423 in 1997. There were
no deferred financing costs amortized for the years ended December 31, 1996 and
1995.
The Company capitalizes interest on assets constructed for its formaldehyde
production facility in New York State. In 1997, total interest costs incurred
were $683,481, of which $55,682 was capitalized. Interest was not capitalized
for 1996 or 1995.
In 1997, $533,927 of start-up and pre-operating expenses incurred in the
construction and initial production of the new manufacturing facility in New
York State were written off. There were no costs of this nature in 1996 and
1995.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 8 - Financial instruments with off-balance-sheet risk
During 1997, the Company entered into an interest rate swap agreement ("swap")
for purposes of fixing the variable rate aggregated the Industrial Revenue Bond
("IRB") borrowing. This swap alters the interest rate characteristics of the IRB
to eliminate the interest rate sensitivity. Swaps involve the periodic exchange
of payments over the life of the agreements. Amounts received or paid on swaps
are used to manage interest rate sensitivity. At December 31, 1997, the Company
had one swap agreement outstanding, the net effect of which is to effectively
covert the $6.0 million variable rate IRB to a fixed rate of 4.74% until
maturity. Payments or receipts under this agreement are due monthly. Changes in
the fair value of the swap is not reflected in the accompanying financial
statements. The estimated fair value of this instrument was $(182,921) as of
December 31, 1997. The Company's credit exposure on this swap is limited to the
value of the swap that has become favorable to the Company in the event of
nonperformance by the counterparties. The Company did not require collateral
from counterparties on its existing agreement. The Company actively monitors the
credit ratings of counterparties and anticipates performance by the counter
parties with whom they transacted the swap.
Note 9 - Related party transactions
During September 1994 a shareholder of the Company entered into an agreement to
purchase 533,333 shares of preferred stock. During January 1996 this shareholder
converted these shares and 666,667 shares of preferred stock into common stock.
On June 30, 1995, Harold N. Spurlock, then Chairman of the Board, President and
Chief Executive Officer of the Company, received a loan in the amount of
$112,500 from Spurlock Adhesives. Principal and interest at 9.0% per annum are
payable in five equal annual installments commencing in July 1996. The balance
as of December 31, 1997 was $59,122. The loan relates to the purchase by Mr.
Spurlock of certain manufacturing assets in Malvern, Arkansas that were
contributed by Mr. Spurlock to Air Resources pursuant to the Spurlock Adhesives
Agreement.
In July 1996, the Company entered into an employment contract with its founder
and former chief executive officer to serve as its vice president for product
development through August 31, 1999. The contract provides for an annual salary
of $180,000 during the contract term. The contract also provides for post
retirement benefit payments of $100,000 per year for a five-year period
beginning August 31, 1999. The Company intends to fund the post retirement
payments currently by depositing monthly payments of approximately $12,000 into
an interest bearing account.
The estimated payment assumes an earned interest rate of 5% per year on the
deposit amounts and a discount rate of 8% per year to arrive at the net present
value of the annual retirement benefit due at August 31, 1999. The Company has
recorded $124,284 and $42,667 of expense for post retirement benefits for the
years ended December 31, 1997 and 1996 respectively. The Company estimates that
its net commitment for the period from January 1, 1998 to August 31, 1999
pursuant to this contract will be approximately $864,000 for both salary and
post retirement benefits. The Company has invested in annuities to fund the post
retirement benefit. The cash value of these annuities aggregated $171,995 and
$40,000 as of December 31, 1997 and 1996, respectively.
In 1993, the Company made advances to an Executive Officer aggregating $126,000.
These advances were offset through the purchase of land adjacent to the Waverly,
Virginia production facility. In March 1994, a mortgage of $130,000 was found to
encumber the property, preventing transfer of title. In 1997, these advances
were discovered as unpaid and unrecognized. The advances were recognized and the
remaining amount repaid by the Executive Officer in the amount of $97,633 on
October 15, 1997.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 10 - Description of leasing arrangements
The Company leased rail cars, trucking equipment, and a formaldehyde plant under
operating leases expiring in various years through 2003. The lease for the
formaldehyde plant ($660,000 per year) commenced upon successful start up, which
was in February, 1993. The Company had an option to purchase the plant at the
expiration of the initial 10 year lease for the greater of fair market value or
$3,580,000, or to renew the lease for an additional 10 years. During July 1996,
the plant was purchased for $3,200,000.
The Company has remaining operating leases for trucking and rail car equipment
which have fixed annual payments as follows: $34,824 in 1998, $33,000 in 1999,
$33,000 in each year thereafter through 2001.
Rent expense was $78,916, $395,627 and $761,997 for the years ended December 31,
1997, 1996 and 1995.
Note 11 - Income taxes
Deferred income taxes arise from temporary differences resulting from income and
expense items reported for financial accounting and tax purposes in different
periods. Deferred taxes are classified as current or non-current, depending on
the classification of assets and liabilities to which they relate. Deferred
taxes arising from temporary differences that are not related to an asset or
liability are classified as current or non-current depending on the periods in
which the temporary differences are expected to reverse.
Deferred tax assets and liabilities at December 31, 1997 and 1996 resulted from
the following:
<TABLE>
<CAPTION>
1997 1996
-----------------------------
<S> <C> <C>
Deferred tax assets
Operating loss carry forward $ 69,682 $ -
Post retirement liability 63,925 14,507
Deferred tax liabilities
Accelerated depreciation 40,699 157,983
The provision for income taxes expense (benefit) at
December 31, 1997 and 1996 consists of the following:
1997 1996
-----------------------------
Current $ 6,329 $ 987,910
Deferred (158,633) 26,323
-----------------------------
$ (152,304) $ 1,021,487
============ ===========
</TABLE>
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 11 - Income taxes (concluded)
A reconciliation of the federal taxes at statutory rates to the tax provision
for the years ended December 31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate $ 69,510 $ 846,091 $ 882,843
State income taxes 14,571 149,415 104,000
Utilization of loss carry forward (69,682) (13,912) (801,532)
Surtax exemption - - (11,750)
Book/tax depreciation difference 13,838 (48,083) (34,000)
Post retirement benefits (63,925) 14,507 -
Other (116,616) 73,469 (23,961)
----------------------------------------------------
Provision for income taxes expense (benefit) $ (152,304) $ 1,021,487 $ 115,600
====================================================
</TABLE>
Note 12 - Stockholders' equity
During 1995 the Company adopted a stock option plan for the benefit of certain
employees, officers and directors. The number of restricted common shares
reserved under the plan is 500,000. The option price on the grant date shall not
be less than the fair market value on such date provided that an owner of more
than 10% of the common stock shall not have an option granted at a price less
than 110% of the fair market value on the date of the grant. During 1995, the
Company issued 210,000 options exercisable at $0.50 per share under the plan
which expire 50,000 in 1998, 50,000 in 2000 and 110,000 in 2005. During June
1996, the Company granted additional options under the plan for 75,000 shares
exercisable at $0.55 for a ten year period. No options were granted for the year
ended December 31, 1997.
Following is a summary of the transactions in the plan:
<TABLE>
<CAPTION>
Weighted
Shares Average Price
-------------------------------
<S> <C> <C>
Balance, beginning of period - $ -
Granted 210,000 0.50
Canceled - -
Exercised - -
-----------------------------
Balance, December 31, 1995 210,000 0.50
Granted 75,000 0.55
Canceled - -
Exercised - -
-----------------------------
Balance, December 31, 1996 and 1997 285,000 0.51
==============
Options available at December 31, 1997 215,000
==============
</TABLE>
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 12 - Stockholders' equity (continued)
Pro forma information regarding net income and earnings per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions; risk-free
interest rate of 6.87%; dividend yields of 0%; volatility factor of 2.05%; and a
weighted-average expected life of the option of 5.2 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is calculated as of the date of grant. TheCompany's pro forma information
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C>
Pro forma net income (loss) $ (24,740) $ 1,474,969 $ 2,433,940
Pro forma earnings per share
Basic $ 0.00 $ 0.22 $ 0.36
Diluted $ 0.00 $ 0.21 $ 0.36
</TABLE>
During January, 1996 the holder of the 1,200,000 shares of preferred stock of
Air Resources Corporation converted these shares into 2,400,000 shares of common
stock of Air Resources Corporation. In connection with the recapitalization, the
Company agreed to reacquire 80,000 shares of the Air Resources Corporation
common stock from a dissenting shareholder for $120,000 in cash. Also during
1996, the Company acquired 71,427 shares of common stock of Air Resources from a
former officer.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 13 - Earnings per share
The following table sets forth the reconciliation of the numerators and
denominators of the basic and diluted earnings per share ("EPS") computations:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income (loss) available to shareholders $ (24,740) $ 1,493,675 $ 2,480,998
============= ============ ============
Denominator:
Weighted average shares outstanding 6,573,639 6,711,733 6,717,666
------------------------------------------------
Basic EPS weighted average shares outstanding 6,573,639 6,711,733 6,717,666
Effect of dilutive securities:
Incremental shares attributable to the
Stock Option Plan 10,509 210,900 52,500
------------------------------------------------
Diluted EPS weighted average shares outstanding 6,584,148 6,922,633 6,770,166
================================================
Basic earnings per share $ 0.00 $ 0.22 $ 0.37
=============== =============== ===============
Diluted earnings per share $ 0.00 $ 0.22 $ 0.37
============== =============== ===============
</TABLE>
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 14 - Sales to major customers and concentration of credit risk
The Company, whose customers produce raw materials used in the construction
industry made sales in excess of 10% of its gross revenues for the year ended
December 31, 1997, 1996 and 1995 as follows:
<TABLE>
<CAPTION>
Receivable
Customer Sales % at 12/31
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997
International Paper $ 4,423,800 17% $ 158,681
Union Camp 3,919,989 15 170,026
Schenectady 3,869,340 15 71,964
Willamette 4,715,645 19 113,564
1996
International Paper $ 4,537,102 16% $ 108,000
Union Camp 3,865,062 13 162,000
Schenectady 3,521,857 12 57,000
Willamette 7,478,831 26 424,000
1995
International Paper $ 4,964,000 15% $ 124,000
Union Camp 3,900,000 12 166,000
Schenectady 5,124,000 15 41,000
Willamette 7,454,000 22 636,000
</TABLE>
Note 15 - Commitments and contingencies
In connection with the construction of the formaldehyde production facility in
New York State, the Company has entered into a turnkey plant construction
agreement with DB Western, Inc., whereby the Company will pay an aggregate of
$6,568,100 of construction costs. The Company paid a deposit of $66,000 at
October 1, 1996 to initiate the contract. The total amount outstanding at
December 31, 1997 was $3,222,100. Construction is currently scheduled for
completion in June 1998.
Should the Company be unable to complete the contract, the deposit would be
forfeited and any additional costs due and payable incurred by D.B. Western in
connection with the project would become due by the Company.
In connection with the new production facility in New York state, the Company
entered into an operating lease agreement with D.B. Western, Inc. on September
30, 1997, for a formaldehyde plant adjacent to the Company's facility. The term
of the lease is for ten (10) years at a monthly rental payment of $46,139.
Rental payments commence ten days after the plant is mechanically operational.
The Company anticipates completion of the facility in mid-1998. Based upon
completion of the facility on July 1, 1998, the Company estimates lease payments
of $276,834 in 1998 and $553,668 for each year from 1999 to 2007. Rental expense
for 2008 is estimated to be $276,834.
The Company purchases substantially all of its three raw material components for
its resin, formaldehyde, and fertilizer operations from four suppliers. The
Company purchased $13,488,767, $15,158,111 and $19,232,831 from these suppliers
during 1997, 1996 and 1995 and had a balance due to them of $1,742,592 and
$1,089,433 at December 31, 1997 and 1996. The Company believes that alternate
sources for its raw materials are readily available.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 15 - Commitments and contingencies (concluded)
In April 1997, a shareholders' derivative suit was filed against the Company and
certain current and former officers and directors of the Company in State
District Court in Denver, Colorado. The suit, which has subsequently been moved
to the United States District Court for the District of Colorado, alleges that
the defendants engaged in various activities that breached their fiduciary
duties to the plaintiffs and/or violated provisions of Colorado law applicable
to domestic corporations.
The Special Litigation Committee is currently conducting an investigation into
matters that are likely to cause the supplement of its report, initially issued
in October 1996. The Company expects to defend the lawsuit to the full extent
appropriate, upon resolution of the pending investigation. At this time,
management cannot reliably estimate the potential effect of this suit on the
financial statements of the Company
During 1993, the Company was made aware of a claim by two former directors
requesting that the Company repurchase 381,000 shares of its common stock from
said directors pursuant to a reorganization agreement entered into during 1992.
Subsequently, one of these former directors sold his holdings of 233,000 common
shares. The purchase agreement set the repurchase price at $2.81 per share or an
aggregate of $418,280 after considering the above described disposition of
shares by the former director. The Company settled these claims by paying these
individuals $84,690 in cash in 1995 and by repurchasing 71,427 common shares
from one of the individuals for $75,000 in 1996. The Company had accrued the
potential maximum liability of $75,000 at December 31, 1995. In addition, the
Company repurchased and retired 1,000 shares of common stock from this
individual for $1,000.
Note 16 - Pension plan
The Company has a 401(k) retirement plan for the benefit of eligible employees.
Contributions are funded by the Company and established by the Board of
directors annually. Contributions for 1997, 1996 and 1995 were $166,282,
$132,476 and $113,114, respectively.
<PAGE>
SPURLOCK INDUSTRIES, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 17 - Disclosures about Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments are as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------------------------
Carrying Est. Fair Carrying Est. Fair
Value Value Value Value
<S> <C> <C> <C> <C>
Financial assets
Cash $ 362,685 $ 362,685 $ 106,072 $ 106,072
Accounts receivable 1,222,277 1,222,277 1,446,930 1,446,930
Notes receivable 161,066 161,066 232,062 232,062
Cash value of annuity 171,995 171,995 40,000 40,000
Financial liabilities
Notes Payable 1,341,622 1,341,622 1,420,801 1,420,801
Long term debt 9,598,315 9,598,315 3,402,621 3,402,621
Post retirement benefit liability 166,956 166,956 42,667 42,667
Financial instruments with off-balance sheet risk
Interest rate swap agreement - (182,921) - -
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
On February 17, 1998, the Board of Directors approved the replacement
of James E. Scheifley & Associates, P.C. (formerly Winter, Scheifley &
Associates, P.C.) as the independent accountant chosen to audit the Company's
financial statements and approved the appointment of Cherry, Bekaert & Holland,
L.L.P. as the Company's independent accountant for the 1997 fiscal year. The
Company has previously disclosed the appointment to the Commission on a Current
Report on Form 8-K dated February 17, 1998.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors. The business experience of the directors of the Company for
the past five years is summarized below.
PHILLIP S. SUMPTER, 58, has been Chairman of the Board of Directors and
Chief Executive Officer of both the Company and Spurlock Adhesives since
February 11, 1998. Mr. Sumpter has served as a director of the Company since
December 1995 and was its Executive Vice President from March 1996 to February
11, 1998. He was a director of Air Resources from December 1995 to July 1996. In
March 1996, he was appointed Executive Vice President of Spurlock Adhesives, a
subsidiary of the Company and Air Resources. He was in private practice as a
business consultant from June 1993 to March 1996. He has also served as Director
of Marketing of Monadnock Lifetime Products, Inc., a manufacturer of police
protection equipment, since January 1995. Mr. Sumpter was Chairman of the Board
of Wibbies, Inc., a manufacturer of children's clothing, from February 1990 to
May 1993. In October 1993, Wibbies, Inc. filed a petition for liquidation and
sale of assets under Maryland law.
HAROLD N. SPURLOCK, 73, has served as a director of the Company since
January 1996. Mr. Spurlock was Chairman of the Board of Directors and Chief
Executive Officer of the Company from January 1996 to August 1996. He served as
Chairman of the Board of Directors and Chief Executive Officer of Air Resources
from August 1992 to July 1996 and as President from July 1994 to July 1996. He
also served as Chairman of the Board of Spurlock Adhesives, which he founded,
from November 1989 until August 1996. In August 1996, Mr. Spurlock became a Vice
President of Spurlock Adhesives in charge of product development.
RAYMOND G. TUTTLE, 71, has served as a director of the Company since
January 1997. Mr. Tuttle has been in private practice as a commission salesman
of structural steel since 1995. Mr. Tuttle has served as Chairman of the Board
of Standard Supplies Inc., a manufacturer of fabricated steel located in
Rockville, Maryland and as General Manager for approximately the past 13 years.
He also served as a member of the Board of Directors of Devlin Lumber, a lumber
distributor.
GLEN S. WHITWER, 53, has served as a director of the Company since
August 1996, and has been a principal of Whitwer & Company, Inc., a management
consulting firm located in Kensington, Maryland, since September 1994. He was
co-owner of Quinn, Whitwer & Co., Inc., a business consultant located in
Bethesda, Maryland, from July 1986 to September 1994.
Executive Officers. The business experience of Phillip S. Sumpter, the
Chairman and Chief Executive Officer of the Company, for the past five years is
summarized above. The business experience of Irvine R. Spurlock, the President
of the Company, for the past five years in summarized below.
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<PAGE>
IRVINE R. SPURLOCK, 44, is currently President of the Company. Mr.
Spurlock previously served as Chairman of the Board of Directors, President and
Chief Executive Officer of the Company from August 1996 to February 11, 1998 and
had been a director of the Company from January 1996 to February 11, 1998. Mr.
Spurlock was Executive Vice President of the Company from January 1996 to August
1996. He was Executive Vice President of Air Resources from June 1995 to July
1996 and a director from December 1992 to July 1996. Mr. Spurlock has served as
President of Spurlock Adhesives since 1989 and was Chairman of the Board of
Directors and Chief Executive Officer from August 1996 to February 1998 and a
director from 1989 to February 1998.
Unauthorized Advances to Former Officers and Directors. In early
January and early February 1998, the Company discovered that two of its officers
and directors, Irvine R. Spurlock and H. Norman Spurlock, Jr., had diverted
corporate funds for personal use and that, according to the Company's Special
Litigation Committee, a third officer, Warren E. Beam, had colluded in the
diversions by Norman Spurlock. For further information on the diversions of
corporate funds and the subsequent resignations of these officers and directors,
see Item 3., "Legal Proceedings" above.
The business experience of Irvine R. Spurlock for the past five years
is summarized above. The business experience of H. Norman Spurlock, Jr., an
executive officer and a director of the Company through January 23, 1998, and
Warren E. Beam, Jr., an executive officer of the Company through January 26,
1998, for the past five years is summarized below.
H. NORMAN SPURLOCK, JR., 36, served as Executive Vice President of the
Company from August 1996 to January 23, 1998, and as Secretary and a director of
the Company from January 1996 to January 23, 1998. From January 1996 until
August 1996, he served as Vice President. Mr. Spurlock was Vice President of Air
Resources from March 1994 to July 1996, Secretary from June 1994 to July 1996
and a director from December 1992 to July 1996. He was Treasurer of Air
Resources from June 1993 to July 1994. Mr. Spurlock also served as Executive
Vice President of Spurlock Adhesives from August 1996 to January 1998 and as
Secretary and a director from 1989 to January 1998. From 1989 to August 1996,
Mr. Spurlock served as Vice President of Spurlock Adhesives.
WARREN E. BEAM, JR., CPA, 40, served as Treasurer and Controller of the
Company from January 1996 to January 26, 1998. Mr. Beam was Treasurer of Air
Resources from July 1994 to July 1996 and Controller from June 1993 to July
1996. Mr. Beam was Treasurer of Spurlock Adhesives from January 1993 to January
1998 and Controller from October 1992 to January 1998.
Management Appointments. In connection with the resignations of Norman
Spurlock and Warren Beam described above, the Company has appointed Kirk J.
Passopulo as Secretary of the Company and Lawrence C. Birkholz, CPA, as Interim
Controller of the Company.
Family Relationships. There are no family relationships between any
director and executive officer, except that Harold N. Spurlock, a director of
the Company, is the father of Irvine R. Spurlock, an executive officer of the
Company. Harold N. Spurlock is also the father of H. Norman Spurlock, Jr., a
former director and executive officer of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires the Company's
directors and executive officers and persons who beneficially own more than 10%
of the Company's Common Stock to file initial reports of ownership and reports
of changes in ownership of Common Stock with the Securities and Exchange
Commission (the "Commission"). Such persons are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms that
they file.
To the Company's knowledge, based solely upon a review of the copies of
such reports furnished to the Company, the Company believes that applicable
Section 16(a) filing requirements were satisfied for events and transactions
that occurred in 1997.
Item 11. Executive Compensation
The following table summarizes the compensation paid or accrued to the
Chief Executive Officer of the Company and its other most highly paid executive
officers (the "Named Executive Officers") for the last fiscal year in all
capacities in which they served the Company.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Award
------------------- -----
Securities
Name and Other Annual Underlying
Principal Position Year Salary Bonus Compensation Options
------------------ ---- ------ ----- ------------ -------
<S> <C> <C> <C> <C> <C>
Phillip S. Sumpter, Chairman and 1997 $180,000 -- (3) --
Chief Executive Officer (1) 1996 (2) $141,942 -- (3) 50,000 (4)
1995 -- -- -- --
Irvine R. Spurlock, President (5) 1997 $186,725 -- (3) --
1996 $179,880 -- (3) --
1995 $186,725 $ 9,060 (6) (3) 50,000 (4)
Harold N. Spurlock, Vice President 1997 $180,000 $ 50,000 (3) --
of Spurlock Adhesives 1996 $170,130 $ 50,000 (3) --
1995 $194,500 -- (3) --
H. Norman Spurlock, Jr., Executive 1997 $182,000 -- (3) --
Vice President and Secretary (7) 1996 $178,835 -- (3) --
1995 $181,966 $ 9,060 (6) (3) 50,000 (4)
</TABLE>
- ----------------
(1) Mr. Sumpter was elected Chairman of the Board and Chief Executive
Officer on February 11, 1998. During the fiscal year ended December 31,
1997 and until February 11, 1998, he served as Executive Vice President
and Chief Financial Officer.
(2) Represents compensation for Mr. Sumpter's employment with the Company
beginning April 1, 1996.
(3) The value of perquisites and other personal benefits did not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus shown in
the table.
(4) Represents shares of Air Resources' common stock. As of July 26, 1996,
these options were automatically converted to options to purchase
shares of Common Stock.
-40-
<PAGE>
(5) Irvine Spurlock served as Chairman of the Board, President and Chief
Executive Officer during the fiscal year ended December 31, 1997 and
until February 11, 1998. On February 11, 1998, he resigned as Chairman
of the Board and Chief Executive Officer but retained his title as
President.
(6) Award of 50,000 shares of Air Resources' common stock, the per share
fair market value of which was $.1812 based on the average of the
average bid and asked prices on the National Daily Quotation Sheets on
the date of award.
(7) Norman Spurlock served as Executive Vice President and Secretary during
the fiscal year ended December 31, 1997 and until his resignation from
the Company on January 23, 1998.
The executive officers of the Company participate in other benefit
plans provided to all full-time employees of the Company who meet eligibility
requirements, including group life insurance, hospitalization and major medical
insurance.
Unauthorized Advances to Former Officers and Director. In early January
and early February 1998, the Company discovered that two of its officers and
directors, Irvine R. Spurlock and H. Norman Spurlock, Jr., had diverted
corporate funds for personal use and that, according to the Company's Special
Litigation Committee, a third officer, Warren E. Beam, had colluded in the
diversions by Norman Spurlock. For further information on the diversions of
corporate funds and the subsequent resignations of these officers and directors,
see Item 3., "Legal Proceedings" above.
Option Grants, Exercises and Holdings. The Company did not grant any
options to the Named Executive Officers named in the Summary Compensation Table
during the fiscal year ended December 31, 1997. In addition, no options were
exercised by any of the Named Executive Officers of the Company during the
fiscal year ended December 31, 1997.
The following table sets forth information with respect to unexercised
options held by the Named Executive Officers as of December 31, 1997:
Fiscal Year End Options
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
Fiscal Year End at Fiscal Year End (1)
--------------- ----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Phillip S. Sumpter 50,000 - $0 -
Irvine R. Spurlock 50,000 - $0 -
H. Norman Spurlock, Jr. 50,000 - $0 -
</TABLE>
(1) The value of unexercised in-the-money options at fiscal year end was
calculated by determining the difference between the fair market value
of the Company's Common Stock underlying the options on December 31,
1997 per share and the exercise price of the options ($0.50 for Messrs.
Spurlock and Spurlock and $0.55 for Mr. Sumpter).
Compensation of Directors. The Company pays each director who is not an
employee of the Company $2,000 per meeting.
In May 1997, the Company created a Special Litigation Committee,
consisting of Messrs. Tuttle and Whitwer, to investigate the allegations
contained in a shareholders' derivative suit filed against the
-41-
<PAGE>
Company and to determine whether maintenance of the derivative proceeding was in
the best interests of the Company. Mr. Tuttle was paid $9,990 for his service on
the Special Litigation Committee in 1997. Mr. Whitwer was paid $29,523 for his
service on the Special Litigation Committee in 1997, and, at Mr. Whitwer's
request, the Company paid his compensation directly to Whitwer & Company, Inc.,
a management consulting firm owned by Mr. Whitwer. For further information on
the Special Litigation Committee and the shareholders' derivative suit, see Item
3., "Legal Proceedings," above.
Employment Agreements. The Company, Spurlock Adhesives and Mr. Sumpter
have entered into an employment agreement that provides for his employment as
Chairman of the Board of Directors and Chief Executive Officer of the Company
and Spurlock Adhesives. The term of the agreement commenced on April 1, 1998 and
will end on March 31, 2001, when it will automatically renew for successive
terms of one year each unless it is terminated or not renewed by any party.
Under the agreement, Mr. Sumpter is entitled to receive annual base compensation
of $190,000, subject to annual adjustments by the Company. If the agreement is
terminated by the Company and Spurlock Adhesives without cause (as provided in
the agreement), Mr. Sumpter will continue to receive his base compensation
through the earlier of the last date of the remaining term of the agreement, the
date of his death or the date that is 18 months after such termination. If the
agreement is terminated by Mr. Sumpter with good reason (as provided in the
agreement), Mr. Sumpter will continue to receive his base compensation through
the earlier of the last date of the remaining term of the agreement, the date of
his death or the date that is 12 months after such termination. In the event of
a change of control of the Company and Spurlock Adhesives (as provided in the
agreement), Mr. Sumpter will have the option to terminate his employment and
will be entitled to receive a lump sum payment equal to one and one half times
his total compensation under the agreement.
The agreement requires Mr. Sumpter to keep in confidence certain trade
secrets and confidential information of the Company and Spurlock Adhesives
during the term of his employment and for a period of five years thereafter. Mr.
Sumpter has further agreed not to remove or retain any documents of Spurlock
Adhesives. Also, for so long as Mr. Sumpter is employed by the Company and
Spurlock Adhesives and as long as he is receiving any compensation under the
agreement, he has agreed not to compete with the Company and Spurlock Adhesives.
In connection therewith, Mr. Sumpter has also agreed in the agreement not to
solicit employees of the Company and Spurlock Adhesives for a period of 12
months following termination of his employment for any reason.
Pursuant to an Agreement and Plan of Reorganization dated April 22,
1992 (the "Spurlock Adhesives Agreement"), Air Resources, among other things,
acquired all of the capital stock of Spurlock Adhesives from Harold Spurlock.
The Spurlock Adhesives Agreement required Air Resources to purchase all of
Harold Spurlock's shares of Air Resources' common stock at his request upon the
termination of his employment by Air Resources. The per share purchase price set
by the Spurlock Adhesives Agreement was the highest market bid price at which
such shares have traded in the preceding twelve months. The Spurlock Adhesives
Agreement also provided for Air Resources to purchase all of Harold Spurlock's
shares of Air Resources' common stock upon his death at the request of his heirs
upon mutually agreeable terms. These provisions of the Spurlock Adhesives
Agreement relating to Air Resources' obligations to purchase Harold Spurlock's
shares were terminated by mutual agreement effective April 15, 1996, without
compensation to Harold Spurlock.
On August 21, 1996, Harold Spurlock and the Company entered into a
certain Employment and Retirement Benefit Agreement (the "Employment Agreement")
which provides, among other things, for Harold Spurlock's employment and certain
retirement benefits. Pursuant to the Employment Agreement, Harold Spurlock has
agreed to serve as vice president for product development, and as a member of
the Company's Board of Directors, until August 31, 1999.
For his services, Harold Spurlock will receive under the Employment
Agreement a base salary of $180,000 per year, reimbursement of expenses in
accordance with the general policies of Spurlock Adhesives, and such additional
or special compensation as the Board of Directors of Spurlock Adhesives
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<PAGE>
may determine from time to time. Harold Spurlock will not receive any additional
compensation for service on the Company's Board of Directors.
The Employment Agreement provides that Harold Spurlock's employment
with Spurlock Adhesives will be terminated by reason of his death or permanent
disability, by Harold Spurlock upon 30 days notice in writing, or by Spurlock
Adhesives with cause. "Cause" is deemed to exist under the Employment Agreement
if Harold Spurlock (i) willfully refuses to perform services thereunder, (ii)
materially breaches the provisions thereof relating to trade secrets, and
confidential information, retention of documents, and noncompetition, (iii)
engages in acts of dishonesty or fraud, or (iv) engages in other serious
misconduct. If Harold Spurlock's employment with Spurlock Adhesives terminates
for cause, or due to death, permanent disability or voluntary termination, any
portion of his fixed salary, which is earned but unpaid as of the date of such
termination shall be paid to him, or his designated beneficiary in the event of
death.
The Employment Agreement provides for a retirement benefit equal to
$100,000 per year to be received by Harold Spurlock upon his retirement from
employment at or after August 31, 1999, or permanent disability prior to such
date, for a period of five years. In the event of Harold Spurlock's death prior
to or after such date, Harold Spurlock's wife would receive such benefit during
such five year period. Any benefit payable to Harold Spurlock's wife would cease
upon her death. Neither Harold Spurlock nor his wife would be entitled to any
retirement or death benefit under the Employment Agreement in the event that he
voluntarily terminated his employment with Spurlock Adhesives prior to August
31, 1999 without "good reason." Under the Employment Agreement, "good reason" is
deemed to exist if, and only if:
(a) Spurlock Adhesives generally fails to timely pay the amounts
and benefits provided to Harold Spurlock under the Employment Agreement;
(b) the assignment to Harold Spurlock of duties materially
inconsistent with and inferior to Harold Spurlock's position, duties and
responsibilities and status as a vice president; or
(c) the transfer of Harold Spurlock's place of employment further
than 30 miles beyond the limits of Petersburg, Virginia without his prior
consent.
The Employment Agreement requires Harold Spurlock to keep in confidence
certain trade secrets and confidential information of Spurlock Adhesives during
the term of his employment and for a period of five years thereafter. Harold
Spurlock has further agreed not to remove or retain any documents of Spurlock
Adhesives. Also, for so long as Harold Spurlock is employed by Spurlock
Adhesives and as long as he is receiving retirement benefits, he has agreed not
to compete with Spurlock Adhesives. In connection therewith, Harold Spurlock has
also agreed in the Employment Agreement not to solicit employees of Spurlock
Adhesives for a period of 12 months following termination of his employment for
any reason.
Bonus. On June 11, 1996, the Board of Directors of Spurlock Adhesives
resolved to pay a bonus to Harold Spurlock in the amount of $150,000 to reward
his past performance to Spurlock Adhesives, including its favorable operating
performance in 1995 and year-to-date 1996. Such bonus was to be paid upon the
effectiveness of a new employment contract (described above), September 1, 1996.
Subsequently, Spurlock Adhesives and Harold Spurlock agreed, in order to assist
the Company in managing its liquidity position, that such bonus be paid over the
next three years at $50,000 per year. The 1996 payment was made in December
1996, as is reflected in the Summary Compensation Table above. The 1997 payment
has been paid to Harold Spurlock periodically as an addition to his salary under
the Employment Agreement described above.
Indemnification Agreements. On December 21, 1995, Air Resources entered
into an Indemnification Agreement with Phillip S. Sumpter upon his appointment
to the Board of Directors. The Company succeeded to and assumed all the rights
and obligations of Air Resources under the
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<PAGE>
Indemnification Agreement, which was subsequently superseded by a new
Indemnification Agreement between such parties dated January 30, 1997. Similar
Indemnification Agreements were entered into between the Company and Glen S.
Whitwer and Raymond G. Tuttle on September 19, 1996 and January 30, 1997,
respectively. Such agreements provide for the indemnification of such directors
against claims, losses, liabilities, damages, costs and expenses that each may
suffer as a result of his service as a director of the Company, to the full
extent that such indemnification is permitted and not prohibited by applicable
federal or state law, including securities law, or the Articles of Incorporation
of the Company.
Report of the Board of Directors on Executive Compensation. The
Company's compensation policies applicable to its executive officers are
administered by the Compensation Committee of the Board of Directors, both
member of which are non-employee directors. The goal of the policies is to
attract, motivate, reward and retain the management talent required to achieve
the Company's business objectives, at compensation levels which are fair and
equitable and competitive with those of comparable companies. This goal is
furthered by the Board of Directors' policy of linking compensation to
individual and corporate performance and by encouraging significant stock
ownership by management in order to align the financial interests of management
with those of the shareholders.
The three main components of executive compensation are base salary,
annual cash bonus awards, and equity participation in the form of stock options
under the Company's 1995 Stock Incentive Plan. Each year the Board of Directors
reviews the total compensation package of each executive officer to ensure that
it meets the above described goal. As part of this review, the Board of
Directors considers corporate performance information, compensation survey data
and the recommendations of management.
Base Salary. Base salaries for executive officers are reviewed annually
to determine whether adjustments may be necessary. Factors considered by the
Board of Directors in determining base salaries for executive officers include
personal performance of the executive officer in light of individual levels of
responsibility, the overall performance and profitability of the Company during
the preceding year, economic trends that may be affecting the Company, and the
competitiveness of the executive officer's salary with the salaries of executive
officers in comparable positions at companies of comparable size or operational
characteristics. Each factor is weighed in a subjective analysis of the
appropriate level of compensation for that executive officer.
Irvine R. Spurlock served as Chairman of the Board of Directors,
President and Chief Executive Officer of the Company during the fiscal year
ended December 31, 1997. Mr. Spurlock's base salary for the fiscal year ended
December 31, 1997 was $186,725. The salary was set following a thorough review
and evaluation by the Board of Directors of Mr. Spurlock's personal performance
in light of his management responsibilities, the level of profitability of the
Company during the fiscal year ended December 31, 1996, and the competitiveness
of Mr. Spurlock's salary to those of other chief executive officers in
comparable companies.
Bonus Awards. The Company from time to time will award to its executive
officers bonuses in the form of cash and/or shares of Common Stock. The
determination of such bonus awards is made by the Board of Directors and is
generally based on the same factors used to determine base salary, as described
above. Particular attention is given to those executive officers who contribute
in a substantial degree to the success of the Company.
1995 Stock Incentive Plan. The incentive plan provides for
administration by a committee, which shall include at least two outside
directors, or, if no committee is designated by the Board of Directors, by the
Board of Directors. On November 20, 1997, the Board of Directors created a
Compensation Committee and designated it to administer the plan.
The shareholder-approved incentive plan is designed to provide current
and deferred incentive compensation to officers, directors and key employees of
the Company who contribute in a substantial degree to the success of the
Company. The incentive plan affords these selected individuals a means of
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<PAGE>
participating in, and an incentive to contribute further to, such success.
Grants are made to executive officers based on salary, responsibility and
performance of the individual officer, director or employee.
The exercise price per share for options granted under the incentive
plan is determined by the Board of Directors on the date of grant. Under certain
circumstances, the exercise price shall not be less than the fair market value
of Common Stock on the date of grant. Accordingly, if there is no appreciation
in the market price for Common Stock, the options are valueless. The term of any
option granted under the incentive plan is fixed by the Board of Directors on
the date of grant.
Deductibility of Executive Compensation. Section 162(m) of the Internal
Revenue Code of 1986, as amended, applicable for 1995 and thereafter, generally
disallows a tax deduction to public companies for compensation over $1 million
paid in any year (not including amounts deferred) to a company's chief executive
officer and to the four other most highly compensated officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. The Company believes that all compensation paid in
1997 to such officers is deductible under Section 162(m) because such
compensation is less than the threshold amount and is structured in a manner
believed to qualify as performance-based compensation not subject to the
deduction limit.
Board of Directors
Phillip S. Sumpter, Chairman
Harold N. Spurlock
Raymond G. Tuttle
Glen S. Whitwer
Compensation Committee Interlocks and Insider Participation. Prior to
November 20 1997, executive compensation was examined and approved by the entire
Board of Directors. On November 20, 1997, the Board of Directors created a
compensation committee, consisting of the outside directors, Messrs. Tuttle and
Whitwer. Executive compensation is now examined and approved by the Compensation
Committee, which then makes recommendations to the Board of Directors. The
entire Board of Directors must approve executive compensation. For the fiscal
year ended December 31, 1997, the Board of Directors included the following
officers and employees of the Company and/or Spurlock Adhesives, who
participated in deliberations of the Board of Directors concerning executive
officer compensation: Harold N. Spurlock, H. Norman Spurlock, Jr., Irvine R.
Spurlock and Phillip S. Sumpter. There were no changes in executive compensation
during 1997.
Performance Graph. Set forth below is a line graph comparing the yearly
percentage change in the Company's cumulative total shareholder return
(including reinvestment of dividends) on the Common Stock with (a) the S&P's
SmallCap 600 Index, representing a broad equity market index assuming
reinvestment of dividends, and (b) a cumulative total return, assuming
reinvestment of dividends, of a peer group selected by the Company on an
industry and line-of-business basis (the "Peer Group"), in each case assuming
that $100 is invested on December 31, 1992.
[The Performance Graph is a line graph which displays the indexed returns (in
dollars) set forth in the second table below entitled "Indexed Returns($)."]
-45-
<PAGE>
Set forth below are the annual return percentages and index returns for
the S&P SmallCap 600 Index, the Peer Group and for the Company, as presented in
the Performance Graph above. The shareholder returns shown in the graph and the
table are not necessarily indicative of future performance.
Total Shareholder Returns (Dividends Reinvested)
ANNUAL RETURN PERCENTAGE
Years Ending December 31
<TABLE>
<CAPTION>
Company Name/Index 1993 1994 1995 1996 1997
- ------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
S&P SmallCap 600 Index 18.79% - 4.77% 29.96% 21.32% 23.97%
Peer Group 46.05% 39.84% 31.66% - 8.56% 15.30%
Spurlock Industries, Inc. -93.18% 0.00% 333.39% 0.83% - 0.53%
</TABLE>
INDEXED RETURNS ($)
Years Ending December 31
<TABLE>
<CAPTION>
Base
Period
Company Name/Index 1992 1993 1994 1995 1996 1997
- ------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
S&P SmallCap 600 Index 121.04 143.78 136.92 177.95 215.89 267.64
Peer Group 97.68 142.66 199.50 262.66 240.18 276.93
Spurlock Industries, Inc. 183.33 12.50 12.50 54.17 53.72 53.44
</TABLE>
The Peer Group companies include ChemFirst Inc., Geon Company (included
from 1994 forward) and Mississippi Chemical Corp. (included from 1994 forward).
These companies were selected by the Company because they are generally in the
same industry and line of business as the Company.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of March 31, 1998, by (i) each person
who is known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii) the
Company's "Named Executive Officers" set forth in the Summary Compensation Table
as disclosed in Item 11 above, and (iv) all of the directors and executive
officers of the Company as a group. For the purposes of the following table,
beneficial ownership has been determined in accordance with the provisions of
Rule 13d-3 under the Exchange Act, under which, in general, a person is deemed
to be a beneficial owner of a security if he or she has or shares the power to
vote or direct the voting of the security or the power to dispose or direct
disposition of the security, or if he or she has the right to acquire beneficial
ownership of the security within 60 days. Except as otherwise indicated (i) each
shareholder identified in the table possesses sole voting and investment power
with respect to his shares,
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<PAGE>
and (ii) the mailing address of each individual is Spurlock Industries, Inc.,
209 West Main Street, Waverly, Virginia 23890.
<TABLE>
<CAPTION>
Name and Address of Common Stock
Beneficial Owner Beneficially Owned Percent of Class*
- ---------------- ------------------ -----------------
<S> <C> <C>
Phillip S. Sumpter (1) 80,000 1.9
Irvine R. Spurlock (2)(3)(4) 3,434,800 51.5
Harold N. Spurlock (2) 3,670,800 54.6
H. Norman Spurlock, Jr. (2)(3)(4) 3,414,800 51.1
1706 Westover Avenue
Petersburg, VA 23805
Raymond G. Tuttle 0 0
Glen S. Whitwer 0 0
Lee Rasmussen 346,283 5.1
14945 E. Radcliffe Drive
Aurora, CO 80015
Executive officers and
directors as a group (four persons) 3,900,800 58.9
</TABLE>
- -----------------
*Based on 6,527,066 shares of Common Stock outstanding at March 31, 1998.
(1) Includes options to purchase 50,000 shares of Common Stock at $.55 per
share pursuant to the 1995 Stock Incentive Plan and 30,000 shares owned
by Mr. Sumpter's spouse.
(2) Includes beneficial ownership of 3,364,800 shares held by the Spurlock
Family Limited Partnership (the "Partnership"). The general partner of
the Partnership is the Spurlock Family Corporation, control of which at
March 31, 1998 was held 1/3 each by Harold N. Spurlock, Irvine R.
Spurlock and H. Norman Spurlock, Jr. Effective April 8, 1998, Norman
Spurlock resigned as an officer and a director of, and relinquished all
interest in, the Spurlock Family Corporation.
(3) Pursuant to an agreement between Lloyd B. Putman, H. Norman Spurlock,
Jr. and Irvine R. Spurlock, dated January 12, 1996, Irvine and Norman
Spurlock each purchased 507,400 shares of Air Resources' common stock
from Mr. Putman in consideration of a joint promissory note due in
installments ending May 2000. In accordance with the stock purchase
agreement, the shares purchased have been pledged as security for the
promissory note, but Irvine and Norman Spurlock retained the right to
vote their respective shares until an event of default thereunder.
Irvine and Norman Spurlock transferred all such shares to the
Partnership in 1996.
(4) Includes options to purchase 50,000 shares of Common Stock at $.50 per
share pursuant to the 1995 Stock Incentive Plan. The options held by
Norman Spurlock expire April 23, 1998.
Item 13. Certain Relationships and Related Transactions
Certain Related Transactions. In May 1997, the Company created a
Special Litigation Committee, consisting of Messrs. Tuttle and Whitwer, to
investigate the allegations contained in a shareholders' derivative suit filed
against the Company and to determine whether maintenance of the derivative
proceeding was in the best interests of the Company. Mr. Tuttle was paid $9,990
for his service on the Special Litigation Committee in 1997. Mr. Whitwer was
paid $29,523 for his service on the Special Litigation Committee in 1997, and,
at Mr. Whitwer's request, the Company paid his compensation directly to Whitwer
& Company, Inc., a management consulting firm owned by Mr. Whitwer. For further
information on the Special Litigation Committee and the shareholders' derivative
suit, see Item 3., "Legal Proceedings," above.
Unauthorized Advances to Former Officers and Director. In early January
and early February 1998, the Company discovered that two of its officers and
directors, Irvine R. Spurlock and H. Norman Spurlock, Jr., had diverted
corporate funds for personal use and that, according to the Company's Special
Litigation Committee, a third officer, Warren E. Beam, had colluded in the
diversions by Norman
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<PAGE>
Spurlock. For further information on the diversions of corporate funds and the
subsequent resignations of these officers and directors, see Item 3., "Legal
Proceedings" above.
Indebtedness of Management. On June 30, 1995, Harold N. Spurlock, then
Chairman of the Board, President and Chief Executive Officer of the Company,
received a loan in the amount of $112,500 from Spurlock Adhesives. Principal and
interest at 9.0% per annum are payable in five equal annual installments
commencing in July 1996, the first of which was paid as agreed. The largest
aggregate amount of such debt outstanding during 1997 was $82,500. The balance
as of December 31, 1997 was $60,483. The loan relates to the purchase by Mr.
Spurlock of certain manufacturing assets in Malvern, Arkansas that were
contributed by Mr. Spurlock to Air Resources pursuant to the Spurlock Adhesives
Agreement.
In 1993, Harold N. Spurlock received advances in the aggregate
principal amount of $126,000 from Spurlock Adhesives. On December 21, 1993, the
Board of Directors of Spurlock Adhesives approved the purchase by Spurlock
Adhesives of a parcel of land owned by Harold Spurlock that adjoins its Waverly,
Virginia plant, at a price equal to the total amount of the advances ($126,000).
Such property was purchased by Mr. Spurlock on June 14, 1989 in a transaction
from Lone Star, Inc. for $150,000.
Subsequently, on March 15, 1994, the purchase transaction was modified
because the property was found to be subject to a $130,000 mortgage. The
modified transaction entailed the assignment of all of Mr. Spurlock's right,
title and interest in the property to Spurlock Adhesives in exchange for the
assumption by Spurlock Adhesives of the $130,000 mortgage loan, plus a $20,000
reduction in the $126,000 of advances made to Mr. Spurlock. At this point, the
balance of the advances totalled approximately $106,000.
Subsequent to December 31, 1993, the financial records of the Company
do not reflect the advances to Mr. Spurlock, or any payments made or interest
charged thereon. In October, 1997, these advances were discovered as unpaid and
unrecognized. The advances were then recognized in the amount of $97,633, Mr.
Spurlock was notified and such remaining amount repaid by Mr. Spurlock on
October 15, 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements:
(i) Independent Auditors' Report
(ii) Consolidated Balance Sheets as of December
31, 1997 and 1996
(iii) Consolidated Statements of Operations for
the years ended December 31, 1997, 1996 and
1995
(iv) Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1997, 1996 and 1995
(v) Consolidated Statements of Cash Flows for
the years ended December 31, 1997, 1996 and
1995
(vi) Notes to Consolidated Financial Statements
(2) Financial Statement Schedules: none.
(3) Exhibits
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<PAGE>
Exhibit No. Document
2 Agreement and Plan of Merger dated February 15, 1996, between
Air Resources Corporation and Spurlock Industries, Inc.,
incorporated by reference to Exhibit 2 to the Form S-4 of the
Registrant filed with the Securities and Exchange Commission
on February 20, 1996, as amended by Amendment No. 1 and No. 2
thereto, Registration No. 33-01448 (as amended, the "Form
S-4").
3.1 Articles of Incorporation of Spurlock Industries, Inc.,
incorporated by reference to Exhibit 3.1 to the Form S-4.
3.2 Bylaws of Spurlock Industries, Inc., incorporated by reference
to Exhibit 3.2 to the Form S-4.
10.1 Agreement and Plan of Reorganization, dated April 22, 1992,
between Air Resources Corporation and Spurlock Adhesives,
Inc., incorporated by reference to Exhibit 10.1 to the Form
S-4.
10.2 Employment and Retirement Benefit Agreement dated August 21,
1996 by and between Spurlock Adhesives, Inc. and Harold N.
Spurlock, as amended by First Amendment thereto dated February
24, 1997 by and between such parties, incorporated by
reference to Exhibit 10.2 to the Registrant's Form 10-K for
the year ended December 31, 1996, filed with the Securities
and Exchange Commission on March 31, 1997.
10.3 Air Resources Corporation 1995 Stock Incentive Plan,
incorporated by reference to Exhibit 10.3 to the Form S-4.
10.4 Incentive Stock Option Agreement, dated February 22, 1995,
between Air Resources Corporation and Irvine R. Spurlock,
incorporated by reference to Exhibit 10.4 to the Form S-4.
10.5 Incentive Stock Option Agreement, dated February 22, 1995,
between Air Resources Corporation and H. Norman Spurlock, Jr.,
incorporated by reference to Exhibit 10.5 to the Form S-4.
10.6 Incentive Stock Option Agreement, dated May 15, 1995, between
Air Resources Corporation and Warren E. Beam, incorporated by
reference to Exhibit 10.6 to the Form S-4.
10.7 Indemnification Agreement, dated January 30, 1997, between
Spurlock Industries, Inc. and Phillip S. Sumpter, incorporated
by reference to Exhibit 10.7 to the Registrant's Form 10-K for
the year ended December 31, 1996, filed with the Securities
and Exchange Commission on March 31, 1997.
10.8 Promissory Note made by H. Norman Spurlock, Jr. in favor of
Spurlock Adhesives, Inc. as of January 10, 1996, incorporated
by reference to Exhibit 10.8 to the Form S-4.
10.9 Letter Agreement dated September 7, 1993, between Air
Resources Corporation and Lloyd B. Putman, incorporated by
reference to Exhibit 10.9 to the Form S-4.
10.10 Collateral Promissory Note made by Harold N. Spurlock in favor
of Spurlock Adhesives, Inc. as of June 30, 1995, incorporated
by reference to Exhibit 10.10 to the Form S-4.
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<PAGE>
10.11 Indemnification Agreement, dated September 19, 1996, between
Spurlock Industries, Inc. and Glen S. Whitwer, incorporated by
reference to Exhibit 10.11 to the Registrant's Form 10-K for
the year ended December 31, 1996, filed with the Securities
and Exchange Commission on March 31, 1997.
10.12 Indemnification Agreement, dated January 30, 1997 between
Spurlock Industries, Inc. and Raymond G. Tuttle, incorporated
by reference to Exhibit 10.12 to the Registrant's Form 10-K
for the year ended December 31, 1996, filed with the
Securities and Exchange Commission on March 31, 1997.
10.13 Loan and Security Agreement, dated July 1, 1996, between
Spurlock Adhesives, Inc. and National Canada Finance
Corporation, incorporated by reference to Exhibit 10 to the
Registrant's Form 10-Q for the quarter ended June 30, 1996,
filed with the Securities and Exchange Commission on August
15, 1996.
10.14 Spurlock Industries, Inc. 1995 Stock Incentive Plan,
incorporated by reference to Exhibit 4.3 of the Registrant's
Registration Statement on Form S-8, File No. 333-09659.
10.15 Form of Spurlock Industries, Inc., Incentive Stock Option
Agreement, incorporated by reference to Exhibit 10.2 to the
Registrant's Form 10-Q for the quarter ended September 30,
1996, filed with the Securities and Exchange Commission on
November 14, 1996.
10.16 Form of Spurlock Industries, Inc. Non-Qualified Stock Option
Agreement, incorporated by reference to Exhibit 10.3 to the
Registrant's Form 10-Q for the quarter ended September 30,
1996, filed with the Securities and Exchange Commission on
November 14, 1996.
10.17 Letter agreement between Spurlock Adhesives, Inc. and KeyBank
of New York dated August 4, 1997, incorporated by reference to
Exhibit 10.1 to the Registrant's Form 10-Q for the quarter
ended September 30, 1997, filed with the Securities and
Exchange Commission on November 14, 1997.
10.18 Promissory Note dated August 13, 1997 from Spurlock Adhesives,
Inc. payable to KeyBank of New York, incorporated by reference
to Exhibit 10.2 to the Registrant's Form 10-Q for the quarter
ended September 30, 1997, filed with the Securities and
Exchange Commission on November 14, 1997.
10.19 HCHO/UFC Turnkey Plant "B" Sale Contract - Design, Engineer,
Equipment Supply, Construct, and Install Contract dated
September 30, 1997 between Spurlock Adhesives, Inc. and D.B.
Western, Inc., incorporated by reference to Exhibit 10.3 to
the Registrant's Form 10-Q for the quarter ended September 30,
1997, filed with the Securities and Exchange Commission on
November 14, 1997.
10.20 HCHO/UFC Plant "A" - Lease dated September 30, 1997 between
Spurlock Adhesives, Inc. and D.B. Western, Inc., incorporated
by reference to Exhibit 10.4 to the Registrant's Form 10-Q for
the quarter ended September 30, 1997, filed with the
Securities and Exchange Commission on November 14, 1997.
10.21 Guaranty dated September 1, 1997 of Spurlock Industries, Inc.
in favor of D.B. Western, Inc., incorporated by reference to
Exhibit 10.5 to the Registrant's Form 10-Q for the quarter
ended September 30, 1997, filed with the Securities and
Exchange Commission on November 14, 1997.
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<PAGE>
10.22 Guaranty dated September 1, 1997 of Spurlock Industries, Inc.
in favor of D.B. Western, Inc., incorporated by reference to
Exhibit 10.6 to the Registrant's Form 10-Q for the quarter
ended September 30, 1997, filed with the Securities and
Exchange Commission on November 14, 1997.
10.23 Guaranty of Payment dated September 30, 1997 of Irvine R.
Spurlock for the benefit of D.B. Western, Inc., incorporated
by reference to Exhibit 10.7 to the Registrant's Form 10-Q for
the quarter ended September 30, 1997, filed with the
Securities and Exchange Commission on November 14, 1997.
10.24 Indenture dated August 13, 1997 between Town of Moreau, New
York as grantor and Spurlock Adhesives, Inc. as grantee,
incorporated by reference to Exhibit 10.8 to the Registrant's
Form 10-Q for the quarter ended September 30, 1997, filed with
the Securities and Exchange Commission on November 14, 1997.
10.25 Indenture dated August 13, 1997 between Town of Moreau, New
York, as grantor and Spurlock Adhesives, Inc. as grantee,
incorporated by reference to Exhibit 10.9 to the Registrant's
Form 10-Q for the quarter ended September 30, 1997, filed with
the Securities and Exchange Commission on November 14, 1997.
10.26 Employment Agreement by and between Spurlock Industries, Inc.,
Spurlock Adhesives Incorporated [sic] and Phillip S. Sumpter,
dated as of March 11, 1996, incorporated by reference to
Exhibit 10.17 to Amendment No. 4 to the Registrant's Form 10-K
for the year ended December 31, 1996, filed with the
Securities and Exchange Commission on April 16, 1998.
10.27* Employment Agreement by and between Spurlock Industries, Inc.,
Spurlock Adhesives, Inc. and Phillip S. Sumpter, dated as of
April 1, 1998.
10.28* Deed, dated October 9, 1997, between Spurlock Adhesives, Inc.,
as Grantor, and the County of Saratoga Industrial Development
Agency, as Grantee.
10.29* Bill of Sale, dated October 1, 1997, from Spurlock Adhesives,
Inc., to the County of Saratoga Industrial Development Agency.
10.30* Trust Indenture, dated October 1, 1997, between the County of
Saratoga Industrial Development Agency and Star Bank, N.A.
10.31* Installment Sale Agreement, dated October 1, 1997, between the
County of Saratoga Industrial Development Agency and Spurlock
Adhesives, Inc.
10.32* Irrevocable Transferable Direct Pay Letter of Credit No. NSL
792132, dated October 10, 1997, from KeyBank National
Association in favor of Star Bank, N.A.
10.33* Letter of Credit Reimbursement Agreement, dated October 1,
1997, between Spurlock Adhesives, Inc. and KeyBank National
Association.
10.34* Pledge and Assignment, dated October 1, 1997, from the County
of Saratoga Industrial Development Agency to Star Bank, N.A.
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<PAGE>
10.35* Mortgage and Security Agreement, dated October 1, 1997, from
the County of Saratoga Industrial Development Agency and
Spurlock Adhesives, Inc. to KeyBank National Association.
10.36* Security Agreement, dated October 1, 1997, between Spurlock
Adhesives, Inc., as Debtor, and KeyBank National Association,
as Secured Party.
10.37* Guaranty of Payment and Performance, dated October 1, 1997,
from Spurlock Industries, Inc., to KeyBank National
Association.
10.38* Remarketing Agreement, dated October 1, 1997, among Spurlock
Adhesives, Inc., KeyBank National Association and the County
of Saratoga Industrial Development Agency.
10.39* Pledge and Security Agreement, dated October 1, 1997, between
Spurlock Adhesives, Inc. and KeyBank National Association.
10.40* Payment in Lieu of Tax Agreement, dated October 1, 1997,
between the County of Saratoga Industrial Development Agency
and Spurlock Adhesives, Inc.
10.41* Building Loan Agreement, dated October 1, 1997, among KeyBank
National Association, Spurlock Adhesives, Inc. and the County
of Saratoga Industrial Development Agency.
10.42* Tax Regulatory Agreement, dated October 10, 1997, from
Spurlock Adhesives, Inc., for the benefit of the County of
Saratoga Industrial Development Agency and Star Bank, N.A.
10.43* Deed of Trust and Security Agreement, dated October 1, 1997,
from Spurlock Adhesives, Inc. to Otto W. Konrad and Bruce H.
Matson, as collective Trustee, for the benefit of KeyBank
National Association.
10.44* Hazardous Substances Indemnity Agreement, dated October 1,
1997, by Spurlock Adhesives, Inc., and Spurlock Industries,
Inc., for the benefit of KeyBank National Association.
10.45* Guaranty, dated October 1, 1997, from Spurlock Industries,
Inc., to the County of Saratoga Industrial Development Agency.
10.46* Performance Bond No. 644927, dated October 9, 1997, issued by
Nobel Insurance Company, as Surety, on behalf of D.B. Western,
Inc., as Principal, for the benefit of Spurlock Adhesives,
Inc., Key Bank and National Bank of Canada, as the Obligees.
10.47* Promissory Note, dated October 10, 1997, from Spurlock
Adhesives, Inc., payable to KeyBank National Association.
10.48* Settlement Agreement, dated April 8, 1998, among Spurlock
Industries, Inc., Spurlock Adhesives, Inc., Spurlock Family
Limited Partnership, H. Norman Spurlock, Jr. and Harold N.
Spurlock, Sr.
10.49* Unconditional Guaranty, dated April 8, 1998, given by Harold
N. Spurlock, Sr., to Spurlock Adhesives, Inc.
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<PAGE>
10.50* Pledge and Security Agreement, dated April 8, 1998, between
Spurlock Adhesives, Inc., and Spurlock Family Limited
Partnership.
10.51* Promissory Note, dated April 8, 1998, from Spurlock Family
Limited Partnership, payable to Spurlock Adhesives, Inc.
21* Subsidiaries of the Registrant.
23.1* Consent of Cherry, Bekaert & Holland, L.L.P.
23.2* Consent of James E. Scheifley & Associates, P.C. (formerly
Winter, Scheifley & Associates, P.C.), independent auditors
27* Financial Data Schedule (filed electronically only).
* Filed herewith.
(b) Reports on Form 8-K.
None.
(c) The exhibits required by Item 601 of Regulation S-K are filed
as exhibits to this Form 10-K.
(d) There are no financial statements of the Company required by
Regulation S-X which were excluded from the Annual Report to Shareholders by
Rule 14a-3(b).
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<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
SPURLOCK INDUSTRIES, INC.
Date: April 15, 1998 By: /s/ Phillip S. Sumpter
---------------------------
Phillip S. Sumpter
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Phillip S. Sumpter Chairman and Chief Executive April 15, 1998
- ------------------------------------------- Officer and Director (Principal Executive
Phillip S. Sumpter and Financial Officer)
/s/ Lawrence C. Birkholz Controller April 15, 1998
- ------------------------------------------- (Principal Accounting Officer)
Lawrence C. Birkholz
/s/ Harold N. Spurlock Director April 15, 1998
- -------------------------------------------
Harold N. Spurlock
/s/ Raymond G. Tuttle Director April 15, 1998
- -------------------------------------------
Raymond G. Tuttle
/s/ Glen S. Whitwer Director April 15, 1998
- -------------------------------------------
Glen S. Whitwer
</TABLE>
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<PAGE>
INDEX TO EXHIBITS
Exhibit No. Document
2 Agreement and Plan of Merger dated February 15, 1996, between
Air Resources Corporation and Spurlock Industries, Inc.,
incorporated by reference to Exhibit 2 to the Form S-4 of the
Registrant filed with the Securities and Exchange Commission
on February 20, 1996, as amended by Amendment No. 1 and No. 2
thereto, Registration No. 33-01448 (as amended, the "Form
S-4").
3.1 Articles of Incorporation of Spurlock Industries, Inc.,
incorporated by reference to Exhibit 3.1 to the Form S-4.
3.2 Bylaws of Spurlock Industries, Inc., incorporated by reference
to Exhibit 3.2 to the Form S-4.
10.1 Agreement and Plan of Reorganization, dated April 22, 1992,
between Air Resources Corporation and Spurlock Adhesives,
Inc., incorporated by reference to Exhibit 10.1 to the Form
S-4.
10.2 Employment and Retirement Benefit Agreement dated August 21,
1996 by and between Spurlock Adhesives, Inc. and Harold N.
Spurlock, as amended by First Amendment thereto dated February
24, 1997 by and between such parties, incorporated by
reference to Exhibit 10.2 to the Registrant's Form 10-K for
the year ended December 31, 1996, filed with the Securities
and Exchange Commission on March 31, 1997.
10.3 Air Resources Corporation 1995 Stock Incentive Plan,
incorporated by reference to Exhibit 10.3 to the Form S-4.
10.4 Incentive Stock Option Agreement, dated February 22, 1995,
between Air Resources Corporation and Irvine R. Spurlock,
incorporated by reference to Exhibit 10.4 to the Form S-4.
10.5 Incentive Stock Option Agreement, dated February 22, 1995,
between Air Resources Corporation and H. Norman Spurlock, Jr.,
incorporated by reference to Exhibit 10.5 to the Form S-4.
10.6 Incentive Stock Option Agreement, dated May 15, 1995, between
Air Resources Corporation and Warren E. Beam, incorporated by
reference to Exhibit 10.6 to the Form S-4.
10.7 Indemnification Agreement, dated January 30, 1997, between
Spurlock Industries, Inc. and Phillip S. Sumpter, incorporated
by reference to Exhibit 10.7 to the Registrant's Form 10-K for
the year ended December 31, 1996, filed with the Securities
and Exchange Commission on March 31, 1997.
10.8 Promissory Note made by H. Norman Spurlock, Jr. in favor of
Spurlock Adhesives, Inc. as of January 10, 1996, incorporated
by reference to Exhibit 10.8 to the Form S-4.
10.9 Letter Agreement dated September 7, 1993, between Air
Resources Corporation and Lloyd B. Putman, incorporated by
reference to Exhibit 10.9 to the Form S-4.
10.10 Collateral Promissory Note made by Harold N. Spurlock in favor
of Spurlock Adhesives, Inc. as of June 30, 1995, incorporated
by reference to Exhibit 10.10 to the Form S-4.
10.11 Indemnification Agreement, dated September 19, 1996, between
Spurlock Industries, Inc. and Glen S. Whitwer, incorporated by
reference to Exhibit 10.11 to the Registrant's Form 10-K for
the year ended December 31, 1996, filed with the Securities
and Exchange Commission on March 31, 1997.
10.12 Indemnification Agreement, dated January 30, 1997 between
Spurlock Industries, Inc. and Raymond G. Tuttle, incorporated
by reference to Exhibit 10.12 to the Registrant's Form 10-K
for the year ended December 31, 1996, filed with the
Securities and Exchange Commission on March 31, 1997.
10.13 Loan and Security Agreement, dated July 1, 1996, between
Spurlock Adhesives, Inc. and National Canada Finance
Corporation, incorporated by reference to Exhibit 10 to the
Registrant's Form 10-Q for the quarter ended June 30, 1996,
filed with the Securities and Exchange Commission on August
15, 1996.
10.14 Spurlock Industries, Inc. 1995 Stock Incentive Plan,
incorporated by reference to Exhibit 4.3 of the Registrant's
Registration Statement on Form S-8, File No. 333-09659.
10.15 Form of Spurlock Industries, Inc., Incentive Stock Option
Agreement, incorporated by reference to Exhibit 10.2 to the
Registrant's Form 10-Q for the quarter ended September 30,
1996, filed with the Securities and Exchange Commission on
November 14, 1996.
10.16 Form of Spurlock Industries, Inc. Non-Qualified Stock Option
Agreement, incorporated by reference to Exhibit 10.3 to the
Registrant's Form 10-Q for the quarter ended September 30,
1996, filed with the Securities and Exchange Commission on
November 14, 1996.
10.17 Letter agreement between Spurlock Adhesives, Inc. and KeyBank
of New York dated August 4, 1997, incorporated by reference to
Exhibit 10.1 to the Registrant's Form 10-Q for the quarter
ended September 30, 1997, filed with the Securities and
Exchange Commission on November 14, 1997.
10.18 Promissory Note dated August 13, 1997 from Spurlock Adhesives,
Inc. payable to KeyBank of New York, incorporated by reference
to Exhibit 10.2 to the Registrant's Form 10-Q for the quarter
ended September 30, 1997, filed with the Securities and
Exchange Commission on November 14, 1997.
10.19 HCHO/UFC Turnkey Plant "B" Sale Contract - Design, Engineer,
Equipment Supply, Construct, and Install Contract dated
September 30, 1997 between Spurlock Adhesives, Inc. and D.B.
Western, Inc., incorporated by reference to Exhibit 10.3 to
the Registrant's Form 10-Q for the quarter ended September 30,
1997, filed with the Securities and Exchange Commission on
November 14, 1997.
10.20 HCHO/UFC Plant "A" - Lease dated September 30, 1997 between
Spurlock Adhesives, Inc. and D.B. Western, Inc., incorporated
by reference to Exhibit 10.4 to the Registrant's Form 10-Q for
the quarter ended September 30, 1997, filed with the
Securities and Exchange Commission on November 14, 1997.
10.21 Guaranty dated September 1, 1997 of Spurlock Industries, Inc.
in favor of D.B. Western, Inc., incorporated by reference to
Exhibit 10.5 to the Registrant's Form 10-Q for the quarter
ended September 30, 1997, filed with the Securities and
Exchange Commission on November 14, 1997.
10.22 Guaranty dated September 1, 1997 of Spurlock Industries, Inc.
in favor of D.B. Western, Inc., incorporated by reference to
Exhibit 10.6 to the Registrant's Form 10-Q for the quarter
ended September 30, 1997, filed with the Securities and
Exchange Commission on November 14, 1997.
10.23 Guaranty of Payment dated September 30, 1997 of Irvine R.
Spurlock for the benefit of D.B. Western, Inc., incorporated
by reference to Exhibit 10.7 to the Registrant's Form 10-Q for
the quarter ended September 30, 1997, filed with the
Securities and Exchange Commission on November 14, 1997.
10.24 Indenture dated August 13, 1997 between Town of Moreau, New
York as grantor and Spurlock Adhesives, Inc. as grantee,
incorporated by reference to Exhibit 10.8 to the Registrant's
Form 10-Q for the quarter ended September 30, 1997, filed with
the Securities and Exchange Commission on November 14, 1997.
10.25 Indenture dated August 13, 1997 between Town of Moreau, New
York, as grantor and Spurlock Adhesives, Inc. as grantee,
incorporated by reference to Exhibit 10.9 to the Registrant's
Form 10-Q for the quarter ended September 30, 1997, filed with
the Securities and Exchange Commission on November 14, 1997.
10.26 Employment Agreement by and between Spurlock Industries, Inc.,
Spurlock Adhesives Incorporated [sic] and Phillip S. Sumpter,
dated as of March 11, 1996, incorporated by reference to
Exhibit 10.17 to Amendment No. 4 to the Registrant's Form 10-K
for the year ended December 31, 1996, filed with the
Securities and Exchange Commission on April 16, 1998.
10.27* Employment Agreement by and between Spurlock Industries, Inc.,
Spurlock Adhesives, Inc. and Phillip S. Sumpter, dated as of
April 1, 1998.
10.28* Deed, dated October 9, 1997, between Spurlock Adhesives, Inc.,
as Grantor, and the County of Saratoga Industrial Development
Agency, as Grantee.
10.29* Bill of Sale, dated October 1, 1997, from Spurlock Adhesives,
Inc., to the County of Saratoga Industrial Development Agency.
10.30* Trust Indenture, dated October 1, 1997, between the County of
Saratoga Industrial Development Agency and Star Bank, N.A.
10.31* Installment Sale Agreement, dated October 1, 1997, between the
County of Saratoga Industrial Development Agency and Spurlock
Adhesives, Inc.
10.32* Irrevocable Transferable Direct Pay Letter of Credit No. NSL
792132, dated October 10, 1997, from KeyBank National
Association in favor of Star Bank, N.A.
10.33* Letter of Credit Reimbursement Agreement, dated October 1,
1997, between Spurlock Adhesives, Inc. and KeyBank National
Association.
10.34* Pledge and Assignment, dated October 1, 1997, from the County
of Saratoga Industrial Development Agency to Star Bank, N.A.
10.35* Mortgage and Security Agreement, dated October 1, 1997, from
the County of Saratoga Industrial Development Agency and
Spurlock Adhesives, Inc. to KeyBank National Association.
10.36* Security Agreement, dated October 1, 1997, between Spurlock
Adhesives, Inc., as Debtor, and KeyBank National Association,
as Secured Party.
10.37* Guaranty of Payment and Performance, dated October 1, 1997,
from Spurlock Industries, Inc., to KeyBank National
Association.
10.38* Remarketing Agreement, dated October 1, 1997, among Spurlock
Adhesives, Inc., KeyBank National Association and the County
of Saratoga Industrial Development Agency.
10.39* Pledge and Security Agreement, dated October 1, 1997, between
Spurlock Adhesives, Inc. and KeyBank National Association.
10.40* Payment in Lieu of Tax Agreement, dated October 1, 1997,
between the County of Saratoga Industrial Development Agency
and Spurlock Adhesives, Inc.
10.41* Building Loan Agreement, dated October 1, 1997, among KeyBank
National Association, Spurlock Adhesives, Inc. and the County
of Saratoga Industrial Development Agency.
10.42* Tax Regulatory Agreement, dated October 10, 1997, from
Spurlock Adhesives, Inc., for the benefit of the County of
Saratoga Industrial Development Agency and Star Bank, N.A.
10.43* Deed of Trust and Security Agreement, dated October 1, 1997,
from Spurlock Adhesives, Inc. to Otto W. Konrad and Bruce H.
Matson, as collective Trustee, for the benefit of KeyBank
National Association.
10.44* Hazardous Substances Indemnity Agreement, dated October 1,
1997, by Spurlock Adhesives, Inc., and Spurlock Industries,
Inc., for the benefit of KeyBank National Association.
10.45* Guaranty, dated October 1, 1997, from Spurlock Industries,
Inc., to the County of Saratoga Industrial Development Agency.
10.46* Performance Bond No. 644927, dated October 9, 1997, issued by
Nobel Insurance Company, as Surety, on behalf of D.B. Western,
Inc., as Principal, for the benefit of Spurlock Adhesives,
Inc., Key Bank and National Bank of Canada, as the Obligees.
10.47* Promissory Note, dated October 10, 1997, from Spurlock
Adhesives, Inc., payable to KeyBank National Association.
10.48* Settlement Agreement, dated April 8, 1998, among Spurlock
Industries, Inc., Spurlock Adhesives, Inc., Spurlock Family
Limited Partnership, H. Norman Spurlock, Jr. and Harold N.
Spurlock, Sr.
10.49* Unconditional Guaranty, dated April 8, 1998, given by Harold
N. Spurlock, Sr., to Spurlock Adhesives, Inc.
10.50* Pledge and Security Agreement, dated April 8, 1998, between
Spurlock Adhesives, Inc., and Spurlock Family Limited
Partnership.
10.51* Promissory Note, dated April 8, 1998, from Spurlock Family
Limited Partnership, payable to Spurlock Adhesives, Inc.
21* Subsidiaries of the Registrant.
23.1* Consent of Cherry, Bekaert & Holland, L.L.P.
23.2* Consent of James E. Scheifley & Associates, P.C. (formerly
Winter, Scheifley & Associates, P.C.), independent auditors
27* Financial Data Schedule (filed electronically only).
* Filed herewith.
Exhibit 10.27
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of the 1st day
of April, 1998, by and between SPURLOCK INDUSTRIES, INC., a Virginia corporation
("SII"), SPURLOCK ADHESIVES, INC., a Virginia corporation ("SAI"), the mailing
address for both of which is 209 West Main Street, P.O. Box 8, Waverly, Virginia
23890 (together hereafter referred to as "Employer"), and PHILLIP S. SUMPTER, a
Virginia resident ("Employee"), currently residing at 33296 Shingleton Road,
Waverly, Virginia 23890.
AGREEMENT:
In consideration of the mutual agreements contained herein, the
sufficiency and adequacy of which are acknowledged, the parties agree as
follows:
1. Employment. Employer hereby employs Employee, and Employee
hereby accepts employment by Employer, as the Chairman of the Board and Chief
Executive Officer of Employer. As Chairman of the Board and Chief Executive
Officer, Employee will faithfully perform such duties as may reasonably be
assigned to him by the Board of Directors of Employer from time to time.
Employee will devote his best efforts and substantially all of his time,
knowledge and ability to advance the business of Employer, and will not engage
in any conduct that reasonably may be expected to have any adverse effect upon
Employer.
2. Compensation. During the term of Employee's employment
hereunder, Employee shall receive as full compensation for all duties performed
by him on Employer's behalf:
A. Base Compensation. An annual salary of one hundred ninety
thousand dollars ($190,000) payable in equal installments not less than monthly,
subject to any annual adjustments as may be made by Employer from time to time.
B. Bonuses. Employer and Employee agree that Employee shall
be eligible for additional compensation in the form of bonuses based upon the
value of Employee's work contributions to Employer and the performance of
Employer in the marketplace - in the event Employer establishes a bonus plan or
program.
C. Stock Options. Employee shall be entitled to participate
in and shall receive the benefit of any existing stock option plans of Employee
or of any stock option plans created during the term of this Agreement which
benefit other executive employees.
D. Company Vehicle. Employer shall provide to Employee, as
additional compensation, a suitable vehicle for Employee's use. Employer shall
solely be responsible for any and all costs associated with maintaining,
insuring and registering said vehicle.
<PAGE>
E. Retirement. Employee shall be entitled to participate in
and shall receive the benefit of any existing group retirement plans of Employer
or of any retirement plans created during the term of this Agreement which
benefit other executive employees generally.
F. Fringe Benefits. Employer shall procure comprehensive
health and dental insurance for Employee and Employee's spouse and disability
insurance for Employee under one or more policies of insurance comparable to the
best existing policies by which Employer insures its other executive employees.
G. Vacation and Holidays. Employee shall be entitled to four
(4) weeks of paid annual vacation. Employee may accrue vacation, in whole or in
part, from year to year. Employee shall also receive such holidays as Employer
provides its other executive employees.
3. Term. This Agreement shall last for an initial term of three (3)
years commencing on April 1, 1998 and ending on March 31, 2001, at which time it
shall automatically renew for successive one (1) year periods unless sooner
terminated in accordance with the provisions hereof or either party gives the
other written notice of its election not to renew the Agreement at least ninety
(90) days before any renewal date.
4. Termination. This Agreement may be terminated as follows:
A. By Employer Without Cause. The Board of Directors of
Employer may terminate Employee's employment at any time without Cause (as
defined herein) before a Change in Control (as defined in Section 5 below) or at
any time 240 days after a Change in Control, upon not less than fifteen (15)
days advance written notice. In such event, Employee shall be paid the salary
set forth in subsection 2A through the earlier of the last date of the remaining
term of this Agreement, the date of his death, or the date eighteen (18) months
after the termination of his employment.
B. By Employer With Cause. The Board of Directors of the
Employer may, by resolution, terminate the employment of Employee at any time
with Cause; provided, however, Employee shall be entitled to fifteen (15) days
advance written notice before any such proposed resolution may be acted upon and
Employee shall further be entitled to attend any such Board of Directors meeting
and to hear and respond to any and all evidence which the Board of Directors
considers before adopting any such resolution. For purposes of this Section 4,
"Cause" shall be defined as:
(i) Gross incompetence, gross negligence, willful
misconduct in office, breach of a material fiduciary duty or
commission of any fraud or serious dishonest act detrimentally
affecting Employer in Employer's business relations (as
reasonably determined by the Board of Directors;
(ii) Willful and knowing violation of any statute
governing either Employer's business or Employee's conduct as
Employer's employee or conviction
2
<PAGE>
of a felony crime or commission of an act of embezzlement or
fraud against Employer (as reasonably determined by the Board of
Directors);
(iii) Employee's mental or physical disablement
resulting in Employee's inability to fulfill the terms of this
Agreement (as reasonably determined by the Board of Directors);
(iv) Any material breach by Employee of a material term
of this Agreement;
(v) The entry of a decree or order by a court of
competent jurisdiction (a) judging Employer as bankrupt or
insolvent, (b) approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of Employer under any applicable law, (c) appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other
similar official of Employer), or (d) ordering the winding up or
liquidation of the affairs of Employer; or
(vi) The death of Employee.
In the event of termination with Cause, Employee shall be entitled to no further
compensation or benefits under this Agreement.
C. By Employee Without Good Reason. Employee may terminate
his employment without Good Reason, as hereafter defined. If Employee terminates
his employment without Good Reason, he shall be entitled to no further
compensation or benefits under this Agreement[, and, in the event such
termination is during the initial term of this Agreement, he shall forfeit any
right to exercise any unexpired incentive stock option awarded during such
term].
D. By Employee With Good Reason. Employee may terminate his
employment with Employee at any time with Good Reason. In the event Employee
terminates his employment with Good Reason, he shall be paid his salary as set
forth in subsection 2A through the earlier of the last day of the remaining term
of this Agreement, the date of his death, or the expiration of twelve (12)
months from the date of the termination of his employment. He shall not be
required to render any further services to Employer. For purposes of this
Section 4, "Good Reason" is defined as:
(i) The assignment to Employee by the Board of
Directors of duties materially inconsistent with and inferior to
the position, duties, responsibilities and status of the Chief
Executive Officer of Employer, except in connection with the
termination of his employment for Cause; or
(ii) Any material breach by Employer of any material
term of this Agreement, which is not remedied within fifteen
(15) days of written notice to the Board of Directors by
Employee.
3
<PAGE>
5. Change in Control.
A. Definition - Change in Control. "Change in Control" means
consummation prior to March 31, 2001 of:
(i) A reorganization, merger, consolidation or other
event, with respect to which the individuals and entities who
were the respective beneficial owners of the common stock and
voting securities of SII immediately prior to such
reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
Employer resulting from such reorganization, merger or
consolidation;
(ii) A complete liquidation or dissolution of Employer;
or
(iii) A change in the composition of the Board of
Directors of SII such that the individuals who, as of the date
hereof, constitute the Board of Directors of SII (the Board of
Directors as of such date hereinafter being referred to as the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board of Directors; provided, however, for
purposes of this Section, that any individual who becomes a
member of the Board of Directors subsequent to the date hereof
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
those individuals who are members of the Board of Directors and
who are also members of the Incumbent Board (or deemed to be
such pursuant to this proviso) shall be considered as though
such individual were a member of the Incumbent Board; but,
provided further that any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule
14A-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934) or other actual threats of solicitation of
proxies or consents by or on behalf of a person other than the
Board of Directors shall not be so considered as a member of the
Incumbent Board.
B. Definition - Total Compensation. "Total Compensation"
means Employee's W-2 compensation for federal tax purposes, health care benefits
and automobile allowance, if any, for the calendar year immediately preceding or
coinciding with a Change of Control.
C. Employment Termination Option. In event of a Change in
Control of Employer, Employee shall, during the period between 60 and 240 days
after the Change in Control event, have the option to terminate his employment
with Employer by delivering written notice of his election to so terminate his
employment hereunder. Such termination shall be considered for all purposes
under this Agreement as a termination with Good Reason provided,
4
<PAGE>
however, Employee shall be entitled to receive a lump sum payment in cash within
thirty (30) days of the date of termination of employment of an amount equal to
one and one half times Total Compensation.
D. No Excess Parachute Payments. It is the intention of the
parties that payments to be made to the Employee pursuant to this Agreement
shall not constitute "excess parachute payments" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended and any regulations issued
thereunder. If the Employer or independent accountant serving as auditor for the
Employer, as the case may be, on the date of the Change of Control determines
that some or all of the payments scheduled under this Agreement, as well as any
other payments determined to be contingent on a Control of Control, would be
non-deductible by the Employer under Section 280G, then payments scheduled under
this Agreement shall be reduced to the maximum amount which may be paid without
causing such payments to be non-deductible, less $1. In making such
determination, the Employer or the Employer's accountant may rely upon interim
or proposed regulations interpreting Section 280G. Employee, at his own expense,
may obtain an independent determination. If a difference of opinion exists with
respect to whether there are excess parachute payments, then a further opinion
may be requested by Employer and Employee, selecting an accountant that is
acceptable to both. The determination by the jointly selected accountant shall
be binding on both parties.
6. Rights to Work Product. Employee agrees that Employer will have
an exclusive right to all products, ideas, inventions, or other works that are
conceived, developed, improved or supplemented by Employee during the period of
his employment with Employer, whether during or outside of Employee's working
hours, which are within the scope of, or related to, any of Employer's
activities or operations, or any of Employee's duties, responsibilities or
activities as an employee. Employee agrees to take at Employer's expense, but
without additional remuneration to him (except as Employer may, in its sole
discretion, grant), any action required by Employer to patent, copyright,
license or otherwise protect Employer's rights and interests in such products,
ideas, inventions or other work.
7. Trade Secrets and Confidential Information. During the term of
this Agreement, Employee will continue to have access to various trade secrets
and confidential information of Employer. Employee acknowledges that such
confidential information and trade secrets are owned and shall continue to be
owned solely by Employer. During the term of his employment and for five (5)
years after such employment terminates, Employee agrees not to use such
information for any purpose whatsoever or to divulge such information to any
person other than Employer or persons to whom Employer has given its written
consent unless Employee is compelled to disclose it by governmental or legal
process or by any provision of law or court order. In the event that Employee is
compelled to divulge such information as described in the previous sentence,
Employee shall give Employer at least five (5) days written notice prior to
divulging the information, unless such notification is prohibited by law.
8. Documents. Under no circumstances shall Employee remove from
Employer's office with intention to retain any of Employer's books, records,
documents, or customer lists, or any copies of such documents, without the
written permission of Employer; nor shall Employee
5
<PAGE>
make any copies of such books, records, documents, or customer lists for use and
retention outside of Employer's office except as specifically authorized in
writing by Employer.
9. Non-Competition. Employee agrees that during his employment with
Employer and for as long as he is receiving compensation under this Agreement,
he will not directly or indirectly, either as principal, agent, manager,
employee, partner, shareholder, director, officer, consultant or otherwise,
become associated with, employed by, or otherwise interested in, whether
financially or in any other capacity, any business operation directly competing
with Employer in any state east of the Mississippi River. This restriction shall
not preclude Employee from becoming the holder of any publicly traded stock,
provided Employee does not acquire a stock interest in excess of one percent
(1%).
10. Non-solicitation. Employee agrees that for a period of twelve
(12) months after his employment has terminated for any reason without the prior
written consent of the Board of Directors of Employer, or for so long as
Employee is receiving compensation from Employer, whichever period is longer:
A. Employee will not, directly or indirectly, solicit or
sell any of the products or services sold by Employer to any person, company,
firm, or corporation or entity who is or was a customer of Employer within two
(2) years prior to the termination of Employee's employment;
B. Employee will not solicit such customers on behalf of
himself or any other person, firm, company, or corporation; and
C. Employee will not, directly or indirectly, employ or
solicit the employment of any person employed by Employer within one (1) year
prior to such employment or solicitation. Further, Employee shall not induce,
solicit or advise any other person or business, or encourage or contribute to
the efforts of any other person or business, to employ or solicit the employment
of any person employed by Employer within one (1) year prior to such employment
or solicitation.
11. Ability to Earn Livelihood. Employee acknowledges that (i) in
the event his employment with Employer terminates for any reason, he will be
able to earn a livelihood without violating the foregoing restrictions; and (ii)
that his ability to earn a livelihood without violating such restrictions is a
material condition to his employment with Employer.
12. Remedies. Employee acknowledges that (i) compliance with
Sections 7, 8, 9, and 10 is necessary to protect the business and good-will of
Employer and (ii) a breach of any of those sections will irreparably and
continually damage Employer, for which money damages may not be adequate.
Therefore, the parties agree that in the event of such breach, Employer may seek
any and all legal or equitable relief available to it, specifically including
but not limited to injunctive relief, without the necessity of bond, and may
hold Employee liable for all damages, including actual and consequential
damages, costs and expenses, as well as legal costs and reasonable attorneys'
fees incurred by Employer as a result of such breach.
6
<PAGE>
13. Duration of Injunction. If Employee violates any of the terms of
Sections 7, 8, 9, or 10 and Employer consequently seeks injunctive relief from a
court, such injunctive relief may be applied prospectively to include the
duration of the covenant unexpired at the time of the first breach,
notwithstanding that the covenant may have otherwise expired at the time a
lawsuit is filed and/or at the time relief is granted.
14. Judicial Modification; Severability. The parties have attempted
to limit Employee's right to compete only to the extent necessary to protect
Employer from unfair competition. The parties recognize, however, that
reasonable people may differ in making such a determination. Consequently, the
parties hereby agree that, if the scope or enforceability of a restrictive
covenant set forth in Section 7, 8, 9 or 10 is in any way disputed at any time,
a court or other trier of fact may modify and reform such provision to
substitute such other terms as are reasonable to protect Employer's legitimate
business interests. If any provision, paragraph, or subparagraph of this
Agreement is adjudged by any court to be void or unenforceable in whole or in
part, such adjudication shall not affect the validity of the remainder of this
Agreement, including any other provision, paragraph, or subparagraph. Each
provision, paragraph, and subparagraph of this Agreement is separable from every
other provision, paragraph, and subparagraph, and constitutes a separate and
distinct covenant.
15. Waiver of Rights. If in one or more instances either party fails
to insist that the other party performs any of the terms of this Agreement, such
failure shall not be construed as waiver by such party of any past, present, or
future right granted under this Agreement and the obligations of both parties
under this Agreement shall continue in full force and effect.
16. Survival. The obligations contained in Sections 7, 8, 9, and 10
shall survive the termination of Employee's employment. In addition, the
termination of employment shall not affect any of the rights or obligations of
either party arising prior to or at the time of the termination of employment,
or which may arise by any event causing the termination of employment.
17. Successors. This Agreement shall be binding upon and shall inure
to the benefit of Employee, and, to the extent applicable, Employee's heirs,
assigns, executors, and personal representative, and upon Employer, its
successors and assigns, including without limitation, any person, partnership,
corporation or any other entity that may acquire all or substantially all of
Employer's assets and business, or with or into which Employer may be
consolidated or merged.
18. Complete Understanding. This Agreement constitutes the complete
understanding between the parties regarding terms and conditions of employment,
all prior representations or agreements having been superseded.
19. Modification. No alteration or modification of any of the
provisions of this Agreement shall be valid unless made in writing and signed by
both parties.
7
<PAGE>
20. Headings. The headings of sections and paragraphs of this
Agreement are for convenience and identification only and do not limit or
construe the contents of such sections and paragraphs.
21. Governing Law. This Agreement shall be subject to and governed
by the laws of the Commonwealth of Virginia. The parties agree that any cause of
action arising from the terms of this Agreement shall be brought only in the
Circuit Court of the City of Richmond, Virginia. The parties agree that such
court shall be the exclusive and sole venue for the adjudication of any disputes
hereunder.
22. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in their names as of the date first written above.
SPURLOCK INDUSTRIES, INC.
By: /s/ Kirk J. Passopulo
---------------------------------
Name: Kirk J. Passopulo
---------------------------
Office: Secretary
-------------------------
SPURLOCK ADHESIVES, INC.
By: /s/ Kirk J. Passopulo
---------------------------------
Name: Kirk J. Passopulo
---------------------------
Office: Secretary
-------------------------
EMPLOYEE
/s/ Phillip S. Sumpter
-------------------------------------
Phillip S. Sumpter
8
Exhibit 10.28
This Indenture State of New York )
County of )ss.:
Made the 9th day of October Recorded on the __ day of _______
Nineteen Hundred and Ninety-Seven A.D., 19__ at _____ o'clock ___M
in liber ____ of Deeds at Page ____
and examined.
Clerk
Between
SPURLOCK ADHESIVES, INC., a corporation having an address of 5090 General Mahone
Highway, Waverly, Virginia 23890,
party of the first part, and
COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT AGENCY, a public benefit corporation
having an address of Saratoga County Municipal Center, 40 McMaster Street,
Ballston Spa, New York 12020
party of the second part,
Witnesseth that the party of the first part, in consideration of Ten
Dollars ($10.00) lawful money of the United States and other good and valuable
consideration paid by the party of the second part, does hereby grant and
release unto the party of the second part, its successors and assigns forever,
all
THAT TRACT OR PARCEL OF LAND, situate in the Town of Moreau, County of
Saratoga and State of New York more fully described as Lot Number 3 as shown on
subdivision maps of Moreau Industrial Park prepared by The Saratoga Associates
and filed in the Saratoga County Clerk's Office on March 18, 1992 in drawer
#M-348 A-Z and AA-DD; and as modified by revised subdivision maps of Moreau
Industrial Park prepared by The Saratoga Associates and filed in the Saratoga
County Clerk's Office on February 16, 1994 in drawer #M-398, A-S and being
further bounded and described as follows:
BEGINNING at a point marked with a capped iron rod found at the point
of intersection of the easterly line of Farnan Road with the common division
line of Lot No. 4 to the north and Lot No. 3 to the south as shown on said map;
thence from said point of beginning along said common division line the
following five (5) courses and distances:
1) North 90 deg. 00 min. 00 sec. East, 347.86 feet to a point marked with
a capped iron rod found;
2) South 00 deg. 00 min. 00 sec. West, 32.63 feet to a point marked with a
capped iron rod found;
3) North 90 deg. 00 min. 00 sec. East, 191.52 feet to a point marked with
a capped iron rod found;
4) North 00 deg. 00 min. 00 sec. East, 32.63 feet to a point marked with a
capped iron rod found;
5) North 90 deg. 00 min. 00 sec. East, 680.17 feet to the point of
intersection of the westerly line of Lot No. 5 with the common division line of
Lot No. 4 to the north and Lot No. 3 to the south as shown on said map; thence
along said westerly line, South 16 deg. 10 min. 56 sec. West, 102.04 feet to a
point in the northwesterly line of lands of The State of New York as shown on
said map, said point also being at the 145 foot elevation; thence along said
northwesterly and the westerly line of lands of The State of New York as it
winds and turns along the 145 foot elevation in a southerly direction 712 +/-
feet to the point of intersection of said westerly line of lands of The State of
New York with the common division line of Lot No. 3 to the north and Lot No. 2
to the south as shown on said map, the last course having a tie-line of South 33
deg. 02 min. 30 sec. West, 699.47 feet; thence along said common division line,
South 90 deg. 00 min. 00 sec. West, 865.65 feet to a point marked with a capped
iron rod found at the point of intersection of the easterly line of Farnan Road
with the common division line of Lot No. 3 to the north and Lot No. 2 to the
south as shown on said map; thence along said easterly line in a northerly
direction the following four (4) courses and distances:
1) North 00 deg. 00 min. 00 sec. West, 116.35 feet to a point of
curvature;
2) Along a curve to the right an arc length of 464.05 feet to a point of
tangency, said curve having a radius of 2,773.32 feet and a delta angle
of 09 deg. 35 min. 13 sec.;
3) North 09 deg. 35 min. 13 sec. East, 50.00 feet to a point of curvature;
4) Along a curve to the left an arc length of 57.49 feet to the point or
place of beginning, said curve having a radius of 2,294.42 feet and a delta
angle of 01 deg. 26 min. 08 sec., said parcel containing 16.37 +/- acres of land
and being Lot No. 3 as shown on said map.
BEING the same premises conveyed by deed dated August 13, 1997 from
Town of Moreau to Spurlock Adhesives Incorporated and recorded in the Saratoga
County Clerk's Office on August 19, 1997 in Book 1468 of Deeds at Page 770.
SUBJECT TO ALL EASEMENTS OF RECORD.
THIS CONVEYANCE DOES NOT CONSTITUTE ALL OR SUBSTANTIALLY ALL OF THE
ASSETS OF THE PARTY OF THE FIRST PART AND HAS BEEN MADE IN THE ORDINARY COURSE
OF BUSINESS OF THE PARTY OF THE FIRST PART.
<PAGE>
Together with the appurtenances and all the estate and rights of the
party of the first part in and to said premises,
To have and to hold the premises herein granted unto the party of the
second part, its heirs and assigns forever.
And said party of the first part covenants as follows:
First, That the party of the second part shall quietly enjoy said
premises;
Second, That said party of the first part will forever Warrant the
title to said premises.
Third, That, in Compliance with Sec. 13 of the Lien Law, the grantor
will receive the consideration for this conveyance and will hold the right to
receive such consideration as a trust fund to be applied first for the purpose
of paying the cost of the improvement and will apply the same first to the
payment of the cost of the improvement before using any part of the total of the
same for any other purpose.
In Witness Whereof, the party of the first part has hereunto set its
hand the day and year first above written.
In Presence of SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
-----------------------------
Name: Phillip S. Sumpter
---------------------------
Title: Executive Vice President
--------------------------
State of New York )
)ss.:
County of SARATOGA )
On this 9th day of October Nineteen Hundred and
Ninety-Seven, before me personally came Phillip S. Sumpter, to me known,
who being by me duly sworn, did depose and say that he resides in
Waverly, Virginia, that he is the Exec Vice President of SPURLOCK ADHESIVES,
INC., the corporation described in and which executed the foregoing instrument,
and that he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Theresa C. Priest
--------------------------------
Notary Public
THERESA C. PRIEST
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
RECORD AND RETURN:
James A. Carminucci, Esq.
Lemery & Reid, P.C.
10 Railroad Place
Saratoga Springs, New York 12866
Exhibit 10.29
CLOSING ITEM NO.: A-2
BILL OF SALE
TO
COUNTY OF SARATOGA
INDUSTRIAL DEVELOPMENT AGENCY
Spurlock Adhesives, Inc., a Virginia corporation having an address of 209 West
Main Street, Waverly, Virginia 23890 (the "Grantor"), for the consideration of
One Dollar ($1.00), cash in hand paid, and other good and valuable consideration
received by the Grantor from the County of Saratoga Industrial Development
Agency, a public benefit corporation organized and existing under the laws of
the State of New York having its office at Saratoga County Municipal Center, 40
McMaster Street, Ballston Spa, New York 12020 (the "Grantee"), the receipt of
which is hereby acknowledged by the Grantor, hereby sells, transfers and
delivers unto the Grantee, and its successors and assigns, all those materials,
machinery, equipment, fixtures or furnishings which are described in Exhibit "A"
attached hereto now owned or hereafter acquired by the Grantor.
TO HAVE AND TO HOLD the same unto the Grantee, and its successors and
assigns, forever.
IN WITNESS WHEREOF, the Grantor has executed this instrument as of
October 1, 1997.
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
------------------------------------
Name: Phillip S. Sumpter
----------------------------------
Title: Executive Vice President
---------------------------------
<PAGE>
L:\WPDATA\69079\93247\BILLSAL2.DOC(25)
EXHIBIT "A"
DESCRIPTION OF EQUIPMENT
All articles of personal property and all appurtenances, wherever
located, now or hereafter acquired with the proceeds of the Grantor's $6,000,000
Multi-Mode Variable Rate Industrial Development Revenue Bonds (Spurlock
Adhesives, Inc. Project) Series 1997 A or any payment made by the Grantor
pursuant to Section 4.5 of the installment sale agreement dated as of October 1,
1997 by and between the Grantee, as seller, and the Grantor, as purchaser and
now or hereafter attached to, contained in or used in connection with the
Project (as defined in said installment sale agreement) or placed on any part
thereof, though not attached thereto.
A-1
Exhibit 10.30
CLOSING ITEM NO.: A-3
- -------------------------------------------------------------------------------
COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT AGENCY
AND
STAR BANK, N.A., AS TRUSTEE
========================================================================
TRUST INDENTURE
========================================================================
DATED AS OF OCTOBER 1, 1997
------------------------------------------
$6,000,000
COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT AGENCY
MULTI-MODE VARIABLE RATE
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(SPURLOCK ADHESIVES, INC. PROJECT), SERIES 1997 A
- -------------------------------------------------------------------------------
THIS INSTRUMENT IS INTENDED TO CONSTITUTE A
SECURITY AGREEMENT UNDER THE UNIFORM COMMERCIAL
CODE OF THE STATE OF NEW YORK.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
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<S> <C>
Recitals..........................................................................................................1
Form of Certificate of Authentication............................................................................13
Form of Assignment ..............................................................................................13
Granting Clause..................................................................................................14
ARTICLE I........................................................................................................16
DEFINITIONS.............................................................................................16
ARTICLE II.......................................................................................................27
THE BONDS...............................................................................................27
SECTION 2.01. AMOUNT, TERMS AND ISSUANCE OF BONDS; LIMITED OBLIGATIONS.........................27
SECTION 2.02. DESIGNATION, DENOMINATIONS AND MATURITY..........................................27
SECTION 2.03. REGISTERED BONDS REQUIRED; BOND REGISTRAR AND BOND REGISTER......................32
SECTION 2.04. TRANSFER AND EXCHANGE............................................................33
SECTION 2.05. DELIVERY OF BONDS................................................................34
SECTION 2.06. EXECUTION........................................................................34
SECTION 2.07. AUTHENTICATION; AUTHENTICATING AGENT.............................................34
SECTION 2.08. PAYMENT OF PRINCIPAL AND INTEREST RIGHTS PRESERVED...............................35
SECTION 2.09. PERSONS DEEMED OWNERS............................................................36
SECTION 2.10. MUTILATED, DESTROYED, LOST OR STOLEN BONDS.......................................36
SECTION 2.11. TEMPORARY BONDS..................................................................37
SECTION 2.12. CANCELLATION OF SURRENDERED BONDS................................................37
SECTION 2.13. SOURCE OF PAYMENT OF BONDS.......................................................37
SECTION 2.14. DELIVERY OF THE BONDS............................................................38
ARTICLE III......................................................................................................39
PURCHASE AND REMARKETING OF BONDS.......................................................................39
SECTION 3.01. PURCHASE OF BONDS ON DEMAND; MANDATORY PURCHASE..................................39
SECTION 3.02. REMARKETING OF BONDS.............................................................41
SECTION 3.03. PURCHASE OF BONDS; UNDELIVERED BONDS.............................................42
SECTION 3.04. DELIVERY OF REMARKETED OR PURCHASED BONDS........................................43
SECTION 3.05. BONDS PLEDGED TO THE CREDIT FACILITY ISSUER......................................43
SECTION 3.06. DRAWINGS ON CREDIT FACILITY......................................................44
SECTION 3.07. DELIVERY OF PROCEEDS OF SALE.....................................................44
SECTION 3.08. LIMITATION ON PURCHASE AND REMARKETING...........................................44
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ARTICLE IV.......................................................................................................45
PROJECT FUND; PROCEEDS OF BONDS.........................................................................45
SECTION 4.01. CREATION OF PROJECT FUND; PROCEEDS OF BONDS......................................45
SECTION 4.02. DISBURSEMENTS FROM AND RECORDS OF PROJECT FUND...................................45
SECTION 4.03. INSURANCE AND CONDEMNATION FUND..................................................46
ARTICLE V........................................................................................................48
BOND FUND; INVESTMENT OF FUNDS; REBATE FUND.............................................................48
SECTION 5.01. BOND FUND........................................................................48
SECTION 5.02. REVENUES TO BE HELD FOR ALL BONDHOLDERS; CERTAIN EXCEPTIONS......................50
SECTION 5.03. INVESTMENT OF PROJECT FUND, INSURANCE AND CONDEMNATION FUND, BOND FUND
AND REBATE FUND.......................................................................50
SECTION 5.04. MONEYS TO BE HELD IN TRUST.......................................................51
SECTION 5.05. CREATION OF REBATE FUND..........................................................51
SECTION 5.06. REPAYMENT TO THE COMPANIES OR THE BANK FROM AMOUNTS REMAINING IN THE
BOND FUND.............................................................................52
ARTICLE VI.......................................................................................................54
CREDIT FACILITIES.......................................................................................54
SECTION 6.01. INITIAL LETTER OF CREDIT.........................................................54
SECTION 6.02. EXPIRATION.......................................................................55
SECTION 6.03. ALTERNATE CREDIT FACILITIES......................................................55
SECTION 6.04. NOTICES OF EXPIRATION AND/OR REPLACEMENT OF CREDIT FACILITY......................56
ARTICLE VII......................................................................................................57
INVESTMENT OR DEPOSIT OF MONEYS.........................................................................57
SECTION 7.01. DEPOSITS.........................................................................57
ARTICLE VIII.....................................................................................................58
REDEMPTION OF BONDS.....................................................................................58
SECTION 8.01. REDEMPTION DATES AND PRICES......................................................58
SECTION 8.02. ISSUER DIRECTION OF OPTIONAL REDEMPTION..........................................59
SECTION 8.03. SELECTION OF BONDS TO BE CALLED FOR REDEMPTION...................................60
SECTION 8.04. NOTICE OF REDEMPTION.............................................................60
SECTION 8.05. BONDS REDEEMED IN PART...........................................................60
SECTION 8.06. NO MANDATORY SINKING FUND REQUIREMENTS...........................................61
ARTICLE IX.......................................................................................................62
COVENANTS AND AGREEMENTS OF THE ISSUER..................................................................62
SECTION 9.01. COVENANTS AND AGREEMENTS OF THE ISSUER..........................................62
SECTION 9.02. OBSERVANCE AND PERFORMANCE OF COVENANTS, AGREEMENTS, AUTHORITY AND
ACTIONS...............................................................................63
SECTION 9.03. LIMITATION ON OBLIGATIONS OF THE ISSUER.........................................63
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ARTICLE X........................................................................................................64
EVENTS OF DEFAULT AND REMEDIES..........................................................................64
SECTION 10.01. EVENTS OF DEFAULT DEFINED.......................................................64
SECTION 10.02. ACCELERATION AND ANNULMENT THEREOF..............................................65
SECTION 10.03. OTHER REMEDIES..................................................................66
SECTION 10.04. LEGAL PROCEEDINGS BY TRUSTEE....................................................66
SECTION 10.05. DISCONTINUANCE OF PROCEEDINGS BY TRUSTEE........................................67
SECTION 10.06. BONDHOLDERS MAY DIRECT PROCEEDINGS..............................................67
SECTION 10.07. LIMITATIONS ON ACTIONS BY BONDHOLDERS...........................................67
SECTION 10.08. TRUSTEE MAY ENFORCE RIGHTS WITHOUT POSSESSION OF BONDS..........................67
SECTION 10.09. REMEDIES NOT EXCLUSIVE..........................................................67
SECTION 10.10. DELAYS AND OMISSIONS NOT TO IMPAIR RIGHTS.......................................67
SECTION 10.11. APPLICATION OF MONEYS IN EVENT OF DEFAULT.......................................68
ARTICLE XI.......................................................................................................69
THE TRUSTEE.............................................................................................69
SECTION 11.01. ACCEPTANCE OF TRUST.............................................................69
SECTION 11.02. NO RESPONSIBILITY FOR RECITALS, ETC.............................................69
SECTION 11.03. TRUSTEE MAY ACT THROUGH AGENTS; ANSWERABLE ONLY FOR WILLFUL MISCONDUCT
OR NEGLIGENCE.........................................................................69
SECTION 11.04. COMPENSATION AND INDEMNITY......................................................70
SECTION 11.05. NOTICE OF DEFAULT; RIGHT TO INVESTIGATE.........................................70
SECTION 11.06. OBLIGATION TO ACT...............................................................70
SECTION 11.07. RELIANCE........................................................................71
SECTION 11.08. TRUSTEE MAY DEAL IN BONDS.......................................................71
SECTION 11.09. CONSTRUCTION OF AMBIGUOUS PROVISIONS............................................71
SECTION 11.10. RESIGNATION OF TRUSTEE..........................................................71
SECTION 11.11. REMOVAL OF TRUSTEE..............................................................71
SECTION 11.12. APPOINTMENT OF SUCCESSOR TRUSTEE................................................71
SECTION 11.13. QUALIFICATION OF SUCCESSOR......................................................72
SECTION 11.14. INSTRUMENTS OF SUCCESSION.......................................................72
SECTION 11.15. MERGER OF TRUSTEE...............................................................72
SECTION 11.16. TRUSTEE NOT REQUIRED TO EXPEND OR RISK OWN FUNDS................................72
SECTION 11.17. CONFLICT OF INTEREST PROVISIONS.................................................72
ARTICLE XII......................................................................................................74
THE REMARKETING AGENT AND THE TENDER AGENT..............................................................74
SECTION 12.01. THE REMARKETING AGENT...........................................................74
SECTION 12.02. THE TENDER AGENT................................................................74
SECTION 12.03. NOTICES.........................................................................75
ARTICLE XIII.....................................................................................................76
ACTS OF BONDHOLDERS; EVIDENCE OF OWNERSHIP..............................................................76
SECTION 13.01. ACTS OF BONDHOLDERS; EVIDENCE OF OWNERSHIP......................................76
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ARTICLE XIV......................................................................................................77
AMENDMENTS AND SUPPLEMENTS..............................................................................77
SECTION 14.01. AMENDMENTS AND SUPPLEMENTS WITHOUT BONDHOLDERS' CONSENT.........................77
SECTION 14.02. AMENDMENTS WITH BONDHOLDERS' AND CREDIT FACILITY ISSUER'S CONSENT...............78
SECTION 14.03. AMENDMENT OF CREDIT FACILITY....................................................78
SECTION 14.04. TRUSTEE AUTHORIZED TO JOIN IN AMENDMENTS AND SUPPLEMENTS; RELIANCE ON
COUNSEL...............................................................................78
SECTION 14.05. AMENDMENTS NOT REQUIRING CONSENT OF BONDHOLDERS................................78
SECTION 14.06. AMENDMENT REQUIRING CONSENT OF BONDHOLDERS.....................................79
ARTICLE XV.......................................................................................................80
DEFEASANCE..............................................................................................80
SECTION 15.01. DEFEASANCE......................................................................80
SECTION 15.02. RELEASE OF INDENTURE............................................................81
SECTION 15.03. SURVIVAL OF CERTAIN PROVISIONS..................................................82
ARTICLE XVI......................................................................................................83
MISCELLANEOUS PROVISIONS................................................................................83
SECTION 16.01. NON-RECOURSE PROVISION..........................................................83
SECTION 16.02. DEPOSIT OF FUNDS FOR PAYMENT OF BONDS...........................................84
SECTION 16.03. EFFECT OF PURCHASE OF BONDS.....................................................84
SECTION 16.04 PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS..................................84
SECTION 16.05. NO RIGHTS CONFERRED ON OTHERS...................................................84
SECTION 16.06. ILLEGAL, ETC. PROVISIONS DISREGARDED...........................................84
SECTION 16.07. SUBSTITUTE NOTICE...............................................................85
SECTION 16.08. NOTICES.........................................................................85
SECTION 16.09. SUCCESSORS AND ASSIGNS..........................................................86
SECTION 16.10. HEADINGS FOR CONVENIENCE ONLY...................................................86
SECTION 16.11. COUNTERPARTS....................................................................86
SECTION 16.13. APPLICABLE LAW..................................................................87
</TABLE>
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TRUST INDENTURE
THIS TRUST INDENTURE dated as of October 1, 1997 is made by
and between the COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT AGENCY, a public
benefit corporation of the State of New York (the "State") having an office for
the transaction of business at Saratoga County Municipal Center, 40 McMaster
Street, Ballston Spa, New York 12020 (the "Issuer"), and STAR BANK, N.A., as
trustee (the "Trustee"), a national banking association authorized to exercise
corporate trust powers in the State, under the following circumstances and
having an office at 425 Walnut Street, Cincinnati, Ohio 45201-1118;
W I T N E S S E T H:
WHEREAS, Title 1 of Article 18-A of the General Municipal Law
of the State (the "Enabling Act") was duly enacted into law as Chapter 1030 of
the Laws of 1969 of the State; and
WHEREAS, the Enabling Act authorizes and provides for the
creation of industrial development agencies for the benefit of the several
counties, cities, villages and towns in the State and empowers such agencies,
among other things, to acquire, construct, reconstruct, lease, improve,
maintain, equip and dispose of land and any building or other improvement, and
all real and personal properties, including, but not limited to, machinery and
equipment deemed necessary in connection therewith, whether or not now in
existence or under reconstruction, which shall be suitable for manufacturing,
warehousing, research, civic, commercial or industrial purposes, in order to
advance the job opportunities, health, general prosperity and economic welfare
of the people of the State and to improve their standard of living; and
WHEREAS, the Enabling Act further authorizes each such agency
to lease or sell any or all of its facilities, to issue its bonds, for the
purpose of carrying out any of its corporate purposes and, as security for the
payment of the principal and redemption price of and interest on any such bonds
so issued and any agreements made in connection therewith, to mortgage and
pledge any or all of its facilities, whether then owned or thereafter acquired,
and to pledge the revenues and receipts from the lease or sale thereof to secure
the payment of such bonds and interest thereon; and
WHEREAS, the Issuer was created, pursuant to and in accordance
with the provisions of the Enabling Act, by Chapter 855 of the Laws of 1971 of
the State (Collectively, with the Enabling Act, the "Act") and is empowered
under the Act to undertake the Project (as hereinafter defined) in order to so
advance the job opportunities, health, general prosperity and economic welfare
of the people of the State and improve their standard of living; and
WHEREAS, the Issuer, by resolution adopted on September 16,
1997 (the "Resolution"), determined to issue its $6,000,000 aggregate principal
amount of Multi-Mode Variable Rate Industrial Development Revenue Bonds
(Spurlock Adhesives, Inc. Project), Series 1997 A (the "Bonds") for the purpose
of financing a portion of the Project Costs (as hereinafter defined); and
WHEREAS, said project (the "Project") shall consist of (A) (1)
the acquisition of a certain parcel of land comprising approximately 16.37 acres
constituting Lot #3 located in the Moreau Industrial Park in the Town of Moreau,
Saratoga County, New York (the "Land"), (2) the construction on the Land of two
(2) buildings approximately 10,000 square feet each in size and one (1)
approximately 800 square foot building for use in the manufacturing of synthetic
organic chemicals and related
<PAGE>
functions (collectively the "Facility") and (3) the acquisition and installation
therein of certain machinery and equipment (the "Equipment" and together with
the Land and the Facility, the "Project Facility"), and (B) the financing of a
portion of the costs of the foregoing; and
WHEREAS, contemporaneously with the execution of the
Indenture, the Issuer and Spurlock Adhesives, Inc. (the "Company") have entered
into an installment sale agreement dated as of October 1, 1997, (the
"Installment Sale Agreement") specifying the terms and conditions pursuant to
which the Issuer agrees to acquire, construct and install the Project Facility
and to sell the Project Facility to the Company; and
WHEREAS, the Issuer, by the terms of the Indenture and as
security for the Bonds, has granted the Trustee a first security interest in the
Trust Revenues (as hereinafter defined); and
WHEREAS, to secure the Bonds, pursuant to a pledge and
assignment dated as of October 1, 1997 (the "Assignment"), the Issuer has
assigned to the Trustee certain of the Issuer's rights and remedies under the
Installment Sale Agreement, including the right to receive installment purchase
payments and other amounts payable thereunder, but not including the Unassigned
Rights (as hereinafter defined); and
WHEREAS, as security for the Bonds, the Company has entered
into a letter of credit reimbursement agreement dated as of October 1, 1997 (the
"Reimbursement Agreement") with KeyBank National Association (the "Bank"),
pursuant to which the Bank has issued in favor of the Trustee an irrevocable
transferable direct-pay letter of credit (the "Letter of Credit") in an amount
equal to the principal amount of the Bonds Outstanding and one hundred and ten
(110) days' interest thereon at a maximum rate of ten percent (10%) per annum,
under which the Bank is obligated to pay to the Trustee, upon presentation of a
sight draft and required accompanying documentation, the amount necessary to pay
the principal of and interest on the Bonds then due and payable;
WHEREAS, the Trustee has the power to enter into the Indenture
and to execute the trusts hereby created and in evidence thereof has joined in
the execution hereof; and
WHEREAS, the execution and delivery of the Indenture and the
issuance of the Bonds under the Act as herein provided have been in all respects
approved and duly and validly authorized by the Resolution; and
WHEREAS, the providing of the Project Facility is for a proper
purpose, to wit, to promote the job opportunities, the health and the general
prosperity and economic welfare of the inhabitants of the State pursuant to the
provisions of the Act; and
WHEREAS, the Issuer deems it appropriate and necessary that
the proceeds of the sale of the Bonds shall be deposited with the Trustee, and
that, upon satisfaction of the requirements set forth herein, the Trustee shall
disburse such proceeds to pay the Project Costs; and
WHEREAS, the Bonds shall be payable solely from the Revenues
(as hereinafter defined), which include, without limitation, installment
purchase payments made by the Company under the Installment Sale Agreement; and
2
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WHEREAS, the Bonds and the Certificate of Authentication to be
endorsed thereon are to be in substantially the following form, with necessary
and appropriate variations, omissions and insertions as permitted or required by
the Indenture:
3
<PAGE>
REGISTERED CUSIP NO.:
NO. ________________ 803484 BT 0
COUNTY OF SARATOGA INDUSTRIAL DEVLEOPMENT AGENCY
MULTI-MODE VARIABLE RATE INDUSTRIAL DEVELOPMENT REVENUE BONDS,
(SPURLOCK ADHESIVES, INC. PROJECT), SERIES 1997 A
MATURITY DATE DATED AS OF:
April 1, 2008 October 10, 1997
REGISTERED OWNER:_________________________________________________________
PRINCIPAL AMOUNT:____________________________________________________ DOLLARS
The County of Saratoga Industrial Development Agency (the "Issuer"), a
public benefit corporation of the State of New York, for value received, hereby
promises to pay (but only out of the sources hereinafter mentioned) to the
registered owner hereof, or registered assigns, on the Maturity Date set forth
above, unless this Bond shall have been called for redemption in whole or in
part and payment of the redemption price shall have been duly made or provided
for, upon surrender hereof, the principal sum set forth above and to pay (but
only out of the sources hereinafter mentioned) to the registered owner hereof,
interest thereon from the date to which interest has accrued and been paid or
duly provided for, or, if prior to the first Interest Payment Date, from the
date of the original issuance of the Bonds, until payment of said principal sum
has been made or provided for, initially at the Weekly Rate (as hereinafter
defined) determined from time to time and payable on the dates set forth herein
and in the Indenture referred to below, commencing on the Interest Payment Date
in January, 1998, and interest on overdue principal, and to the extent permitted
by law, on overdue interest, as provided in the Indenture.
Principal and interest shall be paid in coin or currency of the United
States of America which, at the time of payment, is legal tender for the payment
of public and private debts. Interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, except as provided in the
Indenture, be paid to the person in whose name this Bond is registered at the
close of business on the Regular Record Date (as hereinafter defined) for such
interest. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the registered owner on such Regular Record
Date, and may be paid to the person in whose name this Bond is registered at the
close of business on a Special Record Date for the payment of such defaulted
interest to be fixed by the Trustee (as hereinafter defined), or may be paid, at
any time in any other lawful manner, all as more fully provided in the
Indenture.
The principal or redemption price of this Bond shall be paid at the
principal corporate trust office of Star Bank, N.A., Cincinnati, Ohio or at the
duly designated office of any duly appointed alternate or successor Paying
Agent. The interest on this Bond shall be payable by check mailed to the
registered owner of this Bond at such owner's address as it appears on the Bond
Register of the Bond Registrar; provided that at the request of the registered
owner of at least $1,000,000 in aggregate principal amount of Bonds, interest on
such Bonds shall be payable by wire transfer in immediately available funds to
the bank account number of such owner within the United States appearing on the
4
<PAGE>
Bond Register; and provided further that interest payable at maturity shall be
paid only upon presentation and surrender of this Bond. Notwithstanding anything
herein to the contrary, when this Bond is registered in the name of a Depository
(as hereinafter defined) or its nominee, the principal and redemption price of
and interest on this Bond shall be payable in next day or federal funds
delivered or transmitted to the Depository or its nominee.
THE BONDS ARE LIMITED, SPECIAL OBLIGATIONS OF THE ISSUER PAYABLE
SOLELY FROM PAYMENTS MADE BY THE COMPANY UNDER THE AGREEMENT, MONEYS AND
SECURITIES HELD BY THE TRUSTEE UNDER THE INDENTURE AND THE SECURITY PROVIDED BY
THE LETTER OF CREDIT AND BY THE LIEN OF THE ASSIGNMENT ON THE PROJECT FACILITY.
This Bond is one of a duly authorized series of the County of Saratoga
Industrial Development Agency designated "Multi-Mode Variable Rate Industrial
Development Revenue Bonds, (Spurlock Adhesives, Inc. Project), Series 1997 A"
(the "Bonds"), issuable under the trust indenture, dated as of October 1, 1997
(the "Indenture"), by and between the Issuer and the Trustee, aggregating in
principal amount $6,000,000 and issued for the purpose of assisting in providing
financing for a project (the "Project") consisting of (A) (1) the acquisition of
a certain parcel of land comprising approximately 16.37 acres constituting Lot
#3 located in the Moreau Industrial Park in the Town of Moreau, Saratoga County,
New York (the "Land"), (2) the construction on the Land of two (2) buildings
approximately 10,000 square feet each in size and one (1) approximately 800
square foot building for use in the manufacturing of synthetic organic chemicals
and related functions (collectively the "Facility") and (3) the acquisition and
installation therein of certain machinery and equipment (the "Equipment" and
together with the Land and the Facility, the "Project Facility"), and (B) the
financing of a portion of the costs of the foregoing.
The Project Facility will be sold on an installment sale basis by the
Issuer to Spurlock Adhesives, Inc., a Virginia corporation (the "Company"),
pursuant to the terms of an installment sale agreement dated as of October 1,
1997 (the "Agreement").
The Bonds are issued under and are equally and ratably secured by the
Indenture. The Indenture grants the Trustee a first security interest in the
Revenues (as defined in the Indenture).
Security for the repayment of the Bonds is provided by the Letter of
Credit, as described below.
As additional security for the payment of principal of, premium, if
any, and interest on the Bonds, the Issuer has assigned to the Trustee the
Issuer's rights and remedies under the Agreement (except the Unassigned Issuer's
Rights, as therein defined), including the right to receive installment purchase
payments and other amounts payable thereunder pursuant to a pledge and
assignment dated as of October 1, 1997 (the "Assignment").
If an Event of Default as defined in the Indenture occurs, the
principal of all Bonds issued under the Indenture may become due and payable
upon the conditions and in the manner and with the effect provided in the
Indenture.
Reference is made to the Indenture for a more complete description of
the Project, the provisions, among others, with respect to the nature and extent
of the security for the Bonds, the rights, duties and obligations of the Issuer,
the Trustee and the Bondholders, and the terms and conditions upon
5
<PAGE>
which the Bonds are issued and secured. All terms used herein with initial
capitalization where the rules of grammar or contest do not otherwise require
shall have the meanings as set forth in the Indenture. Each Bondholder assents,
by its acceptance hereof, to all of the provisions of the Indenture.
The Company is required by the Agreement to make payments to the
Trustee in the amounts and at the times necessary to pay the principal of and
interest and any premium (the "Bond Service Charges") on the Bonds. To provide
for the payment of the Bond Service Charges on the Bonds, the Issuer, in the
Indenture, has absolutely and irrevocably assigned to the Trustee any right,
title and interest in and to the Credit Facility Account, Redemption Premium
Account, Remarketing Proceeds Account and the Defeasance Account of the Bond
Fund and all moneys and investments therein (including without limitation the
proceeds of the Letter of Credit (as hereinafter defined)) and granted a
security interest in all moneys and investments in the Project Fund and the
Insurance and Condemnation Fund and the Revenues (other than the
above-referenced accounts of the Bond Fund, all moneys and investments therein
and the proceeds of the Credit Facility).
The Bond Service Charges on the Bonds are payable solely from moneys
held by the Trustee under the Indenture for such purpose, including moneys drawn
by the Trustee under the Letter of Credit referred to below or such other credit
facility, if any, as may then be held by the Trustee under the Indenture for the
benefit of the Bondholders (the Letter of Credit or any such other credit
facility is hereinafter referred to as the "Credit Facility").
DETERMINATION OF INTEREST RATE
This Bond initially shall bear interest at the Weekly Rate (hereinafter
described), which rate shall continue in effect until converted to a different
interest rate or rates determined for the "Interest Rate Mode" (as described
more fully in Section 2.02 of the Indenture) selected by the Company. The
"Interest Rate Modes" which may be selected are as follows: (i) a Weekly Rate in
which the interest rate is determined on the 7th day preceding conversion to a
Weekly Rate and on each Tuesday thereafter or, if not a Business Day, on the
next succeeding Business Day; (ii) a Semi-Annual Rate in which the interest rate
is determined on the tenth Business Day preceding each Semi-Annual Rate Period;
(iii) a Long-Term Rate for a period of one year or more ending on an Interest
Payment Date selected by the Company, in which the interest rate is determined
not later than the 15th Business Day preceding the 1st day of such Long-Term
Rate Period and (iv) a Taxable Weekly Rate in which the interest rate is
determined on the 7th day preceding conversion to the Taxable Weekly Rate and on
each Wednesday thereafter or, if not a Business Day, on the next succeeding
Business Day. The Company may from time to time convert the Interest Rate Mode
for the Bonds to another Interest Rate Mode in accordance with the terms of the
Indenture.
Interest on this Bond, at the interest rate or rates for each Interest
Rate Mode, is payable (a) while the Bonds bear interest at the Weekly Rate, on
the first Wednesday of each January, April, July and October, (b) while the
Bonds bear interest at the Taxable Weekly Rate, on the first Thursday of each
January, April, July and October, and (c) while the Bonds bear interest at the
Semi-Annual Rate or the Long-Term Rate, on October 1 and April 1 of each year
(each date on which interest shall be paid being an "Interest Payment Date").
Interest on this Bond shall be computed on the basis of a year of 365 or 366
days, as appropriate, for the actual number of days elapsed, while the Interest
Rate Mode is the Weekly Rate or the Taxable Weekly Rate, and on the basis of a
360-day year consisting of twelve 30-day months, while the Interest Rate Mode is
the Semi-Annual Rate or the Long-Term Rate. The interest rate or rates for each
Interest Rate Mode for the Bonds shall be determined by the Remarketing Agent on
the
6
<PAGE>
dates and at such times as specified in Section 2.02 of the Indenture. If the
Remarketing Agent fails to determine the interest rate in accordance with
Section 2.02 of the Indenture, the interest rate on this Bond shall be the
interest rate in effect for the previous interest rate period. Each interest
rate determined by the Remarketing Agent shall be the minimum rate of interest
necessary, in the judgment of the Remarketing Agent, to enable the Remarketing
Agent to sell the Bonds at a price equal to the principal amount thereof, plus
accrued interest, if any. Notwithstanding the foregoing, the interest rate borne
by this Bond shall not exceed the lesser of (i) fifteen percent (15%) per annum
or (ii) so long as any Bonds are entitled to the benefit of a Credit Facility,
the maximum interest rate specified in the Credit Facility.
LETTER OF CREDIT PROVISIONS
The Company for itself and on behalf of the Issuer has caused a Letter
of Credit issued by KeyBank National Association (the "Bank") to be delivered to
the Trustee (the "Letter of Credit"). The Trustee shall be entitled under the
Letter of Credit to draw up to an amount equal to the principal of the
outstanding Bonds plus an amount equal to 110 days' accrued interest on the
outstanding Bonds at a rate of ten percent (10%) per annum to pay principal or
purchase price (but not the redemption premium) of and interest on the Bonds
(other than Bonds held pursuant to Section 3.05 of the Indenture or owned by the
Company) on or prior to October 17, 2002 or, under certain circumstances, such
earlier or later date as may be permitted by the Letter of Credit. Subject to
the provisions of the Indenture, the Company may, but is not required to,
provide another Credit Facility upon the termination of the Letter of Credit or
the then current Credit Facility. While the Bonds bear interest at the Weekly
Rate, the Taxable Weekly Rate or the Semi-Annual Rate, the Bonds shall be
subject to mandatory tender for purchase upon any change in the then current
Credit Facility Issuer. During any Long-Term Rate Period, the Company may
substitute any Qualifying Credit Facility for the then current Letter or Credit
or other Credit Facility and the Trustee shall give written notice of such
substitute to the Registered Owner hereof.
REDEMPTION OF BONDS
Whenever the Interest Rate Mode is the Weekly Rate, the Taxable Weekly
Rate or the Semi-Annual Rate, this Bond shall be subject to optional redemption,
in whole on any date or in part on any Interest Payment Date, at a redemption
price of 100% of the principal amount hereof. Whenever the Interest Rate Mode is
the Long-Term Rate, this Bond shall be subject to optional redemption: at any
time during the then current Long-Term Rate Period on or after the date
determined pursuant to Section 8.01(b) of the Indenture at the applicable
redemption price set forth in Section 8.01(b) of the Indenture.
Prior to Conversion to the Taxable Weekly Rate and upon a Determination
of Taxability, the Bonds are subject to mandatory redemption in whole pursuant
to Section 8.01(d) of the Indenture.
The Bonds are subject to redemption prior to maturity in whole or in
part at any time at a redemption price of par plus accrued interest in whole or
in part, to the extent excess moneys in the Project Fund are transferred to the
Bond Fund established under the Indenture, or from proceeds of certain insurance
or eminent domain proceeds pursuant to the extraordinary redemption without
premium provisions set forth in the Indenture, in each case, from moneys drawn
on the Letter of Credit or alternatively, from other funds constituting
Available Moneys.
7
<PAGE>
Any notice of redemption, identifying the Bonds or portions thereof to
be redeemed, shall be given by first class mail to the registered owner of each
Bond to be redeemed in whole or in part at the address shown on the Bond
Register of the Bond Registrar not more than 60 days and not fewer than 30 days
prior to the redemption date. If the source of funds for optional redemption is
to be derived from the proceeds of refunding bonds, optional redemption may be
conditioned upon the deposit of proceeds of such refunding bonds with the
Trustee before the date fixed for redemption and such optional redemption and
notice thereof shall be of no effect unless such moneys are so deposited. All
Bonds so called for redemption will cease to bear interest on the specified
redemption date, provided funds for their redemption and any accrued interest
payable on the redemption date are on deposit at the principal place of payment
at that time.
Notice of any redemption hereunder with respect to Bonds held under a
book entry system shall be given by the Registrar or the Trustee only to the
Depository, or its nominee, as the holder of such Bonds. Selection of book entry
interests in the Bonds called for redemption is the responsibility of the
Depository and any failure of any Direct Participant, Indirect Participant or
Beneficial Owner to receive such notice and its contents or effect will not
affect the validity of such notice or any proceedings for the redemption of such
Bonds.
Except as otherwise provided herein, if less than all the Bonds are to
be redeemed, the particular Bonds to be called for redemption shall be selected
by any method determined by the Trustee to be fair and reasonable; provided,
however, that in connection with any redemption of Bonds the Trustee shall first
select for redemption any Bonds held by the Company or held by or pledged to the
Bank pursuant to Section 3.05 of the Indenture.
PURCHASE OF BONDS
This Bond shall be subject to mandatory purchase in whole (i) on the
effective date of the Conversion of the Interest Rate Mode for the Bonds and
(ii) if the Bonds are then bearing interest at the Weekly, Taxable Weekly or
Semi-Annual Rate, on the Interest Payment Date immediately preceding (by at
least 15 calendar days) the date of the termination of the then current Credit
Facility (whether by expiration according to its terms or upon delivery of an
Alternate Credit Facility), if any, unless the then current Credit Facility
Issuer has provided an Alternate Credit Facility in accordance with Article VI
of the Indenture, at a purchase price equal to 100% of the principal amount
hereof plus accrued interest, if any.
In addition, this Bond is subject to mandatory purchase in whole if the
Bonds are (1) then bearing interest at the Long-Term Rate and (2) subject to
optional redemption, upon the delivering of an Alternate Credit Facility, unless
such Alternate Credit Facility is a Qualifying Alternate Credit Facility, at a
purchase price equal to the principal amount thereof, plus the redemption
premium, if any, that would be payable if the Bonds were redeemed on the
Purchase Date, plus accrued interest, if any, thereon to the Purchase Date.
If the Interest Rate Mode is the Weekly Rate or the Taxable Weekly
Rate, this Bond shall be purchased at the option of the registered owner hereof
upon demand by such registered owner, on any Business Day at a purchase price
equal to the principal amount hereof, plus accrued interest, if any, to the
Purchase Date, upon written notice to the Tender Agent on or before 4:00 p.m.
(Cincinnati, Ohio time) on a Business Day not later than the 7th calendar day
prior to the Purchase Date. If the Interest Rate Mode is the Semi-Annual Rate,
this Bond shall be purchased on the demand of the
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registered owner hereof, on any Interest Payment Date at a purchase price equal
to the principal amount hereof, upon written notice to the Tender Agent on a
Business Day not later than the 8th Business Day prior to such Purchase Date. If
the Interest Rate Mode is the Long-Term Rate, this Bond shall be subject to
mandatory purchase only as set forth in the immediately preceding paragraphs.
Any notice in connection with a demand for purchase of this Bond as set
forth in the preceding paragraphs hereof shall be given at the address of the
Tender Agent designated to the Trustee and shall (A) state the number and
principal amount (or portion thereof in an authorized denomination) of this Bond
to be purchased; (B) state the Purchase Date on which this Bond shall be
purchased and (C) irrevocably request such purchase and agree to deliver this
Bond to the Tender Agent on the Purchase Date. ANY SUCH NOTICE SHALL BE
IRREVOCABLE WITH RESPECT TO THE PURCHASE FOR WHICH SUCH DIRECTION WAS DELIVERED
AND, UNTIL SURRENDERED TO THE TENDER AGENT, THIS BOND OR ANY PORTION HEREOF WITH
RESPECT TO WHICH SUCH DIRECTION WAS DELIVERED SHALL NOT BE TRANSFERABLE. This
Bond must be delivered (together with an appropriate instrument of transfer
executed in blank in form satisfactory to the Tender Agent) at the principal
office of the Tender Agent at or prior to 12:00 noon (Cincinnati, Ohio time) on
the date specified in the aforesaid notice in order for the owner hereof to
receive payment in same-day funds of the purchase price due on such Purchase
Date. NO REGISTERED OWNER SHALL BE ENTITLED TO PAYMENT OF THE PURCHASE PRICE DUE
ON SUCH PURCHASE DATE EXCEPT UPON SURRENDER OF THIS BOND AS SET FORTH HEREIN.
Notwithstanding the foregoing, this Bond shall not be purchased during the
existence of a Default under Section 10.01 (a), (b) or (f) of the Indenture. No
purchase of Bonds pursuant to Section 3.01 of the Indenture shall be deemed to
be a payment or redemption of such Bonds or any portion thereof within the
meaning of the Indenture.
BY ACCEPTANCE OF THIS BOND, THE REGISTERED OWNER HEREOF AGREES THAT
THIS BOND WILL BE PURCHASED, WHETHER OR NOT SURRENDERED, (A) ON THE APPLICABLE
PURCHASE DATE IN CONNECTION WITH THE CONVERSION OF THE INTEREST RATE MODE FOR
THE BONDS OR ANY EXPIRATION OF THE CREDIT FACILITY AS DESCRIBED ABOVE, OR ANY
REPLACEMENT OF THE THEN CURRENT CREDIT FACILITY ISSUER, IF THE BONDS ARE IN THE
WEEKLY RATE MODE OR THE SEMI-ANNUAL RATE MODE AS DESCRIBED ABOVE, OR (B) ON ANY
PURCHASE DATE SPECIFIED BY THE REGISTERED OWNER HEREOF IN THE EXERCISE OF THE
RIGHT TO DEMAND PURCHASE OF THIS BOND AS DESCRIBED ABOVE. IN SUCH EVENT, THE
REGISTERED OWNER OF THIS BOND SHALL NOT BE ENTITLED TO RECEIVE ANY FURTHER
INTEREST HEREON, SHALL HAVE NO FURTHER RIGHTS UNDER THIS BOND OR THE INDENTURE
EXCEPT TO PAYMENT OF THE PURCHASE PRICE HELD THEREFOR, AND SHALL THEREAFTER HOLD
THIS BOND AS AGENT FOR THE TENDER AGENT.
GENERAL PROVISIONS
The initial Remarketing Agent under the Indenture is KeyBank National
Association and the initial Tender Agent under the Indenture is Star Bank, N.A.
The Remarketing Agent and the Tender Agent may be changed at any time in
accordance with the Indenture.
The Bonds are issuable only as fully registered bonds in the
denominations of $100,000 and in any integral multiple of $5,000 in excess
thereof and shall be originally issued only to a Depository to be held in a book
entry system and: (i) the Bonds shall be registered in the name of the
Depository or its nominee, as Bondholder, and immobilized in the custody of the
Depository; (ii) unless
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otherwise requested by the Depository, there shall be a single Bond certificate
for each Bond maturity; and (iii) the Bonds shall not be transferable or
exchangeable, except for transfer to another Depository or another nominee of a
Depository, without further action by the Issuer. While the Bonds are in book
entry only form, Bonds in the form of physical certificates shall only be
delivered to the Depository. If any Depository determines not to continue to act
as a Depository for the Bonds for use in a book entry system, the Issuer at the
request of the Company may attempt to have established a securities
depository/book entry system relationship with another qualified Depository
under the Indenture. If the Issuer does not or is unable to do so, the Trustee,
after making provision for notification to the Beneficial Owners of book entry
interests by the then Depository, shall permit withdrawal of the Bonds from the
Depository, and authenticate and deliver Bond certificates in fully registered
form (in denominations of $100,000 and in any integral multiple of $5,000 in
excess thereof) to the assignees of the Depository or its nominee.
While a Depository is the sole holder of the Bonds, delivery or
notation of partial redemption or tender for purchase of Bonds shall be effected
in accordance with the provisions of the Letter of Representations, as defined
in the Indenture.
In addition to the words and terms defined elsewhere in this Bond, the
following terms shall have the following meanings:
"Beneficial Owner" means with respect to the Bonds, a Person owning a
Beneficial Ownership Interest therein, as evidenced to the satisfaction of the
Trustee.
"Beneficial Ownership Interest" means the beneficial right to receive
payments and notices with respect to the Bonds which are held by the Depository
under a book entry system.
"book entry form" or "book entry system" means, with respect to the
Bonds, a form or system, as applicable, under which (i) the Beneficial Ownership
Interests may be transferred only through a book entry and (ii) physical Bond
certificates in fully registered form are registered only in the name of a
Depository or its nominee as Bondholder, with the physical Bond certificates
"immobilized" in the custody of the Depository. The book entry system maintained
by and the responsibility of the Depository and not maintained by or the
responsibility of the Issuer or the Trustee is the record that identifies, and
records the transfer of the interests of, the owners of book entry interests in
the Bonds.
"Depository" means any securities depository that is a clearing agency
under federal law operating and maintaining, with its participants or otherwise,
a book entry system to record ownership of book entry interests in Bonds, and to
effect transfers of book entry interests in Bonds, and includes and means
initially The Depository Trust Company (a limited purpose trust company), New
York, New York.
This Bond is transferable by the registered owner hereof or his duly
authorized attorney at the principal corporate trust office of Star Bank, N.A.,
as Bond Registrar, in Cincinnati, Ohio, upon surrender of this Bond, accompanied
by a duly executed instrument of transfer in form and with guaranty of signature
satisfactory to the Bond Registrar, subject to such reasonable regulations as
the Company, the Issuer or the Bond Registrar may prescribe, PROVIDED, THAT, IF
MONEYS FOR THE MANDATORY PURCHASE OF THIS BOND HAVE BEEN DEPOSITED WITH THE
TRUSTEE UNDER THE INDENTURE, THIS BOND SHALL NOT BE TRANSFERABLE TO ANYONE UNTIL
DELIVERED TO THE TENDER AGENT. Upon any such transfer, a new Bond or Bonds in
the same aggregate principal amount will be issued to the transferee. Except as
set forth in this Bond and as
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otherwise provided in the Indenture, the person in whose name this Bond is
registered shall be deemed the owner hereof for all purposes, and the Issuer,
the Company, any Paying Agents, the Bond Registrar, the Tender Agent, the
Remarketing Agent and the Trustee shall not be affected by any notice to the
contrary.
The Indenture permits certain amendments or supplements to the
Agreement and the Indenture not prejudicial to the Bondholders to be made
without the consent of or notice to the Bondholders, and other amendments or
supplements thereto to be made with the consent of the Bondholders of not less
than a majority in aggregate principal amount of the Bonds then outstanding.
The Bondholders have only those remedies provided in the Indenture.
NO RECOURSE SHALL BE HAD FOR THE PAYMENT OF THE PRINCIPAL OR REDEMPTION
PRICE OF OR THE INTEREST ON THIS BOND OR FOR ANY CLAIM BASED HEREON OR THEREON
OR ON THE INDENTURE AGAINST ANY PAST, PRESENT OR FUTURE MEMBER, OFFICER,
EMPLOYEE OR AGENT (OTHER THAN THE COMPANY), AS SUCH, OF THE ISSUER OR OF ANY
PREDECESSOR OR SUCCESSOR CORPORTION, EITHER DIRECTLY OR THROUGH THE ISSUER, OR
OTHERWISE, WHETHER BY VIRTUE OF ANY CONSTITUTION, STATUTE OR RULE OF LAW, OR BY
THE ENFORCEMENT OF ANY ASSESSMENT OR PENALTY, OR OTHERWISE, ALL SUCH LIABILITY
BEING, BY THE ACCEPTANCE HEREOF, EXPRESSLY WAIVED AND RELEASED.
This Bond shall not be entitled to any security or benefit under the
Indenture or be valid or become obligatory for any purpose until the certificate
of authentication hereon shall have been signed.
This Bond is not valid unless the Certificate of Authentication
endorsed hereon is duly executed.
THE BONDS ARE NOT AND SHALL NOT BE A DEBT OF THE STATE OF NEW YORK OR
OF SARATOGA COUNTY, NEW YORK, AND NEITHER THE STATE OF NEW YORK NOR SARATOGA
COUNTY, NEW YORK SHALL BE LIABLE THEREON. THE BONDS DO NOT GIVE RISE TO A
PECUNIARY LIABILITY OR CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF THE
STATE OF NEW YORK OR OF SARATOGA COUNTY, NEW YORK.
It is certified and recited that there have been performed and have
happened in regular and due form, as required by law, all acts and conditions
necessary to be done or performed by the Issuer or to have happened (i)
precedent to and in the issuing of the Bonds in order to make them legal, valid
and binding obligations of the Issuer, and (ii) precedent to and in the
execution and delivery of the Indenture and the Agreement; that payment in full
for the Bonds has been received; and that the Bonds do not exceed or violate any
constitutional or statutory limitation.
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IN WITNESS WHEREOF, County of Saratoga Industrial Development Agency
has caused this Bond to be duly executed in its name by the manual or facsimile
signature of its Chairman or Vice Chairman and its corporate seal to be
impressed or reproduced hereon, attested by the manual or facsimile signature of
its Secretary or Assistant Secretary, all as of the date identified above.
COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY
By:____________________________________
, (Vice) Chairman
(S E A L)
ATTEST:
_______________________________
(Assistant) Secretary
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Certificate of Authentication
This Bond is one of the Bonds described in the within mentioned Indenture.
________________________________________
as Trustee
By:_____________________________________
Authorized Signer
Date of Registration and Authentication:____________________________
Registrable at: Payable by:
_____________________, ____________________________
__________, _________ _____________, _____________
[Form of Assignment]
For value received, the undersigned hereby sells, assigns and
transfers unto ______________________________________ the within bond and all
rights thereunder, and hereby irrevocably constitutes and appoints
_______________________________________, attorney to transfer the said bond on
the Bond Register, with full power of substitution in the premises.
Dated: __________________________________
Social Security Number or
Employer Identification
Number of Transferee: __________________________________
Signature guaranteed: __________________________________
NOTICE: The assignor's signature to this Assignment must correspond
with the name as it appears on the face of the within bond in
every particular without alteration, enlargement or any change
whatsoever.
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WHEREAS, all things necessary to make the Bonds, when authenticated by
the Trustee and issued as in the Indenture provided, the valid, binding and
legal special obligations of the Issuer according to the import thereof, and to
constitute the Indenture a valid pledge of and Lien on the Trust Revenues herein
pledged to the payment of the Bonds, have been done and performed, and the
creation, execution and delivery of the Indenture, and the execution and
issuance of the Bonds, subject to the terms hereof, have in all respects been
duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that to secure in the
following order of priority, first, the payment of Bond Service Charges on, and
the purchase price of, the Bonds according to their true intent and meaning, to
secure the performance and observance of all of the covenants, agreements,
obligations and conditions contained therein and herein, and to declare the
terms and conditions upon and subject to which the Bonds are and are intended to
be issued, held, secured and enforced and, second, the payment to the Bank and
performance by the Company of its reimbursement and other obligations under the
Reimbursement Agreement, and in consideration of the premises and the acceptance
by the Trustee of the trusts created herein and of the purchase and acceptance
of the Bonds by the Bondholders and for other good and valuable consideration,
the receipt of which is acknowledged, the Issuer has executed and delivered this
Indenture and (a) absolutely and irrevocably assigns hereby to the Trustee and
to its successors in trust, and its and their assigns, any right, title and
interest of the Issuer in and to the Letter of Credit Account, Redemption
Premium Account, Remarketing Proceeds Account and Defeasance Account of the Bond
Fund and all moneys and investments therein (including without limitation the
proceeds of the Credit Facility) and (b) grants to the Trustee and to its
successors in trust, and its and their assigns, a security interest in (i) the
Project Fund, the Insurance and Condemnation Fund and all moneys and investments
therein and (ii) the Revenues (other than the above-referenced accounts of the
Bond Fund, all moneys and investments therein and the proceeds of the Letter of
Credit) (collectively, the "Trust Estate").
TO HAVE AND TO HOLD unto the Trustee and its successors in that trust
and its and their assigns forever;
BUT IN TRUST, NEVERTHELESS, and subject to the provisions hereof,
(a) except as provided otherwise herein, first, for the
equal and proportionate benefit, security and protection of all present
and future Bondholders of the Bonds issued or to be issued under and
secured by this Indenture,
(b) for the enforcement of the payment of the Bond
Service Charges on the Bonds, when payable, according to the true
intent and meaning thereof and of this Indenture, and
(c) to secure the performance and observance of and
compliance with the covenants, agreements, obligations, terms and
conditions of this Indenture,
in each case, without preference, priority or distinction, as to lien or
otherwise, of any one Bond over any other by reason of designation, number, date
of the Bonds or of authorization, issuance, sale, execution, authentication,
delivery or maturity thereof, or otherwise, so that each Bond and all Bonds
shall have the same right, lien and privilege under this Indenture and shall be
secured equally and ratably hereby, it being intended that the lien and security
of this Indenture shall take effect from the date hereof, without regard to the
date of the actual issue, sale or disposition of the Bonds, as though upon that
date all of the
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Bonds were actually issued, sold and delivered to purchasers for value; and,
second, for the benefit and security of the Bank with respect to the Company's
obligations under the Reimbursement Agreement; provided, however, that the Bank
shall have no right to take any action, other than provided in Article X hereof,
to enforce its rights or interest in the Trust Estate prior to the payment of
all Bond Service Charges on the Bonds; and provided, further, that
(i) if the principal of the Bonds and the interest due or
to become due thereon together with any premium required by redemption
of any of the Bonds prior to maturity shall be well and truly paid, at
the times and in the manner to which reference is made in the Bonds,
according to the true intent and meaning thereof, or the outstanding
Bonds shall have been paid and discharged in accordance with Article XV
hereof, and
(ii) if all of the covenants, agreements, obligations,
terms and conditions of the Issuer under this Indenture shall have been
kept, performed and observed and there shall have been paid to the
Trustee, the Registrar, the Paying Agents and the Authenticating Agents
all sums of money due or to become due to them in accordance with the
terms and provisions hereof, and
(iii) if the Company shall pay and perform or cause to be
paid and performed all of their reimbursement and other obligations
under the Reimbursement Agreement, then, upon such final payments and
subject to the provisions of Article XV hereof,
this Indenture and the rights assigned and security interest granted hereby
shall cease, determine and be void, except as provided in Section 15.03 hereof
with respect to the survival of certain provisions hereof and except for the
interests absolutely assigned in the Credit Facility Account, Redemption Premium
Account, Remarketing Proceeds Account and Defeasance Account; otherwise, this
Indenture shall be and remain in full force and effect.
It is declared that all Bonds issued hereunder and secured hereby are
to be issued, authenticated and delivered, and that all Revenues assigned or
pledged hereby are to be dealt with and disposed of under, upon and subject to,
the terms, conditions, stipulations, covenants, agreements, obligations, trusts,
uses and purposes provided in this Indenture. The Issuer has agreed and
covenanted, and agrees and covenants with the Trustee and with each and all
Bondholders, as follows:
(Balance of page intentionally left blank)
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ARTICLE I
DEFINITIONS
In this Indenture and any indenture supplemental hereto
(except as otherwise expressly provided for or unless the context otherwise
requires) the singular includes the plural and the masculine includes the
feminine.
In addition, each of the following terms shall have the
meaning specified in this Article, unless the context otherwise requires:
"Act" means Title I of Article 18-A of the General Municipal
Law of the State, as amended from time to time, together with Chapter 855 of the
Laws of 1971 of the State, as amended from time to time.
"Affiliate" of any specified entity means any other entity
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified entity and "control", when used with respect
to any specified entity, means the power to direct the management and policies
of such entity, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" means the installment sale agreement, dated as of
even date with this Indenture, between the Issuer and the Company, as amended or
supplemented from time to time.
"Alternate Credit Facility" means any direct pay letter of
credit or other credit enhancement or support facility that has terms which are
the same in all material respects (except for the term and maximum interest rate
but including coverage of accrued interest on the Bonds for 110 days if the
Bonds bear interest at the Weekly Rate or the Taxable Weekly Rate or for 195
days if the Bonds bear interest at the Semi-Annual Rate or the Long-Term Rate)
as the then current Credit Facility and (i) shall have a term of not less than
one year (except if the Long-Term Rate shall then be in effect, the term of such
Alternate Credit Facility shall not expire prior to (a) the first par redemption
date plus 15 days or (b) the first redemption date plus 15 days if the Alternate
Credit Facility covers the redemption premium), (ii) shall be issued by a bank,
a trust company or other financial institution or credit provider, and (iii) the
Trustee shall have received the opinions required by Section 6.03.
"Assignment" means the pledge and assignment dated as of even
date with this Indenture from the Issuer to the Trustee pursuant to which the
Issuer has assigned to the Trustee its rights under the Agreement (except the
Unassigned Issuer's Rights), as said pledge and assignment may be supplemented
or amended from time to time.
"Authenticating Agent" means the Trustee and any agent so
designated in and appointed pursuant to Section 2.07.
"Authorized Newspaper" means a newspaper in English
customarily published each Business Day and generally circulated in the Borough
of Manhattan, City and State of New York.
"Authorized Official" means an officer of the Issuer.
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"Available Moneys" means, with respect to any date, (a) funds
which (i) have been on deposit in the Redemption Premium Account of the Bond
Fund for a period of at least ninety-five (95) consecutive days prior to such
date, (ii) during and prior to which period no Event of Bankruptcy has occurred
and (iii) are represented by cash or its equivalent as of such date; (b) moneys
drawn under the Letter of Credit and deposited directly into the Credit Facility
Account of the Bond Fund; (c) the proceeds deposited directly into the
Defeasance Account of the Bond Fund from the sale of refunding obligations other
than, directly or indirectly, to the Issuer, the Company, any Guarantor, any
Affiliate of the Company or of any Guarantor or any Insider of any of them; (d)
proceeds deposited directly into the Remarketing Proceeds Account of the Bond
Fund from the marketing or remarketing of Bonds to any purchaser other than,
directly or indirectly, the Company, the Issuer, any Guarantor, any Affiliate of
the Company or of any Guarantor or any Insider of any of them; (e) proceeds from
investment of the foregoing, provided such proceeds are retained in the Account
in which they were earned; and (f) any other funds so long as, in the opinion of
nationally recognized counsel experienced in bankruptcy matters, payments
therefrom will not constitute an avoidable preference under the Bankruptcy Code.
"Bank" means initially, KeyBank National Association, and its
successors and assigns in its capacity as issuer of the Letter of Credit and in
the event an Alternate Credit Facility is outstanding, the issuer of the
Alternate Credit Facility.
"Bank Documents" means the Letter of Credit, the Reimbursement
Agreement, the Mortgage, the Pledge and Security Agreement, the Collateral
Mortgage, the Security Agreement, the Guaranty, the Term Loan Note, the Building
Loan Agreement and any other document now or hereafter executed by the Issuer or
the Company or the Guarantor in favor of the Bank which affects the rights of
the Bank in or to the Project, in whole or in part, or which secures or
guarantees any sum due under any Bank Document.
"Bankruptcy Code" means Title 11 of the United States Code, as
it is amended from time to time.
"Beneficial Owner" means, with respect to the Bonds, a Person
owning a Beneficial Ownership Interest therein, as evidenced to the satisfaction
of the Trustee.
"Beneficial Ownership Interest" means the beneficial right to
receive payments and notices with respect to the Bonds which are held by the
Depository under a book entry system.
"Bond" or "Bonds" means the County of Saratoga Industrial
Development Agency Multi-Mode Variable Rate Industrial Development Revenue Bonds
(Spurlock Adhesives, Inc. Project), Series 1997 A.
"Bond Fund" means the trust fund so designated which is
established pursuant to Section 5.01.
"Bondholder" or "holder of Bonds" or "owner of Bonds" means
the registered owner of any Bond other than the registered owner of any Bond
which has been purchased pursuant to Section 3.01 and not surrendered for
payment of the purchase price thereof.
"Bond Register" and "Bond Registrar" shall have the respective
meanings specified in Section 2.03.
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"Bond Service Charges" means, during any time period, the
principal, interest and redemption premium, if any, and purchase price required
to be paid by the Company on behalf of the Issuer on the Bonds during such time
period.
"Bond Year" means the annual period provided for the
computation of Excess Earnings under Section 148(f) of the Code.
"book entry form" or "book entry system" means, with respect
to the Bonds, a form or system, as applicable, under which (i) the Beneficial
Ownership Interests may be transferred only through a book entry and (ii)
physical Bond certificates in fully registered form are registered only in the
name of a Depository or its nominee as Bondholder, with the physical Bond
certificates "immobilized" in the custody of the Depository. The book entry
system maintained by and the responsibility of the Depository and not maintained
by or the responsibility of the Issuer or the Trustee is the record that
identifies, and records the transfer of the interests of, the owners of book
entry interests in the Bonds.
"Building Loan Agreement" means the building loan agreement
dated as of even date with this Indenture, by and between the Issuer, the
Company and the Bank, as amended or supplemented from time to time.
"Business Day" means any day of the year other than (i) a
Saturday or Sunday, (ii) any day on which banks located in the State or the
principal corporate trust office of the Trustee is located are required or
authorized by law to remain closed, or (iii) any day on which the New York Stock
Exchange is closed.
"Code" means the Internal Revenue Code of 1986, as amended,
including, when appropriate, the statutory predecessor of the Code, and all
applicable regulations (whether proposed, temporary or final) under that Code
and the statutory predecessor of the Code, and any official rulings and judicial
determinations under the foregoing applicable to the Bonds.
"Collateral Mortgage" means the collateral mortgage dated as
of even date with this Indenture from the Company in favor of the Bank, as
amended or supplemented from time to time.
"Company" means Spurlock Adhesives, Inc., a corporation,
organized and existing under the laws of the State of Virginia, and its lawful
successors and assigns, to the extent permitted by the Agreement.
"Condemnation" means the taking of title to, or the use of,
Property under the exercise of the power of eminent domain by any Governmental
Authority.
"Conversion" means (a) any conversion from time to time in
accordance with the terms of this Indenture of the Bonds from one Interest Rate
Mode to another Interest Rate Mode and (b) the end of any Long-Term Rate Period.
"Conversion Date" means the first date any Conversion becomes
effective.
"Counsel" means an attorney-at-law or law firm (who may be
counsel for the Company), acceptable to the Issuer and Trustee.
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"Credit Facility" means the Letter of Credit or any Alternate
Credit Facility delivered to the Trustee pursuant to Article VI.
"Credit Facility Account" means the account of that name
established in the Bond Fund pursuant to Section 5.01.
"Credit Facility Issuer" means the Bank with respect to the
Letter of Credit or the institution issuing any Alternate Credit Facility.
"Debt Service Payments" means with respect to any Interest
Payment Date and/or Purchase Date, (A) the interest payable on the Bonds on such
date, plus (B) the principal, if any, payable on the Bonds on such date, plus
(C) the premium, if any, payable on the Bonds on such date.
"Defeasance Account" means the Defeasance Account created
under Section 5.01 hereof.
"Default Rate" means the Prime Rate plus one percent (1.00%).
"Depository" means any securities depository that is a
clearing agency under federal law operating and maintaining, with its
participants or otherwise, a book entry system to record ownership of book entry
interests in Bonds, and to effect transfers of book entry interests in Bonds in
book entry form, and includes and means initially The Depository Trust Company
(a limited purpose trust company), New York, New York.
"Designated Representative" means the person at the time
designated pursuant to the Agreement to act on behalf of the Company by written
certificate furnished to the Trustee, containing the specimen signature of that
person and signed on behalf of the Company by a duly designated representative
thereof.
"Determination of Taxability" means, with respect to the
Bonds, (i) the enactment of legislation or the adoption of final regulations or
a final decision, ruling or technical advice by any federal judicial or
administrative authority which has the effect of requiring interest on the Bonds
to be included in the gross income of the Bondholders for federal income tax
purposes (other than a Bondholder who is a "substantial user" of the Project or
Prior Project or a "related person" as those terms are used in Section 147(a) of
the Code), (ii) the receipt by the Trustee of a written opinion of nationally
recognized bond counsel selected by the Company and approved by the Trustee to
the effect that interest on the Bonds must be included in the gross income of
the Bondholders for federal income tax purposes (other than a Bondholder who is
a "substantial user" of the Project or Prior Project or a "related person" as
those terms are used in Section 147(a) of the Code) or (iii) the delivery to the
Trustee of a written statement signed by the Designated Representative to the
effect that (a) the Company has exceeded or will exceed the maximum amount of
capital expenditures permitted under Section 144(a)(4) of the Code or (b) that
the Company or another "test-period beneficiary" (as said term is defined in
Section 144(a)(10)(D) of the Code) has exceeded or will exceed the maximum
amount of tax-exempt obligations permitted to be outstanding under Section
144(a)(10) of the Code; provided that no decision by any court or decision,
ruling or technical advice by any administrative authority shall be considered
final (a) unless the Bondholder involved in the proceeding or action giving rise
to such decision, ruling or technical advice (1) gives the Company and the
Trustee prompt notice of the commencement thereof and (2) offers the Company the
opportunity to control the contest thereof, provided the Company shall
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have agreed to bear all expenses in connection therewith and to indemnify that
Bondholder against all liabilities in connection therewith, and (b) until the
expiration of all periods for judicial review or appeal.
"Direct Participant" means a Participant as defined in the
Letter of Representations.
"Eligible Investments" means (i) Governmental Obligations;
(ii) obligations issued or guaranteed by any state or political subdivision
thereof rated A or higher by Moody's and by S&P; (iii) open market commercial or
finance paper of any corporation having a net worth in excess of $100,000,000
and which is rated either P-l or A-l or an equivalent by Moody's and S&P; (iv)
bankers' acceptances drawn on and accepted by commercial banks; (v) investments
due within 12 months in certificates of deposit issued by, or bankers'
acceptances of, the Trustee, or of banks or trust companies organized under the
laws of the United States of America or any state thereof, which must have a
reported capital and surplus of at least $25,000,000 in dollars of the United
States of America; (vi) bank repurchase agreements, including the Trustee's,
fully secured by obligations of the type described in (i) above; (vii) variable
rate demand securities redeemable within 7 days or able to be tendered for
remarketing or purchase upon no more than 7 days' notice and secured by a credit
facility issued by a financial institution, which financial institution (or its
corporate parent) maintains a long term debt rating assigned by Moody's and S&P
which is not lower than the third highest long term debt category (without
regard to numerical or other modifiers assigned within the category) by either
Rating Service, or by both Rating Services, if rated by both Rating Services;
and (viii) shares of any so-called "money market mutual fund", including any
"money market mutual fund" which the Trustee or any of its affiliates operates
or manages, which invests solely in obligations described in items (i) through
(vii) above; and further provided that any such investment or deposit is not
prohibited by law.
"Event of Bankruptcy" means the filing of a petition in
bankruptcy (or other commencement of a bankruptcy or similar proceedings) by or
against the Issuer, the Company, any Guarantor, any Affiliate of the Company or
of any Guarantor or any Insider of any of them as debtor, under any applicable
bankruptcy, reorganization, insolvency or other similar law as now or hereafter
in effect.
"Event of Default" means any of the events specified in
Section 10.01 hereof to be an Event of Default. "Default" means any event which
with the giving of notice or the lapse of time or both would constitute an Event
of Default.
"Excess Earnings" means an amount equal to the sum of (i) plus
(ii) where:
(i) is the excess of
(a) the aggregate amount earned from the date of
issuance of the Bonds on all nonpurpose investments in which gross proceeds of
the Bonds are invested (other than investments attributable to an excess
described in this clause (i)), over
(b) the amount that would have been earned if
such nonpurpose investments (other than amounts attributable to an excess
described in this clause (i)) had been invested at a rate equal to the yield on
the Bonds; and
(ii) is any income attributable to the excess described in
clause (i) of this definition.
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The sum of (i) plus (ii) shall be determined in accordance with Section 148(f)
of the Code. As used herein, the terms "gross proceeds", "nonpurpose
investments" and "yield" have the meanings assigned to them for purposes of
Section 148 of the Code.
"Financing Documents" means the Bonds, the Indenture, the
Agreement, the Assignment, the Bank Documents, the Tax Regulatory Agreement, the
Remarketing Agreement and any other document now or hereafter executed by the
Issuer, the Company or the Bank in favor of the Bondholders, the Trustee or the
Bank which affects the rights of the Bondholders, the Trustee or the Bank in or
to the Project Facility, in whole or in part, or which secures or guarantees any
sum due under the Bonds or any other Financing Document, each as amended from
time to time, and all documents related thereto and executed in connection
therewith.
"Governmental Obligations" means (a) direct obligations of the
United States of America, (b) obligations unconditionally guaranteed by the
United States of America and (c) securities or receipts evidencing ownership
interests in obligations or specified portions (such as principal or interest)
of obligations described in (a) or (b).
"Guarantor" means Spurlock Industries, Inc.
"Guaranty" means the guaranty of payment and performance dated
as of even date with this Indenture from the Guarantor in favor of the Bank, as
amended or supplemented from time to time.
"Immediate Notice" means notice transmitted through a
time-sharing terminal, if operative as between any two parties, or if not
operative, in writing or by telephone (promptly confirmed in writing).
"Indenture" means this Trust Indenture as amended or
supplemented at the time in question.
"Indirect Participant" means a Person utilizing the book entry
system of the Depository by, directly or indirectly, clearing through or
maintaining a custodial relationship with a Direct Participant.
"Insider" means any entity referred to or described in Section
101(31) of the Bankruptcy Code, assuming for this purpose that the Company, any
Guarantor, or any Affiliate of any of them, as applicable, is a debtor, and any
limited partner of any of the foregoing.
"Insurance and Condemnation Fund" means the trust fund so
designated which is established pursuant to Section 4.03 hereof.
"Interest Payment Date" means (a) while the Bonds bear
interest at the Weekly Rate, the first Wednesday of each January, April, July
and October, (b) while the Bonds bear interest at the Taxable Weekly Rate, the
first Thursday of each January, April, July and October, and (c) while the Bonds
bear interest at the Semi-Annual Rate or the Long-Term Rate, October 1 and April
1 of each year. The first Interest Payment Date shall be the Interest Payment
Date in January, 1998. In any case, the final Interest Payment Date shall be the
maturity date.
"Interest Period" means for all Bonds the period from and
including each Interest Payment Date to and including the day next preceding the
next Interest Payment Date. The first Interest
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Period for the Bonds shall begin on (and include) the date of the initial
delivery of the Bonds. The final Interest Period shall end on the maturity (or
redemption) date for each Bond.
"Interes Rate Mode" means the Weekly Rate, the Taxable Weekly
Rate, the Semi-Annual Rate or the Long-Term Rate.
"Letter of Credit" means the irrevocable, direct-pay Letter of
Credit issued by the Bank and delivered to the Trustee upon the issuance of the
Bonds.
"Letter of Representations" means the Letter of
Representations by and among the Issuer, the Trustee, the Remarketing Agent and
the Depository.
"Lien" means any interest in Property securing an obligation
owed to a Person, whether such interest is based on the common law, statute or
contract, and including but not limited to a security interest arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" includes
reservations, exceptions, encroachments, projections, easements, rights of way,
covenants, conditions, restrictions, leases and other similar title exceptions
and encumbrances, including but not limited to mechanics', materialmen's,
warehousemen's and carriers' liens and other similar encumbrances affecting real
property. For purposes hereof, a Person shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement
or other arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes.
"Long-Term Rate" means the Interest Rate Mode for the Bonds in
which the interest rate on the Bonds is determined in accordance with Section
2.02(c)(iii).
"Long-Term Rate Period" means any period beginning on, and
including, the Conversion Date to the Long-Term Rate and ending on, and
including, the day preceding the Interest Payment Date selected by the Company
and each period of the same duration (or as close as possible) ending on an
Interest Payment Date thereafter until the earliest of the day preceding the
change to a different Long-Term Rate Period, the Conversion to a different
Interest Rate Mode or the maturity of the Bonds.
"Moody's" means Moody's Investors Service, a Delaware
corporation, its successors and assigns, and, if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized securities rating agency designated by the Trustee, with the consent
of the Company.
"Mortgage" means the mortgage and security agreement dated as
of even date with this Indenture from the Issuer and the Company in favor of the
Bank, as amended or supplemented from time to time.
"Non-Qualifying Alternate Credit Facility" means an Alternate
Credit Facility which is not a Qualifying Alternate Credit Facility.
"Outstanding", in connection with Bonds means, as of the time
in question, all Bonds authenticated and delivered under the Indenture, except:
A. Bonds theretofore cancelled or required to be
cancelled under Section 2.12;
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B. Bonds which are deemed to have been paid in
accordance with Article XV; and
C. Bonds in substitution for which other Bonds have been
authenticated and delivered pursuant to Article II.
In determining whether the owners of a requisite aggregate principal amount of
Bonds Outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under the provisions hereof, Bonds which
are held by or on behalf of the Company (unless all of the outstanding Bonds are
then owned by the Company) shall be disregarded for the purpose of any such
determination. Notwithstanding the foregoing, Bonds so owned which have been
pledged in good faith shall not be disregarded as aforesaid if the pledgee
established to the satisfaction of the Bond Registrar the pledgee's right so to
act with respect to such Bonds and that the pledgee is not the Company.
"Paying Agent" or "Co-Paying Agent" means any national banking
association, bank and trust company or trust company appointed by the Company
and meeting the qualifications of, and subject to the obligations of, the
Trustee in Article XI hereof. "Principal Office" of any Paying Agent shall mean
the office thereof designated in writing to the Trustee.
"Pledge and Security Agreement" means (A) the pledge and
security agreement dated as of even date with this Indenture by and between the
Company and the Bank, as the same may be supplemented or amended from time to
time, and (B) the pledge and security agreement by and between the Company and
any substitute Bank, as the same may be supplemented or amended form time to
time.
"Prime Rate" means that interest rate established from time to
time by the Bank as the Bank's Prime Rate, whether or not such rate is publicly
announced. The Prime Rate may not be the lowest rate charged by the Bank for
commercial or other extensions of credit.
"Project" or "Project Facility" means the Project Facility, as
defined in the Agreement.
"Project Costs" shall have the meaning set forth in Section
4.01 of the Indenture.
"Project Fund" means the trust fund so designated which is
established pursuant to Section 4.01.
"Purchase Date" means (a) if the Interest Rate Mode is the
Weekly Rate or the Taxable Weekly Rate, any Business Day as set forth in Section
3.01(a)(i) and Section 3.01(a)(iv) hereof, respectively, (b) if the Interest
Rate Mode is the Semi-Annual Rate, any Interest Payment Date, (c) if the
Interest Rate Mode is the Long-Term Rate, the final Interest Payment Date for
each Long-Term Rate Period, and (d) each day that Bonds are subject to mandatory
purchase pursuant to Section 3.01(b).
"Qualifying Alternate Credit Facility" means an Alternate
Credit Facility in connection with which the Trustee shall have received, (a) if
the Bonds are then rated by a Rating Service, written evidence (or such other
evidence satisfactory to the Trustee) from the Rating Service then rating the
Bonds to the effect that such Rating Service has reviewed the proposed Alternate
Credit Facility and that the substitution of the Alternate Credit Facility will
not, by itself, result in (i) a permanent withdrawal of its rating of the Bonds
or (ii) the reduction of the current rating of the Bonds, or (b) if the Bonds
are not then rated by a Rating Service, written evidence (or such other evidence
satisfactory to the Trustee) that the Alternate Credit Facility would be issued
by a Credit Facility Issuer which, or the parent corporation
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of which, has a long-term debt rating assigned by a Rating Service which is
equal to or better than the rating of the Credit Facility Issuer being replaced.
"Rate Period" means any period during which a single interest
rate is in effect for a Bond.
"Rating Service" means Moody's, if the Bonds are rated by
Moody's at the time, and S&P, if the Bonds are rated by S&P at the time, and
their successors and assigns.
"Rebate Amount" as of any date means the Excess Earnings as of
such date, or such other amount as may be due to the United States pursuant to
Section 148(f) of the Code.
"Rebate Fund" means the Rebate Fund created in Section 5.05
hereof.
"Record Date" means, as the case may be, the applicable
Regular or Special Record Date.
"Regular Record Date" means, with respect to any Interest
Period, the close of business on the last Business Day of such Interest Period.
"Redemption Premium Account" means the Redemption Premium
Account created under Section 5.01 hereof.
"Reimbursement Agreement" means the letter of credit
reimbursement agreement dated as of October 1, 1997 between the Company and the
Bank, as the same may be amended from time to time and filed with the Trustee,
and any agreement of the Company with a Credit Facility Issuer setting forth the
obligations of the Company to such Credit Facility Issuer arising out of any
payments under a Credit Facility and which provides that it shall be deemed to
be a Reimbursement Agreement for the purpose of this Indenture.
"Remarketing Agent" means KeyBank National Association and its
successors as provided in Section 12.01. "Principal Office" of the Remarketing
Agent means the office designated as such in writing to the Company, the Trustee
and the Tender Agent.
"Remarketing Agreement" means the Remarketing Agreement dated
as of October 1, 1997 among the Company, the Issuer and the Remarketing Agent,
as the same may be amended from time to time, and any remarketing agreement
between the Company, the Issuer and a successor Remarketing Agent.
"Remarketing Proceeds Account" means the Remarketing Proceeds
Account created under Section 5.01 hereof.
"Resolution" means the resolution of the Issuer adopted on
September 16, 1997, authorizing the Issuer to undertake the Project, to issue
and sell the Bonds and to execute and deliver the Financing Documents to which
the Issuer is a party.
"Revenues" means (a) all amounts payable to the Trustee with
respect to the principal or redemption price of, or interest on, the Bonds (i)
by the Company as required under the Agreement, (ii) upon deposit in the Bond
Fund from the proceeds of the Bonds, and (iii) by the Credit Facility Issuer
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under a Credit Facility, and (b) investment income with respect to any moneys
held by the Trustee in the Bond Fund. The term "Revenues" does not include any
moneys or investments in the Rebate Fund.
"S&P" means Standard & Poor's Ratings Group, a New York
corporation, its successors and assigns, and, if such entity shall be dissolved
or liquidated or shall no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Trustee, with the consent of the
Company.
"Security Agreement" means the security agreement dated as of
even date with this Indenture from the Company to the Bank, as said security
agreement may be supplemented or amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Semi-Annual Rate" means the Interest Rate Mode for the Bonds
in which the interest rate on the Bonds is determined in accordance with Section
2.02(c)(ii).
"Semi-Annual Rate Period" means any period beginning on, and
including, the Conversion Date to the Semi-Annual Rate and ending on, and
including, the day preceding the next Interest Payment Date thereafter and each
successive six (6) month period thereafter until the day preceding Conversion to
a different Interest Rate Mode or the maturity of the Bonds.
"Special Record Date" means such date as may be fixed for the
payment of defaulted interest in accordance with Section 2.08.
"State" means the State of New York.
"Taxable Weekly Rate" means the Interest Rate Mode for the
Bonds in which the interest rate on the Bonds is determined weekly in accordance
with Section 2.02(c)(iv).
"Taxable Weekly Rate Period" means the period beginning on,
and including, the Conversion Date to the Taxable Weekly Rate, and ending on,
and including, the next Wednesday and thereafter the period beginning on, and
including, any Thursday and ending on, and including, the next Wednesday.
"Tax Regulatory Agreement" means the tax regulatory agreement
date the Closing Date executed by the Company in favor of the Issuer, the
Trustee and the Bank regarding, among other things, the restrictions prescribed
by the Code in order for the interest on the Bonds to remain excludable from
gross income for federal income tax purposes.
"Tender Agent" means the initial and any successor tender
agent appointed in accordance with Section 12.02 hereof. "Principal Office" of
the Tender Agent means the office thereof designated as such in writing to the
Trustee, the Company and the Remarketing Agent.
"Term Loan Note" means the term loan note dated the Closing
Date in the principal amount of $1,500,00 from the Company in favor of the Bank.
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"Trustee" means Star Bank, N.A. and its successor hereunder.
"Principal Office" of the Trustee means the principal corporate trust office of
the Trustee, which office at the date of acceptance by the Trustee of the duties
and obligations imposed on the Trustee by this Indenture is Cincinnati, Ohio.
"Unassigned Issuer's Rights" means Unassigned Rights as
defined in the Agreement.
"Weekly Rate" means the Interest Rate Mode for the Bonds in
which the interest rate on the Bonds is determined weekly in accordance with
Section 2.02(c)(i).
"Weekly Rate Period" means the period beginning on, and
including, the date of issuance of the Bonds, and ending on, and including, the
next Tuesday and thereafter the period beginning on, and including, any
Wednesday and ending on, and including, the next Tuesday.
The words "hereof", "herein", "hereto", "hereby" and
"hereunder" (except in the form of Bond) refer to the entire Indenture. Unless
otherwise noted, all Section and Article references are to sections and articles
in this Indenture.
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ARTICLE II
THE BONDS
SECTION 2.01. AMOUNT, TERMS AND ISSUANCE OF BONDS; LIMITED
OBLIGATIONS. The Bonds shall, except as provided in Section 2.10, be limited to
$6,000,000 in aggregate principal amount and shall contain substantially the
terms recited in the form of Bond above. No Bonds may be issued under this
Indenture except in accordance with this Article II.
It is determined to be necessary to, and the Issuer shall,
issue, sell and deliver $6,000,000 principal amount of Bonds for the purpose
financing a portion of the Project Costs.
The Bonds may bear such endorsement or legend satisfactory to
the Trustee as may be required to conform to usage or law with respect thereto.
The Bonds, together with the premium, if any, and interest
thereon, shall be limited obligations of the Issuer payable, with respect to the
Issuer, solely from the Revenues, which Revenues are hereby pledged and assigned
for the equal and ratable payment of all sums due under the Bonds, and shall be
used for no other purpose than to pay the principal of, premium, if any, on and
interest on the Bonds except as may be otherwise expressly provided herein.
THE BONDS ARE NOT AND SHALL NOT BE A DEBT OF THE STATE OR OF
SARATOGA COUNTY, NEW YORK AND NEITHER THE STATE NOR SARATOGA COUNTY, NEW YORK
SHALL BE LIABLE THEREON. THE BONDS DO NOT GIVE RISE TO A PECUNIARY LIABILITY OR
CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF THE STATE OR OF SARATOGA
COUNTY, NEW YORK.
No recourse shall be had for the payment of the principal of
or premium, if any, on or the interest on any Bond or for any claim based
thereon or on this Indenture against any past, present or future member,
officer, employee or agent (other than the Company), as such, of the Issuer or
of any predecessor or successor corporation, either directly or through the
Issuer or otherwise, whether by virtue of any constitution, statute or rule of
law, in equity, or by the enforcement of any assessment or penalty, or
otherwise.
SECTION 2.02. (a) DESIGNATION, DENOMINATIONS AND MATURITY. The
Bonds shall be designated "Multi-Mode Variable Rate Industrial Development
Revenue Bonds (Spurlock Adhesives, Inc. Project), Series 1997 A." The Bonds
shall be issuable only in denominations of $100,000 and any larger denomination
constituting an integral multiple of $5,000.
All Bonds shall be dated the date of their authentication.
Each Bond shall bear interest from the Interest Payment Date to which interest
has accrued and has been paid, or if prior to the first Interest Payment Date
for the Bonds, from the date of the original issuance of the Bonds until payment
of the principal or redemption price thereof shall have been made or provided
for in accordance with the provisions of this Indenture, whether upon maturity,
redemption or otherwise.
The Bonds shall mature on April 1, 2008.
The Bonds shall be originally issued only to a Depository to
be held in a book entry system and: (i) the Bonds shall be registered in the
name of the Depository or its nominee, as
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Bondholder, and immobilized in the custody of the Depository; (ii) unless
otherwise requested by the Depository, there shall be a single Bond certificate
for each Bond maturity; and (iii) the Bonds shall not be transferable or
exchangeable, except for transfer to another Depository or another nominee of a
Depository, without further action by the Issuer as set forth in the next
succeeding paragraph of this Section. While the Bonds are in book entry only
form, Bonds in the form of physical certificates shall only be delivered to the
Depository.
So long as a book entry system is in effect for the Bonds,
except as hereinafter provided with respect to Beneficial Ownership Interests,
the Issuer and Trustee shall recognize and treat the Depository, or its nominee,
as the holder of Bonds for all purposes, including payment of Bond Service
Charges, giving of notices, and enforcement of remedies. The crediting of
payments of Bond Service Charges on the Bonds and the transmittal of notices and
other communications by the Depository to the Direct Participants in whose
Depository account the Bonds are recorded, and such crediting and transmittal by
Direct Participants to Indirect Participants or Beneficial Owners and by
Indirect Participants to Beneficial Owners, are the respective responsibilities
of the Depository and the Direct Participants and Indirect Participants and are
not the responsibility of the Issuer or the Trustee; provided, however, that the
Issuer and the Trustee understand that neither the Depository or its nominee
shall provide any consent requested of holders of Bonds pursuant to this
Indenture, and that the Depository will mail an omnibus proxy (including a list
identifying the Direct Participants) to the Issuer which assigns the
Depository's, or its nominee's, voting rights to the Direct Participants to
whose accounts at the Depository the Bonds are credited as of the record date
for mailing of requests for such consents. Upon receipt of such omnibus proxy,
the Issuer shall promptly provide such omnibus proxy (including the list
identifying the Direct Participants attached thereto) to the Trustee, who shall
then treat such Direct Participants as Bondholders for purposes of obtaining any
consents pursuant to the terms of this Indenture.
As long as the Bonds are registered in the name of a
Depository, or its nominee, the Trustee agrees to comply with the terms and
provisions of the Letter of Representations, including the provisions of the
Letter of Representations with respect to any delivery of the Bonds to the
Trustee, which provisions shall supersede the provisions of this Indenture with
respect thereto.
If any Depository determines not to continue to act as a
Depository for the Bonds held in a book entry system, the Company may attempt to
have established a securities depository/book entry system relationship with
another Depository under this Indenture. If the Company does not or is unable to
do so, the Company and the Trustee, after the Trustee has made provision for
notification of the Beneficial Owners by appropriate notice to the then
Depository, shall permit withdrawal of the Bonds from the Depository and shall
authenticate and deliver Bond certificates in fully registered form to the
assignees of the Depository or its nominee or to the Beneficial Owners. Such
withdrawal, authentication and delivery shall be at the cost and expense
(including costs of printing or otherwise preparing and delivering such
replacement Bonds) of the Company. Such replacement Bonds shall be in the
denominations specified in the first paragraph of this Section 2.02, with a
minimum denomination of $100,000.
(b) Interest Rates on the Bonds. The Bonds shall
bear interest in the same Interest Rate Mode at all times. The Bonds shall bear
interest at the Weekly Rate for the period from their original issuance date
until converted to a different Interest Rate Mode. The first Interest Payment
Date shall be the Interest Payment Date in January, 1998. During each Interest
Period for each Interest Rate Mode, the interest rate for the Bonds shall be
determined in accordance with Section 2.02(c) and shall be payable on the
Interest Payment Date for such Interest Period; provided that the interest rate
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borne by the Bonds shall not exceed the lesser of (i) fifteen percent (15%) per
annum or (ii) so long as the Bonds are entitled to the benefits of a Credit
Facility, the maximum interest rate with respect to the Bonds specified in the
Credit Facility. Interest on the Bonds at the interest rate or rates for the
Weekly Rate and the Taxable Weekly Rate shall be computed upon the basis of a
365 or 366-day year, as applicable, for the actual number of days elapsed.
Interest on the Bonds at the interest rate or rates for the Semi-Annual Rate and
the Long-Term Rate shall be computed upon the basis of a 360-day year,
consisting of twelve 30-day months. Each Bond shall bear interest on overdue
principal and, to the extent permitted by law, on overdue interest at the
Default Rate computed from the date of the Default or Event of Default.
(c) Interest Rate Modes. Interest Rates on the
Bonds shall be determined as follows:
(i) If the Interest Rate Mode for the
Bonds is the Weekly Rate, the interest rate on the Bonds for a
particular Weekly Rate Period shall be the rate established by the
Remarketing Agent no later than 3:00 p.m. (Cleveland, Ohio time) on the
Tuesday preceding the Weekly Rate Period (or the 7th day preceding the
Conversion of the Interest Rate Mode to the Weekly Rate), or, if such
day is not a Business Day, on the next succeeding Business Day, as the
minimum rate of interest necessary, in the judgment of the Remarketing
Agent, to enable the Remarketing Agent to sell the Bonds on such
Business Day at a price equal to the principal amount thereof, plus
accrued interest, if any, thereon.
(ii) If the Interest Rate Mode for the
Bonds is the Semi-Annual Rate, the interest rate on the Bonds for a
particular Semi-Annual Rate Period shall be the rate established by the
Remarketing Agent no later than 3:00 p.m. (Cleveland, Ohio time) on the
10th Business Day next preceding the first day of such Semi-Annual Rate
Period as the minimum rate of interest necessary, in the judgment of
the Remarketing Agent, to enable the Remarketing Agent to sell the
Bonds on such first day at a price equal to the principal amount
thereof.
(iii) If the Interest Rate Mode for the
Bonds is the Long-Term Rate, the interest rate on the Bonds for a
particular Long-Term Rate Period shall be the rate established by the
Remarketing Agent not later than the 15th Business Day preceding the
first day of such Long-Term Rate Period as the minimum rate of interest
necessary, in the judgment of the Remarketing Agent, to enable the
Remarketing Agent to sell the Bonds on such first day at a price equal
to the principal amount thereof.
(iv) If the Interest Rate Mode for the
Bonds is the Taxable Weekly Rate, the interest rate on the Bonds for a
particular Taxable Weekly Rate Period shall be the rate established by
the Remarketing Agent no later than 3:00 p.m. (Cleveland, Ohio time) on
the Wednesday preceding the Taxable Weekly Rate Period (or the 7th day
preceding the Conversion of the Interest Rate Mode to the Taxable
Weekly Rate), or, if such day is not a Business Day, on the next
succeeding Business Day, as the minimum rate of interest necessary, in
the judgment of the Remarketing Agent, to enable the Remarketing Agent
to sell the Bonds on such Business Day at a price equal to the
principal amount thereof, plus accrued interest, if any, thereon.
(v) The Remarketing Agent shall provide
the Company, the Trustee and the Tender Agent with Immediate Notice of
all interest rates.
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(vi) If for any reason the interest rate
on a Bond is not determined by the Remarketing Agent pursuant to (i),
(ii) or (iii) above, the interest rate for such Bond for the next
succeeding Rate Period shall be the interest rate in effect for such
Bond for the preceding Rate Period.
(d) Long-Term Rate Periods.
(i) Selection of Long-Term Rate Period.
The Long-Term Rate Period shall be established by the Company in the
notice given pursuant to Section 2.02(e) hereof (the first such
Long-Term Rate Period commencing on the Conversion Date for the Bonds
to a Long-Term Rate) and thereafter each successive Long-Term Rate
Period shall be the same as that so established by the Company until a
different Long-Term Rate Period is specified by the Company in
accordance with this Section or until the occurrence of a Conversion
Date. Each Long-Term Rate Period shall be one year or more in duration
and shall end on the day next preceding an Interest Payment Date;
provided that if the first Long-Term Rate Period commences on a
Conversion Date other than an October 1 and April 1, such first
Long-Term Rate Period shall be of a duration as close as possible to
(but not in excess of) such Long-Term Rate Period and shall terminate
on a day preceding an Interest Payment Date; and further provided that
no Long-Term Rate Period shall extend beyond the maturity date of the
Bonds.
(ii) Change of Long-Term Rate Period.
The Company may change from one Long-Term Rate Period to another
Long-Term Rate Period on any Conversion Date by notifying the Trustee,
the Issuer, the Credit Facility Issuer, the Tender Agent and the
Remarketing Agent at least 4 Business Days prior to the 30th day prior
to the proposed effective date of the change. Such notice shall specify
the last day of the next Long-Term Rate Period which shall be the
earlier of the day before the maturity date of the Bonds or the day
immediately preceding an October 1 or April 1 and which is one year or
more after the effective date and, if such change is conditional, the
interest rate limitations. Any such notice shall be accompanied by an
opinion of Counsel stating that such change is authorized by this
Indenture and, if the change is from a Long-Term Rate Period of one
year to a Long-Term Rate Period of more than one year, an opinion of
nationally recognized bond counsel that such change will not affect the
exclusion from gross income for federal income tax purposes of the
interest on the Bonds. Any change by the Company of the Long-Term Rate
Period may be made conditional on the interest rate being within
certain limits established by the Company. The Remarketing Agent shall
establish what would be the interest rate for the proposed Long-Term
Rate Period in accordance with Section 2.02(c). If the interest rate
established by the Remarketing Agent is not within the limits
established, then the change in the Long-Term Rate Period may be
cancelled by the Company, in which case the Company's notice of the
proposed change shall be of no effect and the Bonds shall not be
subject to any mandatory purchase pursuant to Section 3.01(b). Notice
of such cancellation shall be promptly given to all Bondholders.
(iii) Notice of Long-Term Rate Period.
The Trustee shall notify the Bondholders of any change in the Long-Term
Rate Period pursuant to Section 2.02(d)(ii) by first class mail,
postage prepaid, at least 30 but not more than 60 days before the
effective date of such change. The notice will state:
(A) whether the change in the
Long-Term Rate Period is conditional and, if conditional, the
interest rate limitations set by the Company,
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(B) that the interest rate for
the new Long-Term Rate Period will be determined by the
Remarketing Agent not later than the 15th Business Day
preceding the first day of the new Long-Term Rate Period, and
(C) the effective date of the
new Long-Term Rate Period.
Any notice provided under this Section 2.02(d)(iii) shall be
for informational purposes only and shall not waive or otherwise affect the
mandatory purchase of the Bonds at the end of any Long-Term Rate Period as set
forth in Section 3.01(b) hereof.
(e) Conversion of Interest Rate.
(i) Conversion Directed by the Company.
The Interest Rate Mode for the Bonds is subject to Conversion to a
different Interest Rate Mode from time to time in whole (and not in
part) by the Company, such right to be exercised by notifying the
Trustee, the Credit Facility Issuer, the Tender Agent and the
Remarketing Agent at least 4 Business Days prior to the 30th day prior
to the effective date of such proposed Conversion. Such notice shall
specify (A) the effective date, (B) the proposed Interest Rate Mode,
(C) if the Conversion is to the Long-Term Rate, the end of the
Long-Term Rate Period and (D) if such Conversion is conditional, the
interest rate limitations. The notice must be accompanied by (i) an
opinion of Counsel stating that the Conversion is authorized by this
Indenture and, if the Conversion is from a Rate Period of one year or
less to a Rate Period of more than one year or from a Rate Period of
more than one year to a Rate Period of one year or less, an opinion of
nationally recognized bond counsel that such Conversion will not affect
the exclusion from gross income for federal income tax purposes of the
interest on the Bonds, (ii) if the stated amount of the Credit
Facility, if any, to be held by the Trustee after such Conversion is
increased over that of the then current Credit Facility, an opinion of
reputable bankruptcy counsel stating that payments of principal and
interest on the Bonds from funds drawn on such Credit Facility will not
constitute avoidable preferences with respect to the bankruptcy of the
Company under the Bankruptcy Code and (iii) if the Conversion is to a
Long-Term Rate, an official statement relating to the Bonds executed by
the Company and the Issuer together with an opinion of counsel to the
effect that such official statement fairly and accurately describes the
Bonds, the security for the Bonds, and the Financing Documents relating
to the Bonds and such security. Any Conversion by the Company of the
Interest Rate Mode to the Long-Term Rate may be made conditional on the
initial interest rate determined for such Interest Rate Mode being
within certain limits established by the Company. The Remarketing Agent
shall establish what would be the interest rate for the proposed
Interest Rate Mode in accordance with Section 2.02(c). If the interest
rate established by the Remarketing Agent is not within the limits
established, then such Conversion may be cancelled by the Company, in
which case, the Company's notice of Conversion shall be of no effect
and the Bonds shall not be subject to any mandatory purchase pursuant
to Section 3.01(b). Notice of such cancellation shall be given promptly
to all Bondholders. Notwithstanding the foregoing, commencing upon the
day on which the Bonds first bear interest at the Taxable Weekly Rate
and continuing thereafter, the Bonds shall not be subject to Conversion
to a different Interest Rate Mode.
(ii) Limitations. Any Conversion of the
Interest Rate Mode for the Bonds pursuant to paragraph (i) above must
comply with the following:
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(A) the Conversion Date must
be an Interest Payment Date which is a date on which the Bonds
are subject to optional redemption pursuant to Section
8.01(a), (b) or (c);
(B) the Conversion Date must
be a Business Day; and
(C) the Credit Facility, if
any, to be held by the Trustee must cover accrued interest for
the Bonds for 110 days, if the Conversion is to the Weekly
Rate or the Taxable Weekly Rate, or for 195 days, if the
Conversion is to the Semi-Annual Rate or the Long-Term Rate.
(iii) Notice to Bondholders of Conversion
of Interest Rate. The Trustee shall notify the Bondholders of each
Conversion by first class mail, postage prepaid, at least 30 days but
not more than 60 days before the Conversion Date. The notice will
state:
(A) that the Interest Rate
Mode will be converted and what the new Interest Rate Mode
will be;
(B) the Conversion Date;
(C) if the Conversion is to
the Long-Term Rate, whether the conversion is conditional and,
if conditional, the interest rate limitations set by the
Company; and
(D) that the Bonds will be
subject to mandatory purchase on the Conversion Date in
accordance with Section 3.01(b).
If the Conversion is to the Long-Term Rate, the notice will
also state the information required by Section 2.02(d)(iii).
(iv) Cancellation of Conversion of
Interest Rate Mode. Notwithstanding any provision of this Section 2.02,
the Interest Rate Mode shall not be converted if (A) the Remarketing
Agent has not determined the initial interest rate for the new Interest
Rate Mode in accordance with this Section 2.02 or (B) the Trustee shall
receive written notice prior to such Conversion that either of the
opinions required under Section 2.02(e)(i) has been rescinded. If the
Trustee shall have sent any notice to the Bondholders regarding a
Conversion of the Interest Rate Mode under Section 2.02(e)(iii), the
Trustee shall promptly notify all Bondholders of such rescission and
the cancellation of any mandatory purchase pursuant to Section 3.01(b).
(f) Binding Effect of Determination and
Computations. The determination of each interest rate in accordance with the
terms of this Indenture shall be conclusive and binding upon the owners of the
Bonds, the Issuer, the Company, the Trustee, each Paying Agent, the Tender
Agent, the Remarketing Agent and the Credit Facility Issuer, if any.
SECTION 2.03. REGISTERED BONDS REQUIRED; BOND REGISTRAR AND
BOND REGISTER. All Bonds shall be issued in fully registered form. The Bonds
shall be registered upon original issuance and upon subsequent transfer or
exchange as provided in this Indenture.
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The Company shall designate one or more persons to act as
"Bond Registrar" for the Bonds provided that the Bond Registrar appointed for
the Bonds shall be either the Trustee or a person which would meet the
requirements for qualification as a successor trustee imposed by Section 11.13.
The Company hereby appoints Star Bank, N.A. as Bond Registrar. Any person other
than the Trustee undertaking to act as Bond Registrar shall first execute a
written agreement, in form satisfactory to the Trustee, to perform the duties of
a Bond Registrar under this Indenture, which agreement shall be filed with the
Trustee.
The Bond Registrar shall act as registrar and transfer agent
for the Bonds. There shall be kept at an office of the Bond Registrar a register
(herein sometimes referred to as the "Bond Register") in which, subject to such
reasonable regulations as it, the Trustee or the Bond Registrar may prescribe,
shall provide for the registration of the Bonds and for the registration of
transfers of the Bonds. The Bond Registrar shall designate, by a written
notification to the Trustee, a specific office location (which may be changed
from time to time, upon similar notification) at which the Bond Register is
kept. If the Bond Registrar is the Trustee, such location shall be the principal
corporate trust office of the Trustee.
The Bond Registrar shall forthwith following each Regular
Record Date and at any other time as reasonably requested by the Trustee, the
Tender Agent or the Remarketing Agent, certify and furnish to the Trustee, the
Tender Agent, the Remarketing Agent and any Paying Agent as the Trustee shall
specify, the names, addresses, and holdings of Bondholders and any other
relevant information reflected in the Bond Register, and the Trustee, the Tender
Agent, the Remarketing Agent and any such Paying Agent shall for all purposes be
fully entitled to rely upon the information so furnished to them and shall have
no liability or responsibility in connection with the preparation thereof.
SECTION 2.04. TRANSFER AND EXCHANGE. As provided in Section
2.03, the Company shall cause a Bond Register to be kept at the designated
office of the Bond Registrar. Upon surrender for registration of transfer of any
Bond at such office, the Issuer upon request of the Company shall execute and
the Trustee or its Authenticating Agent shall authenticate and deliver in the
name of the transferee or transferees, one or more new fully registered Bonds of
authorized denomination for the aggregate principal amount which the registered
owner is entitled to receive.
At the option of the registered owner, Bonds may be exchanged
for other Bonds of any other authorized denomination, of a like aggregate
principal amount, upon surrender of the Bonds to be exchanged at any such office
or agency. Whenever any Bonds are so surrendered for exchange, the Issuer shall
execute, and the Trustee or the Authenticating Agent shall authenticate and
deliver, the Bonds which the Bondholder making the exchange is entitled to
receive.
All Bonds presented for registration of transfer, exchange,
redemption or payment (if so required by the Issuer, the Bond Registrar or the
Trustee) shall be accompanied by a written instrument or instruments of transfer
or authorization for exchange, in form and with guaranty of signature
satisfactory to the Bond Registrar, duly executed by the owner or by his
attorney duly authorized in writing.
No service charge shall be made to a Bondholder for any
exchange or registration of transfer of Bonds, but the Issuer, the Company or
the Bond Registrar may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto.
Neither the Issuer nor the Bond Registrar on behalf of the
Issuer shall be required (i) to register the transfer or exchange of any Bond
during a period beginning at the opening of business 15
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days before the date of redemption of Bonds selected for redemption and ending
at the close of business on the day of such redemption (ii) to register the
transfer or exchange of any Bond so selected for redemption in whole or in part,
or (iii) other than pursuant to Article III, to register any transfer or
exchange of any Bond with respect to which the owner has submitted a demand for
purchase in accordance with Section 3.01(a) or which has been purchased pursuant
to Section 3.01(b).
New Bonds delivered upon any registration of transfer or
exchange shall be valid obligations of the Issuer subject to the limitations set
forth herein, evidencing the same debt as the Bonds surrendered, shall be
secured by this Indenture and shall be entitled to all of the security and
benefits hereof to the same extent as the Bonds surrendered.
SECTION 2.05. DELIVERY OF BONDS. Upon the execution and
delivery of this Indenture, and satisfaction of the conditions set forth in
Section 2.14 hereof, the Issuer upon request of the Company shall execute the
Bonds and deliver them to the Trustee. Thereupon, the Trustee shall authenticate
the Bonds and deliver them to the Depository, as directed by the Issuer in
accordance with this Section 2.05.
Before the Trustee delivers any Bonds, the Trustee shall have
received a request and authorization to the Trustee on behalf of the Issuer,
signed by the Authorized Official, to authenticate and deliver the Bonds to, or
on the order of, the Placement Agent upon payment to the Trustee of the amount
specified therein (including without limitation, any accrued interest), which
amount shall be deposited as provided in Sections 4.01 and 5.01 hereof.
SECTION 2.06. EXECUTION. The Bonds shall be executed by the
manual or facsimile signature of the Chairman (or Vice Chairman) and Secretary
(or Assistant Secretary) of the Issuer.
Bonds executed as above provided may be issued and shall, upon
request of the Issuer, be authenticated by the Trustee or the Authenticating
Agent, notwithstanding that any officer signing such Bonds or whose facsimile
signature appears thereon shall have ceased to hold office at the time of
issuance or authentication or shall not have held office at the date of the
Bond.
SECTION 2.07. AUTHENTICATION; AUTHENTICATING AGENT. No Bond
shall be valid for any purpose until the Certificate of Authentication thereon
shall have been duly executed as provided in this Indenture, and such
authentication shall be conclusive proof that such Bond has been duly
authenticated and delivered under this Indenture and that the owner thereof is
entitled to the benefit of the trust hereby created.
If the Bond Registrar is other than the Trustee, the Trustee
may appoint the Bond Registrar as an Authenticating Agent with the power to act
on the Trustee's behalf and subject to its direction in the authentication and
delivery of Bonds in connection with the registration of transfers and exchanges
under Section 2.04 hereof, and the authentication and delivery of Bonds by an
Authenticating Agent pursuant to this Section shall, for all purposes of this
Indenture, be deemed to be the authentication and delivery "by the Trustee". The
Trustee shall, however, itself authenticate all Bonds upon their initial
issuance and any Bonds issued in substitution for other Bonds pursuant to
Sections 2.10 and 2.11. The Trustee shall be entitled to be reimbursed for
payments made to any Authenticating Agent as reasonable compensation for its
services.
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Any corporation into which any Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate trust business of any Authenticating Agent, shall be the successor of
the Authenticating Agent hereunder, if such successor corporation is otherwise
eligible as a Bond Registrar under Section 2.03, without the execution or filing
or the taking of any further act on the part of the parties hereto or the
Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Trustee and the Company. The Trustee may at
any time terminate the agency of any Authenticating Agent by giving written
notice of termination to such Authenticating Agent, the Company and the Issuer.
Upon receiving such a notice of resignation or upon such a termination, or in
case at any time any Authenticating Agent shall cease to be eligible under this
Section, the Trustee may appoint a successor Authenticating Agent, shall give
written notice of such appointment to the Company and shall mail notice of such
appointment to all owners of Bonds as the names and addresses of such owners
appear on the Bond Register.
SECTION 2.08. PAYMENT OF PRINCIPAL AND INTEREST RIGHTS
PRESERVED. The principal or redemption price of any Bond shall be payable, upon
surrender of such Bond, in any coin or currency of the United States of America
which, at the time of payment, is legal tender for the payment of public and
private debts, at the Principal Office of any Paying Agent, including funds
evidenced by wire transfer. Interest on any Bond on each Interest Payment Date
in respect thereof shall be payable by check mailed to the address of the person
entitled thereto as such address shall appear in the Bond Register; provided
that at the written request of the owner of at least $1,000,000 aggregate
principal amount of Bonds received by the Bond Registrar at least one Business
Day before the corresponding Record Date, interest accrued on the Bonds will be
payable by wire transfer within the United States in immediately available funds
to the bank account number of such owner specified in such request and entered
by the Bond Registrar on the Bond Register; and provided further that interest
payable at maturity (or redemption) shall be paid only upon presentation and
surrender of such Bond.
Interest on any Bond which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the person
in whose name that Bond is registered at the close of business on the Regular
Record Date for such interest.
Notwithstanding anything herein to the contrary, when any Bond
is registered in the name of a Depository or its nominee, the principal and
redemption price of and interest on such Bond shall be payable in next day or
federal funds delivered or transmitted to the Depository or its nominee.
Any interest on any Bond which is payable, but is not
punctually paid or provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the owner of such
Bond on the relevant Regular Record Date by virtue of having been such owner,
and such Defaulted Interest shall be paid to the person in whose name the Bond
is registered at the close of business on a Special Record Date to be fixed by
the Trustee, such date to be no more than 15 nor fewer than 10 days prior to the
date of proposed payment. The Trustee shall cause notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor to be mailed,
first class postage prepaid, to each Bondholder at his address as it appears in
the Bond Register, not fewer than 10 days prior to such Special Record Date.
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Subject to the foregoing provisions of this Section 2.08, each
Bond delivered under this Indenture upon registration of transfer of or exchange
for or in lieu of any other Bond shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Bond.
SECTION 2.09. PERSONS DEEMED OWNERS. The Issuer, the Company,
the Trustee, any Paying Agent, the Bond Registrar, the Tender Agent and any
Authenticating Agent may deem and treat the person in whose name any Bond is
registered as the absolute owner thereof (whether or not such Bond shall be
overdue and notwithstanding any notation of ownership or other writing thereon
made by anyone other than the Issuer, the Company, the Trustee, any Paying
Agent, the Bond Registrar, the Tender Agent or the Authenticating Agent) for the
purpose of receiving payment of or on account of the principal of (and premium,
if any, on), and (subject to Section 2.08) interest on, such Bond, and for all
other purposes, and neither the Issuer, the Company, the Trustee, the Tender
Agent, any Paying Agent, the Bond Registrar nor the Authenticating Agent shall
be affected by any notice to the contrary. All such payments so made to any such
registered owner, or upon his order, shall be valid and, to the extent of the
sum or sums so paid, effectual to satisfy and discharge the liability for moneys
payable upon any such Bond.
SECTION 2.10. MUTILATED, DESTROYED, LOST OR STOLEN BONDS.
(a) If any Bond shall become mutilated, lost,
stolen or destroyed, the affected Bondholder shall be entitled to the issuance
of a substitute Bond only as follows:
(1) in the case of a lost, stolen or
destroyed Bond, the Bondholder shall (i) provide notice of the loss,
theft or destruction to the Issuer, the Company and the Trustee within
a reasonable time after the Bondholder receives notice of the loss,
theft or destruction, (ii) request the issuance of a substitute Bond
and (iii) provide evidence, satisfactory to the Company and the
Trustee, of the ownership and the loss, theft or destruction of the
affected Bond;
(2) in the case of a mutilated Bond,
the Bondholder shall surrender the Bond to the Trustee for
cancellation; and
(3) in all cases, the Bondholder shall
provide indemnity against any and all claims arising out of or
otherwise related to the issuance of substitute Bonds pursuant to this
Section satisfactory to the Issuer, the Company, the Trustee and any
Credit Facility Issuer.
Upon compliance with the foregoing, a new Bond of like tenor and denomination,
executed by the Issuer, shall be authenticated by the Trustee and delivered to
the Bondholder, all at the expense of the Bondholder to whom the substitute Bond
is delivered. Notwithstanding the foregoing, the Trustee shall not be required
to authenticate and deliver any substitute Bond for a Bond which has been called
for redemption or which has matured or is about to mature and, in any such case,
the principal or redemption price and interest then due or becoming due shall be
paid by the Trustee or a Paying Agent in accordance with the terms of the
mutilated, lost, stolen or destroyed Bond without substitution therefor.
(b) Every substituted Bond issued pursuant to
this Section 2.10 shall constitute an additional contractual obligation of the
Issuer (subject to Section 16.01 hereof) and shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Bonds duly issued hereunder unless the Bond alleged to have been destroyed, lost
or stolen shall be at any time enforceable by a bona fide purchaser for value
without notice. In the event the Bond alleged to have
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been destroyed, lost or stolen shall be enforceable by anyone, the Issuer may
recover the substitute Bond from the Bondholder to whom it was issued or from
anyone taking under the Bondholder except a bona fide purchaser for value
without notice.
(c) All Bonds shall be held and owned upon the
express condition that the foregoing provisions are exclusive with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and
shall preclude any and all other rights or remedies, notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement or payment of negotiable instrument or investment or other
securities without their surrender.
SECTION 2.11. TEMPORARY BONDS. Pending preparation of
definitive Bonds, or by agreement with the purchasers of all Bonds, the Issuer
may issue, and, upon its request, the Trustee shall authenticate, in lieu of
definitive Bonds one or more temporary printed or typewritten Bonds of
substantially the tenor recited above in any denomination authorized under
Section 2.02. Upon request of the Issuer, the Trustee shall authenticate
definitive Bonds in exchange for and upon surrender of an equal principal amount
of temporary Bonds. Until so exchanged, temporary Bonds shall have the same
rights, remedies and security hereunder as definitive Bonds.
SECTION 2.12. CANCELLATION OF SURRENDERED BONDS. Bonds
surrendered for payment, redemption, transfer or exchange and Bonds surrendered
to the Trustee by the Issuer, or by the Company on behalf of the Issuer, for
cancellation shall be cancelled by the Trustee and returned to the Company.
SECTION 2.13. SOURCE OF PAYMENT OF BONDS. To the extent
provided in and except as otherwise permitted by this Indenture, (i) as
specified in Section 16.01 hereof, the Bonds shall be special obligations of the
Issuer and the Bond Service Charges thereon shall be payable equally and ratably
solely from the Revenues, (ii) the payment of Bond Service Charges on the Bonds
shall be secured by the assignment of the Credit Facility Account, Redemption
Premium Account, Remarketing Proceeds Account and Defeasance Account of the Bond
Fund and the grant of a security interest in all moneys and investments in the
Project Fund, the Insurance and Condemnation Fund and the Revenues (other than
such accounts of the Bond Fund, all moneys and investments therein and the
proceeds of the Credit Facility) hereunder and by this Indenture, and (iii)
payments due on the Bonds also shall be secured by the assignment by the Issuer
of its rights under the Agreement (other than the Unassigned Issuer's Rights)
pursuant to the Assignment. The principal of, and any accrued interest on, the
Bonds shall also be payable from moneys derived by the Trustee from drawings
under the Credit Facility related to the Bonds. Notwithstanding anything to the
contrary in the Act, the Bonds or this Indenture, the Bonds do not and shall not
represent or constitute a debt or pledge of the faith and credit or the taxing
power of the Issuer or of the State or of any political subdivision,
municipality or other local agency thereof and are not and will not be secured
by an obligation or pledge of any moneys raised by taxation.
SECTION 2.14. DELIVERY OF THE BONDS. Upon the execution and
delivery of this Indenture, the Issuer shall execute and deliver the Bonds to
the Trustee, and the Trustee shall authenticate and deliver the Bonds to the
purchasers thereof against payment of the purchase price therefor, plus accrued
interest to the day preceding the date of delivery, upon receipt by the Trustee
of the following:
(A) a certified copy of the Resolution;
(B) the executed original Letter of Credit;
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(C) executed counterparts of the Indenture and
the other Financing Documents;
(D) a request and authorization to the Trustee
on behalf of the Issuer signed by an Authorized Official of the Issuer to
deliver the Bonds to the purchasers thereof upon payment to the Trustee for the
account of the Issuer of the purchase price therefor;
(E) signed copies of the opinions of counsel to
the Issuer, the Company and the Bank, and of Bond Counsel;
(F) an executed copy of the arbitrage
certificate of the Issuer and the Tax Regulatory Agreement;
(G) such other documents as the Trustee, the
Bank or Bond Counsel may reasonably require.
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ARTICLE III
PURCHASE AND REMARKETING OF BONDS
SECTION 3.01. PURCHASE OF BONDS ON DEMAND; MANDATORY PURCHASE.
(a) Purchase of Bonds on Demand of Owner.
(i) During Weekly Rate Period and
Taxable Weekly Rate Period. If the Interest Rate Mode for the Bonds is
the Weekly Rate or the Taxable Weekly Rate, any Bond shall be purchased
on the demand of the owner thereof, on any Business Day at a purchase
price equal to the principal amount thereof, plus accrued interest, if
any, to the Purchase Date, upon written notice to the Tender Agent, at
its Principal Office on or before 4:00 p.m. (Cincinnati, Ohio time) on
a Business Day not later than the 7th calendar day prior to the
Purchase Date, which notice (A) states the number and principal amount
(or portion thereof in an authorized denomination) of such Bond to be
purchased, (B) states the Purchase Date on which such Bond shall be
purchased and (C) irrevocably requests such purchase and agrees to
deliver such Bond, duly endorsed in blank for transfer, with all
signatures guaranteed, to the Tender Agent at or prior to 12:00 Noon
(Cincinnati, Ohio time) on such Purchase Date.
The Tender Agent shall promptly,
but in no event later than 4:00 p.m. (Cincinnati, Ohio time) on the
next succeeding Business Day, provide the Remarketing Agent and the
Trustee with Immediate Notice of the receipt of the notice referred to
in the preceding paragraph. Upon its receipt of such Immediate Notice
from the Tender Agent, the Remarketing Agent shall promptly provide the
Company with Immediate Notice of the receipt of the notice referred to
in the preceding paragraph.
(ii) During Semi-Annual Rate Period. If
the Interest Rate Mode for the Bonds is the Semi-Annual Rate, any Bond
shall be purchased, on the demand of the owner thereof, on any Interest
Payment Date for a Semi-Annual Rate Period at a purchase price equal to
the principal amount thereof, upon written notice to the Tender Agent,
at its Principal Office on a Business Day not later than the 8th
Business Day prior to such Purchase Date, which notice (A) states the
number and principal amount (or portion thereof in an authorized
denomination) of such Bond to be purchased, (B) states the Purchase
Date on which such Bond shall be purchased and (C) irrevocably requests
such purchase and agrees to deliver such Bond, duly endorsed in blank
for transfer, with all signatures guaranteed, to the Tender Agent at or
prior to 12:00 Noon (Cincinnati, Ohio time) on such Purchase Date.
The Tender Agent shall promptly,
but in no event later than 4:00 p.m. (Cincinnati, Ohio time) on the
next succeeding Business Day, provide the Remarketing Agent and Trustee
with Immediate Notice of the receipt of the notice referred to in the
preceding paragraph.
(iii) During Long-Term Rate Period. Bonds
shall not be purchased upon the demand of the owner thereof during any
Long-Term Rate Period in whole or in part. At the end of each Long-Term
Rate Period, the Bonds shall be subject to mandatory purchase as set
forth in Section 3.01(b) hereof.
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(iv) Purchase of Portions of Bonds.
Notwithstanding any other provision of this Section 3.01(a), the owner
of a Bond may demand purchase of a portion of such Bond only if the
portion to be purchased and the portion to be retained by the owner
will be in authorized denominations.
(b) Mandatory Purchases of Bonds.
(i) Mandatory Purchase on Conversion
Date. The Bonds shall be subject to mandatory purchase at a purchase
price equal to the principal amount thereof, plus, if the Interest Rate
Mode is the Long-Term Rate, the redemption premium which would be
payable under Section 8.01(b) hereof if the Bonds were redeemed on the
Purchase Date, plus accrued interest, if any, thereon to the Purchase
Date on each Conversion Date for any Conversion.
(ii) Mandatory Purchase for Failure to
Provide Alternate Credit Facility. While the Bonds bear interest at the
Weekly, Semi-Annual or Taxable Weekly Rate, the Bonds shall be subject
to mandatory purchase at a purchase price equal to the principal amount
thereof plus accrued interest, if any, thereon to the Purchase Date,
upon termination of the term of the then current Credit Facility
(whether by expiration according to its terms or upon delivery of an
Alternate Credit Facility) unless such Credit Facility is extended or
replaced prior to its termination with an Alternate Credit Facility
issued by the then current Credit Facility Issuer. The Purchase Date
will be the Interest Payment Date immediately preceding (by at least 15
calendar days) the date of expiration or replacement of the then
current Credit Facility.
(iii) Mandatory Purchase for Failure to
Provide Qualifying Alternate Credit Facility. While the Bonds bear
interest at the Long-Term Rate and are subject to optional redemption
by the Issuer upon direction of the Company pursuant to Section
8.01(b), the Bonds shall be subject to mandatory purchase at a purchase
price equal to the principal amount thereof, plus the redemption
premium, if any, which would be payable under Section 8.01(b) if the
Bonds were redeemed on the Purchase Date, plus accrued interest, if
any, thereon to the Purchase Date, upon the delivery of an Alternate
Credit Facility, unless such Alternate Credit Facility is a Qualifying
Alternate Credit Facility. Any premium to be paid in connection with
such mandatory purchase, if not covered by the then current Credit
Facility, shall be paid from Available Moneys deposited by the Company
into the Redemption Premium Account of the Bond Fund. If there are no
such Available Moneys, the then current Credit Facility may not be
replaced unless replaced with a Qualifying Alternate Credit Facility.
While the Bonds bear interest at the Long-Term Rate, but are not yet
subject to optional redemption by the Issuer pursuant to Section
8.01(b), the Company may not replace the then current Credit Facility
with an Alternate Credit Facility unless such alternate Credit Facility
is a Qualifying Alternate Credit Facility.
(iv) Notice of Mandatory Purchase.
Notice of any mandatory purchase pursuant to this Section 3.01(b) shall
be given by the Trustee thirty (30) days prior to the date of purchase
in the same manner as a notice of redemption pursuant to Section 8.04
hereof; provided that failure to receive notice by mailing, or any
defect in that notice, as to any Bond shall not affect the validity of
the proceedings for the purchase of any other Bond.
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(c) Payment of Purchase Price. The purchase
price of Bonds purchased pursuant to Section 3.01 shall be payable upon
delivery of such Bond to the Tender Agent; provided that such Bond must
be delivered to the Tender Agent on or prior to 12:00 Noon (Cincinnati,
Ohio time) for payment by the close of business on the Purchase Date in
immediately available funds; provided, however, that if the Purchase
Date is not a Business Day, the purchase price shall be payable on the
next succeeding Business Day.
Any Bond delivered for payment of the purchase price shall be
accompanied by an instrument of transfer thereof in form satisfactory to the
Tender Agent executed in blank by the owner thereof and with all signatures
guaranteed by a bank, trust company or member firm of The New York Stock
Exchange, Inc. The Tender Agent may refuse to accept delivery of any Bond for
which an instrument of transfer satisfactory to it has not been provided and
shall have no obligation to pay the purchase price of such Bond until a
satisfactory instrument is delivered.
The Tender Agent shall hold all Bonds delivered pursuant to
this Section 3.01 in trust for the benefit of the owners thereof until moneys
representing the purchase price of such Bonds shall have been delivered to or
for the account of or to the order of such Bondholders, and thereafter shall
deliver such Bonds to the purchasers thereof. All amounts received by the
Trustee from a drawing under a Credit Facility for purchase of Bonds shall be
transferred immediately to the Tender Agent. The Tender Agent shall also hold
all such amounts from a drawing under a Credit Facility that it shall have
received from the Trustee in a separate and segregated account pending payment
of the purchase price of Bonds as set forth in Section 3.03 and neither the
Issuer, the Company, any Guarantor, any Affiliate of the Company or of any
Guarantor, nor any Insider of any of them shall have any right to take, control
or receive the moneys and investments therein.
SECTION 3.02. REMARKETING OF BONDS.
(a) Upon the receipt by the Remarketing Agent of
any notice pursuant to Section 3.01(a), the Remarketing Agent, subject to the
terms of the Remarketing Agreement, shall offer for sale, and shall use its best
efforts to sell (other than to the Issuer, the Company or their Affiliates), the
Bonds in respect of which such notice has been given. Unless otherwise
instructed by the Issuer or the Company, the Remarketing Agent will offer for
sale and use its best efforts to sell any Bonds purchased pursuant to Section
3.01(b). Any such Bonds shall be offered: (i) at 100% of the principal amount
thereof, plus interest accrued, if any, to the Purchase Date, and (ii) pursuant
to terms calling for payment of the purchase price on such Purchase Date against
delivery of such Bonds; provided that the Remarketing Agent shall not sell any
Bond if the amount to be received from the sale of such Bond (including accrued
interest, if any) plus the amount available to be drawn by the Trustee under the
Credit Facility with respect to the Available Moneys available to the Trustee
for such purpose is less than the purchase price (including accrued interest, if
any) to be paid for such Bond. The Remarketing Agent shall direct any person to
whom such Bonds (or authorized portions thereof) are remarketed pursuant to this
Section to deliver the purchase price thereof in immediately available funds to
the Trustee at its principal office on or before 10:00 a.m. (Albany, New York
time) on the Purchase Date. Upon receipt and pending disbursement thereof, the
Trustee shall deposit such moneys in the Remarketing Proceeds Account. The
Trustee, the Tender Agent or the Credit Facility Issuer may purchase any Bonds
offered pursuant to this Section 3.02 for its own account. Each of the Issuer
and the Company acknowledges that they shall have no interest in any proceeds of
the remarketing of Bonds, all of which shall be held in trust by the Trustee or
the Tender Agent for the sole benefit of the holders of the Bonds and, to the
extent that the holders have been paid with draws on the Credit Facility, for
the benefit of the Credit Facility Issuer. The Remarketing Agent shall, no later
than 10:30 a.m. (Albany, New York time) on the Purchase Date,
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give oral or telephonic notice to the Tender Agent and the Trustee of the Bonds
remarketed pursuant to this Section and the Purchase Date therefor, such notice
to be promptly confirmed by telex, telegram or telecopier to the Company and the
Credit Facility Issuer.
(b) The Remarketing Agent shall, subject to the
terms of the Remarketing Agreement, offer for sale, and use its best efforts to
sell, on behalf of the Issuer, Bonds held pursuant to Section 3.05. Any such
Bonds shall be offered at 100% of the principal amount thereof, plus interest
accrued to the sale date.
SECTION 3.03. PURCHASE OF BONDS; UNDELIVERED BONDS.
(a) On each date Bonds are to be purchased
pursuant to Section 3.01, the Tender Agent shall purchase, but only from the
funds listed below, such Bonds from the owners thereof. Funds for the payment of
such purchase price shall be derived from the following sources in the order of
priority indicated, provided that funds derived from Section 3.03(a)(i) and (ii)
shall not be combined with funds derived from Section 3.03(a)(iii) to purchase
any one Bond (or authorized denomination thereof):
(i) Proceeds deposited in the
Remarketing Proceeds Accounts from the remarketing of such Bonds to
persons other than the Issuer, the Company, any Guarantor, or any
Affiliate of any of them or any Insider of the foregoing (exclusive of
any premium) pursuant to Section 3.02(a);
(ii) Available Moneys furnished by the
Trustee to the Tender Agent representing proceeds of a drawing by the
Trustee under the Credit Facility;
(iii) Available Moneys deposited by the
Company into the Redemption Premium Account, if necessary, to pay any
premium included in the purchase price; and
(iv) Moneys paid by the Company to pay
the purchase price furnished by the Trustee to the Tender Agent.
(b) In the event that any holder of a Bond who
shall have given notice demanding purchase pursuant to Section 3.01(a), or which
is subject to mandatory purchase pursuant to Section 3.01(b), shall fail to
deliver such Bond to the Tender Agent at the place and on the applicable date
and time specified, or shall fail to deliver such Bond properly endorsed, such
Bond shall constitute an Undelivered Bond. If funds in the amount of the
purchase price of the Undelivered Bond are available for payment to the holder
thereof on the date and at the time specified, from and after the date and time
of that required delivery, (i) the Undelivered Bond shall no longer be deemed to
be Outstanding under this Indenture; (ii) interest shall no longer accrue
thereon; and (iii) funds in the amount of the purchase price of the Undelivered
Bonds shall be held by the Tender Agent, without liability for interest thereon,
for the benefit of the holder thereof (and in no event for the benefit of the
Issuer, the Company, any Guarantor, any Affiliate of any of them, any Insider of
the foregoing, the Remarketing Agent, the Tender Agent or any other party).
Neither the Issuer, the Company, any Guarantor, any Affiliate of any of them nor
any Insider of the foregoing shall have any right whatsoever to take, control or
receive moneys held by the Tender Agent. Any funds held by the Tender Agent as
described in clause (iii) of the preceding sentence shall be held uninvested.
Any moneys deposited with and held by the Tender Agent not so applied to the
payment of Bonds, if any, within two years after the Purchase Date of such Bonds
shall be paid by the Tender Agent to the Company and thereafter the former
holders of such Bonds shall
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be entitled to look only to the Company for payment, and then only to the extent
of the amount so repaid, and the Company shall not be liable for any interest
thereon and shall not be regarded as a trustee of such money.
SECTION 3.04. DELIVERY OF REMARKETED OR PURCHASED BONDS.
(a) Bonds and Beneficial Ownership Interests
purchased pursuant to Section 3.03 shall be delivered as follows:
(i) Bonds sold by the Remarketing Agent
to persons or entities other than the Issuer or the Company shall be
delivered to the purchasers thereof. With respect to Beneficial
Ownership Interests sold by the Remarketing Agent pursuant to Section
3.02 hereof, the Remarketing Agent and the Trustee shall take such
actions as may be necessary to reflect the transfer of such Beneficial
Ownership Interests to the purchasers thereof in the book entry system
maintained by the Depository.
(ii) Bonds purchased or to be purchased
with moneys described in Section 3.03(a)(ii) shall be delivered to the
Tender Agent to be held pursuant to Section 3.05. With respect to
Beneficial Ownership Interests purchased with moneys described in
Section 3.03(a)(ii), the Remarketing Agent and the Trustee shall take
such actions as may be necessary to reflect the transfer of such
Beneficial Ownership Interests to the purchasers thereof in the book
entry system maintained by the Depository.
(iii) Bonds purchased with moneys
described in Section 3.03(a)(iii) shall, at the direction of the
Company, be (A) delivered to or held by the Tender Agent for the
account of the Company, (B) delivered to the Trustee for cancellation
or (C) delivered to the Company. With respect to Beneficial Ownership
Interests purchased with moneys described in Section 3.03(a)(iii), the
Remarketing Agent and the Trustee shall take such actions as may be
necessary to reflect the transfer of such Beneficial Ownership
Interests to the purchasers thereof in the book entry system maintained
by the Depository.
(b) If, on any date prior to the release of
Bonds held by or for the account of the Company pursuant to Section
3.04(a)(iii), all Bonds are called for redemption pursuant to Section 8.01 or an
acceleration of the Bonds pursuant to Section 10.02 occurs, such Bonds shall be
deemed to have been paid and shall thereupon be cancelled by the Trustee.
(c) Bonds or Beneficial Ownership Interests
(other than Bonds pledged to the Credit Facility Issuer) delivered as provided
in this Section shall be registered (or recorded through the Depository) in the
manner directed by the recipient thereof.
SECTION 3.05. BONDS PLEDGED TO THE CREDIT FACILITY ISSUER. The
Bond Registrar shall register (or the Depository shall record) in the name of
the Company any Bonds delivered to the Tender Agent pursuant to Section
3.04(a)(ii). Thereafter, the Tender Agent shall hold such Bonds unless and until
the Tender Agent shall have received from the Credit Facility Issuer written
notice or telephonic notice, promptly confirmed in writing, which specifies that
the Tender Agent shall deliver such Bonds to the Company or the Remarketing
Agent. Upon receipt of such notice, the Tender Agent shall deliver such Bonds to
the Company or the Remarketing Agent.
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SECTION 3.06. DRAWINGS ON CREDIT FACILITY. Except as provided
in Section 3.08 hereof, on each day on which Bonds are to be purchased pursuant
to Section 3.01 hereof, except to the extent that the Trustee shall have
received telephonic notification from the Remarketing Agent on or prior to 10:30
a.m. (Albany, New York time) on the Purchase Date to the effect that such Bonds
shall have been remarketed pursuant to Section 3.02 hereof and that the moneys
described in Section 3.03(a)(i) hereof will be sufficient to pay the purchase
price of such Bonds, the Trustee shall by 11:00 a.m. (Albany, New York time) on
the Purchase Date draw under the Credit Facility an amount equal to the purchase
price of such Bonds which cannot be purchased from the proceeds of remarketing
then on deposit in the Remarketing Proceeds Account and immediately upon receipt
of such proceeds furnish the proceeds of such drawing to the Tender Agent, and
shall further provide Immediate Notice of such drawing to the Issuer and the
Company. If less than the full purchase price is received for the Bonds that are
to be remarketed, the Trustee shall, by 11:00 a.m. (Albany, New York time) on
the Purchase Date, draw under the Credit Facility an amount which, together with
the remarketing proceeds of the Bonds sold by the Remarketing Agent and received
by the Trustee, will be equal to the purchase price of such Bonds and
immediately upon the receipt of such proceeds furnish the proceeds of such
drawing to the Tender Agent.
SECTION 3.07. DELIVERY OF PROCEEDS OF SALE. The proceeds of
the sale by the Remarketing Agent of any Bonds held by it for the account of the
Company, or delivered to it by any Bondholder or the Tender Agent, shall be
deposited in the Remarketing Proceeds Account.
SECTION 3.08. LIMITATION ON PURCHASE AND REMARKETING. Anything
in this Indenture to the contrary notwithstanding, there shall be no remarketing
of Bonds pursuant to Section 3.02 if there shall have occurred and be continuing
an Event of Default. Any purchase of Bonds pursuant to Section 3.01(a) after an
Event of Default shall have occurred and be continuing shall be made only with
proceeds of a drawing under the Credit Facility, and any Bonds so purchased
shall remain pledged to the Credit Facility Issuer until (a) the Event of
Default shall have been cured or waived or (b) the Bonds are accelerated
pursuant to Section 10.02 hereof.
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ARTICLE IV
PROJECT FUND; PROCEEDS OF BONDS
SECTION 4.01. CREATION OF PROJECT FUND; PROCEEDS OF BONDS.
There is hereby created by the Issuer and ordered maintained as a separate
deposit account (except when invested as provided hereinafter) in the custody of
the Trustee, a trust fund designated "County of Saratoga Industrial Development
Agency - Spurlock Adhesives, Inc. Project Fund." There shall be deposited in the
Project Fund, the proceeds of the sale of the Bonds, other than any proceeds
representing accrued interest, which shall be deposited in the Bond Fund
pursuant to Section 5.01 hereof, and applied to the acquisition, construction,
furnishing, equipment and improvement of the Project and costs of issuance of
the Bonds (collectively, the "Project Costs")
SECTION 4.02. DISBURSEMENTS FROM AND RECORDS OF PROJECT FUND.
Moneys in the Project Fund shall be disbursed in accordance with the provisions
of the Reimbursement Agreement and the Building Loan Agreement. The Trustee is
hereby authorized to make each disbursement required by the provisions thereof.
Disbursements from the Project Fund shall be made only to reimburse or pay the
Company, or any person designated by the Company, for the Project Costs. Any
disbursements from the Project Fund for the payment of Project Costs shall be
made by the Trustee only upon the written order signed by the Designated
Representative and approved by the Bank. Each such written order shall be in
substantially the form of the disbursement request attached as Schedule "D" to
the Building Loan Agreement, shall be consecutively numbered and may be
accompanied by invoices or other documentation supporting the payments or
reimbursements requested. That amount shall be released to the Company, or the
person designated by the Company, upon receipt by the Trustee of a written
direction from the Bank to release that amount.
Any moneys remaining in the Project Fund after the payment in
full of the Project Costs and after any required transfer to the Rebate Fund in
accordance with the provisions of the Tax Regulatory Agreement and Section 5.05
hereof, promptly shall be used to redeem the Bonds in accordance with the
provisions of Section 8.01 hereof.
The Trustee shall cause to be kept and maintained adequate
records pertaining to the Project Fund and all disbursements therefrom. If
reasonably requested by the Company, the Trustee shall file copies of the
records pertaining to the Project Fund and disbursements therefrom with the
Company.
The completion of the Project and payment of all Project Costs
shall be evidenced by the filing with the Trustee of a certificate signed by the
Designated Representative as provided in Section 4.4 of the Agreement and
approved by the Bank directing the use of all remaining moneys in the Project
Fund. That certificate may state that it is given without prejudice to any
rights against third parties which then exist or subsequently may come into
being. Pending disbursement pursuant to the Agreement, the moneys and
investments to the credit of the Project Fund shall constitute a part of the
Revenues in which the Trustee has a security interest hereunder as security for
the payment of the Bond Service Charges.
SECTION 4.03. INSURANCE AND CONDEMNATION FUND. There is hereby
created by the Issuer and ordered maintained as a separate deposit account
(except when invested as provided hereinafter) in the custody of the Trustee, a
trust fund designated "County of Saratoga Industrial Development Agency -
Spurlock Adhesives, Inc. Insurance and Condemnation Fund." The net
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proceeds of any insurance settlement or Condemnation award received by the
Trustee in connection with damage to or destruction of or the taking of part or
all of the Project shall be paid into the Insurance and Condemnation Fund.
(B) If, pursuant to Section 7.1(B) or 7.2(B) of the
Agreement, the Company does not repair, rebuild or restore the Project and
redemption of the Bonds is required, or if a taking in Condemnation as described
in Section 7.2(C) of the Agreement occurs, or if the Company (with the
concurrence of the Bank) exercises its options under Sections 7.1(B) and 7.2(B)
of the Agreement to require the redemption of the Bonds, the Trustee shall,
after making any transfer to the Rebate Fund required by the Tax Regulatory
Agreement and by Section 5.05 hereof, transfer all moneys held in the Insurance
and Condemnation Fund to the Bond Fund to be applied to the redemption of the
Bonds then Outstanding pursuant to Section 8.01(C) hereof, except as provided in
Section 4.03 hereof.
(C) If redemption of the Bonds is not mandated and the
Company elects to repair, rebuild or restore the Project, and provided no Event
of Default has occurred and is continuing, moneys held in the Insurance and
Condemnation Fund and attributable to the damage to or destruction of or the
taking of the Project shall, after any transfer to the Rebate Fund required by
the Tax Regulatory Agreement and Section 5.05 hereof is made, be applied to pay
the cost of such repairs, rebuilding or restoration in accordance with the terms
and conditions set forth in Section 4.03(D) hereof.
(D) The Trustee is hereby authorized to and shall make
such disbursements, at the Company's request, either upon the completion of such
repairs, rebuilding or restoration or periodically as such repairs, rebuilding
or restoration progress, upon receipt by the Trustee of a certificate of a
Designated Representative of the Company, approved in writing by the Bank,
stating with respect to each payment to be made: (i) the amount or amounts to be
paid, the Person or Persons (which may include the Company for reimbursement of
such costs) to whom an amount is to be paid and the total sum of all such
amounts; (ii) that the Company has expended, or is expending, concurrently with
the delivery of such certificate, such amount or amounts on account of costs
incurred in connection with the repair, rebuilding or restoration of the
Project; (iii) that all contractors, workmen and suppliers have been or will be
paid through the date of such certificate from the funds to be disbursed; (iv)
that there exists no Event of Default and no condition, event or act which, with
notice or the lapse of time or both, would constitute an Event of Default; (v)
that such Designated Representative of the Company has no knowledge, after
diligent inquiry and after searching the records of the appropriate state and
local filing offices, of any vendor's Lien, mechanic's Lien or security interest
which should be satisfied, discharged or bonded before the payment as
requisitioned is made or which will not be discharged by such payment; (vi) that
no certificate with respect to such expenditures has previously been delivered
to the Trustee; and (vii) that there remain sufficient moneys in the Insurance
and Condemnation Fund attributable to the damage to, destruction of or taking of
the Project to complete the repair, rebuilding or restoration of the Project.
Each certificate of the Company shall be accompanied by bills, invoices or other
evidences reasonably satisfactory to the Trustee or any other items reasonably
required by the Trustee. The Trustee shall be entitled to rely on such
certificate.
(E) Upon completion of the repair, rebuilding or
restoration of the Project, a Designated Representative of the Company shall
deliver to the Issuer, the Trustee and the Bank a certificate stating (1) the
date of such completion, (2) that all labor, services, materials and supplies
used therefor and all costs and expenses in connection therewith have been paid,
(3) that the Project has been restored to substantially its condition
immediately prior to the damage or Condemnation thereof, or to a condition of at
least equivalent value, operating efficiency and function, (4) that the Issuer
or the Company has good and valid title to all Property constituting part of the
restored Project, and that the
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Project is subject to the Agreement and the Liens and security interests of the
Indenture and the Mortgage and (5) that the restored Project is ready for
occupancy, use and operation for its intended purposes. Notwithstanding the
foregoing, such certificate may state (a) that it is given without prejudice to
any rights of the Company against third parties which exist at the date of such
certificate or which may subsequently come into being, (b) that it is given only
for the purposes of this Section 4.03, and (c) that no Person other than the
Issuer or the Trustee may benefit therefrom. Such certificate shall be
accompanied by (i) an unconditional certificate of occupancy, if required, and
any and all permissions, licenses or consents required of Governmental
Authorities for the occupancy, operation and use of the Project for its intended
purposes, (ii) an opinion of counsel to the Company addressed to the Issuer, the
Trustee and the Bank that the Mortgage constitutes a valid mortgage Lien on and
a valid perfected security interest in the Project subject only to Permitted
Encumbrances, and that the Project, as restored, will serve the purposes
contemplated by the Agreement and the Indenture and (iii) such other
documentation as the Trustee may reasonably require.
(F) If the cost of the repairs, rebuilding or restoration
of the Project effected by the Company shall be less than the amount in the
Insurance and Condemnation Fund, then on the completion of such repairs,
rebuilding or restoration and provided that there has been no Event of Default
under any of the Financing Documents notice of which has been received by the
Trustee in accordance with Section 11.05 hereof, the Trustee shall transfer such
difference to the Company for its purposes if (1) a Designated Representative of
the Company so requests, (2) the Bank consents in writing to such and (3) the
Company obtains and delivers to the Trustee an opinion of Bond Counsel in a form
reasonably satisfactory to the Trustee that such transfer will not cause the
Bonds to be "arbitrage bonds" as defined in Section 148 of the Code; otherwise
such difference shall be deposited by the Trustee in the Bond Fund and applied
to redeem the Bonds in accordance with Article VIII hereof.
(G) If the cost of the repair, rebuilding or restoration
of the Project shall be in excess of the moneys held in the Insurance and
Condemnation Fund, the Company shall immediately deposit such additional moneys
in the Insurance and Condemnation Fund as are necessary to pay the cost of
completing such repair, rebuilding or restoration.
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ARTICLE V
BOND FUND; INVESTMENT OF FUNDS; REBATE FUND
SECTION 5.01. BOND FUND.
(a) There is hereby created by the Issuer and
ordered established as a separate deposit account with the Trustee a trust fund
to be designated "County of Saratoga Industrial Development Agency - Spurlock
Adhesives, Inc. Project Bond Fund," the moneys in which, in accordance with
Section 5.01(c), the Trustee shall make available to the Paying Agent or Agents,
to pay (i) the principal or redemption price of Bonds as they mature or become
due, upon surrender thereof and (ii) the interest on Bonds as it becomes
payable. There are hereby established with the Trustee within the Bond Fund the
following separate and segregated accounts, to be designated the "Credit
Facility Account", "Remarketing Proceeds Account", "Redemption Premium Account"
and "Defeasance Account".
(b) The Trustee shall deposit into the Bond Fund
all payments by the Company in respect to Bond Service Charges and all other
moneys received by the Trustee under and pursuant to the provisions of this
Indenture, the Agreement or any of the provisions of the Reimbursement
Agreement, when accompanied by directions from the person depositing such moneys
that such moneys are to be paid into the Bond Fund and shall deposit into the
following specified accounts of the Bond Fund the following:
(i) into the Credit Facility Account,
all moneys drawn by the Trustee under the Credit Facility which account
shall hold no other moneys;
(ii) into the Remarketing Proceeds
Account, all amounts representing the proceeds from a remarketing of
the Bonds which account shall hold no other moneys;
(iii) into the Redemption Premium
Account, all amounts deposited to pay premiums on the Bonds which
account shall hold no other moneys; and
(iv) into the Defeasance Account, all
amounts deposited to pay and discharge the Bonds pursuant to Section
15.01 hereof which account shall hold no other moneys.
Neither the Issuer, the Company, any Guarantor, any Affiliate of the Company or
of any Guarantor nor any Insider of any of them shall have any interest in nor
any right whatsoever to take or control (other than the right of the Company to
direct investments pursuant to Section 5.03 hereof) the Credit Facility Account,
the Credit Facility, the Redemption Premium Account, the Remarketing Proceeds
Account, the Defeasance Account or any subaccounts of any of the foregoing
accounts, or the moneys and Eligible Investments therein, including any proceeds
thereof, all of which shall be held in trust by the Trustee for the sole benefit
of the Bondholders, until all Bond Service Charges are paid and thereafter for
the benefit of the Credit Facility Issuer; provided, however, that any amounts
which were deposited in the Redemption Premium Account of the Bond Fund for the
purpose of causing such amounts to constitute Available Moneys and which remain
after all of the outstanding Bonds shall be deemed paid and discharged under
this Indenture, shall be retained by the Trustee and shall not be paid to or for
the benefit of the Company, any Guarantor, any Affiliate of the Company or of
any Guarantor or any Insider of any of them, which shall have no right to take
or control such amounts. If the Bonds are then rated by a
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Rating Service or Rating Services, no moneys in the Redemption Premium Account
or the Defeasance Account may be used to pay Bond Service Charges on the Bonds
until the Company delivers to such Rating Service or Rating Services an opinion
of nationally recognized counsel experienced in bankruptcy matters to the effect
that payments on the Bonds from such moneys will not constitute voidable
preferences under the U.S. Bankruptcy Code in the event a petition in bankruptcy
is subsequently filed by or against the Company or the Issuer.
The Trustee shall establish separate subaccounts within the
Redemption Premium Account and the Defeasance Account for each deposit
(including any investment income thereon) made into the Bond Fund so that the
Trustee may at all times ascertain the date and source of deposit of the funds
in such accounts and the Trustee shall assure moneys having different dates of
deposit and held in separate subaccounts shall not be commingled.
(c) Except as provided in Section 10.11, moneys
in the Bond Fund shall be used solely for the payment of the principal or
redemption price of the Bonds and interest on the Bonds from the following
source or sources but only in the following order of priority:
(i) Available Moneys held in the Credit
Facility Account, provided that, in no event, shall moneys held in the
Credit Facility Account be used to pay any amount which may be due on
Bonds held pursuant to Section 3.05;
(ii) Available Moneys held on deposit in
the Redemption Premium Account;
(iii) any other Available Moneys in the
Bond Fund; and
(iv) any other amounts available in the
Bond Fund.
(d) To the extent moneys described under Section
5.01(c)(i) are not available in the Bond Fund to pay principal or redemption
price of the Bonds and interest on the Bonds on any maturity date, Interest
Payment Date, redemption date or Purchase Date (other than Bonds held pursuant
to Section 3.05, except for interest payments on Bonds that were not held
pursuant to Section 3.05 on the Record Date for such payment), the Trustee
shall, on or before 11:00 a.m., Albany, New York time, on the Business Day prior
to such due date, or 11:00 a.m. on such Purchase Date, draw upon or demand
payment under the Credit Facility, if any, then held by the Trustee in a manner
so as to provide immediately available funds by the close of business on such
date in an amount necessary to make the required payments of the principal of
and premium, if applicable and if payable from a draw on the Credit Facility,
and interest on the Bonds on such maturity date, Interest Payment Date,
redemption date or to purchase the Bonds tendered or deemed tendered on such
Purchase Date. Upon receipt of such moneys from the Credit Facility Issuer, the
Trustee shall (i)(a) deposit the amount representing a drawing on the Credit
Facility for the payment of principal of and interest on the Bonds in the Credit
Facility Account of the Bond Fund, and apply the same to the payment of such
principal and interest due on the Bonds or, (b) use the proceeds of the draw to
the pay the purchase price of the Bonds in accordance with Section 3.06 hereof,
and (ii) pay, on behalf of the Company, but only from and to the extent of any
amounts described in Section 5.01(c)(iii) and Section 5.01(c)(iv) then on
deposit in the Bond Fund, any and all amounts then due and payable under the
Reimbursement Agreement. Any payment made by the Trustee on behalf of the
Company described in clause (ii) of the immediately preceding sentence shall be
made by wire transfer of immediately available funds to the account of the
Credit Facility Issuer on the date the Trustee receives moneys pursuant to a
drawing upon the Credit Facility.
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SECTION 5.02. REVENUES TO BE HELD FOR ALL BONDHOLDERS; CERTAIN
EXCEPTIONS. Until applied as provided in this Indenture to the payment of Bonds
or transferred to the Company pursuant to Section 16.02 or Section 5.06,
Revenues shall be held by the Trustee in trust in the Bond Fund for the benefit
of the owners of all Outstanding Bonds, except that (i) any portion of the
Revenues representing principal or redemption price of any Bonds, and interest
on any Bonds previously matured or called for redemption in accordance with
Article VIII of this Indenture, shall be held for the benefit of the owners of
such Bonds only. Anything in this Indenture to the contrary notwithstanding,
neither the Company, any Guarantor, any Affiliate of the Company or of any
Guarantor, nor any Insider of any of the foregoing shall have any right to take,
control or receive moneys from the Credit Facility Account, the Credit Facility,
the Redemption Premium Account, the Remarketing Proceeds Account, the Defeasance
Account, or in any subaccounts of any of the foregoing accounts or the moneys
and Eligible Investments therein, which shall be held in trust by the Trustee
first, for the sole benefit of the holders of the Bonds and then, to the extent
that the holders of the Bonds are paid through draws under a Credit Facility,
for the Credit Facility Issuer to the extent of such draws.
SECTION 5.03. INVESTMENT OF PROJECT FUND, INSURANCE AND
CONDEMNATION FUND, BOND FUND AND REBATE FUND. Moneys in the Project Fund,
Insurance and Condemnation Fund, Bond Fund (except moneys in the Credit Facility
Account, Defeasance Account or Remarketing Proceeds Account) and the Rebate Fund
shall be invested and reinvested by the Trustee in Eligible Investments, at the
oral (confirmed in writing) or written direction of the Designated
Representative. At no time shall any funds constituting gross proceeds of the
Bonds be used in any manner to cause or result in a prohibited payment under
applicable regulations pertaining to, or in any other fashion as would
constitute failure of compliance with, Section 148 of the Code. Investments of
moneys in the Bond Fund shall mature or be redeemable at the option of the
Trustee at the times and in the amounts necessary to provide moneys to pay Bond
Service Charges as they become due at stated maturity or by redemption. Each
investment of moneys in the Rebate Fund shall mature or be redeemable at such
time as may be necessary to make payments from the Rebate Fund.
Subject to any directions from the Designated Representative
with respect thereto, from time to time, the Trustee may sell those investments
and reinvest the proceeds therefrom in Eligible Investments maturing or
redeemable as aforesaid. Any of those investments may be purchased from or sold
to the Trustee, the Bond Registrar, an Authenticating Agent or a Paying Agent,
or any bank, trust company or savings and loan association affiliated with any
of the foregoing. The Trustee shall sell or redeem investments credited to the
Bond Fund to produce sufficient moneys applicable hereunder to and at the times
required for the purposes of paying Bond Service Charges when due as aforesaid,
and shall do so without necessity for any order on behalf of the Issuer and
without restriction by reason of any order. An investment made from moneys
credited to the Project Fund, Insurance and Condemnation Fund, Bond Fund or the
Rebate Fund shall constitute part of that respective Fund. The Project Fund, the
Insurance and Condemnation Fund, the Bond Fund and the Rebate Fund shall be
credited with all proceeds of sale and income from investment of moneys credited
thereto. For purposes of this Indenture, those investments shall be valued at
face amount or market value, whichever is less.
Moneys deposited in the Credit Facility Account in the Bond
Fund shall be invested by the Trustee only in obligations described under clause
(i) of the definition of Eligible Investments. Proceeds received from the
remarketing of the Bonds and deposited in the Remarketing Proceeds Account shall
be invested by the Trustee only in obligations described under clause (i) or
(ii) of the definition of Eligible Investments (provided that if the Bonds are
then rated by a Rating Service or Rating Services, obligations described under
clause (ii) of such definition must be prerefunded or
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escrowed to maturity with obligations described in clause (i) of such definition
and be rated "AAA" by Moody's Investors Service and/or "AAA" by Standard &
Poor's Ratings Group, as applicable to the Rating Service or Rating Services
then rating the Bonds). Such obligations shall be noncallable, and shall mature
in 30 days or less and at the times and in the amounts necessary to make
payments of Bond Service Charges on, or the purchase price of, Bonds when due or
the aforesaid moneys shall be held uninvested in their respective accounts
pending application pursuant to the terms of Article III or Section 5.04 hereof,
as applicable, provided that the holding of such moneys uninvested will not
cause the Bonds to be deemed "arbitrage bonds" within the meaning of Section 148
of the Code. Moneys deposited in the Defeasance Account in the Bond Fund shall
be invested by the Trustee in accordance with Section 9.01 hereof.
SECTION 5.04. MONEYS TO BE HELD IN TRUST. Except where moneys
have been deposited with or paid to the Trustee pursuant to an instrument
restricting their application to particular Bonds, all moneys required or
permitted to be deposited with or paid to the Trustee or any Paying Agent under
any provision of this Indenture, the Agreement or the Credit Facility, and any
investments thereof, shall be held by the Trustee or that Paying Agent in trust
pursuant to the terms of this Indenture. Except for (i) moneys deposited with or
paid to the Trustee or any Paying Agent for the redemption of Bonds, notice of
the redemption of which shall have been duly given, (ii) moneys held by the
Trustee pursuant to Section 3.03(b) hereof, and (iii) moneys in the Rebate Fund,
all moneys described in the preceding sentence held by the Trustee or any Paying
Agent shall be subject to the provisions hereof while so held.
SECTION 5.05. CREATION OF REBATE FUND. There is created by the
Issuer and ordered maintained as a separate deposit account in the custody of
the Trustee a fund to be designated "County of Saratoga Industrial Development
Agency - Spurlock Adhesives, Inc. Project Rebate Fund." Any provision hereof to
the contrary notwithstanding, amounts credited to the Rebate Fund shall be free
and clear of any lien hereunder.
The Trustee shall cause to be calculated, within 30 days after
the end of each 5th Bond Year for each series of Bonds and within 30 days after
Conversion of the interest on the Bonds to the Taxable Weekly Rate and within 30
days after payment in full of all outstanding Bonds of each series, the Rebate
Amount as of the end of that Bond Year or the date of such payment in full;
provided, that the Trustee shall, at the expense of the Company, engage and
furnish information to an independent certified public accounting firm or firm
of attorneys or a recognized rebate calculation firm designated and approved by
the Designated Representative and approved by the Trustee, to make such
calculations on behalf of the Trustee and the Company. The Trustee shall notify
the Company in writing of that amount and of the amount then on deposit in the
applicable accounts in the Rebate Fund. If the amount then on deposit in the
account in the Rebate Fund is in excess of the Rebate Amount (less the Rebate
Amounts, if any, previously paid to the United States pursuant to this Section),
the Trustee shall forthwith pay that excess amount to the Company. If the amount
then on deposit in the applicable account in the Rebate Fund is less than the
Rebate Amount (less the Rebate Amounts, if any, previously paid to the United
States pursuant to this Section), the Company shall, within 5 days after receipt
of the aforesaid notice from the Trustee, pay to the Trustee for deposit in the
Rebate Fund an amount sufficient to cause the applicable account in the Rebate
Fund to contain an amount equal to the Rebate Amount (less the Rebate Amounts,
if any, previously paid to the United States pursuant to this Section). Within
45 days after the end of the 5th Bond Year and every 5th Bond Year thereafter,
the Trustee, acting on behalf of the Issuer, shall pay to the United States in
accordance with Section 148(f) of the Code from the moneys then on deposit in
the applicable account in the Rebate Fund an amount equal to 90% (or such
greater percentage not in excess of 100% as the Company may direct the Trustee
to pay) of the Rebate Amount as of the end of such 5th Bond Year (less the
Rebate Amounts, if any, previously paid to the United States pursuant to
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<PAGE>
this Section). Within 60 days after the Conversion of the interest rate on the
Bonds to the Taxable Weekly Rate or the payment in full of all outstanding Bonds
of each series, the Trustee shall pay to the United States in accordance with
Section 148(f) of the Code from the moneys then on deposit in the applicable
account in the Rebate Fund an amount equal to 100% of the Rebate Amount as of
the date of such payment (less the Rebate Amounts, if any, previously paid to
the United States pursuant to this Section). Any moneys remaining in the
applicable account in the Rebate Fund following such payment shall be paid to
the Company. All computations of Rebate Amounts pursuant to this Section and
Section 3.8 of the Agreement shall treat the amount or amounts, if any,
previously paid to the United States pursuant to this Section and Section 3.8 of
the Agreement as amounts on deposit in the Rebate Fund.
The Trustee shall obtain and keep such records of the
computations made pursuant to this Section as are required under Section 148(f)
of the Code.
If all the gross proceeds of the Bonds of any series, within
the meaning of Section 148(f) of the Code (other than gross proceeds in a bona
fide debt service fund within the meaning of Section 148 of the Code), are
expended for the governmental purpose for which that series of Bonds was issued
so as to meet the exceptions to the rebate requirements set forth in Section
148(f)(4)(B) of the Code (6-month exception) or in Treasury Regulations
ss.1.148-7(d) (18-month exception) as further described in the Tax Compliance
Agreement, the provisions of this Section 5.06 and Section 3.8 of the Agreement
shall be deemed as met.
The procedures provided in this Section may be modified to the
extent necessary to comply with relevant regulations, temporary regulations and
proposed regulations under Section 148 of the Code, as determined in an opinion
of nationally recognized bond counsel delivered to the Trustee; provided that
the Trustee shall not be relieved of its obligation to calculate or cause to be
calculated the Rebate Amount under Section 148 of the Code and to ensure that
sufficient moneys to pay that amount are on deposit in the Rebate Fund.
SECTION 5.06. REPAYMENT TO THE COMPANY OR THE BANK FROM
AMOUNTS REMAINING IN THE BOND FUND. Any amounts remaining in the Bond Fund (i)
after all of the outstanding Bonds shall be deemed paid and discharged under the
provisions of this Indenture, and (ii) after payment of all fees, charges and
expenses of the Trustee, the Registrar and any Paying Agents or Authenticating
Agents and of all other amounts required to be paid under this Indenture and the
Agreement, shall be paid to the Bank and to the extent that those amounts are in
excess of those necessary to effect the payment and discharge of the Company's
obligations under the Reimbursement Agreement and any sum owing to the Bank
under the other Financing Documents and otherwise shall be paid to the Company;
provided, however, that notwithstanding any provision to the contrary in this
Indenture or elsewhere, any moneys in the Credit Facility Account, the
Defeasance Account, the Remarketing Proceeds Account or the Redemption Premium
Account may not be paid to the Company; and provided, further, that any amounts
which were deposited in the Redemption Premium Account of the Bond Fund for the
purpose of causing such amounts to constitute Available Moneys and which remain
after all of the Outstanding Bonds shall be deemed paid and discharged under
this Indenture, shall be retained by the Trustee and shall not be paid to or for
the benefit of the Company, who shall have no right to take or control such
amounts.
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ARTICLE VI
CREDIT FACILITIES
SECTION 6.01. INITIAL LETTER OF CREDIT. The Letter of Credit
shall provide for direct payments to or upon the order of the Trustee as
hereinafter set forth and shall be the irrevocable obligation of the Bank to pay
to or upon the order of the Trustee, upon request and in accordance with the
terms thereof, up to (a) an amount equal to the principal amount of the Bonds
(i) to pay the principal of the Bonds when due whether at stated maturity, upon
redemption or acceleration or (ii) to enable the Tender Agent to pay the
purchase price or portion of the purchase price equal to the principal amount of
Bonds purchased pursuant to Section 3.01 to the extent remarketing proceeds are
not available for such purpose, plus (b) an amount equal to 110 days' interest
accrued on the Bonds at a rate of ten percent (10%) per annum (i) to pay
interest on the Bonds when due or (ii) to enable the Tender Agent to pay the
portion of the purchase price of the Bonds purchased pursuant to Section 3.01
equal to the interest accrued, if any, on such Bonds to the extent remarketing
proceeds are not available for such purpose.
The Letter of Credit shall terminate automatically on the
earliest of (i) the payment by the Bank to the Trustee of the final drawing
available to be made under the Letter of Credit; (ii) receipt by the Bank of the
Letter of Credit and a certificate signed by an officer of the Trustee and the
Designated Representative of the Company stating that no Bonds remain
Outstanding; (iii) receipt by the Bank of the Letter of Credit and a certificate
signed by an officer of the Trustee and the Designated Representative stating
that an Alternate Credit Facility in substitution for the Letter of Credit has
been accepted by the Trustee and is in effect; or (iv) the stated expiration
date of the Letter of Credit.
The Bank's obligation under the Letter of Credit will be
reduced to the extent of any drawing thereunder. The Letter of Credit shall
provide that, with respect to a drawing by the Trustee to pay interest on the
Bonds on any Interest Payment Date or the portion of the purchase price of Bonds
corresponding to interest on the Bonds, if the Trustee shall not have received
from the Bank on or before the close of business on the 5th day after the date
of such drawing a notice by telephonic facsimile (confirmed in writing by a
certificate of the Bank) that the Letter of Credit will not be reinstated as of
the date of such notice to an amount equal to 110 days' interest accrued on the
Bonds at the rate of ten percent (10%) per annum, the Trustee's right to draw
under the Letter of Credit with respect to the payment of interest on an
Interest Payment Date shall be reinstated on and effective as of the 5th day
after such drawing to an amount equal to 110 days' interest accrued on the Bonds
at a rate of ten percent (10%) per annum. With respect to any drawing by the
Trustee to pay a portion of the purchase price corresponding to principal of
Bonds purchased pursuant to Section 3.01, the amount available under the Letter
of Credit for payment of principal or purchase price of the Bonds due shall be
reinstated in an amount equal to any such drawing but only to the extent that
the Bank is reimbursed in accordance with the terms of the Reimbursement
Agreement for the amounts so drawn. In no event will the Trustee be entitled to
make drawings under the Letter of Credit for the payment of any amount due on
any Bond held pursuant to Section 3.05, except for interest payments on Bonds
that were not held pursuant to Section 3.05 on the Record Date for such payment.
In calculating the amount to be drawn on the Letter of Credit for the purchase
of the Bonds, the Trustee shall take into account only the remarketing proceeds,
if any, deposited into the Remarketing Proceeds Account with respect to the
remarketing of such Bonds on or before 10:00 a.m., Albany, New York time on the
Purchase Date, including proceeds from the purchase of the Bonds by the
Remarketing Agent or the Tender Agent for its own account but not including the
remarketing of the Bonds to the Issuer or the Company.
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The Letter of Credit shall provide that if, in accordance with
the terms of the Indenture, the Bonds shall become immediately due and payable
pursuant to any provision of the Indenture, the Trustee shall be entitled to
draw on the Letter of Credit to the extent of the aggregate principal amount of
the Bonds then Outstanding plus, to the extent available under the Letter of
Credit, an amount sufficient to pay interest on all Outstanding Bonds, less
amounts for which the Letter of Credit shall not have been reinstated.
SECTION 6.02. EXPIRATION. If at any time there shall cease to
be any Bonds Outstanding hereunder, the Trustee shall promptly surrender the
current Credit Facility to the Credit Facility Issuer for cancellation. The
Trustee shall comply with the procedures set forth in the Credit Facility
relating to the termination thereof.
SECTION 6.03. ALTERNATE CREDIT FACILITIES. The Company may, at
their option, provide for the delivery to the Trustee of an Alternate Credit
Facility which, if the Interest Rate Mode is the Long-Term Rate, shall be a
Qualified Alternate Credit Facility. Such Alternate Credit Facility shall have a
term of not less than 1 year and set forth a maximum interest rate on the Bonds
with respect to which drawings may be made. The Company shall give the Trustee
an irrevocable written notice of their intention to replace the then current
Credit Facility with an Alternate Credit Facility prior to the stated expiration
date of the then current Credit Facility at least 35 days before the Interest
Payment Date preceding (by at least 15 calendar days) the date of delivery of
such Alternate Credit Facility stated in such notice. On or before the date of
delivery of an Alternate Credit Facility to the Trustee, the Company shall
provide the Trustee with (a) an opinion of Counsel stating that the delivery of
such Alternate Credit Facility to the Trustee is authorized under this Indenture
and complies with the terms hereof, (b) an opinion of counsel to the issuer or
provider of such Alternate Credit Facility stating that such Credit Facility is
a legal, valid, binding and enforceable obligation of such issuer or obligor in
accordance with its terms, and (c) if the stated amount of the Alternate Credit
Facility is increased over that of the Credit Facility being replaced, an
opinion of Counsel stating that payments of principal and interest on the Bonds
from funds drawn on such Credit Facility will not constitute avoidable
preferences with respect to the subsequent bankruptcy of the Issuer or the
Company under the Bankruptcy Code.
The Trustee shall then accept such Alternate Credit Facility
and surrender the previously held Credit Facility, if any, to the previous
Credit Facility Issuer for cancellation promptly on or after the 5th Business
Day after the Alternate Credit Facility becomes effective, but not earlier than
the 5th Business Day following the last Interest Payment Date covered by the
Credit Facility to be cancelled. Each Alternate Credit Facility shall have a
term of not less than 1 year.
Unless all of the conditions of this Section 6.03 shall have
been satisfied, and the expiring Credit Facility (whether by expiration
according to its terms or upon delivery of an Alternate Credit Facility) shall
have been replaced with an Alternate Credit Facility, which if the Interest Rate
Mode is the Long-Term Rate, shall be a Qualifying Alternate Credit Facility, and
if the Interest Rate Mode is the Weekly Rate, the Taxable Weekly Rate or the
Semi-Annual Rate, shall be issued by the then current Credit Facility Issuer, at
least 35 days before the Interest Payment Date immediately preceding (by at
least 15 calendar days) the expiration date of the Credit Facility being
replaced, the Trustee shall call the Bonds for purchase pursuant to Section
3.01(b) and Section 6.04. In any event, the Trustee shall not give notice of
purchase of the Bonds on account of a failure to provide a Qualifying Alternate
Credit Facility until the time specified in the preceding sentence for delivery
of such Qualifying Alternate Credit Facility.
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SECTION 6.04. NOTICES OF EXPIRATION AND/OR REPLACEMENT OF
CREDIT FACILITY.
(a) The Trustee shall notify the Bondholders of
the expiration of the term of the Credit Facility (whether by expiration
according to its terms or upon delivery of an Alternate Credit Facility) which
will subject the Bonds to mandatory purchase in accordance with Section 3.01(b)
by first class mail delivered to each Bondholder's registered address at least
30 days but not more than 60 days before any Purchase Date resulting from such
expiration. The notice will state (i) that the Credit Facility is expiring
according to its terms or will expire upon delivery of an Alternate Credit
Facility, and (ii) the Purchase Date for the Bonds.
(b) The Trustee shall notify Bondholders of the
replacement of a Credit Facility with any Alternate Credit Facility by first
class mail delivered to each Bondholder's registered address at least 30 days
but not more than 60 days prior to the effective date of such replacement.
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ARTICLE VII
INVESTMENT OR DEPOSIT OF MONEYS
SECTION 7.01. DEPOSITS. All moneys received by the Trustee
under this Indenture shall be deposited with the Trustee, until or unless
invested or deposited as provided in Section 5.03. All deposits with the Trustee
shall be secured as required by applicable law for such trust deposits. The
Trustee may deposit such moneys with any other depository which is authorized to
receive them and is subject to supervision by public banking authorities.
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ARTICLE VIII
REDEMPTION OF BONDS
SECTION 8.01. REDEMPTION DATES AND PRICES. The Bonds shall be
subject to redemption prior to maturity in the amounts, at the times and in the
manner provided in this Article VIII. Payments of the redemption price of any
Bond shall be made in immediately available funds on the redemption date only
upon the surrender to the Paying Agent of any Bond so redeemed.
(a) Whenever the Interest Rate Mode for the
Bonds is the Weekly Rate, the Taxable Weekly Rate or the Semi-Annual Rate, the
Bonds shall be subject to redemption at the option of the Issuer, upon the
direction of the Company, in whole on any date or in part on any Interest
Payment Date, at a redemption price of 100% of the principal amount thereof.
(b) Whenever the Interest Rate Mode for the
Bonds is the Long-Term Rate, the Bonds shall be subject to redemption prior to
the end of the then current Long-Term Rate Period at the option of the Issuer,
upon the direction of the Company, at any time during the redemption periods and
at the redemption prices set forth below, plus interest accrued to the
redemption date (which redemption price and accrued interest shall be paid only
from Available Moneys):
<TABLE>
<CAPTION>
Length of Current Long- Commencement of Redemption Price as
Term Rate Period (Years) Redemption Period Percentage of Principal
------------------------ ----------------- -----------------------
<S> <C> <C>
More than 9 years 5th anniversary of commencement 102%, declining by 1% on each
of Long-Term Rate Period succeeding anniversary of the
first day of the redemption
period until reaching 100% and
thereafter 100%
More than 7, but not more 4th anniversary of commencement of 101%,declining by 1% on each
than 9 years of Long-Term Rate Period succeeding anniversary of the
first day of the redemption
period until reaching 100% and
thereafter 100%
More than 5, but not more 3rd anniversary of commencement 101%,declining by 1% on each
than 7 years of Long-Term Rate Period succeeding anniversary of the
first day of the redemption
period until reaching 100% and
thereafter 100%
</TABLE>
If, at the time of the Company's notice of Conversion of the Interest Rate Mode
for the Bonds to the Long-Term Rate pursuant to Section 2.02(e), the Company
provides a certification of the Remarketing Agent to the Trustee and the Issuer
that the foregoing schedule is not consistent with prevailing market conditions,
the foregoing redemption periods and redemption prices may be revised, effective
as of the Conversion Date, as determined by the Remarketing Agent in its
judgment, taking into account the then prevailing market conditions, as
stipulated in such certification, which shall be appended by the Trustee to its
counterpart of this Indenture.
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(c) Extraordinary Redemption Without Premium.
The Bonds shall be subject to redemption prior to maturity (1) as a whole,
without premium, as provided in Section 4.03 hereof, in the event of (a) a
taking in Condemnation of, or failure of title to, all or substantially all of
the Project Facility, (b) damage to or destruction of part or all of the Project
Facility and (x) election by the Company to redeem the Bonds in accordance with
Section 7.1 of the Agreement or (y) election by the Bank to cause a redemption
of the Bonds in accordance with Section 7.1 of the Agreement, or (c) a taking in
Condemnation of part of the Project Facility and (x) election by the Company to
redeem the Bonds in accordance with Section 7.2 of the Agreement or (y) election
by the Bank to cause a redemption of the Bonds in accordance with Section 7.2 of
the Agreement, or (2) in part, without premium, (a) as provided in Section 4.03
hereof, in the event that (i) excess moneys remain in the Insurance and
Condemnation Fund following damage or condemnation of a portion of the Project
Facility and completion of the repair, rebuilding or restoration of the Project
Facility by the Company, and (ii) such moneys are not paid to the Company
pursuant to Section 4.03 hereof, or (b) as provided in Section 4.02 hereof, in
the event excess moneys remain in the Project Fund after the Completion Date. In
any such event, the Bonds shall be redeemed, as a whole or in part, as the case
may be, in the manner provided in this Article III, at such time as the Trustee
determines, at a redemption price equal to the principal amount thereof, plus
accrued interest to the redemption date, without premium.
(d) Mandatory Redemption Upon a Determination of
Taxability. Prior to Conversion to the Taxable Weekly Rate and upon the
occurrence of a Determination of Taxability, the Bonds are subject to mandatory
redemption in whole from the proceeds of the Company paying advance installment
purchase payments at a redemption price equal to one hundred percent (100%) of
the outstanding principal amount thereof, plus interest accrued to the
redemption date, at the earliest practicable date selected by the Trustee, after
consultation with the Company, but in no event later than 90 days following the
Trustee's being notified of or otherwise becoming aware of a Determination of
Taxability.
(e) Redemption Premium. Any premium payable on
redemption may be paid only from moneys satisfying the requirements of Section
5.01(c)(iii). The Company may call any Bonds for redemption pursuant to this
subsection (e) which would require a payment of a premium only if the Trustee
can draw under the Credit Facility and has in the Redemption Premium Account
moneys that satisfy the requirements of Section 5.01(c)(iii), which together
constitute an aggregate amount sufficient to pay such premium and the principal
of and interest on the Bonds so called to the date of redemption.
SECTION 8.02. ISSUER DIRECTION OF OPTIONAL REDEMPTION. The
Trustee shall call the Bonds for optional redemption when and only when it shall
have been notified by the Issuer to do so, at the direction of the Company, or
by written notice from the Company to the Trustee and the Bank on behalf of the
Issuer. So long as a Credit Facility is then held by the Trustee, the Trustee
shall only call Bonds for optional redemption if it has Available Moneys in the
Redemption Premium Account of the Bond Fund or will receive Available Moneys
from the proceeds of refunding bonds or from drawings under the Credit Facility,
in the aggregate, sufficient to pay the redemption price of the Bonds to be
called for redemption, plus accrued interest thereon. Notice of any optional
redemption shall specify the principal amount of Bonds to be redeemed and the
redemption date. The Issuer upon written request of the Company will give notice
to the Trustee at least 5 days prior to the day on which the Trustee is required
to give notice of such optional redemption to the Bondholders.
SECTION 8.03. SELECTION OF BONDS TO BE CALLED FOR REDEMPTION.
Except as otherwise provided herein or in the Bonds, if less than all the Bonds
are to be redeemed, the
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particular Bonds to be called for redemption shall be selected by any method
determined by the Trustee to be fair and reasonable; provided, however, that in
connection with any redemption of Bonds the Trustee shall first select for
redemption any Bonds held pursuant to Section 3.05 prior to any selection by
lot. The Trustee shall treat any Bond of a denomination greater than $5,000 as
representing that number of separate Bonds each of the denomination of $5,000 as
can be obtained by dividing the actual principal amount of such Bond by $5,000;
provided that at any time, no $5,000 portion of a Bond shall be redeemed if it
results in the unredeemed portion of the Bond being less than $100,000.
SECTION 8.04. NOTICE OF REDEMPTION.
(a) When required to redeem Bonds under any
provision of this Article VIII, or when directed to do so by the Issuer upon
written request or the Company on behalf of the Issuer, the Trustee shall cause
notice of the redemption to be given by first class mail, postage prepaid, to
all registered owners of Bonds to be redeemed at their registered addresses not
more than 60 and not fewer than 30 days prior to the redemption date. Failure to
mail any such notice or defect in the mailing thereof in respect of any Bond
shall not affect the validity of the redemption of any other Bond. Notices of
such redemptions shall also be mailed to the Remarketing Agent, the Tender Agent
and the Credit Facility Issuer, if any, (and the Rating Service, if the Bonds
are then rated by a Rating Service). Any such notice shall be given in the name
of the Company, shall identify the Bonds to be redeemed (and, in the case of
partial redemption of any Bonds, the respective principal amounts thereof to be
redeemed), shall specify the redemption date and the redemption price and when
any interest accrued to the redemption date will be payable, and shall state
that on the redemption date the redemption price of the Bonds called for
redemption will be payable at the principal corporate trust office of the
Trustee and/or of one or more Paying Agents and from that date interest will
cease to accrue. The Trustee shall at all reasonable times make available to any
interested party complete information as to Bonds which have been redeemed or
called for redemption.
(b) If at the time of mailing of notice of any
optional redemption in connection with a refunding of the Bonds the Company
shall not have deposited with the Trustee moneys sufficient to redeem all the
Bonds called for redemption, such notice may state that it is conditional in
that it is subject to the deposit of the proceeds of refunding notes with the
Trustee not later than the redemption date, and such notice and such optional
redemption shall be of no effect unless such moneys are so deposited.
(c) Notice of any redemption hereunder with
respect to Bonds held under a book entry system shall be given by the Registrar
or the Trustee only to the Depository, or its nominee, as the holder of such
Bonds. Selection of book entry interests in the Bonds called for redemption is
the responsibility of the Depository and any failure of any Direct Participant,
Indirect Participant or Beneficial Owner to receive such notice and its contents
or effect will not affect the validity of such notice or any proceedings for the
redemption of such Bonds.
SECTION 8.05. BONDS REDEEMED IN PART. Any Bond which is to be
redeemed only in part shall be surrendered at a place stated for the surrender
of Bonds called for redemption in the notice provided for in Section 8.04 (with
due endorsement by, or a written instrument of transfer in form satisfactory to
the Trustee duly executed by, the owner thereof or his attorney duly authorized
in writing) and the Issuer shall execute and the Trustee shall authenticate and
deliver to the owner of such Bond without service charge, a new Bond or Bonds,
of any authorized denomination as requested by such owner in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Bond so surrendered, provided further that, if less than all of an
outstanding Bond of one
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maturity in a book entry system is to be called for redemption, the Trustee
shall give notice to the Depository or the nominee of the Depository that is the
holder of such Bond, and the selection of the beneficial interests in that Bond
to be redeemed shall be at the sole discretion of the Depository and its
participants.
SECTION 8.06. NO MANDATORY SINKING FUND REQUIREMENTS. The
Bonds are not subject to mandatory redemption prior to stated maturity pursuant
to any mandatory sinking fund requirements.
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ARTICLE IX
COVENANTS AND AGREEMENTS OF THE ISSUER
SECTION 9.01. COVENANTS AND AGREEMENTS OF THE ISSUER. In
addition to any other covenants and agreements of the Issuer contained in this
Indenture or the Act, the Issuer further covenants and agrees with the
Bondholders and the Trustee as follows:
(a) Payment of Bond Service Charges. The Issuer,
subject to the provisions of Section 2.01 and 16.01 hereof, will pay all Bond
Service Charges, or cause them to be paid, solely from the sources provided
herein, on the dates, at the places and in the manner provided in this
Indenture.
(b) Revenues and Assignment of Revenues. The
Issuer will not assign the Revenues or create or authorize to be created any
debt, lien or charge thereon, other than the assignment thereof under this
Indenture.
(c) Recordings and Filings. The Lien on the
Project Facility created by the Mortgage shall be perfected by the recording by
the Issuer, at the expense of the Company, of the Mortgage in the office of the
County Clerk of Saratoga County, New York. The security interests of the Trustee
created by the Indenture and the other Financing Documents and the security
interests of the Issuer assigned to the Trustee shall be perfected by the filing
by the Company, the Issuer and the Trustee in the office of the County Clerk of
Saratoga County, New York and the office of the Secretary of State of the State
of financing and continuation statements (which continuation statements the
Trustee is hereby expressly authorized to sign) required to be filed pursuant to
the Uniform Commercial Code of the State in order to perfect the security
interests created herein and therein. Such financing statements and continuation
statements shall be filed without the necessity of the signature of the Issuer
or the Company as debtor from time to time by the Trustee, at the expense of the
Company, as are required by law to preserve the Lien of the Indenture. The
Trustee shall be entitled to receive, no less frequently than each five (5) year
anniversary of the date of the issuance of the Bonds, an opinion of Counsel,
addressed to the Trustee, stating that all such necessary recordings or filings
have been completed.
(d) Inspection of Project Books. All books,
instruments and documents in the Issuer's possession relating to the Project and
the Revenues shall be open to inspection at all times during the Issuer's
regular business hours by any accountants or other agents of the Trustee or the
Credit Facility Issuer which the Trustee or the Credit Facility Issuer may
designate from time to time.
(e) Register. At reasonable times and under
reasonable regulations established by the Registrar, the Register may be
inspected and copied by the Company, the Trustee, by Bondholders of 25% or more
in principal amount of the Bonds then outstanding, or a designated
representative thereof.
(f) Rights and Enforcement of the Agreement. The
Trustee may enforce, in its name or in the name of the Issuer, all rights of the
Issuer for and on behalf of the Bondholders, except for Unassigned Issuer's
Rights, and may enforce all covenants, agreements and obligations of the Company
under and pursuant to the Agreement, regardless of whether the Issuer is in
default in the pursuit or enforcement of those rights, covenants, agreements or
obligations. Subject to the provisions of Sections 9.03 and 16.01 hereof, the
Issuer, however, will do all things and take all actions on its part necessary
to comply with covenants, agreements, obligations, duties and responsibilities
on its part to be observed or performed under the Agreement, and will take all
actions within its authority to keep the Agreement in effect in accordance with
the terms thereof.
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(g) Issuer Not to Adversely Affect Exclusion
From Gross Income of Interest on the Bonds. The Issuer covenants that it (i)
will not take any action (or omit to take any action which the Trustee or the
Company, together with Bond Counsel, advise the Issuer in writing to take) which
action (or omission) would in any way adversely affect the exclusion from gross
income for federal income tax purposes of interest on the Bonds.
SECTION 9.02. OBSERVANCE AND PERFORMANCE OF COVENANTS,
AGREEMENTS, AUTHORITY AND ACTIONS. The Issuer will observe and perform
faithfully at all times all covenants, agreements, authority, actions,
undertakings, stipulations and provisions to be observed or performed on its
part under the Agreement, this Indenture, the Act and the Bonds which are
executed, authenticated and delivered under this Indenture.
The Issuer represents and warrants that
(a) It is duly authorized by the
Constitution and laws of the State, including particularly and
without limitation the Act, to issue the Bonds, to execute and
deliver this Indenture and the Agreement and to provide the
security for payment of the Bond Service Charges in the manner
and to the extent set forth in this Indenture.
(b) All actions required on its part to
be performed for the issuance, sale and delivery of the Bonds
and for the execution and delivery of this Indenture and the
Agreement have been or will be taken duly and effectively.
(c) The Bonds will be valid and
enforceable special obligations of the Issuer according to
their terms.
SECTION 9.03. LIMITATION ON OBLIGATIONS OF THE ISSUER.
Notwithstanding any provision of the Indenture to the contrary, the Issuer shall
not be obligated to take any action or execute any instrument pursuant to any
provision hereof, unless (A) it shall have been requested to do so in writing by
the Trustee, the holders of not less than twenty-five percent (25%) in aggregate
principal amount of the Bonds then Outstanding or the Company, and (B) if
compliance with such request is reasonably expected to result in the incurrence
by the Issuer (or any member, officer, agent [other than the Company], servant
or employee of the Issuer) of any liability, fees, expenses or other costs, the
Issuer shall have received from the Trustee, such holders or the Company, as the
case may be, security or indemnity reasonably satisfactory to the Issuer for
protection against such liability, however remote, and for the reimbursement of
all such fees, expenses and other costs; provided, however, that no limitation
on the obligations of the Issuer contained in this Section 9.03 by virtue of any
lack of assurance provided in (B) hereof shall be deemed to prevent the
occurrence and full force and effect of any Event of Default hereunder.
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ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
SECTION 10.01. EVENTS OF DEFAULT DEFINED. Each of the
following shall be an "Event of Default" hereunder:
(a) Payment of the principal or redemption price
of any Bond is not made when it becomes due and payable at maturity or upon call
for redemption; or
(b) Payment of any interest on any Bond is not
made when it becomes due and payable; or
(c) If no Credit Facility is then held by the
Trustee, failure by the Issuer to observe and perform any covenant, condition or
agreement on its part to be observed or performed hereunder, other than any such
failure which results in an Event of Default under Section 10.01(a), (b) or (f)
of this Indenture, for a period of 30 days after written notice of such failure
requesting such failure to be remedied, given to the Issuer and the Company by
the Trustee, unless the Trustee shall agree in writing to an extension of such
time prior to its expiration, which notice may be given by the Trustee in its
discretion and shall be given by the Trustee at the written request of the
Bondholders of not less than 25 percent in aggregate principal amount of Bonds
then outstanding; or
(d) The Trustee receives notice from the Credit
Facility Issuer, if any, of the Credit Facility then held by the Trustee that an
Event of Default under the Reimbursement Agreement has occurred and is
continuing and the Trustee is to accelerate the maturity of the Bonds; or
(e) If a Credit Facility is then held by the
Trustee, receipt by the Trustee, on or before the close of business on the 5th
day following a drawing under such Credit Facility to pay interest on the Bonds
on an Interest Payment Date or the portion of the purchase price of Bonds
corresponding to interest on the Bonds, of notice by telephone (promptly
confirmed in writing) or facsimile from the Credit Facility Issuer that the
interest component of the Credit Facility will not be reinstated as of the date
of such notice to the amount required to be maintained pursuant to this
Indenture; or
(f) If payment of the purchase price of any Bond
required to be purchased pursuant to Section 3.01 is not made when such payment
has become due and payable; or
(g) If a Credit Facility is then held by the
Trustee, the Credit Facility Issuer fails to honor any proper drawing under the
Credit Facility; or
(h) If a Credit Facility is then held by the
Trustee, a decree or order of a court or agency or supervisory authority, having
jurisdiction in the premises for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling or assets and
liabilities or similar proceeding, or for the winding-up or liquidation of its
affairs, shall have been entered against the Credit Facility Issuer or the
Credit Facility Issuer shall have consented to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to the Credit
Facility Issuer or of or relating to all or substantially all of its property
and the lapse of 60 days during which an Alternate Credit Facility Issuer
complying with the terms hereof has not been delivered to the Trustee; or
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(i) The occurrence and continuance of an Event
of Default as defined in Section 10.1 of the Agreement.
SECTION 10.02. ACCELERATION AND ANNULMENT THEREOF. If any
Event of Default under Section 10.01(d), Section 10.01(e) or 10.01(h) occurs,
then the principal of all Bonds then Outstanding, together with interest accrued
thereon to the date of acceleration (which date shall be within the period for
which an interest drawing sufficient to pay the interest accrued on the Bonds to
such date is available under the Credit Facility), shall become immediately due
and payable at the place of payment provided therein without notice,
declaration, or demand, anything in this Indenture or in the Bonds to the
contrary notwithstanding. If any other Event of Default occurs and is
continuing, the Trustee may, and upon request of the owners of 25% in principal
amount of all Bonds then Outstanding shall, by notice in writing to the Issuer
and the Company, declare the principal of all Bonds then Outstanding to be
immediately due and payable; and upon such declaration the said principal,
together with interest accrued thereon to the date of acceleration (which date
shall be within the period for which principal and interest on the Bonds is
covered by the amounts available under the Letter of Credit), shall become due
and payable immediately at the place of payment provided therein, anything in
the Indenture or in the Bonds to the contrary notwithstanding. Upon the
occurrence of any acceleration hereunder, the Trustee shall immediately exercise
such rights as it may have under (i) this Indenture to declare all payments
hereunder and under the Bonds to be due and payable immediately and (ii) under
the Agreement to declare all payments thereunder to be due and payable
immediately, and to the extent it has not already done so, shall immediately
draw upon the Credit Facility, if any, to the extent permitted by the terms
thereof.
Immediately after any acceleration hereunder, the Trustee, to
the extent it has not already done so, shall notify in writing the Issuer, the
Company, the Credit Facility Issuer, the Tender Agent and the Remarketing Agent
of the occurrence of such acceleration. Within 5 days of the occurrence of any
acceleration hereunder, the Trustee shall notify by first class mail, postage
prepaid, the owners of all Bonds Outstanding of the occurrence of such
acceleration.
If, after the principal of the Bonds has become due and
payable, all arrears of interest upon the Bonds are paid by the Company, and the
Company also performs all other things in respect to which they may have been in
default hereunder and pays the reasonable charges of the Trustee and the
Bondholders, including reasonable attorneys' fees, then, and in every such case,
the owners of a majority in principal amount of the Bonds then Outstanding, by
notice to the Company and to the Trustee, may annul such acceleration and its
consequences, and such annulment shall be binding upon the Trustee and upon all
owners of Bonds issued hereunder; provided, however, that the Trustee shall not
annul any declaration resulting from (i) an Event of Default specified in
Section 10.01(e), (ii) an Event of Default specified in Section 10.01(d) without
the prior written consent of the Credit Facility Issuer or (iii) any Event of
Default which has resulted in a drawing under the Credit Facility unless the
Trustee has received written confirmation from the Credit Facility Issuer that
the Credit Facility has been reinstated to an amount equal to the amount thereof
prior to such drawing. No such annulment shall extend to or affect any
subsequent default or impair any right or remedy consequent thereon. The Trustee
shall forward a copy of any notice from Bondholders received by it pursuant to
this paragraph to the Company and to the Credit Facility Issuer. Immediately
upon such annulment, the Trustee shall cancel, by notice to the Issuer, the
Company and to the Credit Facility Issuer, any demand for acceleration of
payments hereunder and under the Bonds made by the Trustee pursuant to this
Section 10.02. The Trustee shall promptly give written notice of such annulment
to the Issuer, the Company, the Credit Facility Issuer, the
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Tender Agent, the Remarketing Agent, and, if notice of the acceleration of the
Bonds shall have been given to the Bondholders, shall give notice thereof to the
Bondholders.
SECTION 10.03. OTHER REMEDIES. If any Event of Default occurs
and is continuing, the Trustee, before or after the principal of the Bonds
becomes immediately due and payable, may enforce each and every right granted to
it under this Indenture and under any supplements or amendments hereto or the
Agreement. In exercising such rights, the Trustee shall take such action as, in
the judgment of the Trustee applying the standards described in Section 11.06,
would best serve the interests of the Bondholders.
As assignee of the Agreement (except for the Unassigned
Issuer's Rights), the Trustee is empowered to enforce each remedy, right and
power granted to the Issuer under the Agreement. In exercising any remedy, right
or power thereunder or hereunder, the Trustee shall take any action which would
best serve the interests of the Bondholders in the judgment of the Trustee.
Notwithstanding anything to the contrary herein, so long as
the Letter of Credit is in effect and the Bank is making all required payments
with respect to the Letter of Credit in accordance with the terms of the Letter
of Credit, the Trustee shall not exercise any remedies under this Article X and
the Trustee shall not, without the prior written consent of the Bank, take any
actions which the Trustee is required or entitled to take under this Article X
unless and until the Trustee shall have accelerated the Bonds and drawn upon the
Letter of Credit in accordance with Section 10.02 hereof and the Bank shall have
defaulted in the performance of its obligations under the Letter of Credit, in
which case the Bank shall have no authority to exercise any further rights
hereunder unless and until said default shall have been cured by the Bank to the
reasonable satisfaction of the Trustee.
In the event of a default by the Bank in the performance of
its obligations under the Letter of Credit, notwithstanding the provisions of
the above subparagraph, the Bank shall have no authority to exercise any further
rights hereunder, unless and until said default shall have been cured by the
Bank to the reasonable satisfaction of the Trustee.
SECTION 10.04. LEGAL PROCEEDINGS BY TRUSTEE. If any Event of
Default has occurred and is continuing, the Trustee in its discretion may, and
upon the written request of the owners of 25% in principal amount of all Bonds
then Outstanding and receipt of indemnity to its satisfaction shall, in its own
name:
A. By mandamus, or other suit, action or proceeding at
law or in equity, enforce all rights of the Bondholders;
B. Bring suit upon the Bonds or the Credit Facility, if
any;
C. By action or suit in equity require the Company to
account as if it were the trustee of an express trust for the Bondholders; and
D. By action or suit in equity enjoin any acts or things
which may be unlawful or in violation of the rights of the Bondholders.
SECTION 10.05. DISCONTINUANCE OF PROCEEDINGS BY TRUSTEE. If
any proceeding commenced by the Trustee on account of any default is
discontinued or is determined adversely to the Trustee, then the Company, the
Credit Facility Issuer, if any, the Trustee and the
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Bondholders shall be restored to their former positions and rights hereunder as
though no such proceedings had been commenced.
SECTION 10.06. BONDHOLDERS MAY DIRECT PROCEEDINGS. Subject to
the provisions of Section 10.03 hereof, the owners of a majority in principal
amount of the Bonds Outstanding shall have the right, after furnishing indemnity
satisfactory to the Trustee, to direct the method and place of conducting all
remedial proceedings by the Trustee hereunder, provided that such direction
shall not be in conflict with any rule of law or with this Indenture or unduly
prejudice the rights of minority Bondholders.
SECTION 10.07. LIMITATIONS ON ACTIONS BY BONDHOLDERS. No
Bondholder shall have any right to bring suit on the Credit Facility. No
Bondholder shall have any right to pursue any other remedy hereunder unless:
(a) the Trustee shall have been given written
notice of an Event of Default,
(b) the owners of at least 25% in principal
amount of all Bonds then Outstanding shall have requested the Trustee, in
writing, to exercise the powers hereinabove granted or to pursue such remedy in
its or their name or names,
(c) the Trustee shall have been offered
indemnity satisfactory to it against costs, expenses and liabilities, except
that no offer of indemnification shall be required for a declaration of
acceleration under Section 10.02 or for a drawing under the Credit Facility, if
any, and
(d) the Trustee shall have failed to comply with
such request within a reasonable time.
SECTION 10.08. TRUSTEE MAY ENFORCE RIGHTS WITHOUT POSSESSION
OF BONDS. All rights under the Indenture and the Bonds may be enforced by the
Trustee without the possession of any Bonds or the production thereof at the
trial or other proceedings relative thereto, and any proceeding instituted by
the Trustee shall be brought in its name for the ratable benefit of the owners
of the Bonds.
SECTION 10.09. REMEDIES NOT EXCLUSIVE. No remedy herein
conferred is intended to be exclusive of any other remedy or remedies, and each
remedy is in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute.
SECTION 10.10. DELAYS AND OMISSIONS NOT TO IMPAIR RIGHTS. No
delays or omission in respect of exercising any right or power accruing upon any
default shall impair such right or power or be a waiver of such default, and
every remedy given by this Article X may be exercised from time to time and as
often as may as deemed expedient.
SECTION 10.11. APPLICATION OF MONEYS IN EVENT OF DEFAULT. Any
moneys received by the Trustee under this Article X shall be applied in the
following order; provided that any moneys received by the Trustee from a drawing
on the Credit Facility shall be applied to the extent permitted by the terms
thereof only as provided in (B) below with respect to the principal of, and
interest accrued on, Bonds other than Bonds held by the Company after purchase
thereof pursuant to Section 3.04(a)(iii) and other than Bonds held pursuant to
Section 3.05:
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A. To the payment of the reasonable costs of the
Trustee, including counsel fees, any disbursements of the Trustee; and
B. To the payment of principal or redemption price (as
the case may be) and interest then owing on the Bonds, and in case such moneys
shall be insufficient to pay the same in full, then to the payment of principal
or redemption price and interest ratably, without preference or priority of one
over another or of any installment of interest over any other installment of
interest;
C. To the reimbursement of the Credit Facility Issuer
for unreimbursed draws under the Credit Facility; and
D. To the payment of reasonable costs and expenses of
the Credit Facility Issuer, including counsel fees, incurred in connection with
the Event of Default.
The surplus, if any, shall be paid to the Company or the
person lawfully entitled to receive the same as a court of competent
jurisdiction may direct.
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ARTICLE XI
THE TRUSTEE
SECTION 11.01. ACCEPTANCE OF TRUST. The Trustee accepts and
agrees to execute the trusts hereby created, but only upon the additional terms
set forth in this Article, to all of which the parties hereto and the
Bondholders agree.
SECTION 11.02. NO RESPONSIBILITY FOR RECITALS, ETC. The
recitals, statements and representations in the Indenture or in the Bonds, save
only the Trustee's Certificate of Authentication upon the Bonds, have been made
by the Issuer and not by the Trustee; and the Trustee shall be under no
responsibility for the correctness thereof, or for the validity, priority,
recording or re-recording, filing or re-filing of this Indenture, the Agreement
or the Reimbursement Agreement or any financing statements, amendments thereto
or continuation statements, or for insuring the Project or collecting any
insurance moneys, or for the validity of the execution by the Issuer of this
Indenture or of any supplements thereto or instruments of further assurance, or
for the validity or sufficiency of the security afforded by this Indenture or
the Bonds issued hereunder or intended to be secured hereby, or as to the
maintenance of the security hereof. The Trustee shall not be bound to ascertain
or inquire as to the performance or observance of any covenants, conditions or
agreements on the part of the Issuer or on the part of the Issuer hereunder or
under the Reimbursement Agreement, except as expressly provided herein or in the
Reimbursement Agreement. Except as otherwise expressly provided herein or in the
Agreement, the Trustee shall have no obligation to perform any of the duties of
the Issuer under the Agreement.
The Trustee shall not be accountable for the application of
the proceeds of any Bonds authenticated or delivered hereunder which has been
made by or on behalf of the Issuer or the Company.
The permissive right of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty.
Unless otherwise provided herein, all moneys received by the
Trustee under this Indenture shall be held in trust for the purposes for which
those moneys were received, until those moneys are used, applied or invested as
provided herein; provided, that those moneys (other than such moneys as are
required by the terms hereof to be deposited into the Credit Facility Account,
Redemption Premium Account or Defeasance Account in the Bond Fund and proceeds
received from the remarketing of the Bonds) need not be segregated from other
moneys, except to the extent required by this Indenture or by law. The Trustee
shall not have any liability for interest on any moneys received hereunder,
except to the extent expressly provided herein or agreed with the Issuer or the
Company.
SECTION 11.03. TRUSTEE MAY ACT THROUGH AGENTS; ANSWERABLE ONLY
FOR WILLFUL MISCONDUCT OR NEGLIGENCE. The Trustee may exercise any powers
hereunder and perform any duties required of it through attorneys, agents,
officers or employees, and shall be entitled to advice of Counsel concerning all
questions hereunder. The Trustee shall not be answerable for the default or
misconduct of any attorney or agent selected by it with reasonable care. Except
as otherwise provided herein, the Trustee shall not be answerable for the
exercise of any discretion or power under the Indenture nor for anything
whatsoever in connection with the trust hereunder, except only its own willful
misconduct or negligence.
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SECTION 11.04. COMPENSATION AND INDEMNITY. (a) The Company
shall pay the Trustee reasonable compensation for its services hereunder, and
also all its reasonable expenses and disbursements, including the reasonable
fees and out-of-pocket expenses of counsel for the Trustee, as provided in the
Agreement. If the Company shall have failed to make any such payment, the
Trustee shall have, in addition to any other rights hereunder, a claim, prior to
the Bondholders, for the payment of its compensation and indemnification and the
reimbursement of its expenses and any advances made by it upon the moneys and
obligations in the Bond Fund, except for (i) moneys or obligations held by the
Trustee for the payment of particular Bonds or (ii) the proceeds of any drawing
under the Credit Facility or (iii) moneys held in the Remarketing Proceeds
Account of the Bond Fund or in the Rebate Fund.
(b) The Company agrees to indemnify the Trustee
for and to hold the Trustee harmless against all liabilities, claims, costs,
losses and expenses incurred without negligence or bad faith on the part of the
Trustee on account of any action taken or omitted to be taken by the Trustee in
accordance with the terms of this Indenture or the Bonds, or at the request of
or with the consent of the Company, including, without limitation, the costs and
expenses of the Trustee in defending itself against any action, claim or
proceeding in connection with any of the foregoing.
SECTION 11.05. NOTICE OF DEFAULT; RIGHT TO INVESTIGATE. The
Trustee shall, within 10 days after the occurrence of an Event of Default, give
written notice by first class mail to registered owners of Bonds and to the
Issuer and the Company of all Defaults known to the Trustee, unless such
Defaults have been remedied; provided that in the case of a Default under
Section 10.01, the Trustee may withhold such notice so long as it in good faith
determines that such withholding is in the interest of the Bondholders. The
Trustee shall not be deemed to have notice of any Default under Section 10.01
(other than payment Defaults) unless notified in writing of such Default by the
owners of at least 25% in principal amount of all Bonds than Outstanding. The
Trustee may, however, at any time require of the Issuer, subject to the
provisions of Section 9.03 hereof, or the Company on behalf of the Issuer, full
information as to the performance of any covenant hereunder; and, if information
satisfactory to it is not forthcoming, the Trustee may make or cause to be made,
at the expense of the Company, an investigation into the affairs of the Company
related to this Indenture.
SECTION 11.06. OBLIGATION TO ACT. Except during the
continuance of an Event of Default, the Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this Indenture against
the Trustee. If any Event of Default shall have occurred and be continuing, the
Trustee shall exercise such of the rights and remedies vested in it by this
Indenture and shall use the same degree of care in their exercise as a prudent
person would exercise or use in the circumstances in the conduct of his own
affairs. The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Bondholders pursuant to this Indenture (other than the Trustee's obligation
to draw under a Credit Facility, make payments when due to Bondholders from
funds available under this Indenture and accelerate the Bonds when required by
Article X of this Indenture) unless such Bondholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred in compliance with such request or
direction.
SECTION 11.07. RELIANCE. The Trustee may act on any
requisition, resolution, notice, telegram, request, consent, waiver,
certificate, statement, affidavit, voucher, note, or other paper or document
which it in good faith believes to be genuine and to have been passed or signed
by the proper persons or to have been prepared and furnished pursuant to any of
the provisions of the Indenture, including without limitation, any direction of
the Tender Agent or the Remarketing Agent to draw on the
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Credit Facility; and the Trustee shall be under no duty to make any
investigation as to any statement contained in any such instrument, but may
accept the same as conclusive evidence of the accuracy of such statement.
SECTION 11.08. TRUSTEE MAY DEAL IN BONDS. The Trustee may in
good faith buy, sell, own, hold and deal in any of the Bonds and may join in any
action which any Bondholders may be entitled to take with like effect as if the
Trustee were not a party to this Indenture. The Trustee may also engage in or be
interested in any financial or other transaction with the Company; provided that
if the Trustee determines that any such relation is in conflict with its duties
under this Indenture, it shall eliminate the conflict or resign as Trustee.
SECTION 11.09. CONSTRUCTION OF AMBIGUOUS PROVISIONS. The
Trustee may construe any ambiguous or inconsistent provisions of the Indenture,
and any construction by the Trustee shall be binding upon the Bondholders.
SECTION 11.10. RESIGNATION OF TRUSTEE. The Trustee may resign
and be discharged of the trusts created by the Indenture by written resignation
filed with the Issuer and the Company not fewer than 30 days before the date
when it is to take effect; provided notice of such resignation is mailed to the
owners of the Bonds not fewer than three weeks prior to the date when the
resignation is to take effect. Such resignation shall take effect only upon the
appointment of a successor trustee.
SECTION 11.11. REMOVAL OF TRUSTEE. Any Trustee hereunder may
be removed at any time by an instrument appointing a successor to the Trustee so
removed, executed by the owners of a majority in principal amount of the Bonds
then Outstanding and filed with the Trustee, the Company and the Issuer.
The Trustee may also be removed at any time for any breach of
trust or for acting or proceeding in violation of, or for failing to act or
proceed in accordance with, any provision of this Indenture with respect to the
duties and obligations of the Trustee by any court of competent jurisdiction
upon the application of the Issuer or the owners of not less than 20 percent in
aggregate principal amount of the Bonds Outstanding.
No removal shall take effect until a successor Trustee has
been appointed pursuant to Section 11.12 hereof.
SECTION 11.12. APPOINTMENT OF SUCCESSOR TRUSTEE. If the
Trustee or any successor trustee resigns or is removed or dissolved, or if its
property or business is taken under the control of any state or federal court or
administrative body, a vacancy shall forthwith exist in the office of the
Trustee, and the Company on behalf of the Issuer, with the consent of the Credit
Facility Issuer, which consent shall not be unreasonably withheld, shall appoint
a successor and shall mail notice of such appointment to registered owners of
the Bonds. If the Company fails to make such appointment promptly, the owners of
a majority in principal amount of the Bonds then Outstanding may do so.
If no appointment of a successor Trustee shall be made
pursuant to the foregoing provisions of this Section 11.12, the Holder of any
Bond outstanding hereunder or any retiring Trustee may apply to any court of
competent jurisdiction to appoint a successor Trustee. Such court may thereupon,
after such notice, if any as such court may deem proper and prescribe, appoint a
successor Trustee.
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SECTION 11.13. QUALIFICATION OF SUCCESSOR. A successor trustee
shall be a national banking association with trust powers or a bank and trust
company or a trust company having capital and surplus of at least $20,000,000
(or a combined capital and surplus in excess of $5,000,000 and the obligations
of which, whether now in existence or hereafter incurred, are fully guaranteed
by a corporation organized and doing business under the laws of the United
States, and State or Territory thereof or of the District of Columbia, that has
a combined capital and surplus of at least $50,000,000), if there be one able
and willing to accept the trust on reasonable and customary terms.
SECTION 11.14. INSTRUMENTS OF SUCCESSION. Any successor
trustee shall execute, acknowledge and deliver to the Issuer an instrument
accepting such appointment hereunder; and thereupon such successor trustee,
without any further act, deed or conveyance, shall become fully vested with all
the estates, properties, rights, powers, trusts, duties and obligations of its
predecessor in the trust hereunder, with like effect as if originally named
Trustee herein. The Trustee ceasing to act hereunder shall pay over to the
successor trustee all moneys held by it hereunder; and, upon request of the
successor trustee, the Trustee ceasing to act and the Issuer shall execute and
deliver an instrument transferring to the successor trustee all the estates,
properties, rights, powers and trusts hereunder of the Trustee ceasing to act.
SECTION 11.15. MERGER OF TRUSTEE. Any corporation into which
any Trustee hereunder may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which any Trustee
hereunder shall be a party, shall be the successor trustee under the Indenture,
without the execution or filing of any paper or any further act on the part of
the parties hereto, anything herein to the contrary notwithstanding.
SECTION 11.16. TRUSTEE NOT REQUIRED TO EXPEND OR RISK OWN
FUNDS. No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
SECTION 11.17. CONFLICT OF INTEREST PROVISIONS. The Trustee
shall comply with the provisions contained in Section 127 of the New York Real
Property Law to the extent to which that Section applies by its terms. In
addition and notwithstanding anything to the contrary set forth herein or in any
other Financing Document and to the extent required by law, the provisions of
Sections 126 and 130-k of the New York Real Property Law (as amended from time
to time and including any successor statutes thereto) are hereby incorporated by
reference herein with the same force and effect as if the same were set forth in
full herein. To the extent of any conflict between the provisions of said Real
Property Law and the provisions of the Indenture or of any other Financing
Document, the provisions of said Real Property Law shall govern.
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ARTICLE XII
THE REMARKETING AGENT AND THE TENDER AGENT
SECTION 12.01. THE REMARKETING AGENT.
(a) The Issuer hereby appoints KeyBank National
Association as Remarketing Agent under this Indenture. The Company on behalf of
the Issuer may appoint a different Remarketing Agent. Each Remarketing Agent, by
written instrument delivered to the Trustee and the Issuer, shall accept the
duties and obligations imposed on it under this Indenture and shall become a
party to the Remarketing Agreement.
(b) In addition to the other obligations imposed
on the Remarketing Agent hereunder, the Remarketing Agent shall agree to keep
such books and records as shall be consistent with prudent industry practice and
make such books and records available for inspection by the Issuer and the
Trustee at all reasonable times.
(c) If at any time a Remarketing Agent is unable
or unwilling to act as a Remarketing Agent, such Remarketing Agent, upon 60
days' prior written notice to the Issuer, the Trustee, the Tender Agent, and any
other Remarketing Agent, may resign. Any Remarketing Agent may be removed at any
time by the Company on behalf of the Issuer, by written notice signed by the
Issuer and delivered to the Trustee and such Remarketing Agent. Upon resignation
or removal of a Remarketing Agent, the Company on behalf of the Issuer shall
either appoint a successor Remarketing Agent or authorize the remaining
Remarketing Agent or Agents to act alone in such capacity, in which case all
reference in this Indenture to the Remarketing Agent shall mean the remaining
Remarketing Agent or Agents. If the remaining Remarketing Agent resigns or is
removed, the Company on behalf of the Issuer shall appoint a substitute
Remarketing Agent or Agents.
(d) In the event that the Company on behalf of
the Issuer shall fail to appoint a successor Remarketing Agent or Agents, upon
the resignation or removal of the remaining Remarketing Agents or upon their
dissolution, insolvency or bankruptcy, the Trustee may either appoint a
Remarketing Agent or Agents or itself act as Remarketing Agent until the
appointment of a successor Remarketing Agent or Agents in accordance with this
Section 12.01; provided, however, that the Trustee, in its capacity as
Remarketing Agent, shall not be required to sell Bonds.
SECTION 12.02. THE TENDER AGENT.
(a) The Tender Agent shall be Star Bank, N.A.,
having its Principal Office at Cincinnati, Ohio. The Company on behalf of the
Issuer shall appoint any successor Tender Agent for the Bonds, as necessary,
subject to the conditions set forth in Section 12.02(b) hereof. Any successor
Tender Agent shall designate its Principal Office and signify its acceptance of
the duties and obligations imposed upon it hereunder by a written instrument of
acceptance delivered to the Trustee, the Issuer and the Credit Facility Issuer
in which the Tender Agent will agree, particularly:
(i) to hold all Bonds delivered to it
pursuant to Section 3.01 hereof, as agent and bailee of, and in escrow
for the benefit of, the respective owners thereof until moneys
representing the purchase price of such Bonds shall have been delivered
to or for the account of or to the order of such owners;
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(ii) to hold all moneys (without investment
thereof) delivered to it hereunder for the purchase of Bonds pursuant
to Section 3.01 hereof as agent and bailee of, and in escrow for the
benefit of, the person or entity which shall have so delivered such
moneys until the Bonds purchased with such moneys shall have been
delivered to or for the account of such person or entity;
(iii) to hold Bonds for the account of the Issuer
as contemplated by Section 3.04(a)(iii) hereof;
(iv) to hold Bonds purchased pursuant to Section
3.01 with moneys representing the proceeds of a drawing under the
Credit Facility to be held pursuant to Section 3.05 as agent and
bailee; and
(v) to keep such books and records as shall be
consistent with prudent industry practice and to make such books and
records available for inspection by the Trustee and the Issuer at all
reasonable times.
(b) The Tender Agent shall be a corporation duly
organized under the laws of the United States of America or any state or
territory thereof, and, if the Bonds are rated by Moody's and, if not a bank or
trust company, rated at least Baa3/P3 or otherwise qualified by Moody's, having
a combined capital and surplus of at least $20,000,000 (or a combined capital
and surplus in excess of $5,000,000 and the obligations of which, whether now in
existence or hereafter incurred, are fully guaranteed by a corporation organized
and doing business under the laws of the United States, and State or Territory
thereof or of the District of Columbia, that has a combined capital and surplus
of at least $50,000,000) and authorized by law to perform all the duties imposed
upon it by this Indenture. The Tender Agent may at any time resign and be
discharged of the duties and obligations created by this Indenture by giving at
least 60 days' notice to the Trustee, the Issuer, the Credit Facility Issuer and
the Remarketing Agent. In the event that the Company on behalf of the Issuer
shall fail to appoint a successor Tender Agent, upon the resignation or removal
of the Tender Agent, the Trustee shall either appoint a Tender Agent or itself
act as Tender Agent until the appointment of a successor Tender Agent. The
Tender Agent may be removed at any time by an instrument signed by the Company
on behalf of the Issuer, filed with the Trustee, the Remarketing Agent and the
Credit Facility Issuer, if any.
In the event of the resignation or removal of the Tender
Agent, the Tender Agent shall deliver any Bonds and moneys held by it in such
capacity to its successor or, if there is no successor, to the Trustee.
SECTION 12.03. NOTICES. The Trustee shall, within 10 days of
receipt of written notice of the resignation or removal of the Remarketing Agent
or the Tender Agent or the appointment of successor Remarketing Agent or Tender
Agent, give notice thereof by first class mail, postage prepaid, to the owners
of the Bonds.
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ARTICLE XIII
ACTS OF BONDHOLDERS; EVIDENCE OF OWNERSHIP
SECTION 13.01. ACTS OF BONDHOLDERS; EVIDENCE OF OWNERSHIP. Any
action to be taken by Bondholders may be evidenced by one or more concurrent
written instruments of similar tenor signed or executed by such Bondholders in
person or by agent appointed in writing. The fact and date of the execution by
any person of any such instrument may be proved by acknowledgment before a
notary public or other officer empowered to take acknowledgments or by an
affidavit of a witness to such execution. Where such execution is by an officer
of a corporation or a member of a partnership, on behalf of such corporation or
partnership, such certificate or affidavit shall also constitute sufficient
proof of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the person executing the same, may
also be proved in any other manner which the Trustee deems sufficient. The
ownership of the Bonds shall be proved by the Bond Register. Any action by the
owner of any Bond shall bind all future owners of the same Bond in respect of
anything done or suffered by the Issuer or the Trustee in pursuance thereof.
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ARTICLE XIV
AMENDMENTS AND SUPPLEMENTS
SECTION 14.01. AMENDMENTS AND SUPPLEMENTS WITHOUT BONDHOLDERS'
CONSENT. This Indenture may be amended or supplemented at any time and from time
to time, without the consent of the Bondholders, but with the consent of the
Credit Facility Issuer, if any, which consent shall not be withheld
unreasonably, by a supplemental indenture authorized by a resolution of the
Issuer, executed by the Issuer and the Trustee and filed with the Trustee, for
one or more of the following purposes:
(a) to add additional covenants of the Issuer or
to surrender any right or power herein conferred upon the Issuer;
(b) for any purpose not inconsistent with the
terms of this Indenture or to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may be
defective or inconsistent with any other provision contained herein or in any
supplemental indenture, or to make such other provisions in regard to matters or
questions arising under this Indenture which shall not, in the opinion of the
Trustee, materially adversely affect the interests of the owners of the Bonds;
(c) to permit the Bonds to be converted to
certificateless securities or securities represented by a master certificate
held in trust, ownership of which, in either case, is evidenced by book entries
on the books of the Bond Registrar, for any period of time;
(d) to permit the appointment of a co-trustee
under this Indenture;
(e) to authorize different authorized
denominations of the Bonds and to make correlative amendments and modifications
to this Indenture regarding exchangeability of Bonds of different authorized
denominations, redemptions of portions of Bonds of particular authorized
denominations and similar amendments and modifications of a technical nature;
(f) to modify, alter, supplement or amend this
Indenture in such manner as shall permit the qualification hereof under the
Trust Indenture Act of 1939, as from time to time amended;
(g) to modify, alter, amend or supplement this
Indenture in any other respect which is not materially adverse to the
Bondholders; or
(h) To make amendments to the provisions hereof
relating to arbitrage matters under Section 148 of the Code, if, in the opinion
of nationally recognized bond counsel selected by the Company and approved by
the Trustee, those amendments would not cause the interest on the Bonds
outstanding to be included in gross income of the Bondholders for federal income
tax purposes which amendments may, among other things, change the responsibility
for making the relevant calculations.
The Company shall pay to the Trustee the reasonable fees of
any attorneys or counsel retained by the Trustee for the purposes of researching
and rendering the opinion described in (b) above.
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Before the Issuer and the Trustee shall enter into any
supplemental indenture pursuant to this Section 14.01, there shall have been
delivered to the Trustee an opinion of Counsel stating that such supplemental
indenture is authorized under this Indenture, and that such supplemental
indenture will, upon the execution and delivery thereof, be valid and binding
upon the Issuer in accordance with its terms.
SECTION 14.02. AMENDMENTS WITH BONDHOLDERS' AND CREDIT
FACILITY ISSUER'S CONSENT. This Indenture may be amended from time to time,
except with respect to (1) the principal, redemption price, purchase price,
interest payable upon any Bonds, (2) the Interest Payment Dates, the dates of
maturity or the redemption or purchase provisions of any Bonds, and (3) this
Article XIV, by a supplemental indenture consented to by the Credit Facility
Issuer and by the Issuer and approved by the owners of at least a majority in
aggregate principal amount of the Bonds then Outstanding which would be affected
by the action proposed to be taken. This Indenture may be amended with respect
to the matters enumerated in clauses (l) through (3) of the preceding sentence
with the unanimous consent of all Bondholders, the Credit Facility Issuer and
the Issuer.
SECTION 14.03. AMENDMENT OF CREDIT FACILITY. The Trustee shall
notify Bondholders of a proposed amendment of the Credit Facility which would
materially adversely affect the interests of the Bondholders and may consent
thereto with the consent of the owners of at least a majority in aggregate
principal amount of the Bonds then Outstanding which would be affected by the
action proposed to be taken; provided, that the Trustee shall not, while the
Interest Rate Mode is the Long-Term Rate, without the unanimous consent of the
owners of all Bonds then Outstanding, consent to any amendment which would (1)
decrease the amount payable under the Credit Facility or (2) reduce the term of
the Credit Facility.
SECTION 14.04. TRUSTEE AUTHORIZED TO JOIN IN AMENDMENTS AND
SUPPLEMENTS; RELIANCE ON COUNSEL. The Trustee is authorized to join with the
Issuer in the execution and delivery of any supplemental indenture or amendment
permitted by this Article XIV and in so doing shall be fully protected by an
opinion of Counsel that such supplemental indenture or amendment is so permitted
and has been duly authorized by the Issuer and that all things necessary to make
it a valid and binding agreement have been done; provided that certain
amendments may, by agreement between the Trustee and the Credit Facility Issuer,
require the prior consent of the Credit Facility Issuer.
SECTION 14.05. AMENDMENTS NOT REQUIRING CONSENT OF
BONDHOLDERS. Without the consent of or notice to the Bondholders, the Issuer and
the Trustee may, with the written consent of the Credit Facility Issuer (which
shall be required only if there exists no wrongful dishonor of any drawing
presented under the Credit Facility or Alternate Credit Facility then in
effect), consent to any amendment, change or modification of the Agreement as
may be required (i) by the provisions of the Agreement or this Indenture, (ii)
for the purpose of curing any ambiguity, inconsistency or formal defect or
omission in the Agreement, (iii) in connection with an amendment or to effect
any purpose for which there could be an amendment of this Indenture pursuant to
Section 14.01 hereof, or (v) in connection with any other change therein which
is not to the material prejudice of the Trustee or the Bondholders of the Bonds,
in the judgment of the Trustee.
SECTION 14.06. AMENDMENT REQUIRING CONSENT OF BONDHOLDERS.
Except for the amendments, changes or modifications contemplated in Section
14.05 hereof, neither the Issuer nor the Trustee shall consent to
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(a) any amendment, change or modification of the
Agreement which would change the amount or time as of which installment purchase
payments are required to be paid, without the giving of notice as provided in
this Section of the proposed amendment, change or modification and receipt of
the written consent thereto of the Credit Facility Issuer (which shall be
required only if there exists no wrongful dishonor of any drawing presented
under the Credit Facility or Alternate Credit Facility then in effect) and the
Bondholders of all of the then outstanding Bonds, or
(b) any other amendment, change or modification
of the Agreement or the Credit Facility without the giving of notice as provided
in this Section of the proposed amendment, change or modification and receipt of
the written consent thereto of the Credit Facility Issuer and the Bondholders of
not less than a majority in aggregate principal amount of the Bonds then
outstanding.
The consent of the Bondholders shall be obtained as provided in Section 14.02
hereof with respect to Supplemental Indentures.
If the Issuer and the Company shall request at any time the
consent of the Trustee to any proposed amendment, change or modification of the
Agreement contemplated in subparagraphs (a) or (b), upon being indemnified by
the Company satisfactorily with respect to expenses, the Trustee shall cause
notice of the proposed amendment, change or modification to be provided in the
manner which is required by Section 14.02 hereof with respect to notice of
Supplemental Indentures. The notice shall set forth briefly the nature of the
proposed amendment, change or modification and shall state that copies of the
instrument or document embodying it are on file at the principal corporate trust
office of the Trustee for inspection by all Bondholders.
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ARTICLE XV
DEFEASANCE
SECTION 15.01. DEFEASANCE.
(a) When the principal or redemption price (as
the case may be) of, and interest on, all Bonds issued hereunder have been paid,
or provision has been made for payment of the same, together with the
compensation of the Trustee and all other sums payable hereunder by the Issuer
when provision also shall be made for the payment of all other sums payable
under the Agreement, then, the right, title and interest of the Trustee shall
thereupon cease and the Trustee, on demand of the Company on behalf of the
Issuer, shall release this Indenture and shall execute such documents to
evidence such release as may be reasonably required by the Company on behalf of
the Issuer and shall turn over to the Issuer or to such person, body or
authority as may be entitled to receive the same all balances then held by it
hereunder. If payment or provision therefor is made with respect to less than
all of the Bonds, the particular Bonds (or portion thereof) for which provision
for payment shall have been considered made shall be selected by lot by the
Trustee, and thereupon the Trustee shall take similar action for the release of
this Indenture with respect to such Bonds.
(b) Provision for the payment of Bonds shall be
deemed to have been made when the Trustee holds in the Defeasance Account, in
trust and irrevocably set aside exclusively for such payment in the Defeasance
Account, (i) moneys sufficient to make such payment and any payment of the
purchase price of Bonds pursuant to Section 3.01; provided, that if a Credit
Facility is then held by the Trustee, any such moneys necessary for the payment
of Bonds not yet due shall constitute Available Moneys and/or (ii) Governmental
Obligations maturing as to principal and interest in such amounts and at such
times as will provide sufficient moneys (without consideration of any
reinvestment thereof) to make such payment and any payment of the purchase price
of Bonds pursuant to Section 3.01, and which are not subject to prepayment,
redemption or call prior to their stated maturity; provided, that if a Credit
Facility is then held by the Trustee, such Governmental Obligations shall have
been on deposit with the Trustee in a separate and segregated account for a
period of 95 days during which no Event of Bankruptcy has occurred, or shall
have been purchased with Available Moneys.
No Bonds in respect of which a deposit under clause (i) or
(ii) above has been made shall be deemed paid within the meaning of this Article
unless the Trustee is satisfied that the amounts deposited are sufficient to
make all payments that might become due on the Bonds; provided that
notwithstanding any other provision of this Indenture, any Bonds purchased with
such moneys pursuant to Section 3.01 shall be surrendered to the Trustee for
cancellation and shall not be remarketed. Notwithstanding the foregoing, no
delivery to the Trustee under this subsection (b) shall be deemed a payment of
any Bonds which are to be redeemed prior to their stated maturity until such
Bonds shall have been irrevocably called or designated for redemption on a date
thereafter on which such Bonds may be redeemed in accordance with the provisions
of this Indenture and proper notice of such redemption shall have been given in
accordance with Article VIII or the Issuer following written request of the
Company shall have given the Trustee, in form satisfactory to the Trustee,
irrevocable instructions to give, in the manner and at the times prescribed by
Article VIII, notice of redemption. Neither the obligations nor moneys deposited
with the Trustee pursuant to this Section shall be withdrawn or used for any
purpose other than, and shall be segregated and held in trust for, the payment
of the principal of, redemption price of and interest on the Bonds with respect
to which such deposit has been made. In the event that such moneys or
obligations are to be applied to the payment of principal or redemption price of
any Bonds more than 60 days following the deposit thereof with the Trustee, the
Trustee shall publish
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once in an Authorized Newspaper a notice stating that such moneys or obligations
have been deposited and identifying the Bonds for the payment of which such
moneys or obligations are being held and shall mail copies of all such notices
to all owners of Bonds for the payment of which such moneys or obligations are
being held at their registered addresses and to the Rating Service, if the Bonds
are then rated by a Rating Service.
(c) Anything in Article XIV to the contrary
notwithstanding, if moneys or Governmental Obligations have been deposited or
set aside with the Trustee pursuant to this Article for the payment of the
principal or redemption price of the Bonds and the interest thereon and the
principal or redemption price of such Bonds and the interest thereon shall not
have in fact been actually paid in full, no amendment to the provisions of this
Article shall be made without the consent of the owner of each of the Bonds
affected thereby.
Notwithstanding the foregoing, those provisions relating to
the purchase of Bonds, the maturity of Bonds, interest payments and dates
thereof, and the Trustee's remedies with respect thereto, and provisions
relating to exchange, transfer and registration of Bonds, replacement of
mutilated, destroyed, lost or stolen Bonds, the safekeeping and cancellation of
Bonds, non-presentment of Bonds, the holding of moneys in trust, and repayments
to the Issuer from the Bond Fund and the duties of the Trustee in connection
with all of the foregoing and the fees, expenses and indemnities of the Trustee,
shall remain in effect and shall be binding upon the Trustee, the Issuer, for
itself, and the Bondholders notwithstanding the release and discharge of the
lien of this Indenture.
SECTION 15.02. RELEASE OF INDENTURE. If (i) the Issuer shall
pay all of the outstanding Bonds, or shall cause them to be paid and discharged,
or if there otherwise shall be paid to the Bondholders of the outstanding Bonds,
all Bond Service Charges due or to become due thereon, and (ii) provision also
shall be made for the payment of all other sums payable hereunder or under the
Agreement, then, this Indenture shall cease, determine and become null and void
(except for those provisions surviving by reason of Section 9.03 hereof in the
event the Bonds are deemed paid and discharged pursuant to Section 9.02 hereof),
and the covenants, agreements and obligations of the Issuer hereunder shall be
released, discharged and satisfied.
Thereupon, and subject to the provisions of Section 15.03
hereof if applicable,
(i) the Trustee shall release this
Indenture (except for those provisions surviving by reason of Section
15.03 hereof in the event the Bonds are deemed paid and discharged
pursuant to Section 15.01 hereof), and shall execute and deliver to the
Issuer any instruments or documents in writing as shall be requisite to
evidence that release and discharge or as reasonably may be requested
by the Issuer,
(ii) the Trustee and any other Paying
Agents shall assign and deliver to the Issuer any property subject at
the time to the lien of this Indenture which then may be in their
possession, except amounts in the Bond Fund required (a) to be paid to
the Company or the Bank under Section 5.06 hereof, or (b) to be held by
the Trustee and the Paying Agents under Section 5.06 hereof or
otherwise for the payment of Bond Service Charges, and
(iii) the Trustee shall return the Credit
Facility to the Bank.
SECTION 15.03. SURVIVAL OF CERTAIN PROVISIONS. Notwithstanding
the foregoing, any provisions of the Act and this Indenture which relate to the
maturity of Bonds, interest
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payments and dates thereof, optional and mandatory redemption provisions,
exchange, transfer and registration of Bonds, replacement of mutilated,
destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds,
non-presentment of Bonds, the holding of moneys in trust, and repayments to the
Company and the Bank from the Bond Fund, the rebate of moneys to the United
States in accordance with Section 5.05 hereof, and the duties of the Trustee and
the Registrar in connection with all of the foregoing, shall remain in effect
and be binding upon the Trustee, the Registrar, the Authenticating Agents,
Paying Agents and the Bondholders notwithstanding the release and discharge of
this Indenture. The provisions in this Article shall survive the release,
discharge and satisfaction of this Indenture.
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ARTICLE XVI
MISCELLANEOUS PROVISIONS
SECTION 16.01. NON-RECOURSE PROVISION. (A) The obligations and
agreements of the Issuer contained herein and in the other Financing Documents
and any other instrument or document executed in connection therewith, and any
other instrument or document supplemental hereto or thereto, shall be deemed the
obligations and agreements of the Issuer and not of any member, officer, agent
(other than the Company) or employee of the Issuer in his individual capacity,
and the members, officers, agents (other than the Company) and employees of the
Issuer shall not be liable personally hereon or be subject to any personal
liability or accountability based upon or in respect hereof or thereof or on any
transaction contemplated hereby or thereby.
(B) The obligations and agreements of the Issuer
contained herein shall not constitute or give rise to any obligations of
Saratoga County, New York or the State, and neither Saratoga County, New York
nor the State shall be liable thereon, and further, such obligations and
agreements shall not constitute or give rise to a general obligation of the
Issuer, but rather shall constitute limited, special obligations of the Issuer
payable solely from the revenues of the Issuer derived and to be derived from
the sale or other disposition of the Project Facility and the other security
pledged for payment of the Bonds (except for revenues derived by the Issuer with
respect to the Unassigned Rights).
(C) No order or decree of specific performance
with respect to any of the obligations of the Issuer hereunder (other than
pursuant to Section 10.02 hereof, and then only to the extent of the Issuer's
obligations thereunder) shall be sought or enforced against the Issuer unless
the party seeking such order or decree shall first have complied with Section
9.03 hereof.
(D) The Issuer shall be entitled to the advice
of counsel (who may be counsel to any party or to any Bondholder) and shall be
wholly protected as to any action taken or omitted to be taken in good faith in
reliance upon such advice. The Issuer may rely conclusively on any notice,
certificate or other document furnished to it under any Financing Document and
reasonably believed by it to be genuine. The Issuer shall not be liable for any
action taken by it in good faith and reasonably believed by it to be within the
discretion or power conferred upon it, or in good faith omitted to be taken by
it and reasonably believed to be beyond such discretion or power, or taken by it
pursuant to any direction or instruction by which it is governed under any
Financing Document, or omitted to be taken by it by reason of the lack of
direction or instruction required for such action under any Financing Document,
and shall not be responsible for the consequences of any error of judgment
reasonably made by it. When any payment, consent or other action by the Issuer
is called for by the Indenture, the Issuer may defer such action pending an
investigation or inquiry or receipt of such evidence, if any, as it may
reasonably require in support thereof. A permissive right or power to act shall
not be construed as a requirement to act, and no delay in the exercise of a
right or power shall affect the subsequent exercise thereof. The Issuer shall in
no event be liable for (i) the application or misapplication of funds or (ii)
other acts or defaults, by any Person, except, in either case, by its own
members, officers and employees.
(E) In approving, concurring in or consenting to
any action or in exercising any discretion or in making any determination under
the Indenture, the Issuer may consider the interests of the public, which shall
include the anticipated effect of any transaction on tax revenues and
employment, as well as the interests of the other parties hereto and the
Bondholders; provided, however, that nothing herein shall be construed as
conferring on any Person other than the Trustee and the Bondholders any right to
notice, hearing or participation in the Issuer's consideration, and nothing in
this Section 16.01 shall be construed as conferring on any of them any right
additional to those conferred elsewhere herein and provided further that nothing
in this
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<PAGE>
Section 16.01 shall be construed as affecting the existence or non-existence of
an Event of Default. Subject to the foregoing, the Issuer shall not unreasonably
withhold any approval or consent to be given by it hereunder.
SECTION 16.02. DEPOSIT OF FUNDS FOR PAYMENT OF BONDS. If the
principal or redemption price of any Bonds becoming due, either at maturity or
by call for redemption or otherwise, together with all interest accruing thereon
to the due date, has been paid or provision therefor made in accordance with
Section 15.01, all interest on such Bonds shall cease to accrue on the due date
and all liability of the Issuer with respect to such Bonds shall likewise cease,
except as hereinafter provided. Thereafter the owners of such Bonds shall be
restricted exclusively to the funds so deposited for any claim of whatsoever
nature with respect to such Bonds, and the Trustee shall hold such funds in
trust for such owners.
Moneys so deposited with the Trustee which remain unclaimed 2
years after the date payment thereof becomes due shall, at the request of the
Issuer and if the Issuer is not at the time to the knowledge of the Trustee in
default with respect to any covenant in the Indenture or the Bonds contained, be
paid to the Issuer, and, upon the request of, and provision of adequate
indemnification from the Issuer, the Trustee shall pay such moneys to the
Issuer; and the owners of the Bonds for which the deposit was made shall
thereafter be limited to a claim against the Issuer; provided, however, that the
Trustee, before making payment to the Issuer, may, at the expense of the Issuer,
cause a notice to be published once in an Authorized Newspaper, stating that the
moneys remaining unclaimed will be returned to the Issuer after a specified
date.
SECTION 16.03. EFFECT OF PURCHASE OF BONDS. No purchase of
Bonds pursuant to Section 3.01 shall be deemed to be a payment or redemption of
such Bonds or any portion thereof and such purchase will not operate to
extinguish or discharge the indebtedness evidenced by such Bonds.
SECTION 16.04 PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS.
If any Interest Payment Date, maturity date, or date fixed for redemption of any
Bonds is a Saturday, Sunday or a day on which the Trustee is required or
authorized or not prohibited, by law to close and is closed, then payment of
interest, principal and any redemption premium need not be paid by the Trustee
on that date, but that payment may be made on the next succeeding Business Day
on which the Trustee is open for business with the same force and effect as if
that payment were made on the Interest Payment Date, maturity date or date fixed
for redemption and no interest shall accrue for the period after that date.
SECTION 16.05. NO RIGHTS CONFERRED ON OTHERS. Nothing herein
contained shall confer any right upon any person other than the parties hereto,
the Issuer, the Credit Facility Issuer and the owners of the Bonds.
SECTION 16.06. ILLEGAL, ETC. PROVISIONS DISREGARDED. If any
term or provision of this Indenture or the Bonds or the application thereof for
any reason or circumstance shall to any extent be held invalid or unenforceable,
the remaining provisions or the application of such term or provision to persons
and situations other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision hereof and thereof
shall be valid and enforced to the fullest extent permitted by law.
82
<PAGE>
SECTION 16.07. SUBSTITUTE NOTICE. If for any reason it shall
be impossible to make publication of any notice required hereby in a newspaper
or newspapers, then such publication or other notice in lieu thereof as shall be
made with the approval of the Trustee shall constitute a sufficient giving of
such notice.
SECTION 16.08. NOTICES. Any notice to the Issuer, the Company
or the Trustee shall be given in writing, either by registered mail, to be
deemed effective 2 days after mailing, or by telegram, or by telephone,
confirmed in writing, to:
<TABLE>
<CAPTION>
<S> <C>
The Company: Spurlock Adhesives, Inc.
5090 General Mahone Highway
Waverly, Virginia 23890
Attention: Phillip S. Sumpter, Executive Vice President
Telephone: (804) 834-3113
Telecopy: (804) 834-2860
With a Copy to: Williams Mullen Christian & Dobbins, P.C.
1021 East Cary Street
Richmond, Virginia 23219
Attention: David L. Dallas, Jr., Esq.
Telephone: (804) 643-1991
Telecopy: (804) 783-6456
The Issuer: County of Saratoga Industrial Development Agency
Saratoga County Municipal Center
40 McMaster Street
Ballston Spa, New York 12020
Attention: Administrator
Telephone: (518) 884-4705
Telecopy: (518) 885-2220
With a Copy to: Snyder, Kiley, Toohey & Corbett, LLP
160 West Avenue
P.O. Box 4367
Saratoga Springs, New York 12866
Attention: Michael J. Toohey, Esq.
Telephone: (518) 584-1500
Telecopy: (518) 584-1503
The Trustee: Star Bank, N.A.
425 Walnut Street
6th Floor
Cincinnati, Ohio 45202
Attention: Corporate Trust Services
Telephone: (513) 632-2047
Telecopy: (513) 632-5511
83
<PAGE>
If to the Bank: KeyBank National Association
66 South Pearl Street
Albany, New York 12207-1501
Attention: Corporate Banking Division
Telephone: (518) 486-8181
Telecopy: (518) 487-4285
With a Copy to: KeyBank National Association
66 South Pearl Street
Albany, New York 12207
Attention: International Division, Letter of Credit Department
Telephone: (518) 486-8144
Telecopy: (518) 487-4998
and
Crane Kelley Greene & Parente
90 State Street
Albany, New York 12207
Attention: Kevin J. Kelley, Esq.
Telephone: (518) 432-8000
Telecopy: (518) 432-0086
</TABLE>
SECTION 16.09. SUCCESSORS AND ASSIGNS. All the covenants,
promises and agreements in this Indenture contained by or on behalf of the
Issuer, or by or on behalf of the Trustee, shall bind and inure to the benefit
of their respective successors and assigns, whether so expressed or not.
SECTION 16.10. HEADINGS FOR CONVENIENCE ONLY. The descriptive
headings in this Indenture are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
SECTION 16.11. COUNTERPARTS. The Indenture may be executed in
any number of counterparts, each of which when so executed and delivered shall
constitute an original, but all of which, when taken together, shall constitute
but one and the same instrument, and shall become effective when copies hereof
shall be delivered to each of the parties hereto, which copies, when taken
together, bear the signatures of each of the parties hereto.
SECTION 16.12. APPLICABLE LAW. This Indenture shall be
governed by and construed in accordance with the laws of the State of New York.
84
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused these presents to be
signed in its name and behalf of its Chairman, and to evidence its acceptance of
the trusts hereby created, the Trustee has caused these presents to be signed in
its name and behalf by one of its duly authorized trust officers, all as of the
day and year first hereinabove written.
COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ Floyd H. Rourke
------------------------------------
Floyd H. Rourke, Chairman
STAR BANK, N.A., as Trustee
By: /s/ Keith A. Maurmeier
------------------------------------
Name: Keith A. Maurmeier
----------------------------------
Title: Senior Trust Officer
---------------------------------
The Company hereby approves, consents to and agrees to be bound by all
of the terms and provisions of the Indenture insofar as such terms or
provisions, directly or indirectly, relate to, apply to, require or prohibit
action by or deal with the Company, or Property of the Company, including,
without limitation, the Project Facility, and including, but not limited to, all
provisions for the deposit or payment of moneys to funds held by the Trustee
under the Indenture. The Company hereby agrees, at its own expense, to do al
things and take all actions as shall be necessary to enable the Issuer to
perform its obligations under the Indenture. This paragraph shall bind the
Company and its successors and assigns.
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
------------------------------------
Name: Phillip S. Sumpter
----------------------------------
Title: Executive Vice President
---------------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On the 7th day of October, 1997, before me personally came FLOYD H.
ROURKE, to me known, who being by me duly sworn, did depose and say that he
resides in Northumberland, New York, that he is the CHAIRMAN of the COUNTY OF
SARATOGA INDUSTRIAL DEVELOPMENT AGENCY, the public benefit corporation of the
State of New York described in and which executed the foregoing instrument, and
that he signed his name thereto by authority of said public benefit corporation.
/s/ Theresa C. Priest
---------------------------------------
Notary Public
THERESA C. PRIEST
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
85
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On this 9th day of October, 1997, before me personally came Keith A.
Maurmeier, to me known, who being by me duly sworn, did depose and sat that he
resides in Cincinnati Ohio, that he is the Senior Trust Officer of STAR BANK,
N.A. the national banking association described in and which executed the
foregoing instrument, and that he signed his name thereto by order of the Board
of Directors of said national banking association.
/s/ Theresa C. Priest
---------------------------------------
Notary Public
THERESA C. PRIEST
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On this 9th day of October, 1997, before me personally came Phillip S.
Sumpter, to me known, who being by me duly sworn, did depose and sat that he
resides in Waverly Virginia, that he is the Exec V.P. of SPURLOCK ADHESIVES,
INC., the corporation described in and which executed the foregoing instrument,
and that he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Theresa C. Priest
---------------------------------------
Notary Public
THERESA C. PRIEST
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
86
<PAGE>
Exhibit 10.31
CLOSING ITEM NO.: A-4
- -------------------------------------------------------------------------------
COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT AGENCY
AND
SPURLOCK ADHESIVES, INC.
INSTALLMENT SALE AGREEMENT
DATED AS OF OCTOBER 1, 1997
-----------------------------------------
CERTAIN RIGHTS OF THE COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY (THE "ISSUER") UNDER THIS
INSTALLMENT SALE AGREEMENT AND CERTAIN MONEYS DUE AND
TO BECOME DUE TO THE ISSUER HEREUNDER HAVE BEEN
ASSIGNED TO STAR BANK, N.A., AS TRUSTEE (THE
"TRUSTEE"), PURSUANT TO A PLEDGE AND ASSIGNMENT DATED
AS OF OCTOBER 1, 1997, FROM THE ISSUER TO THE
TRUSTEE.
-----------------------------------------
THIS INSTALLMENT SALE AGREEMENT IS INTENDED TO
CONSTITUTE A SECURITY AGREEMENT UNDER THE UNIFORM
COMMERCIAL CODE OF THE STATE OF NEW YORK.
------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is not part of the Installment
Sale Agreement and is for convenience of reference only)
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS.............................................................................3
SECTION 1.2. INTERPRETATION..........................................................................9
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER....................................11
SECTION 2.2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY...................................12
SECTION 2.3. COVENANT WITH TRUSTEE AND BONDHOLDERS AND BANK.........................................13
ARTICLE III
CONVEYANCE AND USE OF PROJECT FACILITY
SECTION 3.1. CONVEYANCE TO ISSUER...................................................................14
SECTION 3.2. USE OF PROJECT FACILITY................................................................14
ARTICLE IV
ACQUISITION, RECONSTRUCTION, CONSTRUCTION AND INSTALLATION OF PROJECT FACILITY; ISSUANCE OF
BONDS; USE OR PROCEEDS
SECTION 4.1. ACQUISITION, CONSTRUCTION AND INSTALLATION OF PROJECT FACILITY.........................15
SECTION 4.2. ISSUANCE OF BONDS......................................................................16
SECTION 4.3. APPLICATION OF PROCEEDS OF BONDS.......................................................16
SECTION 4.4. COMPLETION OF PROJECT FACILITY.........................................................18
SECTION 4.5. COMPLETION BY COMPANY..................................................................18
SECTION 4.6. REMEDIES TO BE PURSUED AGAINST CONTRACTORS, SUBCONTRACTORS, MATERIALMEN AND
THEIR SURETIES.................................................................................18
ARTICLE V
AGREEMENT TO CONVEY PROJECT FACILITY; INSTALLMENT PURCHASE PAYMENTS AND OTHER AMOUNTS PAYABLE
SECTION 5.1. AGREEMENT TO CONVEY PROJECT FACILITY...................................................20
SECTION 5.2. CONVEYANCE; INSTRUMENTS................................................................20
SECTION 5.3. INSTALLMENT PURCHASE PAYMENTS AND OTHER AMOUNTS PAYABLE................................20
SECTION 5.4. NATURE OF OBLIGATIONS OF COMPANY HEREUNDER.............................................21
i
<PAGE>
SECTION 5.5. PREPAYMENT OF INSTALLMENT PURCHASE PAYMENTS............................................22
SECTION 5.6. RIGHTS AND OBLIGATIONS OF COMPANY UPON DISCHARGE OF LIEN OF MORTGAGE...................22
SECTION 5.7. GRANT OF SECURITY INTEREST.............................................................22
ARTICLE VI
MAINTENANCE, MODIFICATIONS, TAXES AND INSURANCE
SECTION 6.1. MAINTENANCE AND MODIFICATIONS OF PROJECT FACILITY......................................24
SECTION 6.2. TAXES, ASSESSMENTS AND UTILITY CHARGES.................................................24
SECTION 6.3. INSURANCE REQUIRED.....................................................................25
SECTION 6.4. ADDITIONAL PROVISIONS RESPECTING INSURANCE.............................................26
SECTION 6.5. APPLICATION OF NET PROCEEDS OF INSURANCE...............................................27
SECTION 6.6. PAYMENTS IN LIEU OF TAXES..............................................................27
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
SECTION 7.1. DAMAGE OR DESTRUCTION..................................................................29
SECTION 7.2. CONDEMNATION...........................................................................30
SECTION 7.3. ADDITIONS TO PROJECT FACILITY..........................................................32
ARTICLE VIII
SPECIAL COVENANTS
SECTION 8.1. NO WARRANTY OF CONDITION OR SUITABILITY BY ISSUER; ACCEPTANCE "AS IS\..................33
SECTION 8.2. HOLD HARMLESS PROVISIONS...............................................................33
SECTION 8.3. RIGHT OF ACCESS TO PROJECT FACILITY....................................................34
SECTION 8.4. COMPANY NOT TO TERMINATE EXISTENCE OR DISPOSE OF ASSETS; CONDITIONS UNDER
WHICH EXCEPTIONS PERMITTED.....................................................................34
SECTION 8.5. AGREEMENT TO PROVIDE INFORMATION.......................................................34
SECTION 8.6. BOOKS OF RECORD AND ACCOUNT; FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATES.............35
SECTION 8.7. COMPLIANCE WITH ORDERS, ORDINANCES, ETC................................................35
SECTION 8.8. DISCHARGE OF LIENS AND ENCUMBRANCES....................................................35
SECTION 8.9. PERFORMANCE BY ISSUER OR TRUSTEE OF COMPANY'S OBLIGATIONS..............................36
SECTION 8.10. DEPRECIATION DEDUCTIONS AND TAX CREDITS...............................................36
SECTION 8.11. IDENTIFICATION OF EQUIPMENT...........................................................36
SECTION 8.12. INDEMNIFICATION OF TRUSTEE............................................................36
SECTION 8.13. COVENANT AGAINST ARBITRAGE BONDS......................................................37
SECTION 8.14. ENVIRONMENTAL MATTERS.................................................................37
SECTION 8.15. INDEMNIFICATION OF BANK...............................................................38
ARTICLE IX
ASSIGNMENTS; MERGER OF ISSUER
SECTION 9.1. ASSIGNMENT OF INSTALLMENT SALE AGREEMENT...............................................39
SECTION 9.2. PLEDGE AND ASSIGNMENT OF ISSUER'S INTERESTS TO TRUSTEE.................................39
ii
<PAGE>
SECTION 9.3. MERGER OF ISSUER.......................................................................39
SECTION 9.4. SALE OR LEASE OF PROJECT FACILITY......................................................39
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
SECTION 10.1. EVENTS OF DEFAULT DEFINED.............................................................41
SECTION 10.2. REMEDIES ON DEFAULT...................................................................42
SECTION 10.3. REMEDIES CUMULATIVE...................................................................43
SECTION 10.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES.........................................43
SECTION 10.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER............................................43
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. NOTICES...............................................................................44
SECTION 11.2. BINDING EFFECT........................................................................45
SECTION 11.3. SEVERABILITY..........................................................................45
SECTION 11.4. AMENDMENTS, CHANGES AND MODIFICATIONS.................................................46
SECTION 11.5. EXECUTION OF COUNTERPARTS.............................................................46
SECTION 11.6. APPLICABLE LAW........................................................................46
SECTION 11.7. RECORDING AND FILING..................................................................46
SECTION 11.8. SURVIVAL OF OBLIGATIONS...............................................................46
SECTION 11.9. TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING................................46
SECTION 11.10. NO RECOURSE; SPECIAL OBLIGATION......................................................46
SECTION 11.11. SUBORDINATION TO MORTGAGE AND ASSIGNMENT.............................................47
SECTION 11.12. SUBMISSION TO JURISDICTION...........................................................47
EXHIBIT "A"
REAL PROPERTY DESCRIPTION...........................................................................A-1
EXHIBIT "B"
DESCRIPTION OF EQUIPMENT............................................................................B-1
EXHIBIT "C"
FORM OF DEED TO COMPANY.............................................................................C-1
EXHIBIT "D"
FORM OF BILL OF SALE TO THE COMPANY.................................................................D-1
</TABLE>
iii
<PAGE>
INSTALLMENT SALE AGREEMENT
THIS INSTALLMENT SALE AGREEMENT dated as of OCTOBER 1, 1997, (the
"Installment Sale Agreement") by and between the COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY, a public benefit corporation of the State of New York (the
"State") having its office at 40 McMaster Street, Ballston Spa, New York 12020
(the "Issuer"), and SPURLOCK ADHESIVES, INC., a corporation organized and
existing under the laws of the State of Virginia, having an address of 209 West
Main Street, Waverly, Virginia 23890 (the "Company");
W I T N E S S E T H :
WHEREAS, the Issuer, by resolution adopted on September 16, 1997, (the
"Resolution"), determined to issue its $6,000,000 aggregate principal amount of
Multi-Mode Variable Rate Industrial Development Revenue Bonds (Spurlock
Adhesives, Inc. Project), Series 1997 A (the "Bonds") for the purpose of
financing a portion of the costs of the Project (as hereinafter defined); and
WHEREAS, said Project (the "Project") shall consist of (A) (1) the
acquisition of a certain parcel of land comprising approximately 16.37 acres
constituting Lot #3 located in the Moreau Industrial Park in the Town of Moreau,
Saratoga County, New York (the "Land"), (2) the construction on the Land of two
(2) buildings approximately 10,000 square feet each in size and one (1)
approximately 800 square foot building for use in the manufacturing of synthetic
organic chemicals and related functions (collectively the "Facility") and (3)
the acquisition and installation therein of certain machinery and equipment (the
"Equipment" and together with the Land and the Facility, the "Project
Facility"), and (B) the financing of a portion of the costs of the foregoing;
and
WHEREAS, contemporaneously with the execution of the Installment Sale
Agreement, the Issuer and Star Bank, N.A., as trustee (the "Trustee"), have
entered into a trust indenture dated as of October 1, 1997, (the "Indenture")
specifying the terms and conditions upon which the Bonds are issued and secured;
and
WHEREAS, as security for the Bonds, the Company will enter into a
letter of credit reimbursement agreement dated as of October 1, 1997 (the
"Reimbursement Agreement") with KeyBank National Association, a national banking
association organized and existing under the laws of the United States (the
"Bank"), pursuant to which the Bank is to issue in favor of the Trustee an
irrevocable transferable direct-pay letter of credit (the "Letter of Credit") in
an amount equal to the aggregate of the principal amount of the Bonds, together
with one hundred ten (110) days' interest thereon at a maximum rate of ten
percent (10%); and
WHEREAS, the Issuer proposes to undertake the Project, appoint the
Company as agent of the Issuer to undertake the acquisition, construction and
installation of the Project Facility and sell the Project Facility to the
Company, and the Company desires to act as agent of the Issuer to undertake the
acquisition, reconstruction, construction and installation of the Project
Facility and purchase the Project Facility from the Issuer, all pursuant to the
terms and conditions hereinafter set forth in the Installment Sale Agreement;
and
WHEREAS, the providing of the Project Facility and the sale of the
Project Facility to the Company pursuant to the Installment Sale Agreement is
for a proper purpose, to wit, to advance the job
<PAGE>
opportunities, health, general prosperity and economic welfare of the
inhabitants of the State, pursuant to the provisions of the Act (as hereinafter
defined); and
WHEREAS, all things necessary to constitute the Installment Sale
Agreement a valid and binding agreement by and between the parties hereto in
accordance with the terms hereof have been done and performed, and the creation,
execution and delivery of the Installment Sale Agreement have in all respects
been duly authorized by the Issuer and the Company;
NOW, THEREFORE, FOR AND IN CONSIDERATION OF THE PREMISES AND THE MUTUAL
COVENANTS HEREINAFTER CONTAINED, THE PARTIES HERETO HEREBY FORMALLY COVENANT,
AGREE AND BIND THEMSELVES AS FOLLOWS, TO WIT:
2
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. The terms defined in this Section 1.1 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
the Installment Sale Agreement and of any agreement supplemental hereto shall
have the respective meaning specified in this Section 1.1
"Act" means Title 1 of Article 18-A of the General Municipal Law of the
State, as amended from time to time, together with Chapter 855 of the Laws of
1971 of the State, as amended from time to time.
"Act of Bankruptcy" means the filing of a petition in bankruptcy (or
the other commencement of a bankruptcy or similar proceeding) by or against the
Company or the Issuer under any applicable bankruptcy, insolvency,
reorganization or similar law, now or hereafter in effect.
"Assignment" means the pledge and assignment dated as of October 1,
1997 from the Issuer to the Trustee pursuant to which the Issuer has assigned to
the Trustee its rights under the Installment Sale Agreement (other than
Unassigned Rights), as said pledge and assignment may be supplemented or amended
from time to time.
"Alternate Credit Facility" shall have the meaning assigned to such
term in the Indenture.
"Authorized Representative" means the Person or Persons at the time
designated to act in behalf of the Issuer or the Company, as the case may be, by
written certificate furnished to the Trustee containing the specimen signature
of each such Person and signed on behalf of (A) the Issuer by its Chairman or
Vice Chairman, or such other person as may be authorized by resolution of the
Issuer, and (B) the Company by Irvine Spurlock, Phillip Sumpter or such other
person as may be authorized by the Company.
"Available Moneys" shall have the meaning assigned to such term in the
Indenture.
"Bank" means initially, KeyBank National Association, and its
successors and assigns in its capacity as issuer of the Letter of Credit and in
the event an Alternate Credit Facility is outstanding, the issuer of the
Alternate Credit Facility.
"Bank Documents" means the Letter of Credit, the Reimbursement
Agreement, the Mortgage, the Pledge and Security Agreement, the Collateral
Mortgage, the Security Agreement, the Guaranty, the Term Loan Note, the Building
Loan Agreement and any other document now or hereafter executed by the Issuer or
the Company or the Guarantor in favor of the Bank which affects the rights of
the Bank in or to the Project, in whole or in part, or which secures or
guarantees any sum due under any Bank Document.
"Bill of Sale to Issuer" means the bill of sale from the Company to the
Issuer conveying the Company's interest in the Equipment to the Issuer.
"Bond Counsel" means Lemery and Reid, P.C. of Saratoga Springs, New
York or such other attorney or firm of attorneys located in the State whose
experience in matters relating to the issuance of
3
<PAGE>
obligations by states and their political subdivisions is nationally recognized
and who are acceptable to the Issuer and the Trustee in their reasonable
discretion.
"Bond Fund" means the fund so designated and established pursuant to
Section 402 of the Indenture.
"Bond Payment Date" means each Interest Payment Date and each date on
which principal or premium shall be payable on the Bonds according to their
terms and the Indenture, so long as any Bonds shall be Outstanding.
"Bond Registrar" means the Trustee.
"Bond Year" means each one (1) year period ending on the anniversary of
the Closing Date.
"Bondholder" or "Holder" or "Owner" means the registered owner of any
Bond as indicated on the bond register maintained by the Bond Registrar.
"Bonds" means the Issuer's Multi-Mode Variable Rate Industrial
Development Revenue Bonds (Spurlock Adhesives, Inc. Project), Series 1997 A
issued in the aggregate principal amount of $6,000,000 pursuant to the
Resolution and Article II of the Indenture.
"Building Loan Agreement" means the building loan agreement dated as of
October 1, 1997 by and between the Issuer, the Company and the Bank, as amended
or supplemented from time to time.
"Business Day" means any day of the year on which the Trustee and
banking institutions located in the State are open for the purpose of conducting
business.
"Closing Date" means the date on which authenticated Bonds are
delivered to the purchaser of the Bonds and payment is received therefor by the
Trustee on behalf of the Issuer.
"Code" means the Internal Revenue Code of 1986, as amended, and the
applicable regulations of the United States Treasury Department promulgated
thereunder and under the Internal Revenue Code of 1954, as amended.
"Collateral Mortgage" means the collateral mortgage dated as of October
1, 1997 from the Company in favor of the Bank, as said collateral mortgage may
be amended or supplemented from time to time.
"Company" means Spurlock Adhesives, Inc., a corporation organized and
existing under the laws of the State of Virginia, having an address of 209 West
Main Street, Waverly, Virginia 23890, and its successors and permitted assigns.
"Completion Date" means the date identified on the completion
certificate delivered by the Company in accordance with Section 4.4 of the
Installment Sale Agreement.
"Condemnation" means the taking of title to, or the use of, Property
under the exercise of the power of eminent domain by any Governmental Authority.
4
<PAGE>
"Construction Contract" means the contract for the construction of the
Facility by and between the Company and the Contractor.
"Construction Period" means the period (A) beginning on the Closing
Date and (B) ending on the Completion Date.
"Contractor" means D.B. Western, Inc.
"Cost of the Project" means all those costs and items of expense
enumerated in Section 4.3 of the Installment Sale Agreement.
"Debt Service Payment" means, with respect to any Interest Payment Date
and/or Purchase Date, (A) the interest payable on the Bonds on such Bond Payment
Date, plus (B) the principal, if any, payable on the Bonds on such Bond Payment
Date, plus (C) the premium, if any, payable on the Bonds on such Bond Payment
Date.
"Deed to Issuer" means the deed from the Company to the Issuer with
respect to the Project Facility.
"Equipment" means all materials, machinery, equipment, fixtures or
furnishings intended to be acquired with the proceeds of the Bonds or any
payment made by the Company pursuant to Section 4.5 of the Installment Sale
Agreement, and such substitutions and replacements therefor as may be made from
time to time pursuant to the Installment Sale Agreement, including, without
limitation, all the Property described in Exhibit "B" attached to the
Installment Sale Agreement and the Mortgage.
"Event of Default" means any of those events defined as Events of
Default by the terms of Article X of the Indenture, Article X of the Installment
Sale Agreement or Article VI of the Mortgage.
"Facility" means all those buildings, improvements, structures and
other related facilities (A) affixed to or attached to the Land and (B) financed
with the proceeds of the sale of the Bonds or any payment made by the Company
pursuant to Section 4.5 of the Installment Sale Agreement.
"Financing Documents" means the Bonds, the Indenture, the Installment
Sale Agreement, the Assignment, the Bank Documents, the Tax Regulatory Agreement
and any other document now or hereafter executed by the Issuer or the Company in
favor of the Bondholders or the Trustee or the Bank which affects the rights of
the Bondholders or the Trustee or the Bank in or to the Project Facility, in
whole or in part, or which secures or guarantees any sum due under the Bonds or
any other Financing Document, each as amended from time to time, and all
documents related thereto and executed in connection therewith.
"Governmental Authority" means the United States, the State, any other
state and any political subdivision of any of them, and any agency, department,
commission, board, bureau or instrumentality of any of them.
"Gross Proceeds" means one hundred percent (100%) of the proceeds of
the transaction in question, including, but not limited to, the settlement of
any insurance or Condemnation award.
"Guarantor" means Spurlock Industries, Inc.
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"Guaranty" means the payment and performance guaranty dated as of
October 1, 1997 from the Guarantor in favor of the Bank, as said payment and
performance guaranty may be amended or supplemented from time to time.
"Indebtedness" shall have the meaning assigned to such term in Section
2.01 of the Mortgage.
"Indenture" means the trust indenture dated as of September 1, 1997 by
and between the Issuer and the Trustee, as said trust indenture may be
supplemented or amended from time to time.
"Independent Counsel" shall mean an attorney or firm of attorneys duly
admitted to practice law before the highest court of any state and approved by
the Bank and not a full-time employee of the Company or the Issuer.
"Installment Sale Agreement" means the installment sale agreement dated
as of October 1, 1997 by and between the Issuer and the Company, as said
installment sale agreement may be supplemented or amended from time to time.
"Insurance and Condemnation Fund" means the fund so designated and
established pursuant to Section 4.03 of the Indenture.
"Interest Payment Date" means the date on which an installment of
interest on the Bonds is paid as set forth in the Indenture.
"Issuer" means (A) County of Saratoga Industrial Development Agency and
its successors and assigns, and (B) any public benefit corporation or political
subdivision resulting from or surviving any consolidation or merger to which
County of Saratoga Industrial Development Agency or its successors or assigns
may be a party.
"Land" means the approximately 16.37 acre parcel of land constituting
Lot #3 in the Moreau Industrial Park in the Town of Moreau, Saratoga County, New
York, as more particularly described in Exhibit "A" attached to the Installment
Sale Agreement and Exhibit "A" attached to the Mortgage.
"Letter of Credit" means (A) the irrevocable, direct-pay Letter of
Credit issued by the Bank and delivered to the Trustee upon the issuance of the
Bonds and (B) any Alternate Credit Facility.
"Lien" means any interest in Property securing an obligation owed to a
Person, whether such interest is based on the common law, statute or contract,
and including but not limited to a security interest arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" includes reservations,
exceptions, encroachments, projections, easements, rights of way, covenants,
conditions, restrictions, leases and other similar title exceptions and
encumbrances, including but not limited to mechanics', materialmen's,
warehousemen's and carriers' liens and other similar encumbrances affecting real
property. For purposes hereof, a Person shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement
or other arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes.
"Local Authority" means any Governmental Authority which exercises
jurisdiction over the Land or the reconstruction, construction or installation
of the Project Facility.
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"Maturity Date" means with respect to any Bonds, the Stated Maturity.
"Mortgage" means the mortgage and security agreement dated as of
October 1, 1997 from the Issuer and the Company to the Bank, as said mortgage
may be supplemented or amended from time to time.
"Mortgaged Property" shall have the meaning assigned to such term in
Section 2.01 of the Mortgage.
"Net Proceeds" means so much of the Gross Proceeds with respect to
which that term is used as remain after payment of all fees for services,
expenses, costs and taxes (including attorneys' fees) incurred in obtaining such
Gross Proceeds.
"Outstanding" shall have the meaning assigned to such term in the
Indenture.
"Permit" shall mean any permit, license, certificate or authorization
of any kind required by any Governmental Authority in connection with the use,
ownership, occupancy or operation of the Project Facility, including all such
environmental permits required for the transfer, sale or conveyance of any part
of the Project Facility or the storage, treatment, generation, handling,
transportation, processing or disposal of Hazardous Substances.
"Permitted Encumbrances" means (A) utility, access and other easements,
rights of way, restrictions, encroachments and exceptions that benefit or do not
materially impair the utility or the value of the Property affected thereby for
the purposes for which it is intended, (B) mechanics', materialmen's,
warehousemen's, carriers' and other similar Liens to the extent permitted by
Section 8.8(B) of the Installment Sale Agreement, (C) Liens for taxes,
assessments and utility charges (1) to the extent permitted by Section 6.2(B) of
the Installment Sale Agreement, or (2) at the time not delinquent, (D) any Lien
on the Project Facility obtained through any Financing Document, (E) any
exception appearing in the mortgagee title insurance policy issued on the
Closing Date and accepted by the Bank and (F) any Permitted Lien (as defined in
the Reimbursement Agreement).
"Person" means an individual, partnership, corporation, trust,
unincorporated organization or Governmental Authority.
"Plans and Specifications" means the plans and specifications for the
construction and reconstruction of the Facility, prepared and stamped by the
Architect, and all material amendments and modifications thereof made by change
orders; and, if an item for the construction and reconstruction of the Facility
is not specifically detailed in the aforementioned plans and specifications, but
rather is described by way of manufacturer's or supplier's or contractor's shop
drawings, catalog references or similar descriptions, the term also includes
such shop drawings, catalog references and descriptions.
"Pledge and Security Agreement" means (A) the pledge and security
agreement dated as of October 1, 1997 by and between the Company and the Bank,
as the same may be supplemented or amended from time to time, and (B) the pledge
and security agreement by and between the Company and any substitute Bank, as
the same may be supplemented or amended form time to time.
"Project" means (A) the acquisition of the Land, (B) the construction
of the Facility, (C) the installation of the Equipment; and (D) the financing of
a portion of the costs of the foregoing by the issuance of the Bonds.
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"Project Facility" means, collectively, the Land, the Facility and the
Equipment.
"Project Fund" means the fund so designated and established pursuant to
Section 402 of the Indenture.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Rebate Amount" shall have the meaning assigned to such term in the Tax
Regulatory Agreement.
"Rebate Fund" means the fund so designated and established pursuant to
Section 402 of the Indenture.
"Request for Disbursement" means a request from the Company, as agent
of the Issuer, stating the amount of disbursement sought in substantially the
form of Schedule "D" attached to the Building Loan Agreement.
"Reimbursement Agreement" means the letter of credit reimbursement
agreement dated as of October 1, 1997 between the Company and the Bank, as the
same may be amended from time to time and any agreement of the Company with a
Credit Facility Issuer setting forth the obligations of the Company to such
Credit Facility Issuer arising out of any payments under a Credit Facility.
"Requirement" or "Local Requirement" means any law, ordinance, order,
rule or regulation of a Governmental Authority or a Local Authority,
respectively.
"Resolution" means the resolution of the Issuer adopted on September
16, 1997, authorizing the Issuer to undertake the Project, to issue and sell the
Bonds and to execute and deliver the Financing Documents to which the Issuer is
a party.
"Security Agreement" means the security agreement dated as of October
1, 1997 from the Company to the Bank, as said security agreement may be
supplemented or amended from time to time.
"SEQR" means Article 8 of the Environmental Conservation Law, Chapter
43-B of the Consolidated Laws of New York, as amended and the regulations
adopted pursuant thereto.
"State" means the State of New York.
"Stated Amount" shall have the meaning assigned to such term in the
Letter of Credit.
"Stated Maturity" means, when used with respect to any Bond or any
installment of interest thereon, the date specified in such Bond as the fixed
date on which the principal of such Bond or such installment of interest on such
Bond is due and payable.
"Tax Regulatory Agreement" means the tax regulatory agreement dated the
Closing Date executed by the Company in favor of the Issuer, the Trustee and the
Bank regarding, among other things, the restrictions prescribed by the Code in
order for interest on the Bonds to remain excluded from gross income for federal
income tax purposes.
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"Term Loan Note" means the term loan note dated the Closing Date in the
principal amount of $1,500,000 from the Company in favor of the Bank.
"Trust Estate" shall have the meaning assigned to such term in the
Indenture.
"Trustee" means Star Bank, N.A., a national banking association
organized and existing under the laws of the United States, having its office at
425 Walnut Street, Cincinnati, Ohio 45201-1118, or any successor trustee or
co-trustee, acting as trustee under the Indenture.
"Unassigned Rights" means (A) the rights of the Issuer granted pursuant
to Sections 2.2(E), 2.2(F), 2.2(J), 3.2, 4.1(B), 4.1(D), 4.1(E)(2), 4.1(F),
4.1(G), 4.4, 5.2, 5.3(B)(2), 6.1(B)(1), 6.3, 6.4 (as it relates to the insurance
required by Section 6.3), 6.5, 6.6, 7.1, 7.2, 8.1, 8.2, 8.3, 8.4, 8.5, 8.6(C),
8.7, 8.8, 8.9, 8.11, 8.14, 9.1, 9.3, 9.4, 11.1, 11.2, 11.10 and 11.11(B) of the
Installment Sale Agreement, (B) the moneys due and to become due to the Issuer
for its own account or the members, officers, agents (other than the Company)
and employees of the Issuer for their own account pursuant to Sections 2.2(F),
4.1(F), 5.3(B)(2), 5.3(C), 6.4(B), 8.2, 8.14 and 10.4 of the Installment Sale
Agreement, (C) the rights of the Issuer under Section 6.6 of the Installment
Sale Agreement and the moneys due as payments in lieu of taxes under Section 6.6
of the Installment Sale Agreement, and (D) the right to enforce the foregoing
pursuant to Article X of the Installment Sale Agreement. Notwithstanding the
preceding sentence, to the extent the obligations of the Company under the
Sections of the Installment Sale Agreement listed in (A) or (C) above do not
relate to the payment of moneys to the Issuer for its own account or to the
members, officers, agents (other than the Company) and employees of the Issuer
for their own account, such obligations, upon assignment of the Installment Sale
Agreement by the Issuer to the Trustee pursuant to the Assignment and to the
Bank pursuant to the Mortgage, shall be deemed to and shall constitute
obligations of the Company to the Issuer and the Trustee and the Bank, jointly
and severally, and either the Issuer or the Trustee or the Bank may commence an
action to enforce the Company's obligations under the Installment Sale
Agreement.
SECTION 1.2. INTERPRETATION. (A) In the Installment Sale Agreement, unless the
context otherwise requires:
(1) the terms "hereby", "hereof", "herein", "hereunder"
and any similar terms as used in the Installment Sale
Agreement refer to the Installment Sale Agreement, and the
term "heretofore" shall mean before, and the term "hereafter"
shall mean after, the date of the Installment Sale Agreement;
(2) words of masculine gender shall mean and include
correlative words of feminine and neuter genders, and words
importing the singular number shall mean and include the
plural number, and vice versa;
(3) words importing persons shall include firms,
associations, partnerships (including limited partnerships),
trusts, corporations and other legal entities, including
public bodies, as well as natural persons;
(4) any headings preceding the texts of the several
Articles and Sections of the Installment Sale Agreement, and
any table of contents or marginal notes appended to copies
hereof, shall be solely for convenience of reference and shall
neither constitute a part of the Installment Sale Agreement
nor affect its meaning, construction or effect; and
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(5) any certificates, letters or opinions required to be
given pursuant to the Installment Sale Agreement shall mean a
signed document attesting to or acknowledging the
circumstances, representations, opinions of law or other
matters therein stated or set forth or setting forth matters
to be determined pursuant to the Installment Sale Agreement.
(B) If any one or more of the covenants or agreements
provided herein on the part of the Issuer or the Company to be performed shall,
for any reason, be held or shall, in fact, be inoperative, unenforceable or
contrary to law in any particular case, such circumstance shall not render the
provision in question inoperative or unenforceable in any other case or
circumstance. Further, if any one or more of the phrases, sentences, clauses,
paragraphs or sections herein should be contrary to law, then such covenant or
covenants or agreement or agreements shall be deemed separable from the
remaining covenants and agreements hereof and shall in no way affect the
validity of the other provisions of the Installment Sale Agreement.
(C) The Installment Sale Agreement shall be construed in
accordance with the applicable laws of the State.
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ARTICLE II
REPRESENTATIONS, WARRANTIES
AND COVENANTS
SECTION 2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER. The Issuer
makes the following representations, warranties and covenants as the basis for
the undertakings on its part herein contained:
(A) The Issuer is duly established under the provisions
of the Act and has the power to enter into the Installment Sale Agreement and to
carry out its obligations hereunder. Based upon the representations of the
Company as to the utilization of the Project Facility, the Project Facility will
constitute a "project", as such quoted term is defined in the Act. By proper
official action, the Issuer has been duly authorized to execute, deliver and
perform the Installment Sale Agreement and the other Financing Documents to
which it is a party.
(B) Neither the execution and delivery of the Installment
Sale Agreement, the consummation of the transactions contemplated hereby nor the
fulfillment of or compliance with the provisions of the other Financing
Documents by the Issuer will conflict with or result in a breach by the Issuer
of any of the terms, conditions or provisions of the Act, the by-laws of the
Issuer or any order, judgment, agreement or instrument to which the Issuer is a
party or by which it is bound, or will constitute a default by the Issuer under
any of the foregoing.
(C) The Issuer will cause the Project Facility to be
acquired, reconstructed, constructed and installed and will sell the Project
Facility to the Company pursuant to the Installment Sale Agreement, all for the
purpose of advancing the job opportunities, health, general prosperity and
economic welfare of the people of the State and improving their standard of
living.
(D) Except as provided in Article IX hereof and in
Section 10.2(A)(3) hereof, the Issuer, to the extent of its interest therein,
shall not sell, assign, transfer, encumber or pledge as security the Project
Facility or any part thereof and shall maintain the Project Facility free and
clear of all Liens and encumbrances, except as contemplated or allowed by the
terms of the Installment Sale Agreement and the other Financing Documents.
(E) To assist in financing the Cost of the Project, the
Issuer will issue and sell the Bonds. In no event will the Issuer issue and sell
additional obligations to pay the Cost of the Project if the issuance and sale
of such further obligations would cause interest on the Bonds to be or become
subject to federal income taxation under the Code. The Issuer shall cooperate
with the Company in the filing by the Company, as agent of the Issuer, of such
returns and other information with the Internal Revenue Service as are required
by any applicable law or regulation, provided the Company shall bear all costs
of preparing, gathering and/or filing such returns and other information.
(F) So long as the Bonds shall be outstanding, the Issuer
shall not take any action (or omit to take any action which the Trustee or the
Company, together with Bond Counsel, advise the Issuer in writing to take) which
action (or omission) will in any way cause (1) the proceeds from the sale of the
Bonds to be applied in a manner contrary to that provided in the Financing
Documents or (2) interest on the Bonds to be includable under the Code in the
gross income of the holders thereof.
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SECTION 2.2. The Company makes the following representations, warranties and
covenants as the basis for the undertakings on its part herein contained:
(A) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Virginia, is
authorized to conduct business within the State and has the power and authority
to enter into the Installment Sale Agreement and the other Financing Documents
to which the Company is a party and carry out its obligations hereunder and
thereunder.
(B) Neither the execution and delivery of the Installment
Sale Agreement or the other Financing Documents to which the Company is a party,
the consummation of the transactions contemplated hereby or thereby nor the
fulfillment of or compliance with the provisions of the Installment Sale
Agreement or the other Financing Documents to which it is a party will (1)
conflict with or result in a breach of any of the terms, conditions or
provisions of the Company's Certificate of Incorporation or By-Laws or of any
order, judgment, agreement or instrument to which the Company is a party or by
which it is bound, or constitute a default under any of the foregoing, (2)
result in the creation or imposition of any Lien of any nature upon any Property
of the Company under the terms of any such instrument or agreement, or (3)
require consent under (which has not been heretofore received), conflict with or
violate any existing law, rule, regulation, judgment, order, writ, injunction or
decree of any government, governmental instrumentality or court (domestic or
foreign) having jurisdiction over the Company or any of the Property of the
Company.
(C) The completion of the Project Facility by the Issuer
and the lease and sale thereof by the Issuer to the Company will not result in
the removal of a commercial, manufacturing or industrial plant of the Company or
any other proposed occupant of the Project Facility from one area of the State
to another area of the State or in the abandonment of one or more plants or
facilities of the Company or any other proposed occupant of the Project Facility
located in the State.
(D) The Financing Documents to which the Company is a
party constitute, or upon their execution and delivery in accordance with the
terms thereof will constitute, valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms.
(E) So long as any Bond is Outstanding, the Project
Facility will continue to be a "project", as such quoted term is defined in the
Act, and the Company will not take any action (or omit to take any action
required by the Financing Documents or which the Trustee or the Issuer or the
Bank, together with Bond Counsel, advise the Company in writing should be
taken), or allow any action to be taken, which action (or omission) would in any
way (1) cause the Project Facility not to constitute a "project", as such quoted
term is defined in the Act, (2) cause the proceeds of the Bonds to be applied in
a manner contrary to that provided in the Financing Documents or (3) adversely
affect the exclusion from gross income of the interest on the Bonds for federal
income tax purposes.
(F) The Company shall cause all notices required by law
to be given, and shall comply or cause compliance with all laws, ordinances,
municipal rules and regulations and requirements of all Governmental Authorities
applying to or affecting the conduct of work on the Project Facility and the
Company will defend and save the Issuer and its officers, members, agents and
employees harmless from all fines and penalties due to failure to comply
therewith.
(G) The Company hereby covenants to comply with all
mitigation measures, requirements and conditions, if any, enumerated in the
findings issued by the Town of Moreau under
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SEQR with respect to the Project Facility and in any other approvals issued by
any other Governmental Authority.
(H) The Project Facility and the operation thereof will
comply with all applicable building, zoning, environmental, planning and
subdivision laws, ordinances, rules and regulations of Governmental Authorities
having jurisdiction over the Project Facility.
(I) All proceeds from the sale of the Bonds shall be used
solely to pay the Cost of the Project and the total Cost of the Project is not
expected to be less than $6,000,000.
(J) The Company shall (1) cause any new employment
opportunities created in connection with the Project to be listed with (i) the
Regional Office of the New York State Department of Economic Development serving
Moreau, New York, (ii) the New York State Department of Labor Jobs Service
Division, and (iii) the local service delivery area administrative entity
created pursuant to the United States Job Training Partnership Act (P.L. 97-300)
serving Moreau, New York, (2) the Company shall file with the Issuer on or
before January 1 of each year during which the Bonds are outstanding the status
of its employment plan with respect to the Project, including the number of
employment opportunities created, the number of employment openings listed in
accordance with (i) above and the number of employment positions filled, and (3)
the Company agrees, subject to the terms of an existing collective bargaining
agreement(s), to first consider for such new employment persons eligible under
the United States Job Training Partnership Act.
(K) Except as provided in Section 9.4(B) hereof, all
items comprising the Equipment shall remain in the Facility at all times during
which any Bonds are Outstanding.
(L) Not more than one-third of the total Cost of the
Project shall be used to provide facilities primarily used in making Retail
Sales (as such term is defined in Section 862 of the General Municipal Law of
the State) to customers who personally visit such facilities.
(M) All representations, warranties, statements of
reasonable expectation and covenants of the Company made in the Tax Regulatory
Agreement (including the schedules attached thereto) are hereby declared to be
for the benefit of, among others, the Issuer and are hereby incorporated herein
by reference with the same force and effect as if set forth in full herein and
are hereby represented to be true and correct.
SECTION 2.3. COVENANT WITH TRUSTEE AND BONDHOLDERS AND BANK. The Issuer and the
Company agree that the Installment Sale Agreement is executed in part to induce
the purchase of the Bonds and to induce the Bank to issue the Letter of Credit.
Accordingly, all representations, covenants and agreements on the part of the
Issuer and the Company set forth in the Installment Sale Agreement are hereby
declared to be for the benefit of the Issuer, the Trustee, the holders from time
to time of the Bonds and the Bank.
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ARTICLE III
CONVEYANCE AND USE OF PROJECT FACILITY
SECTION 3.1. CONVEYANCE TO ISSUER. The Company has conveyed or will convey, or
will cause to be conveyed, to the Issuer title to the Project Facility pursuant
to the Deed to Issuer and the Bill of Sale to Issuer. The Company represents and
warrants that it has good and marketable title to the Project Facility, free and
clear of all Liens except for Permitted Encumbrances, and agrees that it will
defend, indemnify and hold the Issuer, the Trustee and the Bank harmless from
any expense or liability due to any defect in title thereto.
SECTION 3.2. USE OF PROJECT FACILITY. Subsequent to the Closing Date, the
Company shall be entitled to use the Project Facility in any manner not
otherwise prohibited by the Financing Documents, provided that such use causes
the Project Facility to qualify or continue to qualify as a "project" under the
Act and does not tend, in the reasonable judgment of the Issuer, to bring the
Project Facility into disrepute as a public project; provided, further, however,
that at no time shall any such use be other than as a manufacturing facility
without the written consent of the Issuer and the Bank.
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ARTICLE IV
ACQUISITION, CONSTRUCTION AND INSTALLATION OF
PROJECT FACILITY; ISSUANCE OF BONDS; USE OF PROCEEDS
SECTION 4.1. ACQUISITION, CONSTRUCTION AND INSTALLATION OF PROJECT FACILITY. (A)
The Company shall, on behalf of the Issuer, promptly acquire, construct and
install the Project Facility or cause the Project Facility to be acquired,
constructed, and installed, all in accordance with the Plans and Specifications.
(B) No material change in the Plans and Specifications
shall be made unless the Bank shall have consented thereto in writing and the
Issuer shall have been furnished with an unqualified opinion of Bond Counsel
that the construction of the Facility and installation of the Equipment in
accordance with the revised Plans and Specifications will not adversely affect
the tax-exempt status of the interest payable on the Bonds.
(C) Title to all materials, equipment, machinery and
other items of Property intended to be incorporated into or installed in and to
become part of the Project Facility shall vest in the Issuer immediately upon
deposit on the Land or incorporation into or installation in the Facility,
whichever shall occur first. The Company shall execute, deliver and file all
instruments necessary or appropriate to vest title in the Issuer and shall take
all action necessary or appropriate to protect such title against claims of any
third Persons.
(D) The Issuer shall enter into, and accept the
assignment of, such contracts as the Company may request in order to effectuate
the purposes of this Section 4.1; provided, however, that the liability of the
Issuer thereunder shall be limited to moneys disbursed under the Indenture.
(E) The Issuer hereby appoints the Company as its true
and lawful agent to perform under the following authority in compliance with the
terms, purposes and intent of the Financing Documents, and the Company hereby
accepts such agency: (1) to acquire the land and reconstruct and construct the
Facility and acquire, construct and install the Project Facility, (2) to make,
execute, acknowledge and deliver any contracts, orders, receipts, writings and
instructions with any other Persons, and in general to do all things which may
be requisite or proper, all for the reconstruction, construction and
installation of the Project Facility, with the same powers and with the same
validity as the Issuer could do if acting in its own behalf, provided that the
liability of the Issuer thereunder shall be limited to moneys advanced under the
Indenture, (3) to pay all fees, costs and expenses incurred in the
reconstruction, construction and installation of the Project Facility from funds
made available therefor in accordance with the Installment Sale Agreement and
the Indenture, (4) to request on behalf of the Issuer, and receive for the
purpose of paying the Cost of the Project, disbursements of the proceeds of the
Bonds pursuant to the Indenture, (5) to ask, demand, sue for, levy, recover and
receive all such sums of money, debts, dues and other demands whatsoever which
may be due, owing and payable to the Issuer under the terms of any contract,
order, receipt or writing in connection with the reconstruction, construction
and installation of the Project Facility and to enforce the provisions of any
contract, agreement, obligation, bond or other performance security in
connection with the same, and (6) to appoint sub-agents in connection with any
of the foregoing.
(F) The Company has given or will give or cause to be
given all notices and has complied or will comply or cause compliance with all
laws, ordinances, rules, regulations and
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requirements of all Governmental Authorities applying to or affecting the
conduct of work on the Project Facility, and the Company will defend, indemnify
and save the Issuer, the Trustee and the Bank and their respective officers,
members, agents, servants and employees harmless from all fines and penalties
due to failure to comply therewith. All permits and licenses necessary for the
prosecution of work on the Project Facility shall be procured promptly by the
Company.
(G) To the extent required by applicable law, the Company
will cause (1) compliance with the requirements of Article 8 of the Labor Law of
the State, and (2) any contractor, subcontractors and other persons involved in
the construction and installation of the Project Facility to comply with Article
8 of the Labor Law of the State.
(H) The Company for itself and on behalf of the Issuer
covenants that the moneys advanced pursuant to the Indenture shall be held as a
trust fund pursuant to Section 13 of the Lien Law of the State to be applied
first for the purpose of paying the Cost of Improvement (as defined in the Lien
Law) with regard to the Project Facility and it will apply the same first to
such payment before using any part thereof for any other purpose.
(I) The Company agrees to file with the Department of
Taxation and Finance of the State in a manner and at the time prescribed
thereby, information relating to the extent of exemption from sales and use tax
claimed with respect to the construction and equipping of the Project Facility
all in compliance with Section 874 of the General Municipal Law of the State.
THE COMPANY ACKNOWLEDGES THAT THE FAILURE TO COMPLY WITH THE PROVISIONS OF SAID
SECTION 874 SHALL RESULT IN A REVOCATION OF THE AUTHORITY GRANTED PURSUANT TO
SUBSECTION (E) OF THIS SECTION 4.1.
SECTION 4.2. ISSUANCE OF BONDS. In order to finance a portion of the Cost of the
Project, together with other costs and incidental expenses in connection
therewith, the Issuer agrees that it will issue, sell and cause to be delivered
to the purchaser thereof the Bonds, as provided in the Indenture. THE ISSUER
MAKES NO REPRESENTATION, EXPRESS OR IMPLIED, THAT THE NET PROCEEDS OF THE BONDS
WILL BE SUFFICIENT TO COMPLETE THE ACQUISITION, CONSTRUCTION AND INSTALLATION OF
THE PROJECT FACILITY.
SECTION 4.3. APPLICATION OF PROCEEDS OF BONDS. The proceeds of the sale of the
Bonds shall be deposited by the Issuer with the Trustee as provided in the
Indenture and, following the Completion Date and upon submission to the Trustee
of a Request for Disbursement certified by an Authorized Representative of the
Company, and otherwise complying with the requirements of the Indenture, the
Reimbursement Agreement and the Building Loan Agreement, shall be applied to pay
the following items of cost and expenses in connection with the acquisition of
the Land, the construction of the Facility, the acquisition and installation of
the Equipment and the financing of the same, and for no other purpose:
(A) the cost of preparing the Plans and Specifications as
they relate to the Facility and the Equipment (including any preliminary study
or planning for the Facility and the Equipment or any necessary further study or
any aspect thereof);
(B) all costs incurred in connection with the acquisition
of the Land, the construction of the Facility and the acquisition and
installation of the Equipment (including architectural, engineering and
supervisory services with respect thereto);
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(C) all fees, taxes, charges and other expenses for
recording or filing, as the case may be, the Assignment, the Installment Sale
Agreement or a Memorandum thereof, the Indenture, the Mortgage, the Collateral
Mortgage any other agreement contemplated hereby, any financing statements and
any title curative documents that the Issuer or the Trustee or the Bank may deem
desirable in order to perfect or protect the Issuer's, the Trustee's, the Bank's
or the Company's respective interests in the Project Facility, and any security
interests contemplated by the Financing Documents;
(D) all fees and expenses in connection with any actions
or proceedings that the Issuer or the Trustee or the Bank may deem desirable in
order to perfect or protect the Issuer's, the Trustee's, the Bank's or the
Company's respective interests in the Project Facility, except for removing
Permitted Encumbrances;
(E) any expenses of the Company in enforcing any remedy
against any contractor or subcontractor in accordance with Section 4.6 hereof;
(F) the cost of all insurance maintained with respect to
the Project Facility pursuant to Section 6.3 hereof during the Construction
Period and the cost of maintaining a payment and performance bond (or letter of
credit in substitution therefor), if any, with respect to the Construction
Contract;
(G) all interest payable on the Bonds during the
Construction Period;
(H) all interest payable on any interim financing the
Company may have secured with respect to the Project Facility in anticipation of
the issuance of the Bonds;
(I) all legal, accounting, financial advisory, investment
banking, underwriting, rating agency, blue sky, legal investment and any other
fees, discounts, costs and expenses incurred by the Issuer, the Company, the
Trustee or the Bank in connection with the preparation, reproduction,
authorization, issuance, execution, delivery and sale of the Bonds and the other
Financing Documents and all other documents in connection therewith, with the
acquisition of the Land, the construction of the Facility and the acquisition
and installation of the Equipment, and with any other transaction contemplated
by the Bonds, the Indenture and the Installment Sale Agreement;
(J) the administration and acceptance fees, costs and
expenses (including, but not limited to, reasonable attorneys' fees) of the
Issuer, the Trustee and the Bank;
(K) all title insurance, appraisal and surveying costs;
(L) payment of the taxes and assessments for the Project
Facility payable during or allocable to the Construction Period;
(M) the satisfaction of any existing indebtedness
encumbering the Project Facility; and
(N) reimbursement to the Company for any of the above
enumerated costs and expenses paid and incurred by the Company.
SECTION 4.4. COMPLETION OF PROJECT FACILITY. The Company will proceed with due
diligence to complete in a good and workmanlike manner the acquisition of the
Land, the construction of the Facility and the acquisition and installation of
the Equipment and in any event completion of the
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Project Facility shall occur within three (3) years from the Closing Date.
Completion of the same shall be evidenced by a certificate signed by an
Authorized Representative of the Company delivered to the Issuer, the Trustee
and the Bank stating (A) the date of such completion, (B) that all labor,
services, materials and supplies used therefor and all costs and expenses in
connection therewith have been or will be paid, (C) that the acquisition of the
Land, the construction of the Facility and the acquisition and installation of
the Equipment have been completed with the exception of ordinary punchlist items
and work awaiting seasonal opportunity, (D) that the Company or the Issuer has
good and valid title to all Property constituting a portion of the Project
Facility, and that the Project Facility is subject to the Installment Sale
Agreement and that the Project Facility is subject to the Lien of the Mortgage,
and (E) that the Project Facility is ready for occupancy, use and operation for
its intended purposes. Notwithstanding the foregoing, such certificate may state
(1) that it is given without prejudice to any rights of the Company against
third parties which exist at the date of such certificate or which may
subsequently come into being, (2) that it is given only for the purposes of this
Section 4.4, and (3) that no Person other than the Issuer, the Trustee and the
Bank may benefit therefrom. Such certificate shall be accompanied by (a) a
certificate of occupancy, or a letter from the Local Authority stating no
certificate of occupancy is required, and any and all permissions, licenses or
consents required of Governmental Authorities for the occupancy, operation and
use of the Project Facility for its intended purposes, (b) if requested, an
opinion of counsel to the Company addressed to the Issuer, the Trustee and the
Bank that the Indenture constitutes a valid first Lien on and perfected security
interest in the Trust Revenues subject only to Permitted Encumbrances, and that
the Project Facility will serve the purposes contemplated by the Installment
Sale Agreement and the Indenture and (c) any other items reasonably requested by
the Issuer or the Trustee or the Bank.
SECTION 4.5. COMPLETION BY COMPANY. (A) In the event that the proceeds of the
Bonds are not sufficient to pay in full all costs of acquiring the Land,
constructing the Facility and acquiring and installing the Equipment, the
Company agrees, for the benefit of the Issuer and the Trustee and the Bank, to
complete such acquisition, construction and installation and to pay all such
sums as may be in excess of the moneys available therefor in the Project Fund.
Title to the interest in the Facility constructed and the Equipment acquired or
installed at the Company's expense shall immediately upon such acquisition,
construction or installation vest in the Issuer. The Company shall execute,
deliver and record or file such instruments as the Issuer may request in order
to perfect or protect the Issuer's title to or interest in such portions of the
Facility and the Equipment as are contemplated in this paragraph.
(B) No payment by the Company pursuant to this Section
4.5 shall entitle the Company to any reimbursement for any such expenditure from
the Issuer or the Trustee or to any diminution or abatement of any amounts
payable by the Company under the Installment Sale Agreement.
SECTION 4.6. REMEDIES TO BE PURSUED AGAINST CONTRACTORS, SUBCONTRACTORS,
MATERIALMEN AND THEIR SURETIES. In the event of a default by any contractor,
subcontractor or materialman under any contract made by it in connection with
the construction of the Facility or the acquisition and installation of the
Equipment or in the event of a breach of warranty or other liability with
respect to any materials, workmanship or performance guaranty, the Company may
proceed, either separately or in conjunction with others, to exhaust the
remedies of the Company and the Issuer against the contractor, subcontractor or
materialman so in default and against each surety for the performance of such
contract. The Company may, in its own name or, with the prior written consent of
the Issuer, in the name of the Issuer, prosecute or defend any action or
proceeding or take any other action involving any such contractor,
subcontractor, materialman or surety which the Company deems reasonably
necessary, and in such event the Issuer hereby agrees, at the Company's sole
expense, to cooperate fully with the Company and to take all action necessary to
effect the substitution of the Company for the Issuer in any
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such action or proceeding. The Company shall immediately advise the Issuer,
Trustee and the Bank of any actions or proceedings taken hereunder. The Net
Proceeds of any recovery secured by the Company as a result of any action
pursued against a contractor, subcontractor, materialman or their sureties
pursuant to this Section 4.6 shall be used to the extent necessary to complete
the Project Facility, the balance then to be deposited in the Insurance and
Condemnation Fund and applied as provided in Section 4.03 of the Indenture.
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ARTICLE V
AGREEMENT TO CONVEY PROJECT FACILITY; INSTALLMENT
PURCHASE PAYMENTS AND OTHER AMOUNTS PAYABLE
SECTION 5.1. AGREEMENT TO CONVEY PROJECT FACILITY. In consideration of the
Company's covenant herein to make installment purchase payments and in
consideration of the other covenants of the Company contained herein, including
the covenant to make additional and other payments required hereby, the Issuer
hereby agrees to sell and convey to the Company, and the Company hereby agrees
to purchase and acquire from the Issuer, the Project Facility, subject only to
Permitted Encumbrances and the Lien of the Mortgage. The obligation of the
Issuer under this Section to convey the Project Facility to the Company shall be
subject to there being no Event of Default existing hereunder, or any other
event which would, but for the passage of time, be an Event of Default.
SECTION 5.2. CONVEYANCE; INSTRUMENTS. (A) the Project Facility shall be conveyed
from the Issuer to the Company on April 1, 2008, or on such earlier date as
hereinafter provided.
(B) The sale and conveyance of the Issuer's right, title
and interest in and to the Land and the Facility shall be effected by the
execution, delivery and recording by the Issuer of the Deed to the Company (a
form of which is attached hereto as Exhibit "C"). The sale and conveyance of the
Issuer's right, title and interest in and to the Equipment shall be effected by
the execution and delivery by the Issuer to the Company of the Bill of Sale to
the Company (a form of which is attached hereto as Exhibit "D").
(C) The Company hereby agrees to pay all expenses, filing
and recording fees and taxes, if any, applicable to or arising from the transfer
contemplated by this Section.
SECTION 5.3. INSTALLMENT PURCHASE PAYMENTS AND OTHER AMOUNTS PAYABLE. (A) On or
before each Bond Payment Date, the Company shall pay to the Trustee for deposit
into the Bond Fund an amount which, when added to any amounts then held in the
Bond Fund, shall equal the amount payable as principal of, and premium, if any,
and interest on the Bonds on such Bond Payment Date and all other amounts then
due or past due on the Bonds, including any late charges accruing thereon and
any acceleration or prepayment of principal and accrued interest thereon.
Notwithstanding the foregoing, while the Letter of Credit is in effect, the
Company shall deposit all such amounts directly with the Bank to reimburse the
Bank for draws on the Letter of Credit, and the Bank shall apply such amounts to
the reimbursement obligation of the Company. The obligation of the Company to
make any payment hereunder shall be deemed satisfied and discharged to the
extent of the corresponding payment made by the Bank to the Trustee under the
Letter of Credit, provided further, however, that any payment by the Bank to the
Trustee under the Letter of Credit will not relieve the Company of any of its
obligations under the Reimbursement Agreement.
(B) The Company shall pay as additional installment
purchase payments any premium due on the Bonds and any of the following:
(1) Within thirty (30) days after receipt of a
demand therefor from the Trustee, the Company shall pay to the
Trustee the following amounts:
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(a) the reasonable fees and expenses of the
Trustee for performing its obligations under the Indenture;
(b) the sum of the expenses of the Trustee
reasonably incurred in performing the obligations of (i) the
Company under the Installment Sale Agreement, or (ii) the
Issuer under the Bonds, the Indenture or the Installment Sale
Agreement; and
(c) the Trustee's reasonable attorneys' fees
incurred in connection with the foregoing and any other moneys
due the Trustee pursuant to the provisions of any of the
Financing Documents.
(2) (a) Within thirty (30) days after receipt of
a demand therefor from the Issuer, the Company shall pay to the Issuer
the sum of the reasonable expenses including attorneys' fees of the
Issuer and the officers, members, agents and employees thereof incurred
by reason of the Issuer's ownership, financing or sale of the Project
Facility or in connection with the carrying out of the Issuer's duties
and obligations under the Installment Sale Agreement or any of the
other Financing Documents, and any other reasonable expense of the
Issuer with respect to the Project Facility, the sale of the Project
Facility to the Company, the Bonds or any of the other Financing
Documents, the payment of which is not otherwise provided for under the
Installment Sale Agreement.
(C) The Company agrees to make the above-mentioned
payments, without any further notice, in lawful money of the United States of
America as, at the time of payment, shall be legal tender for the payment of
public and private debts. In the event the Company shall fail to make any
payment required by this Section 5.3 for a period of more than ten (10) days
from the date such payment is due, the Company shall pay the same, together with
interest thereon, at a rate of two percent (2%) per month or the maximum rate
permitted by law, whichever is less, from the date on which such payment was due
until the date on which such payment is made.
(D) In the event of an application of moneys in the
Project Fund toward prepayment of the principal of the Bonds pursuant to Section
4.02 of the Indenture, there shall be no abatement or reduction in the amounts
payable by the Company under this Section 5.3.
SECTION 5.4. NATURE OF OBLIGATIONS OF COMPANY HEREUNDER. (A) The obligations of
the Company to make the payments required by the Installment Sale Agreement and
to perform and observe any and all of the other covenants and agreements on its
part contained herein shall be general obligations of the Company and shall be
absolute and unconditional irrespective of any defense or any rights of set-off,
recoupment or counterclaim the Company may otherwise have against the Issuer,
the Trustee or the Bank. The Company agrees that it will not suspend,
discontinue or abate any payment required by, or fail to observe any of its
other covenants or agreements contained in, the Installment Sale Agreement, or
terminate the Installment Sale Agreement for any cause whatsoever, including,
without limiting the generality of the foregoing, failure to complete the
acquisition of the Land, the construction of the Facility or the acquisition and
installation of the Equipment, any material defect in the title, design,
operation, merchantability, fitness or condition of the Project Facility or any
part thereof or in the suitability of the Project Facility or any part thereof
for the Company's purposes or needs, failure of consideration for, destruction
of or damage to, Condemnation of title to or the use of all or any part of the
Project Facility, any change in the tax or other laws of the United States of
America or of the State or any political subdivision thereof, or any failure of
the Issuer to perform and observe any agreement, whether expressed or implied,
or any duty, liability or obligation arising out of or in connection with the
Installment Sale Agreement.
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(B) Nothing contained in this Section 5.4 shall be
construed to release the Issuer from the performance of any of the agreements on
its part contained in the Installment Sale Agreement, and, in the event the
Issuer should fail to perform any such agreement, the Company may institute such
action against the Issuer as the Company may deem necessary to compel
performance (subject to the provisions of Section 11.10 hereof) or recover
damages for non-performance; provided, however, that the Company shall look
solely to the Issuer's estate and interest in the Project Facility for the
satisfaction of any right or remedy of the Company for the collection of a
judgment (or other judicial process) requiring the payment of money by the
Issuer in the event of any liability on the part of the Issuer, and no other
Property or assets of the Issuer shall be subject to levy, execution, attachment
or other enforcement procedure for the satisfaction of the Company's remedies
under or with respect to the Installment Sale Agreement, the relationship of the
Issuer and the Company hereunder or the Company's lease of and title to the
Project Facility, or any other liability of the Issuer to the Company.
SECTION 5.5. PREPAYMENT OF INSTALLMENT PURCHASE PAYMENTS. At any time that any
Bond is subject to prepayment, to the extent and subject to the conditions upon
which prepayment of such Bond is permitted by the terms thereof, the Company
may, at its option, prepay, in whole or in part, the installment purchase
payments payable hereunder by either (A) causing there to be Available Moneys in
an amount equal to the redemption price of the Bonds being redeemed on deposit
with the Trustee thirty-five (35) days prior to the date such moneys are to be
applied to the redemption of Bonds under Section 8.02 of the Indenture, or (B)
delivering to the Trustee notice of its election to cause the redemption of the
Bonds together with a written assurance from the Bank that the Letter of Credit
may be drawn upon to pay the redemption price of the Bonds being redeemed. In no
event shall prepayment be permitted unless the Company shall give to the Trustee
the notice required by Section 8.02 of the Indenture.
SECTION 5.6. RIGHTS AND OBLIGATIONS OF COMPANY UPON DISCHARGE OF LIEN OF
MORTGAGE. (A) Subject to the provisions of Section 5.6(B) hereof, in the event
the Bonds and all sums due under the Reimbursement Agreement and the other
Financing Documents shall have been paid in full, the Issuer shall request the
Bank to do all acts and execute all documents as may be reasonably necessary to
effect the satisfaction and discharge of the Lien of the Mortgage on the Project
Facility.
(B) The conditions that must be satisfied in order to
obtain the discharge and satisfaction of the Lien of the Mortgage on the Project
Facility shall be determined in accordance with the provisions of the Mortgage
and the Indenture. In the event that such conditions are satisfied, the Issuer
shall request the Bank to do all acts and execute all documents as may
reasonably be necessary to effect discharge of the Lien of the Mortgage on the
Project Facility, and, at the request of the Company, shall do all acts and
execute all documents as may reasonably be necessary to discharge the Lien of
the Installment Sale Agreement on the Project Facility to the extent the same
may be discharged.
SECTION 5.7. GRANT OF SECURITY INTEREST. The Company hereby grants the Issuer a
security interest in all of the right, title and interest of the Company in the
Project Facility and in all additions and accessions thereto, all replacements
and substitutions therefor and all proceeds thereof and all books, records and
accounts of the Company pertaining to the Project Facility as security for
payment of the installment purchase payments and all other payments and
obligations of the Company hereunder. The Company hereby irrevocably appoints
the Issuer as its attorney-in-fact to execute and deliver and file any
instruments necessary or convenient to perfect and continue the security
interest granted herein.
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ARTICLE VI
MAINTENANCE, MODIFICATIONS, TAXES AND INSURANCE
SECTION 6.1. MAINTENANCE AND MODIFICATIONS OF PROJECT FACILITY. (A) So long as
any of the Bonds are Outstanding the Company shall (1) keep the Project Facility
in good condition and repair and preserve the same against waste, loss, damage
and depreciation, ordinary wear and tear excepted, (2) make all necessary
repairs and replacements to the Project Facility or any part thereof (whether
ordinary or extraordinary, structural or nonstructural, foreseen or unforeseen),
and (3) operate the Project Facility in a sound, economic manner and in
conformity with all applicable environmental laws and regulations.
(B) After the Construction Period, the Company shall not
make any structural additions, modifications or improvements to the Project
Facility without the prior written consent of the Bank, and in any event shall
not make any such structural additions, modifications or improvements unless:
(1) the Company shall (a) give or cause to be
given all notices and comply or cause compliance with all laws,
ordinances, municipal rules and regulations and requirements of all
Governmental Authorities applying to or affecting the conduct of work
on such addition, modification or improvement to the Project Facility,
or a part thereof, (b) defend and save the Issuer, the Trustee and the
Bank and their respective officers, members, agents and employees
harmless from all fines and penalties due to failure to comply
therewith, (c) promptly procure all permits and licenses necessary for
the prosecution of any work described in this Section 6.1(B), and (d)
make all payments in lieu of taxes required by Section 6.6 hereof;
(2) the addition, modification or improvement to
the Project Facility shall not constitute a default under any of the
Financing Documents; and
(3) the Company shall furnish to the Issuer, the
Trustee and the Bank, at least 30 days prior to commencing such
addition, modification or improvement an opinion, in form and substance
satisfactory to the Issuer, the Trustee and the Bank, of Bond Counsel
that the tax-exempt status of the interest on the Bonds will not be
adversely affected thereby.
SECTION 6.2. TAXES, ASSESSMENTS AND UTILITY CHARGES. (A) The Company shall pay
or cause to be paid, as the same respectively become due, (1) all taxes and
governmental charges of any kind whatsoever which may at any time be lawfully
assessed or levied against or with respect to the Project Facility, (2) all
utility and other charges, including "service charges", incurred or imposed for
the operation, maintenance, use, occupancy, upkeep and improvement of the
Project Facility, and (3) all assessments, rents and other charges of any kind
whatsoever lawfully made by any Governmental Authority for public improvements;
provided that, with respect to special assessments or other governmental charges
that may lawfully be paid in installments over a period of years, the Company
shall be obligated hereunder to pay only such installments as are required to be
paid during all periods that sums payable by the Company hereunder or under any
of the other Financing Documents are due and owing.
(B) Notwithstanding the provisions of subsection (A) of
this Section 6.2 but subject, however, to the provisions of Section
2.02(B)(3)(b) of the PILOT Agreement, the Company may in good faith
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actively contest any such taxes, assessments and other charges, provided that
the Company shall have paid such taxes.
SECTION 6.3. INSURANCE REQUIRED. At all times that any Bond is Outstanding
and/or the Issuer is the owner of the Project Facility, the Company shall
maintain or, with respect to the insurance required by Subsection (E) of this
Section 6.3, cause the general contractor to maintain, insurance with respect to
the Project Facility against such risks and for such amounts as are customarily
insured against by businesses of like size and type, paying, as the same become
due and payable, all premiums with respect thereto, including, but not
necessarily limited to:
(A) (1) Prior to completion of the Project Facility,
builder's all-risk (or equivalent coverage) insurance upon any work done or
material furnished in connection with the reconstruction and equipping of the
Project Facility with extended coverage for vandalism, malicious mischief,
debris removal and collapse insurance endorsements issued to the Company and the
Issuer as insured, and the Bank as mortgagee and loss payee under a New York
standard mortgagee clause, and written in one hundred percent (100%)
non-reporting completed form with fire and extended coverage in the Stated
Amount, and (2) with respect to the Project Facility, at such time that
builder's risk insurance shall not be available due to the completion of the
Project Facility, insurance protecting the interests of the Company and the
Issuer as insured and the Bank and as mortgagee and loss payee, as its interest
may appear, against loss or damage to the Project Facility by fire, lightning,
vandalism, malicious mischief and other perils normally insured against with a
uniform extended coverage endorsement, such insurance at all times to be in an
amount not less than the greater of the total principal amount of the Bonds
Outstanding or the total cash replacement cost of the Project Facility,
exclusive of footings and foundations as determined at least once every three
(3) years by a recognized appraiser or insurer selected by the Company;
provided, however, that the Company may, with the consent of the Bank (such
consent not to be unreasonably withheld or delayed) insure all or a portion of
the Project Facility under a blanket insurance policy or policies covering not
only the Project Facility or portions thereof but other Property.
(B) To the extent applicable, workers' compensation
insurance, disability benefits insurance and such other forms of insurance which
the Company is required by law to provide, covering loss resulting from injury,
sickness, disability or death of employees of the Company who are located at or
assigned to the Project Facility or who are responsible for the reconstruction
and construction of the Facility or the installation of the Equipment.
(C) Insurance protecting the Company, the Issuer and the
Bank against loss or losses from liabilities imposed by law or assumed in any
written contract (including, without limitation, the contractual liability
assumed by the Company under Sections 8.2, 8.12 and 8.13 of the Installment Sale
Agreement) and arising from personal injury or death or damage to the Property
of others caused by any accident or occurrence, with limits of not less than
$2,000,000 per person per accident or occurrence on account of personal injury,
including death resulting therefrom, and $2,000,000 per accident or occurrence
on account of damage to the Property of others, excluding liability imposed upon
the Company by any applicable workers' compensation law, and a separate umbrella
liability policy with a limit of not less than $5,000,000.
(D) If the Project Facility is located within an area
identified by the Secretary of Housing and Urban Development as having special
flood hazards, insurance against loss by floods in an amount at least equal to
the total principal amount of the Bonds Outstanding or to the maximum limit of
coverage made available, whichever is less.
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(E) During the Construction Period, the general
contractor and any subcontractor constructing and equipping the Project Facility
shall be required to carry workers' compensation and general comprehensive
liability insurance containing coverages for premises operations, products and
completed operations, explosion, collapse and underground damage hazard,
contractor's protective, owner's protective and coverage for all owned,
non-owned and hired vehicles with non-ownership protection from the general
contractor or subcontractor's employees providing the following minimum limits:
(a) Workers' compensation and employer's
liability - in accordance with applicable
law, covering loss resulting from injury,
sickness, disability and death of employees
located at or assigned to the Facility or
who are responsible for the construction of
the Facility or the installation of the
Equipment.
(b) comprehensive general liability:
(i) Bodily injury liability in an
amount not less than $1,000,000 for each
accident and not less than $5,000,000 for
injuries sustained by two or more persons in
any one accident.
(ii) Property damage liability in an
amount not less than $1,000,000 for each
accident and not less than $5,000,000 in the
aggregate for each year of the policy
period.
(c) Comprehensive automobile liability:
(i) Bodily injury liability in an
amount not less than $1,000,000 for each
accident and not less than $5,000,000 for
injuries sustained by two or more persons in
any one accident.
(F) Business Interruption insurance in an amount
sufficient to cover any loss of income from the Project Facility for a period of
not less than twelve (12) months, to be reviewed and adjusted annually.
(G) Other insurance coverage required by any Governmental
Authority in connection with any Requirement.
(H) THE ISSUER DOES NOT IN ANY WAY REPRESENT OR WARRANT
THAT THE INSURANCE SPECIFIED HEREIN, WHETHER IN SCOPE OR IN LIMITS OF COVERAGE,
IS ADEQUATE OR SUFFICIENT TO PROTECT THE COMPANY'S OR THE TRUSTEE'S RESPECTIVE
BUSINESS OR INTERESTS.
SECTION 6.4. ADDITIONAL PROVISIONS RESPECTING INSURANCE. (A) All insurance
required by Section 6.3 hereof shall be procured and maintained in financially
sound and generally recognized responsible insurance companies selected by the
Company and authorized to write such insurance in the State and satisfactory to
the Issuer and the Bank. The company or companies issuing the policies required
by Sections 6.3(A) and 6.3(F) shall be rated "A" or better by A.M. Best Co.,
Inc. in the most recent edition of Best's Key Rating Guide. Such insurance may
be written with deductible amounts comparable to those on similar policies
carried by other companies engaged in businesses similar in size, character and
other respects to those in which the Company is engaged. All policies evidencing
such insurance shall name the Company and the Issuer as insureds, policies
evidencing insurance as required by Section 6.3(A) shall name the Bank as
mortgagee and loss payee, as its interest may appear, and provide for at least
thirty (30) days' written notice to the Company, the Issuer and the Bank prior
to
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cancellation, lapse, reduction in policy limits or material change in coverage
thereof and shall contain a standard mortgagee endorsement in favor of the Bank
as mortgagee and loss payee, as its interest may appear. All insurance required
hereunder shall be in form, content and coverage satisfactory to the Issuer and
the Bank. Binders satisfactory in form and substance to the Issuer and the Bank
to evidence all insurance required hereby shall be delivered to the Issuer and
the Bank on or before the Closing Date. The Company shall deliver to the Issuer
and the Bank on or before the first Business Day of each calendar year
thereafter a binder dated not earlier than the immediately preceding November
15th reciting that there is in full force and effect, with a term covering at
least the next succeeding calendar year, insurance in the amounts and of the
types required by Sections 6.3 and 6.4 hereof. At least thirty (30) days prior
to the expiration of any such policy, the Company shall furnish to the Issuer
and the Bank evidence that the policy has been renewed or replaced or is no
longer required by the Installment Sale Agreement.
(B) All premiums with respect to the insurance required
by Section 6.3 hereof shall be paid by the Company; provided, however, that, if
the premiums are not timely paid, the Issuer or the Bank may pay such premiums
and the Company shall pay immediately upon demand all sums so expended by the
Issuer or the Bank together with interest at a rate of one and one half percent
(1.5%) per month or the highest rate permitted by law, whichever is less. All
amounts so paid by the Issuer or the Bank together with interest thereon shall
be deemed secured by the Financing Documents.
(C) (1) The Company shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under Section 6.3 unless the Issuer and the Bank are included therein
as a named insured with loss payable to the Bank under a standard
non-contributory mortgage endorsement of the above described character. The
Company shall immediately notify the Bank whenever any such separate insurance
is taken out and shall promptly deliver to the Bank and the Issuer the policy or
policies of such insurance.
(2) Each of the policies required pursuant to Section
6.3 hereof shall waive any right of subrogation against any Person insured under
such policy, and shall waive any right of the insurers to any set-off or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of any Person insured under such policy.
SECTION 6.5. APPLICATION OF NET PROCEEDS OF INSURANCE. The Net Proceeds of the
insurance carried pursuant to the provisions of Section 6.3 hereof shall be
applied as follows: (A) the Net Proceeds of the insurance required by Section
6.3(A) and 6.3(D) hereof shall be paid to the Bank and applied as provided in
Section 7.1 hereof, (B) the Net Proceeds of the insurance required by Section
6.3(B), 6.3(C), 6.3(E) and 6.3(G) hereof shall be applied toward extinguishment
or satisfaction of the liability with respect to which such insurance proceeds
may be paid and (C) the Net Proceeds of the insurance required by Section 6.3(F)
shall be applied toward Debt Service Payments.
SECTION 6.6. PAYMENTS IN LIEU OF TAXES. (A) It is recognized that, under the
provisions of the Act, the Issuer is required to pay no taxes or assessments
upon any of the property acquired by it or under its jurisdiction, control or
supervision or upon its activities. It is not the intention, however, of the
parties hereto that the Project Facility be treated as exempt from real property
taxation. Accordingly, the parties acknowledge that a Payment In Lieu of Tax
Agreement (the "PILOT Agreement") has been executed with respect to the Project
Facility. Until the expiration date of the PILOT Agreement, the Issuer and the
Company hereby agree that the Company (or any subsequent user of the Project
Facility under this Installment Sale Agreement) shall be required to make or
cause to be made payments in lieu of real estate taxes in the amounts and in the
manner set forth in the PILOT Agreement.
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(B) In the event that (1) the Project Facility would be
subject to real property taxation if owned by the Company but shall be deemed
exempt from real property taxation due to the involvement of the Issuer
therewith, and (2) the PILOT Agreement shall not have been entered into by the
Issuer and the Company, or, if entered into, the PILOT Agreement shall for any
reason no longer be in effect, the Issuer and the Company hereby agree that the
Company, or any subsequent user of the Project Facility under this Installment
Sale Agreement, shall in such event be required to make or cause to be made
payments in lieu of taxes to the school district or school districts, city,
town, county, village and other political units wherein the Project Facility is
located having taxing powers (such political units are hereinafter collectively
referred to as the "Taxing Entities") in such amounts as would result from taxes
being levied on the Project Facility by the Taxing Entities if the Project
Facility were privately owned by the Company and not deemed owned by or under
the jurisdiction, control or supervision of the Issuer, but with appropriate
reductions similar to the real property tax exemptions and credits, if any,
which would be afforded to the Company if it were the owner of the Project
Facility. It is agreed that the Company, in cooperation with the Issuer, (a)
shall cause the Project Facility to be valued for purposes of determining the
amounts due hereunder as if owned by the Company as aforesaid by the appropriate
officer or officers of any of the Taxing Entities as may from time to time be
charged with responsibility for making such valuations, (b) shall cause to be
appropriately applied to the valuation or valuations so determined the
respective tax rate or rates of the Taxing Entities that would be applicable to
the Project Facility if so privately owned, (c) shall cause the appropriate
officer or officers of the Taxing Entities charged with the duty of levying and
collecting such taxes to submit to the Company, when the respective levies are
made for purposes of such taxes upon Property privately owned as aforesaid,
statements specifying the amounts and due dates of such taxes which the Taxing
Entities would receive if such Property were so privately owned by the Company
and not deemed owned by or under the jurisdiction, control or supervision of the
Issuer, and (d) shall file with the appropriate officer or officers any accounts
or tax returns furnished to the Issuer by the Company for the purpose of such
filing.
(C) The Company shall pay or cause to be paid to the
Taxing Entities when due all such payments in lieu of taxes with respect to the
Project Facility required by Section 6.6(B) of this Installment Sale Agreement
to be paid to the Taxing Entities, subject in each case to the Company's right
to (a) obtain exemptions and credits, if any, which would be afforded to a
private owner of the Project Facility, including any available exemption under
Section 485-b of the New York Real Property Tax Law with respect to the Project
Facility, (b) contest valuations of the Project Facility made for the purpose of
determining such payments therefrom (provided, however, no such contest shall
entitle the Company to defer payments in lieu of taxes by reason of any such
contest), and (c) seek to obtain a refund of any such payments made. In the
event the Company shall fail to make or cause to be made any such payments in
lieu of taxes, the amount or amounts so in default shall continue as an
obligation of the Company until fully paid, and the Company hereby agrees to pay
or cause to be paid the same, together with late charges and interest thereon as
provided for in subsection (5) of Section 874 of the General Municipal Law of
the State (or any successor provision).
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ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
SECTION 7.1. DAMAGE OR DESTRUCTION. (A) If the Project Facility shall be damaged
or destroyed, in whole or in part:
(1) the Issuer shall have no obligation to replace,
repair, rebuild or restore the Project Facility;
(2) there shall be no abatement or reduction in the
amounts payable by the Company under the Installment Sale Agreement
(whether or not the Project Facility is replaced, repaired, rebuilt or
restored);
(3) the Company shall promptly give notice of such damage
or destruction to the Issuer, the Trustee and the Bank; and
(4) except as otherwise provided in subsection (B) of
this Section 7.1,
(a) the Company shall promptly replace, repair,
rebuild or restore the Project Facility to substantially the same
condition and value as an operating entity as existed prior to such
damage or destruction, with such changes, alterations and modifications
as may be desired by the Company and consented to in writing by the
Issuer and the Bank, provided that such changes, alterations or
modifications do not (i) so change the nature of the Project Facility
that it does not constitute a "project", as such quoted term is defined
in the Act, (ii) change the use of the Project Facility as specified in
Section 3.2 hereof without the prior written consent of the Issuer,
which consent shall not be unreasonably withheld or delayed, or (iii)
adversely affect the exclusion of the interest on the Bonds from gross
income for federal income tax purposes; and
(b) pursuant to and in accordance with Section
4.03 of the Indenture, the Trustee shall make available to the Company
(from the Net Proceeds of any insurance settlement) such moneys as may
be necessary to pay the costs of the replacement, repair, rebuilding or
restoration of the Project Facility. In the event such Net Proceeds are
not sufficient to pay in full the costs of such replacement, repair,
rebuilding or restoration, the Company shall nonetheless complete such
work and shall pay from its own moneys that portion of the costs
thereof in excess of such Net Proceeds. Any balance of such Net
Proceeds remaining after payment of all of the costs of such
replacement, repair, rebuilding or restoration shall be applied as
provided in Section 4.03 of the Indenture.
(B) Notwithstanding anything to the contrary contained in
subsection (A) of this Section 7.1, in the event that the damage to the Project
Facility exceeds the sum of all indebtedness then secured by a Lien on the
Project Facility or any part thereof, the Company shall not be obligated to
replace, repair, rebuild or restore the Project Facility and the Net Proceeds of
any insurance settlement shall not be applied as provided in subsection (A) of
this Section 7.1 if the Company shall notify the Issuer and the Bank that, in
the Company's sole judgment, the Company does not deem it practical to so
replace, repair, rebuild or restore the Project Facility and the Bank concurs
with such determination. In such event, or if an Event of Default shall have
occurred and be continuing, the lesser of (1) the total amount of the Net
Proceeds collected under any and all policies of insurance covering the damage
to or destruction of the Project Facility, or (2) the amount necessary to redeem
the Bonds in whole and all interest accrued
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thereon, together with any other sums payable to the Issuer, the Trustee and the
Bank pursuant to the Financing Documents, shall be transferred by the Trustee
from the Insurance and Condemnation Fund to the Bond Fund to be applied to the
redemption of the Bonds and payment of all such amounts to the Issuer, the
Trustee and the Bank. If the Net Proceeds collected under any and all policies
of insurance are less than the amount necessary to redeem the Bonds in full and
pay any and all amounts payable to the Issuer, the Trustee and the Bank, the
Company shall pay the difference between such amounts and the Net Proceeds of
all insurance settlements so that all of the Bonds then Outstanding shall be
redeemed and any and all amounts payable under the Financing Documents to the
Issuer, the Trustee and the Bank shall be paid in full.
(C) If there are no Bonds Outstanding and all other
amounts due under the Installment Sale Agreement and the other Financing
Documents are paid in full, all such Net Proceeds or the balance thereof shall
be paid to the Company for its purposes.
(D) The Company may not adjust any claims under any
policies of insurance required by Section 6.3(A) through 6.3(D) hereof without
the prior written consent of the Bank, which consent shall not be unreasonably
withheld or delayed.
(E) Notwithstanding anything to the contrary set forth
herein, the Net Proceeds of any insurance settlement shall be transmitted to the
Trustee for deposit into the Insurance and Condemnation Fund.
SECTION 7.2. CONDEMNATION. (A) If title to, or the use of, less than
substantially all of the Project Facility shall be taken by Condemnation:
(1) the Issuer shall have no obligation to
restore the Project Facility;
(2) there shall be no abatement or reduction in
the amounts payable by the Company under the Installment Sale
Agreement (whether or not the Project Facility is restored);
(3) the Company shall promptly give notice of
such Condemnation to the Issuer, the Trustee and the Bank; and
(4) except as otherwise provided in subsection
(B) of this Section 7.2,
(a) the Company shall promptly restore
the Project Facility (excluding any part of the Facility taken
by Condemnation) to substantially the same condition and value
as an operating entity as existed prior to such Condemnation;
and
(b) pursuant to and in accordance with
Section 4.03 of the Indenture, the Trustee shall make
available to the Company (from the Net Proceeds of any
Condemnation award) such moneys as may be necessary to pay the
costs of the restoration of the Project Facility. In the event
such Net Proceeds are not sufficient to pay in full the costs
of such restoration, the Company shall nonetheless complete
such restoration and shall pay from its own moneys that
portion of the costs thereof in excess of such Net Proceeds.
Any balance of such Net Proceeds remaining after payment of
all of the costs of such restoration shall be applied in
accordance with Section 4.03 of the Indenture.
(B) Notwithstanding anything to the contrary contained in
subsection (A) of this Section 7.2, in the event that the Net Proceeds received
in conjunction with the taking of the Project Facility or any part
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thereof exceeds the sum of all indebtedness then secured by a Lien on the
Project Facility or any part thereof, the Company shall not be obligated to
restore the Project Facility and the Net Proceeds of any Condemnation award
shall not be applied as provided in subsection (A) of this Section 7.2 if the
Company shall notify the Issuer, the Trustee and the Bank that, in the Company's
sole judgment, the Company does not deem it practicable or desirable to replace,
repair, rebuild or restore the Project Facility and the Bank concurs with such
determination. In such event, or if an Event of Default under any of the
Financing Documents shall have occurred and be continuing, the lesser of (1) the
Net Proceeds of any Condemnation award, or (2) the amount necessary to redeem
the Bonds in whole and all interest accrued thereon, together with any other
sums payable to the Issuer, the Trustee and the Bank pursuant to the Financing
Documents, shall be transferred by the Trustee from the Insurance and
Condemnation Fund to the Bond Fund to be applied to the redemption of the Bonds
and the payment of all such amounts due the Issuer, the Trustee and the Bank. If
the Net Proceeds of any Condemnation award are less than the amount necessary to
redeem the Bonds in full and pay any and all amounts payable to the Issuer, the
Trustee and the Bank, the Company shall pay the difference between such amounts
and such Net Proceeds so that all of the Bonds Outstanding shall be redeemed and
any and all amounts payable under the Financing Documents to the Issuer, the
Trustee and the Bank shall be paid in full.
(C) If title to, or use of, all or substantially all of
the Project Facility shall be taken by Condemnation:
(1) neither the Issuer nor the Company shall
have any obligation to restore the Project Facility;
(2) there shall be no abatement or reduction in
the amounts payable by the Company under the Installment Sale
Agreement; and
(3) the Net Proceeds of any Condemnation award
shall be applied as provided in subsection (B) of this Section
7.2.
(D) If there are no Bonds Outstanding and all other
amounts due under the Installment Sale Agreement and the other Financing
Documents have been paid in full, all such Net Proceeds or the balance thereof
shall be paid to the Company for its purposes.
(E) Unless an Event of Default under any of the Financing
Documents shall have occurred and be continuing, the Company shall have sole
control of any Condemnation proceeding with respect to the Project Facility or
any part thereof, except that the prior written consent of the Bank shall be
required for settlement of any such proceeding, which consents shall not be
unreasonably withheld or delayed. The Company shall notify the Issuer, the
Trustee and the Bank of the institution of any Condemnation proceedings within
seven (7) days after receipt of notice of such proceeding and the Company shall,
within seven (7) days after any inquiry from the Issuer, the Trustee and the
Bank, inform the Issuer, the Trustee and the Bank in writing of the status of
such proceeding.
(F) Notwithstanding anything to the contrary set forth
herein, the Net Proceeds of any Condemnation award shall be transmitted to the
Trustee for deposit into the Insurance and Condemnation Fund.
SECTION 7.3. ADDITIONS TO PROJECT FACILITY. All replacements, repairs,
rebuilding or restoration made pursuant to Sections 7.1 or 7.2 hereof, whether
or not requiring the expenditure of the
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Company's own moneys, shall automatically become part of the Project Facility as
if the same were specifically described herein.
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ARTICLE VIII
SPECIAL COVENANTS
SECTION 8.1. NO WARRANTY OF CONDITION OR SUITABILITY BY ISSUER; ACCEPTANCE "AS
IS". THE ISSUER MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE
CONDITION, TITLE, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS OF THE PROJECT
FACILITY OR ANY PART THEREOF OR AS TO THE SUITABILITY OF THE PROJECT FACILITY OR
ANY PART THEREOF FOR THE COMPANY'S PURPOSES OR NEEDS. THE COMPANY SHALL ACCEPT
TITLE TO THE PROJECT FACILITY "AS IS", WITHOUT RECOURSE OF ANY NATURE AGAINST
THE ISSUER FOR ANY CONDITION NOW, HERETOFORE OR HEREAFTER EXISTING. NO
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY ARE MADE. IN
THE EVENT OF ANY DEFECT OR DEFICIENCY OF ANY NATURE, WHETHER PATENT OR LATENT,
THE ISSUER SHALL HAVE NO RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO.
SECTION 8.2. HOLD HARLESS PROVISIONS. (A) The Company hereby releases the Issuer
and its members, officers, agents and employees from, agrees that the Issuer and
its members, officers, agents (other than the Company) and employees shall not
be liable for and agrees to indemnify, defend and hold the Issuer and its
members, officers, agents (other than the Company) and employees harmless from
and against any and all claims, causes of action, judgments, liabilities,
damages, losses, costs and expenses arising as a result of the Issuer's
undertaking the Project, including, but not limited to, (1) liability for loss
or damage to Property or bodily injury to or death of any and all Persons that
may be occasioned, directly or indirectly, by any cause whatsoever pertaining to
the Project Facility or arising by reason of or in connection with the
occupation or the use thereof or the presence of any Person or Property on, in
or about the Project Facility, (2) liability arising from or expense incurred by
the Issuer's financing, acquiring, constructing, reconstructing, equipping,
installing, owning or selling the Project Facility, including, without limiting
the generality of the foregoing, any sales or use taxes which may be payable
with respect to goods supplied or services rendered with respect to the Project
Facility, all liabilities or claims arising as a result of the Issuer's
obligations under the Installment Sale Agreement or any of the other Financing
Documents or the enforcement of or defense of validity of any provision of any
Financing Documents, and all liabilities or claims arising as a result of or in
connection with the offering, issuance, sale or resale of the Bonds, (3) all
claims arising from the exercise by the Company of the authority conferred on it
pursuant to Section 4.1(E) hereof, and (4) all causes of action and attorneys'
fees and other expenses incurred in connection with any suits, actions or
proceedings which may arise as a result of any of the foregoing; provided that
any such claims, causes of action, judgments, liabilities, damages, losses,
costs or expenses of the Issuer are not incurred or do not result from the
intentional wrongdoing of the Issuer or any of its members, officers, agents
(other than the Company) or employees. The foregoing indemnities shall apply
notwithstanding the fault or negligence in part of the Issuer or any of its
officers, members, agents or employees and notwithstanding the breach of any
statutory obligation or any rule of comparative or apportioned liability.
(B) In the event of any claim against the Issuer or its
members, officers, agents (other than the Company) or employees by any employee
of the Company or any contractor of the Company or anyone directly or indirectly
employed by any of them or anyone for whose acts any of them may be liable, the
obligations of the Company hereunder shall not be limited in any way by any
limitation on the amount or type of damages, compensation or benefits payable by
or for the Company or such contractor under workers' compensation laws,
disability benefits laws or other employee benefit laws.
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(C) To effectuate the provisions of this Section 8.2, the
Company agrees to provide for and insure, in the liability policies required by
Section 6.3(C) of the Installment Sale Agreement, its liabilities assumed
pursuant to this Section 8.2.
(D) Notwithstanding any other provisions of the
Installment Sale Agreement, the obligations of the Company pursuant to this
Section 8.2 shall remain in full force and effect after the termination of the
Installment Sale Agreement until the expiration of the period stated in the
applicable statute of limitations during which a claim, cause of action or
prosecution relating to the matters herein described may be brought and the
payment in full or the satisfaction of such claim, cause of action or
prosecution and the payment of all expenses, charges and costs incurred by the
Issuer, or its officers, members, agents or employees, relating thereto.
SECTION 8.3. RIGHT OF ACCESS TO PROJECT FACILITY. The Company agrees that the
Issuer, the Trustee and the Bank and their duly authorized agents shall have the
right at all reasonable times and upon reasonable prior notice to enter upon and
to examine and inspect the Project Facility.
SECTION 8.4. COMPANY NOT TO TERMINATE EXISTENCE OR DISPOSE OF ASSETS; CONDITIONS
UNDER WHICH EXCEPTIONS PERMITTED. The Company agrees that, so long as the Bonds
are Outstanding, it will maintain its corporate existence, will not dissolve or
otherwise dispose of all or substantially all of its assets, and will not
consolidate with or merge into another corporation, or permit one or more
corporations to consolidate with or merge into it; provided, however, that, if
no Event of Default specified in Section 10.1 hereof shall have occurred and be
continuing, the Company may consolidate with or merge into another domestic
corporation organized and existing under the laws of one of the states of the
United States, or permit one or more such domestic corporations to consolidate
with or merge into it, or sell or otherwise transfer to another Person all or
substantially all of its assets as an entirety and thereafter dissolve, provided
(A) that the Issuer and the Bank give their written consent, which consents
shall not be unreasonably withheld, (B) that the surviving, resulting or
transferee corporation assumes in writing all of the obligations of and
restrictions on the Company under this Installment Sale Agreement and the other
Financing Documents, (C) that the consummation of such transaction will not
adversely affect the exclusions from gross income of the interest on the Bonds
for federal income tax purposes and (D) that as of the date of such transaction,
the Trustee, the Issuer and the Bank shall be furnished with a certificate,
dated the effective date of such transaction, signed by an Authorized
Representative of the Company and of the surviving, resulting or transferee
corporation, as the case may be, or the transferee of its assets to the effect
that immediately after the consummation of the transaction and after giving
effect thereto, no Event of Default exists under the Installment Sale Agreement
and no event exists which, with notice or lapse of time or both, would become
such an Event of Default.
SECTION 8.5. AGREEMENT TO PROVIDE INFORMATION. The Company agrees, whenever
requested by the Issuer or the Trustee or the Bank, to provide and certify or
cause to be provided and certified such information concerning the Company, its
finances and other topics related to the Bonds and/or the Project Facility as
the Issuer (in carrying out its obligations hereunder and under the other
Financing Documents and under the Act) or the Trustee or the Bank from time to
time reasonably considers necessary or appropriate, including, but not limited
to, such information as to enable the Issuer or the Trustee or the Bank to make
any reports required by law or governmental regulation.
SECTION 8.6. BOOKS OF RECORD AND ACCOUNT; FINANCIAL STATEMENTS; COMPLIANCE
CERTIFICATES. (A) The Company agrees to maintain proper accounts, records and
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books in which full and correct entries shall be made, in accordance with
generally accepted accounting principles, of all business and affairs of the
Company.
(B) As soon as possible after the end of each calendar
year , but in any event within ninety (90) days after such date, the Company
shall furnish to the Issuer, the Trustee and the Bank a certificate of an
Authorized Representative of the Company stating that no Event of Default
hereunder has occurred or is continuing or, if any Event of Default exists,
specifying the nature and period of existence thereof and what action the
Company has taken or proposes to take with respect thereto.
(A) The Company agrees, for the benefit of the Issuer and
the Bank, that it will, during any period in which any Bond is Outstanding,
promptly comply with all statutes, codes, laws, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all Governmental Authorities,
foreseen or unforeseen, ordinary or extraordinary, which now or at any time
hereafter may be applicable to the Company or the Project Facility or any part
thereof, or to any use, manner of use or condition of the Project Facility or
any part thereof (the applicability of such laws, ordinances, rules and
regulations to be determined both as if the Issuer were the owner of the Project
Facility and as if the Company and not the Issuer were the owner of the Project
Facility).
(B) Notwithstanding the provisions of subsection (A) of this Section 8.7,
the Company may in good faith actively contest the validity or the applicability
of any requirement of the nature referred to in such subsection (A), provided
that the Company (1) first shall have notified the Issuer and the Bank in
writing of such contest, (2) is not otherwise in default under any of the
Financing Documents, (3) shall have set aside adequate reserves for any such
requirement, and (4) demonstrates to the reasonable satisfaction of the Issuer
and the Bank that noncompliance with such requirement will not materially
endanger the Lien of the Mortgage as to the Project Facility or subject the
Project Facility or any part thereof to loss or forfeiture. Otherwise, the
Company shall promptly take such action with respect thereto as shall be
reasonably satisfactory to the Issuer and the Bank.
(C) Notwithstanding the provisions of subsection (B) of
this Section 8.7, if the Issuer or any of its members, officers, agents,
servants or employees may be liable for prosecution for failure to comply
therewith, the Company shall promptly take such action with respect thereto as
shall be satisfactory to the Issuer.
SECTION 8.8. DISCHARGE OF LIENS AND ENCUMBRANCES. (A) The Company hereby
covenants that the Mortgage is a valid Lien on the Project Facility subject only
to Permitted Encumbrances, and the Company agrees not to create or suffer to be
created any other Lien, except for Permitted Encumbrances, on the Project
Facility or any part thereof or any funds of the Issuer applicable to the
Project Facility.
(B) Notwithstanding the provisions of subsection (A) of
this Section 8.8, the Company may in good faith actively contest any such Lien,
provided that (1) the Company first shall have notified the Issuer and the Bank
in writing of such contest, (2) the Company is not in default under any of the
Financing Documents, (3) such Lien shall be removed within sixty (60) days of
the date of such notice by the Company or secured by the Company's posting a
bond in form and substance satisfactory to the Issuer and the Bank and (4)
demonstrates to the reasonable satisfaction of the Issuer and the Bank that the
contesting of such Lien and its non-discharge will not materially endanger the
Lien of the Mortgage as to the Project Facility or subject the Project Facility
or any part thereof to loss or forfeiture.
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SECTION 8.9. PERFORMANCE BY ISSUER OR TRUSTEE OF COMPANY'S OBLIGATIONS. Should
the Company fail to make any payment or to do any act as herein provided, the
Issuer or the Trustee or the Bank may, but need not, without notice to or demand
on the Company and without releasing the Company from any obligation herein,
make or do the same, including, without limitation, appearing in and defending
any action purporting to affect the rights or powers of the Company or the
Issuer, and paying all expenses, including, without limitation, reasonable
attorneys' fees; and the Company shall pay immediately upon demand all sums so
incurred or expended by the Issuer or the Trustee or the Bank under the
authority hereof and all fees, costs and expenses, together with interest
thereon, at the rate of one and one half percent (1.5%) per month or the maximum
permitted by law, whichever is less.
SECTION 8.10. DEPRECIATION DEDUCTIONS AND TAX CREDITS. The parties agree that as
between them the Company shall be entitled to all depreciation deductions and
accelerated cost recovery system deductions with respect to any portion of the
Project Facility pursuant to Sections 167 and 168 of the Code and to any
investment credit pursuant to Section 38 of the Code with respect to any portion
of the Project Facility which constitutes "Section 38 Property" and to all other
state and/or federal income tax deductions and credits which may be available
with respect to the Project Facility.
SECTION 8.11. IDENTIFICATION OF EQUIPMENT. All Equipment which is or may become
part of the Project Facility pursuant to the provisions of the Installment Sale
Agreement shall be properly identified by the Company by such appropriate
records, including computerized records, as may be approved by the Issuer, the
Trustee and the Bank.
SECTION 8.12. INDEMNIFICATION OF TRUSTEE. (A) Notwithstanding any other
provisions of the Financing Documents, the Company agrees to indemnify and hold
the Trustee, and its directors, officers, agents and employees, harmless from
and against any and all claims, causes of action, judgments, liabilities,
damages, losses, costs and expenses, including, but not limited to, reasonable
attorneys' fees, arising out of the execution, delivery or performance of the
Financing Documents, provided that the same are not a result of the negligence
or willful misconduct of the Trustee.
(B) Notwithstanding any other provisions of the
Installment Sale Agreement or the other Financing Documents, the obligations of
the Company pursuant to this Section 8.12 shall remain in full force and effect
after the termination of the Installment Sale Agreement until the expiration of
the period stated in the applicable statute of limitations during which a claim,
cause of action or prosecution relating to the matters herein described may be
brought and the payment in full or the satisfaction of such claim, cause of
action or prosecution and the payment of all reasonable fees, expenses and
charges paid or incurred by the Trustee, or its directors, officers, agents or
employees, relating thereto.
(C) To effectuate the provisions of this Section 8.12,
the Company agrees to provide for and insure, in the liability policies required
by Section 6.3(C) of the Installment Sale Agreement, its liabilities assumed
pursuant to this Section 8.12.
SECTION 8.13. COVENANT AGAINST ARBITRAGE BONDS. Notwithstanding any other
provision of the Installment Sale Agreement, so long as the Bonds shall be
outstanding, neither the Issuer nor the Company shall use, or direct or permit
the use of, the proceeds of the Bonds or any other moneys within their
respective control (including without limitation the proceeds of any insurance
or any Condemnation award with respect to the Project Facility) in any manner
which, if such use had been reasonably expected on the date of issuance of the
Bonds, would have caused the bonds to be "arbitrage bonds" within the meaning
ascribed to such quoted term in Section 148(a) of the Code. The Issuer
authorized
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the Company, on the Issuer's behalf, to calculate and make the rebate payments
required by Section 148(f) of the Code.
SECTION 8.14. ENVIRONMENTAL MATTERS. (A) The Company shall keep or cause the
Project Facility to be kept free of Hazardous Substances, except for Hazardous
Substances which may be used in connection with the Company's operations, all of
which have been and shall be conducted in accordance with applicable law.
Without limiting the foregoing, the Company shall not cause or permit the
Project Facility to be used to generate, process, store, handle, dispose or
transfer Hazardous Substances, except in compliance with all applicable
environmental laws and Permits, nor shall the Company cause or permit, as a
result of any act or omission on the part of the Company, a Release of Hazardous
Substances onto the Land or any other Property. The Company shall comply with
and ensure compliance by all tenants, if any, with all applicable laws, whenever
and whomever triggered by, and obtain and comply with any and all approvals,
registrations or Permits required thereunder.
(B) The Company shall (1) conduct and complete all
investigations, studies, sampling and testing and all remedial, removal and
other actions necessary to clean up and remove all Hazardous Substances on, from
or affecting the Project Facility (a) in accordance with all applicable
environmental laws, (b) to the satisfaction of the Issuer and the Bank, and (c)
in accordance with the orders and directives of all Governmental Authorities,
and (2) defend, indemnify, and hold harmless the Issuer and the Bank and their
respective employees, agents, officers and directors from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs or
expenses of whatever kind or nature, known or unknown, contingent or otherwise,
arising out of or in any way related to (a) the presence, disposal, Release or
threatened Release of any Hazardous Substance on, from or affecting the Project
Facility; (b) any personal injury (including wrongful death) or property damage
arising out of or related to such Hazardous Substance; (c) any lawsuit or
administrative proceeding brought or threatened, settlement reached, or
government order relating to such Hazardous Substance; and (d) any violation of
any law or regulation or demand of any Governmental Authority or any policies or
requirements of the Bank or the Issuer which are based upon or in any way
related to such Hazardous Substances including, without limitation, reasonable
costs and expenses of or relating to attorneys, consultants, investigations and
laboratory fees, and court costs and litigation expenses. In the event the
Mortgage is foreclosed or the Issuer tenders deed in lieu of foreclosure, the
Company shall deliver the Project Facility to the Bank free of any and all
Hazardous Substances so that the condition of the Project Facility shall conform
with all environmental laws and Permits affecting the Project Facility. The
provisions of this Section 8.14 shall be in addition to any and all other
obligations and liabilities the Company may have to the Issuer and the Bank at
common law and under statute, and shall survive the transactions contemplated
herein.
(C) If the Company fails to cause any Release of
Hazardous Substances on, at or from the Project Facility to be contained,
removed, cleaned up or otherwise remediated within one hundred and twenty (120)
days after receiving notice thereof, the Issuer and the Bank shall have the
right (but not the obligation), upon ten (10) days' written notice to the
Company (or without notice in the case of emergency), to take or complete such
action on behalf of the Company. The contractors and subcontractors selected by
the Issuer and the Bank shall have the right to enter the Project Facility with
such Persons, machinery and equipment as shall be necessary, and to undertake
such investigative, containment, removal, clean-up and other remedial actions as
they shall deem necessary and appropriate without thereby incurring any
liability to the Company on account thereof, except for the gross negligence or
willful misconduct of the Issuer and the Bank or the negligence or willful
misconduct of such contractors or subcontractors. The Company agrees to
cooperate with all contractors and subcontractors engaged in such investigative,
containment, removal, clean-up or other remedial actions. The Company shall be
liable to the Issuer and the Bank for all reasonable costs and expenses,
including,
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without limitation, attorneys' and experts' fees, expenses and disbursements,
paid or incurred on account of such actions undertaken on behalf of the Company,
and shall promptly reimburse the Issuer and the Bank, as the case may be,
therefor on demand. Until paid by the Company, all such costs and expenses,
together with the interest thereon at the rate of one and one half percent
(1.5%) per month (or the highest rate permitted by law, whichever is less) shall
be deemed additional rent under this Installment Sale Agreement.
SECTION 8.15. INDEMNIFICATION OF BANK. (A) Notwithstanding any other provisions
of the Financing Documents, the Company agrees to indemnify and hold the Bank,
and its directors, officers, agents and employees, harmless from and against any
and all claims, causes of action, judgments, liabilities, damages, losses, costs
and expenses, including, but not limited to action, judgments, liabilities,
damages, losses, costs and expenses, including, but not limited to, reasonable
attorneys' fees, arising out of the execution, delivery or performance of the
Financing Documents, provided that the same are not a result of the negligence
or willful misconduct of the Bank.
(B) Notwithstanding any other provisions of this
Installment Sale Agreement or other Financing Documents, the obligations of the
Company pursuant to this Section 8.15 shall remain in full force and effect
after the termination of this Installment Sale Agreement until the expiration of
the period stated in the applicable statute of limitations during which a claim,
cause of action or prosecution relating to the matters herein described may be
brought and the payment in full or the satisfaction of such claim, cause of
action or prosecution and the payment of all reasonable fees, expenses and
charges paid or incurred by the Bank, or its directors, officers, agents or
employees, relating thereto.
(C) To effectuate the provisions of this Section 8.15,
the Company agrees to provide for and insure, in the liability policies required
by Section 6.3(C) of this Installment Sale Agreement, its liabilities assumed by
this Section 8.15.
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ARTICLE IX
ASSIGNMENTS; MERGER OF ISSUER
SECTION 9.1. ASSIGNMENT OF INSTALLMENT SAFE AGREEMENT. The Installment Sale
Agreement may not be assigned by the Company, in whole or in part, without the
prior written consent of the Issuer, the Trustee and the Bank, which consents
shall not be unreasonably withheld or delayed.
SECTION 9.2. PLEDGE AND ASSIGNMENT OF ISSUER'S INTERESTS TO TRUSTEE. The Issuer
has pledged and assigned, pursuant to the terms of the Assignment and the
Mortgage, certain of its rights and interests under and pursuant to the
Installment Sale Agreement to the Trustee and the Bank as security for the
payment of the principal, premium, if any, and interest on the Bonds. Such
pledge and assignment shall in no way impair or diminish any obligations of the
Issuer under the Installment Sale Agreement. The Company hereby acknowledges
receipt of notice of and consents to such pledge and assignment by the Issuer to
the Trustee and the Bank and specifically agrees to perform for the benefit of
the Trustee and the Bank all of its duties and undertakings hereunder (except
duties undertaken with respect to the Unassigned Rights).
SECTION 9.3. MERGER OF ISSUER. (A) Nothing contained in the Installment Sale
Agreement shall prevent the consolidation of the Issuer with, or merger of the
Issuer into, or assignment by the Issuer of its rights and interests hereunder
to, any other public benefit corporation of the State or political subdivision
thereof which has the legal authority to perform the obligations of the Issuer
hereunder, provided that upon any such consolidation, merger or assignment, the
due and punctual performance and observance of all of the agreements and
conditions of the Installment Sale Agreement, the Bonds and the Indenture to be
kept and performed by the Issuer shall be expressly assumed in writing by the
public benefit corporation or political subdivision resulting from such
consolidation or surviving such merger or to which the Issuer's rights and
interests hereunder or under the Installment Sale Agreement shall be assigned.
(B) As of the date of any such consolidation, merger or
assignment, the Issuer shall give notice thereof in reasonable detail to the
Company, the Trustee and the Bank. The Issuer shall promptly furnish to the
Trustee, the Company and the Bank such additional information with respect to
any such consolidation, merger or assignment as the Trustee, the Company and the
Bank reasonably may request.
SECTION 9.4. SALE OR LEASE OF PROJECT FACILITY. (A) The Company may not sell,
sublease, transfer, convey or otherwise dispose of the Project Facility or any
part thereof and without the prior written consent of the Issuer and the Bank.
(B) Notwithstanding anything to the contrary in the
Installment Sale Agreement, in any instance after the Completion Date where the
Company reasonably determines that any item of Equipment has become inadequate,
obsolete, worn out, unsuitable, undesirable or unnecessary, the Company may
remove such item of Equipment and may sell, trade in, exchange or otherwise
dispose of the same, as a whole or in part, provided, however that no such
Equipment having a value in excess of $100,000 shall be removed, sold, traded
in, exchanged or otherwise disposed of without the consent of the Bank which
consent shall not unreasonably be withheld provided that such removal will not
materially impair the value of the Project Facility as collateral. At the
request of the Company, the Issuer shall execute and deliver, and shall request
the Bank to execute and deliver, to the Company all instruments necessary or
appropriate to enable the Company to sell or otherwise dispose of any such item
of Equipment free from
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the Liens of the Financing Documents. The Company shall pay all costs and
expenses (including reasonable counsel fees) incurred in transferring title to
and releasing from the Liens of the Financing Documents any item of Equipment
removed pursuant to this Section 9.4.
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ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
SECTION 10.1. EVENTS OF DEFAULT DEFINED. (A) The following shall be "Events of
Default" under the Installment Sale Agreement, and the terms "Event of Default"
or "Default" shall mean, whenever they are used in the Installment Sale
Agreement, any one or more of the following events:
(1) A default by the Company in the due and punctual
payment of the amounts specified to be paid pursuant to Section 5.3(A)
hereof.
(2) A default in the performance or observance of any
other of the covenants, conditions or agreements on the part of the
Company in the Installment Sale Agreement and the continuance thereof
for a period of thirty (30) days after written notice is given by the
Issuer or the Trustee or the Bank to the Company, or, if such covenant,
condition or agreement is capable of cure but cannot be cured within
such thirty (30) day period, the failure of the Company to commence to
cure within such thirty (30) day period and thereafter diligently
proceed with all action required to complete said cure within ninety
(90) days of such written notice unless such time to cure is otherwise
extended by the Issuer and the Trustee and the Bank in writing.
(3) The occurrence of an "Event of Default" under any of
the other Financing Documents.
(4) Any representation or warranty made by the Company
herein or in any other Financing Document proves to have been false in
any material manner at the time it was made.
(5) The Company shall generally not pay its debts as such
debts become due or admits its inability to pay its debts as they
become due.
(6) The Company shall conceal, remove or permit to be
concealed or removed any part of its Property, with intent to hinder,
delay or defraud its creditors, or any one of them, or shall make or
suffer a transfer of any of its Property which is fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or shall make any
transfer of its Property to or for the benefit of a creditor at a time
when other creditors similarly situated have not been paid; or shall
suffer or permit, while insolvent, any creditor to obtain a Lien upon
any of its Property through legal proceedings or distraint which is not
vacated within sixty (60) days from the date thereof.
(7) (a) The filing by the Company (as debtor) of a
voluntary petition under Title 11 of the United States Code or any
other federal or state bankruptcy statute; (b) the failure by the
Company within sixty (60) days to lift any execution, garnishment or
attachment of such consequence as will impair the Company's ability to
carry out its obligations hereunder; (c) the commencement of a case
under Title 11 of the United States Code against the Company as the
debtor or commencement under any other federal or state bankruptcy
statute of a case, action or proceeding against the Company and
continuation of such case, action or proceeding without dismissal for a
period of sixty (60) days; (d) the entry of an order for relief by a
court of competent jurisdiction under Title 11 of the United States
Code or any other federal or state bankruptcy statute with respect to
the debts of the Company; or (e) in connection with any insolvency or
bankruptcy case, action or proceeding, appointment by final order,
judgment or decree of a court of competent jurisdiction of a receiver
or trustee of the whole or
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a substantial portion of the Property of the Company, unless such
order, judgment or decree is vacated, dismissed or dissolved within
sixty (60) days of such appointment.
(8) Final judgment or judgments for the payment of money
in excess of an aggregate of $100,000 shall be rendered against the
Company and the Company shall not discharge the same or cause it to be
bonded or discharged within sixty (60) days from the entry thereof, or
shall not appeal therefrom or from the order, decree or process upon
which or pursuant to which said judgment was granted, based or entered
and secure a stay of execution pending such appeal.
(9) The imposition of a Lien on the Project Facility
other than a Lien being contested as provided in Section 8.8(B) of the
Installment Sale Agreement or a Permitted Encumbrance.
(10) Subject to the provisions of Section 9.4(B) hereof,
the removal of the Equipment or any portion thereof outside the Town of
Moreau, New York without the prior written consent of the Issuer.
(11) The occurrence of an "Event of Default" under the
PILOT Agreement.
(B) Notwithstanding the provisions of Section 10.1(A)
hereof, if by reason of force majeure (as hereinafter defined) either party
hereto shall be unable, in whole or in part, to carry out its obligations under
the Installment Sale Agreement and if such party shall give notice and full
particulars of such force majeure in writing to the other party and to the
Trustee within a reasonable time after the occurrence of the event or causes
relied upon, the obligations under the Installment Sale Agreement of the party
giving such notice, so far as they are affected by such force majeure, shall be
suspended during the continuance of the inability, which shall include a
reasonable time for the removal of the effect thereof. The suspension of such
obligations for such period pursuant to this subsection (B) shall not be deemed
an Event of Default under this Section 10.1 or under any of the other Financing
Documents. Notwithstanding anything to the contrary in this subsection (B), an
event of force majeure shall not excuse, delay or in any way diminish the
obligations of the Company to make the payments required by Sections 4.5, 5.3,
6.6, 8.4 and 8.14 hereof, to obtain and continue in full force and effect the
insurance required by Article VI hereof, to provide the indemnity required by
Section 8.2, 8.4 and 8.14 hereof and to comply with the provisions of Sections
2.2(E), 4.5, 6.6, 8.2, 8.4, 8.5, 8.7(C), 8.12, 8.13 and 8.14 hereof. The term
"force majeure" as used herein shall include, without limitation, acts of God,
strikes, lockouts or other industrial disturbances, acts of public, enemies,
orders of any kind of any Governmental Authority or any civil or military
authority, insurrections, riots, epidemics, landslides, earthquakes, fire,
hurricanes, storms, floods, washouts, droughts, arrests, restraint of government
and people, civil disturbances, explosions, breakage or accident to machinery,
transmission pipes or canals, entire failure of utilities or any other cause or
event not reasonably within the control of the party claiming such inability. It
is agreed that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the party having
difficulty and the party having difficulty shall not be required to settle any
strike, lockout or other industrial disturbances by acceding to the demands of
the opposing party or parties.
SECTION 10.2. REMEDIES ON DEFAULT. (A) Whenever any Event of Default shall have
occurred, the Issuer may, to the extent permitted by law, take any one or more
of the following remedial steps:
(1) declare, by written notice to the Company, to be
immediately due and payable, whereupon the same shall become
immediately due and payable, (a) all unpaid rental payments
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payable pursuant to Section 5.3(A) hereof, and (b) all other payments
due under the Installment Sale Agreement or any of the other Financing
Documents;
(2) take any other action at law or in equity which may
appear necessary or desirable to collect any amounts then due or
thereafter to become due hereunder and to enforce the obligations,
agreements or covenants of the Company under the Installment Sale
Agreement; and
(3) in the event of a default by the Company in the
payment of any amounts due and owing under the PILOT Agreement and upon
forty-five (45) days' prior written notice to the Company and the Bank,
terminate the PILOT Agreement and reconvey the Project Facility to the
Company subject to the Lien of the Financing Documents. The Company
hereby consents to said reconveyance and appoints the Issuer its
attorney-in-fact, which appointment is coupled with an interest and is
irrevocable, to execute any and all instruments and documents in its
name as may be necessary, in the sole discretion of the Issuer, to
effectuate such transfer.
(B) Any sums paid to the Issuer as a consequence of any
action taken pursuant to this Section 10.2 (excepting sums payable to the Issuer
as a consequence of action taken to enforce the Unassigned Rights) shall be paid
to the Trustee and applied in accordance with the provisions of Section 10.11 of
the Indenture.
(C) No action taken pursuant to this Section 10.2
(including repossession of the Project Facility) shall relieve the Company from
its obligations to make all payments required by the Installment Sale Agreement
and the other Financing Documents.
SECTION 10.3. REMEDIES CUMULATIVE. No remedy herein conferred upon or reserved
to the Issuer is intended to be exclusive of any other available remedy, but
each and every such remedy shall be cumulative and in addition to every other
remedy given under the Installment Sale Agreement or now or hereafter existing
at law or in equity. No delay or omission to exercise any right or power
accruing upon any default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle
the Issuer to exercise any remedy reserved to it in this Article X, it shall not
be necessary to give any notice, other than such notice as may be herein
expressly required.
SECTION 10.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. In the event the
Company should default under any of the provisions of the Installment Sale
Agreement, and the Issuer or the Trustee or the Bank should employ attorneys or
incur other expenses for the collection of amounts payable hereunder or the
enforcement of performance or observance of any obligations or agreements on the
part of the Company herein contained, the Company shall, on demand therefor, pay
to the Issuer or the Trustee or the Bank, as the case may be, the reasonable
fees of such attorneys and such other expenses so incurred, whether an action is
commenced or not.
SECTION 10.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event any
agreement contained herein should be breached by either party and thereafter
such breach be waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1. NOTICES. All notices, certificates and other communications
hereunder shall be in writing and shall be sufficiently given and shall be
deemed given when (A) sent to the applicable address stated below by registered
or certified mail, return receipt requested, postage prepaid, or by such other
means (including, without limitation, personal and overnight delivery) as shall
provide the sender with documentary evidence of such delivery, or (B) delivery
is refused by the addressee, as evidenced by the affidavit of the Person who
attempted to effect such delivery. The addresses to which notices, certificates
and other communications hereunder shall be delivered are as follows:
If to the Company:
Spurlock Adhesives, Inc.
5090 General Mahone Highway
Waverly, Virginia 23890
Attention: Phillip S. Sumpter, Executive Vice President
With a Copy to:
Williams Mullen Christian & Dobbins, P.C.
1021 East Cary Street
Richmond, Virginia 23219
Attention: David L. Dallas, Jr., Esq.
If to the Issuer:
County of Saratoga Industrial Development Agency
Saratoga County Municipal Center
40 McMaster Street
Ballston Spa, New York 12020
Attention: Administrator
With a Copy to:
Michael J. Toohey, Esq.
Snyder, Kiley, Toohey & Corbett, LLP
160 West Avenue
P.O. Box 4367
Saratoga Springs, New York 12866
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If to the Trustee:
Star Bank, N.A.
425 Walnut Street
6th Floor
Cincinnati, Ohio 45202
Attention: Trust Financial Services Group
If to the Bank:
KeyBank National Association
66 South Pearl Street
Albany, New York 12207-1501
Attention: Corporate Banking Division
With a Copy to:
KeyBank National Association
66 South Pearl Street
Albany, New York 12207
Attention: International Division, Letter of Credit Department
and
Crane Kelley Greene & Parente
90 State Street
Albany, New York 12207
Attention: Kevin J. Kelley, Esq.
The Issuer, the Company, the Trustee and the Bank may, by notice given
hereunder, designate any further or different addresses to which subsequent
notices, certificates and other communications shall be sent.
SECTION 11.2. BINDING EFFECT. The Installment Sale Agreement shall inure to the
benefit of the Issuer, the Company, the Trustee, the Bank and the holders of the
Bonds and shall be binding upon the Issuer, the Company and, as permitted by the
Installment Sale Agreement, their respective heirs, successors and assigns.
SECTION 11.3. SEVERABILITY. If any one or more of the covenants or agreements
provided herein on the part of the Issuer or the Company to be performed shall,
for any reason, be held or shall, in fact, be inoperative, unenforceable or
contrary to law in any particular case, such circumstance shall not render the
provision in question inoperative or unenforceable in any other case or
circumstance. Further, if any one or more of the phrases, sentences, clauses,
paragraphs or sections herein shall be contrary to law, then such covenant or
covenants or agreement or agreements shall be deemed separable from the
remaining covenants and agreements hereof and shall in no way affect the
validity of the other provisions of the Installment Sale Agreement.
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SECTION 11.4. AMENDMENTS, CHANGES AND MODIFICATIONS. The Installment Sale
Agreement may not be amended, changed, modified, altered or terminated, except
by an instrument in writing signed by the parties hereto, with the written
consent of the Trustee and the Bank.
SECTION 11.5. EXECUTION OF COUNTERPARTS. The Installment Sale Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
SECTION 11.6. APPLICABLE LAW. The Installment Sale Agreement shall be governed
exclusively by the applicable laws of the State.
SECTION 11.7. RECORDING AND FILING. (A) The Assignment, the Installment Sale
Agreement, the Mortgage and financing statements perfecting the security
interests created and/or assigned thereby shall be recorded or filed, as the
case may be, by the Issuer in the office of the County Clerk of Saratoga County,
New York, or in such other office as may at the time be provided by law as the
proper place for the recordation or filing thereof, and said statements as well
as continuation statements may be filed without the signature of the Issuer and
the Company. The Trustee shall be entitled to receive, no less frequently than
each five (5) year anniversary of the date of the issuance of the Bonds, an
opinion of Counsel (as defined in the Indenture), addressed to the Trustee,
stating that all such necessary recordings and filings have been completed.
(B) The Issuer and the Company shall execute and deliver
all instruments and shall furnish all information which the Trustee or the Bank
may deem necessary or appropriate to protect any Lien created or contemplated by
the Installment Sale Agreement, the Indenture and the Mortgage.
SECTION 11.8. SURVIVAL OF OBLIGATIONS. (A) The obligations of the Company to
make the payments required by Section 5.3(B) hereof and to provide the indemnity
required by Sections 8.2, 8.4, 8.12, 8.13 and 8.14 hereof shall survive the
termination of the Installment Sale Agreement and the full payment of the Bonds,
and all such payments after such termination shall be made upon demand of the
party to whom such payment is due.
(B) The obligations of the Company with respect to the
Unassigned Rights shall survive the termination of the Installment Sale
Agreement until the expiration of the period stated in the applicable statute of
limitations during which a claim, cause of action or prosecution relating to the
Unassigned Rights may be brought and the payment in full or the satisfaction of
such claim, cause of action or prosecution and the payment of all expenses and
charges incurred by the Issuer, or its officers, members, agents or employees,
relating thereto.
SECTION 11.9. TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING. The Table
of Contents and the headings of the several sections in the Installment Sale
Agreement have been prepared for convenience of reference only and shall not
control, affect the meaning of or be taken as an interpretation of any provision
of the Installment Sale Agreement.
SECTION 11.10. NO RECOURSE; SPECIAL OBLIGATION. The obligations and agreements
of the Issuer contained herein and in the other Financing Documents and any
other instruments or documents executed in connection therewith or herewith, and
any other instrument or document supplemental thereto or hereto, shall be deemed
the obligations and agreements of the Issuer, and not of any member, officer,
agent (other than the Company) or employee of the Issuer in his individual
capacity, and the members, officers, agents (other than the Company) and
employees of the Issuer shall not be liable
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personally hereon or thereon or be subject to any personal liability or
accountability based upon or in respect hereof or thereof or of any transaction
contemplated hereby or thereby. The obligations and agreements of the Issuer
contained herein and therein shall not constitute or give rise to an obligation
of the State or of Saratoga County, New York, and neither the State nor Saratoga
County, New York shall be liable hereon or thereon, and, further, such
obligations and agreements shall not constitute or give rise to a general
obligation of the Issuer, but rather shall constitute limited, special
obligations of the Issuer payable solely from the revenues of the Issuer derived
and to be derived from the sale or other disposition of the Project Facility
(except for revenues derived by the Issuer with respect to the Unassigned
Rights). No order or decree of specific performance with respect to any of the
obligations of the Issuer hereunder shall be sought or enforced against the
Issuer unless (A) the party seeking such order or decree shall first have
requested the Issuer in writing to take the action sought in such order or
decree of specific performance, and ten (10) days shall have elapsed from the
date of receipt of such request, and the Issuer shall have refused to comply
with such request (or, if compliance therewith would reasonably be expected to
take longer than ten [10] days, shall have failed to institute and diligently
pursue action to cause compliance with such request) or failed to respond within
such notice period, (B) if the Issuer refuses to comply with such request and
the Issuer's refusal to comply is based on its reasonable expectation that it
will incur fees and expenses, the party seeking such order or decree shall have
placed in an account with the Issuer an amount or undertaking sufficient to
cover such reasonable fees and expenses, and (C) if the Issuer refuses to comply
with such request and the Issuer's refusal to comply is based on its reasonable
expectation that it or any of its members, officers, agents (other than the
Company) or employees shall be subject to potential liability, the party seeking
such order or decree shall (1) agree to indemnify and hold harmless the Issuer
and its members, officers, agents (other than the Company) and employees against
any liability incurred as a result of its compliance with such demand, and (2)
if requested by the Issuer, furnish to the Issuer satisfactory security to
protect the Issuer and its members, officers, agents and employees against all
liability expected to be incurred as a result of compliance with such request.
SECTION 11.11. SUBORDINATION OT MORTGAGE AND ASSIGNMENT. (A) Except as set forth
below, the Installment Sale Agreement and all rights of the Company and the
Issuer hereunder are and shall be subordinate to the Liens of the Mortgage and
the Assignment. The subordination of the Installment Sale Agreement to the
Mortgage and the Assignment shall be automatic, without the execution of any
further subordination agreement by the Company or the Issuer. Nonetheless, if
the Trustee and/or the Bank requires a further written subordination agreement,
the Company and the Issuer agree to execute, acknowledge and deliver the same.
(B) Notwithstanding anything to the contrary contained
herein or in any other Financing Document, the Installment Sale Agreement shall
constitute a first priority lien on the Project Facility in favor of the Issuer
to the extent of and as security for the payment by the Company of all amounts
due and owing to the Issuer under Section 6.6 hereof, including the payment of
all amounts due and owing under the PILOT Agreement such that the rights of the
Trustee and the Bank under the Mortgage, the Assignment and the other Financing
Documents shall be expressly subordinated thereto, notwithstanding the relative
order of recordation of such documents.
SECTION 11.12. SUBMISSION TO JURISDICTION. The Company hereby irrevocably and
unconditionally agrees that any suit, action or proceeding arising out of or
relating to this Installment Sale Agreement shall be brought in the state courts
of the State of New York or federal district court for the Northern District of
New York and waives any right to object to jurisdiction within either of the
foregoing forums by the Issuer. Nothing contained herein shall prevent the
Issuer from bringing any suit, action or proceeding or exercising any rights
against any security and against the Company personally,
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and against any property of the Company, within any other jurisdiction and the
initiation of such suit, action or proceeding or taking of such action in any
such other jurisdiction shall in no event constitute a waiver of the agreements
contained herein with respect to the laws of the State of New York governing the
rights and obligations of the parties hereto or the agreement of the Company to
submit to personal jurisdiction within the State of New York.
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IN WITNESS WHEREOF, the Issuer and the Company have caused the Installment
Sale Agreement to be executed in their respective names by their respective
Authorized Representatives, all as of the day and year first above written.
COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ Floyd H. Rourke
-----------------------------------
Floyd H. Rourke, Chairman
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
-----------------------------------
Name: Phillip S. Sumpter
---------------------------------
Title: Executive Vice President
---------------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On the 7th day of October, 1997, before me personally came FLOYD H.
ROURKE, to me known, who being by me duly sworn, did depose and say that he
resides in Northumberland, New York, that he is the CHAIRMAN of the COUNTY OF
SARATOGA INDUSTRIAL DEVELOPMENT AGENCY, the public benefit corporation of the
State of New York described in and which executed the foregoing instrument, and
that he signed his name thereto by authority of said public benefit corporation.
/s/ Theresa C. Priest
-----------------------------------
Notary Public
Theresa C. Priest
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On this 7th day of October, 1997, before me personally came Phillip S.
Sumpter, to me known, who being by me duly sworn, did depose and sat that he
resides in Waverly Virginia, that he is the Exec. VP of SPURLOCK ADHESIVES,
INC., the corporation described in and which executed the foregoing instrument,
and that he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Theresa C. Priest
-----------------------------------
Notary Public
Theresa C. Priest
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
<PAGE>
EXHIBIT "A"
REAL PROPERTY DESCRIPTION
THAT TRACT OR PARCEL OF LAND, situate in the Town of Moreau, County of
Saratoga and State of New York more fully described as Lot Number 3 as shown on
subdivision maps of Moreau Industrial Park prepared by The Saratoga Associates
and filed in the Saratoga County Clerk's Office on March 18, 1992 in drawer
#M-348 A-Z and AA-DD; and as modified by revised subdivision maps of Moreau
Industrial Park prepared by The Saratoga Associates and filed in the Saratoga
County Clerk's Office on February 16, 1994 in drawer #M-398, A-S and being
further bounded and described as follows:
BEGINNING at a point marked with a capped iron rod found at the point
of intersection of the easterly line of Farnan Road with the common division
line of Lot No. 4 to the north and Lot No. 3 to the south as shown on said map;
thence from said point of beginning along said common division line the
following five (5) courses and distances:
1) North 90 deg. 00 min. 00 sec. East, 347.86 feet to a point marked with
a capped iron rod found;
2) South 00 deg. 00 min. 00 sec. West, 32.63 feet to a point marked with a
capped iron rod found;
3) North 90 deg. 00 min. 00 sec. East, 191.52 feet to a point marked with
a capped iron rod found;
4) North 00 deg. 00 min. 00 sec. East, 32.63 feet to a point marked with a
capped iron rod found;
5) North 90 deg. 00 min. 00 sec. East, 680.17 feet to the point of
intersection of the westerly line of Lot No. 5 with the common division line of
Lot No. 4 to the north and Lot No. 3 to the south as shown on said map; thence
along said westerly line, South 16 deg. 10 min. 56 sec. West, 102.04 feet to a
point in the northwesterly line of lands of The State of New York as shown on
said map, said point also being at the 145 foot elevation; thence along said
northwesterly and the westerly line of lands of The State of New York as it
winds and turns along the 145 foot elevation in a southerly direction 712 +/-
feet to the point of intersection of said westerly line of lands of The State of
New York with the common division line of Lot No. 3 to the north and Lot No. 2
to the south as shown on said map, the last course having a tie-line of South 33
deg. 02 min. 30 sec. West, 699.47 feet; thence along said common division line,
South 90 deg. 00 min. 00 sec. West, 865.65 feet to a point marked with a capped
iron rod found at the point of intersection of the easterly line of Farnan Road
with the common division line of Lot No. 3 to the north and Lot No. 2 to the
south as shown on said map; thence along said easterly line in a northerly
direction the following four (4) courses and distances:
1) North 00 deg. 00 min. 00 sec. West, 116.35 feet to a point of
curvature;
2) Along a curve to the right an arc length of 464.05 feet to a point of
tangency, said curve having a radius of 2,773.32 feet and a delta angle
of 09 deg. 35 min. 13 sec.;
3) North 09 deg. 35 min. 13 sec. East, 50.00 feet to a point of curvature;
4) Along a curve to the left an arc length of 57.49 feet to the point or
place of beginning, said curve having a radius of 2,294.42 feet and a delta
angle of 01 deg. 26 min. 08 sec., said parcel containing 16.37 +/- acres of land
and being Lot No. 3 as shown on said map.
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EXHIBIT "B"
DESCRIPTION OF EQUIPMENT
All articles of personal property and all appurtenances acquired with
the proceeds of the Bonds or any payment made by the Company pursuant to Section
4.5 of the Installment Sale Agreement and now or hereafter attached to,
contained in or used in connection with the Facility or placed on any part
hereof, though not attached thereto, including, but not limited to, all
equipment, machinery, pipes, screens, fixtures, heating, lighting, plumbing,
ventilation, air conditioning, compacting and elevator plants, drapes, blinds
and accessories, sprinkler systems and other fire prevention and extinguishing
apparatus and materials; and together with any and all products of any of the
above, all substitutions, replacements, additions or accessions therefor, and
any and all cash proceeds or non-cash proceeds realized from the sale, transfer
or conversion of any of the above. The references to "proceeds" shall not be
deemed to be an authorization by the Bank of the disposition of any of the
foregoing.
B-1
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EXHIBIT "C"
FORM OF DEED TO COMPANY
THIS INDENTURE made __________________, ____, between COUNTY OF
SARATOGA INDUSTRIAL DEVELOPMENT AGENCY, a public benefit corporation organized
under the laws of the State of New York, with offices at 40 McMaster Street,
Ballston Spa, New York 12020, party of the first part, and
SPURLOCK ADHESIVES, INC., a Virginia corporation having an address of
5090 General Mahone Highway, Waverly, Virginia 23890, party of the second part
WITNESSETH that the party of the first part, in consideration of One
and 00/100 dollars ($1.00), lawful money of the United States, and other good
and valuable consideration paid by the party of the second part, the heirs or
successors and assigns of the party of the second part forever, all
[Insert description of Land from Deed to Issuer]
TOGETHER with the appurtenances and all the estate and rights of the
party of the first part in and to said premises,
TO HAVE AND TO HOLD the premises herein granted unto the party of the
second part, the heirs or successors and assigns of the party of the second part
forever.
The word "party" shall be construed as if it read "parties" whenever
the sense of this Indenture so requires.
IN WITNESS WHEREOF, the party of the first part has duly executed this
deed the day and year first above written.
COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY
BY:_________________________________
C-1
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EXHIBIT "D"
FORM OF BILL OF SALE TO THE COMPANY
County of Saratoga Industrial Development Agency, a public benefit
corporation of the State of New York (the "State") having its office at the
Saratoga County Municipal Center, 40 McMaster Street, Ballston Spa, New York
12020 (the "Grantor"), for the consideration of One Dollar ($1.00), cash in hand
paid, and other good and valuable consideration received by the Grantor from
Spurlock Adhesives, Inc. a corporation organized and existing under the laws of
the State of Virginia having its office at 5090 General Mahone Highway, Waverly,
Virginia 23890 (the "Grantee"), the receipt of which is hereby acknowledged by
the Grantor, hereby sells, transfers and delivers unto the Grantee, and its
successors and assigns, all those materials, machinery, equipment, fixtures or
furnishings which are described in Exhibit "A" attached hereto and by this
reference made a part hereof, now owned or hereafter acquired by the Grantor
with proceeds of the sale of the Bonds (as defined in the installment sale
agreement dated as of October 1, 1997, [the "Installment Sale Agreement"] by and
between the Grantor and the Grantee) or any payment made by the Grantee pursuant
to Section 4.5 of the Installment Sale Agreement, and such additions thereto and
substitutions therefor as may be made from time to time.
TO HAVE AND TO HOLD the same unto the Grantee, and its successors and
assigns, forever.
THE GRANTOR MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE
CONDITION, TITLE, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS OF ANY OF THE
EQUIPMENT DESCRIBED ABOVE. THE GRANTEE ACCEPTS TITLE TO SUCH EQUIPMENT "AS IS",
WITHOUT RECOURSE AGAINST THE GRANTOR FOR ANY CONDITION NOW OR HEREAFTER
EXISTING. IN THE EVENT OF A DEFICIENCY OR DEFAULT OF ANY NATURE, WHETHER PATENT
OR LATENT, THE GRANTOR SHALL HAVE NO RESPONSIBILITY OR LIABILITY WHATSOEVER WITH
RESPECT THERETO.
IN WITNESS WHEREOF, the Grantor has caused this bill of sale to be
executed in its name by its duly authorized officer on the date indicated
beneath the signature of such officer and dated as of the _____ day of
__________, ____.
COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY
By:______________________________
Chairman
D-1
Exhibit 10.32
KEYBANK NATIONAL ASSOCIATION
INTERNATIONAL DIVISION
LETTER OF CREDIT DEPARTMENT
66 SOUTH PEARL STREET
ALBANY, NEW YORK 12207
IRREVOCABLE TRANSFERRABLE DIRECT PAY
LETTER OF CREDIT NO. NSL792132
October 10, 1997
Star Bank, N.A.,
as Trustee under the Trust Indenture
with the County of Saratoga Industrial
Development Agency, dated as of
October 1, 1997
425 Walnut Street, ML 5125
Cincinnati, Ohio 45202-1118
Attention: Corporate Trust Services
Ladies and Gentlemen:
At the request and on the instructions of our customer, Spurlock
Adhesives, Inc. ("Applicant"), as account party, KeyBank National Association
(hereinafter "we" or "our") hereby establishes this Irrevocable Transferrable
Direct Pay Letter of Credit ("Letter of Credit") in your favor, not
individually, but solely as Trustee (hereinafter "you" or "your") for the
benefit of the holders of County of Saratoga Industrial Development Agency
Multi-Mode Variable Rate Industrial Development Revenue Bonds (Spurlock
Adhesives, Inc. Project), Series 1997A (the "Bonds") issued by County of
Saratoga Industrial Development Agency ("Issuer") pursuant to a Trust Indenture,
dated as of October 1, 1997, by and between the Issuer and Star Bank, N.A., as
Trustee ("Trustee") (the "Indenture"). All capitalized terms used but not
defined herein shall have the meanings set forth in the Indenture.
We hereby irrevocably authorize you to draw on us in accordance with
the terms and conditions hereinafter set forth, by one or more sight drafts in
the form of Exhibit 1 attached hereto ("Draft(s)"), in an aggregate amount not
exceeding $6,180,822, as reduced and reinstated from time to time in accordance
with the provisions hereof (the "Stated Amount"), of which an aggregate amount
not exceeding (i) $6,000,000 may be drawn with respect to (a) the unpaid
principal amount of Bonds Outstanding, whether at maturity, acceleration or upon
redemption ("Principal Drawing") or (b) that portion of the Purchase Price
corresponding to principal of Bonds Outstanding tendered and not remarketed
pursuant to the Indenture ("Bond Purchase Drawing - Principal"); plus (ii)
$180,822.00 (computed on the basis of up to one hundred ten (110) days of
accrued interest on Bonds Outstanding at an assumed maximum interest rate of ten
<PAGE>
percent (10%) per annum, calculated on the basis of a 365 or 366 day year) may
be drawn with respect to (a) the payment of up to one hundred ten (110) days
accrued interest on Bonds Outstanding ("Interest Drawing") or (b) that portion
of the Purchase Price corresponding to interest on Bonds Outstanding tendered
and not remarketed pursuant to the Indenture ("Bond Purchase Drawing -
Interest), ("Bond Purchase Drawing - Principal" and "Bond Purchase Drawing -
Interest" shall be, collectively, "Bond Purchase Drawing").
Each drawing honored by us shall reduce that portion of the Stated
Amount available under this Letter of Credit, subject only to reinstatement with
respect to drawings as hereinafter provided.
The Stated Amount with respect to an Interest Drawing shall be
automatically and irrevocably reinstated, effective as of the close of business
of the fifth (5th) day after such Interest Drawing, by the amount of a Draft so
drawn, so long as you have not received from us, on or before the close of
business on the fifth (5th) day after the date of the presentation to us of a
Draft, written notice to the effect that an Event of Default under the Letter of
Credit Reimbursement Agreement, dated as of October 1, 1997, between Applicant
and us ("Reimbursement Agreement"), has occurred, and that the Stated Amount
with respect to an Interest Drawing is not being reinstated.
Upon receipt by us or our agent of Bonds pledged in connection with any
Bond Purchase Drawing pursuant to the Pledge and Security Agreement, the Stated
Amount shall be automatically and irrevocably reinstated by the amount of such
Bond Purchase Drawing.
The Stated Amount shall be decreased, and not reinstated, from time to
time upon payment under this Letter of Credit for the redemption of the Bonds as
provided in the Indenture by (i) with respect to principal, the aggregate
principal amount of the Bonds so redeemed, and (ii) with respect to interest,
the amount that bears the same proportion to $180,822.00 as the amount specified
in the immediately preceding clause (i) bears to $6,000,000.
Each Draft for each drawing under this Letter of Credit must bear on
its face the clause "Drawn under KeyBank National Association Letter of Credit
No. NSL792132," be dated the Business Day of presentation and be accompanied by
(i) if the drawing being made is a "Bond Purchase Drawing" pursuant to the
Indenture, your completed and signed certificate in the form of Exhibit 2
attached hereto, dated the date of the accompanying Draft; or (ii) if the
drawing being made is a "Principal Drawing" or an "Interest Drawing," your
completed and signed certificate in the form of Exhibit 3 attached hereto, dated
the date of the accompanying Draft. Presentation of Draft(s) and such
certificates shall be made at our office specified above or at any other office
as may be designated by us by written notice delivered to you via delivery in
person, registered mail, certified mail return receipt requested or facsimile
transmission (518) 487-4998 with a cover letter expressly stating that originals
of the facsimile transmission will be delivered by nationally recognized
overnight courier. If you draw on this Letter of Credit at or prior to 11:00
a.m., New York time, on a Business Day, and provided that such drawing
2
<PAGE>
conforms to the terms and conditions hereof, we shall pay you the amount
specified, on the next Business Day, in accordance with your payment
instructions provided, however, if a drawing is presented prior to 11:00 am to
pay the Purchase Price of Bonds which have not been remarketed, and provided
that such drawing conforms to the terms and conditions hereof, we shall pay you
the amount specified, on such Business Day. For purposes of this Letter of
Credit, a Business Day shall mean any day of the year other than (i) a Saturday
of a Sunday, or (ii) any day on which banks located in the State of New York or
in the cities in which your principal corporate trust office or our office at
which demands for payment under this Letter of Credit are to be presented are
required or authorized by law to remain closed, or (ii) any day on which the New
York Stock Exchange is closed.
This Letter of Credit shall automatically terminate at our aforesaid
address on the close of business on the first to occur of the following dates
("Termination Date"): (i) the Stated Expiration Date or (ii) the date of the
receipt by us of the Letter of Credit and a certificate signed by the Trustee
and Applicant that none of the Bonds are Outstanding under the Indenture and the
Indenture has been discharged in accordance with its terms, or (iii) the date of
receipt by us of the Letter of Credit and a certificate signed by an officer of
the Trustee and an authorized representative of Applicant stating that an
Alternate Credit Facility in substitution for the Letter of Credit has been
accepted by the Trustee and is in effect, or (iv) the date on which the final
drawing available under this Letter of Credit is honored by us. The Stated
Expiration Date shall be October 17, 2002 and may be extended by us in our
discretion at any time or from time to time, by amendment in writing with
written notice of such amendment to you (with copies to the Applicant, the
Issuer and the Remarketing Agent) no less than 45 days prior to the Stated
Expiration Date, specifying a new Stated Expiration Date.
If a drawing by you hereunder does not, in any instance, conform to the
terms and conditions of this Letter of Credit, we shall give you immediate
notice that the purported drawing was not effected in accordance with the terms
and conditions of this Letter of Credit, stating the reasons therefor and that
we are holding the documents at your disposal or are returning the same to you,
as we may elect. Upon being notified that the purported drawing was not effected
in accordance with this Letter of Credit, you may attempt to correct any such
nonconforming drawing if, and to the extent that, you are entitled (without
regard to the provisions of this sentence) and able to do so.
All payments by us hereunder will be with our own funds.
This Letter of Credit sets forth in full the terms of our undertaking,
and such undertaking shall not in any way be modified, amended, amplified or
limited by reference to any document, instrument or agreement referred to herein
or in which this Letter of Credit is referred to or to which this Letter of
Credit relates, except for the certificates referred to herein (Exhibits 2 and
3) and, for the purpose of certain definitions, the Indenture, and any such
reference shall not be deemed to incorporate herein by reference, any document,
instrument or agreement except for such certificates and definitions.
3
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This Letter of Credit is transferable in its entirety (but not in part)
to any transferee within the United States who has succeeded you as Trustee
under the Indenture. Transfer of the amount available under this Letter of
Credit to such Transferee shall be effected by the presentation to us of this
Letter of Credit accompanied by a certificate in the form of Exhibit 4 attached
hereto, and unless this Letter of Credit is so presented to us, we shall have no
obligation hereunder to any Transferee. Upon such transfer, we will either
reissue this Letter of Credit in the maximum amount then available hereunder or
otherwise amend this Letter of Credit to reflect such maximum amount then
available.
Only you (or a transferee as permitted by the terms of this Letter of
Credit) may make a drawing under this Letter of Credit.
This Letter of Credit is issued under and shall be governed by the
express terms of the Uniform Customs and Practice for Documentary Credits (1993
Rev.) International Chamber of Commerce Publication No. 500, as may be amended
from time to time, and, to the extent not inconsistent therewith, the Uniform
Commercial Code as in effect (together with all revisions and amendments) in the
State of New York.
Communications and notices with respect to this Letter of Credit shall
be in writing and shall be addressed to us at our office specified above
specifically referring to the letter of credit number of this Letter of Credit,
and shall be addressed to you at your address specified above.
We hereby agree with the drawer that each Draft drawn under and in
compliance with the terms of this Letter of Credit will be duly honored on
delivery of documents as specified herein if presented at our office indicated
above on or before the Termination Date.
Very truly yours,
KEYBANK NATIONAL ASSOCIATION
By: /s/ Richard C. Van Auken
--------------------------------------
Title: Senior Banker
By: /s/
--------------------------------------
Title: Vice President
01294\lettcred
4
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EXHIBIT 1
SIGHT DRAFT
U.S. $ City:_______________
State:_______________
Date:_______________
For Value Received
Pay at sight
to______________________________________________________________________________
________________________________________________________________________________
U.S. Dollars.
Drawn under KeyBank National Association, Letter of Credit No.
NSL792132, dated October 10, 1997.
To: KeyBank National Association
66 South Pearl Street
Albany, New York 12207
Attention: International Division, Letter of Credit Department
Facsimile: (518) 487-4998
The signature below constitutes an endorsement of this Sight Draft.
Star Bank, N.A.,
as Trustee
By:___________________________________
Authorized Trust Officer
<PAGE>
EXHIBIT 2
CERTIFICATE FOR PURCHASE OF BONDS OUTSTANDING TENDERED FOR
PURCHASE PURSUANT TO THE TRUST INDENTURE OF COUNTY OF SARATOGA
INDUSTRIAL DEVELOPMENT AGENCY MULTI-MODE VARIABLE RATE
INDUSTRIAL DEVELOPMENT REVENUE BONDS (SPURLOCK ADHESIVES, INC.
PROJECT), SERIES 1997A UNDER LETTER OF CREDIT NO. NSL792132.
Any capitalized term used, but not defined herein, shall have its
respective meaning as set forth in the Letter of Credit referred to above.
The undersigned, a duly authorized trust officer of _________________,
as Trustee under the Indenture (the "Trustee") hereby certifies to KeyBank
National Association, as issuer of the Letter of Credit referred to above (the
"Bank"), that:
(1) The Trustee is the Trustee under the Indenture for the holders
of the Bonds.
(2) The Trustee is making a drawing under the Letter of Credit in
the amount of (i) $ __________ with respect to payment of the principal portion
of, and (ii) $_________ with respect to payment of the interest portion of, the
Purchase Price of Bonds tendered but not remarketed, or for which remarketing
proceeds have not been received, pursuant to the Indenture.
(3) The amount of the Draft accompanying this Certificate* does not
exceed the Stated Amount in respect of principal or interest as set forth in
this Certificate.
(4) The amount of the Draft accompanying this Certificate was
computed in accordance with the terms and conditions of the Bonds and the
Indenture.
(5) The Letter of Credit referred to above has not expired pursuant
to its terms.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate, dated the date of the accompanying Draft, to wit, the ____ day of
_________, 19__.
[NAME OF TRUSTEE]
By:________________________________
[Name and Title]
* Trustee shall send a copy of each certificate to Applicant at the
address specified in the Reimbursement Agreement.
<PAGE>
EXHIBIT 3
CERTIFICATE FOR PAYMENT OF PRINCIPAL OR INTEREST ON COUNTY OF SARATOGA
INDUSTRIAL DEVELOPMENT AGENCY MULTI-MODE VARIABLE RATE INDUSTRIAL DEVELOPMENT
REVENUE BONDS (SPURLOCK ADHESIVES, INC. PROJECT), SERIES 1997A UNDER LETTER OF
CREDIT NO. NSL792132.
Any capitalized term used, but not defined herein, shall have its
respective meaning as set forth in the letter of Credit referred to above.
The undersigned, a duly authorized trust officer of the Trustee under
the Indenture (the "Trustee"), hereby certifies to KeyBank National Association,
as issuer of the Letter of Credit referred to above (the "Bank"), that:
(1) The Trustee is the Trustee under the Indenture for the holders
of the Bonds.
(2) [Complete the applicable Section(s) below and strike or delete
the inapplicable Sections]
A. Periodic Interest Drawing. The amount of the Interest Drawing is
$________, which equals the amount of interest on the Bonds which is due and
payable with Letter of Credit proceeds on the same date as the date of the Draft
accompanying this Certificate.
B. Default Interest Drawing. An Event of Default as defined in the
Indenture has occurred, and the amount of the Interest Drawing of $_________, is
the maximum amount permitted under the Letter of Credit for the payment of
interest on Bonds Outstanding on the same date as the date of the Draft
accompanying this Certificate.
C. Periodic Principal Drawing. The amount of the Principal Drawing
is $__________, which equals the amount of principal of the Bonds which is due
and payable on the same date as the date of the Draft accompanying this
Certificate.
D. Default Principal Drawing. An Event of Default as defined in the
Indenture has occurred, and the amount of Principal Drawing of $_________, is
the amount of the principal of the Bonds, which is due and unpaid as of the date
of the Draft accompanying this Certificate.
(3) The amount of the Draft accompanying this Certificate* does not
exceed the Stated Amount with respect to the drawings of principal or interest,
as set forth in this Certificate.
(4) The amount of the Draft accompanying this Certificate was
computed in accordance with the terms and conditions of the Bonds and the
Indenture.
(5) The Letter of Credit referred to above has not expired pursuant
to its terms.
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate, dated the date of the accompanying Draft, to wit, the ____ day of
_________, 19__.
[NAME OF TRUSTEE]
By:_________________________________
[Name and Title]
* Trustee shall send a copy of each certificate to Applicant at the address
specified in the Reimbursement Agreement.
<PAGE>
EXHIBIT 4
TRANSFER CERTIFICATE
Date:________________
KEYBANK NATIONAL ASSOCIATION
66 South Pearl Street
Albany, New York 12207
Attention: International Division, Letter of Credit Department
Re: Irrevocable Transferrable Direct Pay Letter of Credit No. NSL792132
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to the following "Transferee":
(Name of Transferee)
[Address:]
all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety. The Transferee has succeeded the undersigned as Trustee
under the Indenture (as defined in the Letter of Credit).
By this transfer, all rights of the undersigned beneficiary in the
Letter of Credit are transferred to the Transferee and the Transferee shall have
the sole rights as beneficiary thereof, including sole rights relating to any
amendments of the Letter of Credit, whether increases in the amount to be drawn
thereunder, or extensions of the Stated Expiration Date thereof, or other
amendments, and whether such amendments now exist or are made after the date
hereof. All amendments are to be advised direct to the Transferee without
necessity of any consent of or notice to the undersigned beneficiary.
The undersigned hereby certifies that the Transferee has become
successor Trustee under the Trust Indenture dated as of October 1, 1997, between
the undersigned and the County of Saratoga Industrial Development Agency (the
"Issuer"), relating to the Issuer's Multi-Mode Variable Rate Industrial
Development Revenue Bonds (Spurlock Adhesives, Inc. Project), Series 1997A (the
"Bonds") and has accepted such appointment in writing.
The original of the Letter of Credit is returned herewith and in
accordance therewith we ask you to endorse the within transfer on the reverse
thereof, and forward it directly to the Transferee with your customary notice or
issue a replacement letter of credit to the Transferee as provided therein.
Very truly yours,
<PAGE>
____________________________________
SIGNATURE AUTHENTICATED, as
Trustee
We certify that we have succeeded as Trustee under the Indenture (as defined in
the Letter of Credit).
Name:
(Bank)
Title:
(Authorized Officer)
01294\lettcred.2
Exhibit 10.33
LETTER OF CREDIT
REIMBURSEMENT AGREEMENT
THIS LETTER OF CREDIT REIMBURSEMENT AGREEMENT, (the "Reimbursement
Agreement"), dated as of the 1st day of October, 1997, by and between SPURLOCK
ADHESIVES, INC. ("Borrower"), a Virginia corporation, and KEYBANK NATIONAL
ASSOCIATION, a national banking association (the "Bank").
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Issuer (as hereinafter defined)
to finance the cost of acquiring, constructing and equipping certain facilities
in the Town of Moreau, Saratoga County, State of New York; and
WHEREAS, the Issuer proposes to provide such financing by issuing its
Multi-Mode Variable Rate Industrial Development Revenue Bonds, (Spurlock
Adhesives, Inc. Project), Series 1997A in the aggregate principal amount of Six
Million Dollars ($6,000,000) (the "Bonds"), under the terms and conditions more
fully set forth in a Trust Indenture, dated as of October 1, 1997, by and
between the Issuer and Star Bank, N.A., as Trustee; and
WHEREAS, to enhance the marketability of the Bonds the Borrower has
applied to the Bank for the issuance of a letter of credit (the "Letter of
Credit") in favor of the Trustee in an amount not to exceed Six Million One
Hundred Eighty Thousand Eight Hundred Twenty-Two Dollars ($6,180,822) to secure
the payment of the Bonds; and
WHEREAS, it is the purpose of this Reimbursement Agreement to set forth
the Bank's commitment to issue the Letter of Credit and the Borrower's agreement
to reimburse the Bank for any and all payments made by the Bank pursuant to the
Letter of Credit.
NOW THEREFORE, in consideration of the mutual agreements made herein
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
SECTION ONE
DEFINITIONS
Section 1.1. Terms Defined As used in this Reimbursement Agreement, the
following terms have the following respective meanings. Any accounting term used
but not specifically defined herein shall be construed in accordance with GAAP.
Capitalized terms used in this Reimbursement Agreement not otherwise defined
herein shall be defined as set forth in the Indenture or the Letter of Credit.
The definition of each agreement, document, and instrument set forth in this
Section 1. I shall be deemed to mean and include such agreement, document, or
instrument as amended, restated, or modified from time to time:
"Assignment" shall mean the Assignment of Contract Documents from the
Borrower to the Bank, dated as of October 1, 1997.
"Bank's Prime Rate" means that rate of interest established by Bank as
its Prime Rate whether or not such rate is publicly announced. The Prime Rate
may not be the lowest rate charged by Bank for commercial or other extensions of
credit.
"Bank Documents: means the Letter of Credit, the Reimbursement
Agreement, the Mortgage, the Pledge Agreement, the Building Loan Agreement, the
Collateral Mortgages, the Indemnity Agreement, the Assignment, the Security
Agreement, the Guaranty and any other document now or hereafter executed by the
Issuer, the Borrower or the Guarantor in favor of the Bank which affects the
rights of the Bank in or to the Project Facility, in whole or in part, or which
secures or guarantees any sum under any Bank Document.
"Bank Obligation" shall mean an amount equal to the outstanding
liability of the Bank from time to time under the Letter of Credit.
"Bank's Inspector" shall mean any inspector designated by the Bank to
periodically inspect the Project Facility during construction.
"Bond Counsel" shall mean Lemery & Reid, P.C., or any other nationally
recognized Bond Counsel reasonably acceptable to Bank.
"Bond Purchase Drawing" shall have the meaning set forth in the Letter
of Credit.
"Bonds" shall mean the Six Million Dollars ($6,000,000) aggregate
principal amount of County of Saratoga Industrial Development Agency Multi-Mode
Variable Rate Industrial Development Revenue Bonds (Spurlock Adhesives, Inc.
Project), Series 1997A issued by the Issuer pursuant to the Indenture.
2
<PAGE>
"Building Loan Agreement" shall mean the Building Loan Agreement, dated
as of October 1, 1997, between the Bank, the Borrower and the Issuer.
"Business Day" shall mean any day of the year other than (i) a Saturday
or Sunday, (ii) any day on which commercial banks located in New York, New York,
or the city or cities in which are located the corporate trust offices of the
Trustee and the Tender Agent and the office of the Bank at which demands for
payment under the Letter of Credit are to be presented are authorized by law to
close, or (iii) any day on which the New York Stock Exchange is closed.
"Closing Date" shall mean October 10, 1997, or such other date agreed
upon by the Borrower, Issuer, and the Bank.
"Completion Date" shall mean May 30, 1998.
"Current Assets" shall mean, at a particular date, the current assets
of the Borrower, as determined in accordance with GAAP.
"Current Liabilities" shall mean, at a particular date, the current
liabilities of the Borrower, as determined in accordance with GAAP.
"Credit" shall have the meaning set forth in Section 8. 1 (b) hereof.
"Date of Issuance" shall mean the date of issuance of the Letter of
Credit.
"Determination of Taxability" shall have the meaning assigned thereto
in the Indenture.
"Eligible Investments" shall have the meaning assigned thereto in the
Indenture.
"Environmental Law" shall mean any federal, state, or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to,
or imposing liability upon a Person in connection with the use, release or
disposal of any hazardous toxic or dangerous substance, waste or material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may from time to time be amended or supplemented, and all
regulations thereunder.
"Event of Default" shall have the meaning assigned thereto in Section 7
hereof.
"Financing Documents" shall have the meaning assigned thereto in the
Indenture.
"GAAP" shall mean generally accepted accounting principles as then in
effect, which shall include the official interpretations thereof by the
Financial Accounting Standards Board, consistently applied.
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"General Contract" shall mean the general construction contract dated
September 30, 1997 between the Borrower and the General Contractor for the
Project Facility.
"General Contractor" shall mean D.B. Western, Inc., an Oregon
corporation.
"Guarantor" shall mean Spurlock Industries, Inc., a Virginia
corporation.
"Indebtedness" shall mean, at a particular date, all indebtedness for
money borrowed or for the deferred purchase price of property and lease
obligations of Borrower which have been, or which in accordance with Statement
of Financial Accounting Standards No. 13, as from time to time amended, should
be, capitalized.
"Indenture" shall mean the Trust Indenture, dated as of October 1,
1997, between the Issuer and the Trustee.
"Indenture Default" shall mean an Event of Default under and pursuant
to the Indenture.
"Interest Coverage Requirement" shall mean the amount equal to 110
days' accrued interest at the Maximum Rate on the outstanding principal amount
of the Bonds to enable the Trustee to pay (i) the interest on the Bonds when due
and (ii) an amount equal to the interest portion, if any, of the purchase price
of any Bonds tendered for purchase by the holder thereof to the extent
remarketing proceeds are not available for such purposes.
"Interest Drawing" shall have the meaning set forth in the Letter of
Credit.
"Issuer" shall mean the County of Saratoga Industrial Development
Agency, a public benefit corporation existing under the laws of the State of New
York.
"Land" shall have the meaning set forth in the Indenture.
"Letter of Credit" shall mean the Letter of Credit to be issued by the
Bank on the Closing Date pursuant to this Reimbursement Agreement, such Letter
of Credit to be substantially in the form of Exhibit A hereto.
"Letter of Credit Fee" shall have the meaning set forth in Section
2.2(b) hereof.
"Maximum Rate" shall mean a rate per annum of ten percent (10%).
"Mortgage" shall have the meaning set forth in the Indenture.
"Net Profit After Tax" means, for any period, the net income of the
Borrower after provisions for taxes as determined in accordance with GAAP.
"Permitted Liens" shall mean the Liens referred to in Section 6.8
hereof.
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"Person" shall mean any natural person, corporation (which shall be
deemed to include business trust), association, partnership, political entity,
or political subdivision thereof.
"Plan" shall mean any plan defined in Section 4021(a) of ERISA in
respect of which Borrower or any Subsidiary of the Borrower is an "employer" or
a "substantial employer" as defined in Sections 3(5) and 4001(a)(2) of ERISA,
respectively.
"Plans and Specifications" shall mean the plans and specifications for
the Project Facility approved by the Bank.
"Pledge Agreement" means the Pledge and Security Agreement dated as of
October 1, 1997 from Borrower to the Bank.
"Pledged Collateral" shall mean the collateral in which the Borrower
has given the Bank a lien or security interest pursuant to the Mortgage, the
Security Agreement, the Assignment and/or the Pledge Agreement.
"Project Fund" shall have the meaning assigned thereto in the
Indenture.
"Principal Drawing" shall have the meaning set forth in the Letter of
Credit.
"Project Facility" shall have the meaning set forth in the Indenture.
"Purchaser" shall mean the original purchaser or purchasers of the
Bonds.
"Remarketing Agent" shall mean KeyBank National Association, Cleveland,
Ohio.
"Reportable Event" shall mean any reportable event as that term is
defined in ERISA.
"Security Agreement" shall mean the Security Agreement dated of even
date herewith by Borrower to Bank.
"Stated Amount" shall have the meaning set forth in the Letter of
Credit.
"Stated Expiration Date" shall mean October 17, 2002, subject to
extension as provided in Section 8.1 herein.
"Subordinated Debt" shall mean Indebtedness of a Person which is
subordinated, in a manner satisfactory to the Bank, to all Indebtedness owing to
the Bank and to all other indebtedness which is pari passu therewith or senior
thereto.
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"Subsidiary" or "Subsidiaries" shall mean (i) any for profit
corporation more than fifty percent (50%) of the capital stock of which is owned
or controlled, directly or indirectly, by Borrower or any Subsidiary and whose
accounts are required to be consolidated with those of Borrower in accordance
with generally accepted accounting principles, consistently applied and (ii) any
non-profit corporation which is controlled, directly or indirectly, by Borrower.
"Tangible Net Worth" shall mean the total assets of a Person less such
Person's (i) Total Debt, (ii) aggregate amount of all intangible assets and
(iii) amounts due from related parties.
"Termination Date" shall have the meaning set forth in the Letter of
Credit.
"Total Debt" shall mean the total of all items of Indebtedness or
liability which in accordance with GAAP would be included in determining total
liabilities on the liability side of the balance sheet as of the date of
determination.
"Trustee" shall mean Star Bank, N.A. or any successor Trustee under the
Indenture.
SECTION TWO
ISSUANCE OF LETTER OF CREDIT
Section 2.1. Issuance of Letter of Credit. Subject to the terms and
conditions hereof, the Bank agrees to execute and deliver the Letter of Credit
substantially in the form of Exhibit A hereto. The obligations of the Bank under
the Letter of Credit shall be absolute and irrevocable and shall be performed
strictly in accordance with the terms of the Letter of Credit and this
Reimbursement Agreement.
Section 2.2. Fees and Reimbursement.
A. The Borrower hereby agrees to pay to the Bank:
1. Before 2:00 p.m., New York time, on each date that
any amount is drawn under the Letter of Credit
pursuant to a Principal Drawing or an Interest
Drawing; and before 2:00 p.m., New York time on or
before the second (2nd) Business Day after the date
that any amount is drawn under the Letter of Credit
pursuant to a Bond Purchase Drawing a sum equal to
the amount so drawn under the Letter of Credit plus
(x) interest accrued from the date of any such
Principal Drawing, Interest Drawing, or Bond Purchase
Drawing, if any, on the amount so drawn under the
Letter of Credit as determined pursuant to clause (3)
of this subsection (A) of this Section 2.2, plus (y)
any and all charges and expenses which the Bank may
pay or incur relative to such drawing under the
Letter of Credit, plus (z) a fee in the amount of Two
Hundred Dollars ($200.00) for that drawing under the
Letter of Credit;
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2. Upon each transfer of the Letter of Credit in
accordance with its terms and as a condition thereto,
a sum in such amount as shall be necessary to cover
the reasonable costs and expenses to the Bank
incurred in connection with such transfer;
3. Interest, payable on demand, on any and all amounts
of any Principal Drawing, Interest Drawing and/or
Bond Purchase Drawing not paid by the Borrower when
due under any section of this Reimbursement Agreement
from the date such amounts become due until payment
in full, such interest at a rate per annum equal to
(i) prior to the occurrence of an Event of Default,
the Bank's Prime Rate, (ii) upon the occurrence of an
Event of Default and during the continuance thereof,
the Bank's Prime Rate plus four percent (4%);
4. On demand, reasonable costs, fees and expenses
incurred by the Bank, including reasonable attorneys
fees, in connection with the issuance of the Letter
of Credit or the preparation or execution of any
documents or opinions related thereto;
5. On demand, any and all reasonable expenses incurred
by the Bank, including reasonable attorneys fees, in
enforcing any of its rights under this Reimbursement
Agreement, or any of the Bank Documents; and
6. On or prior to closing, any and all appraisal fees
relating to the appraisal of the real property
subject to the Mortgage and the Collateral Mortgage.
7. On or prior to the Closing Date, a one-time
origination fee equal to $38,400.
B. The Borrower hereby agrees to pay to Bank on the date of
issuance of the Letter of Credit and on each annual
anniversary of that date, a fee (the "Letter of Credit Fee")
equal to an amount calculated by multiplying the sum of (i)
the maximum amount available to be drawn under the Letter of
Credit with respect to a Principal Drawing on the date of
calculation and (ii) the maximum amount available to be drawn
under the Letter of Credit with respect to Interest Drawings
on the date of calculation, by one percent (1.0%) per annum.
C. The Borrower shall pay to the Bank all reasonable legal,
documentation and construction monitoring costs associated
with closing and funding this transaction.
D. If any change in any law or regulation or in the
interpretation thereof by any court or administrative or
governmental authorities charged with the administration
thereof shall impose, modify or deem applicable any reserve,
special deposit or similar requirement which would impose on
the Bank any reasonable additional costs (i) generally upon
the issuance or maintenance of
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letters of credit by the Bank, (ii) specifically in respect of
this Reimbursement Agreement or the Letter of Credit, or (iii)
in respect of any capital adequacy requirement (including,
without limitation, a requirement which affects the manner in
which the Bank allocates capital resources to its
commitments), and the result of such imposition of additional
costs as described in clause (i), (ii), or (iii) above shall
be to increase the cost to the Bank of issuing or maintaining
the Letter of Credit (which increase in cost shall be the
result of the Bank's reasonable allocation of the aggregate of
such cost increases resulting from such events), then, (x)
within thirty days of the Bank's obtaining knowledge of such
change in law, regulations or interpretation thereof, the Bank
shall so notify the Borrower and (y) upon receipt of such
notice from the Bank, accompanied by a certificate as to such
increased cost, the Borrower shall pay as of the effective
date of such change or interpretation all additional amounts
which are necessary to compensate the Bank for such increased
cost incurred by the Bank. The certificate of the Bank as to
such increased costs shall show the manner of calculation and
shall be conclusive (absent manifest error) as to the amount
thereof.
E. The Borrower's obligations to make payments to the Bank under
this Section 2.2 shall be deemed satisfied to the extent of
payments made by the Trustee to the Bank from funds on deposit
with and held by the Trustee pursuant to the Indenture.
F. All payments by the Borrower to the Bank hereunder shall be
made in lawful currency of the United States and in
immediately available funds at the Bank's principal office,
currently at 66 South Pearl Street, Albany, New York 12207.
Section 2.3. Borrower's Obligations Unconditional. The payment
obligations of the Borrower under this Reimbursement Agreement shall be
absolute, unconditional and irrevocable and shall be satisfied strictly in
accordance with the terms of this Reimbursement Agreement, under all
circumstances whatsoever, including, without limitation, the following
circumstances:
A. Any lack of validity or enforceability of the Bank Documents,
the Financing Documents or any other agreement or instrument
relating thereto;
B. Any amendment or waiver of or any consent to departure from
the terms of the Letter of Credit, the Bank Documents, the
Financing Documents or any other agreement or instrument
relating thereto;
C. The existence of any claim, setoff, defense or right which the
Borrower may have at any time against any beneficiary or any
transferee of the Letter of Credit (or any persons or entities
for whom any such beneficiary or any such transferee may be
acting), the Bank or any other person or entity, whether in
connection with this Reimbursement Agreement, the transactions
contemplated by the Bank Documents or the Financing Documents,
or any unrelated transaction;
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D. Any statement or any other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being
untrue or inaccurate in any respect whatsoever;
E. Payment by the Bank under the Letter of Credit against
presentation of a request which on its face appears to be in
accordance with the terms of the Letter of Credit; or
F. Any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
SECTION THREE
REPRESENTATIONS AND WARRANTIES
The Borrower expressly represents and warrants that:
Section 3.1. Incorporation and Legal Authority. Borrower is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Virginia, is duly qualified to do business and is in good
standing in the State of New York, and has all requisite corporate power and
authority to own its property and to carry on its business as now being
conducted, to enter into the Bank Documents and the other agreements referred to
herein and transactions contemplated thereby, and to carry out the provisions
and conditions of the Bank Documents. Borrower is duly qualified to do business
and is in good standing in every jurisdiction where the failure to so qualify
would have a material adverse effect on the business of Borrower.
Section 3.2. Due Execution and Delivery. Borrower has full power,
authority and legal right to incur the obligations provided for in, and to
execute and deliver and to perform and observe the terms and provisions of, the
Bank Documents, and each of them has been duly executed and delivered by the
Borrower by all required corporate action, and the Borrower has obtained all
requisite consents to the transactions contemplated thereby under any instrument
to which it is a party, and the Bank Documents constitute the legal, valid and
binding obligations of the Borrower enforceable in accordance with their
respective terms, except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditors'
rights generally.
Section 3.3. No Breach of Other Instruments. Neither the execution and
delivery of the Bank Documents, nor the compliance by Borrower with the terms
and conditions of the Bank Documents, nor the consummation of the transactions
contemplated thereby, will conflict with or result in a breach of Borrower's
articles of incorporation or by-laws, or any of the terms, conditions or
provisions of any agreement or instrument or any charter or other corporate
restriction or law, regulation, rule or order of any governmental body or agency
to which Borrower is now a party or is subject, or imposition of a lien, charge
or encumbrance which will
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have a material adverse affect upon any of the property or assets of the
Borrower pursuant to the terms of any such agreement or instrument.
Section 3.4. Government Authorization. No consent, approval,
authorization or order of any court or governmental agency or body not
previously obtained is required for the consummation by Borrower of the
transactions contemplated by the Bank Documents or the Financing Documents.
Section 3.5. Ratification Of Liens On And Security Interests In The
Project Facility. The Company hereby ratifies, confirms and acknowledges the
Bank's rights, Liens on and security interests in the Project Facility and the
other collateral as described in and granted pursuant to the Mortgage, the
Collateral Mortgage, the Security Agreement and the other Financing Documents.
Section 3.6. Absence of Defaults, etc. Borrower is not (i) in material
default under any indenture or contract or agreement to which it is a party or
by which it is bound, (ii) in violation of its articles of incorporation or
by-laws, each as amended, (iii) in default with respect to any order, writ,
injunction or decree of any court, or (iv) in default under any order or license
of any federal or state governmental department, which default or violation in
any of the aforesaid cases materially and adversely affects its respective
business or property. There exists no condition, event or act which constitutes,
or after notice or lapse of time or both would constitute, an Event of Default.
Section 3.7. Indebtedness of Borrower. Borrower does not have
outstanding on the date hereof, any Indebtedness for borrowed money in excess of
$100,000, except for such Indebtedness reflected on the financial statements
referred to in Section 3.9 hereof or otherwise disclosed to the Bank, and except
in connection with the Bonds.
Section 3.8. Subsidiaries. Borrower has no Subsidiaries.
Section 3.9. Financial Statements. All financial statements of Borrower
furnished to the Bank on or prior to the date hereof are correct and complete in
all material respects and fairly present the financial position of Borrower at
the dates thereof and the results of its operations for the periods covered
thereby, and such financial statements, including any notes and comments
contained therein, have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved.
Section 3.10. No Adverse Change. Subsequent to the date of the
financial statements referred to in Section 3.9 hereof, there has been no
material adverse change in the business, properties or condition, financial or
otherwise, of the Borrower, except for changes arising in the ordinary course of
business or in connection with the issuance and sale of the Bonds or as may be
otherwise disclosed in writing to the Bank prior to the date hereof.
Section 3.11. Taxes. Borrower has filed all tax returns which are to be
filed and has paid, or has made adequate provision for the payment of, all taxes
which have or may become due pursuant to said returns or to assessments received
by them. The Borrower knows of no deficiency assessment or proposed deficiency
assessment of taxes against Borrower, except as
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may be otherwise disclosed in writing to the Bank prior to the date hereof.
Section 3.12. ERISA. No Reportable Event or Prohibited Transaction (as
defined in Section 4975 of the Internal Revenue Code) has occurred and is
continuing with respect to any Plan and Borrower has not incurred any
"accumulated funding deficiency" as such term is defined in Section 302 of
ERISA.
Section 3.13. Litigation. Except as otherwise disclosed in writing to
the Bank prior to the date hereof, there are no actions, suits or proceedings
pending, or to the knowledge of Borrower, threatened against Borrower or its
property in any court, or before or by any federal, state or municipal or other
governmental department, commission, board, bureau, agency or other
instrumentality, domestic or foreign, which could result in any adverse change
in the business, property or assets, or in the condition, financial or
otherwise, of Borrower, except for actions, suits or proceedings of a character
normally incident to the kind of business conducted by Borrower, none of which,
either individually or in the aggregate, if adversely determined, would
materially impair Borrower's right or ability to carry on its business
substantially as now conducted or materially adversely affect the financial
position or operations of the Borrower.
Section 3.14. Ownership of Property. Borrower, or the Issuer, has good
and marketable fee title to, or valid leasehold interests in, its real
properties in accordance with the laws of the jurisdiction where located, and
good and marketable title to substantially all its other property and assets,
subject, however, in the case of real property, to title defects and
restrictions which do not materially interfere with the operations conducted
thereon by Borrower. Except for Permitted Liens, the real property and all other
property and assets of the Borrower are free from any liens or encumbrances
securing Indebtedness and from any other liens, encumbrances, charges or
security interests of any kind. Each lease to which Borrower is a party is in
full force and effect, no material default on the part of any party thereto
exists, and, as to each of such leases to which Borrower is party as lessee,
Borrower enjoys peaceful and undisturbed possession of the property affected
thereby.
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Section 3.15. No Burdensome Restrictions. Borrower is not a party to
any instrument or agreement or subject to any charter or other corporate
restriction which would to a material extent adversely affect the business,
property, assets, operations or condition, financial or otherwise, of Borrower.
Section 3.16. Environmental Matters. Borrower is in compliance with all
Environmental Laws and all applicable federal, state and local health and safety
laws, regulations, ordinances or rules, except to the extent that any
non-compliance will not, in the aggregate, have a materially adverse effect on
Borrower or the ability of Borrower to fulfill its obligations under this
Reimbursement Agreement.
SECTION FOUR
CLOSING CONDITIONS
The obligation of the Bank to issue the Letter of Credit on the Closing
Date shall be subject to the following conditions precedent:
Section 4.1. Execution and Delivery of the Bank Documents and the
Financing Documents. The Borrower and the Guarantor, as applicable, shall have
delivered to the Bank fully executed copies of each of the Bank Documents, and
the Issuer, the Trustee, the Borrower, and the Guarantor, as applicable, shall
have duly authorized, executed and delivered the Financing Documents, transcript
of proceedings, authorizing resolutions and incumbency certificates.
Section 4.2. Delivery of Documents Relating to the Project Facility.
The Borrower shall have duly and validly executed and delivered the Mortgage,
Security Agreement, Assignment, Bond Pledge, and UCC financing statements; the
Mortgage, the Assignment and UCC financing statements shall have been duly
recorded and/or filed in favor of the Bank. In addition, the Borrower shall have
delivered to the Bank:
(a) Evidence that the Land is not located in a special flood
hazard area as identified by HUD;
(b) Certificates of insurance and evidence of payment of premiums
therefor with respect to the insurance required by the Bank
with respect to the Project Facility as set forth in Sections
6.3 and 6.4 of the Installment Sale Agreement;
(c) A current certified survey of the Land prepared by a
registered surveyor satisfactory to the Bank, and containing
on the face thereof the completed certificate of the surveyor
in the form of the surveyor's certificate required by the
Bank, dated not more than thirty (30) days prior to the Date
of Issuance, and in compliance with the Minimum Standard
Detail Requirements for ALTA/ASCM Class A land title surveys,
as adopted by the American Land Title Association and American
Congress on Surveying and Mapping in 1992;
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(d) A current Phase I environmental audit of the Project Facility
satisfactory to the Bank in its sole discretion prepared by an
environmental consultant reasonably satisfactory to the Bank;
(e) A Commitment to issue the Title Policy in the form of an ALTA
Loan Policy of Title Insurance issued by the Title Company (i)
insuring that the Mortgage, as of the time of its filing for
record, is a first and best lien upon the Land, and that the
title to the Land is free, clear and unencumbered, subject
only to the Permitted Liens; (ii) insuring the priority of the
Mortgage over mechanics or materialmen's liens; (iii)
obligating the Title Company to affirmatively insure that
access to Land is by a dedicated and accepted public
right-of-way; and (iv) including such endorsements and
affirmative insurance as may be required by the Bank,
including, but not limited to, the so-called "Pending
Disbursement Clause";
(f) Evidence satisfactory to the Bank that the Project Facility,
when completed, and the proposed and actual use thereof, will
comply in all material respects with all applicable laws,
statutes, codes, ordinances, rules and regulations, including,
but not limited to, zoning and Environmental Laws, of all
governmental authorities having jurisdiction over the same,
and that there is no action or proceeding pending (or any time
for an appeal of any decision rendered) before any court,
quasi-judicial body or administrative agency at the Date of
Issuance relating to the validity of this Reimbursement
Agreement or the transactions contemplated hereby or the
proposed or actual use or operation of the Project Facility.
Section 4.3. Issuance and Sale of the Bonds. The Bonds shall have been
duly issued and sold to the Purchaser pursuant to the Financing Documents.
Section 4.4. Representations and Warranties True as of Closing and No
Event of Default. The representations and warranties contained in this
Reimbursement Agreement and the other Bank Documents shall be true in all
material respects on the Closing Date with the same effect as though made on and
as of that date and no condition, event or act shall have occurred which
constitutes an Event of Default or, with notice or lapse of time, or both, would
constitute an Event of Default.
Section 4.5. Opinion of Borrower Counsel. The Bank shall have received
from Williams, Mullen, Christian & Dobbins, P.C., counsel for the Borrower, a
closing opinion with respect to such matters incident to the transactions
contemplated hereby as Bank and Bank's counsel may reasonably request.
Section 4.6. Opinion of Bond Counsel. The Bank shall have received from
Bond Counsel an opinion with respect to the tax-exempt status of the Bonds and
the absence of any securities registration requirements with respect to the
Bonds or the Letter of Credit under the Securities Act of 1933, as amended.
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Section 4.7. Proceedings Satisfactory. All proceedings taken in
connection with the execution and delivery of this Reimbursement Agreement and
the other Bank Documents shall be satisfactory to the Bank and the Bank shall
have received copies of such certificates, documents and papers as reasonably
requested in connection therewith, all in form and substance satisfactory to the
Bank.
Section 4.8 Guaranty. The Guarantor shall have executed and delivered
the Guaranty to the Bank.
Section 4.9 Other. Borrower shall have delivered to the Bank such other
documents, instruments and approvals as Bank may reasonably request and this
Reimbursement Agreement shall be in effect.
SECTION FIVE
DISBURSEMENTS FROM PROJECT FUND
Borrower shall not request or receive any disbursement of funds from
the Project Fund unless the Bank shall have approved such disbursement in
writing to the Trustee and the following conditions shall be true with respect
to each such disbursement:
Section 5.1. Bank's Inspector's Certificate. Prior to each disbursement
the Bank's Inspector shall inspect the Project Facility to verify that the
request for disbursement accurately indicates the amount of construction
completed to said date. The Bank shall have received a certificate from the
Bank's Inspector certifying (i) that the construction of the Project Facility
theretofore completed, if any, has been performed substantially in accordance
with the Plans and Specifications; (ii) that the quality of construction of the
Project Facility theretofore completed is in accordance with generally accepted
standards in the construction industry for the cost of the construction of the
Project Facility; (iii) that the undisbursed portion of the Project Fund
together with other monies to be provided by Borrower are adequate to complete
the construction and equipping of the Project Facility pursuant to the Plans and
Specifications by the Completion Date; and (iv) that it is reasonable to expect
that the completion of the Project Facility will occur on or before the
Completion Date. It is understood and agreed that the Bank shall not be liable
for any reason as a result of such inspections, the parties hereby agreeing that
the inspections are solely for the benefit of the Bank.
Section 5.2. No Liens. The Bank shall have received evidence
satisfactory to the Bank that since the last preceding disbursement from the
Project Fund there has been no change in the state of title to the Project
Facility. The Borrower shall pay the cost of each title update required by the
Bank from the title company in connection with each request for approval of
disbursement and each endorsement to the title policy.
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Section 5.3. Request for Approval of Disbursement. Not later than five
(5) business days before the date on which the Borrower desires a disbursement
from the Project Fund, the Borrower shall submit to the Bank (i) a written
request for approval of the disbursement from the Project Fund; (ii) a
certification of the Borrower that, among other things, the Borrower has paid or
actually incurred the costs for which the request is being made; (iii) a revised
Project Budget showing the balance of each category of Project costs; and (iv) a
requisition using AIA Form G702 and/or G703 if the draw is used for construction
or such other form as the Bank may request, accompanied by a cost breakdown, the
accuracy of which shall be verified by the Bank's Inspector.
Section 5.4. Compliance with the Building Loan Agreement. The Borrower
will submit evidence to the Bank that it is in compliance with all conditions to
the disbursement of loan proceeds under the Building Loan Agreement.
SECTION SIX
COVENANTS
The Borrower covenants and agrees that, except as otherwise waived by
the Bank in writing, from the date of this Reimbursement Agreement and until the
obligations of the Borrower to the Bank hereunder are satisfied in full, it will
comply with the following provisions:
Section 6.1. Accounting; Financial Statements and Other Information.
Borrower will maintain a standard system of accounting, established and
administered in accordance with generally accepted accounting principles
consistently followed throughout the periods involved, and will set aside on its
books for each fiscal year the proper amounts for depreciation, obsolescence,
amortization, bad debts, current and deferred taxes, and other purposes as shall
be required by generally accepted accounting principles. The Borrower will
deliver to the Bank:
(a) As soon as practicable after the end of each month in each
fiscal year, except the last, and in any event within thirty
(30) days thereafter, internally prepared monthly financial
statements of the Borrower, certified as complete and correct
by the principal financial officer of the Borrower, subject to
changes resulting from year-end adjustments;
(b) As soon as practicable after the end of each fiscal year, and
in any event within one hundred twenty (120) days thereafter,
a statement of condition of Borrower as of the end of such
year, and statements of cash flows and changes in financial
position and/or changes in fund balances as applicable to
Borrower for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all
in reasonable detail and certified as complete and correct by
the principal financial officer of Borrower, reviewed (audit
level) by a firm of independent certified public accountants
selected by Borrower and satisfactory to the Bank;
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(c) Promptly upon receipt thereof, copies of all other written
reports submitted to the Borrower by independent accountants
in connection with any annual or interim audit of the
corporate books of the Borrower;
(d) With reasonable promptness, such other data and information as
from time to time may be reasonably requested by the Bank; and
(e) Accompanying each set of financial statements specified in (a)
and (b) above, a certificate of a principal officer of
Borrower, to the effect that (i) Borrower has complied with
and is in compliance with all the terms and covenants of this
Reimbursement Agreement binding upon Borrower and with all the
terms and covenants of the other Financing Documents binding
upon Borrower, and (ii) there exists no Event of Default, and
no event which with the giving of notice or passage of time or
both, would constitute such an Event of Default or if this is
not the case, that one or more specified Events of Default has
occurred and the steps Borrower, with Bank's written
concurrence, is taking to cure same.
Section 6.2. Insurance and Maintenance of Properties and Business. The
Borrower will maintain, with financially sound and reputable insurers, insurance
to protect its properties and business against losses or damages of the kind
customarily insured against by corporations of established favorable reputation
engaged in the same or a similar business and similarly situated, including, but
not limited to, (a) the insurance required pursuant to the Bank Documents and
the Financing Documents, (b) necessary workers' compensation insurance, (c)
adequate public liability insurance, and (d) such other insurance as may be
required by law or as may be reasonably required in writing by the Bank.
Borrower will, upon request, furnish to the Bank a schedule of all insurance
carried by it, setting forth in detail the amount and type of such insurance.
The Borrower will maintain, in good repair, working order and condition (normal
wear and tear excepted), all properties used or useful in the business of the
Borrower.
Section 6.3. Payment of Indebtedness and Taxes. Borrower will pay (a)
all of its Indebtedness (not required to be subordinated hereunder) and other
obligations in accordance with normal terms or any applicable grace periods and
(b) all taxes, assessments, and other governmental charges levied upon any of
its respective properties or assets or in respect of its respective franchises,
business, income, or profits before the same become delinquent, except that no
such Indebtedness, obligations, taxes, assessments, or other charges need be
paid if contested by Borrower in good faith and by appropriate proceedings
promptly initiated and diligently conducted and if appropriate provision, if
any, as shall be required by GAAP, shall have been made therefor.
Section 6.4. Litigation; Adverse Changes. Borrower will promptly notify
the Bank in writing of (a) any event which, if existing at the date hereof,
would require qualification of the representations and warranties set forth in
Sections 3.10 and 3.13 and (b) any material adverse change in the condition,
business, or prospects, financial or otherwise, of Borrower.
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Section 6.5. Inspection. Borrower will make available for inspection by
duly authorized representatives of the Bank, its books, records, and properties
when reasonably requested to do so, and will furnish the Bank such information
regarding its respective business affairs and financial condition within a
reasonable time after written request therefor.
Section 6.6. Environmental Matters. Borrower:
(a) Shall comply in all material respects with all Environmental
Laws.
(b) Shall deliver promptly to Bank (i) copies of any documents
received from the United States Environmental Protection
Agency or any state, county or municipal environmental or
health agency, and (ii) copies of any documents submitted by
Borrower to the United States Environmental Protection Agency
or any state, county or municipal environmental or health
agency concerning its operations.
Section 6.7. Sale, Purchase and/or Lease of Assets. Borrower will not,
directly or indirectly, (a) make or commit to make any expenditures in respect
of the purchase or other acquisition of fixed or capital assets (excluding
normal replacements and maintenance which are properly charged to current
operations), provided, that the Borrower may make capital expenditures during
calendar year 1997 in an amount not to exceed $7,000,000 and, thereafter, for
any calendar year, in an amount not to exceed $800,000 or (b) sell, lease,
transfer or otherwise dispose of all or any substantial part of its assets to
any other Person.
Section 6.8. Mortgage, Security Interests, and Liens. Borrower will
not, directly or indirectly, create, incur, assume, or permit to exist any
mortgage, security interest, lien, charge, encumbrance on, pledge or deposit of,
or conditional sale or other title retention agreement with respect to, any
property or asset of Borrower now owned or hereafter acquired and included in
the Project Facility (herein called "Liens") other than:
(a) Liens for taxes, assessments, or governmental charges or
levies the payment of which is not at the time required by
Section 6.3 hereof;
(b) Liens imposed by law, such as Liens of landlords, carriers,
warehousemen, mechanics, and materialmen arising in the
ordinary course of business for sums not yet due or being
contested by appropriate proceedings promptly initiated and
diligently conducted, provided other appropriate provision, if
any, as shall be required by GAAP shall have been made
therefor;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance, and other types of social security, or
to secure the performance of tenders, statutory obligations,
and surety and appeal bonds, or to secure the performance and
return of money bonds and other similar obligations, excluding
obligations for the payment of borrowed money;
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(d) Any judgment Lien arising in connection with court proceedings
so long as the execution or other enforcement thereof is
effectively stayed and the claims secured thereby are being
contested in good faith by appropriate proceedings;
(e) Other Liens (other than mechanics liens relating to the
Project Facility) incidental to the conduct of the Borrower's
business or ownership of properties and assets, which are not
incurred nor granted in connection with the borrowing of money
or the obtaining of advances or credits, and which do not in
the aggregate materially detract from the value of its or
their respective property or assets or materially impair the
use thereof in the ordinary course of business;
(f) Purchase money security interest on any capital asset of
Borrower if such purchase money security interest attaches to
such capital asset concurrently with the acquisition thereof,
provided the debt so secured does not cause the Borrower to
breach Section 6.7 of this Agreement;
(g) Liens or interests evidenced by the Installment Sale
Agreement, Mortgage, the Assignment, the Collateral Mortgage,
the Security Agreement or the Pledge Agreement, as well as any
other Liens in favor of the Bank or any affiliate of the Bank;
(h) Any Lien on the project Facility to which the Bank gives its
prior written consent;
(i) The mortgage and security agreement dated as of october 1,
1997 (the "Second Mortgage") from the Issuer and the Company
to D.B. Western, Inc.;
(j) The Lien granted pursuant to the Construction Contract; and
(k) The operating lease between the Company and D.B. Western, Inc.
dated September 30, 1997.
Section 6.9. Borrowed Money. The Borrower will not, directly or
indirectly, create, incur, or assume Indebtedness, or otherwise become, be, or
remain liable with respect to, any Indebtedness, provided that the foregoing
restrictions shall not apply to:
(a) The Indebtedness created hereunder and any other Indebtedness
now or hereafter payable by the Borrower to the Bank or any
affiliate of the Bank;
(b) Indebtedness of the Borrower which has been subordinated to
the Bank in a manner satisfactory to the Bank;
(c) Existing Indebtedness which is reflected on the Borrower's
financial statements referred to in Section 3.9 hereof or has
been otherwise disclosed to the Bank;
(d) Indebtedness secured by a Permitted Lien;
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(e) Indebtedness of the Borrower evidenced by the Bonds; and
(f) Normal and customary trade debt incurred in the ordinary
course of business.
Section 6.10. Investments; Loans. The Borrower will not, directly or
indirectly, (a) purchase or otherwise acquire or own any stock or other
securities of any other Person or (b) make or permit to be outstanding any loan
or advance (other than trade advances in the ordinary course of business) to any
other Person except that:
(i) Borrower may purchase or otherwise acquire and own
marketable direct obligations of the United States of
America or any agencies thereof, and certificates of
deposit and bankers' acceptances issued or created by
any domestic commercial bank;
(ii) Borrower may make Eligible Investments; and
(iii) Borrower may make employee loans not to exceed $1,000
per employee at any time and not to exceed $25,000 in
the aggregate at any time.
Section 6.11. Assumptions; Guaranties. Borrower will not assume,
guarantee, endorse, or otherwise become directly or contingently liable for
(including, without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to, or
otherwise invest in any debtor or otherwise to assure the creditor against loss)
any financial obligation or Indebtedness of any other Person, except guaranties
by endorsement of negotiable instruments for deposit, collection, or similar
transactions in the ordinary course of business.
Section 6.12. Mergers; Consolidation. Borrower will not merge or
consolidate with any Person, dissolve, wind up its affairs, or sell, assign,
lease, or otherwise dispose of (whether in one transaction or in a series of
transactions), all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person.
Section 6.13. Profitability Covenant. The Borrower will not suffer or
permit any after- tax net loss (excluding non-cash extraordinary losses) for any
two (2) consecutive fiscal quarters.
Section 6.14 Net Profit After Tax. The Borrower's Net Profit After Tax
shall not be less than (i) $750,000 as of September 30, 1997 (cumulative
year-to-date); (ii) $1,000,000 as of December 31, 1997 (cumulative
year-to-date); and, thereafter, (iv) $300,000 for each subsequent quarter.
Section 6.15 Tangible Net Worth. The Borrower's Tangible Net Worth
shall not as of September 30, 1997 or for any subsequent quarter be less than
$4,500,000.
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Section 6.16. Total Debt to Tangible Net Worth. The Borrower will not
permit the ratio of its Total Debt to its Tangible Net Worth, calculated as of
the end of each quarter, to exceed 2.75 to 1.00.
Section 6.17. Debt Service Coverage Ratio. The Borrower will not suffer
or permit on September 30, 1997 or at the end of any subsequent quarter,
Adjusted Net Income for the 12- month period then or most recently ended,
expressed as a multiple of the current maturities of long term debt as of such
date, to be less than 1.3 to 1. (For purposes hereof, "Adjusted Net Income"
shall mean the net income of the Borrower, plus depreciation for such period,
plus amortization for such period).
Section 6.18. Changes to Plans and Specifications, General Contract.
The Borrower will not make or permit to be made (a) any material change in the
Plans and Specifications; (b) any changes in excess of 10% in any line item of
the Project Facility budget, (c) any material change in the terms and conditions
of the General Contract or (d) any change in the identity of the General
Contractor.
Section 6.19. Construction of Project. The Borrower will cause the
construction of the Project Facility to be carried forward with diligence and
continuity and to be completed by the Completion Date, and in accordance with
the Plans and Specifications and all applicable zoning, building and other laws,
statutes, codes, ordinances, rules and regulations.
Section 6.20. Additional Funds. The Borrower will, at any time or times
upon request of the Bank, deposit with the Bank such additional funds as are
reasonably determined by the Bank or the Bank's Inspector to be necessary (in
excess of the proceeds of the Bonds) to pay for completion of the Project
Facility and all costs and expenses related thereto.
Section 6.21. Evidence of Payment of Costs. The Borrower will furnish
to the Bank copies of all affidavits, lien waivers, releases or other evidence
requested by the Bank from time to time to establish that all bills for labor
and materials performed or furnished in connection with the Project Facility and
all bills of the General Contractor and its subcontractors and material
suppliers, have been paid in full, except for retainages.
Section 6.22. Entry; Correction of Defective Work. The Borrower will
allow the Bank, through the Bank's Inspector, and the Bank's officers, agents or
employees, at all reasonable times, (a) the right of entry and free access to
the Land to inspect all work done, labor performed and materials furnished in
furtherance of the Project Facility and (b) to require to be replaced or
otherwise corrected any materials or work which fails to comply in any material
respect with the Plans and Specifications.
Section 6.23. Compliance with General Contract. The Borrower shall
comply in all material respects with its obligations under the General Contract.
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Section 6.24. Title. The Borrower will keep the title to the Project
Facility free and clear of all liens, encumbrances, easements, restrictions and
claims, except for (a) the Permitted Encumbrances, (b) any lien, restriction or
encumbrance created in connection with this Reimbursement Agreement or otherwise
approved by the Bank, and (c) real estate taxes and installments of special
assessments, if any, which are a lien but not yet due and payable.
Section 6.25. Payment Schedule of Bonds. The Borrower shall cause the
original principal amount of the Bonds to be repaid not later than the scheduled
payments described in Exhibit B attached hereto and made a part hereof.
SECTION SEVEN
EVENTS OF DEFAULT
Section 7.1. Events of Default. The occurrence and continuance of any
one or more of the following events shall constitute an Event of Default under
this Agreement:
(a) If any representation or warranty made herein by Borrower or
any officer thereof or in any other written statement,
certificate, report, or financial statement at any time
furnished by or for Borrower in connection herewith, proves to
be incorrect in any material respect when made; or
(b) If Borrower fails to perform or observe any other provision,
covenant, or agreement contained in this Reimbursement
Agreement or, subject to any applicable grace periods, in any
other of the Bank Documents or Financing Documents, and such
failure remains unremedied for thirty (30) calendar days after
the Bank shall have given written notice thereof to Borrower,
or, if such covenant, condition or agreement is capable of
cure but cannot be cured within such thirty (30) day period,
the failure of the Borrower to commence to cure within such
thirty (30) day period and thereafter diligently proceed with
all action required to complete said cure within ninety (90)
days of such written notice unless such time to cure is
otherwise extended by the Bank in writing ; or
(c) If, subject to any applicable grace period, Borrower (i) fails
to pay any Indebtedness for borrowed money exceeding $100,000
individually or in the aggregate (other than as arising under
this Reimbursement Agreement) owing by Borrower when due,
whether at maturity, by acceleration, or otherwise or (ii)
fails to perform any term, covenant, or agreement on its part
to be performed under any agreement or instrument (other than
this Reimbursement Agreement) evidencing, securing or relating
to such Indebtedness when required to be performed, or is
otherwise in default thereunder, if the effect of such failure
is to accelerate, or to permit the holder(s) of such
Indebtedness or the trustee(s) under any such agreement or
instrument to accelerate, the maturity of such
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Indebtedness, unless waived by such holder(s) or trustee(s);
or
(d) If Borrower discontinues business except as otherwise
permitted under this Reimbursement Agreement; or
(e) An Indenture Default shall have occurred under the Indenture;
or
(f) Borrower or the Guarantor fails to make or cause to be made
any payment to the Bank required to be made pursuant to the
terms of the Bank Documents; or
(g) If Borrower or the Guarantor (i) is adjudicated a debtor or
insolvent, or ceases, is unable, or admits in writing its
inability, to pay its debts as they mature, or makes an
assignment for the benefit of creditors, (ii) applies for, or
consents to, the appointment of any receiver, trustee, or
similar officer for it or for all or any substantial part of
its property, or any such receiver, trustee, or similar
officer is appointed without the application or consent of the
Borrower, or the Guarantor, as the case may be, (iii)
institutes, or consents to the institution of, by petition,
application, or otherwise, any bankruptcy reorganization,
arrangement, readjustment of debt, dissolution, liquidation,
or similar proceeding relating to it under the laws of any
jurisdiction, (iv) has any such proceeding instituted against
it which remains thereafter undismissed for a period of sixty
(60) days or (v) has any judgment, writ, warrant of attachment
or execution or similar process issued or levied against a
substantial part of its property of the Borrower or the
Guarantor and such judgment, writ, or similar process is not
released, vacated, or fully bonded within sixty (60) days
after its issue or levy.
(h) Final judgment or judgments for the payment of money in excess
in the aggregate of $100,000 shall be rendered against
Borrower or the Guarantor and Borrower or the Guarantor shall
not discharge the same or cause it to be bonded or discharged
within sixty (60) days from the entry thereof, or shall not
appeal therefrom or from the order, decree or process upon
which or pursuant to which said judgment was granted, based or
entered and secure a stay of execution pending such appeal.
(i) an "event of default" occurs under the loan and security
agreement dated as of July 1, 1996 between the Borrower and
National Bank of Canada (f/k/a National Canada Finance
Corporation).
Section 7.2. No Waiver; Remedies. If an Event of Default occurs and is
continuing, the Bank may exercise any and all remedies, legal or equitable, to
collect the amounts due from the Borrower, pursuant to this Reimbursement
Agreement, and in its sole discretion, may notify the Trustee that an Event of
Default has occurred and may instruct the Trustee to redeem, or call for
purchase, the Bonds. Upon receipt by the Trustee of such instructions from the
Bank, the Bonds shall be redeemed or purchased pursuant to the Indenture. No
failure on the part of
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the Bank to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right or remedy. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law or equity.
SECTION EIGHT
TRANSFER, REDUCTION OR TERMINATION OF LETTER OF CREDIT
Section 8.1. Transfer of Letter of Credit; Reduction or Termination of
Letter of Credit Commitment and Related Matters.
(a) The Letter of Credit may be transferred in accordance with the
provisions set forth therein.
(b) If the Borrower shall be entitled to a credit against the
principal amount of the Bonds prior to maturity (the "Credit")
pursuant to an optional redemption of a portion of the Bonds
or to the purchase of Bonds in the open market and
cancellation of such Bonds in accordance with the provisions
of the Indenture, and such amounts have been paid by or on
behalf of the Borrower other than by the Bank, the Borrower
shall have the right at any time thereafter to reduce
permanently, without penalty or premium, the Stated Amount in
the manner set forth below. The Stated Amount will be reduced
by an amount equal to the sum of the following corresponding
reductions in the amounts available for Principal Drawings,
Bond Purchase Drawings and Interest Drawings: (a) the amount
available for Principal Drawings and Bond Purchase Drawing -
Principal (as defined in the Letter of Credit) will be reduced
by an amount equal to the amount of such Credit; and (b) the
amount available for Interest Drawings will be reduced to an
amount equal to the Interest Coverage Requirement. The
aforementioned reduction will occur not less than three (3)
Business Days' after written notice to the Bank, accompanied
by the original Letter of Credit and the written certificate
of the Trustee stating that the Borrower is entitled to such
Credit and designating the amount of such Credit and the date
upon which such credit shall become effective (which shall be
a Business Day).
(c) If the Stated Amount shall be reduced pursuant to paragraph
(b) hereof, then the Bank shall have the right to require the
Trustee to surrender the outstanding Letter of Credit to the
Bank on the effective date of such reduction of the Stated
Amount and to accept on such date, in substitution for the
then outstanding Letter of Credit, a substitute irrevocable
letter of credit, dated such date, for an amount equal to the
amount to which the Stated Amount shall have been so reduced
(also less the amount of any drawings upon the Letter of
Credit which have not been reinstated under paragraph (d)
hereof) but otherwise having terms identical to the then
outstanding Letter of Credit.
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(d) The obligation of the Bank to honor Interest Drawings, under
the Letter of Credit, up to the amount of the Interest
Coverage Requirement, (as same may have been reduced pursuant
to subsection (b) of this Section 8.1), will be automatically
reinstated to the Interest Coverage Requirement unless, before
the end of five (5) days after the date of an Interest
Drawing, the Bank shall deliver to the Trustee and the
Borrower a certificate stating that the Bank is not
reinstating the amount paid pursuant to such Interest Drawing,
there having occurred an Event of Default or an event which
with notice or lapse of time or both would constitute an Event
of Default. Failure to deliver such certificate within the
time stated shall be deemed to mean the amounts drawn have
been reinstated in full, but shall not be deemed an admission
that the Bank has in fact been reimbursed by the Borrower.
Notwithstanding the Bank's delivery of a certificate providing
that the automatic reinstatement has not occurred, the Bank
may thereafter present a new certificate reinstating the
amount of such drawing as a part of the available Stated
Amount.
(e) The Bank shall reinstate amounts drawn under the Letter of
Credit pursuant to a Bond Purchase Drawing upon receipt by the
Bank of money (other than draws under the Letter of Credit)
then held by the Trustee and designed to reimburse the Bank
for all or a portion of the amounts drawn pertaining to said
Bond Purchase Drawing for Bonds tendered for purchase and
remarketed by the Remarketing Agent.
The Letter of Credit shall terminate automatically on the earliest of
(i) the payment by the Bank to the Trustee of the final drawing available to be
made under the Letter of Credit; (ii) receipt by the Bank of the Letter of
Credit and a certificate signed by an officer of the Trustee and an authorized
representative of Borrower stating that no Bonds remain outstanding; (iii)
receipt by the Bank of the Letter of Credit and a certificate signed by an
officer of the Trustee and an authorized representative of Borrower stating that
an Alternate Credit Facility in substitution for the Letter of Credit has been
accepted by the Trustee and is in effect; or (iv) the Stated Expiration Date.
Notwithstanding the foregoing, the Bank may in writing, effective on each
October 1, commencing October 1, 2002 extend the Stated Expiration Date of the
Letter of Credit for an additional one-year period; provided, however, that such
extension shall be, in each instance, made in the sole discretion of the Bank
and the Bank may at any time, upon written notice delivered to Borrower and
Trustee, elect not to extend the Stated Expiration Date. The Bank shall notify
Borrower and Trustee of its decision of whether the Stated Expiration Date shall
be extended no later than forty-five (45) days prior to October 1 of each year,
provided that the failure of Bank to deliver such notice, or to deliver any
notice, shall not mean that Bank has elected to extend the Stated Expiration
Date. If the Bank extends the Stated Expiration Date, it shall do so in the form
of an amendment to the Letter of Credit, which it shall promptly deliver to
Trustee.
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SECTION NINE
MISCELLANEOUS
Section 9.1. Liability of the Bank. Between the Borrower and the Bank,
the Borrower assumes all risks of the acts or omissions of the Trustee and any
transferee of the Letter of Credit with respect to its use of the Letter of
Credit or its proceeds. Neither the Bank nor any of its officers or directors
shall be liable or responsible for: (a) the use which may be made of the Letter
of Credit or its proceeds or for any acts or omissions of the Trustee and any
transferee in connection therewith; (b) the validity, sufficiency or genuineness
of documents, inaccuracy of any of the statements or representations contained
therein or of any endorsement(s) thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
(c) good faith payment by the Bank against presentation of documents which do
not strictly comply with the terms of the Letter of Credit, including any
failure of any documents to bear any reference or adequate reference to the
Letter of Credit; or (d) any other circumstances whatsoever in making or failing
to make payment under the Letter of Credit, except the Borrower shall have a
claim against the Bank, and the Bank shall be liable to the Borrower, to the
extent, but only to the extent of any direct, as opposed to consequential,
damages suffered by the Borrower which the Borrower proves were caused by (i)
the Bank's willful misconduct or gross negligence in honoring a draft under the
Letter of Credit, or (ii) the Bank's willful failure to pay under the Letter of
Credit after presentation to it by the Trustee (or a successor trustee under the
Indenture to whom the Letter of Credit has been transferred in accordance with
its terms) of a sight draft and certificate strictly complying with the terms
and conditions of the Letter of Credit. In furtherance and not in limitation of
the foregoing, the Bank may accept documents that appear on their face to be in
order, and may assume the genuineness and rightfulness of any signature thereon,
without responsibility for further investigation, regardless of any notice or
information to the contrary unless actually received by the Bank; provided, that
if the Bank shall receive written notification from both the Trustee and the
Borrower that documents conforming to the terms of the Letter of Credit to be
presented to the Bank are not to be honored, the Bank agrees that it will not
honor such documents and the Borrower shall indemnify and hold the Bank harmless
from such failure to honor.
Section 9.2 Indemnification.
(a) Borrower hereby agrees to indemnify Bank and hold Bank
harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses which may arise or be asserted
against Bank by reason of the execution, delivery or
performance of this Reimbursement Agreement, the Letter of
Credit, the Financing Documents, or any transaction
contemplated thereby, with the exception of any claim, damage,
loss, liability, cost or expense arising solely out of Bank's
gross negligence of wilful misconduct.
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(b) Borrower hereby agrees to indemnify and hold Bank harmless
against any and all claims, expenses, demands, losses, costs,
fines or liabilities of whatever kind or nature (including,
without limitation, arising from personal injury or property
damage) in any way related to any environmental condition on,
above, within, in the vicinity of, related to or affected by
the Project Facility, with the exception of any claim,
expense, demand, loss, cost, fine or liability arising solely
out of Bank's gross negligence or wilful misconduct. The
provisions of this Section 9.2 shall survive termination of
this Reimbursement Agreement and shall apply to any and all
such claims, expenses, demands, losses, costs, fines or
liabilities of whatever kind or nature, notwithstanding the
discharge of the Mortgage, the Collateral Mortgage, and/or the
Security Agreement and the payment of the indebtedness secured
thereby.
(c) Borrower hereby agrees to indemnify and hold Bank harmless
against any and all claims, expenses, demands, losses, costs,
fines or liabilities of whatever kind of nature in any way
related to the occurrence of a Determination of Taxability,
with the exception of any claim, expense, demand, loss, cost,
fine or liability arising solely out of Bank's gross
negligence or wilful misconduct.
Section 9.3. Right to Set-Off. Upon the occurrence of any Event of
Default hereunder the Bank is hereby irrevocably authorized at any time and from
time to time without notice to the Borrower, any such notice being expressly
waived by the Borrower, to set-off and appropriate and apply any and all
deposits (general or special, time or demand, provisional or final), in any
currency, any other credits, indebtedness or claims, in any currency, in each
case whether direct or indirect or contingent or matured or unmatured, at any
time held or owing by the Bank to or for the credit or the account of the
Borrower, or any part thereof in such amounts as the Bank may elect, against and
on account of the obligations and liabilities of the Borrower to Bank hereunder
and claims of every nature and description of the Bank against the Borrower,
whether arising hereunder or otherwise, as the Bank may elect, whether or not
the Bank has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Bank agrees to notify
the Borrower promptly of any such set-off and the application made by the Bank,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Bank under this subsection are
in addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Bank may have.
Section 9.4. Additional Collateral. As additional security for this
Reimbursement Agreement, the Borrower agrees that in the event that Trustee
shall, after the occurrence of a continuing Event of Default hereunder and
acceleration of the Indebtedness evidenced hereby, draw upon the Letter of
Credit to pay all Bonds, the Bank shall be and become the assignee of all rights
and interests of the Issuer and the Trustee, all as provided more fully in the
Indenture. The Borrower does hereby consent to such Assignment, and does agree
to execute any and all such documents, instruments and certificates in
connection therewith as the Bank shall deem appropriate.
Section 9.5. Optional Redemption. If the Borrower elects to exercise
its option to direct redemption of the Bonds by a prepayment, Borrower shall
give Bank ten (10) days' prior written notice of such intent. Prior to notifying
the Trustee of its election to redeem the Bonds, the
26
<PAGE>
Borrower shall deliver moneys (in good and collected funds) in an amount equal
to the amount necessary to effect the redemption to the Bank and the Bank shall
then inform the Trustee that those moneys are on deposit and that the Trustee
may draw on the Letter of Credit to effect that redemption of the Bonds.
Section 9.6. Pledge of Bonds. Bonds which are not remarketed shall be
held by the Trustee, as agent for the Bank, as security for the obligations of
the Borrower under this Agreement Pledge. The Borrower hereby grants the Bank a
lien on such Bonds while they are so held by the Trustee.
Section 9.7. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered, or mailed first-class postage prepaid, or receipt by fax,
independently confirmed by other than the Sender's machine,
(a) if to the Bank, at:
(i) 66 South Pearl Street
Albany, New York 12207
Attention: International Division,
Letter of Credit Department
Fax Number: (518) 487-4998
(ii) KeyBank National Association
66 South Pearl Street
Albany, New York 12207
Attention: Corporate Banking Division;
Attention: Richard Van Auken
Fax Number: (518) 487-4285
with a copy to:
Crane, Kelley, Greene & Parente
90 State Street, Suite 1515
Albany, New York 12207
Attention: Kevin J. Kelley, Esq.
or at such other address as may have been furnished for such purpose to the
Borrower by the Bank in writing; or
(b) if to the Borrower, at:.
Spurlock Adhesives, Inc.
5090 General Mahone Highway
Waverly, Virginia 23890
Attention: Chief Financial Officer
27
<PAGE>
with a copy to:
William L. Pitman, Esq.
Williams Mullen Christian & Dobbins, P.C.
1021 East Cary Street
Richmond, Virginia 23219
or at such other address as may have been furnished for such purpose to the Bank
by the Borrower in writing.
Section 9.8. Survival of Representations and Warranties. All
agreements, representations and warranties contained in the Bank Documents shall
survive the execution and delivery of this Reimbursement Agreement, any
investigation at any time made by or on behalf of the Bank and the issuance and
acceptance of the Letter of Credit. All statements contained in any certificates
or other instruments delivered by or on behalf of the Borrower pursuant hereto
shall constitute representations and warranties by the Borrower under this
Reimbursement Agreement.
Section 9.9. Payments on Holidays. Whenever any payment to be made
pursuant to this Reimbursement Agreement shall be stated to be due on a public
holiday in the State of New York, Saturday or Sunday, such payment may be made
on the next succeeding business day and such extension of time shall in such
case be included in computing interest, if any, in connection with such payment.
Section 9.10. Computation of Interest. All computations of interest
hereunder shall be made on the basis of a three hundred sixty (360) day year
consisting of twelve (12) thirty (30) day months.
Section 9.11. Entire Agreement. The Bank Documents and the Letter of
Credit embody the entire agreement and understanding between the Bank and the
Borrower and supersede all prior agreements and understandings relating to the
subject matter hereof.
Section 9.12. Parties in Interest. All the terms and provisions of this
Reimbursement Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto.
Section 9.13. Participations. The Bank reserves the right to sell
participations in its obligations evidenced by the Letter of Credit, provided,
however, that Borrower shall continue to deal solely with Bank in such event, it
being understood and agreed that Borrower shall have no responsibility to such
participants.
Section 9.14. Expenses. Borrower agrees, regardless of whether or not
the Bonds are eventually issued and sold and regardless of whether or not the
transactions contemplated hereby
28
<PAGE>
shall be consummated, to pay all reasonable expenses incurred by the Bank
incident to such transactions in the preparation of documentation relating
thereto, including all fees and disbursement of the counsel to the Bank, for
services to the Bank. Borrower further agrees to pay all like expenses incurred
by the Bank in connection with any amendments of or waivers or consents
requested by Borrower under or with respect to the Bank Documents or the
enforcement from time to time by the Bank of its rights under and pursuant to
the Bank Documents.
Section 9.15. Counterparts. This Reimbursement Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument and any of the parties hereto may execute
this Reimbursement Agreement by signing any such counterpart.
Section 9.16. Governing Law. This Reimbursement Agreement shall be
governed exclusively by and construed in accordance with the applicable laws of
the State of New York.
IN WITNESS WHEREOF, the undersigned have caused this Reimbursement
Agreement to be executed as of the date first above written.
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
--------------------------------
Phillip S. Sumpter,
Executive Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Richard Van Auken
--------------------------------
Richard Van Auken,
Senior Banker
01294\reimburs.3
29
<PAGE>
EXHIBIT A
KEYBANK NATIONAL ASSOCIATION
INTERNATIONAL DIVISION
LETTER OF CREDIT DEPARTMENT
66 SOUTH PEARL STREET
ALBANY, NEW YORK 12207
IRREVOCABLE TRANSFERRABLE DIRECT PAY
LETTER OF CREDIT NO. NSL792132
October 10, 1997
Star Bank, N.A.,
as Trustee under the Trust Indenture
with the County of Saratoga Industrial
Development Agency, dated as of
October 1, 1997
425 Walnut Street, ML 5125
Cincinnati, Ohio 45202-1118
Attention: Corporate Trust Services
Ladies and Gentlemen:
At the request and on the instructions of our customer, Spurlock
Adhesives, Inc. ("Applicant"), as account party, KeyBank National Association
(hereinafter "we" or "our") hereby establishes this Irrevocable Transferrable
Direct Pay Letter of Credit ("Letter of Credit") in your favor, not
individually, but solely as Trustee (hereinafter "you" or "your") for the
benefit of the holders of County of Saratoga Industrial Development Agency
Multi-Mode Variable Rate Industrial Development Revenue Bonds (Spurlock
Adhesives, Inc. Project), Series 1997A (the "Bonds") issued by County of
Saratoga Industrial Development Agency ("Issuer") pursuant to a Trust Indenture,
dated as of October 1, 1997, by and between the Issuer and Star Bank, N.A., as
Trustee ("Trustee") (the "Indenture"). All capitalized terms used but not
defined herein shall have the meanings set forth in the Indenture.
We hereby irrevocably authorize you to draw on us in accordance with
the terms and conditions hereinafter set forth, by one or more sight drafts in
the form of Exhibit 1 attached hereto ("Draft(s)"), in an aggregate amount not
exceeding $6,180,822, as reduced and reinstated from time to time in accordance
with the provisions hereof (the "Stated Amount"), of which an aggregate amount
not exceeding (i) $6,000,000 may be drawn with respect to (a) the unpaid
principal amount of Bonds Outstanding, whether at maturity, acceleration or upon
redemption ("Principal Drawing") or (b) that portion of the Purchase Price
corresponding to principal of Bonds Outstanding tendered and not remarketed
pursuant to the Indenture ("Bond Purchase Drawing - Principal"); plus (ii)
$180,822.00 (computed on the basis of up to one hundred ten (110) days of
accrued interest on Bonds Outstanding at an assumed maximum interest rate of ten
<PAGE>
percent (10%) per annum, calculated on the basis of a 365 or 366 day year) may
be drawn with respect to (a) the payment of up to one hundred ten (110) days
accrued interest on Bonds Outstanding ("Interest Drawing") or (b) that portion
of the Purchase Price corresponding to interest on Bonds Outstanding tendered
and not remarketed pursuant to the Indenture ("Bond Purchase Drawing -
Interest), ("Bond Purchase Drawing - Principal" and "Bond Purchase Drawing -
Interest" shall be, collectively, "Bond Purchase Drawing").
Each drawing honored by us shall reduce that portion of the Stated
Amount available under this Letter of Credit, subject only to reinstatement with
respect to drawings as hereinafter provided.
The Stated Amount with respect to an Interest Drawing shall be
automatically and irrevocably reinstated, effective as of the close of business
of the fifth (5th) day after such Interest Drawing, by the amount of a Draft so
drawn, so long as you have not received from us, on or before the close of
business on the fifth (5th) day after the date of the presentation to us of a
Draft, written notice to the effect that an Event of Default under the Letter of
Credit Reimbursement Agreement, dated as of October 1, 1997, between Applicant
and us ("Reimbursement Agreement"), has occurred, and that the Stated Amount
with respect to an Interest Drawing is not being reinstated.
Upon receipt by us or our agent of Bonds pledged in connection with any
Bond Purchase Drawing pursuant to the Pledge and Security Agreement, the Stated
Amount shall be automatically and irrevocably reinstated by the amount of such
Bond Purchase Drawing.
The Stated Amount shall be decreased, and not reinstated, from time to
time upon payment under this Letter of Credit for the redemption of the Bonds as
provided in the Indenture by (i) with respect to principal, the aggregate
principal amount of the Bonds so redeemed, and (ii) with respect to interest,
the amount that bears the same proportion to $180,822.00 as the amount specified
in the immediately preceding clause (i) bears to $6,000,000.
Each Draft for each drawing under this Letter of Credit must bear on
its face the clause "Drawn under KeyBank National Association Letter of Credit
No. NSL792132," be dated the Business Day of presentation and be accompanied by
(i) if the drawing being made is a "Bond Purchase Drawing" pursuant to the
Indenture, your completed and signed certificate in the form of Exhibit 2
attached hereto, dated the date of the accompanying Draft; or (ii) if the
drawing being made is a "Principal Drawing" or an "Interest Drawing," your
completed and signed certificate in the form of Exhibit 3 attached hereto, dated
the date of the accompanying Draft. Presentation of Draft(s) and such
certificates shall be made at our office specified above or at any other office
as may be designated by us by written notice delivered to you via delivery in
person, registered mail, certified mail return receipt requested or facsimile
transmission (518) 487-4998 with a cover letter expressly stating that originals
of the facsimile transmission will be delivered by nationally recognized
overnight courier. If you draw on this Letter of Credit at or prior to 11:00
a.m., New York time, on a Business Day, and provided that such drawing
2
<PAGE>
conforms to the terms and conditions hereof, we shall pay you the amount
specified, on the next Business Day, in accordance with your payment
instructions provided, however, if a drawing is presented prior to 11:00 am to
pay the Purchase Price of Bonds which have not been remarketed, and provided
that such drawing conforms to the terms and conditions hereof, we shall pay you
the amount specified, on such Business Day. For purposes of this Letter of
Credit, a Business Day shall mean any day of the year other than (i) a Saturday
of a Sunday, or (ii) any day on which banks located in the State of New York or
in the cities in which your principal corporate trust office or our office at
which demands for payment under this Letter of Credit are to be presented are
required or authorized by law to remain closed, or (ii) any day on which the New
York Stock Exchange is closed.
This Letter of Credit shall automatically terminate at our aforesaid
address on the close of business on the first to occur of the following dates
("Termination Date"): (i) the Stated Expiration Date or (ii) the date of the
receipt by us of the Letter of Credit and a certificate signed by the Trustee
and Applicant that none of the Bonds are Outstanding under the Indenture and the
Indenture has been discharged in accordance with its terms, or (iii) the date of
receipt by us of the Letter of Credit and a certificate signed by an officer of
the Trustee and an authorized representative of Applicant stating that an
Alternate Credit Facility in substitution for the Letter of Credit has been
accepted by the Trustee and is in effect, or (iv) the date on which the final
drawing available under this Letter of Credit is honored by us. The Stated
Expiration Date shall be October 17, 2002 and may be extended by us in our
discretion at any time or from time to time, by amendment in writing with
written notice of such amendment to you (with copies to the Applicant, the
Issuer and the Remarketing Agent) no less than 45 days prior to the Stated
Expiration Date, specifying a new Stated Expiration Date.
If a drawing by you hereunder does not, in any instance, conform to the
terms and conditions of this Letter of Credit, we shall give you immediate
notice that the purported drawing was not effected in accordance with the terms
and conditions of this Letter of Credit, stating the reasons therefor and that
we are holding the documents at your disposal or are returning the same to you,
as we may elect. Upon being notified that the purported drawing was not effected
in accordance with this Letter of Credit, you may attempt to correct any such
nonconforming drawing if, and to the extent that, you are entitled (without
regard to the provisions of this sentence) and able to do so.
All payments by us hereunder will be with our own funds.
This Letter of Credit sets forth in full the terms of our undertaking,
and such undertaking shall not in any way be modified, amended, amplified or
limited by reference to any document, instrument or agreement referred to herein
or in which this Letter of Credit is referred to or to which this Letter of
Credit relates, except for the certificates referred to herein (Exhibits 2 and
3) and, for the purpose of certain definitions, the Indenture, and any such
reference shall not be deemed to incorporate herein by reference, any document,
instrument or agreement except for such certificates and definitions.
3
<PAGE>
This Letter of Credit is transferable in its entirety (but not in part)
to any transferee within the United States who has succeeded you as Trustee
under the Indenture. Transfer of the amount available under this Letter of
Credit to such Transferee shall be effected by the presentation to us of this
Letter of Credit accompanied by a certificate in the form of Exhibit 4 attached
hereto, and unless this Letter of Credit is so presented to us, we shall have no
obligation hereunder to any Transferee. Upon such transfer, we will either
reissue this Letter of Credit in the maximum amount then available hereunder or
otherwise amend this Letter of Credit to reflect such maximum amount then
available.
Only you (or a transferee as permitted by the terms of this Letter of
Credit) may make a drawing under this Letter of Credit.
This Letter of Credit is issued under and shall be governed by the
express terms of the Uniform Customs and Practice for Documentary Credits (1993
Rev.) International Chamber of Commerce Publication No. 500, as may be amended
from time to time, and, to the extent not inconsistent therewith, the Uniform
Commercial Code as in effect (together with all revisions and amendments) in the
State of New York.
Communications and notices with respect to this Letter of Credit shall
be in writing and shall be addressed to us at our office specified above
specifically referring to the letter of credit number of this Letter of Credit,
and shall be addressed to you at your address specified above.
We hereby agree with the drawer that each Draft drawn under and in
compliance with the terms of this Letter of Credit will be duly honored on
delivery of documents as specified herein if presented at our office indicated
above on or before the Termination Date.
Very truly yours,
KEYBANK NATIONAL ASSOCIATION
By:
--------------------------------------
Title: Senior Banker
By:
--------------------------------------
Title: Vice President
01294\lettcred
4
<PAGE>
EXHIBIT 1
SIGHT DRAFT
U.S. $ City:_______________
State:_______________
Date:_______________
For Value Received
Pay at sight
to______________________________________________________________________________
________________________________________________________________________________
U.S. Dollars.
Drawn under KeyBank National Association, Letter of Credit No.
NSL792132, dated October 10, 1997.
To: KeyBank National Association
66 South Pearl Street
Albany, New York 12207
Attention: International Division, Letter of Credit Department
Facsimile: (518) 487-4998
The signature below constitutes an endorsement of this Sight Draft.
Star Bank, N.A.,
as Trustee
By:___________________________________
Authorized Trust Officer
<PAGE>
EXHIBIT 2
CERTIFICATE FOR PURCHASE OF BONDS OUTSTANDING TENDERED FOR
PURCHASE PURSUANT TO THE TRUST INDENTURE OF COUNTY OF SARATOGA
INDUSTRIAL DEVELOPMENT AGENCY MULTI-MODE VARIABLE RATE
INDUSTRIAL DEVELOPMENT REVENUE BONDS (SPURLOCK ADHESIVES, INC.
PROJECT), SERIES 1997A UNDER LETTER OF CREDIT NO. NSL792132.
Any capitalized term used, but not defined herein, shall have its
respective meaning as set forth in the Letter of Credit referred to above.
The undersigned, a duly authorized trust officer of _________________,
as Trustee under the Indenture (the "Trustee") hereby certifies to KeyBank
National Association, as issuer of the Letter of Credit referred to above (the
"Bank"), that:
(1) The Trustee is the Trustee under the Indenture for the holders
of the Bonds.
(2) The Trustee is making a drawing under the Letter of Credit in
the amount of (i) $ __________ with respect to payment of the principal portion
of, and (ii) $_________ with respect to payment of the interest portion of, the
Purchase Price of Bonds tendered but not remarketed, or for which remarketing
proceeds have not been received, pursuant to the Indenture.
(3) The amount of the Draft accompanying this Certificate* does not
exceed the Stated Amount in respect of principal or interest as set forth in
this Certificate.
(4) The amount of the Draft accompanying this Certificate was
computed in accordance with the terms and conditions of the Bonds and the
Indenture.
(5) The Letter of Credit referred to above has not expired pursuant
to its terms.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate, dated the date of the accompanying Draft, to wit, the ____ day of
_________, 19__.
[NAME OF TRUSTEE]
By:________________________________
[Name and Title]
* Trustee shall send a copy of each certificate to Applicant at the
address specified in the Reimbursement Agreement.
<PAGE>
EXHIBIT 3
CERTIFICATE FOR PAYMENT OF PRINCIPAL OR INTEREST ON COUNTY OF SARATOGA
INDUSTRIAL DEVELOPMENT AGENCY MULTI-MODE VARIABLE RATE INDUSTRIAL DEVELOPMENT
REVENUE BONDS (SPURLOCK ADHESIVES, INC. PROJECT), SERIES 1997A UNDER LETTER OF
CREDIT NO. NSL792132.
Any capitalized term used, but not defined herein, shall have its
respective meaning as set forth in the letter of Credit referred to above.
The undersigned, a duly authorized trust officer of the Trustee under
the Indenture (the "Trustee"), hereby certifies to KeyBank National Association,
as issuer of the Letter of Credit referred to above (the "Bank"), that:
(1) The Trustee is the Trustee under the Indenture for the holders
of the Bonds.
(2) [Complete the applicable Section(s) below and strike or delete
the inapplicable Sections]
A. Periodic Interest Drawing. The amount of the Interest Drawing is
$________, which equals the amount of interest on the Bonds which is due and
payable with Letter of Credit proceeds on the same date as the date of the Draft
accompanying this Certificate.
B. Default Interest Drawing. An Event of Default as defined in the
Indenture has occurred, and the amount of the Interest Drawing of $_________, is
the maximum amount permitted under the Letter of Credit for the payment of
interest on Bonds Outstanding on the same date as the date of the Draft
accompanying this Certificate.
C. Periodic Principal Drawing. The amount of the Principal Drawing
is $__________, which equals the amount of principal of the Bonds which is due
and payable on the same date as the date of the Draft accompanying this
Certificate.
D. Default Principal Drawing. An Event of Default as defined in the
Indenture has occurred, and the amount of Principal Drawing of $_________, is
the amount of the principal of the Bonds, which is due and unpaid as of the date
of the Draft accompanying this Certificate.
(3) The amount of the Draft accompanying this Certificate* does not
exceed the Stated Amount with respect to the drawings of principal or interest,
as set forth in this Certificate.
(4) The amount of the Draft accompanying this Certificate was
computed in accordance with the terms and conditions of the Bonds and the
Indenture.
(5) The Letter of Credit referred to above has not expired pursuant
to its terms.
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate, dated the date of the accompanying Draft, to wit, the ____ day of
_________, 19__.
[NAME OF TRUSTEE]
By:_________________________________
[Name and Title]
* Trustee shall send a copy of each certificate to Applicant at the address
specified in the Reimbursement Agreement.
<PAGE>
EXHIBIT 4
TRANSFER CERTIFICATE
Date:________________
KEYBANK NATIONAL ASSOCIATION
66 South Pearl Street
Albany, New York 12207
Attention: International Division, Letter of Credit Department
Re: Irrevocable Transferrable Direct Pay Letter of Credit No. NSL792132
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to the following "Transferee":
(Name of Transferee)
[Address:]
all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety. The Transferee has succeeded the undersigned as Trustee
under the Indenture (as defined in the Letter of Credit).
By this transfer, all rights of the undersigned beneficiary in the
Letter of Credit are transferred to the Transferee and the Transferee shall have
the sole rights as beneficiary thereof, including sole rights relating to any
amendments of the Letter of Credit, whether increases in the amount to be drawn
thereunder, or extensions of the Stated Expiration Date thereof, or other
amendments, and whether such amendments now exist or are made after the date
hereof. All amendments are to be advised direct to the Transferee without
necessity of any consent of or notice to the undersigned beneficiary.
The undersigned hereby certifies that the Transferee has become
successor Trustee under the Trust Indenture dated as of October 1, 1997, between
the undersigned and the County of Saratoga Industrial Development Agency (the
"Issuer"), relating to the Issuer's Multi-Mode Variable Rate Industrial
Development Revenue Bonds (Spurlock Adhesives, Inc. Project), Series 1997A (the
"Bonds") and has accepted such appointment in writing.
The original of the Letter of Credit is returned herewith and in
accordance therewith we ask you to endorse the within transfer on the reverse
thereof, and forward it directly to the Transferee with your customary notice or
issue a replacement letter of credit to the Transferee as provided therein.
Very truly yours,
<PAGE>
____________________________________
SIGNATURE AUTHENTICATED, as
Trustee
We certify that we have succeeded as Trustee under the Indenture (as defined in
the Letter of Credit).
Name:
(Bank)
Title:
(Authorized Officer)
01294\lettcred.2
<PAGE>
EXHIBIT B
Spurlock Adhesives, Inc. IDRB
Principal Amortization Schedule
Payments Due on the "Interest Payment Date" of Each Quarter
=====================
Debt Service Schedule
=====================
Date Principal Coupon Interest Period Total Fiscal Total
---- --------- ------ -------- ------------ ------------
1/ 1/98
4/ 1/98
7/ 1/98 150,000.00 150,000.00
10/ 1/98 150,000.00 150,000.00
1/ 1/99 150,000.00 150,000.00
4/ 1/99 150,000.00 150,000.00 600,000.00
7/ 1/99 150,000.00 150,000.00
10/ 1/99 150,000.00 150,000.00
1/ 1/ 0 150,000.00 150,000.00
4/ 1/ 0 150,000.00 150,000.00 600,000.00
7/ 1/ 0 150,000.00 150,000.00
10/ 1/ 0 150,000.00 150,000.00
1/ 1/ 1 150,000.00 150,000.00
4/ 1/ 1 150,000.00 150,000.00 600,000.00
7/ 1/ 1 150,000.00 150,000.00
10/ 1/ 1 150,000.00 150,000.00
1/ 1/ 2 150,000.00 150,000.00
4/ 1/ 2 150,000.00 150,000.00 600,000.00
7/ 1/ 2 150,000.00 150,000.00
10/ 1/ 2 150,000.00 150,000.00
1/ 1/ 3 150,000.00 150,000.00
4/ 1/ 3 150,000.00 150,000.00 600,000.00
7/ 1/ 3 150,000.00 150,000.00
10/ 1/ 3 150,000.00 150,000.00
1/ 1/ 4 150,000.00 150,000.00
4/ 1/ 4 150,000.00 150,000.00 600,000.00
7/ 1/ 4 150,000.00 150,000.00
10/ 1/ 4 150,000.00 150,000.00
1/ 1/ 5 150,000.00 150,000.00
4/ 1/ 5 150,000.00 150,000.00 600,000.00
7/ 1/ 5 150,000.00 150,000.00
10/ 1/ 5 150,000.00 150,000.00
1/ 1/ 6 150,000.00 150,000.00
4/ 1/ 6 150,000.00 150,000.00 600,000.00
7/ 1/ 6 150,000.00 150,000.00
10/ 1/ 6 150,000.00 150,000.00
1/ 1/ 7 150,000.00 150,000.00
4/ 1/ 7 150,000.00 150,000.00 600,000.00
7/ 1/ 7 150,000.00 150,000.00
10/ 1/ 7 150,000.00 150,000.00
1/ 1/ 8 150,000.00 150,000.00
4/ 1/ 8 150,000.00 150,000.00 600,000.00
------------ -------- ------------
6,000,000.00 6,000,000.00
ACCRUED
6,000,000.00 6,000,000.00
============ ======== ============
Exhibit 10.34
CLOSING ITEM NO.: A-7
- -------------------------------------------------------------------------------
COUNTY OF SARATOGA
INDUSTRIAL DEVELOPMENT AGENCY
to
STAR BANK, N.A.,
AS TRUSTEE
===================================================================
PLEDGE AND ASSIGNMENT
with
ACKNOWLEDGEMENT
thereof by
SPURLOCK ADHESIVES, INC.
===================================================================
DATED AS OF OCTOBER 1, 1997
-------------------------------
RELATING TO
$6,000,000
AGGREGATE PRINCIPAL AMOUNT OF
COUNTY OF SARATOGA
INDUSTRIAL DEVELOPMENT AGENCY
MULTI-MODE VARIABLE RATE BONDS
(SPURLOCK ADHESIVES, INC. PROJECT),
SERIES 1997 A
- -------------------------------------------------------------------------------
<PAGE>
PLEDGE AND ASSIGNMENT
THIS PLEDGE AND ASSIGNMENT (the "Assignment"), dated as of OCTOBER 1,
1997, is from the COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT AGENCY, a public
benefit corporation duly organized and existing under the laws of the State of
New York, having its principal office at Saratoga County Municipal Center, 40
McMaster Street, Ballston Spa, New York 12020 (the "Issuer") to STAR BANK, N.A.,
a national banking association duly organized and existing under the laws of the
United States, having an office for the transaction of business at 425 Walnut
Street, Cincinnati, Ohio 45201-1118, as trustee (the "Trustee") for the holders
of the Issuer's Multi-Mode Variable Rate Industrial Development Revenue Bonds
(Spurlock Adhesives, Inc. Project), Series 1997 A in the aggregate principal
amount of $6,000,000 (the "Bonds") issued pursuant to a certain trust indenture,
dated as of October 1, 1997 (the "Trust Indenture") by and between the Issuer
and the Trustee.
For value received, the receipt of which is hereby acknowledged, the
Issuer hereby pledges, assigns, transfers and sets over to the Trustee, and
hereby grants the Trustee a lien on and security interest in, all of the
Issuer's right, title and interest in any and all moneys due or to become due
and any and all other rights and remedies of the Issuer under or arising out of
that certain installment sale agreement, dated as of October 1, 1997 (the
"Installment Sale Agreement") by and between the Issuer and Spurlock Adhesives,
Inc. (the "Company") (except for the "Unassigned Rights", as defined therein,
and moneys payable pursuant to the Unassigned Rights), which Installment Sale
Agreement is intended to be recorded immediately prior to the recordation
hereof; provided, however, that the assignment made hereby shall not permit the
amendment of the Installment Sale Agreement without the prior written consent of
the Issuer, which consent shall not be unreasonably withheld.
The Trustee shall have no obligation, duty or liability under the
Installment Sale Agreement except as specifically set forth in the Installment
Sale Agreement and accepted pursuant to the acceptance attached hereto, nor
shall the Trustee be required or obligated in any manner to fulfill or perform
any obligation, covenant, term or condition of the Issuer under the Installment
Sale Agreement or to make any inquiry as to the nature or sufficiency of any
payment received by it, or to present or file any claim, or to take any other
action to collect or enforce the payment of any amounts which may have been
assigned to it or to which it may be entitled hereunder at any time.
The Issuer hereby irrevocably constitutes and appoints the Trustee its
true and lawful attorney-in-fact, with power of substitution for the Issuer and
in the name of the Issuer or in the name of the Trustee or otherwise, for the
use and benefit of the holders of the Bonds, to ask, demand, require, receive,
collect, compound and give discharges and releases of all claims for any and all
moneys due or to become due under or arising out of the Installment Sale
Agreement (except for claims relating to moneys due or to become due with
respect to the Unassigned Rights) and to endorse any checks and other
instruments or orders in connection therewith, and, if any "Event of Default"
specified in the Indenture or the Bonds shall occur, (a) to settle, compromise,
compound and adjust any such claims (except for claims arising pursuant to the
Unassigned Rights), (b) to exercise and enforce any and all claims, rights,
powers and remedies of the Issuer under or arising out of the Installment Sale
Agreement (except for rights of the Issuer and moneys payable pursuant to the
Unassigned Rights), (c) to file, commence and prosecute any suits, actions and
proceedings at law or in equity in any court of competent jurisdiction to
collect any such sums assigned to the Trustee hereunder and to enforce any
rights in respect thereto and all other claims, rights, powers and remedies of
the Issuer under or arising out of the Installment Sale Agreement (except for
rights of the Issuer and moneys payable pursuant to the Unassigned Rights), and
(d) generally to sell, assign, transfer, pledge, make any agreement with respect
<PAGE>
to and otherwise deal with any of such claims, rights, powers and remedies as
fully and completely as though the Trustee were the absolute owner thereof for
all purposes, and at such times and in such manner as may seem to the Trustee to
be necessary or advisable in its absolute discretion.
The Issuer further agrees that at any time, and from time to time, upon
the written request of the Trustee, and at the sole cost and expense of the
Company, the Issuer will promptly and duly execute and deliver any and all such
further instruments and documents as the Trustee may deem desirable in order to
obtain the full benefits of this Assignment and all rights and powers herein
granted.
The Issuer hereby ratifies and confirms the Installment Sale Agreement
and does hereby warrant and represent (a) that the Installment Sale Agreement is
in full force and effect, (b) that the Issuer is not in default under the
Installment Sale Agreement and (c) that the Issuer has not assigned or pledged,
and hereby covenants that it will not assign or pledge, so long as this
Assignment shall remain in effect, the whole or any part of the moneys, rights
or remedies hereby assigned to anyone other than the Trustee.
All moneys due and to become due to the Trustee under or pursuant to
the Installment Sale Agreement shall be paid directly to the Trustee at 425
Walnut Street, P.O. Box 1118, Cincinnati, Ohio 45201-1118, or at such other
address as the Trustee may designate to the Company and the Issuer in writing
from time to time.
If the Issuer shall pay or cause to be paid, or there shall be paid, to
the Trustee or its successors and assigns the principal of, premium, if any, and
interest on the Bonds and all other sums due or to become due pursuant to the
Trust Indenture and this Assignment, then this Assignment and the estate and
rights created hereby shall cease, terminate and be void, and thereupon the
Trustee shall cancel and discharge the lien of this Assignment and execute and
deliver to the Issuer, and record, if necessary, such instruments in writing as
shall be required to release the lien hereof, and shall reconvey, release,
assign and deliver unto the Issuer the estate, right, title and interest in and
to any and all property conveyed, sold, transferred, assigned or pledged to the
Trustee, or otherwise subject to the lien of this Assignment all pursuant to
Section 15.02 of the Indenture.
This Assignment shall be binding upon the Issuer and its successors and
assigns and shall inure to the benefit of the Trustee and its successors and
assigns as trustee for the holders of the Bonds or any part thereof.
All covenants, stipulations, promises, agreements and obligations of
the Issuer contained in this Assignment, in the Trust Indenture, in the Bonds,
in the Installment Sale Agreement and in the other documents and instruments
connected herewith or therewith, and in any documents supplemental hereto or
thereto (collectively, the "Financing Documents") shall be deemed to be the
covenants, stipulations, promises, agreements and obligations of the Issuer and
not of any member, officer, agent (other than the Company), servant or employee
of the Issuer in his individual capacity, and no recourse under or upon any
covenant, stipulation, promise, agreement or obligation in the Financing
Documents contained or otherwise based upon or in respect of the Financing
Documents, or for any claim based thereon or otherwise in respect thereof, shall
be had against any past, present or future member, director, officer, agent
(other than the Company), servant or employee, as such, of the Issuer or of any
successor public benefit corporation or political subdivision or any person
executing the Financing Documents on behalf of the Issuer, either directly or
through the Issuer or any successor public benefit corporation or political
subdivision or any person executing the Financing Documents on behalf of the
Issuer, it being expressly understood that the Financing Documents are limited
corporate obligations, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, any such member, director, officer, agent
2
<PAGE>
(other than the Company), servant, or employee of the Issuer or of any successor
public benefit corporation or political subdivision or any person executing the
Financing Documents on behalf of the Issuer because of the creation of the
indebtedness thereby authorized, or under or by reason of the covenants,
stipulations, promises, agreements or obligations contained in the Financing
Documents or implied therefrom; and that any and all such personal liability of,
and any and all such rights and claims against, every such member, director,
officer, agent (other than the Company), servant or employee because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in the Financing Documents or
implied therefrom, are, to the extent permitted by law, expressly waived and
released as a condition of, and as a consideration for, the execution of the
Financing Documents and the issuance of the Bonds.
The obligations and agreements of the Issuer contained herein shall not
constitute or give rise to an obligation of the State of New York or of Saratoga
or Saratoga County, New York, and neither the State of New York nor Saratoga or
Saratoga County, New York shall be liable thereon, and further such obligations
and agreements shall not constitute or give rise to a general obligation of the
Issuer, but rather shall constitute limited, special obligations of the Issuer
payable solely from the revenues of the Issuer derived and to be derived from
the lease, sale or other disposition of the Project Facility, except for
revenues derived by the Issuer with respect to the "Unassigned Rights" (as
defined in the Installment Sale Agreement).
Notwithstanding any provision of this Assignment to the contrary, the
Issuer shall not be obligated to take any action pursuant to any provision
hereof unless (i) the Issuer shall have been requested to do so in writing by
the Company or the Trustee and (ii) if compliance with such request is
reasonably expected to result in the incurrence by the Issuer (or any member,
director, officer, agent, servant or employee of the Issuer) in any liability,
fees, expenses or other costs, the Issuer shall have received from the Company
or the Trustee, as the case may be, security or indemnity satisfactory to the
Issuer for protection against all such liability, however remote, and for the
reimbursement of all such fees, expenses and other costs.
The Installment Sale Agreement relates to the premises located in the
Moreau Industrial Park in the Town of Moreau, Saratoga County, New York and more
particularly described on Exhibit "A" attached hereto.
3
<PAGE>
IN WITNESS WHEREOF, the Issuer has duly executed this Assignment as of
October 1, 1997.
COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ Floyd H. Rourke
--------------------------------------
Floyd H. Rourke, Chairman
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On the 7th day of October, 1997, before me personally came FLOYD H.
ROURKE, to me known, who being by me duly sworn, did depose and say that he
resides in Northumberland, New York, that he is the CHAIRMAN of the COUNTY OF
SARATOGA INDUSTRIAL DEVELOPMENT AGENCY, the public benefit corporation of the
State of New York described in and which executed the foregoing instrument, and
that he signed his name thereto by authority of said public benefit corporation.
/s/ Theresa C. Priest
-----------------------------------
Notary Public
Theresa C. Priest
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
4
<PAGE>
ACCEPTANCE
STAR BANK, N.A., as trustee (the "Trustee") hereby accepts the
foregoing Pledge and Assignment (the "Assignment") and agrees to fulfill all the
duties and obligations imposed on the Trustee under said Assignment and under
the provisions of the Installment Sale Agreement, dated as of October 1, 1997,
by and between County of Saratoga Industrial Development Agency and Spurlock
Adhesives, Inc.
IN WITNESS WHEREOF, the Trustee has duly executed this Acceptance as of
October 1, 1997.
STAR BANK, N.A., as Trustee
By: /s/ Keith A. Maurmeier
-----------------------------------
Name: Keith A. Maurmeier
---------------------------------
Title: Senior Trust Officer
--------------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On this 9th day of October, 1997, before me personally came Keith A.
Maurmeier, to me known, who being by me duly sworn, did depose and sat that he
resides at Cincinnati, OH, that he is the Senior Trust Officer of STAR BANK,
N.A., the national banking association described in and which executed the
foregoing instrument, and that he signed his name thereto by order of the Board
of Directors of said national banking association.
/s/ Theresa C. Priest
-----------------------------------
Notary Public
Theresa C. Priest
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
<PAGE>
ACKNOWLEDGEMENT BY VENDEE OF ASSIGNMENT OF
VENDEE'S RIGHTS UNDER INSTALLMENT SALE AGREEMENT
The undersigned hereby acknowledges receipt of notice of the pledge and
assignment by the County of Saratoga Industrial Development Agency (the
"Issuer") to Star Bank, N.A., as trustee (the "Trustee") of certain of the
Issuer's rights and remedies under an installment sale agreement, dated as of
October 1, 1997 (the "Installment Sale Agreement") by and between the Issuer as
Vendor and the undersigned as Vendee, which assignment is contained in a certain
pledge and assignment, dated as of October 1, 1997 (the "Assignment") from the
Issuer to the Trustee, which Assignment includes the right to collect and
receive all amounts payable by the undersigned under the Installment Sale
Agreement (except for rights of the Issuer and moneys payable pursuant to the
"Unassigned Rights", as such quoted term is defined in the Installment Sale
Agreement). The undersigned, intending to be legally bound by the Assignment,
hereby agrees with the Trustee (i) to pay directly to the Trustee all sums due
and to become due to the Issuer from the undersigned under the Installment Sale
Agreement (except for moneys payable pursuant to the Unassigned Rights) without
set-off, counterclaim or deduction for any reason whatsoever, (ii) except as
otherwise provided in the Installment Sale Agreement, not to seek to recover
from the Trustee any moneys paid to the Trustee pursuant to the Installment Sale
Agreement, (iii) to perform for the benefit of the Trustee all of the duties and
undertakings of the undersigned under the Installment Sale Agreement (except for
duties and obligations relating to the Unassigned Rights) and (iv) that the
Trustee shall not be obligated by reason of the Assignment or otherwise to
perform or be responsible for the performance of any of the duties, undertakings
or obligations of the Issuer under the Installment Sale Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Acknowledgment as
of October 1, 1997.
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
-----------------------------------
Name: Phillip S. Sumpter
---------------------------------
Title: Executive Vice President
--------------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On this 9th day of October, 1997, before me personally came Phillip S.
Sumpter, to me known, who being by me duly sworn, did depose and sat that he
resides in Waverly VA, that he is the Exec VP of SPURLOCK ADHESIVES, INC., the
corporation described in and which executed the foregoing instrument, and that
he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Theresa C. Priest
-----------------------------------
Notary Public
Theresa C. Priest
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
<PAGE>
EXHIBIT "A"
DESCRIPTION OF PREMISES
THAT TRACT OR PARCEL OF LAND, situate in the Town of Moreau, County of
Saratoga and State of New York more fully described as Lot Number 3 as shown on
subdivision maps of Moreau Industrial Park prepared by The Saratoga Associates
and filed in the Saratoga County Clerk's Office on March 18, 1992 in drawer
#M-348 A-Z and AA-DD; and as modified by revised subdivision maps of Moreau
Industrial Park prepared by The Saratoga Associates and filed in the Saratoga
County Clerk's Office on February 16, 1994 in drawer #M-398, A-S and being
further bounded and described as follows:
BEGINNING at a point marked with a capped iron rod found at the point
of intersection of the easterly line of Farnan Road with the common division
line of Lot No. 4 to the north and Lot No. 3 to the south as shown on said map;
thence from said point of beginning along said common division line the
following five (5) courses and distances:
1) North 90 deg. 00 min. 00 sec. East, 347.86 feet to a point marked with
a capped iron rod found;
2) South 00 deg. 00 min. 00 sec. West, 32.63 feet to a point marked with a
capped iron rod found;
3) North 90 deg. 00 min. 00 sec. East, 191.52 feet to a point marked with
a capped iron rod found;
4) North 00 deg. 00 min. 00 sec. East, 32.63 feet to a point marked with a
capped iron rod found;
5) North 90 deg. 00 min. 00 sec. East, 680.17 feet to the point of
intersection of the westerly line of Lot No. 5 with the common division line of
Lot No. 4 to the north and Lot No. 3 to the south as shown on said map; thence
along said westerly line, South 16 deg. 10 min. 56 sec. West, 102.04 feet to a
point in the northwesterly line of lands of The State of New York as shown on
said map, said point also being at the 145 foot elevation; thence along said
northwesterly and the westerly line of lands of The State of New York as it
winds and turns along the 145 foot elevation in a southerly direction 712 +/-
feet to the point of intersection of said westerly line of lands of The State of
New York with the common division line of Lot No. 3 to the north and Lot No. 2
to the south as shown on said map, the last course having a tie-line of South 33
deg. 02 min. 30 sec. West, 699.47 feet; thence along said common division line,
South 90 deg. 00 min. 00 sec. West, 865.65 feet to a point marked with a capped
iron rod found at the point of intersection of the easterly line of Farnan Road
with the common division line of Lot No. 3 to the north and Lot No. 2 to the
south as shown on said map; thence along said easterly line in a northerly
direction the following four (4) courses and distances:
1) North 00 deg. 00 min. 00 sec. West, 116.35 feet to a point of
curvature;
2) Along a curve to the right an arc length of 464.05 feet to a point of
tangency, said curve having a radius of 2,773.32 feet and a delta angle
of 09 deg. 35 min. 13 sec.;
3) North 09 deg. 35 min. 13 sec. East, 50.00 feet to a point of curvature;
4) Along a curve to the left an arc length of 57.49 feet to the point or
place of beginning, said curve having a radius of 2,294.42 feet and a delta
angle of 01 deg. 26 min. 08 sec., said parcel containing 16.37 +/- acres of land
and being Lot No. 3 as shown on said map.
Exhibit 10.35
CLOSING ITEM NO.: A-8
- --------------------------------------------------------------------------------
COUNTY OF SARATOGA
INDUSTRIAL DEVELOPMENT AGENCY
AND
SPURLOCK ADHESIVES, INC.
TO
KEYBANK NATIONAL ASSOCIATION
=============================================
MORTGAGE AND SECURITY AGREEMENT
=============================================
DATED AS OF OCTOBER 1, 1997
--------------------------------
THIS MORTGAGE (A) AFFECTS TANGIBLE AND INTANGIBLE PERSONAL PROPERTY AS
WELL AS REAL PROPERTY, (B) CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, AND (C)
IS INTENDED TO CONSTITUTE A SECURITY AGREEMENT UNDER THE UNIFORM COMMERCIAL CODE
OF THE STATE OF NEW YORK.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is not part of
this Mortgage and is for convenience of reference only)
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS OF TERMS.............................................................3
SECTION 1.02. INTERPRETATION...................................................................9
ARTICLE II
REAL ESTATE MORTGAGE; GRANTING CLAUSES; SECURITY AGREEMENT; GENERAL COVENANTS
SECTION 2.01. GRANTING CLAUSES................................................................11
SECTION 2.02. SECURITY AGREEMENT..............................................................12
SECTION 2.03. INFORMATION UNDER UNIFORM COMMERCIAL CODE.......................................13
SECTION 2.04. PERFORMANCE OF COVENANTS........................................................13
SECTION 2.05. PRIORITY OF LIEN OF MORTGAGE; DISCHARGE OF LIENS AND ENCUMBRANCES...............13
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE ISSUER....................................15
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................15
SECTION 3.03. PERFORMANCE OF COVENANTS........................................................16
SECTION 3.04. COVENANTS REGARDING REIMBURSEMENT AGREEMENT.....................................16
ARTICLE IV
MAINTENANCE, MODIFICATION, TAXES AND INSURANCE
SECTION 4.01. MAINTENANCE OF AND MODIFICATIONS TO PROJECT FACILITY BY COMPANY.................17
SECTION 4.02. INSURANCE REQUIRED..............................................................17
SECTION 4.03. TAXES, ASSESSMENTS AND UTILITY CHARGES..........................................17
SECTION 4.04. PAYMENTS IN LIEU OF TAXES.......................................................17
ARTICLE V
SPECIAL COVENANTS
SECTION 5.01. RIGHT OF ACCESS TO THE PROJECT FACILITY.........................................18
SECTION 5.02. INSPECTION OF PROJECT FACILITY BOOKS............................................18
SECTION 5.03. AGREEMENT TO PROVIDE INFORMATION................................................18
SECTION 5.04. BOOKS OF RECORD AND ACCOUNT; FINANCIAL STATEMENTS; COMPLIANCE
CERTIFICATES..........................................................................18
SECTION 5.05. COMPLIANCE WITH ORDERS, ORDINANCES, ETC.........................................18
i
<PAGE>
SECTION 5.06. RECORDATION OF MORTGAGE, ASSIGNMENT AND INSTALLMENT SALE AGREEMENT AND
FILING OF SECURITY INSTRUMENTS........................................................19
SECTION 5.07. [INTENTIONALLY OMITTED].........................................................19
SECTION 5.08. ENVIRONMENTAL WARRANTIES AND COVENANTS..........................................19
SECTION 5.09. MORTGAGE TAX....................................................................21
SECTION 5.10. FEES AND EXPENSES OF THE BANK...................................................21
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT DEFINED.......................................................22
SECTION 6.02. ACCELERATION, ANNULMENT OF ACCELERATION.........................................24
SECTION 6.03. ENFORCEMENT OF REMEDIES.........................................................24
SECTION 6.04. APPOINTMENT OF RECEIVERS........................................................25
SECTION 6.05. APPLICATION OF MONEYS...........................................................25
SECTION 6.06. REMEDIES CUMULATIVE.............................................................25
SECTION 6.07. TERMINATION OF PROCEEDINGS......................................................26
SECTION 6.08. WAIVER AND NON-WAIVER OF EVENT OF DEFAULT.......................................26
SECTION 6.09. REPAYMENT AND SECURING OF EXPENSES PAID BY THE BANK.............................26
SECTION 6.10. OTHER ACTIONS BY THE BANK.......................................................27
SECTION 6.11. REPAYMENT AND SECURING OF COLLECTION COSTS INCURRED BY BANK.....................27
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. LIMITATION OF RIGHTS............................................................28
SECTION 7.02. LAWS............................................................................28
SECTION 7.03. REVENUE STAMPS..................................................................28
SECTION 7.04. FURTHER ASSURANCE...............................................................28
SECTION 7.05. SATISFACTION OF MORTGAGE........................................................28
SECTION 7.06. SEVERABILITY....................................................................28
SECTION 7.07. COVENANTS RUN WITH THE LAND.....................................................29
SECTION 7.08. NOTICES.........................................................................29
SECTION 7.09. COUNTERPARTS....................................................................30
SECTION 7.10. APPLICABLE LAW..................................................................30
SECTION 7.11. TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING..........................30
SECTION 7.12. AMENDMENT, ETC..................................................................30
SECTION 7.13. USURY...........................................................................30
SECTION 7.14. NO RECOURSE; SPECIAL OBLIGATION.................................................31
SECTION 7.15. WAIVER OF NOTICE................................................................31
SECTION 7.16. LIEN LAW........................................................................31
SECTION 7.17. PROVISIONS REGARDING MAXIMUM INDEBTEDNESS, REDUCTION OF SECURED AMOUNT
AND TREATMENT AND APPLICATION OF PAYMENTS.........................................32
ii
<PAGE>
EXHIBIT "A"
DESCRIPTION OF LAND................................................................................A-1
EXHIBIT "B"
DESCRIPTION OF EQUIPMENT...........................................................................B-1
</TABLE>
iii
<PAGE>
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT dated as of OCTOBER 1, 1997, (the
"Mortgage") from COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT AGENCY (the
"Issuer"), a public benefit corporation of the State of New York (the "State")
having a principal office at 40 McMaster Street, Ballston Spa, New York 12020
and SPURLOCK ADHESIVES, INC. (the "Company"), a corporation organized and
existing under the laws of the Commonwealth of Virginia, having an address of
5090 General Mahone Highway, Waverly, Virginia 23890 to KEYBANK NATIONAL
ASSOCIATION, (the "Bank") a national banking association organized and existing
under the laws of the United States and having an office at 66 South Peal
Street, Albany, New York 12207-1501, as Issuer of the Letter of Credit (as
hereinafter defined).
W I T N E S S E T H :
WHEREAS, the Issuer by resolution adopted on September 16, 1997,
resolved to undertake the Project (as hereinafter defined); and
WHEREAS, said project (the "Project") consists of (A) (1) the
acquisition of a certain parcel of land comprising approximately 16.37 acres
constituting Lot #3 located in the Moreau Industrial Park in the Town of Moreau,
Saratoga County, New York (the "Land"), (2) the construction on the Land of two
(2) buildings approximately 10,000 square feet each in size and one (1)
approximately 800 square foot building for use in the manufacturing of synthetic
organic chemicals and related functions (collectively the "Facility") and (3)
the acquisition and installation therein of certain machinery and equipment (the
"Equipment" and together with the Land and the Facility, the "Project
Facility"), and (B) the financing of a portion of the costs of the foregoing by
the issuance of the Issuer's $6,000,000 aggregate principal amount Multi-Mode
Variable Rate Industrial Development Revenue Bonds (Spurlock Adhesives, Inc.
Project), Series 1997 A (the "Bonds"); and
WHEREAS, the Bonds are to be issued pursuant to the terms of a trust
indenture dated as of October 1, 1997, (the "Indenture") by and between the
Issuer and Star Bank, N.A., as trustee (the "Trustee"); and
WHEREAS, contemporaneously with the execution of the Indenture, the
Issuer and the Company have entered into an installment sale agreement dated as
of October 1, 1997 (the "Installment Sale Agreement") with respect to the
Project Facility; and
WHERAS, to secure the Bonds, pursuant to a pledge and assignment dated
as of October 1, 1997 (the "Assignment"), the Issuer has assigned to the Trustee
certain of the Issuer's rights and remedies under the Installment Sale
Agreement, including the right to receive installment purchase payments and
other amounts payable thereunder, but not including the Unassigned Rights (as
hereinafter defined); and
WHERAS, as security for the Bonds, the Company has entered into a
letter of credit reimbursement agreement dated as of October 1, 1997 (the
"Reimbursement Agreement") with the Bank, pursuant to which the Bank has issued
in favor of the Trustee an irrevocable transferable direct-pay letter of credit
(the "Letter of Credit") in an amount equal to the principal amount of the Bonds
Outstanding and one hundred and ten (110) days' interest thereon, under which
the Bank is obligated to pay to the
<PAGE>
Trustee, upon presentation of a sight draft and required accompanying
documentation, the amount necessary to pay the principal of an interest on the
Bonds then due and payable;
WHEREAS, to provide the Company with additional funds with which to
complete the Project, the Bank will extend to the Company a term loan in the
amount of $1,500,000 to be evidenced by a note dated the Closing Date (as
hereinafter defined) from the Company in favor of the Bank (the "Term Loan
Note"); and
WHEREAS, the Company and the Issuer as security for the obligations of
the Company under the Reimbursement Agreement and under the Term Loan Note
intend to grant the Bank a mortgage Lien (as hereinafter defined) on and
security interest in the Project Facility; and
WHEREAS, all things necessary to constitute the Mortgage a valid Lien
on and pledge of the Mortgaged Property (as hereinafter defined) herein
described in accordance with the terms hereof have been done and performed, and
the creation, execution and delivery of the Mortgage, as security for the
obligations of the Company under the Reimbursement Agreement and the Term Loan
Note, have in all respects been duly authorized;
NOW, THEREFORE, THIS MORTGAGE FURTHER WITNESSETH:
KNOW ALL MEN BY THESE PRESENTS, that the Company and the Issuer, in
order to secure the obligations of the Company under the Reimbursement Agreement
and the Term Loan Note in the principal amount of SEVEN MILLION SIX HUNDRED
EIGHTY THOUSAND EIGHT HUNDRED TWENTY-TWO AND 00/100 DOLLARS ($7,680,822),
according to their tenor and effect, the payment of all other sums required to
be paid hereunder and under the Reimbursement Agreement and the other Bank
Documents and the performance and observance by the Issuer and the Company of
all of the covenants, agreements, representations and warranties herein and in
the Reimbursement Agreement, and the other Bank Documents, do hereby covenant
and agree as follows:
2
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS OF TERMS. The following words and terms shall have the
following meanings, unless the context or use indicates another or different
meaning or intent:
"Act" means Title 1 of Article 18-A of the General Municipal Law of the
State, as amended from time to time, together with Chapter 855 of the Laws of
1971 of the State, as amended from time to time.
"Act of Bankruptcy" means the filing of a petition in bankruptcy (or
the other commencement of a bankruptcy or similar proceeding) by or against the
Company or the Issuer under any applicable bankruptcy, insolvency,
reorganization or similar law, now or hereafter in effect.
"Assignment" means the pledge and assignment dated as of October 1,
1997 from the Issuer to the Trustee pursuant to which the Issuer has assigned to
the Trustee its rights under the Installment Sale Agreement (other than
Unassigned Rights), as said pledge and assignment may be supplemented or amended
from time to time.
"Alternate Credit Facility" shall have the meaning assigned to such
term in the Indenture.
"Authorized Representative" means the Person or Persons at the time
designated to act in behalf of the Issuer or the Company, as the case may be, by
written certificate furnished to the Trustee containing the specimen signature
of each such Person and signed on behalf of (A) the Issuer by its Chairman or
Vice Chairman, or such other person as may be authorized by resolution of the
Issuer, and (B) the Company by Irvine Spurlock, Phillip Sumpter or such other
person as may be authorized by the Company.
"Available Moneys" shall have the meaning assigned to such term in the
Indenture.
"Bank" means initially, KeyBank National Association, and its
successors and assigns in its capacity as issuer of the Letter of Credit and in
the event an Alternate Credit Facility is outstanding, the issuer of the
Alternate Credit Facility.
"Bank Documents" means the Letter of Credit, the Reimbursement
Agreement, the Mortgage, the Pledge and Security Agreement, the Collateral
Mortgage, the Security Agreement, the Guaranty, the Term Loan Note, the Building
Loan Agreement and any other document now or hereafter executed by the Issuer or
the Company or the Guarantor in favor of the Bank which affects the rights of
the Bank in or to the Project, in whole or in part, or which secures or
guarantees any sum due under any Bank Document.
"Bill of Sale to Issuer" means the bill of sale from the Company to the
Issuer conveying the Company's interest in the Equipment to the Issuer.
"Bond Counsel" means Lemery and Reid, P.C. of Saratoga Springs, New
York or such other attorney or firm of attorneys located in the State whose
experience in matters relating to the issuance of
3
<PAGE>
obligations by states and their political subdivisions is nationally recognized
and who are acceptable to the Issuer and the Trustee in their reasonable
discretion.
"Bond Fund" means the fund so designated and established pursuant to
Section 402 of the Indenture.
"Bond Payment Date" means each Interest Payment Date and each date on
which principal or premium shall be payable on the Bonds according to their
terms and the Indenture, so long as any Bonds shall be Outstanding.
"Bond Registrar" means the Trustee.
"Bond Year" means each one (1) year period ending on the anniversary of
the Closing Date.
"Bondholder" or "Holder" or "Owner" means the registered owner of any
Bond as indicated on the bond register maintained by the Bond Registrar.
"Bonds" means the Issuer's Multi-Mode Variable Rate Industrial
Development Revenue Bonds (Spurlock Adhesives, Inc. Project), Series 1997 A
issued in the aggregate principal amount of $6,000,000 pursuant to the
Resolution and Article II of the Indenture.
"Building Loan Agreement" means the building loan agreement dated as of
October 1, 1997 by and between the Issuer, the Company and the Bank, as amended
or supplemented from time to time.
"Business Day" means any day of the year on which the Trustee and
banking institutions located in the State are open for the purpose of conducting
business.
"Closing Date" means the date on which authenticated Bonds are
delivered to the purchaser of the Bonds and payment is received therefor by the
Trustee on behalf of the Issuer.
"Code" means the Internal Revenue Code of 1986, as amended, and the
applicable regulations of the United States Treasury Department promulgated
thereunder and under the Internal Revenue Code of 1954, as amended.
"Collateral Mortgage" means the collateral mortgage dated as of October
1, 1997 from the Company in favor of the Bank, as said collateral mortgage may
be amended or supplemented from time to time.
"Company" means Spurlock Adhesives, Inc., a corporation organized and
existing under the laws of the State of Virginia, having an address of 209 West
Main Street, Waverly, Virginia 23890, and its successors and permitted assigns.
"Completion Date" means the date identified on the completion
certificate delivered by the Company in accordance with Section 4.4 of the
Installment Sale Agreement.
"Condemnation" means the taking of title to, or the use of, Property
under the exercise of the power of eminent domain by any Governmental Authority.
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"Construction Contract" means the contract for the construction of the
Facility by and between the Company and the Contractor.
"Construction Period" means the period (A) beginning on the Closing
Date and (B) ending on the Completion Date.
"Contractor" means D.B. Western, Inc.
"Cost of the Project" means all those costs and items of expense
enumerated in Section 4.3 of the Installment Sale Agreement.
"Debt Service Payment" means, with respect to any Interest Payment Date
and/or Purchase Date, (A) the interest payable on the Bonds on such Bond Payment
Date, plus (B) the principal, if any, payable on the Bonds on such Bond Payment
Date, plus (C) the premium, if any, payable on the Bonds on such Bond Payment
Date.
"Deed to Issuer" means the deed from the Company to the Issuer with
respect to the Project Facility.
"Equipment" means all materials, machinery, equipment, fixtures or
furnishings intended to be acquired with the proceeds of the Bonds or any
payment made by the Company pursuant to Section 4.5 of the Installment Sale
Agreement, and such substitutions and replacements therefor as may be made from
time to time pursuant to the Installment Sale Agreement, including, without
limitation, all the Property described in Exhibit "B" attached to the
Installment Sale Agreement and the Mortgage.
"Event of Default" means any of those events defined as Events of
Default by the terms of Article X of the Indenture, Article X of the Installment
Sale Agreement or Article VI of the Mortgage.
"Facility" means all those buildings, improvements, structures and
other related facilities (A) affixed to or attached to the Land and (B) financed
with the proceeds of the sale of the Bonds or any payment made by the Company
pursuant to Section 4.5 of the Installment Sale Agreement.
"Financing Documents" means the Bonds, the Indenture, the Installment
Sale Agreement, the Assignment, the Bank Documents, the Tax Regulatory Agreement
and any other document now or hereafter executed by the Issuer or the Company in
favor of the Bondholders or the Trustee or the Bank which affects the rights of
the Bondholders or the Trustee or the Bank in or to the Project Facility, in
whole or in part, or which secures or guarantees any sum due under the Bonds or
any other Financing Document, each as amended from time to time, and all
documents related thereto and executed in connection therewith.
"Governmental Authority" means the United States, the State, any other
state and any political subdivision of any of them, and any agency, department,
commission, board, bureau or instrumentality of any of them.
"Gross Proceeds" means one hundred percent (100%) of the proceeds of
the transaction in question, including, but not limited to, the settlement of
any insurance or Condemnation award.
"Guarantor" means Spurlock Industries, Inc.
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"Guaranty" means the payment and performance guaranty dated as of
October 1, 1997 from the Guarantor in favor of the Bank, as said payment and
performance guaranty may be amended or supplemented from time to time.
"Indebtedness" shall have the meaning assigned to such term in Section
2.01 of the Mortgage.
"Indenture" means the trust indenture dated as of September 1, 1997 by
and between the Issuer and the Trustee, as said trust indenture may be
supplemented or amended from time to time.
"Independent Counsel" shall mean an attorney or firm of attorneys duly
admitted to practice law before the highest court of any state and approved by
the Bank and not a full-time employee of the Company or the Issuer.
"Installment Sale Agreement" means the installment sale agreement dated
as of October 1, 1997 by and between the Issuer and the Company, as said
installment sale agreement may be supplemented or amended from time to time.
"Insurance and Condemnation Fund" means the fund so designated and
established pursuant to Section 4.03 of the Indenture.
"Interest Payment Date" means the date on which an installment of
interest on the Bonds is paid as set forth in the Indenture.
"Issuer" means (A) County of Saratoga Industrial Development Agency and
its successors and assigns, and (B) any public benefit corporation or political
subdivision resulting from or surviving any consolidation or merger to which
County of Saratoga Industrial Development Agency or its successors or assigns
may be a party.
"Land" means the approximately 16.37 acre parcel of land constituting
Lot #3 in the Moreau Industrial Park in the Town of Moreau, Saratoga County, New
York, as more particularly described in Exhibit "A" attached to the Installment
Sale Agreement and Exhibit "A" attached to the Mortgage.
"Letter of Credit" means (A) the irrevocable, direct-pay Letter of
Credit issued by the Bank and delivered to the Trustee upon the issuance of the
Bonds and (B) any Alternate Credit Facility.
"Lien" means any interest in Property securing an obligation owed to a
Person, whether such interest is based on the common law, statute or contract,
and including but not limited to a security interest arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" includes reservations,
exceptions, encroachments, projections, easements, rights of way, covenants,
conditions, restrictions, leases and other similar title exceptions and
encumbrances, including but not limited to mechanics', materialmen's,
warehousemen's and carriers' liens and other similar encumbrances affecting real
property. For purposes hereof, a Person shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement
or other arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes.
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"Local Authority" means any Governmental Authority which exercises
jurisdiction over the Land or the reconstruction, construction or installation
of the Project Facility.
"Maturity Date" means with respect to any Bonds, the Stated Maturity.
"Mortgage" means the mortgage and security agreement dated as of
October 1, 1997 from the Issuer and the Company to the Bank, as said mortgage
may be supplemented or amended from time to time.
"Mortgaged Property" shall have the meaning assigned to such term in
Section 2.01 of the Mortgage.
"Net Proceeds" means so much of the Gross Proceeds with respect to
which that term is used as remain after payment of all fees for services,
expenses, costs and taxes (including attorneys' fees) incurred in obtaining such
Gross Proceeds.
"Outstanding" shall have the meaning assigned to such term in the
Indenture.
"Permit" shall mean any permit, license, certificate or authorization
of any kind required by any Governmental Authority in connection with the use,
ownership, occupancy or operation of the Project Facility, including all such
environmental permits required for the transfer, sale or conveyance of any part
of the Project Facility or the storage, treatment, generation, handling,
transportation, processing or disposal of Hazardous Substances.
"Permitted Encumbrances" means (A) utility, access and other easements,
rights of way, restrictions, encroachments and exceptions that benefit or do not
materially impair the utility or the value of the Property affected thereby for
the purposes for which it is intended, (B) mechanics', materialmen's,
warehousemen's, carriers' and other similar Liens to the extent permitted by
Section 8.8(B) of the Installment Sale Agreement, (C) Liens for taxes,
assessments and utility charges (1) to the extent permitted by Section 6.2(B) of
the Installment Sale Agreement, or (2) at the time not delinquent, (D) any Lien
on the Project Facility obtained through any Financing Document, (E) any
exception appearing in the mortgagee title insurance policy issued on the
Closing Date and accepted by the Bank and (F) any Permitted Lien (as defined in
the Reimbursement Agreement).
"Person" means an individual, partnership, corporation, trust,
unincorporated organization or Governmental Authority.
"Plans and Specifications" means the plans and specifications for the
construction and reconstruction of the Facility, prepared and stamped by the
Architect, and all material amendments and modifications thereof made by change
orders; and, if an item for the construction and reconstruction of the Facility
is not specifically detailed in the aforementioned plans and specifications, but
rather is described by way of manufacturer's or supplier's or contractor's shop
drawings, catalog references or similar descriptions, the term also includes
such shop drawings, catalog references and descriptions.
"Pledge and Security Agreement" means (A) the pledge and security
agreement dated as of October 1, 1997 by and between the Company and the Bank,
as the same may be supplemented or amended from time to time, and (B) the pledge
and security agreement by and between the Company and any substitute Bank, as
the same may be supplemented or amended form time to time.
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"Project" means (A) the acquisition of the Land, (B) the construction
of the Facility, (C) the installation of the Equipment; and (D) the financing of
a portion of the costs of the foregoing by the issuance of the Bonds.
"Project Facility" means, collectively, the Land, the Facility and the
Equipment.
"Project Fund" means the fund so designated and established pursuant to
Section 402 of the Indenture.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Rebate Amount" shall have the meaning assigned to such term in the Tax
Regulatory Agreement.
"Rebate Fund" means the fund so designated and established pursuant to
Section 402 of the Indenture.
"Request for Disbursement" means a request from the Company, as agent
of the Issuer, stating the amount of disbursement sought in substantially the
form of Schedule "D" attached to the Building Loan Agreement.
"Reimbursement Agreement" means the letter of credit reimbursement
agreement dated as of October 1, 1997 between the Company and the Bank, as the
same may be amended from time to time and any agreement of the Company with a
Credit Facility Issuer setting forth the obligations of the Company to such
Credit Facility Issuer arising out of any payments under a Credit Facility.
"Requirement" or "Local Requirement" means any law, ordinance, order,
rule or regulation of a Governmental Authority or a Local Authority,
respectively.
"Resolution" means the resolution of the Issuer adopted on September
16, 1997, authorizing the Issuer to undertake the Project, to issue and sell the
Bonds and to execute and deliver the Financing Documents to which the Issuer is
a party.
"Security Agreement" means the security agreement dated as of October
1, 1997 from the Company to the Bank, as said security agreement may be
supplemented or amended from time to time.
"SEQR" means Article 8 of the Environmental Conservation Law, Chapter
43-B of the Consolidated Laws of New York, as amended and the regulations
adopted pursuant thereto.
"State" means the State of New York.
"Stated Amount" shall have the meaning assigned to such term in the
Letter of Credit.
"Stated Maturity" means, when used with respect to any Bond or any
installment of interest thereon, the date specified in such Bond as the fixed
date on which the principal of such Bond or such installment of interest on such
Bond is due and payable.
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"Tax Regulatory Agreement" means the tax regulatory agreement dated the
Closing Date executed by the Company in favor of the Issuer, the Trustee and the
Bank regarding, among other things, the restrictions prescribed by the Code in
order for interest on the Bonds to remain excluded from gross income for federal
income tax purposes.
"Term Loan Note" means the term loan note dated the Closing Date in the
principal amount of $1,500,000 from the Company in favor of the Bank.
"Trust Estate" shall have the meaning assigned to such term in the
Indenture.
"Trustee" means Star Bank, N.A., a national banking association
organized and existing under the laws of the United States, having its office at
425 Walnut Street, Cincinnati, Ohio 45201-1118, or any successor trustee or
co-trustee, acting as trustee under the Indenture.
"Unassigned Rights" means (A) the rights of the Issuer granted pursuant
to Sections 2.2(E), 2.2(F), 2.2(J), 3.2, 4.1(B), 4.1(D), 4.1(E)(2), 4.1(F),
4.1(G), 4.4, 5.2, 5.3(B)(2), 6.1(B)(1), 6.3, 6.4 (as it relates to the insurance
required by Section 6.3), 6.5, 6.6, 7.1, 7.2, 8.1, 8.2, 8.3, 8.4, 8.5, 8.6(C),
8.7, 8.8, 8.9, 8.11, 8.14, 9.1, 9.3, 9.4, 11.1, 11.2, 11.10 and 11.11(B) of the
Installment Sale Agreement, (B) the moneys due and to become due to the Issuer
for its own account or the members, officers, agents (other than the Company)
and employees of the Issuer for their own account pursuant to Sections 2.2(F),
4.1(F), 5.3(B)(2), 5.3(C), 6.4(B), 8.2, 8.14 and 10.4 of the Installment Sale
Agreement, (C) the rights of the Issuer under Section 6.6 of the Installment
Sale Agreement and the moneys due as payments in lieu of taxes under Section 6.6
of the Installment Sale Agreement, and (D) the right to enforce the foregoing
pursuant to Article X of the Installment Sale Agreement. Notwithstanding the
preceding sentence, to the extent the obligations of the Company under the
Sections of the Installment Sale Agreement listed in (A) or (C) above do not
relate to the payment of moneys to the Issuer for its own account or to the
members, officers, agents (other than the Company) and employees of the Issuer
for their own account, such obligations, upon assignment of the Installment Sale
Agreement by the Issuer to the Trustee pursuant to the Assignment and to the
Bank pursuant to the Mortgage, shall be deemed to and shall constitute
obligations of the Company to the Issuer and the Trustee and the Bank, jointly
and severally, and either the Issuer or the Trustee or the Bank may commence an
action to enforce the Company's obligations under the Installment Sale
Agreement.
SECTION 1.02. INTERPRETATION. (A) In the Mortgage, unless the context otherwise
requires:
(1) the terms "hereby", "hereof", "herein", "hereunder",
and any similar terms as used in the Mortgage, refer to the Mortgage,
and the term "heretofore" shall mean before, and the term "hereafter"
shall mean after, the date of the Mortgage;
(2) words of masculine gender shall mean and include
correlative words of feminine and neuter genders, and words importing
the singular number shall mean and include the plural number, and vice
versa; and
(3) words importing persons shall include firms,
associations, partnerships (including limited partnerships), trusts,
corporations and other legal entities, including public bodies, as well
as natural persons;
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(4) any headings preceding the texts of the several
Articles and Sections of the Mortgage, and any table of contents or
marginal notes appended to copies hereof, shall be solely for
convenience of reference and shall neither constitute a part of the
Mortgage nor affect its meaning, construction or effect;
(5) any certificates, letters or opinions required to be
given pursuant to the Mortgage shall mean a signed document attesting
to or acknowledging the circumstances, representations, opinions of law
or other matters therein stated or set forth or setting forth matters
to be determined pursuant to the Mortgage.
(B) If any one or more of the covenants or agreements provided
herein on the part of the Issuer or the Company to be performed shall, for any
reason, be held or shall, in fact, be inoperative, unenforceable or contrary to
law, in any particular case, such circumstance shall not render the provision in
question inoperative or unenforceable in any other case or circumstance.
Further, if any one or more of the phrases, sentences, clauses, paragraphs or
sections herein should be contrary to law, then such covenant or covenants or
agreement or agreements shall be deemed separable from the remaining covenants
and agreements hereof and shall in no way affect the validity of the other
provisions of the Mortgage.
(C) The Mortgage shall be construed in accordance with the
applicable laws of the State.
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ARTICLE II
REAL ESTATE MORTGAGE; GRANTING CLAUSES;
SECURITY AGREEMENT; GENERAL COVENANTS
SECTION 2.01. GRANTING CLAUSES. The Issuer and the Company, in consideration of
the execution and delivery by the Bank of the Letter of Credit, the making of
the loan evidenced by the Term Loan Note and for other good and valuable
consideration, receipt of which is hereby acknowledged, and in order to secure
(1) the obligations of the Company under the Reimbursement Agreement in the
original principal amount of Six Million One Hundred Eighty Thousand Eight
Hundred Twenty-Two and 00/100 Dollars ($6,180,822), (2) the repayment of amounts
due under the Term Loan Note in the original principal amount of One Million
Five Hundred Thousand Dollars ($1,500,000), (3) the payment of all other sums
required to be paid hereunder, under the Reimbursement Agreement and the Term
Loan Note and the other Financing Documents and (4) the performance and
observance by the Issuer and the Company of all of the covenants, agreements,
representations and warranties herein and in the Reimbursement Agreement, the
Term Loan Note and the other Financing Documents (collectively, the
"Indebtedness"); and in order to secure the Indebtedness; hereby warrant,
assign, mortgage, hypothecate, pledge, grant a Lien on and security interest in,
set over and confirm unto the Bank and its successors and assigns forever, all
of the estate, right, title and interest of the Issuer and the Company in, to
and under any and all of the following described property (the "Mortgaged
Property") whether now owned or held or hereafter acquired:
(A) All right, title and interest of the Issuer and the Company in
and to the Land (as more particularly described in Exhibit A attached hereto);
(B) All right, title and interest of the Issuer and the Company in
and to all buildings, structures, improvements and appurtenances now standing,
or at any time hereafter constructed or placed, upon the Land or any part
thereof, including all right, title and interest of the Issuer and the Company
in and to all building materials and fixtures of every kind and nature
whatsoever on the Land or in any building now or hereafter standing on the Land
or any part thereof, including, without limitation, the Facility;
(C) All right, title and interest of the Issuer and the Company in
and to the Equipment;
(D) All right, title and interest in and to all easements,
royalties, mineral, oil and gas rights and profits, water, water rights and
water stock relating to the Land necessary for the ownership, operation, use and
maintenance of the Facility;
(E) Any and all moneys and securities from time to time held by the
Bank under the terms of the Mortgage and any and all other Property of every
name and nature, from time to time hereinafter by delivery or by writing of any
kind conveyed, mortgaged, pledged, assigned or transferred as and for additional
security hereunder by the Issuer or the Company or by anyone on its behalf or
with its written consent in favor of the Bank;
(F) All leases, contract rights, general intangibles and other
agreements affecting the use, operation or occupancy of all or any portion of
the Project Facility or the other real property described
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above now or hereafter entered into, and the right to receive and apply the
rents, issues and profits of the Land or the Facility or the other real property
described above to the payment of the Indebtedness;
(G) All rights and interest of the Issuer under, in and pursuant to
the Installment Sale Agreement (except the Unassigned Rights), including,
without limiting the generality of the foregoing, the present and continuing
right (1) to make claim for, collect or cause to be collected, receive or cause
to be received all installment purchase payments and other sums of money payable
or receivable by the Issuer under the Installment Sale Agreement (except
payments with respect to the Unassigned Rights), (2) to bring actions and
proceedings thereunder for the enforcement thereof (except actions and
proceedings with respect to the Unassigned Rights), and (3) to do any and all
things which the Issuer is or may become entitled to do under the Installment
Sale Agreement; provided that the assignment made by this clause shall not
impair or diminish any obligation of the Issuer under the Installment Sale
Agreement nor impose any obligation, liability or duty upon the Bank; provided,
further, that the assignment made by this clause shall not give to the Bank the
right to amend the Installment Sale Agreement without the prior written consent
of the Issuer;
(H) All proceeds of and any unearned premiums on any insurance
policies covering the Land, the Facility or the Equipment or the other real
property described above, including, without limitation, the right to receive
and apply the proceeds of any insurance or judgments, or settlements made in
lieu thereof, for damage to any of the foregoing;
(I) All other proceeds of the conversion, whether voluntary or
involuntary, of the Project Facility or any other Property or rights encumbered
or conveyed hereby into cash or liquidated claims, including, without
limitation, all title insurance, hazard insurance, Condemnation and other
awards; and
(J) All extensions, additions, substitutions and accessions with
respect to any of the foregoing.
TO HAVE AND TO HOLD the foregoing Mortgaged Property unto the Bank and
its successors and assigns forever;
SUBJECT, HOWEVER, to the Permitted Encumbrances;
EXCEPTING, THEREFROM, the Unassigned Rights;
PROVIDED, HOWEVER, that, if (A) there shall be no Event of Default
under the Reimbursement Agreement or the Term Loan Note and, (B) the Issuer for
itself and the Company shall perform and observe all the covenants to be
performed and observed hereunder and perform all obligations under the
Reimbursement Agreement, the Term Loan Note and the other Financing Documents to
which they are parties, then upon such final payments and such performance and
observance, this Mortgage and the rights hereby granted shall cease, terminate
and be void; otherwise, this Mortgage to be and remain in full force and effect.
SECTION 2.02. SECURITY AGREEMENT. The Mortgaged Property includes both real and
personal Property and all other rights and interest, whether tangible or
intangible in nature, of the Issuer and the Company in the Mortgaged Property.
This Mortgage shall also constitute a security agreement under the Uniform
Commercial Code of the State so that the Bank shall have and may enforce a
security interest in any or all of the Mortgaged Property, in addition to (but
not in limitation of) the Lien upon that portion
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of the Mortgaged Property constituting part of the realty imposed by the
foregoing provisions hereof, such security interest to attach at the earliest
moment permitted by law and also to include and attach to all additions and
accessions thereto, all substitutions and replacements therefor, all proceeds
thereof, including insurance and Condemnation proceeds, and all contract rights,
rental or lease payments and general intangibles of the Issuer and the Company
obtained in connection with or relating to the Mortgaged Property as well as any
and all items of Property in the foregoing classifications which are hereafter
acquired. The Issuer and the Company shall, at the request of the Bank, deliver
to the Bank, any and all further instruments which the Bank shall require in
order to further secure and perfect the Lien of the Mortgage. Pursuant to the
Uniform Commercial Code of the State, the Issuer and the Company hereby
authorize the Bank to execute and file UCC Financing Statements and continuation
statements without the necessity of the Issuer's or the Company's signatures as
debtors if the Bank shall determine that such are necessary or advisable in
order to perfect its security interest in any of the Mortgaged Property covered
by this Mortgage, and shall pay to the Bank, on demand, any expenses incurred by
the Bank in connection with the preparation, execution and filing of such
statements and any continuation statements that may be filed by the Bank without
the necessity of the Issuer's and Company's signatures as debtors.
SECTION 2.03. INFORMATION UNDER UNIFORM COMMERCIAL CODE. The following
information is stated in order to facilitate filings under the Uniform
Commercial Code of the State: The Secured Party is KeyBank National Association,
having an address of 66 South Pearl Street, Albany, New York 12207-1501. The
Debtors are Spurlock Adhesives, Inc., having an address of 5090 General Mahone
Highway, Waverly, Virginia 23890 and the County of Saratoga Industrial
Development Agency, having an office at Saratoga County Municipal Center, 40
McMaster Street, Ballston Spa, New York 12020.
SECTION 2.04. PERFORMANCE OF COVENANTS. The Issuer and the Company hereby
covenant that they will faithfully observe and perform, or cause to be observed
and performed, at all times any and all covenants, undertakings, stipulations
and provisions on their respective parts to be observed or performed contained
in the Mortgage and the other Financing Documents to be executed by them.
SECTION 2.05. PRIORITY OF LIEN OF MORTGAGE; DISCHARGE OF LIENS AND ENCUMBRANCES.
(A) The Company hereby covenants that, except for Permitted Encumbrances, the
Company and the Issuer are lawfully seized of the estate conveyed hereby and
have the right to grant and convey the Mortgaged Property, and Company will
warrant and defend title to the Mortgaged Property against all claims and
demands, subject to the Permitted Encumbrances.
(B) The Issuer shall not and the Company shall not permit or create
or suffer to be permitted or created any Lien, except for Permitted
Encumbrances, upon the Mortgaged Property or any part thereof.
(C) Notwithstanding the provisions of subsection (B) of this
Section 2.05, the Company may in good faith contest any such Lien, provided that
the Company (1) first shall have notified the Issuer and the Bank of such
contest, (2) is not in default under any of the Financing Documents, (3) such
lien shall be removed within sixty (60) days from the date of such notice by the
Company or secured by the Company's posting a bond in form and substance
satisfactory to the Issuer and the Bank, and (4) demonstrates to the reasonable
satisfaction of the Bank that the failure to discharge any such Lien will not
subject the Project Facility or any part thereof or any funds of the Issuer
applicable to the construction of the Project Facility to loss or forfeiture.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer hereby
represents and warrants that it is duly authorized under the Constitution and
laws of the State, including particularly and without limitation, the Act, to
issue the Bonds, to execute and deliver those of the Financing Documents to
which it is a party and to pledge and encumber the Mortgaged Property in the
manner and to the extent herein set forth; and that all action on its part for
the issuance of the Bonds and the execution and delivery of the Financing
Documents to which it is a party has been duly and effectively taken.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants as follows:
(A) (1) The Company and/or the Issuer have good, marketable and
insurable title to the Land, subject only to Permitted Encumbrances, (2) the
Company and the Issuer will own all fixtures and articles of personal Property
now or hereafter constituting part of the Project Facility, including any
substitutions or replacements thereof, free and clear of all Liens and claims
except for Permitted Encumbrances, and (3) this Mortgage is and will remain a
valid and enforceable Lien on the Project Facility.
(B) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia, is
authorized to conduct business in the State of New York and has the power and
authority to enter into the Mortgage and the other Financing Documents executed
by the Company and to mortgage and pledge the Mortgaged Property in the manner
and to the extent herein set forth, and the Mortgage and the other Financing
Documents executed by the Company constitute valid and enforceable obligations
according to their respective terms.
(C) Neither the execution and delivery of the Mortgage or the other
Financing Documents executed by the Company, the consummation of the
transactions contemplated hereby or thereby nor the fulfillment of or compliance
with the provisions hereof or thereof will conflict with or result in a breach
of any of the terms, conditions or provisions of the Company's Articles of
Incorporation or By-Laws or of any order, judgment, law, restriction, agreement
or instrument to which the Company is a party of by which it is bound, or result
in the creation or imposition of any Lien of any nature (except for Permitted
Encumbrances) upon any of the Property of the Company under the terms or any
such instrument or agreement.
(D) The Project Facility and the operation thereof currently
complies and will continue to comply in all material respects with all
applicable building, zoning and environmental, planning and subdivision laws,
ordinances, permits, licenses, rules and regulations of Governmental Authorities
having jurisdiction over the Project Facility.
(E) The Land is not located in an area identified by the Secretary
of Housing and Urban Development as an area having special flood hazards
pursuant to the terms of the National Flood Insurance Act of 1968 or the Flood
Disaster Protection Act of 1973, as same may have been amended to date.
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(F) The Company has or will obtain at the appropriate time all
necessary certificates, licenses, authorizations, registrations, permits and
approvals necessary for the commencement of the construction on and the
operation of the Project Facility, including, but not limited to, all required
environmental permits, all of which are or will be in full force and effect and
not, to the knowledge of the Company, subject to any revocation, amendment,
release, suspension, forfeiture or the like; the present and contemplated use
and occupancy of the Land does not conflict with or violate any such
certificate, license, authorization, registration, permit or approval; and the
Company has delivered to the Bank, prior to the execution hereof, or will
deliver promptly upon receipt, duplicate originals or officially certified
copies of all such certificates, licenses, authorizations, registrations,
permits and approvals.
SECTION 3.03. PERFORMANCE OF COVENANTS. The Issuer and the Company hereby
covenant that they will faithfully observe and perform at all times any and all
covenants, undertakings, stipulations, warranties and provisions on their
respective parts to be observed or performed contained in the Financing
Documents.
SECTION 3.04. COVENANTS REGARDING REIMBURSEMENT AGREEMENT. The Company covenants
that it will promptly pay, or cause to be paid, any amounts due under the
Reimbursement Agreement.
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ARTICLE IV
MAINTENANCE, MODIFICATION, TAXES AND INSURANCE
SECTION 4.01. MAINTENANCE OF AND MODIFICATIONS TO PROJECT FACILITY BY COMPANY.
The Company shall, (A) keep the Project Facility in good condition and repair
and preserve the same against waste, loss, damage and depreciation, ordinary
wear and tear excepted, (B) make all necessary repairs and replacements to the
Project Facility or any part thereof (whether ordinary or extraordinary,
structural or nonstructural, foreseen or unforeseen), and (C) operate the
Project Facility in a sound and economic manner.
SECTION 4.02. INSURANCE REQUIRED. At all times throughout the term of the
Mortgage, including, without limitation, during any period of construction of
the Facility, the Company shall maintain the insurance described in Article VI
of the Installment Sale Agreement regardless of whether the Installment Sale
Agreement shall be terminated or shall be for any reason not in full force and
effect and shall within ten (10) days of request therefor by the Bank deliver
proof to the Bank that such insurance has been and is being maintained.
SECTION 4.03. TAXES, ASSESSMENTS AND UTILITY CHARGES. (A) The Company shall pay
or cause to be paid, as the same respectively become due, (1) all taxes and
governmental charges of any kind whatsoever which may at any time be lawfully
assessed or levied against or with respect to the Project Facility, (2) all
utility and other charges, including "service charges", incurred or imposed for
the operation, maintenance, use, occupancy, upkeep and improvement of the
Project Facility, and (3) all assessments, charges and rents of any kind
whatsoever lawfully made by any Governmental Authority for public improvements,
provided that, with respect to special assessments or other governmental charges
that may lawfully be paid in installments over a period of years, the Company
shall be obligated under the Mortgage to pay or cause to be paid only such
installments as are required to be paid during the term of the Mortgage and
shall, promptly after the payment of any of the foregoing, forward to the Bank
evidence of such payment.
(B) Notwithstanding the provisions of subsection (A) of this
Section 4.03 but subject, however, to the provisions of Section 2.02(B)(3)(b) of
the PILOT Agreement, the Company may in good faith actively contest any such
taxes, assessments and other charges, provided that the Company shall have paid
such taxes.
SECTION 4.04. PAYMENTS IN LIEU OF TAXES. The Company shall pay all payments in
lieu of taxes due pursuant to Section 6.6 of the Installment Sale Agreement.
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ARTICLE V
SPECIAL COVENANTS
SECTION 5.01. RIGHT OF ACCESS TO THE PROJECT FACILITY. The Issuer and the
Company agree that the Bank or the officers or agents of the Bank shall have the
right at all reasonable times and upon reasonable prior notice to enter upon and
to examine and inspect the Project Facility.
SECTION 5.02. INSPECTION OF PROJECT FACILITY BOOKS. The Issuer and the Company
hereby covenant that all books and documents in their respective possession
relating to the Project Facility and the revenues derived from the Project
Facility shall at all reasonable times be open to inspection by such accountants
or other agents as the Bank may from time to time designate.
SECTION 5.03. AGREEMENT TO PROVIDE INFORMATION. The Company agrees, whenever
requested by the Bank, to provide and certify or cause to be certified such
information concerning the Company, its finances and other topics relating to
the Project Facility as the Bank from time to time reasonably consider necessary
or appropriate, including, but not limited to, such information as to enable the
Bank to make any reports required by law or governmental regulation.
SECTION 5.04. BOOKS OF RECORD AND ACCOUNT; FINANCIAL STATEMENTS; COMPLIANCE
CERTIFICATES. (A) The Company agrees to maintain proper accounts, records and
books in which full and correct entries shall be made of all business and
affairs of the Company.
(B) The Company agrees to provide to the Bank the financial
statements described in and at the times specified in the Reimbursement
Agreement.
SECTION 5.05. COMPLIANCE WITH ORDERS, ORDINANCES, ETC. (A) The Company agrees
that it will, at all times prior to the termination of the Mortgage, promptly
comply with all statutes, codes, laws, acts, ordinances, orders, judgments,
decrees, injunctions, rules, regulations, permits, licenses, authorizations,
directions and requirements of all Governmental Authorities having jurisdiction
over the Company or the Project Facility and all companies or associations
insuring the Mortgaged Property, foreseen or unforeseen, ordinary or
extraordinary, which now or at any time hereafter may be applicable to the
Project Facility or any part thereof, or to any use, manner of use or condition
of the Project Facility or any part thereof.
(B) The Company may in good faith actively contest the validity or
the applicability of any such requirement, provided that the Company (1) first
shall have notified the Issuer and the Bank of such contest, (2) is not in
default under any of the Financing Documents, (3) shall have set aside adequate
reserves for any such requirement, and (4) demonstrates to the reasonable
satisfaction of the Issuer the Bank that noncompliance with such requirement or
requirements will not subject the Lien of the Mortgage as to any part of the
Project Facility, or the value of the Project Facility or any part thereof, to
material loss or forfeiture. Otherwise, the Company shall promptly take such
action with respect thereto as shall be satisfactory to the Issuer and the Bank.
This Section 5.05(B) shall not be deemed to apply to the payment of taxes or
assessments.
SECTION 5.06. RECORDATION OF MORTGAGE, ASSIGNMENT AND INSTALLMENT SALE AGREEMENT
AND FILING OF SECURITY INSTRUMENTS. The Issuer hereby covenants that it
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will cause the Mortgage, the Assignment, and the Installment Sale Agreement, and
all supplements hereto and thereto, together with all other security instruments
and financing statements, to be recorded and filed, as the case may be, in such
manner and in such places as may be required by law in order to perfect the
Liens of the Assignment, the Mortgage and the Installment Sale Agreement. The
Company covenants that it will, upon request of the Bank, cause to be filed all
documents requested by the Bank including, without limitation, continuation
statements under the Uniform Commercial Code of the State, in such manner and in
such places as may be required by law in order to protect and maintain in force
the Liens of the Mortgage, the Installment Sale Agreement and the Assignment.
Without limiting the foregoing, the Issuer and the Company hereby
irrevocably appoint the Bank attorney-in-fact for the Issuer and the Company to
execute, deliver and file such Uniform Commercial Code financing statements and
continuation statements for and on behalf of the Issuer and the Company without
the necessity of the signature of the Issuer and the Company or anyone claiming
under or through the Issuer and the Company, including, but not limited to, the
Company.
SECTION 5.07. [INTENTIONALLY OMITTED].
SECTION 5.08. ENVIRONMENTAL WARRANTIES AND COVENANTS. (A) Warranties. The
Company makes the following representations and warranties to the best of its
knowledge: (i) the Company (or the present owner of the Project Facility, if
different) is in compliance in all respects with all applicable federal, state
and local laws and regulations, including, without limitation, those relating to
toxic and hazardous substances and other environmental matters (the "Laws"),
(ii) no portion of the Project Facility is being used or has been used at any
previous time, for the disposal, storage, treatment, processing or other
handling of any hazardous or toxic substances, in a manner not in compliance
with the Laws, (iii) the soil and any surface water and ground water which are a
part of the Project Facility are free from any solid wastes, toxic or hazardous
substance or contaminant and any discharge of sewage or affluent; and (iv)
neither the federal government nor the State Department of Environmental
Conservation or any other governmental or quasi governmental entity has filed a
lien on the Project Facility, nor are there any governmental, judicial or
administrative actions with respect to environmental matters pending, or the
best of the Company's knowledge, threatened, which involve the Project Facility.
(B) Agreement to Comply. If any environmental contamination is
found at the Project Facility for which any removal or remedial action is
required pursuant to Law, ordinance, order, rule, regulation or governmental
action, the Company agrees that it will at its sole cost and expense take such
removal or remedial action promptly and to the Bank's satisfaction.
(C) Indemnification. The Company agrees to defend, indemnify and
hold harmless the Issuer and its employees, agents, officers and directors, from
and against any claims, actions, demand, penalties, fines, liabilities,
settlements, damages, costs or expenses (including, without limitation, attorney
and consultant fees, investigations and laboratory fees, court costs and
litigation expenses) of whatever kind or nature, known or unknown, contingent or
otherwise arising out of or in any way related to: (i) the past or present
disposal, release or threatened release of any hazardous or toxic substances on
the Project Facility; (ii) any personal injury (including wrongful death or
property damage, real or personal) arising out of or related to such hazardous
or toxic substances; (iii) any lawsuit brought or threatened, settlement reached
or government order given relating to such hazardous or toxic substances; and/or
(iv) any violation of any Law, order, regulation, requirement, or demand of any
government authority, or any policies or requirements of the Issuer, which are
based upon or in any way related to such hazardous or toxic substances.
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(D) Other Sites. The Company knows of no on-site or off-site
locations where hazardous or toxic substances from the operation of the Facility
on the Land have been, except in compliance with the Laws, stored, treated,
recycled or disposed of.
(E) Leases. The Company agrees not to lease or permit the lease of
the Project Facility to a tenant or subtenant whose operations will knowingly
result in contamination of the Project Facility with hazardous or toxic
substances.
(F) Non-Operation by the Bank. The Company acknowledges that any
action taken by the Bank under this Mortgage shall be taken to protect the
Bank's security interest only; the Bank does not intend to be involved in the
operations of the Company.
(G) Compliance Determinations. The Company acknowledges that any
determinations made by the Bank under this Section regarding the compliance with
environmental laws shall be made for the Bank's benefit only and are not
intended to be relied upon by any other party.
(H) Survival of Conditions. The provisions of this Section shall be
in addition to any other obligations and liabilities the Company may have to the
Bank at common law, and shall survive the transactions contemplated herein.
(I) Definitions. The term "hazardous substance" shall include,
without limit, any substance or material defined in 42 U.S.C. Section 9601 (as
the same may be amended from time to time), the Hazardous Materials
Transportation Act (as amended from time to time), and the New York
Environmental Conservation Law or the Resource Conservation and Recovery Act (as
each may be amended from time to time) and in any regulations adopted or
publications promulgated pursuant to any of the foregoing.
(J) Further Indemnification. The Company further agrees to
indemnify and hold the Issuer harmless from and against any loss, liability,
damage, cost or expense (including reasonable attorneys' fees) incurred by the
Issuer resulting from (i) the Company's failure to comply with any order,
decree, settlement, judgment or verdict (whether arising as a result of the
manufacture, holding, handling, transportation, spilling, leaking or dumping of
toxic or hazardous wastes or waste products prior to, or during, the Company's
ownership of the Land), (ii) the Company's failure to comply with any such
statute, rule or regulation, or (iii) the Company's failure to conduct an
appropriate inquiry into previous uses and ownership of any portion of the Land,
as described in the Superfund Amendment and Reauthorization Act of 1986.
(K) Sums Secured by Mortgage. If the Bank incurs any of the costs
or the sums that the Company has agreed to indemnify and hold the Bank harmless
against in accordance with this Section 5.08, then those costs or sums shall be
paid immediately by the Company with interest at the highest interest rate
permitted by law, and will be deemed secured by this Mortgage.
SECTION 5.09. MORTGAGE TAX. The Company agrees that in the event that mortgage
recording tax is required for any reason whatsoever, the Company will pay said
tax on demand to the Bank; and if the Company fails to pay said tax the Bank may
pay same; the amounts paid by the Bank, plus interest at the maximum rate
allowable by law from the date of payment, shall be deemed to be secured by this
Mortgage and shall be collected in like manner as the principal monies.
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SECTION 5.10. FEES AND EXPENSES OF THE BANK. All sums paid or incurred by the
Bank or the expenses (including reasonable attorneys' fees) of enforcing,
defending or upholding the lien of this Mortgage, regardless of whether any
action or proceeding has been commenced, but including any action to foreclose
the Mortgage or to collect the debt secured thereby, shall be paid by the
Company together with interest thereon at the rate specified in the
Reimbursement Agreement or the maximum rate the law allows, whichever is less,
such sums and the interest thereon to be a lien on the Mortgaged Property, prior
to any right, or title to, interest in or claim upon said premises attaching or
accruing subsequent to the lien of the Mortgage and shall be secured by the
Mortgage. In addition to and not in limitation of the foregoing, in any action
or proceeding to foreclose the Mortgage, or to recover or collect the debt
secured thereby, the provisions of law respecting the recovery of costs,
disbursements and allowances shall also apply. The expenses of pursuing,
searching for, retaking, receiving, holding, storing, safe-guarding, and
environmental testing and cleanup, insuring, accounting for, advertising,
preparing for sale or lease, selling, leasing and the like, plus attorneys'
fees, fees for certified public accountants, fees for auctioneers, fees for
brokers and/or appraisers, fees for security guards, fees for environmental
auditors and engineers, fees for hazard insurance premiums, or any other costs
or disbursements whatsoever incurred by or contracted for by the Bank in
connection with the disposition of the Mortgaged Property (including any of the
foregoing incurred or contracted for by the Bank in connection with any
bankruptcy or insolvency proceedings involving the Company) shall all be
chargeable to the Company and shall be secured by the Mortgage, and said Company
will also be responsible for any deficiency.
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT DEFINED. The following shall be "Events of
Default" under the Mortgage and the terms "Event of Default" or "default" shall
mean, whenever they are used in the Mortgage, any one or more of the following
events:
(A) default by the Issuer in the due and punctual payment of
principal of, premium, if any, and interest on the Bonds;
(B) a default by the Company in the due and punctual payment of any
sum due for borrowed money under the Installment Sale Agreement, the
Reimbursement Agreement or the Term Loan Note;
(C) a default in the performance or observance of any other of the
covenants, agreements or conditions on the part of the Issuer or the Company in
any Financing Document to be performed or observed and the continuance thereof
for a period of thirty (30) days after written notice is given by the Trustee
and/or the Bank to the Issuer and the Company, or, if such covenant, condition
or agreement is capable of cure but cannot be cured within such thirty (30) day
period, the failure of the Company to commence to cure within such thirty (30)
day period and thereafter diligently proceed with all action required to
complete said cure within ninety (90) days of such written notice unless such
time to cure is otherwise extended by the Trustee and/or the Bank in writing;
(D) the occurrence of an "Event of Default" under any of the
Financing Documents;
(E) any representation or warranty made by the Issuer or the
Company herein or in any Financing Document shall have been false in any
material manner at the time it was made;
(F) the Company shall generally not pay its debts as such debts
become due or admits its inability to pay its debts as they become due;
(G) the Company shall conceal, remove or permit to be concealed or
removed any part of its Property, with intent to hinder, delay or defraud its
creditors, or any one of them, or shall make or suffer a transfer of any of its
Property which is fraudulent under any bankruptcy, fraudulent conveyance or
similar law; or make any transfer of its Property to or for the benefit of a
creditor at a time when other creditors similarly situated have not been paid;
or shall suffer or permit, while insolvent, any creditor to obtain a Lien upon
any of its Property through legal proceedings or distraint which is not vacated
within sixty (60) days from the date thereof;
(H) the Mortgaged Property, or any substantial part thereof, is in
any manner, whether voluntarily or involuntarily, encumbered, assigned, leased,
subleased, sold, transferred or conveyed, or the Issuer or Company threatens to
encumber, assign, lease, sublease, sell, transfer or convey, the Mortgaged
Property, or any part thereof, to any person without the prior written consent
of the Bank;
(I) (1) the filing by the Company of a voluntary petition under
Title 11 of the United States Code or any other federal or state bankruptcy
statute; (2) the failure by the Company within sixty (60) days to lift any
execution, garnishment or attachment of such consequence as will impair the
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Company's ability to carry out its obligations hereunder; (3) the commencement
of a case under Title 11 of the United States Code against the Company as the
debtor or commencement under any other federal or state bankruptcy statute of a
case, action or proceeding against the Company and continuation of such case,
action or proceeding without dismissal for a period of sixty (60) days; (4) the
entry of an order for relief by a court of competent jurisdiction under Title 11
of the United States Code or any other federal or state bankruptcy statute with
respect to the debts of the Company; or (5) in connection with any insolvency or
bankruptcy case, action or proceeding, appointment by final order, judgment or
decree of a court of competent jurisdiction of a receiver or trustee of the
whole or a substantial portion of the Property of the Company unless such order,
judgment or decree is vacated, dismissed or dissolved within sixty (60) days of
such appointment;
(J) final judgment for the payment of money in excess of $100,000
shall be rendered against the Company and the Company shall not discharge the
same or cause it to be bonded or discharged within sixty (60) days from the
entry thereof, or shall not appeal therefrom or from the order, decree or
process upon which or pursuant to which said judgment was granted, based or
entered and secure a stay of execution pending such appeal; and
(L) the imposition of a Lien on the Project Facility other than a
Lien being contested as provided in Section 8.8(B) of the Installment Sale
Agreement or a Permitted Encumbrance.
Notwithstanding the above provisions of this Section 6.01, if by reason
of force majeure (as hereinafter defined) the Issuer or the Company shall be
unable in whole or in part to carry out its obligations hereunder and if such
party shall give notice and full particulars of such force majeure in writing to
the Bank within a reasonable time after the occurrence of the event or cause
relied upon, the obligations of such party hereunder, so far as they are
affected by such force majeure, shall be suspended during the continuance of the
inability, which shall include a reasonable time for the removal of the effect
thereof. The suspension of such obligations for such period pursuant to this
paragraphs shall not be deemed an Event of Default under this Section 6.01.
Notwithstanding anything to the contrary in this paragraph, an event of force
majeure shall not excuse, delay or in any way diminish the obligations of the
Company to make the payments required by the Reimbursement Agreement and the
Term Loan Note and by Sections 4.5, 5.3, 6.6, 8.4 and 8.14 of the Installment
Sale Agreement to comply with the provisions of Sections 2.2(E), 4.5, 6.6, 8.2,
8.4, 8.5, 8.7(C) and 8.14 of the Installment Sale Agreement, to comply with
Sections 4.03, 5.03, 5.04 and 5.08 hereof, to provide the indemnity required by
Sections 8.2, 8.4, 8.12, 8.13 and 8.14 of the Installment Sale Agreement and to
obtain and continue in full force and effect the insurance required by Sections
6.3 and 6.4 of the Installment Sale Agreement and Section 4.02 hereof. The term
"force majeure" as used herein shall include, without limitation, acts of God,
strikes, lockouts or other industrial disturbances, acts of public enemies,
orders of any kind of any Governmental Authority or any civil or military
authority, insurrections, riots, epidemics, landslides, earthquakes, fire,
hurricanes, storms, floods, washouts, droughts, restraint of government and
people, civil disturbances, explosions, breakage or accident to machinery,
transmission pipes or canals, entire failure of utilities or any other cause or
event not reasonably within the control of the party claiming such inability. It
is agreed that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the party having
difficulty, and the party having difficulty shall not be required to settle any
strike, lockout or other industrial disturbances by acceding to the demands of
the opposing party or parties.
SECTION 6.02. ACCELERATION; ANNULMENT OF ACCELERATION. Upon the occurrence of an
Event of Default hereunder, the Bank may, by notice in writing delivered to the
Company and the Issuer,
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declare the whole of the Indebtedness immediately due and payable, whereupon the
same shall become and be immediately due and payable, anything in the Mortgage
or any other Financing Documents to the contrary notwithstanding. In such event,
there shall be due and payable the total amount of Indebtedness plus all accrued
but unpaid interest thereon and all interest which will accrue thereon to the
date of payment.
SECTION 6.03. ENFORCEMENT OF REMEDIES. (A) Upon the occurrence and continuance
of any Event of Default, the Bank may proceed forthwith to protect and enforce
its rights under the Mortgage, and the other Financing Documents by such suits,
actions or proceedings as it shall deem appropriate, including, without
limitation, an action to foreclose the Lien of the Mortgage, in which case the
Mortgaged Property or any interest therein may be sold for cash or credit in one
or more interests and in any order or manner;
(B) The Bank may sue for, enforce payment of and receive any
amounts due or becoming due from the Company for principal, premium, if any,
interest or otherwise under any of the provisions of the Mortgage or the other
Financing Documents, without prejudice to any other right or remedy of the Bank.
(C) Regardless of the happening of an Event of Default, the Bank
may institute and maintain such suits and proceedings as it may be advised shall
be necessary or expedient to prevent any impairment of the security under the
Mortgage by any acts which may be unlawful or in violation of the Mortgage, or
to preserve or protect the interests of the Bank.
(D) The Bank shall have the right to appear in and defend any
action or proceeding brought with respect to the Mortgaged Property and to bring
any action or proceeding, in the name and on behalf of the Issuer or the
Company, which the Bank, in its discretion, determines should be brought to
protect their interests in the Mortgaged Property.
(E) Upon the occurrence and continuance of any Event of Default
hereunder, the Company, upon demand of the Bank, shall forthwith surrender the
possession of, and it shall be lawful for the Bank, to take possession of, all
or any part of the Mortgaged Property, together with the books, papers and
accounts of the Company pertaining thereto, and to hold, operate and manage the
same, and from time to time to make all needed repairs and improvements as Bank
shall deem wise; and the Bank may sell the Mortgaged Property or any part
thereof, or lease the Mortgaged Property or any part thereof in the name and for
the account of the Issuer or the Company, collect, receive and sequester the
rents, revenues, earnings, income, products and profits therefrom, and pay out
of the same all proper costs and expenses of taking, holding, leasing, selling
and managing the Mortgaged Property, including reasonable compensation to the
Bank and its agents and counsel, and any charges of the Bank hereunder, and any
taxes and other charges prior to the Lien of the Mortgage which the Bank may
deem it wise to pay, and all expenses of such repairs and improvements, and
apply the remainder of the moneys so received in accordance with the provisions
of Section 6.05 hereof.
Whenever all that is due under the Reimbursement Agreement, the Term
Loan Note and the other Financing Documents shall have been paid and all
defaults made good, the Bank shall surrender possession to the Issuer and the
Company; the same right of entry, however, to exist upon any subsequent Event of
Default.
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(F) Notwithstanding anything herein contained to the contrary, the
Issuer or the Company or anyone claiming through or under either of them (1)
will not (a) at any time insist upon, or plead, or in any manner whatever claim
or take any benefit or advantage of any stay or extension or moratorium law, any
exemption from execution or sale of the Mortgaged Property or any part thereof,
wherever enacted, now or at any time hereafter in force, which may affect the
covenants and terms of performance of the Mortgage, (b) claim, take or insist
upon any benefit or advantage of any law now or hereafter in force providing for
the valuation or appraisal of the Mortgaged Property, or any part thereof, prior
to any sale or sales thereof which may be made pursuant to any provision hereof,
or pursuant to the decree, judgment or order of any court of competent
jurisdiction, or (c) after any such sale or sales, claim or exercise any right
under any statute heretofore or hereafter enacted to redeem the Property so sold
or any part thereof, (2) hereby expressly waive all benefit or advantage of any
such law or laws, and (3) covenant not to hinder, delay or impede the execution
of any power herein granted or delegated to the Bank, but to suffer and permit
the execution of every power as though no such law or laws had been made or
enacted. The Company and the Issuer, for themselves and all who may claim under
them, waive, to the extent that they lawfully may, all right to have the
Mortgaged Property marshalled upon any foreclosure hereof.
SECTION 6.04. APPOINTMENT OF RECEIVERS. Upon the occurrence of an Event of
Default hereunder and upon the filing of a suit or commencement of other
judicial proceedings to enforce the rights of the Bank under the Mortgage, the
Bank shall be entitled, as a matter of right, without notice and without regard
to the adequacy of any security for the debt secured hereby, to the appointment
of a receiver or receivers of the Mortgaged Property and of the revenues and
receipts thereof, pending the conclusion of such proceedings and any appeal
therefrom, with such powers as the court making such appointment shall confer.
The receiver shall be entitled to occupational rent from an owner/occupant and
may upon non-payment of said rent evict the owner/occupant.
SECTION 6.05. APPLICATION OF MONEYS. The Net Proceeds received by the Bank or
pursuant to any right given or action taken under the provisions of this Article
VI shall, during the continuance of an event of default hereunder, be applied
(A) first, to the payment of the fees, costs and expenses of the Bank, including
reasonable attorney's fees; (B) second, to the payment of all installments of
interest then due and payable under the Reimbursement Agreement and the Term
Loan Note; (C) third, to the payment of unpaid principal of and premium, if any,
under the Reimbursement Agreement and the Term Loan Note, whether or not then
due and payable; (D) fourth, to the payment of any sum or charge (other than
principal or interest) evidenced or secured by the Mortgage and all interest
payable thereon; (E) fifth, to the payment of interest on principal amounts then
due and payable under any other Financing Document; and (F) sixth, the balance
thereof to be applied in reduction of principal amounts then due and payable
under or any other Financing Document.
SECTION 6.06. REMEDIES CUMULATIVE. No remedy herein conferred upon or reserved
to the Trustee and the Bank is intended to be exclusive of any other available
remedy, but each and every such remedy shall be cumulative and in addition to
every other remedy given under the Mortgage or under any other Financing
Document now or hereafter existing at law or in equity. No delay or omission to
exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Bank to exercise any remedy reserved to
either of them in this Article VI, it shall not be necessary to give any notice,
other than such notice as may be expressly required in the Mortgage.
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SECTION 6.07. TERMINATION OF PROCEEDINGS. In case any proceeding taken by the
Bank on account of any Event of Default shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Trustee,
then the Issuer, the Bank and the Company shall be restored to their former
positions and rights hereunder, and all rights, remedies and powers of the Bank
shall continue as if no such proceeding had been taken.
SECTION 6.08. WAIVER AND NON-WAIVER OF EVENT OF DEFAULT. (A) The Bank may, in
its discretion, agree to waive, in writing, any Event of Default hereunder and
its consequences and annul any acceleration in accordance with Section 6.02
hereof. No such waiver shall extend to or affect any other existing or any
subsequent Event of Default.
(B) The failure of the Bank to insist upon strict performance of
any term hereof shall not be deemed to be a waiver of any term of the Mortgage.
The Company shall not be relieved of the Company's obligations hereunder by
reason of (1) failure of the Bank to comply with any request of the Company to
take any action to foreclose the Mortgage or otherwise enforce any of the
provisions hereof, (2) the release, regardless of consideration, of the whole or
any part of the Mortgaged Property, or (3) any agreement or stipulation by the
Bank extending the time of payment or otherwise modifying or supplementing the
terms of the Mortgage, the Reimbursement Agreement or any of the other Financing
Documents. The Bank may resort for the payment of the Indebtedness to any other
security held by the Bank pursuant to the Financing Documents in such order and
manner as the Bank, in its discretion, may elect. The Bank may take action to
recover the Indebtedness, or any portion thereof, or to enforce any covenant
hereof without prejudice to the right of the Trustee thereafter to foreclose the
Mortgage. The rights of the Bank under the Mortgage shall be separate, distinct
and cumulative and none shall be given effect to the exclusion of the others. No
act of the Bank shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. No waiver of any right
of the Bank shall be effective unless it is in a writing signed by an officer of
the Bank.
SECTION 6.09. REPAYMENT AND SECURING OF EXPENSES PAID BY THE BANK. In the event
the Bank shall pay any premiums on any policies of insurance required to be
maintained or procured by Section 4.02 hereof, or in the event the Bank shall
expend any funds for the payment of any unpaid taxes or assessments upon the
Mortgaged Property, or expend any funds in payment of any unpaid installments
under any applicable agreement for payments in lieu of taxes with any Taxing
Entity or pay or perform any other obligation of either the Issuer or the
Company under any of the Financing Documents, then in any such event such
payment shall be deemed to be secured by the Mortgage and shall be payable to
the Bank in the manner provided and with interest as provided herein, or if not
so provided therein, shall be payable on demand as an additional payment under
the other Financing Documents with interest at the rate specified in the
Reimbursement Agreement or the maximum amount permitted by law, whichever is
less.
SECTION 6.10. OTHER ACTIONS BY THE BANK. Regardless of the happening of an Event
of Default, the Bank may institute and maintain such suits and proceedings as
such shall deem necessary or expedient to prevent any impairment of the security
under the Mortgage by any acts which may be unlawful or in violation of the
Mortgage, or to preserve or protect the interests of the Bank.
SECTION 6.11. REPAYMENT AND SECURING OF COLLECTION COSTS INCURRED BY BANK. In
the event this Mortgage, any other Financing Documents, or any or all of the
foregoing are placed in the hands of an attorney (A) for collection of any sum
payable hereunder or thereunder, (B) for the foreclosure of this Mortgage or (C)
for the enforcement of any of the terms, conditions and obligations of
25
<PAGE>
this Mortgage or the Reimbursement Agreement or the Term Loan Note, the Company
agrees to pay all costs of collection (including reasonable counsel fees and
expenses) incurred by the Bank, together with interest thereon at the rate
specified in the Reimbursement Agreement or the maximum permitted by law,
whichever is less. All such costs as incurred shall be deemed to be secured by
this Mortgage and collectable out of the proceeds of this Mortgage in any manner
permitted by law or by this Mortgage, and the Company shall be liable for any
deficiency.
26
<PAGE>
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. LIMITATION OF RIGHTS. With the exception of rights herein
expressly conferred, nothing expressed or mentioned in or to be implied from the
Mortgage or the other Financing Documents is intended or shall be construed to
give to any Person, other than the parties hereto or thereto, and their
successors and assigns, any right, remedy or claim under or with respect to the
Mortgage or any covenants, conditions and provisions herein contained. The
Mortgage and all of the covenants, conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the parties hereto and their
successors and assigns as herein provided.
SECTION 7.02. LAWS. If any law or ordinance is enacted or adopted which imposes
a tax, either directly or indirectly, on the Mortgage, the Company will pay, or
cause to be paid, such tax, with interest and penalties thereon, if any.
SECTION 7.03. REVENUE STAMPS. If at any time any Governmental Authority shall
require revenue or other stamps to be affixed to the Mortgage, the Company will
pay, or cause to be paid, the same, with interest and penalties thereon, if any.
SECTION 7.04. FURTHER ASSURANCE. The Issuer and the Company will execute and
procure for the Bank and cause to be done any further conveyances, instruments
or acts of further assurance as the Bank shall reasonably require to perfect the
security of the Bank in the Mortgaged Property intended now or hereafter to be
covered by the Mortgage or otherwise for carrying out the intention of
facilitating the performance of the terms of the Mortgage.
SECTION 7.05. SATISFACTION OF MORTGAGE. Upon the payment in full of all of the
amounts due under the Reimbursement Agreement and the Term Loan Note, if (A)
there is no Event of Default under the Reimbursement Agreement and, (B) the
Issuer and the Company have performed and observed all the covenants to be
performed and observed hereunder and have performed all obligations under the
Installment Sale Agreement, the Reimbursement Agreement and the other Financing
Documents to which they are parties, the Bank by acceptance of the Mortgage,
agrees to execute and deliver, (after the expiration of the preference period
under federal bankruptcy law and any similar period under any similar statute
affecting creditors' rights) any and all instruments necessary and/or
appropriate to discharge the Lien of the Mortgage of record and to terminate UCC
Financing Statements.
SECTION 7.06. SEVERABILITY. (A) If any provision of the Mortgage shall, for any
reason, be held or shall, in fact, be inoperative or unenforceable in any
particular case, such circumstance shall not render the provision in question
inoperative or unenforceable in any other case or circumstance or render any
other provision herein contained inoperative or unenforceable.
(B) The invalidity of any one or more phrases, sentences, clauses,
paragraphs or sections in the Mortgage shall not affect the remaining portions
of the Mortgage or any part thereof.
SECTION 7.07. COVENANTS RUN WITH THE LAND. All of the grants, covenants, terms,
provisions and conditions herein shall run with the land and shall apply to,
bind and inure to the benefit of the parties hereto and their respective
successors and assigns.
27
<PAGE>
SECTION 7.08. NOTICES. All notices, certificates and other communications
hereunder shall be in writing and shall be sufficiently given and shall be
deemed given when (A) sent to the applicable address stated below by registered
or certified mail, return receipt requested, postage prepaid, or by such other
means (including, without limitation, personal and overnight delivery) as shall
provide the sender with documentary evidence of such delivery, or (B) delivery
is refused by the addressee, as evidenced by the affidavit of the Person who
attempted to effect such delivery. The addresses to which notices, certificates
and other communications hereunder shall be delivered are as follows:
IF TO THE COMPANY:
Spurlock Adhesives, Inc.
5090 General Mahone Highway
Waverly, Virginia 23890
Attention: Phillip S. Sumpter, Executive Vice President
WITH A COPY TO:
Williams Mullen Christian & Dobbins, P.C.
1021 East Cary Street
Richmond, Virginia 23219
Attention: David L. Dallas, Jr., Esq.
IF TO THE ISSUER:
County of Saratoga Industrial Development Agency
Saratoga County Municipal Center
40 McMaster Street
Ballston Spa, New York 12020
Attention: Administrator
WITH A COPY TO:
Michael J. Toohey, Esq.
Snyder, Kiley, Toohey & Corbett, LLP
160 West Avenue
P.O. Box 4367
Saratoga Springs, New York 12866
IF TO THE BANK:
KeyBank National Association
66 South Pearl Street
Albany, New York 12207-1501
Attention: Corporate Banking Division
28
<PAGE>
WITH A COPY TO:
KeyBank National Association
66 South Pearl Street
Albany, New York 12207
Attention: International Division, Letter of Credit Department
and
Crane Kelley Greene & Parente
90 State Street
Albany, New York 12207
Attention: Kevin J. Kelley, Esq.
The Issuer, the Company and the Bank may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates and
other communications shall be sent.
SECTION 7.09. COUNTERPARTS. The Mortgage may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 7.10. APPLICABLE LAW. The Mortgage shall be governed exclusively by the
applicable laws of the State.
SECTION 7.11. TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING. The table
of contents and the headings of the several articles and sections of the
Mortgage have been prepared for convenience of reference only and shall not
control, affect the meaning of or be taken as an interpretation of any provision
of the Mortgage.
SECTION 7.12. AMENDMENT, ETC. Neither the Mortgage nor any provisions hereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
SECTION 7.13. USURY. Notwithstanding anything to the contrary contained herein,
in no event shall the total of all charges payable hereunder or under the
Reimbursement Agreement or under the Term Loan Note or under any of the other
Financing Documents which are or could be held to be in the nature of interest
exceed the maximum rate permitted to be charged under applicable law. Should the
Bank receive any payment which is or would be in excess of that permitted to be
charged under any applicable law, such payment shall have been, and shall be
deemed to have been, made in error and shall automatically be applied to reduce
the Indebtedness.
SECTION 7.14. NO RECOURSE; SPECIAL OBLIGATION. (A) The obligations and
agreements of the Issuer contained herein and in the other Financing Documents
and in any other instrument or document executed in connection herewith or
therewith, and any other instrument or document supplemental hereto or thereto,
shall be deemed the obligations and agreements of the Issuer, and not of any
member, officer, agent (other than the Company) or employee of the Issuer in his
individual capacity, and the members, officers, agents (other than the Company)
and employees of the Issuer shall not be liable personally hereon or thereon or
be subject to any personal liability or accountability based
29
<PAGE>
upon or in respect hereof or thereof or of any transaction contemplated hereby
or thereby. The obligations and agreements of the Issuer contained herein and
therein shall not constitute or give rise to an obligation of the State or of
Saratoga County, New York, and neither the State nor Saratoga County, New York
shall be liable hereon or thereon, and further, such obligations and agreements
shall not constitute or give rise to a general obligation of the Issuer, but
rather shall constitute limited, special obligations of the Issuer payable
solely from the revenues of the Issuer derived and to be derived from the sale
or other disposition of the Project Facility (except for revenues derived by the
Issuer with respect to the Unassigned Rights) and the other security pledged to
the payment of the Bonds. The limitations on the obligations of the Issuer
contained in this Section 7.14 by virtue of any lack of assurance required by
Paragraph (B) hereof shall not be deemed to prevent the occurrence and full
force and effect of any Event of Default pursuant to Section 6.01 hereof.
(B) No order or decree of specific performance with respect to any
of the obligations of the Issuer hereunder shall be sought or enforced against
the Issuer unless (1) the party seeking such order or decree shall first have
requested the Issuer in writing to take the action sought in such order or
decree of specific performance, and ten (10) days shall have elapsed from the
date of receipt of such request, and the Issuer shall have refused to comply
with such request (or if compliance therewith would reasonably be expected to
take longer than ten (10) days shall have failed to institute and diligently
pursue action to cause compliance with such request) or failed to respond within
such notice period, (2) if the Issuer refuses to comply with such request and
the Issuer's refusal to comply is based on its reasonable expectation that it
will incur fees and expenses, the party seeking such order or decree shall have
placed in an account with the Issuer an amount or undertaking sufficient to
cover such reasonable fees and expenses, and (3) if the Issuer refuses to comply
with such request and the Issuer's refusal to comply is based on its reasonable
expectation that it or any of its members, officers, agents (other than the
Company) or employees shall be subject to potential liability, the party seeking
such order or decree shall (a) agree to indemnify and hold harmless the Issuer
and its members, officers, agents (other than the Company) and employees against
any liability incurred as a result of its compliance with such demand, and (b)
if requested by the Issuer shall furnish to the Issuer satisfactory security to
protect the Issuer and its members, officers, agents (other than the Company)
and employees against all liability expected to be incurred as a result of
compliance with such request.
SECTION 7.15. WAIVER OF NOTICE. Whenever in the Mortgage the giving of notice by
mail or otherwise is required, the giving of such notice may be waived in
writing by the Person or Persons entitled to receive such notice.
SECTION 7.16. LIEN LAW. To the extent permitted by law, the Issuer and the
Company will receive the advances to be made hereunder subject to the trust
provisions of Section 13 of the Lien Law of the State , and will hold the right
to receive such advances as a trust fund to be applied first for the purpose of
paying the cost of constructing the improvements to the Land and will apply the
same first to such payment before using any part of the same for any other
purpose, but nothing herein shall be construed to impose upon the Bank any
obligation to see to the proper allocation of such advances by the Issuer or the
Company.
SECTION 7.17. PROVISIONS REGARDING MAXIMUM INDEBTEDNESS, REDUCTION OF SECURED
AMOUNT AND TREATMENT AND APPLICATION OF PAYMENTS.
(A) Maximum Amount of Indebtedness. Notwithstanding anything to the
contrary in this Mortgage, the maximum aggregate principal amount of
indebtedness that is, or under any contingency
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<PAGE>
may be, secured by this Mortgage either at execution or at any time thereafter
(the "Secured Amount"), is $2,000,000, plus amounts that the Bank expends upon
an Event of Default under this Mortgage to the extent that any such amounts
shall constitute payment of (i) taxes; (ii) premiums on insurance policies
covering the Mortgaged Property or any part thereof; (iii) expenses incurred
defending or in upholding the lien of this Mortgage, including the expenses of
any litigation to prosecute or defend the rights and lien created by this
Mortgage; or (iv) any amount, cost or charge to which the Bank becomes
subrogated, upon payment, whether under recognized principles of law or equity,
or under express statutory authority; then, and in each such event, such amounts
or costs, together with interest thereon, shall be added to the indebtedness
secured hereby and shall be secured by this Mortgage.
(B) Reduction of Secured Amount. The Secured Amount shall be
reduced only by the last and final sums that the Company repays with respect to
the Indebtedness.
(C) Application of Payments. So long as the balance of the
Indebtedness exceeds the Secured Amount, any payments of the Indebtedness by the
Company shall not be deemed to be applied against, or to reduce, the portion of
the Indebtedness secured by this Mortgage.
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<PAGE>
IN WITNESS WHEREOF, the Mortgage has been duly executed as of the date
first above written.
COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ Floyd H. Rourke
---------------------------------
Floyd H. Rourke, Chairman
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
---------------------------------
Name: Phillip S. Sumpter
-------------------------------
Title: Executive Vice President
------------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On the 7th day of October, 1997, before me personally came FLOYD H.
ROURKE, to me known, who being by me duly sworn, did depose and say that he
resides in Northumberland, New York, that he is the CHAIRMAN of the COUNTY OF
SARATOGA INDUSTRIAL DEVELOPMENT AGENCY, the public benefit corporation of the
State of New York described in and which executed the foregoing instrument, and
that he signed his name thereto by authority of said public benefit corporation.
/s/ Theresa C. Priest
-------------------------------------
Notary Public
THERESA C. PRIEST
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On this 9th day of October, 1997, before me personally came Phillip S.
Sumpter, to me known, who being by me duly sworn, did depose and sat that he
resides in Waverly VA, that he is the Exec V.P. of SPURLOCK ADHESIVES, INC., the
corporation described in and which executed the foregoing instrument, and that
he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Theresa C. Priest
-------------------------------------
Notary Public
THERESA C. PRIEST
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
<PAGE>
EXHIBIT "A"
DESCRIPTION OF LAND
THAT TRACT OR PARCEL OF LAND, situate in the Town of Moreau, County of
Saratoga and State of New York more fully described as Lot Number 3 as shown on
subdivision maps of Moreau Industrial Park prepared by The Saratoga Associates
and filed in the Saratoga County Clerk's Office on March 18, 1992 in drawer
#M-348 A-Z and AA-DD; and as modified by revised subdivision maps of Moreau
Industrial Park prepared by The Saratoga Associates and filed in the Saratoga
County Clerk's Office on February 16, 1994 in drawer #M-398, A-S and being
further bounded and described as follows:
BEGINNING at a point marked with a capped iron rod found at the point
of intersection of the easterly line of Farnan Road with the common division
line of Lot No. 4 to the north and Lot No. 3 to the south as shown on said map;
thence from said point of beginning along said common division line the
following five (5) courses and distances:
1) North 90 deg. 00 min. 00 sec. East, 347.86 feet to a point marked with
a capped iron rod found;
2) South 00 deg. 00 min. 00 sec. West, 32.63 feet to a point marked with a
capped iron rod found;
3) North 90 deg. 00 min. 00 sec. East, 191.52 feet to a point marked with
a capped iron rod found;
4) North 00 deg. 00 min. 00 sec. East, 32.63 feet to a point marked with a
capped iron rod found;
5) North 90 deg. 00 min. 00 sec. East, 680.17 feet to the point of
intersection of the westerly line of Lot No. 5 with the common division line of
Lot No. 4 to the north and Lot No. 3 to the south as shown on said map; thence
along said westerly line, South 16 deg. 10 min. 56 sec. West, 102.04 feet to a
point in the northwesterly line of lands of The State of New York as shown on
said map, said point also being at the 145 foot elevation; thence along said
northwesterly and the westerly line of lands of The State of New York as it
winds and turns along the 145 foot elevation in a southerly direction 712 +/-
feet to the point of intersection of said westerly line of lands of The State of
New York with the common division line of Lot No. 3 to the north and Lot No. 2
to the south as shown on said map, the last course having a tie-line of South 33
deg. 02 min. 30 sec. West, 699.47 feet; thence along said common division line,
South 90 deg. 00 min. 00 sec. West, 865.65 feet to a point marked with a capped
iron rod found at the point of intersection of the easterly line of Farnan Road
with the common division line of Lot No. 3 to the north and Lot No. 2 to the
south as shown on said map; thence along said easterly line in a northerly
direction the following four (4) courses and distances:
1) North 00 deg. 00 min. 00 sec. West, 116.35 feet to a point of
curvature;
2) Along a curve to the right an arc length of 464.05 feet to a point of
tangency, said curve having a radius of 2,773.32 feet and a delta angle
of 09 deg. 35 min. 13 sec.;
3) North 09 deg. 35 min. 13 sec. East, 50.00 feet to a point of curvature;
4) Along a curve to the left an arc length of 57.49 feet to the point or
place of beginning, said curve having a radius of 2,294.42 feet and a delta
angle of 01 deg. 26 min. 08 sec., said parcel containing 16.37 +/- acres of land
and being Lot No. 3 as shown on said map.
<PAGE>
EXHIBIT "B"
DESCRIPTION OF EQUIPMENT
All articles of personal property and all appurtenances, wherever
located, now or hereafter acquired with the proceeds of the Bonds or any payment
made by the Company pursuant to Section 4.5 of the Installment Sale Agreement
and all articles of personal property and all appurtenances now or hereinafter
owned by the Issuer or the Company and now or hereafter attached to, contained
in or used in connection with the Project Facility or placed on any part
thereof, though not attached thereto, including, but not limited to, all
equipment, materials, furnishings, machinery, pipes, screens, fixtures, heating,
lighting, plumbing, ventilation, air conditioning, compacting and elevator
plants, drapes, blinds and accessories, sprinkler systems and other fire
prevention and extinguishing apparatus and materials; and together with any and
all products of any of the above, all substitutions, replacements, additions or
accessions therefor, and any and all cash proceeds or non-cash proceeds realized
from the sale, transfer or conversion of any of the above. The references to
"proceeds" shall not be deemed to be an authorization by the Trustee of the
disposition of any of the foregoing.
B-1
Exhibit 10.36
SECURITY AGREEMENT
------------------
Date: As of October 1, 1997
The undersigned, SPURLOCK ADHESIVES, INC., a Virginia corporation with
an office for the transaction of business at 5090 General Mahone Highway,
Waverly, Virginia 23890 (herein referred to as "Debtor"), hereby agrees in favor
of KEYBANK NATIONAL ASSOCIATION, a national banking association with an office
for the transaction of business at 66 South Pearl Street, Albany, New York 12207
(herein referred to as "Secured Party"), as follows:
1. THE INDEBTEDNESS. In consideration of (i) the issuance by the
Secured Party of a letter of credit in the amount of $6,180,822 (the "Letter of
Credit") in favor of Star Bank, N.A., as Trustee (the "Trustee") and the
obligations of Debtor to make payments to the Secured Party as outlined in a
Letter of Credit Reimbursement Agreement dated as of October 1, 1997 (the
"Reimbursement Agreement") and (ii) the loan evidenced by that certain
$1,500,000 Promissory Note (the "Term Loan Note"), Debtor hereby grants to
Secured Party a continuing security interest in and a right of set-off against,
and Debtor hereby assigns to Secured Party, the Collateral described in
Paragraph 2, to secure the payment, performance and observance of the
indebtedness, obligations, liabilities and agreements of any kind of Debtor to
the Secured Party, now existing or hereafter arising, direct or indirect,
absolute or contingent, secured or unsecured, due or not, arising out of or
relating to the Reimbursement Agreement, the Term Loan Note and any of the other
Financing Documents (as that term is defined in a Trust Indenture dated as of
October 1, 1997 (the "Indenture") between the County of Saratoga Industrial
Development Agency (the "Issuer") and the Trustee) (the "Obligations").
2. THE COLLATERAL. The Collateral is described on Schedule "A"
annexed hereto as part hereof and also includes all attachments, accessions and
equipment now or hereafter affixed to the Collateral or used in connection
therewith, substitutions and replacements therefor, all items of Collateral now
owned or existing and hereafter acquired, created or arising, and all proceeds
thereof (including, without limitation, claims of Debtor against third parties
for loss or damage to or destruction of any Collateral).
3. WARRANTIES, REPRESENTATIONS AND COVENANTS. Debtor warrants,
represents and covenants that:
(a) The chief executive office and other places of business
of Debtor, the Collateral and the books and records relating to the
Collateral are, and have been during the four month period prior to the
date hereof (or in the case of a new business, from the date of
commencement of said business), located at the address(es) set forth
below and Debtor will not change the same, or merge or consolidate with
any person or change its name, without prior written notice to and
consent of the Secured Party:
<PAGE>
Addresses:
5090 General Mahone Highway
Waverly, Virginia 23890
Lot 3, Farnam Road
Moreau Industrial Park
Moreau, New York 12803
Route 3, Highway 171
Malvern, Arkansas 72104
(b) Debtor will use the Collateral for lawful and business
purposes only, with all reasonable care and caution and in conformity
with all applicable laws, ordinances and regulations;
(c) Debtor will keep the Collateral in first class order,
repair, running and marketable condition (normal wear and tear
excepted), at Debtor's sole cost and expense;
(d) The Secured Party shall at all reasonable times have free
access to and right of inspection of the Collateral and any records
pertaining thereto (and the right to make extracts from and to receive
from Debtor originals or true copies of such records and any papers and
instruments relating to any Collateral upon request therefor) and
Debtor hereby grants to the Secured Party a security interest in all
such records, papers and instruments to secure the payment, performance
and observance of the Obligations;
(e) The Collateral is now and shall remain personal property,
is not now a fixture and Debtor will not permit any Collateral which is
not now a fixture to become a fixture without prior written notice to
and consent of the Secured Party and without first making all
arrangements, and delivering, or causing to be delivered, to the
Secured Party all instruments and documents, including, without
limitation, waivers and subordination agreements by any landlords or
mortgagees, requested by and satisfactory to the Secured Party to
preserve and protect the primary security interest granted herein
against all persons;
(f) Debtor, at its sole cost and expense, will insure the
Collateral in the name of and with loss or damage payable solely to the
Secured Party, as its interest may appear, against such risks, with
such companies and in such amounts, as may be required by the
Installment Sale Agreement (as defined in the Indenture) and Debtor
will deliver to the Secured Party the original or duplicate policies,
or certificates or other evidence satisfactory to the Secured Party
attesting thereto, and Debtor will promptly notify the Secured Party of
any loss or damage to any Collateral or arising from its use;
2
<PAGE>
(g) Debtor will, at its sole cost and expense, and at all
times, pay and discharge all taxes and assessments in accordance with
the terms of the Installment Sale Agreement and keep the Collateral
free and clear of any and all liens, security interests or
encumbrances, other than Permitted Liens (as defined in the
Reimbursement Agreement), perform all acts and execute all documents
requested by the Secured Party from time to time to evidence, perfect,
maintain or enforce the Secured Party's primary security interest
granted herein or otherwise in furtherance of the provisions of this
Security Agreement;
(h) At any time and from time to time, Debtor shall, at its
sole cost and expense, execute and deliver to the Secured Party such
financing statements pursuant to the Uniform Commercial Code ("UCC"),
applications for certificate of title and other papers, documents or
instruments as may be requested by the Secured Party in connection with
this Security Agreement, and Debtor hereby authorizes the Secured Party
to execute and file at any time and from time to time one or more
financing statements or copies thereof or of this Security Agreement
with respect to the Collateral signed only by the Secured Party;
(i) In its discretion, the Secured Party may, at any time and
from time to time, after a Default (as hereinafter defined) has
occurred and is continuing, in its name or Debtor's or otherwise,
notify any account debtor or obligor of any account, contract,
document, instrument, chattel paper or general intangible included in
the Collateral to make payment to the Secured Party;
(j) In its discretion, Secured Party may, at any time and
from time to time, after a Default has occurred and is continuing,
demand, sue for, collect or receive any money or property at any time
payable or receivable on account of or in exchange for, or make any
compromise or settlement deemed desirable by Secured Party with respect
to, any Collateral, and/or extend the time of payment, arrange for
payment in installments, or otherwise modify the terms of, or release,
any Collateral or Obligations, all without notice to or consent by
Debtor and without otherwise discharging or affecting the Obligations,
the Collateral or the security interest granted herein;
(k) In its discretion, Secured Party may, at any time and
from time to time, for the account of Debtor, pay any amount or do any
act required of Debtor hereunder and which Debtor fails to do or pay,
and any such payment shall be deemed an advance by Secured Party to
Debtor payable on demand together with interest at the highest rate
then payable on any of the Obligations;
(l) Debtor will pay Secured Party for any sums, costs, and
expenses which Secured Party may pay or incur pursuant to the
provisions of this Security Agreement or in negotiating, executing,
perfecting, defending, or protecting the security interest granted
herein or in enforcing payment of the Obligations or otherwise in
connection with the provisions hereof, including but not limited to
court costs, collection charges, travel
3
<PAGE>
expenses, and reasonable attorneys' fees, all of which, together with
interest at the highest rate then payable on any of the Obligations,
shall be part of the Obligations and be payable on demand;
(m) All proceeds of any other Collateral received by Debtor
after the occurrence of a Default shall not be commingled with other
property of Debtor, but shall be segregated, held by Debtor in trust
for Secured Party, and immediately delivered to Secured Party in the
form received, duly endorsed in blank where appropriate to effectuate
the provisions hereof, the same to be held by Secured Party as
additional Collateral hereunder or, at Secured Party's option, to be
applied to payment of the Obligations, whether or not due and in any
order; and
(n) In its sole discretion, Secured Party may, at any time
and from time to time, assign, transfer or deliver to any transferee of
any Obligations, any Collateral, whereupon Secured Party shall be fully
discharged from all responsibility and the transferee shall be vested
with all powers and rights of Secured Party hereunder with respect
thereto, but Secured Party shall retain all rights and powers with
respect to any Collateral not assigned, transferred or delivered.
4. DEFAULT. It shall constitute an event of default ("Default")
under this Security Agreement if an Event of Default shall have occurred under
any of the Financing Documents or if any one or more of the following shall
occur:
(a) Debtor fails to perform any covenant, agreement or
obligation contained in this Security Agreement and such failure
remains unremedied for thirty (30) calendar days after the Secured
Party shall have given written notice thereof to Debtor, or, if such
covenant, condition or agreement is capable of cure but cannot be cured
within such thirty (30) day period, the failure of the Debtor to
commence to cure within such thirty (30) day period and thereafter
diligently proceed with all action required to complete said cure
within ninety (90) days of such written notice unless such time to cure
is otherwise extended by the Secured Party in writing; or
(b) Except as permitted by the Financing Documents, the
Collateral shall be subjected to sale, transfer or other disposition or
any lien, encumbrance or other imposition is placed upon said
Collateral; or
(c) Except as permitted by the Financing Documents, any levy,
seizure, attachment, condemnation, forfeiture or other proceeding shall
be brought against or with respect to the Collateral.
5. REMEDIES. Upon the occurrence of any Default and at any time
thereafter, Secured Party shall have the following rights and remedies (to the
extent permitted by applicable law) in addition to all rights and remedies of a
secured party under the UCC or of Secured Party
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<PAGE>
under the Obligations, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently:
(a) Secured Party may at any time and from time to time, with
or without judicial process or the aid and assistance of others, but
without causing a breach of the peace, enter upon any premises in which
any Collateral may be located and, without resistance or interference
by Debtor, take possession of the Collateral; and/or dispose of any
Collateral on any such premises; and/or require Debtor to assemble and
make available to Secured Party at the expense of Debtor any Collateral
at any place and time designated by Secured Party which is reasonably
convenient to both parties; and/or remove any Collateral from any such
premises for the purpose of effecting sale or other disposition thereof
(and if any of the Collateral consists of motor vehicles, Secured Party
may use Debtor's license plates); and/or sell, resell, lease, assign
and deliver, grant options for or otherwise dispose of any Collateral
in its then condition or following any commercially reasonable
preparation or processing, at public or private sale or proceedings or
otherwise, by one or more contracts, in one or more parcels, at the
same or different times, with or without having the Collateral at the
place of sale or other disposition, for cash and/or credit, and upon
any terms, at such place(s) and time(s) and to such person(s) as
Secured Party deems best, all without demand, notice or advertisement
whatsoever except that where an applicable statute requires reasonable
notice of sale or other disposition Debtor hereby agrees that the
sending of ten days' notice by ordinary mail, postage prepaid, to any
address of Debtor set forth in this Security Agreement shall be deemed
reasonable notice thereof. If any Collateral is sold by Secured Party
upon credit or for future delivery, Secured Party shall not be liable
for the failure of the purchaser to pay for same and in such event
Secured Party may resell such Collateral. Secured Party may buy any
Collateral at any public sale and, if any Collateral is of a type
customarily sold in a recognized market or is of the type which is the
subject of widely distributed standard price quotations, Secured Party
may buy such Collateral at private sale and in each case may make
payment therefor by any means. Secured Party may apply the sale
proceeds actually received from any sale or other disposition to the
reasonable expenses of retaking, holding, preparing for sale, selling,
leasing and the like, to reasonable attorneys' fees and all legal,
travel and other expenses which may be incurred by Secured Party in
attempting to collect the Obligations or enforce this Security
Agreement or in the prosecution or defense of any action or proceeding
related to the subject matter of this Security Agreement; and then to
the Obligations in such order and as to principal or interest as
Secured Party may desire; and Debtor shall remain liable and will pay
Secured Party on demand any deficiency remaining, together with
interest thereon at the highest rate then payable on the Obligations
and the balance of any expenses unpaid, with any surplus to be paid to
Debtor, subject to any duty of Secured Party imposed by law to the
holder of any subordinate security interest in the Collateral known to
Secured Party;
(b) Secured Party may appropriate, set off and apply to the
payment of the Obligations, any Collateral in or coming into the
possession of Secured Party or its
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<PAGE>
agents, without notice to Debtor and in such manner as Secured Party
may in its discretion determine.
6. DESIGNATION AND AUTHORIZATION. To effectuate the terms and
provisions hereof, Debtor hereby designates and appoints Secured Party and each
of its designees or agents as attorney-in-fact of Debtor, irrevocably and with
power of substitution, with authority, after the occurrence of a Default, to:
endorse the name of Debtor on any notes, acceptances, checks, drafts, money
orders, instruments or other evidences of Collateral that may come into Secured
Party's possession; sign the name of Debtor on any invoices, documents, drafts
against and notices to account debtors or obligors of Debtor, assignments and
requests for verification of accounts; execute proofs of claim and loss; execute
endorsements, assignments of other instruments of conveyance or transfer; adjust
and compromise any claims under insurance policies or otherwise; execute
releases; and do all other acts and things necessary or advisable in the sole
discretion of Secured Party to carry out and enforce this Security Agreement or
the Obligations. All acts done under the foregoing authorization, except acts
constituting gross negligence or willful misconduct on the part of the Secured
Party, are hereby ratified and approved and neither Secured Party nor any
designee or agent thereof shall be liable for such acts of commission or
omission, for any error of judgment or for any mistake of fact or law. This
power of attorney being coupled with an interest is irrevocable while any
Obligations shall remain unpaid.
7. PRESERVATION AND DISPOSITION OF COLLATERAL; MISCELLANEOUS.
Secured Party shall have the duty to exercise reasonable care in the custody and
preservation of any Collateral in its possession, which duty shall be fully
satisfied if Secured Party maintains safe custody of such Collateral. Except as
hereinabove specifically set forth, Secured Party shall not be deemed to assume
any other responsibility for, or obligation or duty with respect to, any
Collateral, or its use, of any nature or kind, or any matter or proceedings
arising out of or relating thereto, including, without limitation, any
obligation or duty to take any action to collect, preserve or protect its or
Debtor's rights in the Collateral or against any prior parties thereto, but the
same shall be at Debtor's sole risk and responsibility at all times. Debtor
hereby releases Secured Party from any claims, causes of action and demands at
any time arising out of or with respect to this Security Agreement, the
Obligations, the Collateral and its use and/or any actions taken or omitted to
be taken by Secured Party with respect thereto, and Debtor hereby agrees to hold
Secured Party harmless from and with respect to any and all such claims, causes
of action and demands. Secured Party's prior recourse to any Collateral shall
not constitute a condition of any demand, suit or proceeding for payment or
collection of the Obligations. No act, omission or delay by Secured Party shall
constitute a waiver of its rights and remedies hereunder or otherwise. No single
or partial waiver by Secured Party of any Default or right or remedy which it
may have shall operate as a waiver of any other Default, right or remedy or of
the same Default, right or remedy on a future occasion. Debtor hereby waives
presentment, notice of dishonor and protest of all instruments included in or
evidencing any Obligations or Collateral, and all other notices and demands
whatsoever (except as expressly provided herein). In the event of any litigation
with respect to any matter connected with this Security Agreement, the
Obligations or the Collateral, Debtor hereby waives
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<PAGE>
the right to a trial by jury and all defenses, rights of set-off and rights to
interpose counterclaims of any nature. Debtor hereby irrevocably consents to the
jurisdiction of the Courts of the State of New York and of any Federal Court
located in such State in connection with any action or proceeding arising out of
or relating to the Obligations, this Security Agreement or the Collateral, or
any document or instrument delivered with respect to any of the Obligations.
Debtor hereby waives personal service of any process in connection with any such
action or proceeding and agrees that the service thereof may be made by
certified or registered mail directed to Debtor at any address of Debtor set
forth in this Security Agreement. Debtor so served shall appear or answer to
such process within thirty (30) days after the mailing thereof. Should Debtor so
served fail to appear or answer within said thirty (30) day period, Debtor shall
be deemed in default and judgment may be entered by Secured Party against Debtor
for the amount or such other relief as may be demanded in any process so served.
In the alternative, in its discretion, Secured Party may effect service upon
Debtor in any other form or manner permitted by law. All capitalized terms used
and not otherwise defined shall have the meanings set forth in the reimbursement
agreement and other terms herein shall have the meanings as defined in the UCC,
unless the context otherwise requires. No provision hereof shall be modified,
altered or limited except by a written instrument expressly referring to this
Security Agreement and to such provision, and executed by the party to be
charged. This Security Agreement and all Obligations shall be binding upon the
successors, or assigns of Debtor and shall, together with the rights and
remedies of Secured Party hereunder, inure to the benefit of Secured Party and
its successors, endorsees and assigns. This Security Agreement and the
Obligations shall be governed in all respects by the laws of the State of New
York applicable to contracts executed and to be performed in such State. If any
term of this Security Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby. Secured Party is authorized to annex hereto any schedules
referred to herein. Debtor acknowledges receipt of a copy of this Security
Agreement.
IN WITNESS WHEREOF, the undersigned has executed or caused this
Security Agreement to be executed in the State of New York as of the date first
above set forth.
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
-----------------------------------
Phillip S. Sumpter,
Executive Vice President
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STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On the 9th day of October, 1997, before me personally appeared Phillip
S. Sumpter, to me known, who being by me duly sworn, did depose and say that he
resides at 33296 Shingleton Road, Waverly, Virginia, that he is the Executive
Vice President of SPURLOCK ADHESIVES, INC., the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the board of directors of said corporation.
/s/ Kevin J. Kelley
------------------------------------
Notary Public - State of New York
My Commission Expires:
Kevin J. Kelley
Notary Public, State of New York
Qualified in Albany County
Commission Expires 10/31/97
01294\secagr.rev
8
<PAGE>
SCHEDULE A
(DESCRIPTION OF COLLATERAL)
All of the Debtor's present and future personal property of every kind,
nature and description, wherever located, and to the full extent of Debtor's
interest therein including but not limited to: accounts; contract rights;
chattel paper; general intangibles (including but not limited to tax refunds,
insurance proceeds, patents and patent applications, copyrights, licenses,
trademarks, trade names, customer lists, rights of indemnification, contribution
and subrogation, royalties, computer programs, tapes and software, deposits and
know-how) instruments; documents and documents of title; letters of credit and
all of Debtor's interest in letters of credit; inventory of every kind and
nature and wherever located, including but not limited to, raw materials, work
in process, finished goods, consigned goods to the extent of Debtor's interest
therein, packing materials and advertising materials; automotive equipment;
machinery and equipment and all additions, accessions, substitutions,
replacements, parts and fuel in respect to the same, all Debtor's rights against
suppliers, manufacturers or maintainers of the same, all manuals, drawings, and
materials relating thereto to and for the same; furniture; fixtures; equipment;
and all records and files relating to all of the foregoing, all of the Debtor's
property of any kind in the possession of, or under the custody or control of,
Secured Party or any affiliate or correspondent of Secured Party or in which
Secured Party or any affiliate may have a security interest or title retention
interest; all permits, licenses, certificates, approvals, authorizations and
agreements issued to, used, or owned by Debtor in connection with the operation
of its business; and all proceeds of all of the foregoing, including deposit
accounts.
All of the terms set forth in this Schedule "A" shall have the meanings
set forth in the New York Uniform Commercial Code as in effect on the date
hereof.
01294\security.agr
9
Exhibit 10.37
GUARANTY OF PAYMENT AND PERFORMANCE
THIS GUARANTY OF PAYMENT AND PERFORMANCE dated as of October 1, 1997
(the "Guaranty") from SPURLOCK INDUSTRIES, INC., a Virginia corporation with an
office at 5090 General Mahone Highway, Waverly, Virginia 23890 (the "Guarantor")
to KEYBANK NATIONAL ASSOCIATION, a national banking association with an office
for the transaction of business located at 66 South Pearl Street, Albany, New
York 12207 (the "Bank").
W I T N E S S E T H:
WHEREAS, the County of Saratoga Industrial Development Agency, a public
benefit corporation duly organized and existing under the laws of the State of
New York (the "Issuer"), intends to issue its Multi-Mode Variable Rate
Industrial Development Revenue Bonds (Spurlock Adhesives, Inc. Project), Series
1997A in the aggregate principal amount of $6,000,000 (the "Bonds'); and
WHEREAS, the Bonds are to be issued under and pursuant to a Trust
Indenture, dated as of October 1, 1997 (the "Indenture") by and between the
Issuer and Star Bank, N.A., as Trustee (the "Trustee"); and
WHEREAS, the proceeds of the Bonds are to be advanced to Spurlock
Adhesives, Inc. (the "Applicant") to assist in the financing of the Project (as
defined in the Indenture); and
WHEREAS, to provide security for the Bonds, the Bank is about to issue
its irrevocable transferable direct pay letter of credit (the "Letter of
Credit") in favor of the Trustee; and
WHEREAS, in connection with the Letter of Credit, the Bank and the
Applicant have or are about to enter into the Letter of Credit Reimbursement
Agreement dated as of October 1, 1997 (the "Reimbursement Agreement"); and
WHEREAS, to provide additional financing for the Project, the Bank will
make a $1,500,000 term loan (the "Term Loan") to the Applicant, which Term Loan
will be evidenced by a $1,500,000 Promissory Note (the "Term Loan Note") from
the Applicant to the Bank; and
WHEREAS, the Bank is unwilling to issue the Letter of Credit or make
the Term Loan unless it receives this Guaranty; and
WHEREAS, the Guarantor is willing to enter into this Guaranty in order
to induce the Bank to issue the Letter of Credit and make the Term Loan and the
Guarantor has approved the form and substance of (i) any documents executed or
delivered by Applicant in connection with the Bonds and the Reimbursement
Agreement (the "Financing Documents") and (ii) any documents executed or
delivered by Applicant in connection with the Term Loan (the "Term Loan
Documents").
<PAGE>
NOW, THEREFORE, in order to induce the Bank to (i) issue the Letter of
Credit and (ii) make the Term Loan and in consideration of the premises and of
other good and valuable consideration, the Guarantor intends to guarantee
absolutely and unconditionally to the Bank, the punctual payment of all amounts
payable by the Applicant under (y) the Reimbursement Agreement and the other
Financing Documents and (z) the Term Loan Note and the other Term Loan Documents
and such further payment and performance as may be set forth in Article 2
hereof.
ARTICLE 1
REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR
The Guarantor hereby represents and warrants to Bank that:
Section 1.1 Capacity of the Guarantor. The Guarantor:
(A) is a corporation duly organized, validly existing and
in good standing under the laws of the state of its
formation, without limitation on the duration of its
existence;
(B) has the power and authority to own its properties and
assets and to carry on its business as now being
conducted; and
(C) has the power and authority to execute, deliver and
perform this Guaranty as required hereunder and to
guarantee the payments to be made by the Applicant
under (i) the Reimbursement Agreement with regard to
the principal of, redemption premium, if any, and
interest on the Bonds pursuant to the provisions hereof
and (ii) the Term Loan Note; and this Guaranty is the
legal, valid and binding obligation of the Guarantor
enforceable in accordance with its terms;
Section 1.2 No Violation of Restrictions. Neither the execution and
delivery of this Guaranty, the consummation of the transactions contemplated
hereby nor the fulfillment of or compliance with the provisions of this Guaranty
will conflict with or result in a breach of the Guarantor's certificate of
incorporation or by-laws or, in any material respect, any of the terms,
covenants, conditions or provisions of any agreement, judgment or order to which
the Guarantor is a party or by which the Guarantor is bound, or will constitute
a default under any of the foregoing, or result in the creation or imposition of
any lien of any nature whatsoever.
Section 1.3 Compliance with Law. The Guarantor (A) is not in
violation of any law, ordinance, governmental rule, regulation, order or
judgment to which the Guarantor may be subject or which would materially affect
the business of the Guarantor and (B) has not failed to obtain any license,
permit, franchise or other governmental authorization necessary to the conduct
of its present business.
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<PAGE>
Section 1.4 Financial Statements. The financial statements
submitted by the Guarantor, including balance sheets, statement of income,
retained earnings and other related schedules, to the Bank fairly represent the
financial condition of the Guarantor as of and for the period ending on the date
of each statement and there has been no material adverse change in the financial
conditions of the Guarantor since the most recent date of the statements
submitted to Bank.
Section 1.5 Solvency of Guarantor and Applicant. The Guarantor is
solvent and has made an appropriate financial investigation of the Applicant and
has determined that the Applicant is solvent at the time of execution of this
Guaranty.
ARTICLE 2
COVENANTS AND AGREEMENTS
Section 2.1 Guaranty of Payment. The Guarantor irrevocably,
absolutely and unconditionally guarantees to the Bank:
(A) (1)(a) The full and prompt payment by the Applicant of each and
every draw made by the Trustee under the Letter of Credit, such payment to be
made in accordance with the terms of the Reimbursement Agreement (together with
all interest accrued thereon, and fees and expenses of the Bank thereunder and
as more particularly set forth in Section 3 and 4 of the Reimbursement
Agreement), as such relate to the principal of the Bonds and the indebtedness
represented thereby, and the redemption premium, if any, on the Bonds when and
as the same shall become due and payable, whether at the stated maturity
thereof, by acceleration, call for redemption, or if tendered for purchase and
not remarketed, or otherwise; (b) the full and prompt payment of interest on the
Bonds when and as the same shall become due and payable; (c) the full and prompt
payment of an amount equal to each and all of the payments and any other sums
when and as the same shall become due, required to be paid by the Applicant
under the terms of the Installment Sale Agreement (as defined in the Indenture);
and (d) the full and prompt payment of all principal, interest and other sums
when and as the same shall become due and payable under the Term Loan Note and
the other Term Loan Documents (the preceding hereinafter collectively the
"Indebtedness"); and (2) the full and prompt performance and observance by the
Applicant of all of the obligations, covenants and agreements required to be
performed and observed by the Applicant under the terms of the Reimbursement
Agreement, the Term Loan Note, the other Financing Documents and the other Term
Loan Documents.
The Guarantor hereby irrevocably and unconditionally agrees that upon
any default by the Issuer in the payment, when due, of the Indebtedness, upon
demand of the Bank, the Guarantor shall promptly pay the same. The Guarantor
further hereby irrevocably and unconditionally agrees that (i) upon any default
by the Applicant in the payment of the Indebtedness, the Guarantor will promptly
pay the same, and (ii) upon any default by the Applicant in any of the
obligations, covenants and agreements required to be performed and observed by
the Applicant under the Installment Sale Agreement, the Building Loan Agreement,
3
<PAGE>
the Mortgage, the Term Loan Note, the other Financing Documents and the other
Term Loan Documents, the Guarantor will effect the observance of such
obligations, covenants and agreements. All payments by the Guarantor shall be
paid in lawful money of the United States of America. Each and every default in
the payment of the Indebtedness, or in the prompt performance and observance by
the Applicant of all of the obligations, covenants and agreements required to be
performed and observed by the Applicant under the terms of the Reimbursement
Agreement, the Term Loan Note, the other Financing Documents or the other Term
Loan Documents, shall give rise to a separate cause of action hereunder, and
separate suits may be brought hereunder as each cause of action arises.
(B) The Guarantor further agrees that this Guaranty constitutes an
absolute, unconditional, present and continuing guarantee of payment and not of
collection, and waives any right to require that any resort be had by the Bank
to (1) any security held by or for the benefit of the Bank for payment of the
Indebtedness, (2) the Bank's rights against any other person, or (3) any other
right or remedy available to the Bank by contract, applicable law or otherwise.
The obligations of the Guarantor under this Guaranty are direct, unconditional
and completely independent of the obligations of any other person or entity, and
a separate cause of action or separate causes of action may be brought and
prosecuted against the Guarantor without the necessity of joining the Issuer,
the Trustee or any other party or previously proceeding with or exhausting any
other remedy against any other person who might have become liable for the
Indebtedness or of realizing upon any security held by or for the benefit of the
Bank. The Guarantor further waives any benefits of any credit for the fair
market value of the Project Facility in any action for foreclosure or for a
deficiency judgment (including any credit under Section 1371 of the New York
Real Property Actions and Proceedings Law).
Section 2.2 Obligations Unconditional. The obligations of the
Guarantor under this Guaranty shall be absolute and unconditional, and shall
remain in full force and effect until the entire Indebtedness, and all payments,
obligations, covenants and agreements of the Applicant under the Reimbursement
Agreement, the Term Loan Note, the other Financing Documents or the other Term
Loan Documents, shall have been paid in full or provided for, and all costs,
Bank's fees and commissions and expenses, if any, referred to in the Financing
Documents and the Term Loan Documents shall have been paid in full and, to the
extent permitted by law, such obligations shall not be affected, modified or
impaired by any state of facts or the happening from time to time of any event,
including, without limitation, any of the following, whether or not with notice
to or the consent of the Guarantor:
(A) The invalidity, irregularity, illegality or
unenforceability of , or any defect in, the Reimbursement Agreement,
the Term Loan Note, any Financing Document or any Term Loan Document of
any collateral security for any thereof (the "Collateral").
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<PAGE>
(B) Any present or future law of order of any government
(de jeure or de facto) or of any agency thereof purporting to reduce,
amend or otherwise affect the Bonds, the Reimbursement Agreement, the
Term Loan Note, any other Financing Document or any other Term Loan
Document or any other obligation of the Issuer, the Applicant or any
other obligor or to any other terms of payment.
(C) The waiver, compromise, settlement, release or
termination of any or all of the obligations, covenants or agreements
of any obligor under the Reimbursement Agreement, the Term Loan Note or
any other Financing Document or Term Loan Document.
(D) The failure to give notice to the Guarantor of the
occurrence of any event of default under the Reimbursement Agreement,
the Term Loan Note or any other Financing Document or Term Loan
Document.
(E) The loss, release, sale, exchange, surrender or other
change in any Collateral.
(F) The extension of the time for payment of the
Indebtedness or any amounts that are due or may become due under the
Reimbursement Agreement, the Term Loan Note or any of the other
Financing Documents or Term Loan Documents or of the time for
performance of any other obligations, covenants or agreements under or
arising out of the Reimbursement Agreement, the Term Loan Note or any
other Financing Document or Term Loan Document or any extension or the
renewal of any thereof.
(G) The modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set forth in the
Reimbursement Agreement, the Term Loan Note or any other Financing
Document or Term Loan Document.
(H) The taking of, or the omission to take, any of the
actions referred to in the Reimbursement Agreement, the Term Loan Note
or any other Financing Document or Term Loan Document.
(I) Any failure, omission or delay on the part of the Bank
to enforce, assert or exercise any right, power or remedy conferred on
the Bank in the Reimbursement Agreement, the Term Loan Note or any
other Financing Document or Term Loan Document.
(J) The voluntary or involuntary liquidation, dissolution,
sale or other disposition of all or substantially all the assets,
marshalling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment of, or other
5
<PAGE>
similar proceedings affecting the Guarantor, the Applicant or the
Issuer or any of their assets, or any allegation or contest of the
validity of the Reimbursement Agreement, the Term Loan Note or any
other Financing Document or Term Loan Document.
(K) The default or failure of the Guarantor to fully
perform any obligations set forth in this Guaranty.
(L) Any event or action that would, in the absence of this
paragraph, result in the release or discharge of the Guarantor from the
performance or observance of any obligation, covenant or agreement
contained in this Guaranty.
(M) Any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or a
guarantor.
Section 2.3 Waiver by Guarantor. The Guarantor hereby waives:
(A) Notice of acceptance of this Guaranty.
(B) Diligence, presentment and demand for payment of the
Bonds and/or the Indebtedness and/or any other obligation under the
Reimbursement Agreement, the Term Loan Note or any other Financing
Document or Term Loan Document.
(C) Protest and notice or protest, dishonor or default to
the Guarantor or to any other party with respect to the Bonds, the
Reimbursement Agreement, the Term Loan Note or any other Financing
Document or Term Loan Document.
(D) Any and all notice to which the Guarantor might
otherwise be entitled.
(E) Any demand for payment under this Guaranty, except as
expressly provided herein.
(F) Any and all defenses to payment including, without
limitation, any defenses and counterclaims of the Guarantor or the
Applicant based upon fraud, negligence or the failure of any condition
precedent or claims of offset or defenses involving the invalidity,
irregularity or unenforceability of all or any part of the liabilities
herein guaranteed or any defense otherwise available to the Guarantor
or the Applicant.
(G) Any and all rights of subrogation, reimbursement,
indemnity, exoneration, contribution or any other claim which the
Guarantor may now or hereafter have against the Applicant or any other
person directly or contingency liable for the Indebtedness guaranteed
hereunder, or against or with respect to the Applicant's property
(including,
6
<PAGE>
without limitation, property collateralizing the Bonds, the
Reimbursement Agreement and/or the Term Loan Note), arising from the
existence or performance of this Guaranty and whether or not such
claim, right or remedy arises in equity, under contract, by statute,
under common law or otherwise.
Section 2.4 Nature of Guaranty. This Guaranty is a guaranty of
payment and not of collections and the Guarantor hereby waives the right to
require that any action be brought first against the Applicant or any security,
or to require that resort be made to any security or to any balance of any
deposit account on credit on the books of the Bank in favor of the Applicant or
of any Guarantor.
Section 2.5 Continuation of Guaranty. The Guarantor further agrees
that the obligations hereunder shall continue to be effective or reinstated, as
the case may be, if at any time payment or any part thereof of the Indebtedness
is rescinded or must otherwise be restored by the Bank upon the bankruptcy or
reorganization of the Applicant, the Guarantor, the Issuer or otherwise.
Section 2.6 Subordination of Debt. The Guarantor hereby
subordinates any and all indebtedness of Applicant now or hereafter owed to
Guarantor to all Indebtedness of Applicant to Bank and agrees with Bank that
Guarantor shall not demand or accept any payment from Applicant after an Event
of Default, shall not claim any offset or other reduction of Guarantor's
obligations hereunder because of any such indebtedness and shall not take any
action to obtain any interest in any of the security described in and encumbered
by the Financing Documents and/or the Term Loan Documents; provided, however,
that, if Bank so requests, such indebtedness shall be collected, enforced and
received by Guarantor as trustee for Bank and paid over the Bank on account of
the indebtedness of Applicant to Bank, but without reducing or affecting in any
manner the liability of Guarantor under the other provisions of this Guaranty
except to the extent the principal amount of such outstanding indebtedness shall
have been reduced by such payment.
Section 2.7 Financial Information. Guarantor will advise Bank in
writing if Guarantor operates on other than a calendar year basis. The Guarantor
will provide audit level fiscal year end financial statements within 120 days of
the end of its fiscal year. Guarantor also agrees to deliver to Bank, from time
to time at the request of Bank, such other financial information with respect to
Guarantor as Bank may reasonably request.
Section 2.8 Transfer of Interest. Guarantor agrees not to make or
permit to be made, by a voluntary or involuntary means, any transfer of the
interest of Guarantor in the Applicant, without first obtaining the prior
written consent of Bank.
7
<PAGE>
ARTICLE 3
EVENTS OF DEFAULT
Section 3.1 Events of Default Defined. An "Event of Default" shall
exist if any of the following occurs:
(A) The Guarantor fails to perform or observe any payment
covenant contained herein.
(B) The Guarantor shall fail to perform any other covenant
contained herein, for thirty (30) days after the Bank has given written
notice of such failure to the Guarantor.
(C) Any warranty, representation or other statement by or
on behalf of the Guarantor contained in this Guaranty is false or
misleading in any material respect when made.
(D) A receiver, liquidator or trustee of the Guarantor or
any of its property is appointed by court order, or the Guarantor is
adjudicated bankrupt or insolvent or any of its property is sequestered
by court order and such order remains in effect for more than ninety
(90) days, or a petition is filed against the Guarantor under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether now
or hereafter in effect, and is not dismissed within ninety (90) days of
such filing.
(E) The Guarantor files a petition in voluntary bankruptcy
or seeks relief under any provision of any reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, or consents to the
filing of any petition against it under any such law.
(F) The Guarantor makes an assignment for the benefit of
creditors or admits in writing inability to pay debts generally as they
become due, or consents to the appointment of a receiver, trustee or
liquidator of all or any part of his or its property.
(G) The occurrence of an event of default under the
Reimbursement Agreement or any other Financing Document or Bank
Document.
Section 3.2 Remedies on Default. If an Event of Default exists,
Bank may proceed to enforce the provisions hereof and to exercise any other
rights, powers and remedies available to the Bank.
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Section 3.3 Waiver and Notice.
(A) No remedy herein conferred upon or reserved to the Bank
is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Guaranty now or
hereafter existing at law or in equity or by statute.
(B) No delay or omission to exercise any right or power
accruing upon the occurrence of any Event of Default shall impair any
such right or power or shall be construed to be a waiver thereof, but
any such right or power may be exercised from time to time and as often
as may be deemed expedient.
(C) In order to entitle the Bank to exercise any remedy
reserved to it in this Guaranty, it shall not be necessary to give any
notice, other than such notice as may be expressly required in this
Guaranty.
(D) No waiver, amendment, release or modification of this
Guaranty shall be established by conduct, custom or course of dealing.
ARTICLE 4
MISCELLANEOUS
Section 4.1 Governing Law. This Guaranty shall be governed by and
construed in accordance with the laws of the State of New York.
Section 4.2 Submission to Jurisdiction. The Guarantor hereby
irrevocably and unconditionally agrees that any suit, action or proceeding
arising out of or relating to this Guaranty may be brought in the state courts
of the State of New York or federal district court for Northern District of New
York and waives any right to object to jurisdiction within either of the
foregoing forums by Bank. Nothing contained herein shall prevent Bank from
bringing any suit, action or proceeding or exercising any rights against any
security and against any Guarantor personally, and against any property of any
Guarantor, within any other jurisdiction and the initiation of such suite,
action or proceeding or taking of such action in any such other jurisdiction
shall in no event constitute a waiver of the agreements contained herein with
respect to the laws of the State of New York governing the rights and
obligations of the parties hereto or the agreement of the Guarantor to submit to
personal jurisdiction within the State of New York.
Section 4.3 Waiver of Jury Trial. The Guarantor and Bank agree that
any suit, action or proceeding arising under or in connection with this Guaranty
shall be before a court without a jury.
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Section 4.4 Successors and Assigns. This Guaranty shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties hereto.
Section 4.5 Notices. Any notices required or permitted to be given
hereunder shall be (i) personally delivered or (ii) given by registered or
certified mail, postage prepaid, return receipt requested, or (iii) forwarded by
overnight courier service, in each instance addressed to the addresses set forth
at the head of this Guaranty, or such other addresses as the parties may for
themselves designate in writing as provided herein for the purpose of receiving
notices hereunder. All notices shall be in writing and shall be deemed given, in
the case of notice by personal delivery, upon actual delivery, and in the case
of appropriate mail or courier service, upon deposit with the U.S. Postal
Service or delivery to the courier service.
Section 4.6 Entire Agreement. This Guaranty, the Reimbursement
Agreement, the Term Loan Note, the other Financing Documents and the other Term
Loan Documents constitute the entire understanding between Applicant, the
Guarantor and the Bank and the extent that any writings not signed by the Bank
or oral statements of conversations at any time made or had are inconsistent
with the provisions of this Guaranty, the same shall be null and void.
Section 4.8 Amendments. No amendment, change, modification,
alteration or termination of this Guaranty shall be made except upon the written
consent of the Bank.
Section 4.9 Assignment. This Guaranty is assignable by Bank in
whole or in part in conjunction with an assignment of the Reimbursement
Agreement and/or the Term Loan Note and any assignment hereof or any transfer or
assignment of the Reimbursement Agreement and/or the Term Loan Note or portions
thereof shall operate to vest in any such assignee the rights and powers, in
whole or in part, as appropriate, herein conferred upon and granted to Bank.
Section 4.10 Partial Invalidity. The invalidity or unenforceability
of any one or more phrases, sentences, clauses or sections in this Guaranty
shall not affect the validity or enforceability of the remaining portions of the
Guaranty or any part thereof.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
day and year first above written.
SPURLOCK INDUSTRIES, INC.
By: /s/ Phillip S. Sumpter
---------------------------------
Phillip S. Sumpter,
Authorized Officer
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STATE OF NEW YORK )
) ss.:
COUNTY OF SARATOGA )
On this 9th day of October, 1997, before me personally came Phillip S.
Sumpter, to me known, who being by me duly sworn, did depose and say that he
resides at 33296 Shingleton Road, Waverly, Virginia; that he is a Exec Vice
President of Spurlock Industries, Inc., the corporation described in, and which
executed the above instrument; and that he signed his name thereto by order of
the board of directors of said corporation.
/s/ Kevin J. Kelley
---------------------------------
NOTARY PUBLIC
Kevin J. Kelley
Notary Public, State of New York
Qualified in Albany County
Commission Expires 10/31/97
01294\guaranty
11
Exhibit 10.38
REMARKETING AGREEMENT
among
SPURLOCK ADHESIVES, INC.
KEYBANK NATIONAL ASSOCIATION, AS
REMARKETING AGENT
and
COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT AGENCY
----------------------------------
Dated as of October 1, 1997
----------------------------------
$6,000,000
County of Saratoga Industrial Development Agency
Multi-Mode Variable Rate
Industrial Development Revenue Bonds
(Spurlock Adhesives, Inc. Project), Series 1997A
<PAGE>
REMARKETING AGREEMENT
This REMARKETING AGREEMENT, dated as of October 1, 1997 (the
"Agreement"), is made by and among Spurlock Adhesives, Inc. (the "Company"),
KeyBank National Association, as remarketing agent (the "Remarketing Agent"),
and the County of Saratoga Industrial Development Agency (the "Issuer"), and is
entered in connection with the issuance by the Issuer of its Multi-Mode Variable
Rate Industrial Development Revenue Bonds (Spurlock Adhesives, Inc. Project),
Series 1997A in the total aggregate principal amount of $6,000,000 (the
"Bonds").
ARTICLE I
Definitions
Section 1.01. Capitalized Terms.
Capitalized terms used in this Remarketing Agreement, unless
otherwise defined herein, shall have the meanings assigned to them in the Trust
Indenture dated as of October 1, 1997 (the "Indenture") between the Issuer and
Star Bank, N.A., as Trustee, with respect to the Bonds.
Section 1.02. Rules of Interpretation.
(a) This Remarketing Agreement shall be interpreted in
accordance with and governed by the laws of the State of New York.
(b) The words "herein" and "hereof" and words of similar
import, without reference to any particular Article, Section or subsection,
refer to this Remarketing Agreement as a whole rather than to any particular
Article, Section or subsection hereof.
(c) The headings of Articles and Sections herein are for
convenience only and shall not affect the construction hereof.
ARTICLE II
Remarketing of Bonds
Section 2.01. Representations and Warranties of the Company.
The Company hereby represents and warrants, for the benefit of
the Remarketing Agent, as remarketing agent and as placement agent in connection
with the initial placement of the Bonds on the delivery date, that:
(a) The Company is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Virginia, and has
full corporate power and authority to enter into the Installment Sale Agreement,
this Remarketing Agreement and the Reimbursement Agreement and to carry out the
provisions hereof and thereof.
<PAGE>
(b) The Installment Sale Agreement, the Reimbursement
Agreement and this Remarketing Agreement have been duly authorized, executed and
delivered by the Company and, assuming the due execution and delivery of such
agreements by the other parties thereto, are valid obligations legally binding
upon the Company and enforceable in accordance with their respective terms,
except as enforceability may be limited by bankruptcy or other laws affecting
the enforcement of creditors' rights generally or by general principles of
equity and public policy. The Company has approved the use and distribution of
the Private Placement Memorandum dated as of October 10, 1997 (the "Placement
Memorandum") in connection with the initial placement of the Bonds.
(c) Except for all consents, approval or authorizations
of, or declaration or filing under any federal or state securities or "blue sky"
laws, no consent, approval or authorization of, or declaration or filing with,
any governmental authority or any other third party is a condition to the
execution and delivery by the Company of the Installment Sale Agreement, this
Remarketing Agreement or the Reimbursement Agreement, or is required in
connection with the offer, issuance and delivery by the Company of the
instruments contemplated hereby. Neither the execution and delivery of the
Indenture, the Installment Sale Agreement, the Reimbursement Agreement, this
Remarketing Agreement or the Bonds nor consummation of the transaction
contemplated hereby or thereby or by the Placement Memorandum, will violate any
provision of law or any applicable regulation, order, writ or decree of any
court or governmental authority or will conflict or will be inconsistent with,
or will result in any breach of any of the terms of, or will constitute a
default under, any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company is a party or by which it may be bound, or will
violate any provision of the Company's Articles of Incorporation or Bylaws.
(d) There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, or before or by any court, public board or
body, pending or, to the best knowledge of the Company, threatened which
challenges the validity of or seeks to enjoin the execution and delivery by the
Company of, or the performance by the Company of its obligations with respect
to, the Indenture, the Installment Sale Agreement, the Remarketing Agreement,
the Reimbursement Agreement or the Bonds, and there is no action, suit,
proceeding, inquiry or investigation, at law or in equity, or before or by any
court, public board or body, pending or, to the best knowledge of the Company,
threatened against or affecting the Company (and to the best knowledge of the
Company there is no basis therefor) wherein there is a reasonable possibility of
an unfavorable decision, ruling or finding which would materially adversely
affect any of the transactions contemplated by the Placement Memorandum, or
which might result in any material adverse change in the properties, condition
(financial or otherwise) or operations of the Company.
(e) The Company represents that the descriptions and
information contained in the Placement Memorandum relating to the Company and
the Project are true and correct and, assuming the purchasers of the Bonds are
not relying on information with respect to the Borrower in evaluating the
creditworthiness of the Bonds, do not contain any untrue statement of a material
fact and do not omit to state any material fact necessary to make such
descriptions and information, in light of the circumstances under which they
were made, not misleading.
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<PAGE>
Section 2.02. Representations and Warranties of the Issuer.
The Issuer hereby represents and warrants, for the benefit of
the Remarketing Agent, as remarketing agent, that:
(a) The Issuer is a public instrumentality constituting a
body corporate and politic duly organized and existing under the laws of the
State of New York and has full power and authority to enter into the Indenture,
the Installment Sale Agreement, this Remarketing Agreement and to issue the
Bonds and to carry out the provisions hereof and thereof.
(b) The Indenture, the Installment Sale Agreement, this
Remarketing Agreement and the Bonds have been duly authorized, executed and
delivered by the Issuer and, assuming the due execution and delivery of such
agreements by the other parties thereto, are valid special obligations legally
binding upon the Issuer and enforceable in accordance with their respective
terms, except as enforceability may be limited by bankruptcy or other laws
affecting the enforcement of creditors' rights generally or by general
principles of equity and public policy.
(c) Except for all consents, approval or authorizations
of, or declaration or filing under any federal or state securities or "blue sky"
laws, no consent, approval or authorization of, or declaration or filing with,
any governmental authority or any other third party is a condition to the
execution and delivery by the Issuer of the Indenture, the Installment Sale
Agreement or this Remarketing Agreement, or is required in connection with the
execution, issuance and delivery by the Issuer of the instruments contemplated
hereby. To the Issuer's knowledge, neither the execution and delivery of the
Indenture, the Installment Sale Agreement, this Remarketing Agreement or the
Bonds nor consummation of the transaction contemplated hereby or thereby, will
constitute on the part of the Issuer a violation of or will conflict or will be
inconsistent with, or will result in any breach of any of the terms of, or will
constitute a default under, any provision of law or any applicable regulation,
order, unit or decree of any court or governmental authority or any indenture,
mortgage, deed of trust, agreement or other instrument to which the Issuer is a
party or by which it may be bound.
(d) To the Issuer's knowledge, there is no action, suit,
proceeding, inquiry or investigation, at law or in equity, or before or by any
court, public board or body, as to which the Issuer has been served or otherwise
received official notice, nor is any such action, suit, proceeding, inquiry or
investigation threatened, which challenges the validity of or seeks to enjoin
the execution and delivery by the Issuer of, or the performance by the Issuer of
its obligations with respect to, the Indenture, the Installment Sale Agreement,
the Remarketing Agreement or the Bonds.
Section 2.03 Representations and Warranties of the Remarketing Agent
The Remarketing Agent represents and warrants as the basis for
the undertakings on the part of the Remarketing Agent herein contained and
throughout the term of this Agreement, that (i) the Remarketing Agent is a
national bank association duly organized and validly existing under the laws of
the United States of America; (ii) the Remarketing Agent has all requisite power
to execute and deliver this Agreement, and has by proper action duly authorized
the execution and delivery of this Agreement, and (iii) this Agreement
constitutes the legal, valid and binding obligation of the Remarketing Agent
enforceable against the Remarketing Agent in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency,
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reorganization, moratorium or other similar law or principles of equity relating
to or affect the enforcement of creditors' rights or contractual obligations
generally.
Section 2.04. Remarketing Agent's Acceptance.
KeyBank National Association hereby accepts the appointment
made by the Issuer pursuant to the Indenture to serve as Remarketing Agent for
the Bonds. Acceptance of that appointment as Remarketing Agent under the
Indenture is expressly subject to the condition that the Remarketing Agent shall
not undertake to perform any duties or assume any obligations to the Issuer, the
Trustee, the Holders or the Company other than those expressly set forth herein
and in the Indenture.
Section 2.05. Remarketing Agent's Obligations.
KeyBank National Association agrees to accept the duties and
obligations imposed upon it as Remarketing Agent under the Indenture, and agrees
particularly in accordance with Article 12.01 of the Indenture:
(a) to determine the interest rates on the Bonds in
accordance with Section 2.02 of the Indenture;
(b) to give notice, by wire, telex, telegraph or
telecopier or other similar means of communication, of each interest rate on the
Bonds on the determination date of said interest rates as provided in Section
2.02 of the Indenture to the Company and the Trustee;
(c) to keep such books and records as shall be consistent
with prudent industry practice and to make such books and records available for
inspection by the Issuer and the Trustee at all reasonable times;
(d) to use its best efforts to remarket the Bonds in
accordance with Section 3.02 of the Indenture; and
(e) to comply with all applicable laws in connection with
its efforts to remarket the Bonds;
(f) to offer the Bonds only to institutional investors
and to obtain from each purchaser of Bonds written representations to the effect
that such purchaser (i) regularly engages in the purchase of securities of
entities such as the Company and the Bank, (ii) has knowledge and experience in
financial and business matters sufficient to make it capable of evaluating the
risks of investing in the Bonds, (iii) has the ability to bear the economic
risks of investing in the Bonds, and (iv) acknowledges that the Issuer has not
undertaken the accuracy or completeness of any information furnished to that
purchaser with respect to the Company or the Bank.
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ARTICLE III
Disclosure
Section 3.01. Provision of Disclosure Materials.
If the Remarketing Agent determines that it is necessary or
desirable to use an amended or supplemented Placement Memorandum in connection
with any remarketing of Bonds, the Remarketing Agent will so notify the Company
and the Company agrees that it shall provide an amended or supplemented
Placement Memorandum satisfactory to the Remarketing Agent for use in connection
with the marketing of the Bonds. The Company agrees to supply to the Remarketing
Agent such number of copies of any Placement Memorandum and documents related
thereto as are reasonably requested from time to time by the Remarketing Agent
and further agrees to, and will use it best efforts to cause the Issuer and the
Bank to amend or supplement such Placement Memorandum (and/or any documents
incorporated by reference therein), in connection with any future remarketing,
so that at all times the Placement Memorandum and documents related thereto will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading. The Issuer has not
confirmed, and assumes no responsibility for, the accuracy, sufficiency or
fairness of any statements in the Placement Memorandum or any supplements
thereto, or in any reports, financial information, offering or disclosure
documents or other information in any way relating to the Project, the Company,
the Bank or the Original Purchaser.
Section 3.02. Continuing Disclosures.
The Company and Issuer agree that the initial offering of the
Bonds is exempt from the requirement of Paragraph (b)(5)(i) of Securities and
Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as
amended (the "Rule") pursuant to Paragraph (d)(1) of the Rule. The Company
hereby covenants and agrees that if as a result of a conversion of Interest Rate
Mode or as a result of any amendment or supplement to the Indenture or the
Installment Sale Agreement, the Bonds cease to be exempt under the Rule, the
Company will enter into an agreement or contract, constituting an undertaking,
to provide ongoing disclosure as may be necessary to comply with the Rule as
then in effect. The covenant and agreement contained in this Section 3.02 is for
the benefit of the Bondholders as required by the Rule.
ARTICLE IV
General
Section 4.01. Indemnification.
The Company agrees to indemnify the Remarketing Agent and the
Issuer for and to hold each harmless against all liabilities, claims, costs and
expenses incurred on the part of the Issuer or without negligence or bad faith
on the part of the Remarketing Agent on account of any action taken or omitted
to be taken by the Remarketing Agent or the Issuer, respectively, in accordance
with the terms of the Bonds, the Reimbursement Agreement, the Installment Sale
Agreement, the Letter of Credit or the Indenture, or in connection with the
remarketing of the Bonds, including the use of the Placement Memorandum, or any
action taken at the request of or
5
<PAGE>
with the consent of the Company, including the reasonable costs and expenses of
the Remarketing Agent or the Issuer in defending itself against any such claim,
action or proceeding brought in connection with the exercise or performance of
any of its powers or duties under the Bonds, the Indenture, the Installment Sale
Agreement, the Reimbursement Agreement or the Letter of Credit; except to the
extent that any such claim, liability, cost or expense arises in connection with
(i) with respect to the Remarketing Agent, the failure by the Remarketing Agent
to deliver any amended or supplemented Placement Memorandum or amendment or
supplement to the Placement Memorandum, to any purchaser of the Bonds if the
Company has provided any amended or supplemented Placement Memorandum or
amendment or supplement to the Placement Memorandum (in accordance with Section
3.01 hereof), as the case may be, to the Remarketing Agent for use in connection
with the placement or remarketing of the Bonds, or (ii) with respect to the
Remarketing Agent, any untrue or misleading statement, or alleged untrue or
misleading statement, or omission or alleged omission in information provided by
the Remarketing Agent for inclusion in any amended or supplemented Placement
Memorandum or any amendment or supplement to the Placement Memorandum.
In case any claim, action or proceeding is brought against the
Remarketing Agent or the Issuer in respect of which indemnity may be sought
hereunder, the Remarketing Agent or the Issuer, as appropriate, promptly shall
give notice of that claim, action or proceeding to the Company, and the Company,
upon receipt of that notice, shall have the right, or, if requested by either
the Remarketing Agent or the Issuer, the obligation to assume the defense of the
claim, action or proceeding at the Company's expense. Such notice shall be given
in sufficient time to allow the Company to defend or participate in such claim,
action or proceeding; provided, that failure of the Remarketing Agent or the
Issuer, as appropriate to give that notice shall not relieve the Company from
any of its obligations under this Section. At their own expense, the Remarketing
Agent and the Issuer may employ separate counsel and participate in the defense.
The Company shall not be liable for any settlement made without its consent,
which consent shall not be unreasonably withheld.
The indemnification set forth above is intended to and shall
include the indemnification of all affected officials, directors, officers and
employees of the Remarketing Agent and the Issuer. Such indemnification is
intended to and shall be enforceable by the Remarketing Agent and the Issuer to
the full extent permitted by law.
Section 4.02. Placement and Remarketing Fees.
The Company shall pay the Remarketing Agent, for its services
as Remarketing Agent, an annual fee equal to 12.5 basis points (1/8th of 1%) per
annum of the amount of Bonds outstanding, payable semi-annually in arrears. The
Company shall pay the Remarketing Agent, for its services as Placement Agent, a
fee equal to one percent (1%) of the aggregate principal amount of the Bonds to
be paid on October 10, 1997.
The Company also shall pay (i) all reasonable expenses in
connection with the provision of information required for the preparation of any
amendment or supplement to the Placement Memorandum provided pursuant to Section
3.01 of this Remarketing Agreement, (ii) all reasonable fees and expenses
incurred with the prior consent of the Company in connection with the
registration of the Bonds under any state securities laws, (iii) all expenses
and costs to effect the authorization, preparation, issuance, registration under
any federal securities laws or the
6
<PAGE>
procurement of an exemption therefrom, delivery and sale of the Bonds, and (iv)
the reasonable cost of obtaining any rating on the Bonds.
Section 4.03. Term.
This Remarketing Agreement will terminate upon the effective
date of the resignation or removal of KeyBank National Association as
Remarketing Agent in accordance with the provisions of this Remarketing
Agreement and Section 12.01 of the Indenture.
Upon the termination of this Remarketing Agreement, the
provisions of Section 4.01 hereof will continue to remain in effect and any
Bonds or moneys then held by KeyBank National Association as Remarketing Agent
will be delivered to the successor remarketing agent or, if there is no
successor, to the Trustee.
Section 4.04 Suspension of Remarketing.
The Remarketing Agent may suspend its remarketing efforts
immediately upon the occurrence of any of the following events, but only after
notice (a "Discretionary Suspension Notice") to the Issuer, the Company, the
Trustee, and the Credit Facility Issuer, which suspension will continue only so
long as the event continues to exist if, in the Remarketing Agent's reasonable
judgment, the continuance of the event has a material adverse effect on its
ability to remarket the Bonds:
(a) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange;
(b) a general moratorium on commercial banking activities
in New York is declared by either federal or New York State authorities;
(c) the engagement by the United States in hostilities
resulting in a declaration of war or national emergency, or the occurrence of
any other outbreak of hostilities or national or international calamity or
crisis, financial or otherwise;
(d) the enactment of a federal law, or the rendering of a
decision by a court of the United States, or the issuance or making of a stop
order, ruling, regulation or official statement by, or on behalf of, the United
States Securities and Exchange Commission or other governmental agency having
jurisdiction of the subject matter, in any such case to the effect that, the
offering or sale of obligations of the general character of the Bonds, or the
remarketing of the Bonds, as contemplated hereby, is or would be in violation of
any provision of the Securities Act of 1933, as amended (the "Securities Act")
and as then in effect, or the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and as then in effect, or the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act") and as then in effect, or with the purpose
or effect of otherwise prohibiting the offering or sale of obligations of the
general character of the Bonds, or the Bonds, as contemplated hereby;
(e) any event shall occur or information shall become
known, which, in the Remarketing Agent's reasonable judgment, makes untrue,
incorrect or misleading in any material respect any statement or information
contained in the then most current Placement Memorandum provided to the
Remarketing Agent in connection with the performance of its duties hereunder, or
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<PAGE>
causes such document to contain an untrue, incorrect or misleading statement of
a material fact or to omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading;
(f) any governmental authority shall impose, as to the
Bonds, or obligations of the general character of the Bonds, any material
restrictions not now in force, or increase materially those now in force;
(g) any of the material representations and warranties of
the Company made hereunder shall not have been true and correct on the date
made; or
(h) the Company fails to observe any of the material
covenants or agreements made herein.
Section 4.05. Remarketing Agent's Performance.
The duties and obligations of the Remarketing Agent shall be
determined solely by the express provisions of this Remarketing Agreement and
the Indenture, and the Remarketing Agent shall not be responsible for the
performance of any duties and obligations other than as are specifically set
forth in this Remarketing Agreement and the Indenture, and no implied covenants
or obligations shall be read into this Remarketing Agreement or the Indenture
against the Remarketing Agent. The Remarketing Agent may conclusively rely upon
any notice or document given or furnished to it, and conforming to the
requirements of this Remarketing Agreement or the Indenture, and the Remarketing
Agent may rely and shall be protected in acting upon such notice or any document
reasonably believed by it to be genuine and to have been given, signed or
presented by the proper party or parties. The Remarketing Agent will endeavor to
comply with all applicable laws and regulations in the performance of its duties
hereunder and under the Indenture and the Installment Sale Agreement.
Section 4.06 Remarketing Agent Not to Act as Underwriter.
It is understood and agreed that the Remarketing Agent, in
entering into this Remarketing Agreement, is obligated to remarket the Bonds
upon consideration of prevailing financial market conditions pursuant to the
Indenture. The Remarketing Agent shall not, in fulfilling its obligations
hereunder, act as an underwriter for Bonds and is in no way obligated, directly
or indirectly, to advance its own funds to purchase Bonds delivered to it
pursuant to the Indenture.
Section 4.05. Notices.
Unless otherwise specified, any notices, requests or other
communications given or made hereunder or pursuant hereto shall be made in
writing and shall be deemed to have been validly given or made if either duly
mailed by certified or registered mail, return receipt requested, or hand
delivered, addressed as follows: if to the Company, Spurlock Adhesives, Inc.
5090 General Mahone Highway, Waverly, Virginia 23890, Attention: Phillip S.
Sumpter, if to the Issuer, County of Saratoga Industrial Development Agency,
Saratoga County Municipal Center, 40 McMaster Street, Ballston Spa, New York
12020 Attention: Administrator, with a copy to Snyder, Kiley, Toohey & Corbett,
LLP, 160 West Avenue, P.O. Box 4367, Saratoga Springs, New York 12866,
Attention: Michael J. Toohey, Esq., and if to the Remarketing Agent, KeyBank
National Association, 127 Public Square, Fourth Floor, Cleveland, Ohio
44114-1306, Attention: Trading and
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Underwriting Department, OH--01-27-0419. The Notice Address shall constitute,
for the purposes set forth in the Indenture, the principal office of KeyBank
National Association as Remarketing Agent.
Section 4.06 No Recourse; Special Obligations.
(a) The obligations and agreements of the Issuer
contained herein and in the other Financing Documents and any other instrument
or document executed in connection herewith, and any other instrument or
document supplemental thereto or hereto, shall be deemed the obligations and
agreements of the Issuer, and not of any member, officer, agent (other than the
Company) or employee of the Issuer in his individual capacity, and the members
officers, agents (other than the Company) and employees of the Issuer shall not
be liable personally hereon or thereon or be subject to any personal liability
or accountability based upon or in respect hereof or thereof or of any
transaction contemplated hereby or thereby. The obligations and agreement of the
Issuer contained herein and therein shall not constitute or give rise to any
obligations of the State or of Saratoga County, New York, and neither the State
nor Saratoga County, New York shall be liable hereon or thereon, and, further,
such obligations and agreements shall not constitute or give rise to a general
obligation of the Issuer, bur rather shall constitute limited, special
obligations of the Issuer payable solely from the revenues of the Issuer derived
and to be derived from the sale of other disposition of the Project and the
other collateral pledged as security therefor (except for revenues derived by
the Issuer with respect to the Unassigned Issuer's Rights).
(b) No order or decree of specific performance with
respect to any of the obligations of the Issuer hereunder or thereunder shall be
sought or enforced against the Issuer unless (i) the party seeking such order or
decree shall first have requested the Issuer in writing to take the action
sought in such order or decree of specific performance, and ten (10) days shall
have elapsed from the date of receipts of such request, and the Issuer shall
have refused to comply with such request (or, if compliance therewith would
reasonably be expected to take longer than ten (1) days, shall have failed to
institute and diligently pursue such action to cause compliance with such
request) or failed to respond within such notice period, and (ii) if the Issuer
refuses to comply with such request and the Issuer's refusal to comply is based
on its reasonable expectation that it will incur fees and expenses, the party
seeking such order or decree shall have placed in an account with the Issuer an
amount or undertaking sufficient to cover such reasonable frees and expenses,
and (iii) if the Issuer refuses to comply with such request and the Issuer's
refusal to comply is based on its reasonable expectation that it or any of its
members, officers, agents (other than the Company) or employees shall be subject
to potential liability, the party seeking such order or decree shall (A) agree
to indemnify and hold harmless the Issuer and its members, officer, agents
(other than the Company) and employees against any liability incurred as a
result of its compliance with such demand, and (B) if requested by the Issuer,
furnish to the Issuer satisfactory security to protect the Issuer and its
members, officers, agents (other than the Company) and employees against all
liability expected to be incurred as a result of compliance with such request.
9
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Company and the
Remarketing Agent have caused this Remarketing Agreement to be duly executed by
their duly authorized representatives, respectively, as of the date first above
written.
COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ Floyd H. Rourke
----------------------------------
Floyd H. Rourke
Chairman
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
----------------------------------
Phillip S. Sumpter
Executive Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/
----------------------------------
Its: Vice President
---------------------------------
361\25081AAB.82Y
10
Exhibit 10.39
CLOSING ITEM NO.: A-12
================================================================================
SPURLOCK ADHESIVES, INC.
and
KEYBANK NATIONAL ASSOCIATION
-----------------------------------------------
PLEDGE AND SECURITY AGREEMENT
-----------------------------------------------
DATED AS OF OCTOBER 1, 1997
================================================================================
<PAGE>
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (the "Agreement"), dated as of
OCTOBER 1, 1997, by and between SPURLOCK ADHESIVES, INC.. a Virginia corporation
having an address at 5090 General Mahone Highway, Waverly, Virginia 23890 (the
"Company"), and KEYBANK NATIONAL ASSOCIATION, a national banking association
organized and existing and existing under the laws of the United States and
having an office at 66 South Pearl Street, Albany, New York 12207-1501 (the
"Bank"):
WHEREAS, the County of Saratoga Industrial Development Agency (the
"Issuer") has agreed with the Company to issue its $6,000,000 aggregate
principal amount Multi-Mode Variable Rate Industrial Development Revenue Bonds
(Spurlock Adhesives, Inc. Project), Series 1997 A (the "Bonds"), under a certain
trust indenture dated as of October 1, 1997 (the "Indenture"), between the
Issuer and Star Bank, N.A., as trustee (the "Trustee"); and
WHEREAS, the Bank has agreed to issue its irrevocable, transferable,
direct-pay letter of credit (the "Letter of Credit") pursuant to the terms of a
certain letter of credit reimbursement agreement dated as of October 1, 1997,
between the Company and the Bank (together with any other subsequent credit and
reimbursement agreements by and between the Company and the Bank collectively
the "Reimbursement Agreement"); and
WHEREAS, in connection with the issuance of the Bonds, the Company has
agreed to enter into the Reimbursement Agreement in order to induce the Bank to
issue the Letter of Credit thereunder which may be used, inter alia, to pay the
purchase price of Bonds which are not successfully remarketed in the event that
a Bondholder (as defined in the Indenture) exercises a demand purchase option or
in the event that such Bonds are subject to mandatory tender; and
WHEREAS, it is a condition precedent to the obligation of the Bank to
issue its Letter of Credit that the Company shall have entered into this
Agreement with the Bank;
NOW, THEREFORE, in consideration of the premises and in order to induce
the Bank to issue the Letter of Credit pursuant to the Reimbursement Agreement
and for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the
Reimbursement Agreement shall have such defined meanings when used herein.
SECTION 2. Pledge. The Company hereby pledges, assigns, hypothecates, transfers,
and delivers to the Bank all of its right, title and interest to all Bonds which
may from time to time be delivered by the Trustee to the Bank in connection with
a drawing by the Trustee under the Letters of Credit for a Bond Purchase
Drawing-Principal or a Bond Purchase Drawing-Interest (both as defined in the
Letter of Credit) to purchase Bonds which have not been successfully remarketed
by the Remarketing Agent (the "Purchased Bonds"), and hereby grants to the Bank
a first lien on, and security interest in, all right, title and interest in and
to the Purchased Bonds and all proceeds thereof, as collateral security for the
complete payment when due of all amounts due to the Bank from the Company under
the Reimbursement Agreement and interest on such amounts as set forth therein
and all obligations due and owing the Bank under any of the other Financing
Documents (collectively, the "Obligations").
<PAGE>
SECTION 3. Registration of Bonds.
(A) Upon delivery thereof to the Bank, Purchased Bonds shall be
registered in the name of the Company and shall be duly endorsed for transfer by
the Company in blank, or the Company shall have delivered to the Bank
appropriate instruments of transfer duly executed in blank by the Company. The
Bank may, but shall not be obligated to, register Purchased Bonds in its name or
that of its agent at any time and from time to time.
(B) If, while this Agreement is in effect, the Company shall become
entitled to receive or shall receive any payment, including, without limitation,
any payment of principal, premium, interest or proceeds of sale with respect to
the Purchased Bonds, such payment shall be subject to this Agreement, and the
Company hereby irrevocably directs the Trustee to make any such payments
directly to the Bank and, in the event any such payments are received by the
Company, the Company agrees to accept the same as the Bank's agent and to hold
the same in trust on behalf of the Bank and to deliver the same forthwith to the
Bank. All sums of money so paid with respect to the Purchased Bonds which are
received by the Company and paid to the Bank, and all such amounts which shall
be paid directly to the Bank by the Trustee, shall be credited against the
corresponding reimbursement obligations of the Company under the Reimbursement
Agreement.
(C) During such time as Bonds are pledged to the Bank under the
terms of this Agreement, the Bank shall be entitled to exercise all of the
rights of an owner of Bonds with respect to voting, consenting and directing the
Trustee as if the Bank were the owner of such Bonds, and the Company hereby
grants and assigns to the Bank all such rights.
SECTION 4. Collateral. All Purchased Bonds at any time pledged hereunder and all
income therefrom and proceeds thereof, are herein collectively referred to as
the "Collateral".
SECTION 5. Release of Bonds. Simultaneously with the receipt by the Bank of the
proceeds of the sale of any Purchased Bonds in an amount equal to the principal
amount of Purchased Bonds remarketed by the Remarketing Agent pursuant to the
Remarketing Agreement, together with any interest accrued on account of the Bond
Purchase Drawing-Principal or Bond Purchase Drawing-Interest, Purchased Bonds in
the principal amount equal to the principal amount received by the Bank from
said sale shall be released from the lien of this Agreement and shall be
delivered to the Remarketing Agent, and such payment shall increase the amount
payable under the Letter of Credit with respect to Bond Purchase
Drawings-Principal and/or Bond Purchase Drawings-Interest.
SECTION 6. Rights of the Bank. The Bank shall not be liable for failure to
collect or realize upon the Obligations or any collateral security or guarantee
therefor, or any part thereof, or for any delay in so doing nor shall it be
under any obligation to take any action whatsoever with regard thereto. If an
Event of Default on the part of the Company under the Reimbursement Agreement
has occurred and is continuing, the Bank may thereafter without notice exercise
all rights, privileges or options pertaining to any Purchased Bonds as if it
were the absolute owner thereof, upon such terms and conditions as it may
determine, all without liability, except to account for property actually
received by the Bank; provided, however, the Bank
2
<PAGE>
shall have no duty to exercise any of the aforesaid rights, privileges or
options and shall not be responsible for any failure to do so or delay in so
doing.
SECTION 7. Remedies. If an Event of Default has occurred and is continuing, and
any portion of the Obligations has been declared due and payable, the Bank,
without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of the time and place of public or
private sale) to or upon the Company or any other Person (all and each of which
demands, advertisements and/or notices are hereby expressly waived), may
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give option or options to
purchase, contract to sell or otherwise dispose of and deliver all or any part
of the Collateral, in such manner as the Bank may elect, including a purchase
for its own account, upon such terms and conditions and at such price as it may
deem advisable. All Purchased Bonds so sold shall be free of any right or equity
of redemption in the Company, which right or equity is hereby expressly waived
or released. The Bank shall apply the net proceeds of any such realization of
sale, after deducting all reasonable costs and expenses incurred in connection
therewith including reasonable attorneys' fees, to the payment in whole or in
part, of the Obligations in such order as the Bank may elect. The Company shall
remain liable for any deficiency remaining unpaid after such application, and
the Bank shall be required to account to the Company for any surplus only after
so applying such net proceeds and after the payment by the Bank of any other
amount required by any provision of law. The Bank shall give ten (10) days'
notice of the time and place of any public sale or of the time after which a
private sale or other intended disposition of the Purchased Bonds is to take
place and such notice shall constitute reasonable notification thereof. In
addition to the rights and remedies granted to it in this Agreement and in any
other instrument or agreement securing, evidencing or relating to any of the
Obligations, the Bank shall have all the rights and remedies of a secured party
under the Uniform Commercial Code of the State of New York.
SECTION 8. Representations, Warranties and Covenants of the Company. The Company
represents and warrants that:
(A) on the date of delivery to the Bank of any Purchased Bonds
described herein, neither the Issuer, the Remarketing Agent, the Trustee nor any
other Person will have any right, title or interest in and to the Purchased
Bonds;
(B) it has, and on the date of delivery to the Bank of any
Purchased Bonds will have, full capacity and legal right to pledge all of its
right, title and interest in and to the Purchased Bonds pursuant to this
Agreement;
(C) this Agreement has been duly authorized, executed and delivered
by the Company and constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms;
(D) no consent of any other party including, without limitation,
creditors of the Company and no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required to be obtained by the
Company in connection with the execution, delivery or performance of this
Agreement;
3
<PAGE>
(E) the execution, delivery and performance of this Agreement will
not violate the Company's Articles of Incorporation or by-laws or any provision
of any applicable law or regulation or of any order, judgment, writ, award or
decree of any court, arbitrator or Governmental Authority, or of any mortgage,
indenture, lease, contract, or other agreement, instrument or undertaking to
which the Company is a party or by which it is bound or upon any of its assets
and will not result in the creation or imposition of any lien, charge or
encumbrance on or security interest in any of the assets of the Company except
as contemplated by this Agreement which would have a material and adverse effect
on the security of the Bank;
(F) there is no pending action or proceeding before any court,
governmental agency or arbitrator against or directly involving the Company and,
to the best of the Company's knowledge, there is no threatened action or
proceeding affecting the Company before any court, governmental agency or
arbitrator which, in any case, is likely materially to impair the Company's
ability to perform its obligations under this Agreement; and
(G) the pledge, assignment and delivery to the Bank of such
Purchased Bonds pursuant to this Agreement will create a valid first lien on and
a first perfected security interest in all right, title and interest of the
Company in and to such Purchased Bonds, and the proceeds thereof, subject to no
prior pledge, lien, mortgage, hypothecation, security interest, charge, option
or encumbrance or to any agreement purporting to grant to any third party a
security interest in the property or assets of the Company which would include
the Purchased Bonds.
The Company covenants and agrees that it will defend the Bank's right,
title and security interest in and to the Purchased Bonds and the proceeds
thereof against the claims and demands of all Persons whomsoever, and covenants
and agrees that it will have like title and right to pledge any other Property
at any time hereafter pledged to the Bank as Collateral hereunder and will
likewise defend the Bank's right thereto and security interest therein.
SECTION 9. No Disposition, etc. Without prior written consent of the Bank, the
Company agrees that it will not sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral, nor will it
create, incur or permit to exist any pledge, lien, mortgage, hypothecation,
security interest, charge, option or any other encumbrance with respect to any
of the Collateral, or any interest therein, or any proceeds thereof, except for
the lien and security interest provided for by this Agreement.
SECTION 10. Sale of Collateral.
(A) The Company recognizes that the Bank may be unable to effect a
public sale of any or all of the Purchased Bonds by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and applicable
state securities laws, but may be compelled to resort to one or more private
sales thereof to a restricted group of purchasers who will be obligated to
agree, among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. The
Company acknowledges and agrees that any such private sale may result in prices
and other terms less favorable to the seller than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner so long as
the Company shall have been given not less than 10 days prior notice of the date
and terms of such private sale. The Bank shall be under no obligation to delay a
sale of any of the Purchased Bonds for the
4
<PAGE>
period of time necessary to permit the Issuer to register such securities for
public sale under the Securities Act, or under applicable state securities laws,
even if the Issuer would agree to do so.
(B) The Company further agrees to do or cause to be done all such
other acts and things as may be necessary to make such sale or sales of any
portion or all of the Purchased Bonds valid and binding and in compliance with
any and all applicable laws, regulations order, writs, injunctions, decrees or
awards of any and all courts, arbitrators or governmental instrumentalities
having jurisdiction over any such sale or sales, all at the Company's expense.
The Company further agrees that a breach of any of the covenants contained in
this paragraph 10 will cause irreparable injury to the Bank, that the Bank has
no adequate remedy at law in respect of such breach and, as a consequence,
agrees that each and every covenant contained in this paragraph shall be
specifically enforceable against the Company and the Company hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Event of Default has occurred under
the Reimbursement Agreement.
SECTION 11. Further Assurances. The Company agrees that at any time and from
time to time upon the written request of the Bank, the Company will execute and
deliver such further documents and do such further acts and things as the Bank
may reasonably request in order to effect the purposes of this Agreement.
SECTION 12. Notices. All notices provided for hereunder shall be in writing and
shall be mailed or delivered to the respective parties hereto as follows:
If to the Company to:
IF TO THE COMPANY:
Spurlock Adhesives, Inc.
5090 General Mahone Highway
Waverly, Virginia 23890
Attention: Phillip S. Sumpter, Executive Vice President
WITH A COPY TO:
Williams Mullen Christian & Dobbins, P.C.
1021 East Cary Street
Richmond, Virginia 23219
Attention: David L. Dallas, Jr., Esq.
IF TO THE BANK:
KeyBank National Association
66 South Pearl Street
Albany, New York 12207-1501
Attention: Corporate Banking Division
5
<PAGE>
WITH A COPY TO:
Crane Kelley Greene & Parente
90 State Street
Albany, New York 12207
Attention: Kevin J. Kelley, Esq.
or as to each party at such other address as shall be designated by such party
in a written notice to each other party. All such notices shall be in writing
and shall be deemed given when (A) sent to the applicable address stated above
by registered or certified mail, postage prepaid, return receipt requested, or
by such other means (including, but not limited to, personal delivery) as shall
provide the sender with documentary evidence of such delivery, (B) delivery is
refused by the addressee as evidenced by the affidavit of the person who
attempted to effect such delivery.
SECTION 13. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 14. No Waiver; Cumulative Remedies. The Bank shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder and no waiver shall be valid unless in writing, signed by the
Bank, and then only to the extent therein set forth. A waiver by the Bank of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Bank would otherwise have on any future occasion.
No failure to exercise or any delay in exercising on the part of the Bank any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are in addition to
and are not exclusive of any rights or remedies provided by the other Financing
Documents, or by law or in equity.
SECTION 15. Waivers, Amendments; Applicable Law. None of the terms or provisions
of this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Company and the Bank. This Agreement
shall be binding upon, and shall inure to the benefit of the parties hereto and
their respective, successors and assigns. This Agreement shall be governed by,
and be construed and interpreted in accordance with, the laws of the State of
New York.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their proper and duly authorized by its officers as of the day
and year first above written.
SPURLOCK ADHESIVES, INC.
BY: /s/ Phillip S. Sumpter
---------------------------------
ITS: Phillip S. Sumpter, Executive Vice President
--------------------------------
KEYBANK NATIONAL ASSOCIATION
BY: /s/ Richard C. Van Auken
---------------------------------
ITS: Senior Banker
--------------------------------
7
Exhibit 10.40
CLOSING ITEM NO.: A-13
- -------------------------------------------------------------------------------
COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT AGENCY
AND
SPURLOCK ADHESIVES, INC.
===========================================================
PAYMENT IN LIEU OF TAX AGREEMENT
===========================================================
DATED AS OF OCTOBER 1, 1997
- -------------------------------------------------------------------------------
<PAGE>
PAYMENT IN LIEU OF TAX AGREEMENT
THIS PAYMENT IN LIEU OF TAX AGREEMENT dated as of OCTOBER 1, 1997
("Agreement") by and between the COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT
AGENCY, a public benefit corporation of the State of New York having its office
at the Saratoga County Municipal Center, 40 McMaster Street, Ballston Spa, New
York 12020 (the "Issuer"), and SPURLOCK ADHESIVES, INC., a corporation having an
address of 5090 General Mahone Highway, Waverly, Virginia 23890 (the "Company");
W I T N E S S E T H:
WHEREAS, the New York State Industrial Development Agency Act, being
Title I of Article 18-A of the General Municipal Law, Chapter 24, of the
Consolidated Laws of the State of New York, as amended (the "Enabling Act"),
authorizes and provides for the creation of industrial development agencies for
the benefit of the several counties, cities, villages and towns in the State of
New York and empowers such agencies, among other things, to acquire, construct,
reconstruct, lease, improve, maintain, equip and dispose of land and any
buildings or other improvements, and all real and personal properties,
including, but not limited to, machinery and equipment deemed necessary in
connection therewith, whether or not now in existence or under construction,
which shall be suitable for, among other things, manufacturing, warehousing,
research, commercial or industrial purposes, in order to advance the job
opportunities, health, general prosperity and economic welfare of the people of
the State of New York and to improve their recreation opportunities, prosperity
and standard of living; and
WHEREAS, the Enabling Act further authorizes each such agency to lease
or sell any or all of its facilities and to issue its bonds for the purpose of
carrying out any of its corporate purposes and, as security for the payment of
the principal and redemption price of, and interest on, any such bonds so issued
and any agreements made in connection therewith, to mortgage and pledge any or
all of its facilities whether then owned or thereafter acquired, and to pledge
the revenues and receipts from the lease or sale thereof to secure the payment
of such bonds and interest thereon; and
WHEREAS, the Issuer was created pursuant to and in accordance with the
provisions of the Enabling Act by Chapter 855 of the Laws of 1971 of the State
of New York, as amended (said chapter and the Enabling Act being hereinafter
collectively referred to as the "Act"), and is empowered under the Act to
undertake the Project (as hereinafter defined) in order to so advance the job
opportunities, health, general prosperity and economic welfare of the people of
the State of New York and improve their standard of living; and
WHEREAS, the Issuer, by resolution adopted on September 16, 1997 (the
"Resolution"), resolved to issue its Industrial Development Revenue Bonds
(Spurlock Adhesives, Inc. Project), Series 1997 A in the aggregate principal
amount not to exceed $6,000,000 (the "Bonds") in connection with a project (the
"Project") undertaken by the Issuer consisting of (A) (1) the acquisition of a
certain parcel of land comprising approximately 16.37 acres constituting Lot #3
located in the Moreau Industrial Park in the Town of Moreau, Saratoga County,
New York as more particularly described on Exhibit "A" attached hereto (the
"Land"), (2) the construction on the Land of two (2) buildings approximately
10,000 square feet each in size and one (1) approximately 800 square foot
building for use in the manufacturing of synthetic organic chemicals and related
functions (collectively the "Facility") and (3) the acquisition and installation
therein of certain machinery and equipment (the "Equipment" and together with
the Land and the Facility, the "Project Facility"), and (B) the financing of a
portion of the costs of the foregoing; and
WHEREAS, the Issuer will sell the Project Facility to the Company
pursuant to the terms of an installment sale agreement dated as of October 1,
1997 (as amended from time to time, the "Installment Sale Agreement") by and
between the Issuer and the Company; and
<PAGE>
WHEREAS, the Bonds will be issued and sold pursuant to a trust
indenture dated as of October 1, 1997 (the "Indenture") by and between the
Issuer and Star Bank, N.A., as trustee (the "Trustee"); and
WHEREAS, under the present provisions of the Act and Section 412-a of
the Real Property Tax Law of the State of New York (the "Real Property Tax
Law"), the Issuer is not required to pay taxes or assessments upon any of the
property acquired by it or under its jurisdiction, supervision or control or
upon its activities; and
WHEREAS, pursuant to the provision of Section 6.6 of the Installment
Sale Agreement, the Company has agreed to make payments in lieu of real estate
taxes with respect to the Project Facility in the amounts and in the manner
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
DEFINITION OF TERMS. All words and terms used herein and not otherwise defined
herein shall have the meanings assigned to such words and terms in the
Installment Sale Agreement.
2
<PAGE>
ARTICLE I
REPRESENTATIONS AND WARRANTIES
SECTION 1.01. REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company represents
and warrants that:
(A) Power: The Company is a company duly formed and validly
existing under the laws of the State of Virginia, is authorized to conduct
business in the State of New York and has power and authority to enter into this
Agreement and to carry out its obligations hereunder.
(B) Authorization: Neither the execution and delivery of this
Agreement, the consummation by the Company of the transactions contemplated
hereby nor the fulfillment by the Company of or compliance by the Company with
the provisions of this Agreement will conflict with or result in a breach of any
of the terms, conditions or provisions of the Articles of Incorporation or
by-laws of the Company or, in any material respect, of any order, judgment,
agreement, or instrument to which the Company is a party or by which it is
bound, or will constitute a default under any of the foregoing.
(C) Governmental Consent: To the knowledge of the Company no
consent, approval or authorization of, or filing, registration or qualification
with, any governmental or public authority on the part of the Company not
already obtained is required as a condition precedent to the execution, delivery
or performance of this Agreement by the Company or as a condition precedent to
the consummation by the Company of the transactions contemplated hereby.
SECTION 1.02. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer
represents and warrants that:
(A) Power: The Issuer is duly established under the provisions of
the Act and has the power to enter into this Agreement and to carry out its
obligations hereunder. By proper official action, the Issuer has been duly
authorized to execute, deliver and perform this Agreement.
(B) Authorization: Neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby by the
Issuer nor the fulfillment by the Issuer or compliance by the Issuer with the
provisions of this Agreement will conflict with or result in a breach by the
Issuer of any of the terms, conditions or provisions of the Act, the by-laws of
the Issuer, or any order, judgment, restriction, agreement or instrument to
which the Issuer is a party or by which it is bound, or will constitute a
default by the Issuer under any of the foregoing.
(C) Governmental Consent: To the knowledge of Issuer no consent,
approval or authorization of, or filing, registration or qualification with, any
governmental or public authority on the part of the Issuer is required as a
condition precedent to the execution, delivery or performance of this Agreement
by the Issuer or as a condition precedent to the consummation by the Issuer of
the transactions contemplated hereby.
3
<PAGE>
ARTICLE II
COVENANTS AND AGREEMENTS
SECTION 2.01. TAX-EXEMPT STATUS OF PROJECT FACILITY.
(A) Assessment of Facility: Pursuant to Section 874 of the Act and
Section 412-a of the Real Property Tax Law, the parties hereto acknowledge that,
upon acquisition of the Project Facility by the Issuer, and for so long
thereafter as the Issuer shall own the Project Facility, the Project Facility
shall be assessed by the various taxing entities having jurisdiction over the
Project Facility, including, without limitation, any county, city, school
district, town, village or other political unit or units wherein the Project
Facility is located (such taxing entities being sometimes collectively
hereinafter referred to as the "Taxing Entities", and each of such Taxing
Entities being sometimes individually hereinafter referred to as a "Taxing
Entity") as exempt upon the assessment rolls of the respective Taxing Entities
prepared subsequent to the acquisition by the Issuer of title to the Project
Facility. The Company shall promptly, following acquisition by the Issuer of
title to the Project Facility, cooperate to ensure that the Project Facility is
assessed as exempt upon the assessment rolls of the respective Taxing Entities
prepared subsequent to such acquisition by the Issuer, and for so long
thereafter as the Issuer shall own the Project Facility, the Company shall take
such further action as may be necessary to maintain such exempt assessment with
respect to each Taxing Entity. The Issuer will cooperate with the Company and
will take all action as may be necessary (subject to the provisions of Section
3.01 hereof) to preserve the tax exempt status of the Project Facility. The
parties hereto acknowledge that the Project Facility shall not be entitled to
such exempt status on the tax rolls of any Taxing Entity until the first March 1
to occur following the Issuer's acquisition of the Project Facility with respect
to town, county and school taxes. Pursuant to the provisions of the Installment
Sale Agreement, the Company will be required to pay to the appropriate Taxing
Entity all taxes and assessments lawfully levied and/or assessed by the
appropriate Taxing Entity against the Project Facility, including taxes and
assessments levied for the current tax year and all subsequent tax years until
the Project Facility shall be entitled to exempt status on the tax rolls of the
appropriate Taxing Entity.
(B) Special Assessments: The parties hereto understand that the
tax exemption extended to the Issuer by Section 874 of the Act and Section 412-a
of the Real Property Tax Law does not entitle the Issuer to exemption from
special assessments and special ad valorem levies. Pursuant to the Installment
Sale Agreement, the Company will be required to pay to the appropriate Taxing
Entity all special assessments and special ad valorem levies lawfully levied
and/or assessed by the appropriate Taxing Entity against the Project Facility.
SECTION 2.02. PAYMENTS IN LIEU OF TAXES.
(A) Agreement to Make Payments: The Company agrees that it will
make annual payments in lieu of real estate taxes with respect to the Project to
the Issuer in the amounts hereinafter provided for redistribution to the
respective Taxing Entities in proportion to the amounts which said Taxing
Entities would have received had not the Project Facility been acquired and
owned by the Issuer.
(B) Amount of Payments in Lieu of Taxes:
(1) Town and County Taxes: (a) Commencing on February 15,
1999 and continuing on February 15 of each year thereafter up to and including
February 15, 2008, payments in lieu of real estate taxes shall be due, owing and
payable by the Company to the Issuer on account of town and county taxes with
respect to each appropriate Taxing Entity equal to the product of (i) the
Initial Assessed Land Value (as herein defined) and (ii) the tax rate or rates
of each such Taxing Entity applicable to the Project Facility for the current
tax year of such Taxing Entity. For purposes of this Section 2.02, the term
"Initial Assessed Land Value" shall mean the greater of
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(i) the Assessed Value of the Land determined in accordance with Section 2.02(3)
hereof and (ii) the product of the purchase price paid by the Company for the
Land and the applicable Equalization Rate.
(b) Commencing February 15, 2009 and continuing on each
February 15 thereafter for such time as this Agreement is in effect,
payments in lieu of real estate taxes shall be due, owing and payable
by the Company to the Issuer on account of town and county taxes with
respect to each appropriate Taxing Entity in an amount to be determined
by multiplying (i) the Assessed Value of the Project Facility
determined pursuant to Section 3 of this Section 2.02 by (ii) the tax
rate or rates of such Taxing Entity applicable to the Project Facility
for the current tax year of such Taxing Entity
(2) School Taxes: (a) Commencing September 15, 1998 and
continuing on September 15 of each year up to and including September 15, 2007,
payments in lieu of real estate taxes shall be due, owing and payable by the
Company to the Issuer on account of school taxes equal to the product of (i) the
Initial Assessed Land Value and (ii) the tax rate or rates of the Hudson Falls
Central School District applicable to the Project Facility for the current tax
year.
(b) Commencing September 15, 2008 and continuing for such
time as this Agreement is in effect, payments in lieu of real estate
taxes shall be due, owing and payable by the Company to the Issuer on
account of school taxes in an amount to be determined by multiplying
(i) the Assessed Value of the Project Facility determined pursuant to
Section 3 of this Section 2.02 by (ii) the tax rate or rates of the
Hudson Falls Central School District applicable to the Project Facility
for the current tax year of the Hudson Falls Central School District.
(3) (a) For purposes of this Section 2.02 the "Assessed
Value" of the Land or the Project Facility, as applicable, shall be determined
by the appropriate officer or officers of the Taxing Entity responsible for
assessing properties in each Taxing Entity (said officer or officers being
hereinafter collectively referred to as the "Assessor"). The Assessor shall (a)
appraise the Land or the Project Facility, as applicable, (excluding, where
permitted by law, personal property) in the same manner as other similar
properties in said Taxing Entity and (b) place a value for assessment purposes
upon the Land or the Project Facility, as applicable, equalized if necessary by
using the appropriate equalization rates as apply in the assessment and levy of
real property taxes.
(b) If the Company is dissatisfied with the amount of
Assessed Value as initially established or as changed, the Company may
pursue review of the Assessed Value under Article 7 of the New York
State Real Property Tax Law or any other law or ordinance then in
effect relating to disputes over assessed valuation of real property in
the State of New York, and may take any and all other action available
to it at law or in equity, for a period of two (2) years from the date
such Assessed Value is initially established or changed. IF THE COMPANY
FAILS TO PURSUE REVIEW OF (I) THE INITIALLY ESTABLISHED ASSESSED VALUE,
DURING THE SEVEN (7) YEAR PERIOD FOLLOWING SUCH ESTABLISHMENT, OR (II)
ANY CHANGE IN ASSESSED VALUE, DURING THE TWO (2) YEAR PERIOD FOLLOWING
ANY SUCH CHANGE, THE COMPANY SHALL BE DEEMED TO HAVE WAIVED ANY RIGHT
TO CONTEST OR DISPUTE SUCH ASSESSED VALUE AT ANY TIME FOR A SEVEN (7)
YEAR PERIOD COMMENCING IN 2008 NOTWITHSTANDING ANYTHING IN THE NEW YORK
STATE REAL PROPERTY TAX LAW TO THE CONTRARY. THIS SEVEN (7) YEAR
LIMITATION SHALL APPLY TO EACH AND EVERY CHANGE IN ASSESSMENT MADE
DURING THE PERIOD THAT THE ISSUER HOLDS TITLE TO THE PROJECT FACILITY,
AND SHALL BE FOR THE BENEFIT OF THE ISSUER AND THE OTHER TAXING
ENTITIES. The Issuer hereby irrevocably appoints the Company its
attorney-in-fact and agent (coupled with an interest) for the purpose
of commencing any proceeding, preparing and filing all documents and
taking any and all other actions required to be taken by Issuer,
necessary or desirable, in the opinion of the Company, to contest or
dispute any Assessed Value within such two (2) year period; provided,
however, that the Issuer shall incur no expense or liability in
connection with any action taken or omitted to be taken by its
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attorney-in-fact and agent. The Issuer agrees to promptly furnish to
the Company any communication which the Issuer may receive from any
Taxing Entity relating to the Project Facility.
(4) Additional Amounts in Lieu of Taxes: Commencing on
each of the first February 15 and September 15 of the first tax year following
the date on which any structural addition shall be made to the Project Facility
or any portion thereof or any additional building or other structure shall be
constructed on the Land (such structural additions and additional buildings and
other structures being hereinafter referred to as "Additional Facilities"), the
Company agrees to make additional annual payments in lieu of property taxes
(such additional payments being hereinafter collectively referred to as
"Additional Payments") to the Issuer with respect to such Additional Facilities,
such Additional Payments to be computed separately for each Taxing Entity as
follows:
(1) Determine the amount of general taxes and general
assessments (hereinafter referred to as the "Normal Tax") which would
be payable to each Taxing Entity if such Additional Facilities were
owned by the Company and not the Issuer by multiplying (a) the
additional Assessed Value of such Additional Facilities determined
pursuant to subsection (B)(3) of this Section 2.02, by (b) the tax rate
or rates of such Taxing Entity that would be applicable to such
Additional Facilities if such Additional Facilities were owned by the
Company and not the Issuer, and (c) reduce the amount so determined by
the amounts of any tax exemptions that would be afforded to the Company
by such Taxing Entity if such Additional Facilities were owned by the
Company and not the Issuer.
(2) In each calendar year during the term of this
Agreement (commencing in the calendar year when such Additional
Facilities first appear on the assessment roll of any Taxing Entity),
the amount payable by the Company to the Issuer on behalf of each
Taxing Entity as a payment in lieu of property tax with respect to such
Additional Facilities pursuant to this Agreement shall be an amount
equal to one hundred percent (100%) of the Normal Tax due each Taxing
Entity with respect to such Additional Facilities for such calendar
year (unless the Issuer and the Company shall enter into a separate
written agreement regarding payments in lieu of property taxes with
respect to such Additional Facilities, in which case the provisions of
such separate written agreement shall control).
SECTION 2.03. INTEREST. If the Company shall fail to make any payment required
by this Agreement when due, its obligation to make the payment so in default
shall continue as an obligation of the Company until such payment in default
shall have been made in full, and the Company shall pay the same together with
late fees and interest thereon equal to the greater of (A) any late fees and
interest which would be applicable with respect to each Taxing Entity were the
Project Facility owned by the Company and not the Issuer and (B) the late fees
and interest prescribed by subsection (5) of Section 874 of the General
Municipal Law of the State of New York (or any successor statute thereto).
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ARTICLE III
LIMITED OBLIGATION OF THE ISSUER
SECTION 3.01. NO RECOURSE; LIMITED OBLIGATION OF THE ISSUER.
(A) No Recourse: All covenants, stipulations, promises, agreements
and obligations of the Issuer contained in this Agreement shall be deemed to be
the covenants, stipulations, promises, agreements and obligations of the Issuer
and not of any member, officer, agent, servant or employee of the Issuer in his
individual capacity, and no recourse under or upon any obligation, covenants or
agreement contained in this Agreement, or otherwise based upon or in respect of
this Agreement, or for any claim based thereon or otherwise in respect thereof,
shall be had against any past, present or future member, officer, agent (other
than the Company), servant or employee, as such, of the Issuer or any successor
public benefit corporation or political subdivision or any person executing this
Agreement on behalf of the Issuer, either directly or through the Issuer or any
successor public benefit corporation or political subdivision or any person so
executing this Agreement, it being expressly understood that this Agreement is a
corporate obligation, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, any such member, officer, agent (other than
the Company), servant or employee of the Issuer or of any successor public
benefit corporation or political subdivision or any person so executing this
Agreement under or by reason of the obligations, covenants or agreements
contained in this Agreement or implied therefrom; and that any and all such
personal liability of, and any and all such rights and claims against, every
such member, officer, agent (other than the Company), servant or employee under
or by reason of the obligations, covenants or agreements contained in this
Agreement or implied therefrom are, to the extent permitted by law, expressly
waived and released as a condition of, and as a consideration for, the execution
of this Agreement.
(B) Limited Obligation: The obligations and agreements of the
Issuer contained herein shall not constitute or give rise to an obligation of
the State of New York or the County of Saratoga, New York, and neither the State
of New York nor the County of Saratoga, New York shall be liable thereon, and
further such obligations and agreements shall not constitute or give rise to a
general obligation of the Issuer, but rather shall constitute limited
obligations of the Issuer payable solely from the revenues of the Issuer derived
and to be derived from the lease, sale or other disposition of the Project
Facility (except for revenues derived by the Issuer with respect to the
Unassigned Rights.
(C) Further Limitation: Notwithstanding any provision of this
Agreement to the contrary, the Issuer shall not be obligated to take any action
pursuant to any provision hereof unless (1) the Issuer shall have been requested
to do so in writing by the Company, and (2) if compliance with such request is
reasonably expected to result in the incurrence by the Issuer (or any of its
members, officers, agents, servants or employees) of any liability, fees,
expenses or other costs, the Issuer shall have received from the Company
security or indemnity and an agreement from the Company satisfactory to the
Issuer to defend and hold harmless the Issuer against all such liability,
however remote, and for the reimbursement of all such fees, expenses and other
costs.
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ARTICLE IV
EVENTS OF DEFAULT
SECTION 4.01. EVENTS OF DEFAULT. Any one or more of the following events
(hereinafter an "Event of Default") shall constitute a default under this
Agreement:
(A) Failure of the Company to pay any amount due and payable by it
pursuant to this Agreement and continuance of said failure for a period of
fifteen (15) days after written notice to the Company stating that such payment
is due and payable;
(B) Failure of the Company to observe and perform any other
covenant, condition or agreement on its part to be observed and performed by it
hereunder (other than as referred to in paragraph (A) above) and continuance of
such failure for a period of thirty (30) days after written notice to the
Company specifying the nature of such failure and requesting that it be
remedied; provided that if such default cannot reasonably be cured within such
thirty (30) day period, and the Company shall have commenced action to cure the
breach of such covenant, condition or agreement within said thirty (30) day
period and thereafter diligently and expeditiously proceeds to cure the same,
such thirty (30) day period shall be extended for a period not to exceed ninety
(90) days from the date of receipt by the Company of such notice; or
(C) Any warranty or representation by the Company contained in
this Agreement shall prove to have been false or incorrect in any material
respect on the date when made or on the effective date of this Agreement and
such falsity or incorrectness has a material adverse affect on the Company's
ability to perform its obligations under this Agreement.
SECTION 4.02. REMEDIES ON DEFAULT. Whenever any Event of Default shall have
occurred and be continuing with respect to this Agreement, the Issuer may take
whatever action at law or in equity as may appear necessary or desirable to
collect the amount then in default or to enforce the performance and observance
of the obligations, agreements and covenants of the Company under this Agreement
including, without limitation, the exercise by the Issuer of the remedy set
forth in subsections (A)(3) and (A)(4) of Section 10.2 of the Installment Sale
Agreement. Each such Event of Default shall give rise to a separate cause of
action hereunder and separate suits may be brought hereunder as each cause of
action arises. The Company irrevocably agrees that any suit, action or other
legal proceeding arising out of this Agreement may be brought in the courts of
the State of New York, consents to the jurisdiction of each such court in any
such suit, action or proceeding, and waives any objection which it may have to
the laying of the venue of any such suit, action or proceeding in any of such
courts.
SECTION 4.03. PAYMENT OF ATTORNEY'S FEES AND EXPENSES. If an Event of Default
should occur and be continuing under this Agreement and the Issuer should employ
attorneys or incur other reasonable expenses for the collection of any amounts
due and payable hereunder or for the enforcement of performance or observance of
any obligation or agreement on the part of the Company herein contained, the
Company agrees that it will, on demand therefor by the Issuer, reimburse the
Issuer for the reasonable fees and disbursements of such attorneys and such
other reasonable expenses so incurred, whether or not an action is commenced.
SECTION 4.04. REMEDIES; WAIVER AND NOTICE.
(A) No Remedy Exclusive: Notwithstanding anything to the contrary
contained herein, no remedy herein conferred upon or reserved to the Issuer or
the Company is intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement or now or hereafter
existing at law or in equity or by statute.
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(B) Delay: No delay or omission in exercising any right or power
accruing upon the occurrence of an Event of Default hereunder shall impair any
such right or power or shall be construed to be a waiver thereof, but any such
right or power may be exercised from time to time and as often as may be deemed
expedient.
(C) Notice Not Required: In order to entitle the Issuer to
exercise any remedy reserved to it in this Agreement, it shall not be necessary
to give any notice, other than such notice as may be expressly required in this
Agreement.
(D) No Waiver: In the event any provision contained in this
Agreement should be breached by any party and thereafter duly waived by the
other party so empowered to act, such waiver shall be limited to the particular
breach so waived and shall not be deemed to be a waiver of any other breach
hereunder. No waiver, amendment, release or modification of this Agreement shall
be established by conduct, custom or course of dealing.
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ARTICLE V
MISCELLANEOUS
SECTION 5.01. TERM OF AGREEMENT.
(A) General: This Agreement shall become effective and the
obligations of the Company and the Issuer shall arise absolutely and
unconditionally upon the execution and delivery of this Agreement by the Company
and the Issuer. This Agreement shall continue to remain in effect until the
termination of the Installment Sale Agreement in accordance with its terms.
(B) Extended Term: In the event that (1) title to the Project
Facility shall be conveyed to the Company, (2) on the date on which the Company
obtains title to the Project Facility, the Project Facility shall be assessed as
exempt upon the assessment roll of any one or more of the Taxing Entities solely
as a result of the Issuer's prior ownership of the Project Facility, and (3) the
fact of obtaining title shall not immediately obligate the Company to make pro
rata tax payments pursuant to legislation similar to Chapter 635 of the 1978
Laws of New York (codified as subsection 3 of Section 302 of the Real Property
Tax Law and Section 520 of the Real Property Tax Law), this Agreement shall
remain in full force and effect but only to the extent set forth in this
sentence and the Company shall be obligated to make payments to the Issuer in
amounts equal to the Normal Tax which would be due from the Company if the
Project Facility were owned by the Company and not the Issuer until the first
tax year in which the Company shall appear on the tax rolls of the various
Taxing Entities having jurisdiction over the Project Facility as the legal owner
of record of the Project Facility.
SECTION 5.02. FORM OF PAYMENTS. The amounts payable under this Agreement shall
be payable in such coin and currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts.
SECTION 5.03. COMPANY ACTS. Where the Company is required to do or accomplish
any act or thing hereunder, the Company may cause the same to be done or
accomplished with the same force and effect as if done or accomplished by the
Company.
SECTION 5.04. AMENDMENT OF AGREEMENT. This Agreement may not be amended,
changed, modified, altered, supplemented or terminated unless such amendment,
change, modification, alteration or termination is in writing and unless signed
by the party against which enforcement of the amendment, change, modification,
alteration, supplement or termination shall be sought and, if any Mortgage
remains outstanding, the Security Representative.
SECTION 5.05. NOTICES. All notices, certificates or other communications
hereunder shall be in writing and shall be sufficiently given and shall be
deemed given when (A) sent to the applicable address stated below by registered
or certified mail, return receipt requested, or by such other means as shall
provide the sender with documentary evidence of such delivery (including, but
not limited to, overnight delivery) or (B) delivery is refused by the addressee,
as evidenced by the affidavit of the Person who attempted to effect such
delivery. The address to which notices, certificates and other communications
hereunder shall be delivered are as follows:
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(A) TO THE ISSUER:
County of Saratoga Industrial Development Agency
Saratoga County Municipal Center
40 McMaster Street
Ballston Spa, New York 12020
Attention: Chairman
WITH A COPY TO:
Snyder, Kiley, Toohey & Corbett
160 West Avenue
P.O. Box 4367
Saratoga Springs, New York 12866
Attention: Michael Toohey, Esq.
(B) TO THE COMPANY:
Spurlock Adhesives, Inc.
5090 General Mahone Highway
Waverly, Virginia 23890
Attention: Phillip S. Sumpter, Executive Vice President
WITH A COPY TO:
Williams Mullen Christian & Dobbins, P.C.
1021 East Cary Street
Richmond, Virginia 23219
Attention: David L. Dallas, Jr., Esq.
provided, that the Issuer and the Company may, by notice given hereunder to each
of the others, designate any further or different addresses to which subsequent
notices, certificates or other communications to them shall be sent.
SECTION 5.06. BINDING EFFECT. This Agreement shall inure to the benefit of, and
shall be binding upon, the Issuer, the Company and their respective successors
and assigns.
SECTION 5.07. SEVERABILITY. If any article, section, subdivision, paragraph,
sentence, clause, phrase, provision or portion of this Agreement shall for any
reason be held or adjudged to be invalid or illegal or unenforceable by any
court of competent jurisdiction, such article, section, subdivision, paragraph,
sentence, clause, phrase, provision or portion so adjudged invalid, illegal or
unenforceable shall be deemed separate, distinct and independent and the
remainder of this Agreement shall be and remain in full force and effect and
shall not be invalidated or rendered illegal or unenforceable or otherwise
affected by such holding or adjudication.
SECTION 5.08. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York including all matters of
construction, validity and performance.
SECTION 5.09. ASSIGNMENT. This Agreement may not be assigned by the Company
absent the prior written consent of the Issuer.
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IN WITNESS WHEREOF, the Issuer and the Company have caused this
Agreement to be executed in their respective names, all being done the date
first above written.
COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ Floyd H. Rourke
-------------------------------------
Floyd H. Rourke, Chairman
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
-------------------------------------
Name: Phillip S. Sumpter
-----------------------------------
Title: Executive Vice President
----------------------------------
<PAGE>
EXHIBIT "A"
DESCRIPTION OF THE REAL PROPERTY
THAT TRACT OR PARCEL OF LAND, situate in the Town of Moreau, County of
Saratoga and State of New York more fully described as Lot Number 3 as shown on
subdivision maps of Moreau Industrial Park prepared by The Saratoga Associates
and filed in the Saratoga County Clerk's Office on March 18, 1992 in drawer
#M-348 A-Z and AA-DD; and as modified by revised subdivision maps of Moreau
Industrial Park prepared by The Saratoga Associates and filed in the Saratoga
County Clerk's Office on February 16, 1994 in drawer #M-398, A-S and being
further bounded and described as follows:
BEGINNING at a point marked with a capped iron rod found at the point
of intersection of the easterly line of Farnan Road with the common division
line of Lot No. 4 to the north and Lot No. 3 to the south as shown on said map;
thence from said point of beginning along said common division line the
following five (5) courses and distances:
1) North 90 deg. 00 min. 00 sec. East, 347.86 feet to a point marked with
a capped iron rod found;
2) South 00 deg. 00 min. 00 sec. West, 32.63 feet to a point marked with a
capped iron rod found;
3) North 90 deg. 00 min. 00 sec. East, 191.52 feet to a point marked with
a capped iron rod found;
4) North 00 deg. 00 min. 00 sec. East, 32.63 feet to a point marked with a
capped iron rod found;
5) North 90 deg. 00 min. 00 sec. East, 680.17 feet to the point of
intersection of the westerly line of Lot No. 5 with the common division line of
Lot No. 4 to the north and Lot No. 3 to the south as shown on said map; thence
along said westerly line, South 16 deg. 10 min. 56 sec. West, 102.04 feet to a
point in the northwesterly line of lands of The State of New York as shown on
said map, said point also being at the 145 foot elevation; thence along said
northwesterly and the westerly line of lands of The State of New York as it
winds and turns along the 145 foot elevation in a southerly direction 712 +/-
feet to the point of intersection of said westerly line of lands of The State of
New York with the common division line of Lot No. 3 to the north and Lot No. 2
to the south as shown on said map, the last course having a tie-line of South 33
deg. 02 min. 30 sec. West, 699.47 feet; thence along said common division line,
South 90 deg. 00 min. 00 sec. West, 865.65 feet to a point marked with a capped
iron rod found at the point of intersection of the easterly line of Farnan Road
with the common division line of Lot No. 3 to the north and Lot No. 2 to the
south as shown on said map; thence along said easterly line in a northerly
direction the following four (4) courses and distances:
1) North 00 deg. 00 min. 00 sec. West, 116.35 feet to a point of
curvature;
2) Along a curve to the right an arc length of 464.05 feet to a point of
tangency, said curve having a radius of 2,773.32 feet and a delta angle
of 09 deg. 35 min. 13 sec.;
3) North 09 deg. 35 min. 13 sec. East, 50.00 feet to a point of curvature;
4) Along a curve to the left an arc length of 57.49 feet to the point or
place of beginning, said curve having a radius of 2,294.42 feet and a delta
angle of 01 deg. 26 min. 08 sec., said parcel containing 16.37 +/- acres of land
and being Lot No. 3 as shown on said map.
Exhibit 10.41
BUILDING LOAN AGREEMENT
THIS BUILDING LOAN AGREEMENT (this "Agreement") is made and entered
into as of the 1st day of October, 1997, by and among KEYBANK NATIONAL
ASSOCIATION, a national banking association with an office for the transaction
of business at 66 South Pearl Street, Albany, New York 12207 (hereinafter
referred to as "Bank"), SPURLOCK ADHESIVES, INC., a Virginia corporation with an
office for the transaction of business at 5090 General Mahone Highway, Waverly,
Virginia, 23890 (the "Company") and the COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY, a New York public benefit corporation with an office for the
transaction of business at Saratoga County Municipal Center, 40 McMaster Street,
Ballston Spa, New York 12020 (the "Issuer").
W I T N E S S E T H:
WHEREAS, the Issuer intends to issue its Multi-Mode Variable Rate
Industrial Development Revenue Bonds (Spurlock Adhesives, Inc. Project) Series
1997 A in the aggregate principal amount of $6,000,000 (the "Bonds"); and
WHEREAS, the Bonds are to be issued pursuant to that certain Trust
Indenture, dated as of October 1, 1997 (the "Indenture"), between the Issuer and
Star Bank, N.A. (the "Trustee"); and
WHEREAS, as security for the Bonds, the Bank is about to issue its
irrevocable direct pay letter of credit (the "Letter of Credit") in favor of the
Trustee; and
WHEREAS, with regard to the Letter of Credit, the Bank and the Company
have or are about to enter into the Letter of Credit Reimbursement Agreement
dated as of October 1, 1997 (the "Reimbursement Agreement"); and
WHEREAS, the Issuer, the Bank, the Trustee and the Company have agreed
that draws are to be advanced to the Company by the Trustee in accordance with
the provisions of this Agreement and the provisions of the Indenture.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Bank agrees to make and the Company agrees to accept,
on its own behalf and on behalf of the Issuer, the loan representing the
indebtedness, as more particularly set forth in the Reimbursement Agreement,
including the draws made on the Bank under the Letter of Credit to cover
disbursements for construction of the Project Facility in accordance with and
subject to the terms and conditions hereinafter set forth.
<PAGE>
ARTICLE 1
TERMS AND DEFINITIONS
In addition to the terms defined in the Indenture and the Reimbursement
Agreement, the following terms shall have the meanings set forth in this
Article. References to documents and other materials shall include those
documents and materials as they may be revised, amended and modified, from time
to time, with the prior written approval of Bank. Capitalized terms not
otherwise defined shall have the meanings set forth in the Indenture.
1.1 Advance. "Advance" means the proceeds of the Term Loan and any
disbursement by the Trustee of Bond proceeds in accordance with the provisions
of this Agreement and Section 407 of the Indenture, upon presentation of a
requisition from the Company.
1.2 Approval. "Approval", "Approved", "approval" or "approved"
means, as the context so determines, an approval by the Bank of a Request for
Disbursement given after full and fair disclosure to the approving parties of
all material facts necessary in order to determine whether approval should be
granted.
1.3 Completion Date. "Completion Date" means May 30, 1998, as such
date may be extended in the sole discretion of the Bank.
1.4 Commitment. "Commitment" means the commitment letter to issue
the Letter of Credit issued by Bank to Company dated May 1, 1997, and accepted
by Company on ________________, 1997.
1.5 Construction Budget. "Construction Budget" means the budget for
total estimated Costs of Project Facility, submitted by Company, approved by
Bank, and attached hereto as Exhibit A.
1.6 Construction Contract. "Construction Contract" means the
contract, dated September 30, 1997, between Company and Contractor and providing
for the construction of the Facility on the Land.
1.7 Construction Inspector. "Construction Inspector" means C.T. Male
Associates, P.C. or at Bank's option either an officer or employee of Bank or
consulting architects, engineers or inspectors appointed by Bank.
1.8 Contingency Reserve. "Contingency Reserve" means the amount(s)
allocated as contingency reserve(s) in the Construction Budget to be disbursed
upon approval of the Bank.
1.9 Contractor. "Contractor" means D.B. Western, Inc., whose address
is 1360 Airport Lane, North Bend, Oregon 97459.
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1.10 Costs of Improvement. "Costs of Improvement" means those items
defined as such under Section 2(5) of the Lien Law.
1.11 Request for Disbursement. "Request for Disbursement" means, with
respect to each Advance, Company's request for such Advance, and documents
required by this Agreement and the Indenture to be furnished to Bank as a
condition to such Advance.
1.12 Event of Default. "Event of Default" means any condition or
event described herein as such.
1.13 Governmental Approvals. "Governmental Approvals" means all
approvals, consents, waivers, orders, acknowledgements, authorizations, permits
and licenses required under applicable Requirements to be obtained from any
Governmental Authority for the construction of the Facility and the use,
occupancy and operation of the Project Facility following completion of
construction of the Facility.
1.14 Governmental Authority. "Governmental Authority" means the
United States of America, the state(s) in which the Land is located and Company
and Guarantor are located or organized, any political subdivision thereof,
municipalities in which the Land is located, and any agency, authority,
department, commission, board, bureau, or instrumentality of any of them.
1.15 Guarantor. "Guarantor" means Spurlock Industries, Inc., a
Virginia corporation with a business address of 209 West Main Street, Waverly,
Virginia 23890.
1.16 Indirect Costs. "Indirect Costs" mean and include title
insurance premiums, survey charges, engineering fees, architectural fees, real
estate taxes during the period of construction, commitment fees and interest
payable to Bank under the Loan, premiums for insurance, legal fees and all other
expenses which are, in accordance with sound accounting practices, capital
expenditures relating to the Project Facility.
1.17 Land. "Land" means the real property described in Exhibit B
attached hereto.
1.18 Lien Law. "Lien Law" means the Lien Law of the State of New
York.
1.19 Loan. "Loan" means, collectively, (i) the credit facility
extended by the Bank to the Company in connection with the Project Facility as
evidenced by the Letter of Credit and the Reimbursement Agreement and (ii) the
Term Loan.
1.20 Loan Amount. "Loan Amount" means the amount outstanding on the
Bonds and the indebtedness of the Loan owing by the Company under the
Reimbursement Agreement and the Term Loan.
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1.21 Operating Lease. "Operating Lease" shall mean the lease
agreement between the Company and the Contractor dated September 30, 1997.
1.22 Payment and Performance Bonds. "Payment and Performance Bonds"
mean dual-obligee payment and performance bonds relating to the Contractor as
Bank may require from time to time, issued by a surety company or companies
acceptable to Bank, in each case in an amount not less than the full contract
price.
1.23 Permitted Liens. "Permitted Liens" shall have the meaning
ascribed to it in the Reimbursement Agreement.
1.24 Plans and Specifications. "Plans and Specifications" means the
plans and specifications for the Facility approved by the Bank.
1.25 Project Facility. "Project Facility" shall mean and include all
costs that will be incurred by Company in connection with the acquisition of the
Land, the construction of the Facility, the equipping of the Facility with the
Equipment, and the operation and carrying of the Project Facility through the
expiration date of the Letter of Credit, including without limitation all
Indirect Costs.
1.26 Requirements. "Requirements" means any law, ordinance, order,
rule or regulation of any Governmental Authority relating in any way to the
Project Facility, Company or Guarantor.
1.27 Term Loan. "Term Loan" shall mean the $1,500,000 loan to be made
by the Bank to the Company to assist in the financing of the Project.
1.28 Termination Date. "Termination Date" means the earlier of the
Completion Date or such other date as may be set forth herein which fixes the
termination of Bank's obligations to make Advances.
ARTICLE 2
FINANCING DOCUMENTS
The Financing Documents (as defined in the Indenture) have been duly
authorized, executed and delivered to each of the parties thereto.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Bank as follows:
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3.1 Validity of Financing Documents. That the Financing Documents to
which it is a party are in all respects valid and legally binding obligations,
enforceable in accordance with their respective terms.
3.2 Title to Project Facility. That the Issuer has good clear record
and marketable fee simple absolute title to the Land, subject to no liens,
security interests, charges or encumbrances in favor of any person other than
the Trustee, the Bank or the Contractor.
3.3 Absence of Conflicts. That the execution and delivery of the
Financing Documents by Company and the Guarantor do not, and the performance and
observance by Company and the Guarantor of their obligations thereunder will
not, contravene or result in a breach of (a) any provision of Company's or the
Guarantor's corporate charter or by-laws, or (b) any Requirements, or (c) any
decree or judgement binding on Company or the Guarantor, or (d) except for the
Loan and Security Agreement dated as of July 1, 1996 by and between the Company
and National Bank of Canada, any agreement or instrument binding on Company or
the Guarantor or any of their respective properties, nor will the same result in
the creation of any lien or security interest under any such agreement or
instrument.
3.4 Pending Litigation. That there are no actions, suits,
investigations or proceedings pending, or, to the knowledge of Company,
threatened against or affecting Company, the Guarantor or the Project Facility,
or involving the validity or enforceability of any of the Financing Documents or
the priority of the lien thereof, or which will affect Company's ability to
repay the Loan, at law or in equity or before or by any Governmental Authority.
3.5 Violations of Requirements. That Company has no knowledge of any
violations or notices of violations of any Requirements.
3.6 Compliance with Requirements. That the Plans and Specifications
and construction of the Project Facility pursuant thereto and the use of the
Project Facility contemplated thereby will comply with all Requirements.
3.7 Organization, Status and Authority. (a) The Company (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the state in which it is incorporated, (ii) is duly qualified to do business
and is in good standing in the State of New York, (iii) has the corporate power,
authority and legal right to own and operate its properties and assets, carry on
the business now being conducted and proposed to be conducted by it, and to
engage in the transactions contemplated by the Financing Documents, and (iv) the
execution and delivery of the Financing Documents to which it is a party and the
performance and observance of the provisions thereof have been duly authorized
by all necessary corporate actions.
3.8 Availability of Utilities. That all utility services necessary
and sufficient for the construction, development and operation of the Project
Facility for its intended purposes are
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presently available to the boundaries of the Land through dedicated public
rights of way or through perpetual private easements, approved by Bank, with
respect to which the Mortgage creates a valid, binding and enforceable first
lien, including, but not limited to, water supply, storm and sanitary sewer,
gas, electric and telephone facilities, and drainage.
3.9 Condition of Project Facility. That neither the Project Facility
nor any portion thereof is now damaged or injured as result of any fire,
explosion, accident, flood or other casualty or has been the subject of any
Condemnation, and to the knowledge of Company, no Condemnation is pending or
contemplated.
3.10 Brokerage Commissions. That any brokerage commissions due in
connection with the transactions contemplated hereby have been paid in full and
that any such commissions coming due in the future will be promptly paid by
Company. Company agrees to and shall indemnify Bank from any liability, claims
or losses arising by reason of any such brokerage commissions. This provision
shall survive the repayment of the Loan and shall continue in full force and
effect so long as the possibility of such liability, claims or losses exists.
3.11 Financial Statements. That the financial statements of Company
and the Guarantor previously delivered to Bank are true and correct in all
respects, have been prepared in accordance with generally accepted accounting
principles consistently applied, and fairly present the respective financial
conditions of the Company and the Guarantor as of the respective dates thereof
and the results of their operations for the periods covered thereby; that no
adverse change has occurred in the assets, liabilities, or financial conditions
reflected therein since the respective dates thereof; and that no additional
borrowings have been made by Company or the Guarantor since the date thereof
other than the borrowing contemplated hereby or previously consented to in
writing by the Bank.
3.12 Taxes. That all federal, state and other tax returns of Company
and the Guarantor required by law to be filed have been filed, that all federal,
state and other taxes, assessments and other governmental charges upon Company
and the Guarantor or their respective properties which are due and payable have
been paid, and that Company and the Guarantor have set aside on their books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods for which such returns have been filed.
3.13 Other Contracts. Except for the Financing Documents, the
Construction Contract and the Operating Lease, Company has made no contract or
arrangement of any kind or type whatsoever (whether oral or written, formal or
informal), the performance of which by the other party thereto could give rise
to a lien or encumbrance on the Project Facility, except for contracts (all of
which have been disclosed in writing to Bank) made by Company with parties who
have executed and delivered lien waivers to Company, and which, in the opinion
of Bank's counsel, will not create rights in existing or future lien claimants
which may be superior to the lien of the Mortgage.
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3.14 Construction Contract. That (i) the Construction Contract is in
full force and effect; (ii) both Company and Contractor are in full compliance
with their respective obligations under the Construction Contract; (iii) the
work to be performed by Contractor under the Construction Contract is the work
called for by the Plans and Specifications and all work required to complete the
Project Facility in accordance with the Plans and Specifications is provided for
under the Construction Contract; and (iv) all work on the Project Facility shall
be completed in accordance with the Plans and Specifications in a good and
workmanlike manner and shall be free of any defects for which the Company is not
compensated in accordance with the terms of the Construction Contract.
3.15 Access. That the rights of way for all roads necessary for the
full utilization of the Project Facility for its intended purposes have either
been acquired by the Company, the appropriate Governmental Authority or have
been dedicated to public use and accepted by such Governmental Authority, and
all such roads shall have been completed, or all necessary steps shall have been
taken by Company and such Governmental Authority to assure the complete
construction and installation thereof prior to the date upon which access to the
Project Facility via such roads will be necessary. All curb cuts, driveway
permits and traffic signals shown on the Plans and Specifications or otherwise
necessary for access to the Project Facility are existing or have been fully
approved by the appropriate Governmental Authority.
3.16 No Default. That no Event of Default exists and no event which
but for the passage of time, the giving of notice or both would constitute an
Event of Default has occurred.
3.17 Plans and Specifications. That Company has furnished Bank true
and complete sets of the Plans and Specifications which comply with all
Requirements, all Governmental Approvals, and all restrictions, covenants and
easements affecting the Project Facility, and which have been approved by the
Contractor, Company's Architect, and such Governmental Authority as is required
for construction of the Project Facility.
3.18 Governmental Approvals. That Company has obtained all
Governmental Approvals from, and has given all such notices to, and has taken
all such other actions with respect to such Governmental Authority as may be
required under applicable Requirements for the construction of the Facility.
3.19 Construction Budget. That the Construction Budget accurately
reflects all costs of construction of the Project Facility.
3.20 Effect of Request for Disbursement. That each Request for
Disbursement submitted as provided in Article 6 hereof and pursuant to the
Indenture shall constitute an affirmation that the representations and
warranties contained in Article 3 of this Agreement and in the other Financing
Documents remain true and correct as of the date thereof; and unless the Bank is
notified to the contrary, in writing, prior to the disbursement of the requested
Advance or any portion thereof, shall constitute an affirmation to the Bank and
the Trustee that the same remain true and correct on the date of such
disbursement.
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3.21 The Company is Agent; Disbursement of Funds. That the Issuer, in
compliance with and subject to the terms of the Installment Sale Agreement, has
appointed the Company its true and lawful agent, and the Company has accepted
such agency for the purpose, among other things, of causing the Facility to be
constructed and equipped in accordance with the terms and conditions of this
Agreement. The Issuer has authorized the Trustee, with the consent of the Bank,
to disburse all monies, as provided for in this Agreement, the Indenture and the
Installment Sale Agreement directly to the Company in accordance with this
Agreement.
ARTICLE 4
COVENANTS OF COMPANY
The Company hereby covenants and agrees with Bank as follows:
4.1 Construction Contract. (i) To permit no default under the terms
of the Construction Contract, (ii) to waive none of the obligations of
Contractor thereunder, (iii) to do no act which would relieve Contractor from
its obligations to construct the Facility according to the Plans and
Specifications, and (iv) to make no amendments to or change orders under the
Construction Contract without the prior approval of Bank.
4.2 Insurance. To obtain insurance or evidence of insurance as
required by the Financing Documents.
4.3 Application of Loan Proceeds. To use the proceeds of the Bonds
solely for the purpose of paying for the cost of the acquisition, construction
and equipping of the Project Facility in accordance with the terms of this
Agreement and the Indenture.
4.4 Project Facility Costs and Expenses. To pay all Project Facility
Costs, regardless of the amount, and to pay all costs and expenses of Bank with
respect to the financing, acquisition and construction of the Project Facility,
including but not limited to, appraisal fees, inspection fees, surveying costs,
legal fees(including legal fees incurred by Bank subsequent to the closing of
the Loan in connection with the disbursement, administration, collection or
transfer of the Loan), advances, recording expenses, surveys, intangible taxes,
expenses of foreclosure (including attorney's fees) and similar items.
4.5 Commencement and Completion of Construction. To commence
construction of the Facility and the acquisition and installation of the
Equipment within thirty (30) days after the date hereof and to diligently pursue
construction to completion prior to the Completion Date in accordance with the
Plans and Specifications, in full compliance with all restrictions, covenants
and easements affecting the Project Facility, all Requirements, and all
Governmental Approvals, and with all terms and conditions of the Financing
Documents without deviation from the Plans and Specifications unless with the
prior approval of Bank and the surety company or companies issuing any Payment
and Performance Bond; to pay all sums and to perform such
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duties as may be necessary to complete such construction of the Facility and the
acquisition and installation of the Equipment in accordance with the Plans and
Specifications and in full compliance with all restrictions, covenants and
easements affecting the Project Facility, all Requirements and all Governmental
Approvals, and with all terms and conditions of the Financing Documents, all of
which shall be accomplished on or before the Completion Date, free from any
liens, claims or assessments (actual or contingent) asserted against the Project
Facility for any material, labor or other items furnished in connection
therewith. Evidence of satisfactory compliance with the foregoing shall be
furnished by Company to Bank on or before the Completion Date.
4.6 Right of Bank to Inspect Project Facility. To permit Bank and
its representatives and agents to enter upon the Project Facility and to inspect
the Project Facility and all materials to be used in the construction thereof
and to cooperate and cause Contractor to cooperate with Bank and its
representatives and agents during such inspections (including making available
to Bank working copies of the Plans and Specifications together with all related
supplementary materials); provided, however, that this provision shall not be
deemed to impose upon Bank any obligation to undertake such inspections.
4.7 Correction of Defects. Unless Company demonstrates to Bank that
such corrective work is inappropriate or inconsistent with the Plans and
Specifications, to promptly correct all defects in the Facility or any departure
from the Plans and Specifications not previously approved by Bank. Company
agrees that any Advance, whether before or after such defects or departures from
the Plans and Specifications are discovered by, or brought to the attention, of
Bank, shall not constitute a waiver of Bank's right to require compliance with
this covenant.
4.8 Sign Regarding Construction Financing. At Bank's option, to
erect promptly and maintain on a suitable site on the Land a sign indicating
that construction financing is being provided by Bank, all to the satisfaction
of Bank; and to prevent the destruction or removal of said sign without the
prior approval of Bank.
4.9 Approval of Change Orders. To permit no material deviations from
the Plans and Specifications during construction without the prior approval of
Bank and the surety company or companies issuing any Payment and Performance
Bonds.
4.10 Notice of Occupancy. To notify Bank at least ten (10) days prior
to, and again on, the date of occupancy of any portion of the Project Facility.
4.11 Books and Records. To keep and maintain complete proper and
accurate books, records and accounts reflecting all items of income and expense
of Company in connection with the Project Facility and the construction of the
Facility, the acquisition and installation of the Equipment and the results of
the operation thereof; and, upon the request of Bank, to make such books,
records and accounts immediately available to Bank for inspection or independent
audit.
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4.12 Financial Statements and Other Information. To furnish to Bank
such financial statements and information as Company has agreed to provide
elsewhere in the Financing Documents.
4.13 Construction Inspector. To permit Bank to retain the
Construction Inspector (the "Construction Inspector") at the cost of Company to
perform the following services on behalf of Bank:
(a) To review and advise Bank whether, in the opinion of the
Construction Inspector, the Plans and Specifications are satisfactory;
(b) To review Requests for Disbursements and change orders;
(c) To make periodic inspections (approximately at the date
of each Request for Disbursement) for the purpose of assuring that
construction of the Facility to date is in accordance with the Plans
and Specifications and to approve Company's then current Request for
Disbursement as being consistent with Company's obligations under this
Agreement and the Indenture, including inter alia, an opinion as to
Company's continued compliance with the provisions of Section 6.1 (f)
(4) hereof.
The fees of the Construction Inspector shall be paid by Company
forthwith upon billing therefor and expenses incurred by Bank on account thereof
shall be reimbursed to Bank forthwith upon request therefor, but neither Bank
nor the Construction Inspector shall have any liability to Company on account of
(i) the services performed by the Construction Inspector, (ii) any neglect or
failure on the part of the Construction Inspector to properly perform its
services, or (iii) any approval by the Construction Inspector of construction of
the Facility. Neither Bank nor the Construction Inspector assumes any obligation
to Company or any other person concerning the quality of construction of the
Facility or the absence therefrom of defects.
4.14 Soil Tests. To provide promptly to Bank at Company's expense
such soil tests and environmental assessments of the Land as Bank may require
from time to time.
4.15 Payment and Performance Bonds. To furnish to Bank and maintain a
Payment and Performance Bond for the Contractor.
4.16 Insufficiency of Loan Proceeds. To deposit funds with Bank as
follows: If at any time or from time to time during the terms of this Agreement,
in Bank's judgment and opinion, the remaining undisbursed portion of the Project
Fund, together with the undisbursed balances of other sums previously deposited
by Company with Bank or the Trustee in connection with the Loan, is or will be
insufficient to fully complete the construction of the Facility and the
acquisition and installation of the Equipment therein in accordance with the
Plans and Specifications, to pay all other Project Facility Costs, to pay all
interest accrued or to accrue on the Loan during the term of the Loan from and
after the date hereof, and to pay all other sums due or to become due under the
Financing Documents, regardless of how such condition may
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be caused, Company shall, within seven (7) days after written notice thereof
from Bank, deposit with Bank such sums of money in cash as Bank may require, in
an amount sufficient to remedy such condition, and sufficient to pay any liens
for services and materials alleged to be due and payable at that time in
connection with the Project Facility, and, at Bank's option, no further Advances
shall be made by the Trustee until the provisions of this Paragraph have been
fully complied with. All such deposited sums shall stand as additional security
for Company's obligations under this Agreement and shall be disbursed by Bank in
the same manner as Advances under this Agreement before any further Advances of
the Bond proceeds shall be made. Neither the Bank nor the Trustee shall have no
obligation to pay Company any interest with respect to such deposited funds.
4.17 Additional Documents. To perform hereunder as follows:
(a) Regarding Construction. To furnish to Bank all
instruments, documents, boundary surveys, footing or foundation
surveys, certificates, plans and specifications, appraisals, title and
other insurance, reports and agreements and each and every other
document and instrument required to be furnished by, the terms of the
Commitment or this Agreement or the other Financing Documents, all at
Company's expense.
(b) Regarding Preservation of Security. To execute and
deliver to Bank such documents, instruments, assignments and other
writings, and to do such other acts necessary or desirable, to preserve
and protect the collateral at any time securing or intended to secure
the Loan, as Bank may require.
(c) Regarding this Agreement. To do and execute all and such
further lawful and reasonable acts, conveyances and assurances in the
law for the better and more effective carrying out of the intents and
purposes of this Agreement as Bank shall require from time to time.
4.18 Financing Publicity. To permit Bank to obtain publicity in
connection with the construction of the Project Facility through press releases
and participation in such events as ground breaking and opening ceremonies; and
to give Bank ample advance notice of such events and to give Bank as much
assistance as possible in connection with obtaining such publicity as Bank may
request.
4.19 Easements and Restrictions. To submit to Bank for Bank's
approval prior to the execution thereof by Company all proposed easements,
restrictions, covenants, permits, licenses, and other instruments which would or
might affect the title to the Project Facility, accompanied by a survey showing
the exact proposed location thereof and such other information as Bank shall
reasonably require. Company shall not subject the Project Facility or any part
thereof to any easement, restriction or covenant (including any restriction or
exclusive use provision in any lease or other occupancy agreement) without the
prior approval of Bank.
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4.20 Compliance with Requirements. To comply promptly with all
requirements and governmental approvals and to furnish Bank, on demand, with
independent evidence of such compliance.
4.21 Leases. To enter into no leases or occupancy agreements
affecting the Project Facility without the prior approval of Bank. Company shall
deliver to Bank executed counterparts of all leases and occupancy agreements
affecting the Project Facility whether executed before or after the date of this
Agreement, and shall not amend any provision thereof or waive any obligations of
tenants under any leases or occupancy agreements affecting the Project Facility
without the prior approval of Bank.
4.22 Compliance With Restrictions, Covenants and Easements. To comply
with all restrictions, covenants and easements affecting the Project Facility.
4.23 Laborers, Subcontractors and Materialmen. To furnish to Bank,
upon request at anytime, and from time to time, affidavits listing all laborers,
subcontractors, materialmen, and any other parties who might or could claim
statutory or common law liens and are furnishing or have furnished labor or
material to the Project Facility or any portion thereof, together with
affidavits, or other evidence satisfactory to Bank, showing that such parties
have been paid all amounts then due for labor and materials furnished to the
Project Facility. In addition, Company will notify Bank immediately, and in
writing, if Company receives any notice, written or oral, from any laborer,
subcontractor or materialmen to the effect that said laborer, subcontractor or
materialmen has not been paid when due for any labor or materials furnished in
connection with the construction of the Facility or the acquisition and
installation of the Equipment.
4.24 Further Assurance of Title. To further assure title as follows:
If at any time Bank or Bank's counsel has reason to believe that, except as
permitted by Section 5.8 hereof, any Advance is not secured or will or may not
be secured by the Indenture and/or the Mortgage as a first lien or security
interest on the Project Facility, then Company shall, within ten (10) days after
written notice from Bank, do all things and matters necessary, to assure to the
satisfaction of Bank and Bank's counsel that any Advance previously made
hereunder or to be made hereunder is secured or will be secured by the Mortgage
as a first lien or first security interest on the Project Facility, and Bank, at
its option, may decline to make further Advances hereunder until Bank has
received such assurance.
4.25 No Transfers or Encumbrances. To cause or permit no sale,
conveyance, transfer, assignment or encumbering of the Project Facility or any
interest therein without the prior approval of the Issuer, the Trustee or the
Bank.
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ARTICLE 5
AGREEMENT TO LEND
Subject to the terms and conditions set forth in this Agreement, the
Reimbursement Agreement and the Indenture, Bank agrees to consent to Advances to
Company from time to time during the period from the date hereof to the
Termination Date in an aggregate principal amount of up to and including the
Loan Amount to pay Project Facility Costs actually incurred in connection with
the acquisition of the Land, construction of the Facility and the acquisition
and installation of the Equipment in the Facility (including Indirect Costs) if
and to the extent such Project Facility Costs are reflected in the Construction
Budget as being funded by proceeds of the Bonds.
5.1 Reimbursement Agreement. The Company shall have an obligation to
pay all sums due under the Reimbursement Agreement and the other Financing
Documents.
5.2 Advances. The Construction Budget reflects, by category and line
items, the purposes and the amounts for which funds to be advanced by Bank under
this Agreement and the Indenture are to be used. Bank shall not be required to
disburse for any category or line item more than the amount specified therefor
in the Construction Budget.
5.3 Cost Overruns. If Company becomes aware of any change in the
Project Facility Costs which will increase a category or line item of the
Project Facility Costs reflected on the Construction Budget (as the Construction
Budget is revised from time to time and approved by Bank), Company shall
immediately notify Bank in writing and promptly submit to Bank for its approval
a revised Construction Budget. No further Advances need be consented to by Bank
unless and until the revised Construction Budget so submitted by Company is
approved by Bank, and Bank reserves the right to approve or disapprove any
revised Construction Budget in its sole and absolute discretion. If Bank
approves the revised Construction Budget, and such revised Construction Budget
reflects Project Facility Costs to be funded by Bank in excess of the Loan
Amount, the amount of such excess shall be funded by the Company.
5.4 Contingency Reserve. Any amount allocated as Contingency Reserve
in the Construction Budget is not intended to be disbursed and will only be
disbursed upon the prior approval of Bank, which approval can be withheld for
any reason or for no reason. The disbursement of a portion of the Contingency
Reserve shall in no way prejudice Bank from withholding disbursement of any
further portion of the Contingency Reserve.
5.5 Stored Materials. Subject to the limitations contained in
Section 5.8 hereof, Bank shall disburse funds for materials, furnishings,
fixtures, machinery or equipment not yet incorporated into Land, the Facility or
Equipment (the "Stored Materials") subject to the requirements set forth in
items (a) through (e) below. Subject to the provisions of Section 5.8 hereof,
any disbursement for the cost of Stored Materials shall be contingent upon Bank
receiving satisfactory evidence that:
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(a) The Stored Materials are components in a form ready for
incorporation into the Facility or Equipment;
(b) The Stored Materials are stored at the Land, in a bonded
warehouse, at a site controlled by Company, or at such other site as
Bank shall approve, and are protected against theft and damage;
(c) The Stored Materials have been paid for in full or will
be paid for with the funds to be disbursed and all lien rights or
claims of the supplier have been released or will be released upon
payment with disbursed funds;
(d) Bank has or will have upon payment with disbursed funds a
perfected, first priority security interest in the Stored Materials;
and
(e) The Stored Materials are insured for an amount equal to
their replacement costs.
5.6 Amount of Advances. In no event shall any Advance exceed the
full amount of Indirect Costs approved by Bank and theretofore paid or to be
paid with the proceeds of such Advance plus ninety (90%) percent of all costs
for construction of Facility and acquisition and installation of the Equipment
approved by Bank and incurred by Company through the date of the Request for
Disbursement less the aggregate amount of any Advances previously made. It is
further understood that the retainage described above is intended to provide a
contingency fund protecting Bank against failure of Company or the Guarantor to
fulfill any obligations under the Financing Documents, and that Bank may charge
amounts against such retainage in the event Bank is required or elects to expend
its own funds to cure any Event of Default. The retainage described herein will
be advanced by the Bank upon satisfaction of the conditions set forth in Section
6.3 hereof.
5.7 Quality of Work. No Advance shall be due unless all work done at
the date the Request for Disbursement for such Advance is submitted is done in a
good and workmanlike manner and without defects, as confirmed by the report of
the Construction Inspector, but the Trustee upon consent of the Bank, may
disburse all or part of any Advance before the sum shall become due if Bank
believes it advisable to do so, and all such Advances or parts thereof shall be
deemed to have been made pursuant to this Agreement.
5.8 Coordination with Construction Contract. The Bank hereby
acknowledges that certain provisions of the Construction Contract conflict with
the terms of this Building Loan Agreement. The Bank hereby agrees that, to the
extent that the terms of the Construction Contract cause a conflict with any of
the representations, warranties or covenants of the Company contained herein,
such conflict is hereby waived by the Bank and the Bank agrees that such a
conflict will not be a default or Event of Default, or ban the Company from
meeting any condition hereunder. Notwithstanding anything to the contrary
contained herein, the Bank hereby agrees to make Advances hereunder which are
not in compliance with the conditions set
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forth in Section 5.5 and Article 6 hereof ("Unsecured Advances") to enable the
Company to make certain payments required by Article 2.1 of the Construction
Contract, provided, however, that the aggregate amount of Unsecured Advances
outstanding hereunder shall not at any time exceed $2,566,000. For purposes
hereof, if an Unsecured Advance is used to finance, in whole or in part, goods,
stored materials or Equipment, the amount of such Unsecured Advance may be
readvanced hereunder upon the delivery to the Land of such goods, stored
materials or Equipment.
ARTICLE 6
CONDITIONS PRECEDENT TO
DISBURSEMENT OF BOND PROCEEDS
6.1 Conditions of Initial Advance. The obligation of Bank to consent
to the initial Advance shall be subject to the following conditions precedent:
(a) Financing Documents. The Financing Documents, in form and
substance satisfactory to Bank and the Trustee, shall have been duly
executed and delivered by the parties thereto and shall be in full
force and effect, and Bank shall have received the original or a fully
executed counterpart thereof. All Financing Documents to be filed or
recorded in the public records shall have been so filed or recorded in
the appropriate public records.
(b) Construction Documents. The Construction Contract, in
form and substance satisfactory to Bank, shall have been duly executed
and delivered by the parties thereto, shall be in full force and
effect, and Bank shall have received a certified or a fully executed
counterpart thereof. The Contractor shall have duly executed and
delivered to Bank a consent to the assignment of the Construction
Contract, in form and substance satisfactory to Bank, and Bank shall
have received the original or a fully executed counterpart thereof.
(c) Subcontracts. Company shall have delivered to Bank, and
Bank shall have approved, a list of all subcontractors and materialmen
who have been or, to the extent identified by Company, will be
supplying labor or materials for the Project Facility, a copy of the
standard form of subcontract to be used by the Contractor, and correct
and complete photocopies of all executed subcontracts and contracts.
(d) Other Contracts. Company shall have delivered to Bank
correct and complete photocopies of all other executed contracts with
contractors, engineers or consultants for the Project Facility, and of
all development, management, brokerage, sales or leasing agreements for
the Project Facility.
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(e) Deliveries. The following items or documents shall have
been delivered to Bank:
(1) Plans and Specifications. Two complete sets of the
Plans and Specifications and approval thereof by any necessary
Governmental Authority, with a certification that the Facility
to be constructed complies with all Requirements and
Governmental Approvals and that the Construction Contract
satisfactorily provides for the construction of the Facility.
(2) Title Insurance Policy. A paid Title Insurance
Policy or report in all respects satisfactory to Bank and its
counsel.
(3) Other Insurance. Policies (or, if permitted,
certificates or other evidence of) all insurance required by
this Agreement or any other Financing Document.
(4) Evidence of Sufficiency of Funds. Evidence
satisfactory to Bank that the proceeds of the Bonds will be
sufficient to cover all Project Facility Costs reasonably
anticipated to be incurred and to satisfy the obligations of
Company to Bank under this Agreement and the Indenture.
(5) Evidence of Access, Availability of Utilities,
Governmental Approvals. Evidence satisfactory to Bank as to:
(A) the methods of access to and egress from
the Project Facility, and nearby or adjoining public
ways, meeting the reasonable requirements of property of
the type contemplated to be completed under this
Agreement and the status of completion of any required
improvements to such access;
(B) the availability of storm and sanitary
sewer facilities meeting the reasonable requirements of
the Project Facility;
(C) the availability of all other required
utilities, in location and capacity sufficient to meet
the reasonable needs of the Project Facility; and
(D) the securing of all Governmental Approvals
from the applicable Governmental Authority which are
required under applicable Requirements for the
construction of the Facility, together with copies of all
such Governmental Approvals.
(6) Environmental Report. An environmental assessment
report or reports of one or more qualified environmental
engineering or similar inspection
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firms approved by Bank in form, scope and substance satisfactory
to Bank, which report or reports shall indicate a condition of
the Land in all respects satisfactory to Bank in its sole
discretion and upon which report or reports Bank is expressly
entitled to rely.
(7) Soil Report. A soil report for the Land prepared
by a soil engineer approved by Bank in form and substance
satisfactory to Bank, containing recommendations for the design
of foundations, paved areas and underground utilities.
(8) Survey. A survey prepared in accordance with
Bank's survey requirements, certified by a land surveyor
registered as such in the state in which the Land is located,
which survey shall be in form and substance satisfactory to
Bank.
(9) Payment and Performance Bonds. Such Payment and
Performance Bonds as may have been requested by Bank.
(10) Request for Disbursement. A Request for
Disbursement complying with the provisions of this Agreement and
the Indenture.
(f) Legal Opinions. Bank shall have received opinions in form
and substance satisfactory to Bank and Bank's counsel from counsel
satisfactory to Bank as to such matters as Bank shall reasonably
request.
(g) Certification Regarding Chattels. Bank shall have
received a certification from the Title Insurer or counsel satisfactory
to Bank (which shall be updated from time to time at Company's expense
upon request by Bank) that a search of the public records disclosed no
conditional sales contracts, chattel mortgages, leases of personalty,
financing statements or title retention agreements which affect the
Project Facility other than Permitted Liens.
(h) Notices. All notices required by any Governmental
Authority or by any applicable Requirement to be filed prior to
commencement of construction of the Facility shall have been filed.
(i) Appraisal. The Bank has received an appraisal of the
Project Facility acceptable to the Bank.
(j) Performance; No Default. Company shall have performed and
complied with all terms and conditions herein required to be performed
or complied with by it at or prior to the date of the initial Advance,
and on the date of the initial Advance, there shall exist no Default or
Event of Default.
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(k) Representations and Warranties. The representations and
warranties made by Company and the Guarantor in the Financing Documents
or otherwise made by or on behalf of Company or the Guarantor in
connection therewith or after the date thereof shall have been true and
correct in all respects on the date on which made and shall also be
true and correct in all respects on the date of the initial Advance.
(l) Other Documents. Such other documents, opinions and
certificates as Bank or its counsel may reasonably require.
(m) Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Agreement and the other
Financing Documents shall be satisfactory to Bank and Bank's counsel in
form and substance, and Bank shall have received all information and
such counterpart originals on certified copies of such documents and
such other certificates, opinions or documents as Bank and Bank's
counsel may reasonably require.
6.2 Conditions of Subsequent Advances. The obligation of Bank to
make any Advance after the initial Advance shall be subject to the following
conditions precedent:
(a) Prior Conditions Satisfied. All conditions precedent to
the initial Advance and any prior Advance shall continue to be
satisfied as of the date of such subsequent Advance.
(b) Performance; No Default. Company shall have performed and
complied with all terms and conditions herein required to be performed
or complied with by it at or prior to the date of such advance, and on
the date of such Advance there shall exist no Default or Event of
Default.
(c) Representations and Warranties. The representations and
warranties made by Company and the Guarantor in the Financing Documents
or otherwise made by or on behalf of Company or the Guarantor in
connection therewith after the date thereof shall have been true and
correct in all respects on the date on which made and shall also be
true and correct in all respects on the date of such Advance.
(d) No Damage. The Facility and the Equipment shall not have
been injured or damaged by fire, explosion, accident, flood or other
casualty, unless Bank shall have received insurance proceeds sufficient
in the judgment of Bank to effect the satisfactory restoration of the
Facility and the Equipment and to permit the completion thereof prior
to the Completion Date.
(e) Receipt by Bank. Bank shall have received:
(1) Request for Disbursement. A Request for
Disbursement complying with the requirements hereof;
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(2) Endorsement to Title Insurance Policy. A "run
down" endorsement to the Title Insurance Policy or report
indicating no change in the state of title and containing no
survey exceptions not approved by Bank, which endorsement shall,
expressly or by virtue of a proper "pending disbursements"
clause or endorsement in the policy, increase the coverage of
the policy to the aggregate amount of all proceeds of the Loan
advanced on or before the effective date of such endorsement;
(3) Current Survey. An updated survey if required by
the Bank;
(4) Certificates. Certificates from Company and the
Construction Inspector to the effect that in their opinion,
based upon on-site observations and submissions by the
Contractor, the construction of the Facility and installation of
the Equipment in the Facility to the date thereof was performed
in a good and workmanlike manner and in accordance with the
Plans and Specifications, stating the estimated total cost of
construction of the Facility and installation of the Equipment
in the Facility, stating the percentage of the in-place
construction of the Facility and installation of the Equipment
in the Facility and stating that the remaining non-disbursed
portion of the Bond proceeds allocated for such purpose is
adequate to complete the construction of the Project Facility;
(5) Contracts. Evidence that one hundred percent
(100%) of the cost of the remaining construction work is covered
by firm contracts or subcontracts, or orders for the supplying
of materials, with contractors, subcontractors, materialmen or
suppliers satisfactory to Bank.
(f) Other Documents. Such other documents, opinions and
certificates as Bank or its counsel may reasonably require.
6.3 Conditions of Final Advance. In addition to the conditions set
forth in Paragraph 6.2 above, Bank's obligation to advance sums retained
pursuant to this Agreement shall be subject to receipt by Bank of the following:
(a) Approval of Facility. Evidence of the approval by all
appropriate Governmental Authority of the Facility in its entirety for
permanent occupancy to the extent any such approval is or will be a
condition of lawful use and occupancy of the Project Facility, and
evidence of approval by all appropriate Governmental Authority of the
contemplated uses thereof.
(b) Approval by Construction Inspector. Notification from the
Construction Inspector to the effect that the construction of the
Facility and installation of the Equipment have been completed in a
good and workmanlike manner in accordance with the Plans and
Specifications.
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(c) Final Survey. A final survey acceptable to Bank showing
the as-built location of the completed Project Facility.
(d) Payment of Costs. Evidence satisfactory to Bank that all
sums due in connection with the construction of the Facility and the
acquisition and installation of the Equipment therein have been paid in
full (or will be paid out of the funds requested to be advanced) and
that no party claims or has a right to claim any statutory or common
law lien arising out of the construction of the Facility, the
acquisition and installation of the Equipment or the supplying of
labor, material, and/or services in connection therewith.
ARTICLE 7
METHOD OF DISBURSEMENT OF LOAN PROCEEDS
Bank agrees to consent to Advances requisitioned of the Trustee in
accordance with the Construction Budget and subject to the following procedures:
7.1 Request for Disbursement to be Submitted. At such time as
Company shall desire an Advance, Company shall complete and execute a Request
for Disbursement for presentation to the Bank for its consent prior to delivery
to the Trustee. Each Request for Disbursement shall be accompanied by:
(a) if the Request for Disbursement includes amounts to be
paid to the Contractor under the Construction Contract, it shall be
accompanied by a completed and itemized Application and Certificate for
Payment (AIA Document No. G702) or similar form approved by Bank,
containing the certification of Contractor and the Construction
Inspector as to the accuracy of same, together with invoices relating
to all items of direct cost covered thereby. All such applications for
payment shall show all subcontractors by name and trade, the total
amount of each subcontract, the amount theretofore paid to each
subcontractor as of the date of such application, and the amount to be
paid from the proceeds of the Advance to each subcontractor;
(b) if the Request for Disbursement includes payments for
Indirect Costs, it shall be accompanied by a completed and itemized
Indirect Cost statement executed by Company, together with invoices for
all items of Indirect Costs covered thereby;
(c) subject to the provisions of Section 5.8 hereof and
except with respect to Permitted Liens, written lien waivers from the
Contractor and such laborers, subcontractors and materialmen for work
done and materials supplied by them which were paid for pursuant to any
prior Request for Disbursement;
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(d) a written request of Company for any necessary changes in
the Plans and Specifications or the Construction Budget;
(e) copies of all change orders and subcontracts, and, to the
extent requested by Bank, of all inspection or test reports and other
documents relating to the construction of the Project Facility, not
previously delivered to Bank; and
(f) such other information, documentation and certification
as Bank shall reasonably request.
7.2 Notice and Frequency of Advances; Retainage. Each Request for
Disbursement shall be submitted to the Bank for its consent at least five (5)
business days prior to the date of submission of the Request for Disbursement to
the Trustee, and no more frequently than twice per month, based on the value of
the work (including the value of architectural and engineering work) completed,
less the holdback (the "Retainage") provided for at Section 5.6 herein, pending
issuance of certificates of occupancy and such evidence of lien-free completion
of construction as the Bank may reasonably require.
7.3 Funds Advanced. The Company irrevocably authorizes the Trustee
to make an Advance from the Project Fund for any sums requisitioned under this
Agreement in accordance with the Indenture.
7.4 Advances Do Not Constitute a Waiver. No Advance shall constitute
a waiver of any of the conditions of Bank's obligation to make further Advances
nor, in the event Company is unable to satisfy any such condition, shall any
Advance have the effect of precluding Bank from thereafter declaring such
inability to be an Event of Default hereunder.
7.5 Trust Fund Provisions. All proceeds advanced hereunder shall be
subject to the trust fund provisions of Section 13 of the Lien Law. The
affidavit attached hereto as Exhibit C is made pursuant to and in compliance
with Section 22 of the Lien Law, and, if so indicated in said affidavit, a
portion of the Loan Amount will be used, in part, for reimbursement for payments
made by the Company prior to the initial Advance hereunder but subsequent to the
commencement of the construction and equipping of the Facility for items
constituting Costs of Improvement.
ARTICLE 8
EVENTS OF DEFAULTS
The occurrence of any one or more of the following conditions or events
(each an "Event of Default") shall constitute a default under and breach of this
Agreement:
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(a) any failure by Company to pay as and when due and payable
after the giving of any required notice and the expiration of any
applicable grace period, any interest on or principal of or other sum
payable under the Installment Sale Agreement or the Reimbursement
Agreement; or
(b) any failure by Company to pay as and when due and payable
any other sums to be paid by Company to Bank under this Agreement and
continuance of such failure for a period of five (5) days after written
notice thereof from Bank; or
(c) title to the Project Facility is or becomes
unsatisfactory to Bank, in its reasonable discretion, by reason of any
lien, charge, encumbrance, title condition or exception (including
without limitation, any mechanic's, materialman's or similar statutory
or common law lien or notice thereof) other than Permitted Liens, and
such matter causing title to be or become unsatisfactory is not cured
or removed (including by bonding) within twenty (20) days after notice
thereof from Bank to Company; or
(d) any refusal by the Title Insurer to insure any Advance as
being secured by the Mortgage as a valid first lien on the Project
Facility and continuance of such refusal for a period of twenty (20)
days after notice thereof by Bank to Company; or
(e) the Project Facility is not completed by the Completion
Date or, in the reasonable estimation of Bank, construction of the
Project Facility will not be completed by the Completion Date; or
(f) the Project Facility or any portion thereof is injured by
fire, explosion, accident, flood or other casualty, unless proceeds
available for restoration and held by the Trustee pursuant to the
Indenture are sufficient, in the reasonable estimation of Bank, to
effect the satisfactory restoration of the Project Facility and to
permit the completion of the Facility prior to the Completion Date; or
(g) the Project Facility is subject to any Condemnation, or
the Project Facility or any portion thereof is subject to any
Condemnation which will prevent, in the reasonable estimation of Bank,
the completion of the Project Facility prior to the Completion Date; or
(h) any voucher or invoice is submitted at any time which
Company knows has not been earned by the payee for services performed
or for materials used in or furnished for the Project Facility; or
(i) any cessation at any time in construction of the Facility
for more than twenty (20) consecutive days except for strikes, acts of
God, fire or other casualty, or other causes entirely beyond Company's
control; or
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(j) any failure by Company to duly observe or perform any
term, covenant, condition or agreement requiring Company to maintain
insurance or to comply with the terms of the Financing Documents after
the giving of any required notice and the expiration of any applicable
cure period; or
(k) Company requests a termination of the Loan, or confesses
inability to continue or complete construction of the Project Facility
in accordance with this Agreement; or
(l) the Guarantor denies that it has any liability or
obligation under the Guaranty or any other agreement to which the
Guarantor is a party, or shall notify Bank of the Guarantor's intention
to attempt to cancel or terminate the Guaranty or any other agreement
to which the Guarantor is a party; or
(m) any representation or warranty made or deemed to be made
by or on behalf of Company or the Guarantor in this Agreement or in any
other Financing Document, or in any report, certificate, financial
statement, Request for Disbursement or other instrument furnished in
connection with this Agreement, any Advance or any other Financing
Document, shall prove to have been false or incorrect in any material
respect as at the date of which made or deemed to be made; or
(n) any dissolution, termination, partial or complete
liquidation, merger or consolidation of Company, or the Guarantor, or
any sale, transfer or other disposition of all or substantially all of
the assets of Company or the Guarantor, other than with the prior
approval of Bank; or
(o) any suit or proceeding shall be filed against Company,
the Guarantor or the Project Facility which, if adversely determined,
would have a materially adverse effect on the ability of Company or the
Guarantor to perform each and every one of their respective obligations
under and by virtue of the Financing Documents; or
(p) any failure by Company to obtain any Governmental
Approvals, or the revocation or other invalidation of any Governmental
Approvals previously issued; or
(q) any change in the legal or beneficial ownership of
Company, other than with the prior approval of Bank; or
(r) any one or more of the obligations of Company or the
Guarantor under the Financing Documents shall at any time and for any
reason cease to be in full force and effect and which shall, in the
reasonable estimation of the Bank, materially adversely affect the
value of the Project Facility or the ability of the Company or the
Guarantor to perform their respective obligations under the Financing
Documents; or
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(s) any default in the payment of money shall occur under or
in respect of any loan agreement, credit agreement, promissory note,
bond, trust deed, indenture, mortgage, pledge, security agreement,
indemnity or guaranty representing an obligation in excess of $100,000
to which Company or the Guarantor is a party (whether as principal or
guarantor or other surety), or any other default shall occur thereunder
which would entitle the holder thereof to declare all amounts payable
with respect thereto to be immediately due and payable; or
(t) If Company or the Guarantor (i) is adjudicated a debtor
or insolvent, or ceases, is unable, or admits in writing its inability,
to pay its debts as they mature, or makes an assignment for the benefit
of creditors, (ii) applies for, or consents to, the appointment of any
receiver, trustee, or similar officer for it or for all or any
substantial part of its property, or any such receiver, trustee, or
similar officer is appointed without the application or consent of the
Company, or the Guarantor, as the case may be, (iii) institutes, or
consents to the institution of, by petition, application, or otherwise,
any bankruptcy reorganization, arrangement, readjustment of debt,
dissolution, liquidation, or similar proceeding relating to it under
the laws of any jurisdiction, (iv) has any such proceeding instituted
against it which remains thereafter undismissed for a period of sixty
(60) days or (v) has any judgment, writ, warrant of attachment or
execution or similar process issued or levied against a substantial
part of its property of the Company or the Guarantor and such judgment,
writ, or similar process is not released, vacated, or fully bonded
within sixty (60) days after its issue or levy.
(u) any failure by Company to duly observe or perform any
other term, covenant, condition or agreement under this Agreement and
continuance of such failure for a period of thirty (30) days after
written notice thereof from Bank; provided, however, that if such
failure is not susceptible of cure during such thirty (30) day period
(but is susceptible of cure) and Company promptly commences and
diligently pursues cure of such failure during such thirty (30) day
period, then such thirty (30) day period shall be extended for an
additional consecutive period of sixty (60) days; or
(v) any "default" or "event of default," as expressly defined
under any of the other Financing Documents shall occur and be
continuing.
ARTICLE 9
RIGHTS AND REMEDIES OF BANK
9.1 Remedies. Upon the occurrence and prior to the curing or waiver
of any Event of Default, Bank may at any time, at its option, exercise any or
all of the following rights and remedies:
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(a) The Bank may, in its sole discretion, deliver to the
Trustee, with a copy to the Issuer and the Company, notice of such
occurrence and upon compliance with Section ______ of the Indenture,
direct the Trustee to redeem the Bonds; and
(b) The Bank may, in its sole discretion, by notice to the
Trustee, the Issuer and the Company, declare all unpaid principal of
and accrued interest due in accordance with the Reimbursement
Agreement, together with all other sums payable under the Financing
Documents, to be immediately due and payable, whereupon same shall
become and be immediately due and payable, anything in the
Reimbursement Agreement or other Financing Documents to the contrary
notwithstanding, and without presentation, protest or further demand or
notice of any kind, all of which are expressly hereby waived by the
Company; provided however, that the Bank may consent to Advances by the
Trustee thereafter without thereby waiving the right to demand payment
of the sums owing under the Reimbursement Agreement, without being
obligated to consent to any other or further Advances, and without
affecting the validity of or enforceability of the Reimbursement
Agreement or other Bond Documents. Notwithstanding and without limiting
the generality of the foregoing, upon the occurrence of an Event of
Default under paragraph (t) of Article 8, all obligations of the
Trustee to make Advances automatically shall so terminate.
(c) At the discretion of the Bank and on behalf of the
Trustee (but in its own behalf in the event that the Trustee has drawn
upon the Letter of Credit in accordance with the Indenture), the Bank
may cause the Project Facility to be completed and may enter upon the
Land and construct, equip and complete the Project Facility in
accordance with the Plans and Specifications, with such changes therein
as the Bank may, from time to time, and in its sole discretion, deem
appropriate. In connection with any construction of the Project
Facility undertaken by Bank pursuant to the provisions of this
subparagraph, Bank may:
(1) use any funds of Company, including any balance
which may be held by Bank as security or in escrow, and any
funds remaining unadvanced under the Project Fund;
(2) employ existing contractors, subcontractors,
agents, architects, engineers, and the like, or terminate the
same and employ others;
(3) employ security watchmen to protect the Project
Facility;
(4) make such additions, changes and corrections in
the Plans and Specifications as shall, in the judgment of Bank,
be necessary or desirable;
(5) take over and use any and all Equipment contracted
for or purchased by Company, if appropriate, or dispose of the
same as Bank sees fit;
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(6) execute all applications and certificates on
behalf of Company which may be required by any Governmental
Authority or Requirement or contract documents or agreements;
(7) pay, settle or compromise all existing or future
bills and claims which are or may be liens against the Project
Facility, or may be necessary for the completion of the Project
Facility or the clearance of title to the Project Facility;
(8) enter into leases and occupancy agreements, and
modify or amend existing leases and occupancy agreements, all as
Bank shall deem to be necessary or desirable;
(9) prosecute and defend all actions and proceedings
in connection with the construction of the Facility or in any
other way affecting the Land or the Project Facility and take
such action and require such performance as Bank deems necessary
under any Payment and Performance Bonds; and
(10) take such action hereunder, or refrain from acting
hereunder, as Bank may, in its sole and absolute discretion,
from time to time determine, and without any limitation
whatsoever, to carry out the intent of this subparagraph.
Company shall be liable to Bank for all costs paid or incurred
for the construction, completion and equipping of the Project
Facility, whether the same shall be paid or incurred pursuant to
the provisions of this subparagraph or otherwise, and all
payments made or liabilities incurred by Bank hereunder of any
kind whatsoever shall be deemed advances made to Company under
this Agreement and shall be secured by the Mortgage and the
other Financing Documents.
To the extent that any costs so paid or incurred by Bank,
together with all other Advances made by Bank hereunder, exceed
the Loan Amount, such excess costs shall be paid by Company to
Bank on demand, with interest thereon at the Default Rate set
forth in the Reimbursement Agreement, until paid; and Company
shall execute such notes or amendments to the Reimbursement
Agreement as may be requested by Bank to evidence Company's
obligation to pay such excess costs and until such notes or
amendments are so executed by Company, Company's obligation to
pay such excess costs shall be deemed to be evidenced by this
Agreement and the Reimbursement Agreement. In the event Bank
takes possession of the Project Facility and assumes control of
such construction as aforesaid, it shall not be obligated to
continue such construction longer than it shall see fit and may
thereafter, at any time, change any course of action undertaken
by it or abandon such construction and decline to make further
payments for the account of Company whether or not the Project
Facility shall have been completed. For the purpose of this
subparagraph, the construction, equipping and completion of the
Project Facility shall be deemed to include any action necessary
to cure any Event of Default by Company under any of the terms
and provisions of any of the Financing Documents.
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(d) Bank may to the extent permitted by applicable law, at
any time and from time to time, without notice (any such notice being
expressly waived), without regard to the adequacy of any collateral,
set off and apply any and all deposits (general or specific, time or
demand, provisional or final, regardless of currency, maturity, or the
branch of Bank where the deposits are held) at any time held or other
sums credited by or due from Bank to Company against any and all
liabilities, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising of Company to Bank.
(e) Bank may exercise any or all of the rights and remedies
set forth in the Reimbursement Agreement and the other Financing
Documents.
9.2 Remedies Not in Conflict with the Indenture. In addition, and to
the extent not in conflict with the Indenture, the Company agrees to the
following:
(a) Power of Attorney. For the purposes of carrying out the
provisions and exercising the rights, powers and privileges granted by
or referred to in this Agreement, Company hereby irrevocably
constitutes and appoints Bank, upon and during the continuation of an
Event of Default, its true and lawful attorney-in-fact, with full power
of substitution, to execute, acknowledge and deliver any instruments
and do and perform any acts which are referred to in this Agreement, in
the name and on behalf of Company. The power vested in such
attorney-in-fact is, and shall be deemed to be, coupled with an
interest and irrevocable.
(b) Remedies Cumulative. Upon the occurrence of any Event of
Default, the rights, powers and privileges provided in this Article 9
and all other remedies available to Bank under this Agreement, the
Reimbursement Agreement or under any of the other Financing Documents
or at law or in equity may be exercised by Bank at any time and from
time to time and shall not constitute a waiver of any of Bank's other
rights or remedies thereunder, whether or not the Loan shall be due and
payable, and whether or not Bank shall have instituted any foreclosure
proceedings or other action for the enforcement of its rights under the
Financing Documents.
(c) Annulment of Defaults. An Event of Default shall not be
deemed to be in existence for any purpose of this Agreement, the
Reimbursement Agreement or any Financing Document if Bank shall have
waived such Event of Default in writing or stated that the same has
been cured to its reasonable satisfaction, but no such waiver shall
extend to or affect any subsequent Event of Default or impair any of
the rights of Bank upon the occurrence thereof.
(d) Waivers. Company hereby waives to the extent not
prohibited by applicable law (a) all presentments, demands for payment
or performance, notices of nonperformance (except to the extent
required by the provisions hereof or of any other Financing Documents),
protests and notices of dishonor, (b) any requirement of diligence or
promptness on Bank's part in the enforcement of its rights (but not
fulfillment of its obligations) under the provisions of this Agreement
or any other Financing Document, and (c) any and all notices of every
kind and description which may be required to be given by any statute
or rule of law and
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any defense of any kind which Company may now or hereafter have with
respect to its liability under this Agreement, the Reimbursement
Agreement or under any other Financing Document.
(e) Course of Dealing, Etc. No course of dealing between
Company and Bank shall operate as a waiver of any of Bank's rights
under this Agreement or any Financing Document. No delay or omission on
Bank's part in exercising any right under this Agreement or any
Financing Document shall operate as a waiver of such right or any other
right hereunder. A waiver on any one occasion shall not be construed as
a bar to or waiver of any right or remedy on any future occasion No
waiver or consent shall be binding upon Bank unless it is in writing
and signed by Bank. The making of an Advance hereunder during the
existence of an Event of Default shall not constitute a waiver thereof.
ARTICLE 10
GENERAL CONDITIONS
The following conditions shall be applicable throughout the term of
this Agreement:
10.1 Rights of Third Parties. All conditions of the obligations of
Bank hereunder, including the obligation to consent to Advances, are imposed
solely and exclusively for the benefit of Bank and its successors and assigns
and no other person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that Bank
will make Advances in the absence of strict compliance with any or all thereof
and no other person shall, under any circumstances, be deemed to be a
beneficiary of such conditions, any and all of which may be freely waived in
whole or in part by Bank at any time if in its sole discretion it deems it
desirable to do so. In particular, Bank makes no representations and assumes no
obligations as to third parties concerning the quality of the construction by
Company of the Project Facility or the absence therefrom of defects. In this
connection Company agrees to and shall indemnify Bank from any liability, claims
or losses resulting from the disbursement of Advances or from the condition of
the Project Facility whether related to the quality of construction or otherwise
and whether arising during or after the term of the Loan made by Bank to Company
in connection herewith. This provision shall survive the repayment of the Bonds
and any sums due to the Bank under the Financing Documents and shall continue in
full force and effect so long as the possibility of such liability, claims or
losses exists.
10.2 Limitation on Issuer Liability; Indemnity. No provision or
covenant contained in this Agreement or any obligation herein or the breach
thereof shall constitute or give rise to pecuniary or other liability or charge
upon the Issuer, its members, officers, employees or agents. The Company shall
indemnify the Issuer against all claims, demands, expenses and liabilities under
this Agreement in accordance with the provisions of the Installment Sale
Agreement.
28
<PAGE>
10.3 Relationship. The relationship between Bank and Company is
solely that of a lender and borrower, and nothing contained herein or in any of
the other Financing Documents shall in any manner be construed as making the
parties hereto partners, joint venturers or any other relationship other than
lender and borrower.
10.4 Evidence of Satisfaction of Conditions. Any condition of this
Agreement which requires the submission of evidence of the existence or
non-existence of a specified fact or facts implies as a condition the existence
or non-existence, as the case may be, of such fact of facts and Bank shall, at
all times, be free independently to establish to its satisfaction and in its
absolute discretion such existence or non-existence.
10.5 Notices. Any notices required or permitted to be given hereunder
shall be: (i) personally delivered or (ii) given by registered or certified
mail, postage prepaid, return receipt requested, or (iii) forwarded by overnight
courier service, in each instance addressed to the addresses set forth at the
head of this Agreement, or such other addresses as the parties may for
themselves designate in writing as provided herein for the purpose of receiving
notices hereunder. All notices shall be in writing and shall be deemed given,
(i) in the case of notice by personal delivery, upon actual delivery, (ii) in
the case of mail service, four (4) days after deposit with the U.S. Postal
Service, or (iii) in the case of overnight courier, the day after delivery to
the courier service. A duplicate copy of each notice, certificate or other
communication given hereunder by (1) the Company or the Issuer shall also be
given to the Trustee, and (2) the Company, Issuer or the Trustee shall also be
given to the Bank.
10.6 Assignment. Company may not assign this Agreement or any of its
rights or obligations hereunder without the prior approval of Bank.
10.7 Successors and Assigns Included in Parties. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors and assigns of such parties shall be included and
all covenants and agreements contained in this Agreement by or on behalf of
Company or by or on behalf of Bank shall bind and inure to the benefit of their
respective heirs, legal representatives, successors and assigns, whether so
expressed or not.
10.8 Headings. The headings of the Articles, Paragraphs and
subparagraphs of this Agreement are for the convenience of reference only, are
not to be considered a part hereof and shall not limit or otherwise affect any
of the terms hereof.
10.9 Invalid Provisions to Affect No Others. If fulfillment of any
provision hereof or any transaction related hereto at the time performance of
such provisions shall be due, shall involve transcending the limit of validity
presently prescribed by law, with regard to obligations of like character and
amount, then ipso facto, the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision herein contained operates
or would prospectively operate to invalidate this Agreement in whole or in part,
then such clause or
29
<PAGE>
provision only shall be held for naught, as though not herein contained, and the
remainder of this Agreement shall remain operative and in full force and effect.
10.10 Number and Gender. Whenever the singular or plural number, or
the masculine, feminine or neuter gender is used herein, it shall equally
include the other.
10.11 Governing Law. This Agreement shall be governed by and construed
in accordance with laws of the State of New York.
10.12 Consent to Jurisdiction. Company hereby irrevocably and
unconditionally (a) submits to personal jurisdiction in the State of New York
over any suit, action or proceeding arising out of or relating to this
Agreement, and (b) waives any and all personal rights under the laws of any
state (i) to the right, if any, to trial by jury, or (ii) to object to
jurisdiction within the State of New York or venue in any particular forum
within the State of New York. Nothing contained herein, however, shall prevent
Bank from bringing any suit, action or proceeding or exercising any rights
against any security and against Company, and against any property of Company,
in any other state. Initiating such suit, action or proceeding or taking such
action in any state shall in no event constitute a waiver of the agreement
contained herein that the laws of the State of New York shall govern the rights
and obligations of Company and Bank hereunder or the submission herein by
Company to personal jurisdiction within the State of New York.
10.13 Amendments. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally, but only by instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
10.14 No Recourse; Special Obligation. (a) The obligations and
agreements of the Issuer, if any, contained herein and in the other Financing
Documents and any other instrument or document executed in connection therewith
or herewith, and any other instrument or document supplemental thereto or
hereto, shall be deemed the obligations and agreements of the Issuer, and not of
any member, officer, director, agent (other than the Company) or employee of the
Issuer in his individual capacity, and the members, officers, directors, agents
(other than the Company) and employees of the Issuer shall not be liable
personally hereon or thereon or be subject to any personal liability or
accountability based upon or in respect hereof or thereof or of any transaction
contemplated hereby or thereby.
(b) The obligations and agreements of the Issuer contained
herein and therein shall not constitute or give rise to an obligation
of the State of New York or Saratoga County, New York, and neither the
State of New York nor Saratoga County, New York shall be liable hereon
or thereon, and, further, such obligations and agreements shall not
constitute or give rise to a general obligation of the Issuer, but
rather shall constitute limited obligations of the Issuer payable
solely from the revenues of the Issuer derived and to be derived from
the sale or other disposition of the Project Facility (except for
revenues derived by the Issuer with respect to the Unassigned Rights).
30
<PAGE>
(c) No order or decree of specific performance with respect
to any of the obligations of the Issuer hereunder shall be sought or
enforced against the Issuer unless (1) the party seeking such order or
decree shall first have requested the Issuer in writing to take the
action sought in such order or decree of specific performance, and ten
(10) days shall have elapsed from the date of receipt of such request,
and the Issuer shall have refused to comply with such request (or, if
compliance therewith would reasonably be expected to take longer than
ten days, shall have failed to institute and diligently pursue action
to cause compliance with such request within such ten day period) or
failed to respond within such notice period, (2) if the Issuer refuses
to comply with such request and the Issuer's refusal to comply is based
on its reasonable expectation that it will incur fees and expenses, the
party seeking such order or decree shall have placed in an account with
the Issuer an amount or undertaking sufficient to cover such reasonable
fees and expenses, and (3) if the Issuer refuses to comply with such
request and the Issuer's refusal to comply is based on its reasonable
expectation that it or any of its members, officers, agents (other than
the Company) or employees shall be subject to potential liability, the
party seeking such order or decree shall (A) agree to indemnify, defend
and hold harmless the Issuer and its members, officers, directors,
agents (other than the Company) and employees against any liability
incurred as a result of its compliance with such demand, and (B) if
requested by the Issuer, furnish to the Issuer satisfactory security to
protect the Issuer and its members, officers, directors, agents (other
than the Company) and employees against all liability expected to be
incurred as a result of compliance with such request. Any failure to
provide the indemnity and/or security required in this Section 10.14
shall not affect the full force and effect of an Event of Default
hereunder.
31
<PAGE>
IN WITNESS WHEREOF, the Bank, the Company and the Issuer have executed
this Agreement as of the date first above written.
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
--------------------------------------
Phillip S. Sumpter,
Executive Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Richard Van Auken
--------------------------------------
Richard Van Auken, Senior Banker
COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ Floyd H. Rourke
--------------------------------------
Chairman
Floyd H. Rourke
32
<PAGE>
STATE OF NEW YORK )
)SS.:
COUNTY OF SARATOGA )
On the 9th day of October, 1997, before me personally appeared Phillip
S. Sumpter, to me known, who being by me duly sworn, did depose and say that he
resides at 33296 Shingleton Road, Waverly, Virginia; that he is an Executive
Vice President of SPURLOCK ADHESIVES, INC., the corporation described in and
which executed the foregoing instrument, and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/ Theresa C. Priest
------------------------------------
Notary Public - State of New York
My Commission Expires:
Theresa C. Priest
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
STATE OF NEW YORK )
) ss.:
COUNTY OF SARATOGA )
On this 9th day of October, 1997, before me personally came Richard Van
Auken, to me known, who being by me duly sworn, did depose and say that he
resides in Brunswick, New York; that he is a Senior Banker of KEYBANK NATIONAL
ASSOCIATION, the national banking association described in, and which executed
the above instrument; and that he signed his name thereto by order of the Board
of Directors of said association.
/s/ Theresa C. Priest
------------------------------------
Notary Public - State of New York
My Commission Expires:
Theresa C. Priest
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
33
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF SARATOGA )
On this 7th day of October, 1997, before me personally came Floyd H.
Rourke, to me known, who being by me duly sworn, did depose and say that he
resides in Northumberland, NY; that he is the CHAIRMAN of the COUNTY OF SARATOGA
INDUSTRIAL DEVELOPMENT AGENCY, the public benefit corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
authority of the members of said public benefit corporation.
/s/ Theresa C. Priest
------------------------------------
Notary Public - State of New York
My Commission Expires:
Theresa C. Priest
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
01294\bldgloan.2
34
<PAGE>
EXHIBIT A
Construction Budget
COPY AT THE OFFICE OF THE BANK
<PAGE>
EXHIBIT B
Description of Land
THAT TRACT OR PARCEL OF LAND, situate in the Town of Moreau, County of
Saratoga and State of New York more fully described as Lot Number 3 as shown on
subdivision maps of Moreau Industrial Park prepared by The Saratoga Associates
and filed in the Saratoga County Clerk's Office on March 18, 1992 in drawer
#M-348 A-Z and AA-DD; and as modified by revised subdivision maps of Moreau
Industrial Park prepared by The Saratoga Associates and filed in the Saratoga
County Clerk's Office on February 16, 1994 in drawer #M-398, A-S and being
further bounded and described as follows:
BEGINNING at a point marked with a capped iron rod found at the point
of intersection of the easterly line of Farnan Road with the common division
line of Lot No. 4 to the north and Lot No. 3 to the south as shown on said map;
thence from said point of beginning along said common division line the
following five (5) courses and distances:
1) North 90 deg. 00 min. 00 sec. East, 347.86 feet to a point marked with
a capped iron rod found;
2) South 00 deg. 00 min. 00 sec. West, 32.63 feet to a point marked with a
capped iron rod found;
3) North 90 deg. 00 min. 00 sec. East, 191.52 feet to a point marked with
a capped iron rod found;
4) North 00 deg. 00 min. 00 sec. East, 32.63 feet to a point marked with a
capped iron rod found;
5) North 90 deg. 00 min. 00 sec. East, 680.17 feet to the point of
intersection of the westerly line of Lot No. 5 with the common division line of
Lot No. 4 to the north and Lot No. 3 to the south as shown on said map; thence
along said westerly line, South 16 deg. 10 min. 56 sec. West, 102.04 feet to a
point in the northwesterly line of lands of The State of New York as shown on
said map, said point also being at the 145 foot elevation; thence along said
northwesterly and the westerly line of lands of The State of New York as it
winds and turns along the 145 foot elevation in a southerly direction 712 +/-
feet to the point of intersection of said westerly line of lands of The State of
New York with the common division line of Lot No. 3 to the north and Lot No. 2
to the south as shown on said map, the last course having a tie-line of South 33
deg. 02 min. 30 sec. West, 699.47 feet; thence along said common division line,
South 90 deg. 00 min. 00 sec. West, 865.65 feet to a point marked with a capped
iron rod found at the point of intersection of the easterly line of Farnan Road
with the common division line of Lot No. 3 to the north and Lot No. 2 to the
south as shown on said map; thence along said easterly line in a northerly
direction the following four (4) courses and distances:
1) North 00 deg. 00 min. 00 sec. West, 116.35 feet to a point of
curvature;
2) Along a curve to the right an arc length of 464.05 feet to a point of
tangency, said curve having a radius of 2,773.32 feet and a delta angle
of 09 deg. 35 min. 13 sec.;
3) North 09 deg. 35 min. 13 sec. East, 50.00 feet to a point of curvature;
4) Along a curve to the left an arc length of 57.49 feet to the point or
place of beginning, said curve having a radius of 2,294.42 feet and a delta
angle of 01 deg. 26 min. 08 sec., said parcel containing 16.37 +/- acres of land
and being Lot No. 3 as shown on said map.
<PAGE>
EXHIBIT C
LIEN LAW, SECTION 22 AFFIDAVIT
STATE OF NEW YORK )
) ss.:
COUNTY OF SARATOGA )
PHILLIP S. SUMPTER, being duly sworn, deposes and says:
1. I am the Executive Vice President of Spurlock Adhesives, Inc.,
the entity described as the Company in the Building Loan Agreement to which this
Affidavit is annexed.
2. The Company and the Bank have entered into a certain Building
Loan Agreement relating to the construction and equipping of a Facility on Land
which is more particularly described in Exhibit B. The Building Loan Agreement
is intended to be filed in the Saratoga County Clerk's Office in accordance with
Section 22 of the Lien Law. All capitalized terms used herein and not otherwise
defined shall have the same meanings assigned thereto in the Building Loan
Agreement.
3. The Bond proceeds will be advanced by the Trustee with the
consent of the Bank in accordance with the terms of the Building Loan Agreement
and the Indenture (as defined herein).
4. The consideration, if any, paid, or to be paid, for the Loan is
set forth in item 5(a) below.
5. All other expenses paid or to be paid in connection with the
Loan are as follows:
(a) Fair and reasonable sums paid for obtaining the Loan and
subsequent financing:
(i) Origination or commitment fee for Loan
$60,000
(ii) Appraisal fees
$-0-
(iii) Construction supervisor fees
$-0-
(iv) Fees and disbursements of Bank's counsel
$-0-
<PAGE>
(v) Costs of title examination and UCC searches, title
insurance premiums and title continuation charges
$-0-
(vi) Survey costs
$-0-
(vii) Recording and filing fees
$-0-
(viii) Mortgage tax
$-0-
(ix) Bond Placement Agent fee
$60,000
Subtotal: $120,000
(b) Architectural, engineering and surveying fees,
$-0-
(c) Construction period interest
$-0-
(d) Insurance premiums during construction of Project Facility
$-0-
(e) Paid to Bank to repay sums previously loaned to pay costs of
construction,
$1,600,000
(f) Payment and Performance Bond premiums
$-0-
(g) Sums paid to take by assignment prior existing mortgages
$-0-
(h) Sums paid to discharge or reduce the indebtedness under prior
existing mortgages
$-0-
(i) Taxes, assessments and other municipal charges existing prior to
the commencement of construction of the Project Facility
$-0-
<PAGE>
(j) Taxes, assessments and other municipal charges accruing during
construction of the Project Facility
$-0-
(k) Other, Land Acquisition
$254,250
Total $1,974,250
Certain of the foregoing amounts are based upon good faith estimates of
costs or expenses not yet incurred and certain items listed above may cost more
or less than such estimates. The Company reserves the right to use unexpended
amounts from any of said items to defray increases incurred in any other item or
items listed above so long as the total amount expended on such items does not
exceed the amount of the Loan.
6. That after payment of all the above fees and expenses, the
amount of money which will be available to pay for the cost of making the
improvements referred to in the Building Loan Agreement will be the sum of $ ,
less all monies needed to pay insurance premiums, interest, taxes, assessments,
water and sewer costs and rent becoming due while the improvements are being
made.
7. All monies advanced by the Bank to the Company under the
Agreement shall be subject to the Trust Fund provisions of Section 13 of the
Lien Law. If an Event of Default occurs during construction of the Facility, the
Bank may refuse to advance additional funds and such unadvanced sums would not
be available to the Company to pay the cost of constructing the Facility.
8. This affidavit is made pursuant to and in compliance with
Section 22 of the Lien Law by the Company, as the "borrower" for the purposes of
said Section.
9. The facts herein stated are true to the best of deponent's
knowledge.
/s/ Phillip S. Sumpter
------------------------------
Sworn to before me this
9th day of October, 1997.
/s/ Kevin J. Kelley
- --------------------------------
NOTARY PUBLIC
STATE OF NEW YORK
KEVIN J. KELLEY
Notary Public, State of New York
Qualified in Albany County
Commission Expires 10/31/97
<PAGE>
EXHIBIT D
COMPANY'S REQUISITION
COMPANY: Spurlock Adhesives, Inc. ("Company")
TRUSTEE: Star Bank, N.A. ("Trustee")
BANK: KeyBank National Association ("Bank")
REQUISITION NO.: ________________
DATE: ____________________, 1997
PROJECT: $6,000,000 County of Saratoga Industrial Development Agency
Multi-Mode Variable Rate Industrial Revenue Bonds (Spurlock
Adhesives, Inc. Project), Series 1997 A
Pursuant to the Building Loan Agreement, dated as of October 1, 1997,
by and among the Company, the Bank and County of Saratoga Industrial Development
Agency (the "Agreement"), Company hereby authorizes and requests an Advance by
the Trustee for the following purpose(s) and in the following amounts:
Amount Purpose(s) Attributable to
________________________________________________________________________________
Total: $____________________
Please disburse such funds in the following manner:
<PAGE>
IN CONNECTION WITH AND IN ORDER TO INDUCE THE TRUSTEE TO ADVANCE THE
AMOUNT REQUESTED ABOVE, THE COMPANY HEREBY REPRESENTS, WARRANTS AND STIPULATES
TO THE TRUSTEE AND THE BANK AS FOLLOWS:
1. There is existing no Event of Default (as defined in the
Agreement) and no event which but for the passage of time, the giving of notice
or both would constitute an Event of Default. The undersigned has duly complied
with and observed all of the terms, covenants and conditions of each of said
instruments required to be performed by the undersigned to the date of this
Requisition, and unless the Bank is notified to the contrary prior to the
disbursement of the Advance requested above, will be so on the date hereof.
2. The amounts herein are true and correct to the best of the
Company's knowledge and after the honoring of this Requisition, the Loan amount
not yet advanced, less the retainage held, if any, shall be sufficient to pay
for the completion of the costs of construction of the Facility not yet paid.
3. All sums previously requisitioned have been applied to the
payment of the costs of construction of the Facility heretofore incurred and the
proceeds of any Advance made in accordance with this Requisition will be applied
to, and solely to, payment of the foregoing items.
4. All work has been performed fully in accordance with the Plans
and Specifications as defined in the Agreement.
5. The Bank has consented to this requisition as evidenced by its
execution of the consent appearing below.
SPURLOCK ADHESIVES, INC.
By:_________________________________
Authorized Officer
Consented to this _____ day
of ________________, 1997
KEYBANK NATIONAL ASSOCIATION
By:___________________________________
Richard C. Van Auken
Vice President
Exhibit 10.42
CLOSING ITEM NO.: A-12
- -------------------------------------------------------------------------------
SPURLOCK ADHESIVES, INC.
TO
COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT AGENCY
AND
STAR BANK, N.A., AS TRUSTEE
========================================================
TAX REGULATORY AGREEMENT
========================================================
DATED OCTOBER 10, 1997
RELATING TO
$6,000,000
AGGREGATE PRINCIPAL AMOUNT OF
COUNTY OF SARATOGA
INDUSTRIAL DEVELOPMENT AGENCY
MULTI-MODE VARIABLE RATE
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(SPURLOCK ADHESIVES, INC. PROJECT), SERIES 1997 A
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is not part of the Tax Regulatory
Agreement and is for convenience of reference only)
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS.......................................................................3
SECTION 1.2. INTERPRETATION...................................................................13
ARTICLE II
THE PROJECT AND THE PROJECT FACILITY
SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................15
SECTION 2.2. REPRESENTATIONS REGARDING MANUFACTURING..........................................17
ARTICLE III
USE OF THE PROCEEDS OF THE BONDS
SECTION 3.1. USE OF THE PROCEEDS OF THE BONDS.................................................18
SECTION 3.2. CERTIFICATION AS TO PROJECT COSTS................................................18
SECTION 3.3. AVERAGE REASONABLY EXPECTED ECONOMIC LIFE AND AVERAGE BOND MATURITY;
FORM 8038.............................................................................18
SECTION 3.4. FINAL REQUEST FOR DISBURSEMENT...................................................19
SECTION 3.5. EXISTING PROPERTY................................................................19
SECTION 3.6. ACQUISITION OF LAND..............................................................19
SECTION 3.7. REFUNDING........................................................................19
ARTICLE IV
AGGREGATE FACE AMOUNT OF THE BONDS
SECTION 4.1. REPRESENTATIONS WITH REGARD TO THE AGGREGATE FACE AMOUNT OF THE BONDS............20
SECTION 4.2. COMPLIANCE WITH CAPITAL EXPENDITURE LIMITATIONS..................................20
SECTION 4.3. OTHER ACTION AFFECTING THE AGGREGATE FACE AMOUNT OF THE BONDS....................21
i
<PAGE>
ARTICLE V
THE $40 MILLION LIMITATION
SECTION 5.1. $40 MILLION LIMITATION REPRESENTATIONS...........................................22
SECTION 5.2. COVENANT AS TO $40 MILLION LIMITATION............................................22
ARTICLE VI
COMPOSITE ISSUES AND FEDERAL GUARANTEES
SECTION 6.1. COMPOSITE AND OTHER ISSUES.......................................................23
SECTION 6.2. FEDERAL GUARANTEES...............................................................23
ARTICLE VII
ARBITRAGE
SECTION 7.1. ARBITRAGE REPRESENTATIONS........................................................25
SECTION 7.2. ARBITRAGE COMPLIANCE.............................................................30
SECTION 7.3. CALCULATION OF REBATE AMOUNT.....................................................31
SECTION 7.4. PAYMENTS TO UNITED STATED........................................................33
SECTION 7.5. RECORDKEEPING....................................................................33
SECTION 7.6. PROHIBITED PAYMENT COVENANT......................................................34
SECTION 7.7. COMPANY RESPONSIBILITY...........................................................34
ARTICLE VIII
COVENANTS AND AMENDMENTS
SECTION 8.1. COMPLIANCE WITH CODE.............................................................35
SECTION 8.2. AMENDMENT........................................................................35
SECTION 8.3. NOTICES..........................................................................35
SECTION 8.4. PARTIES INTERESTED HEREIN........................................................36
SECTION 8.5. COUNTERPARTS.....................................................................36
SCHEDULE A
PART I
SUMMARY OF ACQUISITION AND CONSTRUCTION COSTS.................................................A-1
SCHEDULE A
PART II
SUMMARY OF SOURCES OF FUNDS...................................................................A-3
SCHEDULE A
PART III
ITEMIZATION OF ACQUISITION AND CONSTRUCTION COSTS.............................................A-4
ii
<PAGE>
SCHEDULE A
PART IV
SOURCES FOR PAYMENT OF ACQUISITION AND CONSTRUCTION COSTS.....................................A-9
SCHEDULE B
AVERAGE REASONABLY EXPECTED ECONOMIC LIFE AND AVERAGE MATURITY OF THE BONDS............................B-1
SCHEDULE C
AGGREGATE FACE AMOUNT OF THE BONDS.....................................................................C-1
SCHEDULE D
THE $40,000,000 AGGREGATE LIMIT........................................................................D-1
</TABLE>
iii
<PAGE>
TAX REGULATORY AGREEMENT
THIS TAX REGULATORY AGREEMENT made and dated OCTOBER 10, 1997 (the "Tax
Regulatory Agreement") from SPURLOCK ADHESIVES, INC., a business corporation
organized and existing under the laws of the State of Virginia having its
principal office at 5090 General Mahone Highway, Waverly, Virginia 23890 (the
"Company"), for the benefit of the COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT
AGENCY (the "Issuer") and STAR BANK, N.A., as trustee under the Indenture (as
hereinafter defined) (the "Trustee");
W I T N E S S E T H :
WHEREAS, the Issuer, by resolution adopted on September 16, 1997 (the
"Resolution"), determined to issue its $6,000,000 aggregate principal amount of
Multi-Modal Variable Rate Industrial Development Revenue Bonds (Spurlock
Adhesives, Inc. Project), Series 1997 A (the "Bonds") for the purpose of
financing a portion of the costs of the Project (as hereinafter defined); and
WHEREAS, the Project (the "Project") shall consist of (A) (1) the
acquisition of a certain parcel of land comprising approximately 16.37 acres
constituting Lot #3 located in the Moreau Industrial Park in the Town of Moreau,
Saratoga County, New York (the "Land"), (2) the construction on the Land of two
(2) buildings approximately 10,000 square feet each in size and one (1)
approximately 800 square foot building for use in the manufacturing of synthetic
organic chemicals and related functions (collectively the "Facility") and (3)
the acquisition and installation therein of certain machinery and Project
Facility (the "Project Facility" and together with the Land and the Facility,
the "Project Facility"), and (B) the financing of a portion of the costs of the
foregoing; and
WHEREAS, contemporaneously with the execution of the Indenture, the
Issuer and the Company have entered into an installment sale agreement dated as
of October 1, 1997 (the "Installment Sale Agreement") specifying the terms and
conditions pursuant to which the Issuer agrees to acquire, construct and install
the Project Facility and to sell the Project Facility to the Company; and
WHEREAS, the Issuer proposes to issue the Bonds for the purpose of
providing funds for the acquisition, construction and installation of the
Project Facility; and
WHEREAS, the Issuer, by the terms of the Indenture and as security for
the Bonds, has granted the Trustee a first security interest in the Trust
Revenues (as defined in the Indenture); and
WHEREAS, as further security for the Bonds, the Company has entered
into a reimbursement agreement dated as of October 1, 1997 (the "Reimbursement
Agreement") with KeyBank National Association, a national banking association
organized under the laws of the United States (the "Bank"), pursuant to which
the Bank has issued in favor of the Trustee an irrevocable transferable
direct-pay letter of credit (the "Letter of Credit") to secure the Bonds; and
WHEREAS, the Bonds are to be issued pursuant to the terms of a trust
indenture (the "Indenture") dated as of October 1, 1997 by and between the
Issuer and the Trustee; and
<PAGE>
WHEREAS, the Internal Revenue Code of 1986, as amended (the "Code"),
and the Department of Treasury Regulations promulgated with respect thereto (the
"Regulations"), prescribe restrictions on, among other things, the Bonds, the
activities of the Company, the application of the proceeds of the Bonds and
earnings thereon and the use of the Project Facility in order that interest on
the Bonds be and remain exempt from federal income taxation; and
WHEREAS, in order to ensure that the requirements of the Code are and
will continue to be met, the Company has determined to enter into the Tax
Regulatory Agreement in order to set forth certain representations, intentions,
conditions and covenants relating to, among other things, the Bonds, the
activities of the Company, the application of the proceeds of the Bonds and the
earnings thereon and the use of the Project Facility;
NOW, THEREFORE, in consideration of the issuance, sale and purchase of
the Bonds, the issuance of the Letter of Credit and the mutual covenants and
undertakings set forth in the Financing Documents (as defined in the Indenture),
the Company hereby represents, warrants and undertakes the following for the
benefit of the Issuer, the Trustee and the holders of the Bonds as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. For purposes of the Tax Regulatory Agreement,
capitalized terms not otherwise defined herein shall have the meanings ascribed
to such terms in the Indenture. In addition, the following italicized words and
phrases shall have the following meanings:
"1954 Code" means the Internal Revenue Code of 1954, as amended.
"Aggregate Face Amount" means the aggregate face amount of an issue of
bonds determined in accordance with Section 144(a) of the Code (formerly Section
103(b)(6) of the 1954 Code) and Section 4.1 hereof.
"Average Maturity" means the average maturity of an issue of bonds
within the meaning ascribed to such phrase in Section 147(b) of the Code
(formerly Section 103(b)(14) of the 1954 Code), which requires the determination
of Average Maturity to be made by taking into account the respective issue
prices of the obligations which are issued as part of the issue.
"Average Reasonably Expected Economic Life" shall have the meaning
ascribed to such phrase in Section 147(b) of the Code (formerly Section
103(b)(14) of the 1954 Code) and shall be calculated by taking into account the
respective costs of the different assets forming part of the Project Facility
and determined as of the later of the date on which the Bonds are issued or the
date on which the Project Facility is placed in service or expected to be placed
in service. Land shall not be taken into account. The economic lives of such
assets shall be determined by using class lives under the ADR system (Revenue
Procedure 87-56) for property other than real property and guideline lives under
Revenue Procedure 62-21 for real property. If the Company can establish,
however, on the basis of all the facts and circumstances of each particular
case, such as an appraisal, that the economic lives of such assets are longer
than the lives determined pursuant to the preceding sentence, then such assets
may be assigned such longer economic lives accordingly.
"Code" means the Internal Revenue Code of 1986, as amended.
"Computation Period" means each period from the date of original
issuance of the Bonds through the date on which a determination of the Rebate
Amount is made.
"Fair Market Value" of an investment means the fair market value of
such investment at the time it becomes a Nonpurpose Investment, determined
pursuant to Section 1.148-5(d)(6) of the Regulations.
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"Gross Proceeds" shall have the meaning ascribed to such term in
Section 1.148-1(b) of the Regulations which includes the following:
(A) Sale proceeds, amounts actually or constructively received
from the sale of an issue, including amounts used to pay underwriters' discount
or compensation, and accrued interest other than pre-issuance accrued interest;
(B) Investment proceeds, amounts actually or constructively
received from the investment of proceeds of an issue (as defined in Section
1.148(b) of the Regulations);
(C) Amounts treated as sinking funds under Section 1.148(c)(2) of
the Regulations;
(D) Amounts that are directly or indirectly pledged by a
substantial beneficiary of an issue to pay principal or interest on an issue (as
defined in Section 1.148-1(c)(3) of the Regulations);
(E) Transferred proceeds, any proceeds treated as transferred
proceeds as defined in Section 1.148-9 of the Regulations, or the applicable
corresponding provisions of prior law); and
(F) Other amounts having a nexus to an issue (as defined in
Section 1.148(c) of the Regulations).
"Higher Yielding Investments" means any Investment Property which
produces a Yield over the term of the issue which is materially higher than the
Yield on the issue. For purposes hereof, "materially higher" shall have the
meaning ascribed to such phrase in Section 1.148-2(d)(2) of the which states
that the Yield on any investment is "materially higher" when it exceeds the
Yield on the Bonds by more than one-eighth of one percentage point (1/8 of 1%).
"Included Bonds" means (A) any issue of bonds treated as part of the
same issue as the Bonds pursuant to Section 1.150-1 of the Regulations and
Revenue Ruling 81-216, (B) any issue of bonds required to be aggregated with the
Bonds in determining the Aggregate Face Amount thereof under Section 144(a)(2)
of the Code or Section 103(b)(6)(B) of the 1954 Code and (C) any issue of bonds
aggregated with the Bonds pursuant to Section 144(a)(9) of the Code.
"Included Facilities" means any facilities described in Section
1.103-10(d)(2)(i) of the Regulations which includes any facilities located
within the Town of Moreau, Saratoga County, New York and those facilities
located outside the Town of Moreau, Saratoga County, New York but which are
contiguous to, integrated with or functionally related to a facility located
within the Town of Moreau, Saratoga County, New York.
"Industrial Development Bond" means any bond which constitutes an
industrial development bond as defined in Section 103(b)(2) of the 1954 Code.
"Investment Property" shall have the meaning ascribed to such phrase in
Section 148(b)(2) of the Code which describes the same to mean any security
(within the meaning of Section 165(g)(2)(A) or (B) of
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the Code), or any obligation other than tax-exempt obligations which are not
"specified private activity bonds" within the meaning of Section 57(a)(5)(C) of
the Code, any annuity contract or any investment-type property. Investment
Property shall not mean tax-exempt bonds.
"Issuance Costs" shall have the meaning ascribed to such phrase in
Section 147(g) of the Code and by H. Conf. Rep. No. 99-841, pp. II-729-30, which
describes the same as all costs incurred in connection with the borrowing,
including, but not limited to, underwriter's spread, discount or fees, counsel
fees (including bond counsel, underwriter's counsel, issuer's counsel, company's
counsel and specialized counsel fees), financial advisor's fees, rating agency
fees, trustee fees, paying agent and certifying and authenticating agent fees,
accountant fees, printing costs, costs incurred in connection with obtaining the
required public approval for the issuance of the Bonds and costs of engineering
and feasibility studies.
"Net Proceeds" means the sum of the aggregate principal amount of the
Bonds, minus the proceeds invested in a reasonably required reserve or
replacement fund, plus the amount of invested earnings expected to accrue on the
proceeds of the Bonds. For purposes of calculating the Net Proceeds of the
Bonds, no reduction shall be made for Issuance Costs.
"Nonpurpose Investment" shall have the meaning ascribed to such phrase
in Section 148(f)(6) of the Code which describes the same to be any Investment
Property which is acquired with the Gross Proceeds of the Bonds and which is not
acquired to carry out the governmental purpose of the Bonds.
"Principal User" shall mean "principal user" as such term is used or
defined in Section 144(a)(2)(B) of the Code (formerly Section 103(b)(6)(B)(ii)
of the 1954 Code) and any Regulations or rulings promulgated thereunder.
Pursuant to Section 1.103-10(h)(1) of the Regulations (as published in proposed
form on February 21, 1986 at page 6274 of the Federal Register), a Principal
User is defined as any Person who is a principal owner, a principal lessee, a
principal output purchaser or an "other" principal user, all as defined below:
(A) A principal owner is a Person who, at any time, holds more
than a ten percent (10%) ownership interest (by value) in the facility, or, if
no Person holds more than a ten percent (10%) ownership interest, then the
Person (or Persons in the case of multiple equal owners) who holds the largest
ownership interest in such facility.
(B) A principal lessee is any Person who at any time leases more
than ten percent (10%) of such facility, as determined by reference to the fair
rental value of the portion of the facility so leased.
(C) A principal output purchaser is any Person who purchases the
output or products of an electric or thermal energy, gas, water or other similar
facility, unless the total output purchased by such Person during each one-year
period beginning with the date the facility is placed in service is ten percent
(10%) or less of the facility's total output during each such period.
(D) An "other" principal user is a Person who enjoys a use of the
facility in a degree comparable to the enjoyment of a principal owner or a
principal lessee, taking into account all the relevant
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facts and circumstances, such as the Person's participation in the control over
use of the facility or its remote or proximate location.
Co-owners or co-lessees who are collectively treated as a partnership
subject to Subchapter K under Section 761(a) of the Code are not treated as
Principal Users merely by reason of their partnership interests.
The Internal Revenue Service has interpreted the phrase Principal User
to include, among other Persons, the following:
(1) the owner or purchaser of the facility in question;
(2) any Person using ten percent (10%) or more of the space in a
facility (as measured as a percentage of the square footage of the noncommon use
space);
(3) any Person paying ten percent (10%) or more of the fair rental
value of such facility, or from which more than ten percent (10%) of the annual
revenues attributable to such facility for any year are derived;
(4) a principal customer of whatever is produced at such facility
(the Internal Revenue Service has found that a Person may be a Principal User of
a facility, even though not an occupant, if, pursuant to a contractual
obligation, he takes a substantial portion of the goods or services produced at
the facility);
(5) any Person who both enjoys the primary use of such facility
and directly and indirectly constitutes the primary source of payment of either
the principal of or interest on the any tax-exempt bond issued with respect to
such facility; or
(6) a lessor of such facility having a reversionary interest in
the facility.
It should be noted that there may be more than one Principal User of a
facility and of other facilities. The ten percent fair rental value or annual
revenues test is applied annually, and a Person may qualify as a Principal User
one year but not other years. For example, a Person may qualify as a ten percent
tenant before a facility is fully rented but not afterwards. In that case, for
purposes hereof, that tenant should be considered a Principal User, because he
may qualify in one year even though he may not be includable in that category in
other years. Application of the ten percent fair rental value or annual revenues
test entails numerous complexities relating, among other matters, to tax
reimbursements and other escalation charges and common area maintenance payments
(all of which should be counted as rent) as well as to contingent rents.
"Prior Issues" means, with respect to a new issue of bonds, any
Industrial Development Bond or Qualified Small Issue bond outstanding on the
date of issuance of the new bonds, where the facilities financed in whole or in
part by the proceeds of such Industrial Development Bond or Qualified Small
Issue bond are located within the same incorporated municipality or county as
the facilities to be financed with the proceeds of the new issue of bonds and a
Principal User of such facilities (or a Related Person thereto)
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is or will be a Principal User of the facilities (or a Related Person) to be
financed with the proceeds of the new issue of bonds.
"Private Activity Bond" shall have the meaning ascribed to such phrase
in Section 141 of the Code which describes the same to mean any obligation
issued by any state or political subdivision as part of an issue which satisfies
either of the two tests set forth below:
(A) (1) more than ten percent (10%) of the proceeds of such
issue are to be used directly or indirectly in any Private Business Use; and
(2) the payment of the principal of or interest on more
than ten percent (10%) of the proceeds of such issue is (under the
terms of such issue or any underlying arrangement) directly or
indirectly:
(a) secured by any interest in property used or
to be used for a Private Business Use or in payments in
respect of such property; or
(b) to be derived from payments in respect of
property, or borrowed money, used or to be used for a Private
Business Use; or
(B) the proceeds of the issue which are to be used directly or
indirectly to make or finance loans to Persons other than governmental units
exceed the lesser of:
(1) five percent (5%) of such proceeds; or
(2) $5,000,000.
"Private Business Use" means use (directly or indirectly) in a trade or
business carried on by any Person other than a governmental unit. For purposes
hereof, any activity carried on by a Person other than a natural person shall be
treated as a trade or business.
"Qualified Costs" shall have the meaning ascribed to such phrase in
Section 2.1(D)(1) hereof.
Qualified Small Issue" means an issue of governmental obligations the
interest on which is not subject to federal income taxation because it satisfies
the requirements of the Code for the tax exemption for interest on a qualified
small issue bond, including, but not limited to, Section 144 of the Code which
requires that the Aggregate Face Amount of such issue not exceed $1,000,000 and
at least ninety-five percent (95%) of the Net Proceeds of the issue be used (A)
for the acquisition, construction, reconstruction or improvement of land or
property of a character subject to the allowance for depreciation provided in
Section 167 of the Code, or (B) to redeem part or all of a Prior Issue which was
issued for such purposes. In determining the Aggregate Face Amount of an issue,
certain Prior Issues and Included Bonds must be taken into account in accordance
with Article IV hereof. At the election of the issuer, the $1,000,000
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limitation may be increased to $10,000,000, provided that in determining the
Aggregate Face Amount of such issue Small Issue Capital Expenditures must also
be included.
"Qualifying Rehabilitation Expenditures" shall have the meaning
ascribed to the phrase "rehabilitation expenditures" in Section 147(d)(3) of the
Code (formerly Section 103(b)(17) of the 1954 Code) which describes such
expenditures to mean any amount properly chargeable to capital account which is
incurred by the Person acquiring the building or property (or additions or
improvements to property) in connection with the rehabilitation of a building.
In the case of an integrated operation contained in a building before its
acquisition, such term includes rehabilitating existing equipment in such
building or replacing it with equipment having substantially the same function.
For purposes of this definition, any amount incurred by a successor to the
Person acquiring the building or by the seller under a sales contract with such
Person shall be treated as incurred by such Person.
The term Qualifying Rehabilitation Expenditures does not include:
(A) the cost of buying the existing building;
(B) any expenditure attributable to the enlargement of the
existing building;
(C) any expenditure attributable to the rehabilitation of a
certified historic structure or building in a registered historic district,
unless:
(1) the rehabilitation of such historic structure or
building is a certified rehabilitation within the meaning of Section
48(g)(2)(C) of the 1954 Code; or
(2) the building is not a certified historic structure
and the Secretary of the Interior has certified to the Secretary of the
Treasury that the building is not of historic significance to the
district;
(D) any expenditure of the lessee of a building if, on the date
the rehabilitation is completed, the remaining term of the lease (determined
without regard to renewal periods) is less than the recovery period determined
under Section 168(c) of the Code; or
(E) any expenditure in connection with the rehabilitation of a
building which is allocable to that portion of such building which is tax-exempt
use property within the meaning of 168(h) of the Code.
"Rebate Amount" means the amount computed in accordance with Section
7.3 hereof.
"Regulations" means the Income Tax Regulations promulgated by the
Department of the Treasury from time to time and includes regulations
promulgated in final, temporary or proposed form.
"Related Person" shall have the meaning ascribed to such phrase in
Section 144(a)(3) of the Code (formerly Section 103(b)(6)(C) of the 1954 Code)
which includes:
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(A) Individual: "Related Persons" to an individual include but are
not limited to:
(1) members of his family. The family of an individual
includes his brothers and sisters (whether by the whole or half blood),
spouse, ancestors and lineal descendants;
(2) a corporation more than fifty percent (50%) in value
of the outstanding stock of which is owned (directly or indirectly) by
or for that individual, his family or his partner. An individual is
also considered to own a proportionate share of the stock owned by a
partnership, corporation, estate or trust of which the individual is a
partner, shareholder or beneficiary; and
(3) a partnership, if the individual owns, directly or
indirectly, more than fifty percent (50%) of the capital interest or
profits interest in the partnership.
(B) Partnership: "Related Persons" to a partnership include but
are not limited to:
(1) a Person, if the Person owns, directly or indirectly,
more than fifty percent (50%) of the capital interest or profits
interest in the partnership;
(2) another partnership in which the same Person or
Persons own, directly or indirectly, more than fifty percent (50%) of
the capital interest or profits interest; and
(3) a corporation, if the same Persons own, directly or
indirectly, more than fifty percent (50%) of the capital interest or
profits interest in the partnership and more than fifty percent (50%)
in value of the outstanding stock of the corporation.
(C) Corporation: "Related Persons" to a corporation include but
are not limited to:
(1) an individual who owns, directly or indirectly, more
than fifty percent (50%) in value of the outstanding stock of the
corporation;
(2) a partnership, if the same Persons own, directly or
indirectly, more than fifty percent (50%) of the capital interest or
profits interest in the partnership and more than fifty percent (50%)
in value of the outstanding stock of the corporation;
(3) another S corporation, if the corporation is an S
corporation and the same Persons own more than fifty percent (50%) in
value of the outstanding stock of each corporation;
(4) an S corporation, if the same Persons own more than
fifty percent (50%) in value of the outstanding stock of each
corporation;
(5) another corporation, if such corporations are members
of the same controlled group within the meaning of Section 267(f) of
the Code; and
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(6) another corporation which is a member of the same
"controlled group of corporations". The term "controlled group of
corporations" means:
(a) a parent-subsidiary controlled group;
(b) a brother-sister controlled group;
(c) a combined group consisting of three or more
corporations each of which is a member of a group of corporations
described directly above in (a) or (b) and one of which is a common
parent corporation included in a parent-subsidiary controlled group and
also is included in a brother-sister controlled group; and
(d) two or more insurance companies subject to
federal taxation as Life Insurance Companies under Section 801 of the
Code which are members of a controlled group of corporations described
directly above in (a), (b) or (c).
The term "controlled group of corporations" is more fully defined in
Section 1563(a) of the Code, except that, pursuant to Section 144(a)(3)(B) of
the Code (formerly Section 103(b)(6)(C) of the 1954 Code), "more than 50
percent" shall be substituted for "at least 80 percent" each place it appears in
Section 1563(a) of the Code.
(D) Miscellaneous: The following are also considered "Related
Persons":
(1) a grantor and a fiduciary of any trust;
(2) a fiduciary of a trust and a fiduciary of another
trust, if the same person is a grantor of both trusts;
(3) a fiduciary of a trust and a beneficiary of such
trust;
(4) a fiduciary of a trust and a beneficiary of another
trust, if the same Person is a grantor of both trusts;
(5) a fiduciary of a trust and a corporation more than
fifty percent (50%) in value of the outstanding stock of which is
owned, directly or indirectly, by or for the trust or by or for a
Person who is a grantor of the trust; and
(6) a Person and an organization which is exempt from
federal income taxation under Section 501 of the Code and which is
controlled, directly or indirectly, by such Person or (if such Person
is an individual) by members of the family of such individual.
(E) Stock Ownership: For purposes of determining stock ownership
under all of the above, except subparagraph (C)(6) (relating to members of a
"controlled group of corporations"), the following rules shall apply:
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(1) stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be considered as being
owned proportionately by or for its shareholders, partners or
beneficiaries;
(2) an individual shall be considered as owning the stock
owned, directly or indirectly, by or for his family;
(3) an individual owning (otherwise than through his
family by the application of subparagraph [2] above) any stock in a
corporation shall be considered as owning the stock owned, directly or
indirectly, by or for his partner;
(4) the family of an individual shall include only his
brothers and sisters (whether by the whole or half blood), spouse,
ancestors and lineal descendants;
(5) stock constructively owned by a Person by reason of
the application of subparagraph (1) above shall, for the purpose of
applying subparagraph (1), (2) or (3) above, be treated as actually
owned by such Person, but stock constructively owned by an individual
by reason of the application of subparagraph (2) or (3) above shall not
be treated as owned by him for the purpose of again applying either
subparagraph (2) or (3) in order to make another the constructive owner
of such stock;
(6) the ownership of a capital or profits interest in a
partnership shall be determined in accordance with subparagraphs (1)
through (5) of this paragraph (E), excluding subparagraph (3); and
(7) for the rules for determining stock ownership for
purposes of determining whether a corporation is a member of a
"controlled group of corporations", see Section 1563(d) of the Code.
(F) For purposes of determining whether a Person is a Related
Person to a Substantial User, in addition to all of the other ways that Persons
may be deemed to be Related Persons to a Substantial User, a partnership and
each of its partners (and their spouses and minor children) shall be treated as
Related Persons, and an S corporation and each of its shareholders (and their
spouses and minor children) shall be treated as Related Persons.
"Sinking Fund" shall have the meaning ascribed to such term in Section
1.148-1(c)(2) of the Regulations which includes a debt service fund, redemption
fund, reserve fund, replacement fund or any similar fund, to the extent that the
issuer reasonably expects the fund to pay principal or interest on the issue.
"Small Issue Capital Expenditures" means any capital expenditures as
such term is used or defined in Section 144(a)(4)(A)(ii) of the Code (formerly
Section 103(b)(6)(D) of the 1954 Code) and in any
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Regulations, rulings or other authority promulgated thereunder. Section
1.103-10(b)(2)(ii) of the Regulations describes the same to mean capital
expenditures which meet the following five tests:
(A) the capital expenditure was financed other than from a
Qualified Small Issue;
(B) the capital expenditure was paid or incurred during the
six-year period which begins three (3) years before the date of issuance of the
issue in question and ends three (3) years after such date;
(C) the Principal User of the facility in connection with which
the property resulting from the capital expenditure is used and the Principal
User of the facility financed with the proceeds of the issue in question are the
same Person or two or more Related Persons;
(D) both the facilities referred to in paragraph (C) above were
(during the period described in paragraph (B) above) located in the same
incorporated municipality or in the same county (outside of the incorporated
municipalities in such county); and
(E) the capital expenditure was properly chargeable to the capital
account of any Person or state or local governmental unit (whether or not such
Person is the Principal User of the facility or a Related Person) determined,
for this purpose, without regard to any rule of the Code which permits
expenditures properly chargeable to capital accounts to be treated as current
expenses.
The Internal Revenue Service has ruled that Small Issue Capital
Expenditures include, among other expenses, such expenses as construction period
interest, costs of issuance, costs of equipment moved into the jurisdiction,
certain research and development costs and amounts paid for goodwill. (See
Memorandum to Accountants for a more in-depth discussion of what constitutes
Small Issue Capital Expenditures.)
"Substantial User" means "substantial user" as such term is used or
defined in Section 147(a)(1) of the Code (formerly Section 103(b)(13) of the
1954 Code) and any Regulations, rulings or other authority promulgated
thereunder. Section 1.103-11 of the Regulations describes a Substantial User of
a facility to include any nonexempt person who regularly uses a part of such
facility in his trade or business. However, unless a facility, or a part
thereof, is constructed, reconstructed or acquired specifically for a nonexempt
Person or Persons, such a nonexempt Person shall be considered to be a
Substantial User of a facility only if (A) the gross revenue derived by such
user with respect to such facility is more than five percent (5%) of the total
revenue derived by all users of such facility, or (B) the amount of area of the
facility occupied by such user is more than five percent (5%) of the entire
usable area of the facility. Under certain facts and circumstances, where a
nonexempt Person has a contractual or preemptive right to the exclusive use of
property or a portion of property, such Person may be a Substantial User of such
property. A lessee or sublessee of all or a portion of the facility may also be
a Substantial User of such facility. A licensee or similar Person may also be a
Substantial User where his use is regular and is not merely a casual, infrequent
or sporadic use of the facility. Absent special circumstances, individuals who
are physically present on or in the facility as employees of a Substantial User
shall not be deemed to be Substantial Users.
"Test Period Beneficiary" means "test period beneficiary" as such term
is used or defined in Section 144(a)(10)(D) of the Code (formerly Section
103(b)(15) of the 1954 Code) and any Regulations, rulings or
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other authority promulgated thereunder. Section 144(a)(10)(D) and Section
1.103-10(i)(3) of the Regulations describe a Test Period Beneficiary to be any
Person who is an owner or Principal User of the facility financed by an issue of
tax-exempt Private Activity Bonds, or any Related Person to such owner or
Principal User, at any time during the three-year period beginning on the later
of (A) the date such facility was placed in service, or (B) the date of the
issue of such bonds. Once a Person is a Test Period Beneficiary with respect to
a facility, he will remain a Test Period Beneficiary for so long as such issue
remains outstanding, regardless of the fact that such Person may no longer be an
owner or Principal User of the bond-financed facility or Related Person to
either. However, a Related Person will be treated as a Test Period Beneficiary
only if that Person is or becomes a Related Person at any time during the test
period in which the Principal User in question was a Principal User of the
bond-financed facility and such Principal User has not ceased to be a Principal
User at the time such other Person becomes a Related Person.
"Variable Rate Obligation" means any obligation the Yield on which,
under the terms of the obligation, is adjusted periodically according to a
prescribed formula such that the Yield over the term of the obligation cannot be
determined on the date of original issuance.
"Weighted Average Rate of Interest" of an obligation for any period
means the total interest paid during such period divided by the product of (A)
the principal amount of such obligation, and (B) the amount of time from the
beginning of such period that the obligation is outstanding (expressed in number
of years). Weighted Average Rate of Interest for two or more obligations for any
period shall mean the total interest paid during such period divided by the sum
of the products described above.
"Yield" means "yield" as such term is used or defined in Section 148(h)
of the Code and Section 1.148-1(b) of the Regulations, which provide that Yield
generally means that yield which, when used in computing the present value of
all unconditionally payable payments of principal, interest and fees for
qualified guarantees on the issue, produces an amount equal to the present
value, using the same discount rate, of the aggregate issue price of the issue
as of the issue date.
SECTION 1.2. INTERPRETATION. In the Tax Regulatory Agreement, unless the context
otherwise requires:
(A) words importing the inclusion in gross income for federal
income tax purposes of interest income on any of the Bonds shall not include the
imposition of an alternative minimum or preference tax or environmental tax or
branch profits tax on any Bondholder, in the calculation of which is included
the interest on any of the Bonds;
(B) the terms "hereby", "hereof", "herein", "hereunder" and any
similar terms as used in the Tax Regulatory Agreement refer to the Tax
Regulatory Agreement, and the term "heretofore" shall mean before, and the term
"hereafter" shall mean after, the date of the Tax Regulatory Agreement;
(C) words of masculine gender shall mean and include correlative
words of feminine and neuter genders, and words importing the singular number
shall mean and include the plural number and vice versa; and
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(D) any certificates, letters or opinions required to be given
pursuant to the Tax Regulatory Agreement shall mean a signed document attesting
to or acknowledging the circumstances, representations, opinions of law or other
matters therein stated or set forth or setting forth matters to be determined
pursuant to the Tax Regulatory Agreement.
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ARTICLE II
THE PROJECT AND THE PROJECT FACILITY
SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In consideration of
the mutual covenants contained herein and in the Financing Documents, the
Company hereby makes the following representations and warranties:
(A) The Project undertaken by the Issuer consists of the
acquisition, construction and installation of the Project Facility.
(B) The Project Facility, which is to be acquired, constructed and
installed as part of the Project, is to be located entirely in the Town of
Moreau, Saratoga County, New York.
(C) The Project constitutes a "project" within the meaning of the
Act.
(D) (1) As indicated in Paragraph (I) of Part III of Schedule
A hereto, at least ninety-five percent (95%) of the Net Proceeds of the Bonds
will be expended for costs (a) of "acquisition, construction, reconstruction or
improvement of land or property of a character subject to the allowance for
depreciation" within the meaning of Section 144(a)(1)(A) of the Code (formerly
Section 103(b)(6)(A) of the 1954 Code), (b) which are chargeable to the capital
account of the Company or would be so chargeable either with an election of the
Company, or but for the election of the Company, to deduct the amount of the
item, and (c) which were paid or incurred within sixty days' prior to June 24,
1997 (such costs are hereinafter referred to as "Qualified Costs"). For purposes
of calculating the Net Proceeds of the Bonds, Issuance Costs shall not be taken
into account. In addition, in calculating the amount of the proceeds of the
Bonds utilized for Qualified Costs, Issuance Costs shall not be treated as
utilized for Qualified Costs. The Company shall ensure that, as of the date of
each disbursement from the Project Fund, at least ninety-five percent (95%) of
the total amount disbursed from the Project Fund has been utilized for Qualified
Costs.
(2) No part of the proceeds of the Bonds shall be used to
provide working capital or inventory.
(3) As is indicated in Paragraph (F) of Part III of
Schedule A, the Company will not utilize more than two percent (2%) of
the aggregate face amount of the Bonds for the payment of Issuance
Costs.
(4) No expense for supervision by any officer or employee
of the Company and no expense for work done by any such officer or
employee in connection with the Project is or will be included in the
Cost of the Project, except to the extent any such officer or employee
was specifically employed or designated by the Company for such
particular purpose and such sums may be and are capitalized by the
Company and are allocable to Qualified Costs.
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(E) No portion of the proceeds of the Bonds is to be used to
provide a facility the primary purpose of which is retail food and beverage
services, automobile sales or service, or the provision of recreation or
entertainment.
(F) No portion of the proceeds of the Bonds is to be used to
provide any of the following:
(1) 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 handball or racquetball court), hot tub facility, suntan
facility or racetrack within the meaning of Section 144(a)(8) of the
Code (formerly Section 103(b)(6)(O) of the 1954 Code); or
(2) any airplane, skybox or other private luxury box, any
health club facility, any facility primarily used for gambling, or any
store the principal business of which is the sale of alcoholic
beverages for consumption off premises within the meaning of Section
147(e) of the Code (formerly Section 103(b)(18) of the 1954 Code).
(G) No portion of the proceeds of the Bonds is to be used directly
or indirectly to provide residential real property for family units within the
meaning of Section 144(a)(5) of the Code (formerly Section 103(b)(6)(3) of the
1954 Code).
(H) No portion of the proceeds of the Bonds or of any other Prior
Issues required to be taken into account under Section 144(a)(11)(C) of the Code
was or is to be used, directly or indirectly, (1) to provide "depreciable farm
property" within the meaning of Section 144(a)(11)(B) of the Code, or (2) to
acquire land (or an interest therein) to be used for farming purposes.
(I) The Standard Industrial Classification (SIC) Codes for the
Project Facility and the proportionate amount of the Net Proceeds of the Bonds
allocable with respect to each are as follows:
Net Proceeds of Bonds
allocable to each SIC
SIC Number Number
2821 $1,200,000
2869 $4,800,000
(J) The Company does not expect to sell or otherwise dispose of
the Project Facility, in whole or in part, while the Bonds are Outstanding. The
Company does not expect to sell or trade in any real property as a result of the
issuance of the Bonds or the acquisition, construction and installation of the
Project Facility.
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(K) No portion of the Project Facility to be constructed or
installed with the proceeds of the Bonds was acquired from the Company or any
other Principal User of the Project Facility or any Related Person thereto.
(L) Prior to June 24, 1997 neither the Company, any other
Principal User of the Project Facility nor any Related Person to either had a
leasehold or other interest in the Project Facility.
SECTION 2.2. REPRESENTATIONS REGARDING MANUFACTURING. The Company proposes to
construct and operate a synthetic organic chemical manufacturing facility.
Formaldehyde and urea-formaldehyde aminoplast products will be manufactured at
the proposed site and delivered to local customers in a bulk liquid form via
tanker truck. Basic raw materials for the proposed formaldehyde and
urea-formaldehyde manufacturing processes include methanol, urea, fresh air and
water. Basic raw materials for the proposed urea-formaldehyde aminoplast process
include formaldehyde or urea-formaldehyde, urea and water. Methanol will be
shipped to the proposed site via tanker truck. Urea prills (solid balls) will be
delivered to the site via truck or rail. All raw material and finished goods
storage will be by above ground tanks on the proposed site.
The total cost of the project is expected to be $8,600,000. The following is a
breakdown of this cost:
Land $282,500
Construction
Manufacturing $6,143,200
Support (Storage) 1,524,300
Non Manufacturing 650,000
$8,317,500
----------
Total $8,600,000
==========
Proceeds from the Bonds will be used strictly for manufacturing construction.
The manufacturing support class includes raw material and finished goods storage
as well as office and lab space for support personnel. Office and lab space will
be used for purchasing, employee relations and production control as well as
quality control. No proceeds from the bond issue will be used for support, non
manufacturing or land costs.
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ARTICLE III
USE OF THE PROCEEDS OF THE BONDS
SECTION 3.1. USE OF THE PROCEEDS OF THE BONDS. The Bonds are being issued to
provide funds to enable the Issuer to undertake the Project. The Company hereby
certifies and represents that it reasonably expects that the total cost of the
Project, the proceeds received from the sale of the Bonds, any other financing
to be obtained with respect to the Project and the use of the proceeds of the
Bonds and such other financing will be as set forth in Schedule A.
SECTION 3.2. CERTIFICATION AS TO PROJECT COSTS. The Company hereby certifies
with respect to Schedule A as follows:
(A) No property included in the Project Facility to be financed
with the proceeds of the Bonds was owned by the Company, a Principal User of the
Project Facility or any Related Person to either.
(B) All of the proceeds of the Bonds will be used to finance items
constituting the Cost of the Project as set forth in Section 4.3 of the
Installment Sale Agreement.
(C) No person who was a Substantial User of the Project Facility
(or a Related Person thereto) at any time during the five-year period preceding
the date of issue of the Bonds and who will also be a Substantial User of the
Project Facility (or a Related Person thereto) at any time during the five-year
period following the date of issue of the Bonds, will receive, directly or
indirectly, proceeds of the Bonds in an amount equal to five percent (5%) or
more of the face amount of the Bonds in payment for its interest in the Project
Facility, except to the extent the Company is reimbursed for items constituting
the Cost of the Project paid or incurred pursuant to and within sixty days'
prior to the adoption by the Issuer of the Inducement Resolution for the Project
on June 24, 1997.
(D) No "Acquisition" of any portion of the Project Facility
financed with the proceeds of the Bonds "commenced" prior to within sixty days'
of June 24, 1997 within the meanings ascribed to such quoted terms under Section
1.103-(8)(a)(5) of the Regulations.
(E) Except as listed in Paragraph (E) of Schedule C hereto, there
are no Qualified Small Issues other than the Bonds which are to be used with
respect to a single building, an enclosed shopping mall or a strip of offices,
stores or warehouses constituting part of (or sharing substantial common
facilities with) the Project Facility within the meaning of Section 144(a)(9) of
the Code.
SECTION 3.3. AVERAGE REASONABLY EXPECTED ECONOMIC LIFE AND AVERAGE BOND
MATURITY; FORM 8038. (A) The Average Reasonably Expected Economic Life of that
portion of the Project Facility financed with the proceeds of the Bonds and the
Average Maturity of the Bonds were determined in accordance with Schedule B
hereto. As is indicated on Schedule B, the Average Maturity of the Bonds does
not exceed one hundred twenty percent (120%) of the Average Reasonably Expected
Economic Life of that portion of the Project Facility financed with the proceeds
of the Bonds.
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(B) The Company hereby represents and warrants that the
information contained in Internal Revenue Service Form 8038 attached hereto as
Exhibit I is true and correct, including, but not limited to, the Average
Maturity of the Bonds and the Average Reasonably Expected Economic Life of that
portion of the Project Facility financed with the proceeds of the Bonds. The
Company shall cause Bond Counsel to file a copy of such Form 8038 with the New
York State Department of Economic Development and obtain from that Department a
certification of the Governor that the Bonds satisfy the requirements of Section
146 of the Code (relating to volume limitation) in sufficient time that such
Form 8038, accompanied by such certification, can be filed in a timely fashion
with the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255 as
required by Section 149(e) of the Code.
SECTION 3.4. FINAL REQUEST FOR DISBURSEMENT. In connection with its final
request for disbursement from the Project Fund, the Company hereby covenants
that it shall make all certifications and deliver all items required by the
Indenture.
SECTION 3.5. EXISTING PROPERTY. (A) In order to assure compliance with the
requirements of Section 147(d) of the Code relating to the acquisition of
existing property, the Company hereby covenants and agrees that it will make
Qualifying Rehabilitation Expenditures with respect to any existing building
acquired with the proceeds of the Bonds in an amount at least equal to fifteen
percent (15%) of the cost of acquiring such existing building financed from the
proceeds of the Bonds within two (2) years after the later of the issuance of
the Bonds or the acquisition of such existing building. The Company shall file
with the Trustee, upon the making of all such Qualifying Rehabilitation
Expenditures, an accounting setting forth the amount and nature of such
expenditures.
(B) No portion of the proceeds of the Bonds is to be used to
acquire equipment unless the first use of such equipment is pursuant to such
acquisition.
SECTION 3.6. ACQUISITION OF LAND. As set forth in Paragraph (A) of Part III of
Schedule A, the total cost of land (or any interest therein) included in the
Project is $282,500. $254,250 of the proceeds of the Bonds will be utilized
towards the acquisition of land.
SECTION 3.7. REFUNDING. None of the proceeds of the Bonds will be used to refund
any Private Activity Bond or Industrial Development Bond.
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ARTICLE IV
AGGREGATE FACE AMOUNT OF THE BONDS
SECTION 4.1. REPRESENTATIONS WITH REGARD TO THE AGGREGATE FACE AMOUNT OF THE
BONDS. The Aggregate Face Amount of the Bonds under Section 144(a) of the Code
is the sum of the aggregate principal amount of the Bonds, Prior Issues, Small
Issue Capital Expenditures and Included Bonds, to the extent such Included Bonds
are not within the definition of Prior Issues or Small Issue Capital
Expenditures. The Issuer has elected the application of Section 144(a)(4) of the
Code, pursuant to which the Aggregate Face Amount of the Bonds may be
$10,000,000 or less. The Company makes the following representations and
warranties:
(A) Paragraphs (A) through (C) of Schedule C correctly list the
names, addresses, tax identification numbers and prior outstanding issues of
Prior Issues used to finance the Project Facility and all other Included
Facilities of all the Principal Users of the Project Facility and all the
Related Persons thereto.
(B) Paragraphs (D) and (E) of Schedule C correctly set forth a
true and accurate listing of all Included Bonds which are aggregated with the
Bonds pursuant to Section 1.150-1 of the Regulations and Revenue Ruling 81-216
or in accordance with Section 144(a)(4) and 144(a)(9) of the Code.
(C) Paragraph (F) of Schedule C sets forth a true and accurate
listing of all Small Issue Capital Expenditures paid or incurred with respect to
the Project Facility and all other Included Facilities.
(D) Paragraph (H) of Schedule C sets forth the computation of the
Aggregate Face Amount of the Bonds. The Aggregate Face Amount of the Bonds is
$8,600,000.
SECTION 4.2. COMPLIANCE WITH CAPITAL EXPENDITURE LIMITATIONS. (A) Within three
(3) years after the issuance of the Bonds, the Company will not pay or incur, or
permit to be paid or incurred, Small Issue Capital Expenditures such that the
$10,000,000 limit on the Aggregate Face Amount of the Bonds contained in Section
144(a)(4) of the Code shall be exceeded.
(B) With respect to the period ending three (3) years after the
date of issuance of the Bonds, and so long as the Bonds are Outstanding, the
Company shall keep (and shall cause Principal Users of the Project Facility and
any Related Person thereto to keep) books and records sufficient to indicate the
nature and amount of any Small Issue Capital Expenditures.
(C) If at any time that any of the Bonds are Outstanding, (1) the
books and records required to be kept by this Section 4.2, (2) any return
required to be filed by the Regulations, or (3) any audit of such books and
records or any such return indicate that the limitation on the Aggregate Face
Amount of the Bonds has been exceeded, the Company shall forthwith deliver to
the Trustee a certificate indicating that such limitation may have been exceeded
and requesting the Trustee to designate Bond Counsel to review the books,
records and other documentation referred to in this Section 4.2 and deliver to
the Trustee and the
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Issuer an opinion of Bond Counsel as to whether, based on such books, records
and other documentation, such limitation was exceeded during the three-year
period beginning on the Closing Date.
SECTION 4.3. OTHER ACTION AFFECTING THE AGGREGATE FACE AMOUNT OF THE BONDS. (A)
If, at any time during the three-year period commencing on the date of issuance
of the Bonds, the Company, any other Principal User of the Project Facility or
any Related Person to either proposes to take any action which would cause a
Person not previously treated as a Principal User of the Project Facility or any
Included Facility or a Related Person to such a Principal User to become so
treated, including, but not limited to, (1) merging or consolidating with,
acquiring more than a fifty percent (50%) interest in or being acquired by or
having more than a fifty percent (50%) interest in any other Person who is a
Principal User of any Included Facilities, (2) leasing more than ten percent
(10%) of the Project Facility measured by the fair rental value thereof, (3)
entering into any contract with any Person under which such Person is entitled
to purchase the output of the Project Facility under terms that would cause such
Person to be a Principal User of the Project Facility, or (4) otherwise enjoying
a use of the Project Facility(other than a short-term use) in a degree
comparable to the enjoyment of a principal owner or principal lessee, the
Company shall first file an opinion of Bond Counsel with the Trustee and the
Issuer satisfactory to each to the effect that such action would not cause the
interest on the Bonds to be includable in the gross income of the recipient
thereof for federal income tax purposes.
(B) In addition, if the Company or another Principal User of the
Project Facility, or a Related Person to either, proposes to become a Principal
User of any Included Facility at any time within the three-year period
commencing on the date of issuance of the Bonds, the Company hereby covenants
and agrees that it will first file with the Trustee and the Issuer an opinion of
Bond Counsel satisfactory to each to the effect that such action would not cause
the interest on the Bonds to be includable in the gross income of the recipient
thereof for federal income tax purposes.
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ARTICLE V
THE $40 MILLION LIMITATION
SECTION 5.1. $40 MILLION LIMITATION REPRESENTATIONS. The Company hereby
represents and warrants that:S
(A) The Test Period Beneficiaries of the Project Facility and the
Related Persons to all such Test Period Beneficiaries are as set forth in
Schedule D hereto. The allocation of the amount of the Bonds to each Test Period
Beneficiary and such Related Persons and the allocation of the outstanding
amount of tax-exempt Private Activity Bonds of each such Test Period Beneficiary
and its Related Persons are computed in accordance with the allocation rules of
Section 144(a)(10) of the Code (formerly Section 103(b)(15) of the 1954 Code)
and Section 1.103-10(a)(4) of the Regulations and are as set forth in Schedule D
hereto.
(B) The Aggregate Face Amount of the Bonds allocated to any Test
Period Beneficiary with respect to the Project Facility, when increased by the
outstanding tax-exempt Private Activity Bonds allocated to such Beneficiary and
its Related Persons, does not exceed $40,000,000.
SECTION 5.2. COVENANT AS TO $40 MILLION LIMITATION. The Company hereby covenants
and agrees that, if, at any time during the three-year period beginning on the
later of the date of issuance of the Bonds or the date on which the Project
Facility is placed in service, the Company or any other Principal User of the
Project Facility or Related Person to either proposes to take any action which
would cause any Person not previously treated as either a Principal User of the
Project Facility or such Related Person to such Principal User to become so
treated, and thereby to become a Test Period Beneficiary of the Project
Facility, including, but not limited to, (A) merging or consolidating with,
acquiring more than a fifty percent (50%) interest in or being acquired by any
other Person, (B) leasing more than ten percent (10%) of the Project Facility,
measured by fair rental value, (C) increasing its percentage of ownership or use
of the Project Facility, (D) entering into any contract with any Person under
which such Person is entitled to take output of the Project Facility in
circumstances that would cause such other Person to be a Principal User of the
Project Facility, and (E) otherwise enjoying a use of the Project Facility
(other than a short-term use) in a degree comparable to the enjoyment of a
principal owner or principal lessee, prior to taking any such action the Company
shall file or cause to be filed with the Issuer and the Trustee a certificate
containing the information set forth in Schedule D which establishes that the
aggregate outstanding amount of tax-exempt Private Activity Bonds allocated to
such Test Period Beneficiary does not exceed $40,000,000.
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ARTICLE VI
COMPOSITE ISSUES AND FEDERAL GUARANTEES
SECTION 6.1. COMPOSITE AND OTHER ISSUES. The Company hereby represents and
warrants as follows:
(A) Except as listed in Paragraph (D) of Schedule C, there are no
other obligations heretofore issued or to be issued by or on behalf of any
state, territory or possession of the United States, or any political
subdivision of any of the foregoing, or of the District of Columbia, which
constitute Private Activity Bonds and which are:
(1) to be sold at substantially the same time as the
Bonds;
(2) to be sold at substantially the same interest rate as
the rate of interest on the Bonds;
(3) to be sold pursuant to a common plan of marketing
with the marketing of the Bonds; and
(4) payable (a) directly or indirectly by the Company, a
Principal User of the Project Facility or a Related Person to either or
(b) from a common or pooled security which is used or available to pay
debt service on the Bonds.
For purposes of this Section 6.1, obligations are considered sold on
the earlier of the date a commitment letter or a purchase agreement is executed.
(B) The Bonds are not issued as part of a larger issue where such
larger issue contains any other obligations the interest on which is excluded
from gross income under any provision of federal law.
SECTION 6.2. FEDERAL GUARANTEES. The Company represents that neither (A) payment
of principal of or interest on the Bonds or payments under any of the Financing
Documents are guaranteed, in whole or in part, directly or indirectly, by the
United States (or any agency or instrumentality thereof), nor (B) is any portion
of the proceeds of the Bonds to be used in making loans, the payment of
principal or interest with respect to which is to be guaranteed (in whole or in
part) by the United States (or any agency or instrumentality thereof) or
invested, directly or indirectly, in federally insured deposits or accounts, nor
(C) is the payment of principal or interest on the Bonds otherwise indirectly
guaranteed (in whole or in part) by the United States (or any agency or
instrumentality thereof); provided, however, that the following investments are
permitted and may be made: (1) investments of proceeds of the Bonds for an
initial temporary period until the proceeds are needed for the Project, (2)
investments of a bona-fide debt service fund (as defined in Section
1.103-13(b)(12) of the Regulations), (3) investments of a reserve which meet the
requirements of Section 148(d) of the Code, (4) investments in bonds issued by
the United States Treasury, or (5) other investments permitted under the
Regulations.
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ARTICLE VII
ARBITRAGE
SECTION 7.1. ARBITRAGE REPRESENTATIONS. In connection with the issuance of the
Bonds, the Company hereby represents, covenants and reasonably expects as
follows:
(A) The Project Facility will be acquired, constructed and
installed by the Company pursuant to the Installment Sale Agreement. Under the
Installment Sale Agreement and the Indenture, the Issuer will make available to
the Company the proceeds of the Bonds for the purpose of financing all or a
portion of the Cost of the Project.
(B) (1) The Company will be obligated under the Installment
Sale Agreement to make installment purchase payments in amounts corresponding to
the principal and interest payable by the Issuer on the Bonds. The installment
purchase payments payable under the Installment Sale Agreement are payable on or
before each Bond Payment Date in an amount equal to the principal of and
interest payable on the Bonds on such Bond Payment Dates. Such amounts will be
applied against the Company's obligation to reimburse the Bank under the
Reimbursement Agreement for any draws on the Letter of Credit. The Company will
make such installment purchase payments from its general funds and no fund has
been nor will be set aside for such payments.
(2) Accordingly, the Company will endeavor to ensure that
all amounts held in the Bond Fund and will be depleted at least once a
year except for a "reasonable carryover amount" (as defined in Section
148-1(b) of the Regulations) and that the Bond Fund and Installment
Payment Account qualifies as a "bona-fide debt service fund" (as
defined in Section 148-1(b) of the Regulations). The amounts on deposit
in the Bond Fund may be invested at Higher Yielding Investments as
permitted by Section 148-9(d)(1) of the Regulations.
(C) The Company is required to pay as additional installment
purchase payments any premium when due on the Bonds and the reasonable fees and
expenses of the Issuer and the Trustee and their respective representatives in
connection with their performance of the transactions contemplated by the terms
of the Financing Documents. With the exception of the Issuer's administrative
fee in the amount of $38,250, and the reimbursement of reasonable expenses
incurred by the Issuer and its representatives in connection with the
transactions contemplated thereby, and certain other fees and expenses as set
forth or referred to therein, there are no fees previously paid or currently
payable or expected to be payable to the Issuer directly or indirectly by the
Company or any guarantor of the Bonds.
(D) The Bonds will be placed by KeyBank National Association (the
"Placement Agent") at par plus accrued interest to the purchase date. The
Placement Agent will charge a fee of $60,000 for placing the Bonds. The
Placement Agent has certified that it is placing the Bonds at a price equal to
the principal amount thereof, plus accrued interest to the purchase date.
Therefore, the principal amount of the Bonds is the "issue price" within the
meaning of Section 1.148-1(b) of the Regulations which should be utilized in
calculating the Yield on the Bonds.
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(E) The Yield to be derived by the Issuer in the aggregate from
its administrative fee pursuant to the Installment Sale Agreement will not
exceed by more than one-eighth of one percent (1/8 of 1%) per annum the yield
payable by the Issuer on the Bonds. It is not expected that there will be
sufficient revenues and/or reserves accumulated or retained by the Issuer to
retire the Bonds significantly before maturity.
(F) (1) In accordance with the Indenture, the proceeds from
the sale of the Bonds (other than accrued interest on the Bonds which will be
deposited into the Bond Fund) will be deposited in the Project Fund. The Trustee
will disburse moneys on deposit in the Project Fund to the Company, as agent of
the Issuer, periodically as the acquisition, construction and installation of
the Project Facility progress upon satisfaction of the conditions contained in
Article IV of the Indenture and in the Reimbursement Agreement for such
disbursement. Earnings from investments of amounts in the Project Fund will be
deposited in the Project Fund and upon satisfaction of the conditions contained
in the Indenture will be disbursed to pay the Cost of the Project. Such amounts
so disbursed will be applied to the payment of the Cost of the Project or used
to reimburse the Company for items constituting the Cost of the Project
previously paid and incurred by it in accordance with the Indenture.
(2) Prior to disbursement, such moneys held in the
Project Fund may be invested at an unrestricted Yield during the
applicable temporary periods as provided in the Code and the
Regulations; provided, however, that any proceeds from such investment
or reinvestment of any proceeds of such moneys will, within three (3)
years of the Closing Date or within one (1) year after the receipt of
such investment income, be expended to pay the Cost of the Project,
applied to redeem Bonds or deposited in the Rebate Fund for rebate to
the United States.
(3) Any amounts remaining in the Project Fund on the
Completion Date are to be applied, subject to the rebate requirement
described in Section 7.3 hereof, to the redemption of Bonds.
(4) All of the proceeds of the sale of the Bonds are
expected to be expended for (a) payment of expenses incurred in
connection with the issuance of the Bonds, (b) payment of interest on
the Bonds during the Construction Period, (c) payment of the costs of
acquiring, constructing and installing the Project Facility, and (d)
making any rebate payments to the United States within three (3) years
of the Closing Date.
(5) If a portion of the proceeds of the Bonds or the
earnings thereon are not necessary to complete the Project Facility,
such amounts shall be transferred from the Project Fund to the Bond
Fund, invested at Yield no greater than the Yield on the Bonds and
utilized to redeem Bonds on the first possible date, all in accordance
with Revenue Procedures 79-5 and 81-22.
(G) (1) The anticipated total cost and completion date of
acquisition, construction and installation of the Project Facility are as
follows:
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COST ANTICIPATED DATE OF COMPLETION
$8,600,000 June 30, 1998
(2) The total amount of the proceeds of the Bonds
deposited in the Project Fund will be expended to pay the Cost of the
Project as follows:
(a) $-0- will be expended for payment of
interest during the period of acquisition, construction and
installation of the Project Facility; and
(b) $120,000- will be expended for Issuance
Costs; and
(c) $-0- will be deposited in a reasonably
required reserve or replacement fund; and
(d) $5,880,000 will be expended for the payment
of other items of the Cost of the Project.
(H) The Company has incurred or will incur within six (6) months
from the Closing Date at least $8,600,000 in expenditures for the Cost of the
Project, which is an amount in excess of two percent (2%) of the Cost of the
Project.
(I) The acquisition, construction and installation of the Project
Facility financed with the proceeds of the Bonds will proceed with due diligence
to completion, and all of the proceeds of the Bonds available to pay the costs
of such acquisition, construction or installation will be expended for such
purpose by June 30, 1998.
(J) The total amount of the proceeds received by the Issuer from
the sale of the Bonds, less Issuance Costs (not exceeding two percent (2%) of
the proceeds of the Bonds), will not exceed the amount necessary for the
purposes of the Bonds, i.e., the costs of acquiring, constructing and installing
the Project Facility.
(K) The date of issuance of the Bonds has been determined solely
on the basis of bona-fide financial reasons, and to obtain a favorable rate of
interest on the Bonds, and has not been determined with a view to prolonging
abnormally the period between the issuance of the Bonds and expenditure of the
proceeds thereof.
(L) Pursuant to Section 5.05 of the Indenture, the Trustee has
been directed to establish the Rebate Fund. Pursuant to Section 5.05 of the
Indenture, moneys in the Rebate Fund will be applied first to make the rebate
payments to the United States described in Section 7.4 hereof, and any excess
funds will be deposited in the Project Fund prior to the Completion Date or,
after the Completion Date, transferred to the Bond Fund to be applied to the
redemption of Bonds.
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(M) Pursuant to Section 4.03 of the Indenture, the Trustee has
been directed to establish the Insurance and Condemnation Fund. There are not
expected to be any insurance proceeds or Condemnation awards which will become
available to redeem or secure the Bonds.
(N) There is and will be no segregated or identifiable fund not
described herein (including, but not limited to, a sinking fund, pledged fund or
similar fund, including, without limitation, any arrangement under which moneys,
securities or obligations are pledged directly or indirectly to secure or for
payment of debt service on the Bonds or any contract securing the Bonds or any
arrangement providing for compensating balances to be maintained by the Company,
any guarantor or any Related Person to either with the Trustee or the Bank) held
by or on behalf of the Issuer, the Company, any guarantor, the Bank, the Trustee
or any holder of the Bonds which the holders of the Bonds are assured will be
available to pay the principal of or interest and premium, if any, on the Bonds,
which will be pledged as security for the Bonds, or which will replace moneys
that will be used to pay such principal, interest or premium, if any.
(O) The Project Facility is not expected to be sold, leased in a
transaction which is treated as a sale for federal income tax purposes or
otherwise disposed of (except for ordinary, noncapitalized leases of the Project
Facility [the "Installment Sales"] entered into in the normal course of the
Company's business), in whole or in part, while the Bonds are Outstanding. Set
forth below are covenants of the Company intended to insure that any Installment
Sale of the Project Facility by the Company will be a "true lease" for federal
income tax purposes and will not, therefore, be an "acquired obligation" to
which the proceeds of the Bonds must be allocated pursuant to the Regulations:
(1) any Installment Sale will have a term such that the
economic useful life of the Project Facility at the expiration of the
Installment Sale term, including all fixed-rate renewal option periods,
will equal at least twenty percent (20%) of the reasonably estimated
economic useful life of the Project Facility at the commencement of the
Installment Sale;
(2) the fair market value of the Project Facility at the
end of the term of any such Installment Sale including all fixed-rate
renewal option periods will exceed twenty percent (20%) of the Project
Facility's original cost, without taking inflation into account;
(3) there will be no restrictions as to the use of the
Project Facility at the end of the term of any of the Installment
Sales;
(4) none of the lessees under any Installment Sale will
have any right to purchase all or any portion of the Project Facility
for less than its fair market value at the time the right is exercised;
(5) payments under any Installment Sale do not exceed the
current fair rental value of the Project Facility;
27
<PAGE>
(6) any and all leases to a third party of the Project
Facility or any part thereof entered into by any lessee under a
Installment Sale, its successors or assigns will be fully subordinate
to the Installment Sales;
(7) at the end of the term of any Installment Sale, the
Project Facility will be useful or useable by the Company or suitable
for use by or leasing to Persons other than the tenants under the
Installment Sales or a Related Person;
(8) no lessee under any Installment Sale (nor any Related
Person) may be a Person who furnishes, or has furnished, any part of
the cost of the Project Facility or who loans or guarantees any portion
of the funds used to pay the cost of the Project Facility;
(9) the Company will have no contractual right under any
Installment Sale to cause any Person to purchase the Project Facility
or to abandon the Project Facility to any Person; and
(10) the Company will not execute any Installment Sale
unless it reasonably expects, at the time such Installment Sale is
executed, that it will receive a profit from such Installment Sale
apart from the value of or benefits obtained from any tax deductions,
losses, allowances, credits and any other tax attributes arising from
the ownership of the Project Facility and the Installment Sale.
The Company reasonably expects, therefore, that it is, and will be
throughout the term of any Installment Sale, the owner of the Project Facility
for federal income tax purposes. For purposes of this Section 7.1(O), the terms
of the Installment Sales shall not include any optional renewal periods other
than at fair rental value at the time the option is exercised.
(P) Except as specifically set forth in paragraphs (B) and (F) of
this Section 7.1, no portion of the proceeds of the Bonds is expected to be used
directly or indirectly to acquire Higher Yielding Investments or to replace
funds used directly or indirectly to acquire Higher Yielding Investments.
(Q) Except as specifically set forth in paragraphs (B) and (F) of
this Section 7.1, no Investment Property will be pledged as collateral for the
payment of the principal of or interest on the Bonds.
(R) The proceeds of the Bonds will not be used to refinance or
refund any prior Industrial Development Bond or Private Activity Bond issued by
the Issuer with respect to the Project Facility.
(S) The Company has not entered into any transaction to reduce the
Yield on the investment of the Gross Proceeds of the Bonds in such a manner that
the amount to be rebated to the federal government pursuant to Section 7.4
hereof is less than it would have been had the transaction been at arm's-length
and had the Yield on the Bonds not been relevant to either party to the
transaction (a "Prohibited Payment").
(T) The following are "safe harbor" provisions for compliance with
the fair market value rule contained in Section 1.148(d)(6)(ii) of the
Regulations with respect to investing in certificates of deposit: the
certificate of deposit must have a fixed interest rte, a fixed payment schedule,
and a substantial penalty for early withdrawal. The purchase price of such
certificate of deposit is treated as its fair market value on
28
<PAGE>
the Purchase date if the yield on the certificate of deposit is not less than
(1) the yield on reasonably comparable direct obligations of the United States,
and (2) the highest yield that is published or posted by the provider to be
currently available from the provider on reasonably comparable certificates of
deposit offered to the public.
(U) Any investment of Bond proceeds in a "guaranteed investment
contract" (i.e. a Nonpurpose Investment that has specifically negotiated
withdrawal or reinvestment provisions and a specifically negotiated interest
rate [including any agreement to supply investments on two or more future
dates]) must meet the rules of Section 1.148-5(d)(6)(iii) of the Regulations to
be considered to be in an amount not greater than the fair market value.
(V) The amount of proceeds of the sale of the Bonds which is part
of any reasonably required reserve or replacement fund will not exceed ten
percent (10%) of the proceeds of the Bonds.
(W) The Bonds are not being issued to enable the Issuer or the
Company to exploit the difference between tax-exempt and taxable interest rates
to gain a material advantage and increase the burden on the market for
tax-exempt obligations in any manner, including, without limitation, by selling
a bond that would not otherwise be sold, or selling a larger bond, or issuing it
sooner or permitting it to remain outstanding longer than would otherwise be
necessary.
(X) The representations set forth herein may be relied upon by the
Issuer in issuing its arbitrage certification pursuant to Section 148 of the
Code and Sections 1.148-0 through 1.148-11 of the Regulations. The Company has
reviewed the Arbitrage Certificate of the Issuer, and, to the best of its
knowledge, information and belief, the facts, estimates and circumstances set
forth therein are accurate and complete in all respects and there are no other
facts, estimates or circumstances that would change the expectations and
representations of the Issuer set forth therein.
SECTION 7.2. ARBITRAGE COMPLIANCE. The Company acknowledges that the continued
exemption of interest on the Bonds from federal income taxation depends, in
part, upon compliance with the arbitrage limitations imposed by Section 148 of
the Code, including the rebate requirement described in Section 7.3 hereof and
the one hundred-fifty percent requirement described in Section 7.7 hereof. The
Issuer has, in the Installment Sale Agreement, authorized the Company to take
all actions necessary to comply with the rebate requirements. The Company hereby
agrees and covenants that it shall not permit at any time any of the proceeds of
the Bonds or other funds of the Company to be used, directly or indirectly, to
acquire any asset or obligation, the acquisition of which would cause any of the
Bonds to be an "arbitrage bond" for purposes of Section 148 of the Code. The
Company further agrees and covenants that it shall do and perform all acts and
things necessary in order to assure that the requirements of Section 148(f) of
the Code (formerly Section 103(a)(6) of the 1954 Code) are met. To that end, the
Company, on behalf of the Issuer, shall take the actions described in such
Sections 7.3 through 7.7 hereof and any other actions required under Section 148
and the applicable Regulations with respect to the investment of proceeds on
deposit in the funds and accounts established under the Indenture.
29
<PAGE>
SECTION 7.3. CALCULATION OF REBATE AMOUNT. Section 148(f) of the Code (formerly
Section 103(a)(6) of the 1954 Code) requires the payment to the United States of
the excess of the aggregate amount earned on the investment of Gross Proceeds in
Nonpurpose Investments over the amount that would have been earned on such
investments had the amount so invested been invested at a rate equal to the
Yield on the Bonds, together with any income attributable to such excess. Except
as provided below, all the funds and accounts established under the Indenture
are subject to this requirement. In order to meet the rebate requirements of
such Section 148(f), the Company agrees and covenants to take the following
actions:
(A) For each investment of amounts held with respect to the Bonds
in the various funds and accounts established under the Indenture, the Company
shall record the purchase date of such investment, its purchase price, its Fair
Market Value, accrued interest due on its purchase date, its face amount, its
coupon rate, its yield to maturity, the frequency of its interest payments, its
disposition price and its disposition date. The yield to maturity for an
investment means that discount rate, based on semiannual compounding, which,
when used to determine the present value on the purchase date of such
investment, or the date on which the investment becomes a Nonpurpose Investment,
whichever is later, of all payments of principal and interest on such
investment, gives an amount equal to the Fair Market Value of such investment
plus accrued interest due on such date.
(B) The aggregate amount earned on the investment of Gross
Proceeds in Nonpurpose Investments for each Computation Period shall include all
income realized under federal income tax accounting principles with respect to
such Nonpurpose Investments and with respect to the reinvestment of investment
receipts from such Nonpurpose Investments (without regard to the transaction
costs incurred in acquiring, carrying, selling or redeeming such Nonpurpose
Investments). Such income shall include, for example, gain or loss realized on
the disposition of such Nonpurpose Investments (without regard to when such
gains are taken into account under Section 453 of the Code) and income under
Section 1272 of the Code. In addition, where Nonpurpose Investments are retained
after retirement of the Bonds, any unrealized gains or losses as of the date of
retirement of the Bonds must be taken into account in calculating the aggregate
amount earned on such Nonpurpose Investments. In addition, the aggregate amount
earned on Nonpurpose Investments in any Computation Period shall include the
gain or loss on the sale of any investment determined by subtracting the Fair
Market Value of the investment from the disposition price of the investment.
(C) For each Computation Period specified in paragraph (D) below,
(1) if the Bond issue contains no Variable Rate Obligations, then the Yield on
the Bonds shall be computed as required by Section 1.148-1(b) of the Regulations
using payments of principal and interest actually paid through the last day of
the Computation Period, and payments of principal and interest reasonably
expected to be paid after the Computation Period, and using as the purchase
price of the Bonds the initial offering price to the public (not including bond
houses and brokers, or similar persons or organizations acting in the capacity
of underwriters or wholesalers) at which price a substantial amount of the Bonds
were sold, or, if privately placed, the price paid by the first buyer of such
obligations; or (2) if the Bonds contain Variable Rate Obligations (including
adjustable mode bonds), then the Yield on the Bonds shall be computed as
required by Section 1.148-1(b) of the Regulations using payments of principal
actually paid and interest accrued through the last day of the Computation
Period and payments of principal and interest expected to be made after the
Computation Period, assuming a rate of interest equal to the Weighted Average
Rate of Interest
30
<PAGE>
from the date of original issuance of the Bonds to the end of the Computation
Period, and using as the purchase price of the Bonds the amount described in
clause (1) of this paragraph (C). For purposes of this calculation, the fee paid
by the Company for the Letter of Credit is treated as interest.
(D) Subject to the special rules set forth in paragraph (E) below,
the Company shall determine the amount of earnings received on all investments
described in paragraph (A) above, other than investments in obligations
described in Section 103(a) of the Code or investments of amounts held in the
Rebate Fund, during the Computation Periods ending with the following
determination dates: (1) annually on the first anniversary of the Closing Date
and each succeeding anniversary thereof; (2) the Maturity Date; (3) if all
Outstanding Bonds are paid or redeemed prior to the Maturity Date, the date of
such redemption; (4) the date of expenditure of all the proceeds of the Bonds on
completion of the Project Facility; and (5) in the event of damage to or
Condemnation of the Project Facility, the date of the expenditure of the
proceeds of any insurance settlement or Condemnation award on the completion of
the restoration of the Project Facility.
(E) (1) Except as provided in paragraph (F) below, if all of
the Gross Proceeds of the Bonds have been expended for the purpose of the issue
within six (6) months after the date of original issuance of the Bonds, then the
Rebate Amount shall be zero (0) until such time as either (a) amounts are
received from the sale, Condemnation, casualty, title loss or other disposition
of the Project Facility or any part thereof (which amounts will be held in the
Insurance and Condemnation Fund), or (b) any other amounts become pledged as
security for the Bonds, and neither of such amounts are expended on the payment
of principal or interest on the Bonds within thirteen (13) months of the date of
their receipt. The Company shall evidence qualification for the six (6) month
exception by delivering to the Trustee the documentation required for final
disbursement of moneys from the Project Fund pursuant to Section 4.01 of the
Indenture and receiving the balance on deposit in the Project Fund within six
(6) months after the date of original issuance of the Bonds. The six-month
exception provided by this paragraph (E) is inapplicable if any reserve fund,
sinking fund or pledged fund, other than a bona-fide debt service fund as
defined in Section 1.148-1(b) of the Regulations, is maintained for the Bonds.
(2) In determining whether the Gross Proceeds of the
Bonds have been expended within the six-month period described in
clause (1) above, there shall not be taken into account any amounts
held in the Bond Fund, provided such fund continues to remain a
bona-fide debt service fund (as defined in Section 1.148-1(b) of the
Regulations) which is depleted once a year except for a reasonable
carryover amount not exceeding the greater of (a) one (1) year's
earnings on the Bond Fund or (b) one-twelfth (1/12) of annual debt
service on the Bonds.
(F) For each Computation Period specified in paragraph (D) above,
there shall be calculated for each investment described in paragraph (A) above
(other than investments held in the Rebate Fund) an amount equal to the earnings
which would have been received on such investment if in the Computation Period
an amount equal to the Fair Market Value of such investment were invested at an
interest rate equal to the Yield on the Bonds as described in paragraph (C)
above.
(G) For each Computation Period specified in paragraph (D) above,
the Company shall calculate the Rebate Amount, an amount (to be rounded to the
next larger whole number of cents) equal to
31
<PAGE>
the aggregate amount earned on the investment of Gross Proceeds in Nonpurpose
Investments determined in paragraph (B) above, less the amounts determined in
paragraph (F) above, plus any interest earned on such amount, and less the
amount which has previously been paid to the United States pursuant to Section
7.4 hereof.
(H) For each Computation Period specified in paragraph (D) above,
the Company shall furnish the Trustee in writing, within fifteen (15) days after
the end of the Computation Period, a computation of the Rebate Amount, and (1)
if the Rebate Amount exceeds the amount on deposit in the Rebate Fund, the
Company shall instruct the Trustee to deposit an amount in the Rebate Fund such
that the balance in the Rebate Fund after such deposit shall equal the Rebate
Amount, the Trustee to withdraw such amount from the Project Fund prior to the
Completion Date; provided, however, that, if the Completion Date is passed or if
insufficient funds are available in the Project Fund, the Company shall direct
the Trustee in writing to withdraw excess funds from other funds or accounts to
be deposited in the Rebate Fund or contribute moneys from other sources in the
amount necessary to deposit the full Rebate Amount in the Rebate Fund; and (2)
if the amount in the Rebate Fund exceeds the Rebate Amount, the Company shall
instruct the Trustee to withdraw such excess amount and deposit it (a) in the
Project Fund prior to the Completion Date or (b) in the Bond Fund after the
Completion Date to be used to redeem Bonds in accordance with Article VIII of
the Indenture.
SECTION 7.4. PAYMENTS TO UNITED STATES. (A) Within sixty (60) days after the end
of the fifth Bond Year and the end of every fifth Bond Year thereafter, the
Company shall direct the Trustee in writing to pay to the United States, an
amount equal to ninety percent (90%) of the Rebate Amount. The Company shall
direct the Trustee in writing to pay to the United States, not later than thirty
(30) days after the last Outstanding Bonds are redeemed, the balance, if any, in
the Rebate Fund. In addition, on the date that the Trustee makes any such
payment, the Company shall pay or cause to be paid to the United States any
additional amounts required to be paid under Section 148(f) of the Code.
(B) The Company shall direct the Trustee that each payment of an
installment be made to the Internal Revenue Service Center, Philadelphia,
Pennsylvania 19255. Each payment shall be accompanied by a copy of the Internal
Revenue Service Form 8038 filed with respect to the Bonds and a statement
prepared by the Company summarizing the determination of the Rebate Amount.
(C) If, during any Computation Period, the aggregate amount earned
on Nonpurpose Investments in which the Gross Proceeds of the Bonds are invested
is less than the amount that would have been earned if the obligations had been
invested at a rate equal to the Yield on the Bonds, as determined in Section
7.3(C) hereof, no such deficit may be recovered from any Rebate Amount
previously paid to the United States.
SECTION 7.5. RECORDKEEPING. In connection with the rebate requirement, the
Company shall maintain the following records:
(A) The Company shall retain records of the determinations made
pursuant to Section 7.3 hereof until six (6) years after the retirement of the
last of the Bonds.
32
<PAGE>
(B) The Company shall record all amounts paid to the United States
pursuant to Section 7.4 hereof. The Company shall furnish to the Issuer and the
Trustee copies of the materials filed with the Internal Revenue Service.
SECTION 7.6. PROHIBITED PAYMENT COVENANT. The Company covenants and agrees that
it shall not enter into any transaction to reduce the Yield on the investment of
the Gross Proceeds of the Bonds in such a manner that the Rebate Amount is less
than it would have been had the transaction been at arm's-length and had the
Yield on the Bonds not been relevant to either party to such transaction.
SECTION 7.7. COMPANY RESPONSIBILITY. The Company hereby acknowledges that
compliance with this Article VII shall be solely the responsibility of the
Company and that neither the Issuer nor the Trustee shall have any
responsibility therefor.
33
<PAGE>
ARTICLE VIII
COVENANTS AND AMENDMENTS
SECTION 8.1. COMPLIANCE WITH CODE. (A) The Company covenants and agrees that (1)
it will never permit the use of the Gross Proceeds of the Bonds, or take or omit
to take any action, which would cause interest on the Bonds to be subject to
federal income taxation, and (2) it shall at all times do and perform all acts
and things necessary or desirable and within its control in order to assure that
interest paid on the Bonds shall, for the purposes of federal income taxation,
be excludable from the gross income of the recipients thereof and exempt from
such taxation, except in the event that such recipient is a Substantial User of
the Project Facility or Related Person to such Substantial User.
(B) The Company acknowledges that the covenants and conditions set
forth in Articles II-VII of the Tax Regulatory Agreement are based upon the Code
and Regulations as they exist on the date hereof and that the Code or
Regulations may be subsequently interpreted or modified by the federal
government in a manner which is inconsistent with the covenants set forth
herein. The Company agrees that any such subsequent modification or
interpretation of the Code or Regulations will be deemed a requirement that must
be met pursuant to the general tax covenant set forth in paragraph (A) above.
SECTION 8.2. AMENDMENT. The Tax Regulatory Agreement may be amended only with
the concurring written consent of the Issuer, the Company and the Trustee.
SECTION 8.3. NOTICES. (A) Any notice, demand, direction, certificate, opinion of
counsel, request, instrument or other communication authorized or required by
the Tax Regulatory Agreement to be given to or filed with the Issuer, the
Company or the Trustee shall be deemed to have been sufficiently given or filed
for all purposes of the Tax Regulatory Agreement if and when delivered or sent
by registered or certified mail, return receipt requested, postage prepaid to
the addresses listed in Section 1103 of the Indenture.
(B) The Issuer, the Company and the Trustee may, by like notice,
designate any further or different addresses to which subsequent notice,
demands, directions, certificates, opinions of counsel, requests, instruments or
other communications hereunder shall be sent. Any notice, demand, direction,
certificate, opinion of counsel, request, instrument or other communication
hereunder shall, except as may expressly be provided herein, be deemed to have
been delivered or given as of the date it shall have been mailed.
SECTION 8.4. PARTIES INTERESTED HEREIN. Nothing in the Tax Regulatory Agreement
expressed or implied is intended or shall be construed to confer upon, or to
give to, any Person, other than the Issuer, the Company, the Trustee or the
holders of the Bonds, any right, remedy or claim under or by reason of the Tax
Regulatory Agreement or any covenant, condition or stipulation thereof.
SECTION 8.5. COUNTERPARTS. The Tax Regulatory Agreement may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused these presents to be
executed in its name and behalf for the benefit of the Issuer, the Trustee and
the holders of the Bonds, all as of the day and year first above written.
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
------------------------------
Name: Phillip S. Sumpter
----------------------------
Title: Executive Vice President
---------------------------
35
<PAGE>
SCHEDULE A
PART I
SUMMARY OF ACQUISITION AND CONSTRUCTION COSTS*
Amount To
Be Financed
With Bond
Cost Proceeds
---- --------
(A) Purchase of Real Property $282,500 $254,250
(See Part III, paragraph (A))
(B) Purchase of Project Facility -0- -0-
(See Part III, paragraph (B))
(C) Construction or Renovation $8,047,500 $5,625,750
Costs (See Part III, paragraph (C))
(D) Closing Costs -0- -0-
(See Part III, paragraph (E))
(E) Issuance Costs (See $210,000 $120,000
Part III, paragraph (F))
(F) Miscellaneous Costs $60,000 -0-
---------- ----------
(See Part III, paragraph (H))
TOTAL $8,600,000 $6,000,000
- -------------------
*See detailed itemization attached.
A-1
<PAGE>
SCHEDULE A
PART II
SUMMARY OF SOURCES OF FUNDS*
Amount
------
(A) Debt $7,500,000
(B) Investment Earnings/Equity $1,100,000
(D) Miscellaneous -0-
----------
TOTAL SOURCES OF FUNDS $8,600,000
- -------------------
*See detailed itemization attached.
A-2
<PAGE>
SCHEDULE A
PART III
ITEMIZATION OF ACQUISITION AND CONSTRUCTION COSTS
Instructions: If any item is inapplicable, please mark "N/A". The
"Amount to be Financed with Bond Proceeds" should include any investment
proceeds earned from the investment of Bond proceeds.
<TABLE>
<CAPTION>
<S> <C>
(A) Purchase of Real Property. Attach any real estate contract.
ITEM COST
(1) (a) Contract Purchase Price $282,500
TOTAL PURCHASE PRICE $282,500
TOTAL LAND COSTS $282,500
Amount of Land Costs to be
Financed with Bond Proceeds $254,250-
(B) Purchase of Project Facility.
ITEM COST
(1) New Project Facility -0-
TOTAL NEW PROJECT FACILITY COSTS -0-
Amount of New Project Facility Costs to be
Financed with Bond Proceeds -0-
(2) Portion of New Project Facility Costs Applicable
to Replacing Project Facility Used in an Integrated
Operation Within the Facility Prior to
Bond Issuance -0-
A-3
<PAGE>
(3) Used Project Facility -0-
TOTAL PROJECT FACILITY COSTS -0-
Total Project Facility Costs to be
Financed with Bond Proceeds -0-
(C) Construction or Renovation Costs. Attach any contracts.
ITEM COST
(1) Contract Cost $7,743,500
(2) Licenses and Permits
(3) Architect (attach any Architect's contract)
(4) Engineering
(5) Legal Fees pertaining to construction
(6) Interest during construction
(7) Payment and Performance Bond $43,000
(8) Contingency $118,000
(9) Other (specify) Item: Renovations, etc.
Item: Outside surface repairs $144,000
----------
TOTAL CONSTRUCTION COSTS $8,049,500
Amount of Construction Costs to be
Financed with Bond Proceeds $5,625,750
(D) Construction Costs Constituting Qualifying Rehabilitation Expenditures.
This section is required to be completed only if an existing building
is being acquired. N/A
TOTAL CONSTRUCTION COSTS CONSTITUTING
QUALIFYING REHABILITATION EXPENDITURES N/A
(E) Closing Costs of Loan (other than stated in paragraph (A)(3) above
relating to the purchase of real property
and paragraph (F) below relating to Issuance Costs). -0-
A-4
<PAGE>
ITEM COST
(1) Recordation of Instruments -0-
(2) Title Insurance -0-
(3) Survey -0-
TOTAL CLOSING COSTS OF LOAN -0-
Amount of Closing Costs of Loan to be
Financed with Bond Proceeds -0-
(F) Issuance Costs.
ITEM COST
(1) DTC
(2) Trustee's fee $5,000
(3) Trustee's Counsel fee $5,000
(4) Company Counsel fee $50,000
(5) Bond, Bank and Placement Agent's Counsel fee $50,000
(6) CUSIP fee
(7) Printing and Miscellaneous
(8) Placement fee $60,000
(9) Issuer's fee $30,000
(10) Issuer's Counsel fee $10,000
----------
(A) TOTAL ISSUANCE COSTS $210,000
(B) Amount of Issuance Costs to be Financed with Bond Proceeds
(subject
to a maximum of 2% of Bond proceeds) -$120,000-
(G) Reasonably Required Reserve or Replacement Fund.
NONE
(H) Miscellaneous Costs. Complete this section in every transaction.
ITEM COST
(1) Insurance premiums paid during construction
(e.g. property, liability, etc.) -0-
(2) Travel and entertainment -0-
(3) Principal of interim loan (not
reflected in other items) -0-
(4) Interest on interim loan (not
A-5
<PAGE>
reflected in other items) -0-
(5) Loan servicing fee -0-
(6) Research and development -0-
(7) Carrying costs during construction
(other than interest) -0-
(8) Other (specify)
Item: Letter of Credit fee $60,000
Item:
----------
TOTAL MISCELLANEOUS COSTS $60,000
Amount of Miscellaneous Costs to be Financed
with Bond Proceeds -0-
* * * * * * * * * *
TOTAL ACQUISITION AND CONSTRUCTION COSTS
Total Cost of Project (sum of (A) - (H)) $8,600,000
Total Cost of Project to be financed with
Bond Proceeds $6,000,000
(I) Qualified Costs Test.
(1) Face amount of Bonds $6,000,000
(2) Amount of reasonably required reserve or
replacement fund to be financed with Bond proceeds
(subject to a maximum of 10% of Bond proceeds) -0-
(3) Net Proceeds of the Bonds
(difference of 1 and 2 above) $6,000,000
A-6
<PAGE>
(4) Amount of (3) above which will be spent on
Qualified Costs (i.e., costs
which (a) are expended for the "acquisition,
construction, reconstruction or improvement
of land or property of a character subject to
the allowance for depreciation" within the
meaning of Section 144(a)(1)(A) of the Code,
(b) are chargeable to the capital account of
the Company or would be so chargeable upon
election of the Company to deduct the amount
of the item, and (c) were paid or incurred
within sixty days' prior to June 24, 1997) $5,880,000
(5) Percentage of Net Proceeds of the Bonds to be
spent on Qualified Costs ((4) divided by (3)) 98%
</TABLE>
A-7
<PAGE>
SCHEDULE A
PART IV
SOURCES FOR PAYMENT
OF ACQUISITION AND CONSTRUCTION COSTS
ITEM AMOUNT
(A) Debt
(1) Face amount of the Bonds $6,000,000
(2) Urban Development Action Grant -0-
(3) Conventional loans (specify): $1,500,000
(4) Other (specify)
Item:
TOTAL DEBT $7,500,000
(B) Equity/Investment Earnings
(1) Company's contributions/Investment Earnings $1,110,000
(2) Facility user's contributions -0-
(3) Grants and other (specify) -0-
Item:
Item:
TOTAL EQUITY $1,100,000
(C) Miscellaneous
(1) Like-kind exchange (Swap) -0-
(2) Cash flow from Project Facility -0-
(3) Other (specify) -0-
Item:
TOTAL MISCELLANEOUS -0-
* * * * * * * * * *
TOTAL SOURCE OF FUNDS $8,600,000
A-8
<PAGE>
SCHEDULE B
AVERAGE REASONABLY EXPECTED ECONOMIC LIFE
AND AVERAGE MATURITY OF THE BONDS
(A) ACRS Classifications. The following information with respect to the
classification of Property constituting the Project Facility under the
Accelerated Cost Recovery System ("ACRS") is furnished to complete Internal
Revenue Service Form 8038:
<TABLE>
<CAPTION>
<S> <C>
(1) Cost of Land (or portion thereof
financed by the Bonds) $254,250
(2) Cost of Building (or portion
thereof financed by the Bonds) -0-
(3) Cost of Project Facility with an ACRS life of more
than 5 years (or portion thereof financed by the Bonds) $5,625,750
(4) Cost of Project Facility with an ACRS life of less than
5 years (or portion thereof financed by the Bonds) -0-
(5) Cost of other Property financed by the Bonds (Closing Costs) -0-
</TABLE>
(B) Average Reasonably Expected Economic Life. The following information is set
forth to determine the Average Reasonably Expected Economic Life of that portion
of the Project Facility financed with the proceeds of the Bonds.
<TABLE>
<CAPTION>
A B C D E*** F
Portion of Cost
Description of of Assets Financed Average Basis of Weighted Life
Assets Financed Financed with Expected Determination of Assets
with Bond Proceeds of Economic of Economic (Column C x
Proceeds Cost of Assets Bonds Assets Life Column D)
- -------- -------------- ----- ------ ---- ---------
<S> <C> <C> <C> <C> <C>
Equipment $6,124,790 $5,625,750 10.25 ADR $57,663,938
TOTAL $6,124,790 $5,625,750 10.25 ADR $57,663,938
</TABLE>
B-1
<PAGE>
To determine the Average Reasonably Expected Economic Life of that portion of
the Project Facility financed with the proceeds of the Bonds, divide the sum of
the Weighted Life of Assets (Column F) by the sum of the Cost of Assets (Column
C).
Sum of Column F
_______________ = Average Reasonably Expected Economic Life
Sum of Column C
57,663,938
___________ = 10.25
5,625,750
- -------------------
*** The midpoint lives under the Asset Depreciation Range (Revenue Procedure
87-56) should be used where applicable. In cases of structures, the
guideline lives under Revenue Procedure 62-21 should be used.
(C) Average Maturity of Bonds.
(1) The last possible maturity of the Bonds is 10.5 years
(if such term does not exceed 120% of the Average Reasonably Expected
Economic Life determined in paragraph (B) above, paragraphs (C)(2) and
(3) need not be completed).
N/A
(2) The Average Maturity of the Bonds is determined as
follows:
(a) Each principal installment is multiplied by
the number of payment periods (e.g., monthly, semi-annually, etc.) that
such principal installment is outstanding.
(b) The products obtained as a result of each
multiplication described in (a) above are then added together.
(c) The sum obtained in (b) above is then
divided by the face amount of the Bonds and this number is divided
again by the number of payments per year.
(3) Show calculation of paragraph (2) above or provide
computer printout.
N/A
B-2
<PAGE>
SCHEDULE C
AGGREGATE FACE AMOUNT OF THE BONDS
(A) The following constitute all of the Principal Users of the
Project Facility:
Federal Tax
Identification
Name Address Number
---- ------- ------
Spurlock Adhesives, Inc. 5090 General Mahone Highway 54-1522700
Waverly, Virginia 23890
(B) The following constitute all Related Persons to the Principal
Users listed in paragraph (A) above:
Federal Tax
Identification
Name Address Number
---- ------- ------
Spurlock Industries, Inc. 5090 General Mahone Highway 84-1019856
Waverly, Virginia 23890
(C) The following is a complete listing of all the Prior Issues
used to finance the Project Facility, any other Included Facility or any portion
of either of all the Principal Users listed in paragraph (A) above and all the
Related Persons listed in paragraph (B) above.
Date Outstanding
Name of Issue Issued Principal Amount
- ------------- ------ ----------------
N/A
(D) The following is a complete listing of all tax-exempt bonds
which are aggregated with the Bonds pursuant to Section 1.103-13(b)(10) of the
Regulations and Revenue Ruling 81-216 (including bonds described in Section
6.1(A) of the Tax Regulatory Agreement):
C-1
<PAGE>
Date Outstanding
Name of Issue Issued Principal Amount
- ------------- ------ ----------------
N/A
(E) The following is a complete listing of all tax-exempt bonds, a
portion of the proceeds of which were on are to be used with respect to a
building, enclosed shopping mall or strip of offices, stores or warehouses
constituting part of (or sharing substantially common facilities with) the
Project Facility:
Date Outstanding
Name of Issue Issued Principal Amount
- ------------- ------ ----------------
N/A
(F) The following is a complete listing of all the Small Issue
Capital Expenditures paid or incurred by any Principal User listed in paragraph
(A) above or any Related Person listed in paragraph (B) above with respect to
the Project Facility or any other Included Facility:
Period Amount
------ ------
(G) The sum of:
<TABLE>
<CAPTION>
<S> <C> <C>
(A) $6,000,000 (face amount of the Bonds);
(B) -0- (the sum of the Prior Issues listed in paragraph (C) above);
(C) -0- the sum of all bonds detailed in paragraph (D) above; and
(D) $2,600,000 (the sum of the Small Issue Capital Expenditures listed in
----------
paragraph (F) above, which is $-0-)
$8,600,000 TOTAL
</TABLE>
is the Aggregate Face Amount of the Bonds.
C-2
<PAGE>
SCHEDULE D
THE $40,000,000 AGGREGATE LIMIT
The questions below are formulated to determine whether the sum of the
Aggregate Face Amount of the Bonds allocable to each Test Period Beneficiary,
and the Aggregate Face Amount of all the outstanding tax-exempt Private Activity
Bonds allocated to each such beneficiary under Section 144(a)(10)(D) of the
Code, exceeds $40,000,000.
(A) Listed below are all the facilities which were financed with
the proceeds of tax-exempt Private Activity Bonds of which any Principal User of
the Project Facility is now or was, at any time within the three-year period
from the issuance of said bonds, an owner or a Principal User of such
bond-financed facility and the aggregate authorized face amount of said bonds:
N/A
(B) Listed below are all the facilities which were financed with
the proceeds of tax-exempt Private Activity Bonds of which a Related Person to
the Principal Users listed in paragraph (A) above (or an entity which was a
Related Person to any such Principal User) is now or was, at any time within the
three-year period from the issuance of said bonds, an owner or a Principal User
of such bond-financed facility and the aggregate authorized face amount of said
bonds:
N/A
D-1
Exhibit 10.43
PREPARED BY:
ANDREW M. CONDLIN
WILLIAMS, MULLEN, CHRISTIAN & DOBBINS
PO BOX 1320
RICHMOND, VA 23210-1320
DEED OF TRUST
AND
SECURITY AGREEMENT
Granted By
SPURLOCK ADHESIVES, INC.
a Virginia Corporation
TO
OTTO W. KONRAD
and
BRUCE H. MATSON
Trustees
Securing
KEYBANK NATIONAL ASSOCIATION
DATE: As of October 1, 1997
<PAGE>
DEED OF TRUST
AND
SECURITY AGREEMENT
(COLLATERAL INCLUDES FIXTURES)
THIS DEED OF TRUST AND SECURITY AGREEMENT is made as of the 1st day of
October, 1997, from SPURLOCK ADHESIVES, INC., a Virginia corporation ("Grantor")
to OTTO W. KONRAD and BRUCE H. MATSON (collectively, the "Trustee") as Trustee
for the benefit of KEYBANK NATIONAL ASSOCIATION, and its successors and assigns
("Beneficiary").
Capitalized terms herein are defined in Article II.
ARTICLE I
RECITALS
1.1 The Loan--Grantor is indebted to Beneficiary for the Loan in the
aggregate principal sum of Seven Million Six Hundred Eighty Thousand Eight
Hundred Twenty Two Dollars ($7,680,822) as evidenced by the Note of Grantor.
1.2 Obligations Secured--This Deed of Trust is partial security for (a)
the full and punctual payment of the Loan according to the terms of the Note,
(b) the payment of all sums due to Beneficiary or Trustee according to the terms
of any of the Loan Documents, and (c) the performance of, and compliance with,
all of the obligations of the Grantor contained in the Loan Documents.
ARTICLE II
DEFINITIONS
Whenever capitalized in this Deed of Trust, the following terms shall
have the meaning given in this Article II, unless the context clearly indicates
a contrary intent.
2.1 Beneficiary--"Beneficiary" means KEYBANK NATIONAL ASSOCIATION, its
successors and assigns, and any subsequent holder of the Note.
2.2 Controlling Party--"Controlling Party" means any Person, directly
or indirectly, possessing the power to direct or cause the direction of the
management and policies of any trust or entity comprising the Grantor, whether
through the ownership or control of voting securities or rights, by contract or
otherwise.
2.3 Deed of Trust--"Deed of Trust" means this instrument,
<PAGE>
including all current and future supplements, amendments, and attachments
thereto.
2.4 Default--"Default" means: (a) the failure of Grantor to perform,
cause to be performed, abide by, comply with, or observe any duty or obligation
imposed upon Grantor by the Loan Documents; (b) the breach of any of Grantor's
warranties or covenants contained in any of the Loan Documents; (c) a
misrepresentation by Grantor, its counsel, or any other Person on behalf of
Grantor, in any of the Loan Documents; and (d) any event, happening, or
condition which would constitute an Event of Default if not cured within any
applicable grace period.
2.5 Encumbrances--"Encumbrances" include all liens, mortgages, rights,
leases, restrictions, easements, deeds of trust, covenants, agreements, rights
of way, rights of redemption, security interests, conditional sales agreements,
land installment contracts, options, and all other burdens or charges.
2.6 Event of Default--"Event of Default" has the meaning given and
provided in Section 10.1.
2.7 Grantor--"Grantor" means, jointly and severally, the parties
identified as such in the introductory paragraph of this Deed of Trust, their
successors and assigns, including any subsequent owner of all or any portion of
Grantor's interest in the Trust Property.
2.8 Guaranty--"Guaranty" means the Guaranty Payment and Performance in
favor of the Beneficiary executed by Spurlock Industries, Inc., a Virginia
corporation, pursuant to which it guaranties, among other things, the full and
prompt payment and performance of the Grantor's obligations under the Loan
Documents, subject, however, to the limitations therein contained.
2.9 Land--"Land" means the land more particularly described in Exhibit
A to this Deed of Trust.
2.10 Law--"Law" means all federal, state, county, and municipal laws,
regulations, rules, and ordinances, and all rules, regulations and orders of any
other governmental authority including common law and rulings, decisions and
interpretations of all judicial, quasi-judicial, and administrative bodies.
2.11 Lease--"Lease" means each lease which purports to convey any
interest of Grantor in any portion of the Trust Property and includes subleases
and assignments of leases and Rents.
2.12 Legal Action--"Legal Action" includes all suits or other
proceedings brought at law or in equity or before any
2
<PAGE>
administrative agency, governmental body, or arbitrator which in any manner
relate to the Trust Property or arise out of or relate to any of the Loan
Documents.
2.13 Loan--"Loan" means the extension of credit by the Beneficiary to
the Grantor in the aggregate principal amount of Seven Million Six Hundred
Eighty Thousand Eight Hundred Twenty Two Dollars ($7,680,622) as evidenced by
the Reimbursement Agreement and the Term Loan Note.
2.14 Loan Documents--"Loan Documents" means this Deed of Trust, the
Term Loan Note, the Reimbursement Agreement, the Guaranty, and any and all other
certificates, opinions, assignments and documents executed in connection
herewith or therewith, and all current and future supplements, amendments, and
attachments thereto.
2.15 Note of Grantor or Note--"Note of Grantor" or "Note" means
collectively, the Term Loan Note and the Reimbursement Agreement, evidencing the
Loan, including all current and future supplements, amendments, extensions and
attachments thereto.
2.16 Operate--"Operate" means to operate, use, manage, lease, contract,
and control, including the right to repair, renew, replace, alter, add, better,
and improve.
2.17 Intentionally omitted.
2.18 Permitted Encumbrances--"Permitted Encumbrances" means this Deed
of Trust and all Encumbrances as to which Beneficiary has given its prior
written approval, liens arising for real estate taxes or public charges for
sewage, water, drainage or other public improvements not yet due and payable,
Leases not in violation of Section 7.4 and all liens permitted under the Loan
Documents. Permitted Encumbrances shall include those exceptions specified on
Exhibit B.
2.19 Person--"Person" means any individual, corporation, partnership,
association, trust, joint venture, or any other legal entity.
2.20 Property--"Property" has the meaning given in Section 3.3.
2.21 Real Property--"Real Property" means the Land, together with the
improvements and rights identified in Section 3.1 and all other portions of the
Trust Property which may legally be deemed to be real property under Section
3.7.
2.22 Reimbursement Agreement--means the letter of credit reimbursement
agreement dated as of October 1, 1997 by and between
3
<PAGE>
the Grantor and the Beneficiary, pursuant to which, among other things, the
Beneficiary agrees to issue the Letter of Credit (as defined therein) and the
Grantor agrees to reimburse the Beneficiary for amounts drawn under the Letter
of Credit, as said reimbursement agreement may be supplemented as amended from
time to time.
2.23 Rents--"Rents" includes all rents, profits, royalties, issues,
revenues, income, proceeds, earnings, and products generated by or arising out
of the Trust Property.
2.24 Risk--"Risk" includes risk of loss or damage by fire, lightning,
windstorm, hail, explosion, riot, riot attending a strike, civil strife, civil
commotion, aircraft, vehicles, smoke, vandalism, malicious mischief, boiler
explosion, and any other risk customarily insured against by persons operating
property similar in kind to the Trust Property.
2.25 Taking--"Taking" includes any taking by condemnation or eminent
domain, any sale in lieu of condemnation under threat thereof, the alteration of
the grade of any street, or any other injury to or decrease in the value of the
Trust Property by any public or quasi-public authority or corporation or any
other person having the power of eminent domain.
2.26 Taxes--"Taxes" includes all taxes, excises, documentary stamp and
transfer taxes, recording taxes, assessments, water rents, sewer rents,
metropolitan district charges, sanitary district charges, public dues, and other
public charges levied or assessed upon the Trust Property, upon the Loan, or
upon any Loan Document.
2.27 Tenant--"Tenant" means any lessee of Grantor under any Lease, and
any sub-lessee or assignee of a Lease.
2.28 Term Loan Note--"Term Loan Note" means the $1,500,000 Promissory
Note dated as of October 10, 1997 from the Grantor to the Beneficiary.
2.29 Trustee--"Trustee" means that person or entity named in the
introductory paragraph including any additional, successor, replacement, or
substitute trustee appointed pursuant to Section 9.2.
2.30 Trust Property--"Trust Property" has the meaning given in Section
3.6.
2.31 Uniform Commercial Code--"Uniform Commercial Code" means Virginia
Uniform Commercial Code - Secured Transactions (Virginia Code Section 8.9-101
et. seq.) and any amendments thereto or reenactments thereof.
4
<PAGE>
ARTICLE III
GRANTING CLAUSES
3.1 Lien on Real Property--The Grantor, in consideration of the Loan
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, has granted, bargained, sold and conveyed and by these
presents does hereby grant, bargain, sell and convey unto the Trustee, its
heirs, successors and assigns in trust, with power of sale, for the benefit and
security of the Beneficiary and subject to the terms and conditions hereinafter
set forth, in fee simple, forever, the property described in Exhibit A attached
hereto as a part hereof, together with (a) all buildings and improvements now or
hereafter located thereon, (b) all rights, rights of way, air rights, riparian
rights, franchises, licenses, easements, tenements, hereditaments,
appurtenances, accessions and other rights and privileges now or hereafter
belonging to the Land or the buildings and improvements thereupon, now owned or
hereafter acquired by the Grantor.
3.2 Lien on Fixtures and Personal Property--The Grantor further grants
and assigns to the Trustee for the benefit and security of the Beneficiary all
of the machines, apparatus, equipment, fixtures and articles of personal
property now or hereafter located on the Land or in any improvements thereon
(other than that owned by any Tenant), and all the right, title and interest of
the Grantor in and to any of such property which may be subject to any title
retention or security agreement or instrument having priority over this Deed of
Trust.
3.3 Property--All of the property described in Sections 3.1 and 3.2 is
hereinafter collectively called the "Property".
3.4 Lien on Leases and Rents and Other Rights--The Grantor further
grants and assigns to the Trustee for the benefit and security of the
Beneficiary (a) all Leases and Rents, including, without limitation, all cash or
security deposits to secure performance by Tenants (whether such cash or
securities are to be held until the expiration of the terms of Leases or are to
be applied to one or more of the installments of rent coming due immediately
prior to the expiration of such terms), (b) all of the estate, right, title,
use, claim and demand of every nature whatsoever, at law or in equity, which the
Grantor may now have or may hereafter acquire in, to or with respect to, the
Property, and (c) all right, title and interest of the Grantor in and to all
extensions, betterments, renewals, substitutes and replacements of, and all
additions and appurtenances to, the Property, hereafter acquired by or released
to the Grantor, or constructed, assembled or placed by or for the Grantor on the
Property, and all
5
<PAGE>
conversions of the security constituted thereby.
3.5 Lien on Insurance Policies and Condemnation Awards--The Grantor
further grants and assigns to the Trustee all insurance policies and insurance
proceeds pertaining to the Property and all awards or payments, including
interest thereon and the right to receive the same, which may be made with
respect to any of the Property as a result of any Taking or any injury to or
decrease in the value of the Property.
3.6 The Trust Property--All of the property described in this Article
III is collectively called the "Trust Property."
3.7 Security Interest Under the Uniform Commercial Code--Any portion of
the Trust Property which by law is or may be real property shall be deemed to be
a part of the Real Property for the purposes of this Deed of Trust. The
remainder of the Trust Property shall be subject to the Uniform Commercial Code,
and this Deed of Trust shall constitute a Security Agreement with respect
thereto. Grantor hereby grants to the Beneficiary a security interest in that
portion of the Trust Property not deemed a part of the Real Property for the
purpose of securing performance of all of Grantor's obligations under the Loan
Documents. With respect to such security interest (a) the Beneficiary may
exercise all rights granted or to be granted a secured party under the Uniform
Commercial Code as enacted in Virginia, and (b) upon the occurrence of an Event
of Default as defined hereunder, the Beneficiary shall have a right of
possession superior to any right of possession of the Grantor or any person
claiming through or on behalf of the Grantor.
3.8 Limitation on Security--Notwithstanding any amount otherwise due
Beneficiary pursuant to the terms of the Note, the maximum principal
indebtedness secured hereby is Two Million Dollars ($2,000,000).
ARTICLE IV
HABENDUM CLAUSE AND DEFEASANCES
4.1 Habendum Clause--TO HAVE AND TO HOLD the Trust Property unto the
Trustee and its heirs, successors and assigns, in fee simple forever, upon the
terms and trust herein set forth.
4.2 Termination of the Trust--If all obligations of Grantor under this
Deed of Trust and the other Loan Documents, are paid and satisfied in accordance
with the terms hereof and thereof, the estate hereby granted shall cease and the
Trust Property shall be released to the Grantor, at the cost of the Grantor.
6
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Warranty of Title and Further Assurances--The Grantor covenants and
warrants that the Grantor is seized of the Trust Property in fee simple and that
it has the right and authority to convey the Trust Property in fee simple; that
the same are free and clear of all Encumbrances except for Permitted
Encumbrances; that Grantor warrants generally title to the Trust Property
against the claims of all persons whomsoever with English covenants of title;
and that it will execute such further assurances as may be requested by the
Trustee or Beneficiary.
5.2 Existence, Good Standing, Power and Authority of Grantor--The
Grantor is a Virginia corporation organized and in good standing under the laws
of the Commonwealth of Virginia, and will maintain its good standing and
existence until all of Grantor's obligations under the Loan Documents have been
performed and satisfied. The execution and delivery of the Loan Documents, the
performance of the transactions contemplated by the Loan Documents, and the
performance of Grantor's and any guarantor's obligations under the Loan
Documents, have been duly authorized by all necessary action and will not
conflict with or result in a breach of Law or any agreement or other instrument
to which Grantor or any guarantor is bound. The Loan Documents are valid and
binding on Grantor and any guarantor thereof and are enforceable against Grantor
and each such guarantor in accordance with their respective terms, as
applicable.
5.3 Environmental Protection. The Grantor represents and warrants that:
(i) the Grantor has no knowledge of the presence of or of any discharge,
spillage, uncontrolled loss, seepage or filtration of oil, petroleum or chemical
liquids or solids, liquid or gaseous products or any hazardous waste or
hazardous substance (the "Hazard"), as those terms are used in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C
ss.ss.9601 et seq., as amended by the Superfund Amendments and Reauthorization
Act of 1986; the Resource Conservation and Recovery Act of 1976. (the Solid
Waste Disposal Act or RCRA), 42 U.S.C. ss.ss.6901 et seq., as amended; the Toxic
Substance Control Act (TSCA) 15 U.S.C. ss.ss.2601 et seq., or in any other
federal, state or local law governing hazardous substances, as such laws may be
amended from time to time, (collectively, the "Act"), at, upon, under or within
the Property; and (ii) the Grantor has not caused or permitted to occur and
shall use its best efforts not to permit to exist, any condition which may cause
or constitute a Hazard at, upon, under or within the Property. The term "Hazard"
includes but is not limited to asbestos, polychlorinated biphenyl (PCBs) and
7
<PAGE>
lead based paints. Notwithstanding the foregoing, the Grantor makes no
representation or warranty under Section 5.3(i) with respect to (a) those items
set forth in the Findings Report Preliminary Environmental Inspections, prepared
by Froehling & Robertson, Inc., dated June 25, 1996, a copy of which has been
delivered to the Beneficiary, (b) discharges made in the normal course of
business pursuant to applicable permits for the benefit of Grantor pursuant to
applicable law, and (c) discharge, spillage, uncontrolled loss, seepage or
filtration of any Hazard which is deminimus and is occurring during the normal
course of business.
5.3.1 The Grantor further represents and warrants that (i)
neither the Grantor nor, to the best of its knowledge, any other party, is or
will be involved in operations upon the Property, which operations could lead to
(a) the imposition of liability on the Grantor or on any other subsequent or
former owner of the Property under the Act; or (b) the creation of a lien on the
Property under the Act or under any similar laws or regulations; and (ii) the
Grantor has not permitted, and will not permit, any tenant or occupant of the
Property to engage in any activity that could impose liability under the Act on
such tenant or occupant, on the Grantor or on any other owner of any of the
Property.
5.3.2 The Grantor has complied, and shall comply, in all
material respects with the requirements of the Act and related regulations and
with all similar laws and regulations and shall notify the Beneficiary
immediately in the event of any Hazard or the discovery of any Hazard at, upon,
under or within the Property. The Grantor shall promptly forward to the
Beneficiary copies of all orders, notices, permits, applications or other
communications and reports in connection with any Hazard or the presence of any
Hazard or any other matters relating to the Act or any similar laws or
regulations, as they may affect the Property.
5.3.3 Promptly upon the written request of the Beneficiary
from time to time, when the Beneficiary has a reasonable basis therefor, the
Grantor shall provide to the Beneficiary, at the Grantor's expense, an
environmental site assessment or environmental audit report, prepared by an
environmental engineering firm acceptable in the reasonable opinion of the
Beneficiary, to assess with a reasonable degree of certainty the presence or
absence of any Hazard and the potential costs in connection with abatement,
cleanup or removal of any Hazard found on, under, at or within the Property.
5.3.4 The Grantor shall defend and indemnify the Beneficiary
and hold the Beneficiary harmless from and against all actual loss, liability,
damage and expense, including reasonable attorneys' fees, suffered or incurred
by the Beneficiary, whether as holder of this Deed of Trust, as mortgagee in
possession, or as successor-in-interest to Grantor by foreclosure deed or deed
in
8
<PAGE>
lieu of foreclosure, under or on account of the Act or any similar laws or
regulations, including the assertion of any lien thereunder: (i) with respect to
any Hazard, or the presence of any Hazard affecting the Property whether or not
the same originates or emanates from the Property, including any loss of value
of the Property as a result of the foregoing; and (ii) with respect to any other
matter affecting the Property within the jurisdiction of the Environmental
Protection Agency, any other federal agency, or any state or local environmental
agency. Provided, however, the Grantor's obligations under this Section shall
not apply to any loss, liability, damage or expense which is attributable to any
Hazard resulting from actions on the part of the Beneficiary, whether as holder
of this Deed of Trust, as mortgagee in possession, or as successor-in-interest
to Grantor by foreclosure deed or deed in lieu of foreclosure, under or on
account of the Act or any similar laws or regulations, including the assertion
of any lien thereunder, or any successor-in-interest to or assignee of the
Beneficiary. The Grantor's obligation under this Section shall arise upon the
discovery of the presence of any Hazard under the Act whether or not the
Environmental Protection Agency, any other federal agency or any state or local
environmental agency has taken or threatened any action in connection with the
presence of any Hazard.
5.3.5 In the event of any Hazard, or the presence of any
hazardous substance affecting the Property, whether or not the same originates
or emanates from the Property or any contiguous real estate, and if the Grantor
shall fail to comply with any of the requirements of the Act or related
regulations or any other environmental law or regulation within the time
established by any regulatory agency, the Beneficiary may at its election, but
without the obligation to do so: (i) give such notices and/or cause such work to
be performed at the Property; and/or (ii) take any and all other actions as the
Beneficiary shall reasonably deem necessary or advisable in order to abate the
Hazard, remove the hazardous substance or cure the Grantor's noncompliance. Any
amounts so paid by the Beneficiary pursuant to this Section, together with
interest thereon at the highest rate of interest permitted under the Promissory
Note from the date of payment by the Beneficiary, shall be immediately due and
payable by the Grantor to the Beneficiary and until paid shall be added to and
become a part of the indebtedness under the Loan Documents and shall be secured
by this Deed of Trust.
5.3.6 The provisions of this Section 5.3 are for the benefit
of the Beneficiary only and cannot be assigned to any other party, whatsoever,
except by assignment of the Note and the Loan Documents by the current
Beneficiary to a successor lender.
9
<PAGE>
ARTICLE VI
COVENANTS, RIGHTS, AND DUTIES OF GRANTOR GENERALLY
6.1 Covenant to Pay Loan and to Perform Obligations under the Terms of
the Loan Documents--The Grantor covenants that it will punctually (a) pay to the
Beneficiary the principal and interest of the Loan and all other costs and
indebtedness secured hereby according to the terms of the Note and other Loan
Documents, and (b) perform and satisfy all other obligations of the Grantor
under the Loan Documents.
6.2 Compliance with Laws--The Grantor shall comply with all Laws a
breach of which would materially and adversely affect (a) the financial
condition of the Grantor, (b) the ability to use buildings and other
improvements on the Land for the purposes for which they were designed or
intended, (c) the value or status of the Trust Property, or (d) the value or
status of the Trustee's title to the Trust Property.
6.3 Notice with Respect to Ownership and Control of Grantor--
6.3.1 If Grantor is a corporation, it will at all times
promptly notify Beneficiary of all changes in the ownership of the stock of
Grantor. At any time Beneficiary may request, Grantor shall furnish a complete
statement, sworn to under penalty of perjury by an officer of Grantor, setting
forth all of the stockholders, officers, directors and Controlling Parties of
Grantor, and the extent of their respective stock ownership or control. In the
event the Grantor is aware of any other Person having a beneficial interest in
such stock, the statement shall also set forth the name of such Person and the
extent of their interest.
6.3.2 If Grantor is a partnership, it will at all times
promptly notify Beneficiary of all changes in ownership of partnership interests
of Grantor and the ownership interest of the Grantor's general partner. At any
time Beneficiary may request, Grantor shall furnish a complete statement, sworn
to under penalty of perjury by a general partner of Grantor setting forth all of
the partners of Grantor and the extent of their respective partnership interest
or control and the equity holders of the Grantor's general partner and the
extent of their equity interests. In the event any other Person has a beneficial
interest in such partnership or general partnership interests, the statement
shall also set forth the name of such Person and the extent of their interest.
6.4 Statement of Amount Owing and Defenses--Within ten (10) days after
request from the Beneficiary, the Grantor shall certify, in writing, the amount
of principal and interest then owing on the Loan and whether the Grantor has any
defenses or offsets with
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respect to the Loan.
6.5 Changes in Applicable Tax Laws--In the event (a) any Law is
hereafter enacted which imposes a Tax upon the Loan, any of the Loan Documents,
or the transactions evidenced or contemplated by any of the Loan Documents, or
(b) any Law now in force governing the taxation of deeds of trust, debts secured
by deeds of trust, or the manner of collecting any such Tax shall be changed or
modified, in any manner, so as to impose a Tax upon the Loan, any of the Loan
Documents, or the transactions evidenced or contemplated by any of the Loan
Documents, (including, without limitation, a requirement that revenue stamps be
affixed to any or all of the Loan Documents), the Grantor will pay any such Tax
promptly upon notice from Beneficiary that such Tax is due. If the Grantor fails
to make prompt payment, or if any Law either prohibits the Grantor from making
the payment or would penalize the Beneficiary if Grantor makes the payment, then
the failure, prohibition, or penalty shall entitle the Beneficiary, after ninety
(90) days notice and failure of the Grantor to pay off the Loan in full, without
penalty or premium, to exercise all rights hereunder as though an Event of
Default had occurred.
6.6 Further Assurances and Continuation Statements--The Grantor from
time to time will execute, acknowledge, deliver and record, at the Grantor's
sole cost and expense, all further instruments, deeds, conveyances, supplemental
deeds of trust, assignments, financing statements, transfers, and assurances as
in the opinion of the Beneficiary's counsel, reasonably exercised, may be
necessary (a) to preserve, continue, and protect the interest of the Trustee or
the Beneficiary in the Trust Property, (b) to perfect the grant to the Trustee
of every part of the Trust Property, (c) to facilitate the execution of this
trust, (d) to secure the rights and remedies of the Trustee and the Beneficiary
under this Deed of Trust and the other Loan Documents, or (e) to transfer to any
new Trustee or purchaser at a sale hereunder the Trust Property, funds, and
powers now or hereafter held in trust hereunder. The Grantor, at the request of
the Beneficiary, shall promptly execute any continuation statements required by
the Uniform Commercial Code to maintain the lien on any portion of the Trust
Property subject to the Uniform Commercial Code.
6.7 Expenses--The Grantor shall reimburse the Beneficiary and the
Trustee for any sums, including reasonable attorney's fees and expenses,
incurred or expended by them (a) in connection with any action or proceeding
reasonably necessary or prudent to sustain the lien, security interest,
priority, or validity of any Loan Document, (b) to protect or enforce any of
their rights under the Loan Documents, (c) for any title examination relating to
the title to the Trust Property undertaken after a Default, or (d) for any other
purpose contemplated by the Loan Documents. The Grantor shall, upon demand, pay
all such sums accruing from the time the
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expense is paid and notice thereof is received if such expense is not paid by
the Grantor within seven (7) days of receipt of such notice. All such sums so
expended by the Beneficiary and/or the Trustee shall be secured by this Deed of
Trust. In any action or proceeding to foreclose this Deed of Trust or to recover
or collect the Loan, the provisions of Law allowing the recovery of costs,
disbursements, and allowances shall be in addition to the rights given by this
Section 6.7.
ARTICLE VII
RIGHTS AND DUTIES OF GRANTOR WITH RESPECT TO
MANAGEMENT AND USE OF THE TRUST PROPERTY
7.1 Control by the Grantor--Until the happening of an Event of Default,
the Grantor shall have the right to possess and enjoy the Trust Property and,
except as prohibited by the Loan Documents, to receive the Rents.
7.2 Intentionally Omitted.
7.3 Intentionally Omitted.
7.4 Leases--The Grantor will comply with its obligations under all
Leases. The Grantor, within ten (10) days after written request from the
Beneficiary, shall deliver to the Beneficiary a detailed list and description of
all Leases with copies thereof and such additional information as may be
reasonably requested by the Beneficiary. Grantor will transfer and assign to the
Beneficiary, in a form satisfactory to the Beneficiary, Grantor's interest in
any Lease as further security for the obligations secured hereby. No such
assignment shall impose upon the Beneficiary any liability to perform the
Grantor's obligations under any Lease. The Beneficiary reserves the right, at
its request, to review and approve any and all Leases of any portion of the
Trust Property.
7.5 Enforcement of Leases, Amendment, Waiver, etc.--The Grantor will
enforce all Leases according to their terms. The Grantor shall not (a) cancel or
terminate, or consent to or accept any cancellation, termination, or surrender
of any Lease, or permit any event within the Grantor's control to occur which
would terminate or cancel any Lease, (b) amend or modify any Lease, (c) waive
any default under or breach of any Lease, (d) consent to or permit any
prepayment or discount of rent or advance rent under any Lease, except for the
current month or following month, or (e) give any consent, waiver, or approval
under any Lease or take any other action with respect to any Lease which may
impair the value of the Beneficiary's interest in the Trust Property or the
position or interest of the Trustee with respect to the Trust Property. Grantor
shall comply with and perform all duties and obligations
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imposed upon or assumed by it in all Leases.
7.6 Subordination and Attornment--In the event of a sale pursuant to
this Deed of Trust, each Tenant shall, upon request, attorn to and acknowledge
any purchaser at foreclosure or grantee in lieu of foreclosure as landlord and
the purchaser will not be required to credit any Tenant under any Lease with
rent paid more than one (1) month in advance. All Leases shall be subject and
subordinate to the Loan Documents (including any modifications and amendments)
and any additional financing or refinancing of the Trust Property by or for the
Beneficiary.
7.7 Restriction on Assignment of Rents--The Grantor shall not assign
the Rents arising from the Trust Property or any part thereof or any interest
therein without the prior written consent of the Beneficiary. Any attempted
assignment, pledge, hypothecation, or grant without such consent shall be null
and void.
7.8 Alterations and Additional Improvements--The Grantor shall make no
structural alterations or material nonstructural alterations to the Trust
Property or construct any additional improvements on the Land, without the prior
written consent of the Beneficiary, which consent shall not be unreasonably
delayed or withheld. All alterations or improvements consented to by Beneficiary
shall be completed and paid for by the Grantor within a reasonable time. All
such alterations or improvements shall be erected (a) in a good and workmanlike
manner strictly in accordance with all applicable Law, (b) entirely on the Land,
(c) without encroaching upon any easement, right of way, or land of others, (d)
so as not to violate any applicable use, height, set-back or other applicable
restriction, and (e) without permitting any mechanic's lien to attach to the
Trust Property which is not being contested as permitted in Section 7.13. All
alterations, additions, and new improvements to the Trust Property shall
automatically be a part of the Trust Property and shall be subject to this Deed
of Trust.
7.9 Restrictions on Sale and Transfer of the Trust Property--It shall
be a Default if Grantor shall permit the Trust Property or the corporate
interests in the Grantor, or any part or portion thereof or any interest
therein, to be transferred (whether by voluntary or involuntary conveyance,
merger, operation of law, or otherwise) without the prior written consent of the
Beneficiary which the Beneficiary shall not be obligated to give. Any transferee
of the Trust Property or interest in the Grantor or any part or portion thereof
or any interest therein, by virtue of its acceptance of the transfer, shall
(without in any way affecting Grantor's liability under the Loan Documents) be
conclusively deemed to have agreed to assume primary personal liability for the
performance of the Grantor's obligations under the Loan Documents. This section
shall not apply to any Taking, any disposition
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permitted by Section 7.12, any Lease entered into in compliance with Section
7.4, or any disposition by the Trustee or the Beneficiary by foreclosure
hereunder or as otherwise permitted by the Loan Documents.
7.10 Restriction on Encumbrances--It shall be a Default if Grantor
shall allow any Encumbrances, including secondary and supplemental financing
liens, on the Trust Property except the Permitted Encumbrances. The Grantor
shall give the Beneficiary prompt notice of any defaults in or under any
Permitted Encumbrances and any notice of foreclosure or threat of foreclosure.
The Grantor shall comply with its obligations under all Permitted Encumbrances.
The Beneficiary may, at its election, satisfy any Encumbrance (other than an
Permitted Encumbrance not then in default), and the Grantor shall, on demand,
reimburse the Beneficiary for any sums advanced for such satisfaction accruing
from the date of satisfaction, which sums shall be secured hereby.
7.11 Maintenance, Waste, Repair and Inspection--Grantor shall (a) keep
and maintain the Trust Property in good order, condition, and repair and make
all equipment replacements and repairs necessary to insure that the security for
the Loan is not impaired, (b) not commit or suffer any waste of the Trust
Property, (c) promptly protect and conserve any portion of the Trust Property
remaining after any damage to, or partial destruction of, the Trust Property,
provided any insurance proceeds which may have been received by the Beneficiary
as a result of such damage or destruction of the Trust Property are given to the
Grantor for such purposes, (d) promptly repair, restore, replace or rebuild any
portion of the Trust Property which is damaged or destroyed, provided any
insurance proceeds which may have been received by the Beneficiary as a result
of such damage or destruction of the Trust Property are given to the Grantor for
such purposes, (e) promptly restore the balance of the Trust Property remaining
after any Taking, provided any insurance proceeds which may have been received
by the Beneficiary as a result of such damage or destruction of the Trust
Property are given to the Grantor for such purposes, (f) permit the Beneficiary
or its designee to inspect the Trust Property at all reasonable times, and (g)
not make any material change in the grade of the Trust Property or permit any
excavation of or on the Trust Property.
7.12 Removal and Replacement of Equipment and Improvements--No part of
the Trust Property, except supplies consumed in the normal course of business
and operations, shall be removed from the Land, demolished, or materially
altered without the prior written consent of the Beneficiary, which shall not be
unreasonably withheld. Prior to or simultaneously with their removal, such
fixtures and equipment shall be replaced with fixtures or equipment of equal or
greater value. The replacement fixtures or equipment shall be free of all
Encumbrances, shall automatically be subject to the lien and security interest
of this Deed of Trust, and shall
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automatically be subject to the granting clauses hereof. Upon the sale of any
removed fixtures and equipment which are not replaced, the proceeds shall be
applied as a prepayment of the Loan, to be applied to installments in inverse
order of maturity. All sales shall be conducted in a commercially reasonable
manner with a bona fide effort to obtain a sale price of at least market value.
7.13 Taxes and Permitted Contests--The Grantor will pay and discharge,
as the same shall become due and payable, (i) all its obligations and
liabilities, including all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons which, in any such
case, if unpaid, might by law give rise to a lien upon the Trust Property, and
(ii) all lawful Taxes, assessments and charges or levies made upon it or its
property or assets, by any Government except where any of the items in clause
(i) or (ii) of this Section 7.13 may be diligently contested in good faith by
appropriate proceedings, and the Grantor shall have set aside on its books, if
required under generally accepted accounting principles in the United States,
appropriate reserves for the accrual of any such items.
7.14 Restrictive Covenants, Zoning, etc.--No restrictive covenant,
zoning change, or other restriction affecting the Trust Property may be entered
into, requested by or consented to by Grantor without the prior written consent
of the Beneficiary which consent shall not be unreasonably withheld or delayed.
7.15 Preservation of Appurtenances--The Grantor will do all things
necessary to preserve intact and unimpaired, all easements, appurtenances, and
other interests and rights in favor of, or constituting any portion of, the
Trust Property.
7.16 Real Estate Tax Service--Beneficiary may require the Grantor, at
its sole cost and expense, to cause to be furnished to Beneficiary a prepaid
real estate tax service contract to annually check and report on the status of
real estate taxes for the Trust Property throughout the term of the Loan.
7.17. Escrow. If required by the Beneficiary, the Grantor shall deposit
with the Beneficiary, on the tenth (10) day of each month during the term of
this Deed of Trust, an additional amount as determined by the Beneficiary in its
reasonable discretion, to sufficiently discharge the obligations of the Grantor
for: (a) the payment of Taxes, assessments, levies, fees, rents, and other
public charges imposed upon or assessed against the Trust Property or the
revenues, rents, issues, income, or profits thereof, as provided in Section
7.13; (b) the payment of premiums for fire, casualty, and other hazard insurance
and flood insurance, as provided by Sections 8.1, 8.2, 8.3 and 8.4, for the
purpose of
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providing a fund to assure the payment of the aforesaid expenses when and as
they come due; and (c) if applicable, any owner's association fee, condominium
association fee, or any other similar fee, cost, assessment or charge. Such
amounts shall be applied to the payment of the obligations in respect to which
such amounts were deposited or, at the option of the Beneficiary, to the payment
of such obligations in such order of priority as the Beneficiary shall
determine, on or before the date they become delinquent. If the Beneficiary
determines, prior to the due date of any of the aforementioned obligations, that
the amount then on deposit shall be insufficient for the payment of such
obligations in full, the Grantor, within ten (10) days after demand, shall
deposit the amount of the deficiency with the Beneficiary. The Beneficiary may
also pay any amount as provided herein and add the amount to the indebtedness
hereby secured.
Any amounts deposited with the Beneficiary or the Trustees pursuant to
this Section are hereby pledged as additional security for the payment of the
Loan and other obligations under the Loan Documents (collectively, the "Loan
Obligations") and the Grantor does hereby grant a security interest to the
Beneficiary in such amounts. Any amounts deposited with the Beneficiary pursuant
to the provisions of this Section shall not be, nor be deemed to be, trust
funds, nor shall they operate to curtail or reduce the Loan Obligations. Such
funds so deposited with the Beneficiary or the Trustee pursuant to this Section
shall be maintained in an escrow account with the Beneficiary, without interest,
separate and apart from the Grantor's other funds. The Beneficiary shall not be
liable for any failure to apply to the payment of the obligations in respect to
which such amounts were deposited unless the Grantor, while no Event of Default
exists hereunder, shall have requested the Beneficiary in writing to make
application of such deposits then on hand to the payment of particular escrow
items, which request shall be accompanied by the bills therefor. The Beneficiary
may, in its sole discretion, at any time and from time to time, waive the
requirements of this Section 7.17.
Notwithstanding any other provision of this Section 7.17, the Grantor
shall not be required to make any payment required under this Section 7.17 if
such payment is required to be paid to or on behalf of any beneficiary by any
deed of trust encumbering the Trust Property (each a "Senior Trust") as of the
date hereof.
ARTICLE VIII
INSURANCE AND CONDEMNATION
8.1 Casualty Insurance and Allocation in Event of Loss-- The Grantor
shall keep any improvements constructed on the Land and personalty thereon
insured against loss by fire casualty, and such other hazards and contingencies,
including but not limited to
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lightning, hail, windstorm, explosion, malicious mischief and vandalism, as are
covered by extended coverage policies in effect in the area where the Land is
located and such other risks as may be reasonably specified by the Beneficiary
from time to time, all for the benefit of the Beneficiary. Coverage for the
peril of sprinkler leakage must be included as a covered cause of loss for
buildings equipped with automatic sprinkler systems designed to discharge water,
or a chemical gas, or any other extinguishing agents. Beneficiary may require
boiler and machinery insurance to cover sudden and accidental breakdown of
specific types of equipment, including for example, boilers, heating and
ventilating systems, refrigeration equipment, air conditioning units, pumps,
compressors, motors, blowers, generators and transformers. All insurance shall
be written on policy forms and by insurance companies licensed and lawfully
operating in the jurisdiction in which the Real Property is located with a
rating of "A-" or better and Class IX or better according to A.M. Best Co.
Insurance Guide and reasonably satisfactory to the Beneficiary or the
beneficiary of any Senior Trust, and with respect to casualty insurance, shall
be in an amount equal or greater to the full replacement value of any
improvements and personalty upon the Land, as determined by an appraisal of such
improvements and personalty, acceptable to the Beneficiary and paid for by the
Grantor, but in any event all insurance policies shall be in an amount
sufficient to prevent co-insurance liability, shall name the Beneficiary as a
mortgagee and loss payee, as its interest may appear, shall state that the
insurance coverage shall not be affected by any act or neglect of the Grantor or
owner of the insured Trust Property and shall be endorsed such that the losses
thereunder shall be payable to the Beneficiary, as its interest may appear, and
not to the Grantor and the Beneficiary or the Trustee, jointly. The policy or
policies of insurance shall include a replacement cost or restoration
endorsement and a waiver of subrogation endorsement reasonably satisfactory to
the Beneficiary. Originals or certified true copies of the policy or policies of
such insurance, any endorsements thereto and all renewals thereof shall be
manually signed and delivered to and retained by the Beneficiary, and the
Grantor shall provide the Beneficiary with receipts evidencing the payment of
all premiums due on such policies and the renewals thereof not less than thirty
(30) days prior to the renewal or expiration date thereof. All policies required
hereby shall provide and shall bear an endorsement that they shall not be
canceled, terminated, endorsed or amended without not less than thirty (30) days
prior written notice to the Beneficiary. The Grantor shall give the Beneficiary
prompt notice of any loss covered by such insurance, and, the Beneficiary shall
have the right to adjust and compromise such loss, to collect, receive and
receipt the proceeds of insurance for such loss and to endorse the Grantor's
name upon any check in payment thereof and, for such purposes the Grantor hereby
constitutes and appoints the Beneficiary as its attorney in fact with the power
of attorney granted hereby deemed to be coupled
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with an interest and irrevocable. All monies received as payment for a loss
covered by an insurance policy shall be paid over to the Beneficiary to be
applied, at the option of the Beneficiary, either to the prepayment of the Loan
or to the payment of other charges or expenses actually incurred by the Grantor
in the restoration, reconstruction, repair, renovation or replacement of the
affected portion of the Trust Property, provided that any election by the
Beneficiary to apply insurance proceeds to the cost of restoration,
reconstruction, renovation, repair or replacement shall be subject to
satisfaction of the following conditions: (i) such restoration, renovation,
repair or rebuilding shall, in the judgment of the Beneficiary, attain
completion within the term of the Loan; (ii) such insurance proceeds, together
with undisbursed Loan proceeds and any amounts the Grantor deposits with the
Beneficiary for such purpose are sufficient to fully restore, renovate, repair
or rebuild the damaged or destroyed Trust Property; and (iii) no event or
circumstance has occurred and is existing which with the giving of notice, the
passing of time or both would constitute an Event of Default under this Deed of
Trust or the other Loan Documents, otherwise, such proceeds shall be applied in
payment of the Loan. The Beneficiary reserves the right to require the escrow of
insurance premiums during the term of the Loan.
8.2 Liability Insurance--The Grantor will maintain liability and
indemnity insurance with respect to the Trust Property in an amount not less
than $2,000,000 and with such companies, and subject to the same terms and
conditions specified in Section 8.1 above (excepting that such insurance shall
not have to list Beneficiary as mortgagee and loss payee or state that insurance
coverage shall not be affected by any act or neglect of the Grantor or owner of
the insured property), and as the Beneficiary may reasonably direct and approve.
Evidence of such coverage in the form of a certified copy of the policy or an
insurance certificate must be supplied to Beneficiary.
8.3 Business Interruption Insurance--The Grantor shall also carry and
maintain rental interruption insurance on the Trust Property in the same manner
and under the same conditions as provided in Section 8.1 covering debt service,
real estate taxes and insurance premiums for a period of at least six (6)
months.
8.4 Flood Insurance. In the event that all or any portion of the Real
Property currently or at any time in the future is determined to be located in a
specially designated flood hazard area by the Secretary of Housing and Urban
Development or the Director of the Federal Emergency Management Agency, pursuant
to the provisions of the National Flood Insurance Act of 1968, or the Flood
Disaster Protection Act of 1973, as amended, the Grantor shall obtain and
maintain flood hazard insurance in the full insurable value of the Trust
Property or any portion of the Real Property located within such area, or the
full amount of flood
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insurance available, naming the Beneficiary as loss payee, as its interest may
appear, and complying with all other conditions as provided in Section 8.1
above. The Grantor shall be required to provide flood hazard insurance as
described, unless the Grantor's insurance broker certifies to the Beneficiary in
writing that the Real Property is not in a flood hazard area. The proceeds of
any loss payable under a flood insurance policy shall be applied, at the option
of the Beneficiary, as set forth in Section 8.1 above with respect to casualty
insurance proceeds.
8.5 Condemnation and Allocation of Condemnation Awards--Grantor,
immediately upon obtaining knowledge of the institution of any proceeding for a
Taking, will notify the Beneficiary of such proceedings. The Trustee or the
Beneficiary may participate in any such proceedings, and Grantor will, from time
to time, deliver to the Trustee or the Beneficiary all instruments requested by
them to permit such participation. Any award or payment made as a result of any
Taking shall be paid to the Beneficiary, to be applied by the Beneficiary in
it's sole discretion to restore or repair the Trust Property or to repayment of
the amounts due under the Note and the other Loan Documents, in inverse order of
maturity. The application of any award or payment as a repayment of amounts due
under the Note and the other Loan Documents shall take effect only on the actual
date of the receipt of the payment or award by the Beneficiary. In the event any
payment or award is used to restore the Trust Property, as aforesaid, neither
the Trustee nor the Beneficiary shall be obligated to see to the proper
allocation thereof nor shall any amount so used be deemed a payment of any
indebtedness secured by this Deed of Trust. Payments or awards to be used for
restoration purposes, as aforesaid, shall be held by the Beneficiary and
disbursed under the same terms and conditions as provided for disbursement of
insurance proceeds in Section 8.1.
8.6 Senior Trust--Notwithstanding anything to the contrary in this
Article VIII, all rights of Beneficiary set forth in this Article VIII shall be
limited by the rights of any beneficiary of any Senior Trust, if any.
ARTICLE IX
THE TRUSTEE
9.1 Endorsement and Execution of Documents--Upon the written request of
the Beneficiary, the Trustee may, without liability or notice to the Grantor,
execute, consent to, or join in any instrument or agreement in connection with
or necessary to effectuate the purposes of the Loan Documents. The Grantor
hereby irrevocably designates the Beneficiary as its attorney-in-fact to
execute, acknowledge, and deliver, on the Grantor's behalf and in
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the Grantor's name, all instruments or agreements necessary to implement the
provisions of Section 3.7, contemplated by Section 6.6, or necessary to further
perfect the lien created by this Deed of Trust on the Trust Property. This power
of attorney shall be deemed to be coupled with an interest and shall survive any
disability of the Grantor.
9.2 Substitution of Trustee--The Beneficiary shall at any time have the
irrevocable right to remove the Trustee herein named without notice or cause and
to appoint its successor by an instrument in writing, duly acknowledged, in such
form as to entitle such written instrument to be recorded in Virginia, and in
the event of the death or resignation of the Trustee herein named, the
Beneficiary shall have the right to appoint his successor by such written
instrument, and any Trustee so appointed shall be vested with the title to the
Trust Property hereinbefore described, and shall possess all the powers, duties
and obligations herein conferred on the Trustee in the same manner and to the
same extent as though it were named herein as Trustee.
9.3 Multiple Trustees--Any Trustee, individually, may exercise all
powers granted to two or more Trustees collectively, without the necessity of
the joinder of the other Trustees.
9.4 Terms of Trustee's Acceptance--The Trustee accepts the trust
created by this Deed of Trust upon the following terms and conditions:
9.4.1 The Trustee may exercise any of its powers through
appointment of attorneys-in-fact or agents.
9.4.2 The Trustee shall not be liable for any matter or cause
arising under this Deed of Trust or in connection therewith except by reason of
its own willful misconduct.
9.4.3 The Trustee, after an Event of Default, may select and
employ legal counsel at the expense of Grantor.
9.4.4 The Trustee shall be under no obligation to take any
action upon any Event of Default unless it is furnished security or indemnity,
in form satisfactory to the Trustee, against costs, expenses, and liabilities
which may be incurred by the Trustee.
9.4.5 The Trustee shall have no duty to take any action except
upon written demand of the parties to whom is then owed fifty-one percent (51%)
or more of the then outstanding principal balance of the Note.
9.4.6 The Trustee may resign upon thirty (30) days
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written notice to the Beneficiary.
9.5 Trustee's Reimbursement--The Grantor shall reimburse the Trustee
for all reasonable disbursements and expenses incurred by reason of this Deed of
Trust.
9.6 Save Harmless Clause--The Grantor shall indemnify and save harmless
the Beneficiary and the Trustee, singularly and jointly, from all costs and
expenses, including reasonable attorneys' fees, incurred by them or any of them
by reason of this Deed of Trust, including any Legal Action brought by a third
party or the Grantor to which Beneficiary or the Trustee shall become a party.
Any money so paid or expended by Beneficiary or the Trustee shall be due and
payable upon demand together with interest, if not paid within seven (7) days of
receipt of demand by the Grantor, accruing from the time the expense is paid and
notice thereof is received by the Grantor and shall be secured by this Deed of
Trust.
ARTICLE X
DEFAULT
10.1 Event of Default--The occurrence of any of the following shall
constitute an Event of Default.
10.1.1 Breach of Representations and Warranties--Any
representation or warranty made by the Grantor herein which shall prove to have
been incorrect in any material respect when made or shall be breached.
10.1.2 Insurance Provisions--The failure of Grantor to perform
its obligations set forth in Section 8.1, 8.2, 8.3 or 8.4.
10.1.3 Assignment of Rents--Any attempted assignment by the
Grantor of the whole or any part of the Rents in contravention of Section 7.7.
10.1.4 Prohibited Transfer or Encumbrance--Any transfer or
event in violation of the provisions of Sections 7.9 or 7.10.
10.1.5 Loss of License--The loss of any franchise agreement,
license or permit necessary for the operation, occupancy, or use of the Trust
Property, other than as a result of casualty or condemnation, which loss
continues for a period thirty (30) days after receipt by Grantor (or refusal of
delivery) of written notice given in accordance with the provisions of this Deed
of Trust.
10.1.6 Cross Default. The default by the Grantor or
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by any guarantor of payment or performance of the Grantor under any obligation
or indebtedness to the Beneficiary, whether now existing or hereafter arising,
which default is not cured within any applicable cure or grace period.
10.1.7 Default Under Mortgage--The occurrence of an Event of
Default under (i) the certain Arkansas Mortgage with Power of Sale between
Grantor and Beneficiary dated as of October 1, 1997, or (ii) any Senior Trust or
(iii) the certain Mortgage and Security Agreement dated as of October 1, 1997
from the County of Saratoga Industrial Development Agency and the Grantor to the
Beneficiary.
10.1.8 Default Under Loan Documents--The occurrence of an
Event of Default under any of the other Loan Documents.
10.1.9 Other Defaults--The failure of the Grantor to perform
or observe any of its obligations or covenants under this Deed of Trust not
previously specifically referred to in this Article X, which failure continues
for a period of seven (7) days after receipt by Grantor (or refusal of delivery)
of written notice given in accordance with the provisions of this Deed of Trust
in the event of a monetary default or for a period of thirty (30) days after
receipt by Grantor (or refusal of delivery) of written notice given in
accordance with the provisions of this Deed of Trust in the event of a
non-monetary default. The failure of the Grantor to perform or observe any of
its obligations or covenants constituting an Event of Default under any Loan
Document not previously specifically referred to in this Article X, subject to
any applicable cure period.
10.2 Payment or Performance by Beneficiary--Upon the occurrence of an
Event of Default, Beneficiary may, at its option, make any payments or take any
other actions it deems necessary or desirable to cure the Event of Default or
conserve the Trust Property. The Grantor shall, upon demand, reimburse the
Beneficiary for all sums so advanced or expenses incurred by it, from the date
of advance or payment of the same, which sums shall be secured by this Deed of
Trust. The Trustee or the Beneficiary may enter upon the Trust Property without
prior notice to the Grantor in the event of an emergency (but otherwise after
reasonable prior notice to the Grantor) or judicial process and may take any
action to enforce its rights under this Section 10.2 without liability to the
Grantor, except for its gross negligence or willful misconduct.
10.3 Possession by Beneficiary--Upon the occurrence of an Event of
Default, the Beneficiary may enter upon and take possession of the Trust
Property without notice to the Grantor, judicial process, or the appointment of
a receiver. The Beneficiary may exclude all persons from the Trust Property and
may
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proceed to Operate the Trust Property and receive all Rents. The Beneficiary
shall have the right to Operate the Trust Property and carry on the business of
the Grantor, either in the name of the Grantor or otherwise. The Beneficiary
shall not be liable to the Grantor for taking possession of the Trust Property,
as aforesaid, nor shall Beneficiary be required to make repairs or replacements,
and Beneficiary shall be liable to account only for Rents actually received by
it. All Rents collected by the Beneficiary shall be applied (a) first, to pay
all expenses incurred in taking possession of the Trust Property, (b) second, to
pay costs and expenses to operate the Trust Property, and/or to comply with the
terms of the Loan Documents, including reasonable attorney's fees, (c) third, to
pay all sums secured by the Loan Documents in the order of priority selected by
Beneficiary, and (d) fourth, with the balance, if any, to the Grantor or such
other Person as may be entitled thereto. No assignment of Leases shall impose
upon Trustee or Beneficiary any liability to perform Grantor's obligations under
such Leases.
10.4 Acceleration of the Note--Upon an Event of Default, Beneficiary
may, at its option and without further notice or demand, declare the entire
balance of the Note and all other amounts due under the Loan Documents,
immediately due and payable. Acceleration of maturity, once claimed by the
Beneficiary, may at the option of the Beneficiary, be rescinded by written
acknowledgment to that effect by the Beneficiary, but the tender and acceptance
of partial payments alone shall not in any way affect or rescind such
acceleration of maturity.
10.5 Collection of Rents--Upon the occurrence of an Event of Default
and written demand by the Beneficiary to the Tenants, all Rents shall be payable
directly to the Beneficiary.
10.6 Foreclosure--Except as otherwise specifically provided herein, any
sale of the Trust Property shall be made in accordance with the provisions of
Section 55-59, 55-59.1, 55-59.2, 55-59.3, 55-59.4 and 55-63 of the Code of
Virginia, as amended, or other applicable general local laws of the Commonwealth
of Virginia and/or judicial rules of procedure relating to the foreclosure of
deeds of trust, either by strict foreclosure or foreclosure by sale, or in part
by each such method. Any sale of the Trust Property may be made after
advertising the time, terms and place of sale if permitted by law for three (3)
consecutive days, in a daily newspaper, which is published in, or has a general
circulation in, the county or city wherein the Trust Property is situated. Any
such sale may be made by the payment of cash upon settlement of the sale or upon
such terms, including payment terms, as the Trustees may deem necessary, proper
or advisable, except as specifically limited by applicable law or court rule.
Any such sale may be of the entire Trust Property as the Trustees, in their sole
and absolute discretion, deem necessary, proper, or convenient. The
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Trust Property conveyed hereby shall constitute security for the Loan to the
full extent of the value of the Trust Property without limitation and without
regard to the value upon which any state, city, or county recordation taxes have
been computed and/or paid.
10.6.1 Rights Incident to Sale. The Grantor agrees that the
Beneficiary or the Trustees may, incident to any sale of the Trust Property
under this Deed of Trust, exercise the powers and rights as herein set forth:
(a) Application of Proceeds. Upon the sale of
the Trust Property, the proceeds shall be applied in accordance with Section
55.59.4(3) of the Code of Virginia, as amended.
(b) Payment Before Sale. In the event the amount
due on the principal debt hereby secured and the interest thereon shall be paid
after the commencement of any foreclosure proceeding, including any proceeding
in connection with an assent to decree or power of sale, but before sale of the
Trust Property, the Grantor shall be required to pay all costs and expenses
incident to or resulting from any such foreclosure proceeding, including, but
not limited to the expenses of any advertisement or notice, all court costs, the
counsel fees incurred by the Beneficiary and the Trustee, and a trustees' fee
based on a reasonable hourly rate.
(c) Beneficiary May Bid. At any sale made under
this Deed of Trust, whether made under the power of sale herein granted or under
or by virtue of judicial proceedings, by assent to decree or power of sale, the
Beneficiary, or any wholly-owned subsidiary of the Beneficiary, may bid for and
acquire the Trust Property or any part thereof and in lieu of paying cash
therefor may, if permitted by law, make settlement for the purchase price by
crediting upon the indebtedness of the Grantor secured by this Deed of Trust the
net sales price after deducting therefrom the expenses and costs of the sale and
any other sums which the Beneficiary is authorized to deduct under this Deed of
Trust. Furthermore, in the event the Beneficiary, or any wholly-owned subsidiary
of the Beneficiary, is the successful bidder at any sale made under this Deed of
Trust, the Beneficiary, or any wholly-owned subsidiary of the Beneficiary, if
permitted by law, shall not be required to pay either an initial deposit or any
interest in connection with such sale.
10.6.2 Automatic Acceleration. Should there occur an event
which would, with the giving of notice, the passage of time, or both, constitute
an Event of Default hereunder and if a voluntary or involuntary petition under
the United States Bankruptcy Code thereafter is filed by or against the Grantor
while such event remains uncured, to the extent permitted by law, the entire
principal balance of the Promissory Note then outstanding,
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all accrued interest thereon and all other amounts secured by this Deed of Trust
shall be automatically accelerated and due and payable and the default interest
rate provided for in the Promissory Note shall automatically apply as of the
date of the first occurrence of the event which, with the giving of notice, the
passage of time or both, would constitute an Event of Default, without any
notice, demand or action of any type of the part of the Trustee or Beneficiary.
10.7 Deficiency of Proceeds--If, after a foreclosure sale, a deficiency
exists in the net proceeds of such sale, the Beneficiary shall be entitled to
collect the deficiency from the Grantor and other persons liable therefor.
10.8 Insurance or Condemnation After Deficiency--If the Trust Property
is sold at a foreclosure sale prior to receipt of an insurance or a condemnation
award or payment, the Beneficiary shall receive and apply the proceeds of the
award or payment toward the satisfaction of any deficiency resulting from the
foreclosure sale, whether or not a deficiency judgment is sought, recovered, or
denied.
10.9 Remedies Cumulative--All rights, powers, and remedies of the
Beneficiary or the Trustee provided for in the Loan Documents are cumulative and
concurrent and shall be in addition to and not exclusive of any appropriate
legal or equitable remedy provided by Law or contract. Exercise of any right,
power, or remedy shall not preclude the simultaneous or subsequent exercise of
any other by the Beneficiary or the Trustee.
10.10 Rights under the Uniform Commercial Code--Upon the occurrence of
an Event of Default, the Beneficiary may, at its option, proceed against any
portion of the Trust Property which consists of personal property in accordance
with Beneficiary's rights and remedies under the Uniform Commercial Code. The
Grantor shall, upon request of Beneficiary, assemble and make available to the
Beneficiary those portions of the Trust Property which consist of personal
property at a place to be designated by the Beneficiary and the Beneficiary may
exercise all the rights and remedies of a secured party under the Uniform
Commercial Code. Any notices required by the Uniform Commercial Code shall be
deemed reasonable if mailed certified mail, return receipt requested, postage
prepaid, by the Beneficiary to the Grantor at least five (5) days prior to the
event as to which notice is given.
10.11 Incorporation of Statutory Provisions--Except as otherwise
expressly provided herein, this Deed of Trust shall be construed to impose and
confer upon the parties hereto, and the Beneficiary hereunder, all duties,
rights and obligations prescribed in Section 55-59 and Section 55-59.1 through
55-59.4 of the Code of Virginia (1950), as amended, and in effect as of the
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date of acknowledgment hereof, and further to incorporate herein the following
provisions by short form references below, of Section 55-60 of the Code of
Virginia (1950), as amended:
Exemptions waived.
Subject to all (call) upon default.
Renewal, extension or reinstatement not permitted.
Any Trustee may act.
10.12 Trustee's Bond--The Grantor waives any right to require the
person authorized to make the sale to post a bond in any foreclosure proceeding.
10.13 Appointment of a Receiver--Upon the occurrence of an Event of
Default, the Beneficiary shall be entitled without giving notice to the Grantor
(the Grantor hereby waiving any requirement of such notice) to the immediate
appointment of a receiver for the Trust Property, without regard to the value of
the Trust Property or the solvency of any person liable for payment of the
amounts due under the Loan Documents.
ARTICLE XI
MISCELLANEOUS
11.1 Waivers--No term of any Loan Document shall be deemed waived
unless the waiver shall be in writing and signed by the parties making the
waiver. Any failure by the Beneficiary to insist upon the Grantor's strict
performance of any of the terms of the Loan Documents shall not be deemed or
construed as a waiver of those or any other terms. Any delay in exercising or
enforcing any rights with respect to a Default or an Event or Default shall not
bar the Beneficiary from exercising any rights under the Loan Documents, or at
law or in equity.
<PAGE>
11.2 Consents--
11.2.1 The Beneficiary may (a) release any person liable under
the Loan Documents, (b) release any part of the security, (c) extend the time of
payment of the Loan, and/or (d) modify the terms of the Loan Documents,
regardless of consideration and without notice to or consent by the holder of
any subordinate lien on the Trust Property. No release, extension or
modification of the security held under the Loan Documents shall impair or
affect the lien of this Deed of Trust or the priority of such lien over any
subordinate lien.
11.2.2 Regardless of whether a Person has been given
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notice or has given its prior consent, such Person shall not be relieved of any
obligation under any Loan Documents by reason of (a) the failure of the
Beneficiary, the Trustee, or any other Person to take any action, foreclose, or
otherwise enforce any provision of the Loan Documents, (b) the release of any
other Person liable under any Loan Document, (c) the release of any portion of
the security under the Loan Documents, or (d) any agreement or stipulation
between any subsequent owners of the Trust Property and Beneficiary extending
the time of payment or modifying the terms of any Loan Document.
11.3 Headings--All Article and Section headings are for convenience
only and shall not be interpreted to enlarge or restrict the provisions of this
Deed of Trust.
11.4 Notices--All notices shall be sent to the respective addresses of
the parties as follows:
If to the Beneficiary or Trustee:
KEYBANK NATIONAL ASSOCIATION
66 South Pearl Street
Albany, New York 12207
Attention: Corporate Banking Division
With a copy to:
Kevin J. Kelley
CRANE, KELLEY, GREENE AND PARENTE
90 State Street
Albany, New York 12207
If to the Grantor:
H. Norman Spurlock
P.O. Box 8
Route 460 East
Waverly, Virginia 23890
With a copy to:
c/o William L. Pitman
Williams, Mullen, Christian & Dobbins
1021 E. Cary Street
P.O. Box 1320
Richmond, Virginia 23210
Any notice or demand required or permitted in connection with this Deed
of Trust shall be in writing and made by in person delivery or registered or
certified mail, return receipt requested,
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postage prepaid, addressed to the appropriate party at the appropriate address
set forth below or to such other address as may be hereafter specified by the
party entitled to notice by at least ten (10) days' prior written notice, and
shall be considered given as of the date of delivery, in the case of in person
delivery, or mailing, in the case of registered or certified mail.
11.5 Binding Effect--No transfer of any portion of the Trust Property
or any interest therein shall relieve any transferor of its obligations under
the Loan Documents. No transferor of any obligation under any Loan Document
shall be relieved of its obligations by any modification of any Loan Document
subsequent to the transfer.
11.6 Amendment--No Loan Document may be modified except in writing
signed by (a) the Beneficiary and (b) the Grantor.
11.7 Severability--In the event any provision of this Deed of Trust
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof.
11.8 Notices from Governmental Authorities Affecting The Trust
Property--Any notice from any governmental or quasi-governmental authority or
corporation with respect to the Trust Property sent to or known by the Grantor
shall be promptly transmitted to the Beneficiary.
11.9 Applicable Law--This Deed of Trust and Assignment of Leases shall
be governed by the Laws of the State of Virginia.
11.10 Time of the Essence--Time is of the essence with respect to the
Loan Documents.
11.11 Effect of Payments--Any payment or other performance made in
accordance with the Loan Documents by any Person other than Grantor shall not
entitle such Person to any right of subrogation under the Loan Documents, unless
expressly consented to in writing by the Beneficiary.
11.12 Word Forms--The use of any gender, tense, or conjugation herein
shall be applicable to all genders, tenses and conjugations. The use of the
singular shall include the plural and the plural shall include the singular. For
example, whenever the term "Grantor" is used herein, the term shall refer to
each party constituting the Grantor jointly and severally and individually and
collectively.
11.13 WAIVER OF JURY TRIAL--THE GRANTOR WAIVES THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED
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TO, THE LOAN OR THIS DEED OF TRUST. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY THE GRANTOR AND THE GRANTOR ACKNOWLEDGES THAT EXCEPT FOR
BENEFICIARY'S AND TRUSTEE'S AGREEMENT TO LIKEWISE WAIVE THEIR RIGHTS TO A TRIAL
BY JURY NEITHER THE BENEFICIARY, THE TRUSTEE NOR ANY PERSON ACTING ON THEIR
BEHALF HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY
JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE GRANTOR FURTHER
ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE
REPRESENTED) IN THE SIGNING OF THIS DEED OF TRUST NOTE AND ALL OTHER LOAN
DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL. THE GRANTOR FURTHER ACKNOWLEDGES THAT IT HAS READ AND
UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION AND AS
EVIDENCE OF THIS FACT SIGNS THIS DEED OF TRUST BELOW.
11.14 Conflict Between This Instrument and Reimbursement Agreement--To
the extent a conflict exists between the provisions of this instrument and the
Reimbursement Agreement, the provisions of the Reimbursement Agreement shall
control, excepting conflicts arising between the definition of capitalized terms
occurring in both this instrument and the Reimbursement Agreement, in which case
this instrument shall control.
SIGNATURES APPEAR ON NEXT PAGE
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WITNESS the execution hereof by the Grantor and the affixing of the
Grantor's seal.
GRANTOR:
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
-------------------------------------
Name: Phillip S. Sumpter
-----------------------------------
Its: Exec. Vice President
------------------------------------
[SEAL]
COMMONWEALTH OF VIRGINIA )
) to-wit:
COUNTY OF SUSSEX )
I hereby certify that on this 7th day of November, 1997, came Phillip
S. Sumpter, as Exec Vice President of SPURLOCK ADHESIVES, Inc., a Virginia
corporation, acknowledged the execution of this Deed of Trust on behalf of the
corporation.
/s/
-----------------------------------
Notary Public
(Notarial Seal)
My Commission Expires: 11/30/00.
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Exhibit A
All that certain lot, piece or parcel of land lying and being situate in Waverly
Magisterial District, Sussex County, Virginia, and fronting 1078.63 feet, more
or less, on the southwest side of Route U.S. 460, containing 10.00 acres, as
shown on that certain plat of survey entitled "MAP SHOWING A PARCEL OF LAND
SITUATED WAVERLY DISTRICT SUSSEX COUNTY, VIRGINIA OWNED BY AND SURVEYED FOR
HAROLD N. & DAPHNE R. SPURLOCK", made by Irving H. Pritchett, III, C.L.S., dated
October 27, 1987, a copy of which said survey is attached to deed in Deed Book
132, page 211 and recorded in Plat Book 18, page 122, and to which reference is
made for a more particular description of the property herein conveyed, together
with any appurtenances thereunto appertaining.
Being the same real estate conveyed to Spurlock Adhesives, Inc., a Virginia
corporation, by deed from Harold N. Spurlock and Daphne R. Spurlock, dated July
21, 1992, recorded August 13, 1992, Clerk's Office, Circuit Court, Sussex
County, Virginia, Deed Book 132, page 211.
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Exhibit B
1. Easement granted Chesapeake and Potomac Telephone Company dated October 27,
1967 recorded in Deed Book 70, Page 183, grants easement to place telephone
apparatus cabinet and right of way adjacent to Route 460.
Easement includes right of access and the right to trim trees and to
remove obstructions.
2. Deed in Deed Book 24, page 273 contains reference to an unrecorded easement
to Postal Telegraph Cable Company. A plat recorded with deed into Wright
Chemical Corporation in Deed Book 72, page 616 locates said easement along
southern parcel line.
Easement includes right of access and the right to trim trees and to
remove obstructions.
3. Easement granted County of Sussex dated July 21, 1997, recorded in Deed
Book 156, page 478, which grants a 20' easement for sanitary sewer
and/or a water distribution system and to operate and maintain all such
pipes, improvements, conduits, manholes, equipment, accessories,
sensors, and appurtenances desirable in connection therewith. Easement
dedication includes the right to make use of adjoining land for
construction and maintenance of public facilities within the boundaries
of said easements Easement includes right of access and right to trim
trees and to remove obstructions.
4. Deed of Trust from Spurlock Industries, Inc., a Virginia corporation,
to Otto W. Konrad and Bruce H. Matson, Trustee(s), dated July 11, 1996,
recorded July 15, 1996, Deed Book 150, page 626, to secure the original
principal sum of $3,639,000.00, as corrected by Deed of Correction of
Deed of Trust dated October 1st, 1997 and recorded immediately prior
hereto.
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THIS INSTRUMENT PREPARED BY:
DONALD M. SPEARS, Attorney At Law, ABA #75119
ARKANSAS MORTGAGE
WITH POWER OF SALE
KNOW ALL MEN BY THESE PRESENTS:
That this Arkansas Mortgage With Power of Sale (hereinafter referred to
as MORTGAGE) made and entered into as of the 1st day of October, 1997 by
SPURLOCK ADHESIVES, INC., a Virginia Corporation located in Waverly, Virginia
and whose principal place of business in Arkansas is located in Hot Spring
County, Arkansas (hereinafter referred to as BORROWER), in favor of KEYBANK
NATIONAL ASSOCIATION (hereinafter referred to as LENDER).
WITNESSETH:
That BORROWER, for valuable consideration, does hereby grant, bargain,
sell, convey and deliver unto LENDER and unto its successors and assigns, the
real property in Hot Spring County, Arkansas and described as follows, to wit
(hereinafter referred to as REAL ESTATE):
THE SE1/4 OF THE NE1/4 AND ALSO ALL OF THE SW1/4 OF THE NE1/4 EAST OF
THE MISSOURI PACIFIC RAILROAD, ALL IN SECTION 16, TOWNSHIP 4 SOUTH,
RANGE 16 WEST, HOT SPRING COUNTY, ARKANSAS
(A) Together with all buildings and improvements now or at any time
hereafter located on any land hereinabove described, together with all of the
following equipment now or at any time hereafter located in any such building
regardless of method of annexation or removability, including but not limited
to, all
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electrical equipment including lighting equipment, refrigeration and heating
equipment, ceiling fans, attic and window fans, motors and all other electrical
equipment except items attached merely by plugging in wall sockets; all
furnaces, heaters, radiators and all other heating equipment; all bathtub,
toilets, sinks, basins, pipes and other plumbing equipment; all screens,
awnings, and window shades; permanent floor coverings; all engines and
elevators.
(B) BORROWER also pledges any and all mineral rights related to the
REAL ESTATE and any and all profits and income accruing in regard to any mineral
rights related to the REAL ESTATE that may be owned by it.
(C) In addition to pledging the properties as hereinbefore mentioned,
BORROWER also pledges any and all profits, rents and income accruing in
connection with said properties including, but not limited to, insurance,
proceeds and condemnation awards, and all ledgers, books or accounts and records
relating thereto. However, the right is reserved to the BORROWER to collect the
profits, rents and income as the same mature and become due and payable, but in
the event of default as to any of the covenants herein contained, then at its
option the LENDER shall have the right, without notice, to take over said
properties, manage same, rent same and collect the rent thereon, with the net
income so collected being applied to the indebtedness secured by this MORTGAGE.
TO HAVE AND TO HOLD the aforesaid property together with all the
hereditament and appurtenances thereunto belonging or in any wise appertaining,
unto same unto the said LENDER, its successors and assigns forever.
Except for and specifically excluding the aforesaid mineral
2
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rights, the aforesaid property is hereinafter referred to as the PROPERTY.
And BORROWER covenants with LENDER, its successors and assigns, that
BORROWER will forever warrant and defend the title to the PROPERTY against any
and all lawful claims whatever.
PROVIDED, however, the foregoing conveyance is given as a MORTGAGE for
the purpose of securing:
(a) The payment of (i) a promissory note dated as of October 10, 1997
(the "Term Loan Note") evidencing a loan in the sum of One Million Five Hundred
Thousand Dollars ($1,500,000) and (ii) the Borrower's obligations to the Lender
under a letter of credit reimbursement agreement by and between Borrower and
Lender and dated as of October 1, 1997 (the "Reimbursement Agreement" and
collectively with the Term Loan Note, the "Note") in a maximum principal amount
of Six Million Dollars ($6,000,000) both of which are incorporated herein by
reference (hereinafter referred to as the LOAN), and all successive extensions
and renewals of the indebtedness represented thereby, evidencing an indebtedness
being due and payable as to principal and interest as follows:
Payable according to the terms of the Term Loan Note and the
Reimbursement Agreement executed in connection with the REAL ESTATE
(b) and the repayment to the LENDER of the indebtedness secured hereby
of all reimbursable expense at any time accruing to such LENDER under the
provisions hereof; and
(c) The payment of all future and additional indebtedness, direct or
indirect, created after the date of this MORTGAGE, which may be owing by
BORROWER (or by any of the persons herein
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designated under the term "BORROWER") to the LENDER at any time prior to the
payment in full with interest of the indebtedness or the foreclosure of this
MORTGAGE therefore (the event occurring first to be controlling); such
additional indebtedness to be secured hereby regardless of whether it shall be
predicated upon future loans or advances hereafter made by the LENDER, or
obligations hereafter acquired by such LENDER, through assignment or subrogation
or otherwise, or shall represent indirect obligations (created after the date of
this MORTGAGE), based upon any endorsements, guaranties or suretyship; and it is
agreed that this MORTGAGE shall stand as security for all such future and
additional indebtedness, whether it be incurred for any business purpose that
was related or wholly unrelated to the purpose of the original loan, or whether
it was incurred for some personal or non-business purpose, or for any other
purpose related or unrelated, or similar or dissimilar, to the purpose of the
original loan.
(d) NOTWITHSTANDING ANY AMOUNT OTHERWISE DUE BENEFICIARY PURSUANT TO
THE TERMS OF THE NOTE, THE MAXIMUM PRINCIPAL INDEBTEDNESS SECURED HEREBY IS TWO
MILLION DOLLARS ($2,000,000).
(1) The BORROWER Agrees as follows:
(a.1) The BORROWER covenants and warrants that the BORROWER is
seized of the PROPERTY in fee simple and that it has the right and authority to
convey the PROPERTY in fee simple; that the same are free and clear of all
ENCUMBRANCES, as hereinafter defined, except for PERMITTED ENCUMBRANCES, as
hereinafter defined; that BORROWER warrants generally title to the PROPERTY
against claims of all persons whomsoever; and that it will execute such further
assurances as may be requested by the LENDER.
(a.2) The BORROWER is in good standing under the laws of the
State of Arkansas, and will maintain its good standing and
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existence until all of BORROWER's obligations under this MORTGAGE, the NOTE, the
VIRGINIA DEED OF TRUST, as hereinafter defined, and any and all other
certificates, opinions, assignments and documents executed in connection
herewith or therewith, and all current and future supplements, amendments, and
attachments thereto (hereinafter referred to as the LOAN DOCUMENTS) have been
performed and satisfied. The execution and delivery of the LOAN DOCUMENTS, the
performance of the transactions contemplated by the LOAN DOCUMENTS, and the
performance of BORROWER's and any guarantor's obligations under the LOAN
DOCUMENTS, have been duly authorized by all necessary action and will not
conflict with or result in a breach of law or any agreement or other instrument
to which BORROWER or any guarantor is bound. The LOAN DOCUMENTS are valid and
binding on BORROWER and any guarantor thereof and are enforceable against
BORROWER and each such guarantor in accordance with their respective terms, as
applicable.
(b) The BORROWER represents and warrants that: (i) the
BORROWER has no knowledge of the presence of or of any discharge, spillage,
uncontrolled loss, seepage or filtration of oil, petroleum or chemical liquids
or solids, liquid or gaseous products or any hazardous waste or hazardous
substance (hereinafter referred to as the HAZARD), as those terms are used in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C ss.ss.9601 et seq., as amended by the Superfund Amendments and
Reauthorization Act of 1986; the Resource Conservation and Recovery Act of 1976.
(the Solid Waste Disposal Act or RCRA), 42 U.S.C. ss.ss.6901 et seq., as
amended; the Toxic Substance Control Act (TSCA) 15 U.S.C. ss.ss.2601 et seq., or
in any other federal, state or local law governing hazardous substances, as such
laws may be amended from time to time, (hereinafter referred to as the ACT), at,
upon, under or within the PROPERTY; and (ii) the BORROWER has not caused or
permitted to occur and shall use its best efforts not to permit to exist,
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any condition which may cause or constitute a HAZARD at, upon, under or within
the PROPERTY. The term "HAZARD" includes but is not limited to asbestos,
polychlorinated biphenyl (PCBs) and lead based paints. Notwithstanding the
foregoing, the BORROWER makes no representation or warranty under Section
(1)(b)(i) with respect to (a) those items set forth in the Phase I Environmental
Audit performed by Sherwood Environmental Consultants, Inc., dated June 26,
1996, a copy of which has been delivered to the LENDER, (b) discharges made in
the normal course of business pursuant to applicable permits for the benefit of
BORROWER pursuant to applicable law, and (c) discharge, spillage, uncontrolled
loss, seepage or filtration of any HAZARD, which is deminimus and is occurring
during the normal course of business,
(c) The BORROWER further represents and warrants that (i)
neither the BORROWER nor, to the best of its knowledge, any other party, is or
will be involved in operations upon the PROPERTY, which operations could lead to
(a) the imposition of liability on the BORROWER or on any other subsequent or
former owner of the PROPERTY under the ACT; or (b) the creation of a lien on the
PROPERTY under the ACT or under any similar laws or regulations; and (ii) the
BORROWER has not permitted, and will not permit, any tenant or occupant of the
PROPERTY to engage in any activity that could impose liability under the ACT on
such tenant or occupant, on the BORROWER or on any other owner of any of the
PROPERTY.
(d) The BORROWER has complied, and shall comply, in all
material respects with the requirements of the ACT and related regulations and
with all similar laws and regulations and shall notify the LENDER immediately in
the event of any HAZARD or the discovery of any HAZARD at, upon, under or within
the PROPERTY. The BORROWER shall promptly forward to the LENDER copies of all
orders, notices, permits, applications or other communications and reports in
connection with any HAZARD or the presence of any HAZARD or any other matters
relating to the ACT
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or any similar laws or regulations, as they may affect the PROPERTY.
(e) Promptly upon the written request of the LENDER from time
to time, when the LENDER has a reasonable basis therefor, the BORROWER shall
provide to the LENDER, at the BORROWER's expense, an environmental site
assessment or environmental audit report, prepared by an environmental
engineering firm acceptable in the reasonable opinion of the LENDER, to assess
with a reasonable degree of certainty the presence or absence of any HAZARD and
the potential costs in connection with abatement, cleanup or removal of any
HAZARD found on, under, at or within the PROPERTY.
(f) The BORROWER shall defend and indemnify the LENDER and
hold the LENDER harmless from and against all actual loss, liability, damage and
expense, including reasonable attorneys' fees, suffered or incurred by the
LENDER, whether as holder of this MORTGAGE, as mortgagee in possession, or as
successor-in-interest to BORROWER by foreclosure deed or deed in lieu of
foreclosure, under or on account of the ACT or any similar laws or regulations,
including
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the assertion of any lien thereunder: (i) with respect to any HAZARD, or the
presence of any HAZARD affecting the PROPERTY whether or not the same originates
or emanates from the PROPERTY, including any loss of value of the PROPERTY as a
result of the foregoing; and (ii) with respect to any other matter affecting the
PROPERTY within the jurisdiction of the Environmental Protection Agency, any
other federal agency, or any state or local environmental agency. Provided,
however, the BORROWER's obligations under this Section shall not apply to any
loss, liability, damage or expense which is attributable to any HAZARD resulting
from actions on the part of the LENDER, whether as holder of this MORTGAGE, as
mortgagee in possession, or as successor-in-interest to BORROWER by foreclosure
deed or deed in lieu of foreclosure, under or on account of the ACT or any
similar laws or regulations, including the assertion of any lien thereunder, or
any successor in interest to or assignee of the LENDER. The BORROWER's
obligation under this Section shall arise upon the discovery of the presence of
any HAZARD under the ACT whether or not the Environmental Protection Agency, any
other federal agency or any state or local environmental agency has taken or
threatened any action in connection with the presence of any HAZARD.
(g) In the event of any HAZARD, or the presence of any
hazardous substance affecting the PROPERTY, whether or not the same originates
or emanates from the PROPERTY or any contiguous real estate, and if the BORROWER
shall fail to comply with any of the requirements of the ACT or related
regulations or any other environmental law or regulation within the time
established by any regulatory agency, the LENDER may at its election, but
without the obligation to do so: (i) give such notices and/or cause such work to
be performed at the PROPERTY; and/or (ii) take any and all other actions as the
LENDER shall reasonably deem necessary or advisable in order to abate the
HAZARD, remove the hazardous substance or cure the BORROWER's noncompliance. Any
amounts so paid by the LENDER pursuant to this Section, together with interest
thereon at the highest rate of interest permitted under the NOTE from the date
of payment by the LENDER, shall be immediately due and payable by the BORROWER
to the LENDER and until paid shall be added to and become a part of the
indebtedness under the LOAN DOCUMENTS and shall be secured by this MORTGAGE.
(h) The provisions of Section (1)(b), (c), (d), (e) (f) and
(g) are for the benefit of the LENDER only and cannot be assigned to any other
party, whatsoever, except by assignment of the NOTE and the LOAN DOCUMENTS by
the current LENDER to a successor lender.
(i) The BORROWER covenants that it will punctually (i) pay to
the LENDER the principal and interest of the LOAN and all other costs and
indebtedness secured hereby according to the
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terms of the NOTE and other LOAN DOCUMENTS, and (ii) perform and satisfy all
other obligations of the BORROWER under the LOAN DOCUMENTS.
(j) The BORROWER shall comply with all laws a breach of which
would materially and adversely affect (a) the financial condition of the
BORROWER, (b) the ability to use buildings and other improvements on the REAL
ESTATE for the purposes for which they were designed or intended, (c) the value
or status of the PROPERTY, or (d) the value or status of the LENDER's title to
the PROPERTY.
(k) BORROWER will at all times promptly notify LENDER of all
changes in the ownership of the stock of BORROWER. At any time LENDER may
request, BORROWER shall furnish a complete statement, sworn to under penalty of
perjury by an officer of BORROWER, setting forth all of the stockholders,
officers, directors and Controlling Parties of BORROWER, and the extent of their
respective stock ownership or control. In the event the BORROWER is aware of any
other individual, corporation, partnership, association, trust, joint venture,
or any other legal entity (hereinafter referred to as PERSON) having a
beneficial interest in such stock, the statement shall also set forth the name
of such PERSON and the extent of their interest.
(l) Within ten (10) days after request from the LENDER, the
BORROWER shall certify, in writing, the amount of principal and interest then
owing on the LOAN and whether the BORROWER has any defenses or offsets with
respect to the LOAN.
(m) In the event (a) any law is hereafter enacted which
imposes any taxes, excises, documentary stamp and transfer taxes, recording
taxes, assessments, water rents, sewer rents, metropolitan district charges,
sanitary district charges, public dues, and other public charges levied or
assessed upon the PROPERTY, upon the LOAN, or the transactions evidenced or
contemplated by any of the LOAN DOCUMENTS (hereinafter referred to as TAXES), or
(b) any law now in force governing the taxation
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of mortgages, debts secured by mortgages, or the manner of collecting any such
TAX shall be changed or modified, in any manner, so as to impose a TAX upon the
LOAN, any of the LOAN DOCUMENTS, or the transactions evidenced or contemplated
by any of the LOAN DOCUMENTS, (including, without limitation, a requirement that
revenue stamps be affixed to any or all of the LOAN DOCUMENTS), the BORROWER
will pay any such TAX promptly upon notice from LENDER that such TAX is due. If
the BORROWER fails to make prompt payment, or if any law either prohibits the
BORROWER from making the payment or would penalize the LENDER if BORROWER makes
the payment, then the failure, prohibition, or penalty shall entitle the LENDER,
after ninety (90) days notice and failure of the BORROWER to pay off the LOAN in
full, without penalty or premium, to exercise all rights hereunder as though an
EVENT OF DEFAULT, as hereinafter defined, had occurred.
(n) The BORROWER from time to time will execute, acknowledge,
deliver and record, at the BORROWER's sole cost and expense, all further
instruments, deeds, conveyances, supplemental mortgages, assignments, financing
statements, transfers, and assurances as in the opinion of the LENDER's counsel,
reasonably exercised, may be necessary (a) to preserve, continue, and protect
the interest of the LENDER in the PROPERTY, (b) to perfect the grant to the
LENDER of every part of the PROPERTY, (c) to facilitate the execution of this
MORTGAGE, (d) to secure the rights and remedies of the LENDER under this
MORTGAGE and the other LOAN DOCUMENTS, or (e) to transfer to any purchaser at a
sale hereunder the PROPERTY, funds, and powers now or hereafter held hereunder.
The BORROWER, at the request of the LENDER, shall promptly execute any
continuation statements required by the Uniform Commercial Code effective in the
State of Arkansas and any amendments thereto or reenactments thereof
(hereinafter referred to as the UNIFORM COMMERCIAL CODE) to maintain the lien on
any portion of the PROPERTY subject to the UNIFORM COMMERCIAL CODE.
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(o) The BORROWER shall reimburse the LENDER for any sums,
including reasonable attorney's fees and expenses, incurred or expended by them
(a) in connection with any action or proceeding reasonably necessary or prudent
to sustain the lien, security interest, priority, or validity of any LOAN
DOCUMENT, (b) to protect or enforce any of their rights under the LOAN
DOCUMENTS, (c) for any title examination relating to the title to the PROPERTY
undertaken after an EVENTS OF DEFAULT, or (d) for any other purpose contemplated
by the LOAN DOCUMENTS. The BORROWER shall, upon demand, pay all such sums
accruing from the time the expense is paid and notice thereof is received if
such expense is not paid by the BORROWER within seven (7) days of receipt of
such notice. All such sums so expended by the LENDER shall be secured by this
MORTGAGE. In any action or proceeding to foreclose this MORTGAGE or to recover
or collect the LOAN, the provisions of law allowing the recovery of costs,
disbursements, and allowances shall be in addition to the rights given by this
Section.
(p) The BORROWER will comply with its obligations under any
lease which purports to convey any interest of BORROWER in any portion of the
PROPERTY, including, without limitation, subleases and assignments of leases and
rents (hereinafter referred to as LEASES). The BORROWER, within ten (10) days
after written request from the LENDER, shall deliver to the LENDER a detailed
list and description of all LEASES with copies thereof and such additional
information as may be reasonably requested by the LENDER. BORROWER will transfer
and assign to the LENDER, in a form satisfactory to the LENDER, BORROWER's
interest in any LEASE as further security for the obligations secured hereby. No
such assignment shall impose upon the LENDER any liability to perform the
BORROWER's obligations under any LEASE. The LENDER reserves the right, at its
request, to review and approve any and all LEASES of any portion of the
PROPERTY.
(q) The BORROWER will enforce all LEASES according to
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their terms. The BORROWER shall not (a) cancel or terminate, or consent to or
accept any cancellation, termination, or surrender of any LEASE, or permit any
event within the BORROWER's control to occur which would terminate or cancel any
LEASE, (b) amend or modify any LEASE, (c) waive any default under or breach of
any LEASE, (d) consent to or permit any prepayment or discount of rent or
advance rent under any LEASE, except for the current month or following month,
or (e) give any consent, waiver, or approval under any LEASE or take any other
action with respect to any LEASE which may impair the value of the LENDER's
interest in the PROPERTY. BORROWER shall comply with and perform all duties and
obligations imposed upon or assumed by it in all LEASES.
(r) In the event of a sale pursuant to this MORTGAGE, each
lessee of BORROWER under any LEASE, and any sub-lessee or assignee of a LEASE
(hereinafter referred to as TENANT) shall, upon request, attorn to and
acknowledge any purchaser at foreclosure or grantee in lieu of foreclosure as
landlord and the purchaser will not be required to credit any TENANT under any
LEASE with rent paid more than one (1) month in advance. All LEASES shall be
subject and subordinate to the LOAN DOCUMENTS (including any modifications and
amendments) and any additional financing or refinancing of the PROPERTY by or
for the LENDER.
(s) The BORROWER shall not assign any rents, profits,
royalties, issues, revenues, income, proceeds, earnings, and products generated
by or arising out of the PROPERTY or any part thereof or any interest therein
(hereinafter referred to as the RENTS) without the prior written consent of the
LENDER. Any attempted assignment, pledge, hypothecation, or grant without such
consent shall be null and void.
(t) The BORROWER shall make no structural alterations or
material nonstructural alterations to the PROPERTY or construct any additional
improvements on the REAL ESTATE, without the prior written consent of the
LENDER, which consent shall not be unreasonably delayed or withheld. All
alterations or
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improvements consented to by LENDER shall be completed and paid for by the
BORROWER within a reasonable time. All such alterations or improvements shall be
erected (a) in a good and workmanlike manner strictly in accordance with all
applicable law, (b) entirely on the REAL ESTATE, (c) without encroaching upon
any easement, right of way, or land of others, (d) so as not to violate any
applicable use, height, set-back or other applicable restriction, and (e)
without permitting any mechanic's lien to attach to the PROPERTY which is not
being contested as permitted hereunder. All alterations, additions, and new
improvements to the PROPERTY shall automatically be a part of the PROPERTY and
shall be subject to this MORTGAGE.
(u) It shall be an EVENT OF DEFAULT if BORROWER shall permit
the PROPERTY or the corporate interests in the BORROWER, or any part or portion
thereof or any interest therein, to be transferred (whether by voluntary or
involuntary conveyance, merger, operation of law, or otherwise) without the
prior written consent of the LENDER which the LENDER shall not be obligated to
give. Any transferee of the PROPERTY or interest in the BORROWER or any part or
portion thereof or any interest therein, by virtue of its acceptance of the
transfer, shall (without in any way affecting BORROWER's liability under the
LOAN DOCUMENTS) be conclusively deemed to have agreed to assume primary personal
liability for the performance of the BORROWER's obligations under the LOAN
DOCUMENTS. This Section shall not apply to any disposition permitted by Section
(1)(x), any LEASE entered into in compliance with Section (1)(p), or any
disposition by the LENDER by foreclosure hereunder or as otherwise permitted by
the LOAN DOCUMENTS.
(v) It shall be an EVENT OF DEFAULT if BORROWER shall allow
any liens, mortgages, rights, leases, restrictions, easements, deeds of trust,
covenants, agreements, rights of way, rights of redemption, security interests,
conditional sales agreements, land installment contracts, options, and all other
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burdens or charges, including secondary and supplemental financing liens
(hereinafter referred to as the ENCUMBRANCES), on the PROPERTY, except this
MORTGAGE and all ENCUMBRANCES as to which borrower has given its prior written
approval, liens arising for real estate taxes or public charges for sewage,
water, drainage or other public improvements not yet due and payable, LEASE not
in violation of Section (1)(p) and all liens permitted under the LOAN DOCUMENTS,
as hereinafter defined, including, without limitation, those exceptions
specified on Schedule A (hereinafter referred to as the PERMITTED ENCUMBRANCES).
The BORROWER shall give the LENDER prompt notice of any defaults in or under any
PERMITTED ENCUMBRANCES and any notice of foreclosure or threat of foreclosure.
The BORROWER shall comply with its obligations under all PERMITTED ENCUMBRANCES.
The LENDER may, at its election, satisfy any ENCUMBRANCE (other than an
PERMITTED ENCUMBRANCE not then in default), and the BORROWER shall, on demand,
reimburse the LENDER for any sums advanced for such satisfaction accruing from
the date of satisfaction, which sums shall be secured hereby.
(w) BORROWER shall (i) keep and maintain the PROPERTY in good
order, condition, and repair and make all equipment replacements and repairs
necessary to insure that the security for the LOAN is not impaired, (ii) not
commit or suffer any waste of the PROPERTY, (iii) promptly protect and conserve
any portion of the PROPERTY remaining after any damage to, or partial
destruction of, the PROPERTY, provided any insurance proceeds which may have
been received by the LENDER as a result of such damage or destruction of the
PROPERTY are given to the BORROWER for such purposes, (iv) promptly repair,
restore, replace or rebuild any portion of the PROPERTY which is damaged or
destroyed, provided any insurance proceeds which may have been received by the
LENDER as a result of such damage or destruction of the PROPERTY are given to
the BORROWER for such purposes, (v) promptly restore the balance of the PROPERTY
remaining after any
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taking by condemnation or eminent domain, any sale in lieu of condemnation under
threat thereof, the alteration of the grade of any street, or any other injury
to or decrease in the value of the PROPERTY by any public or quasi-public
authority or corporation or any other person having the power of eminent domain
(hereinafter referred to as a TAKING), provided any insurance proceeds which may
have been received by the LENDER as a result of such damage or destruction of
the PROPERTY are given to the BORROWER for such purposes, (vi) permit the LENDER
or its designee to inspect the PROPERTY at all reasonable times, and (vii) not
make any material change in the grade of the PROPERTY or permit any excavation
of or on the PROPERTY.
(x) No part of the PROPERTY, except supplies consumed in the
normal course of business and operations, shall be removed from the REAL ESTATE,
demolished, or materially altered without the prior written consent of the
LENDER, which shall not be unreasonably withheld. Prior to or simultaneously
with their removal, such fixtures and equipment shall be replaced with fixtures
or equipment of equal or greater value. The replacement fixtures or equipment
shall be free of all ENCUMBRANCES, shall automatically be subject to the lien
and security interest of this MORTGAGE, and shall automatically be subject to
the granting clauses hereof. Upon the sale of any removed fixtures and equipment
which are not replaced, the proceeds shall be applied as a prepayment of the
LOAN, to be applied to installments in inverse order of maturity. All sales
shall be conducted in a commercially reasonable manner with a bona fide effort
to obtain a sale price of at least market value.
(y) The BORROWER will pay and discharge, as the same shall
become due and payable, (i) all its obligations and liabilities, including all
claims or demands of materialmen, mechanics, carriers, warehousemen, landlords
and other like persons which, in any such case, if unpaid, might by law give
rise to a lien upon the PROPERTY, and (ii) all lawful TAXES,
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assessments and charges or levies made upon it or its property or assets, by any
Government except where any of the items in clause (i) or (ii) of this Section
may be diligently contested in good faith by appropriate proceedings, and the
BORROWER shall have set aside on its books, if required under generally accepted
accounting principles in the United States, appropriate reserves for the accrual
of any such items.
(z) No restrictive covenant, zoning change, or other
restriction affecting the PROPERTY may be entered into, requested by or
consented to by BORROWER without the prior written consent of the LENDER which
consent shall not be unreasonably withheld or delayed.
(aa) The BORROWER will do all things necessary to preserve
intact and unimpaired, all easements, appurtenances, and other interests and
rights in favor of, or constituting any portion of, the PROPERTY.
(bb) LENDER may require the BORROWER, at its sole cost and
expense, to cause to be furnished to LENDER a prepaid real estate tax service
contract to annually check and report on the status of real estate taxes for the
REAL ESTATE throughout the term of the LOAN.
(cc) If required by the LENDER, the BORROWER shall deposit
with the LENDER, on the tenth (10) day of each month during the term of this
MORTGAGE, an additional amount as determined by the LENDER in its reasonable
discretion, to sufficiently discharge the obligations of the BORROWER for: (a)
the payment of TAXES, assessments, levies, fees, rents, and other public charges
imposed upon or assessed against the PROPERTY or the revenues, rents, issues,
income, or profits thereof, as provided in (1)(y); (b) the payment of premiums
for fire, casualty, and other hazard insurance and flood insurance, as provided
by Sections (1)(dd), (ee), (ff), and (gg), for the purpose of providing a fund
to assure the payment of the aforesaid expenses when and as they come due; and
(c) if
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applicable, any owner's association fee, condominium association fee, or any
other similar fee, cost, assessment or charge. Such amounts shall be applied to
the payment of the obligations in respect to which such amounts were deposited
or, at the option of the LENDER, to the payment of such obligations in such
order of priority as the LENDER shall determine, on or before the date they
become delinquent. If the LENDER determines, prior to the due date of any of the
aforementioned obligations, that the amount then on deposit shall be
insufficient for the payment of such obligations in full, the BORROWER, within
ten (10) days after demand, shall deposit the amount of the deficiency with the
LENDER. The LENDER may also pay any amount as provided herein and add the amount
to the indebtedness hereby secured.
Any amounts deposited with the LENDER pursuant to this Section are
hereby pledged as additional security for the payment of the LOAN and other
obligations under the LOAN DOCUMENTS (hereinafter collectively referred to as
the LOAN OBLIGATIONS) and the BORROWER does hereby grant a security interest to
the LENDER in such amounts. Any amounts deposited with the LENDER pursuant to
the provisions of this Section shall not be, nor be deemed to be, trust funds,
nor shall they operate to curtail or reduce the LOAN OBLIGATIONS. Such funds so
deposited with the LENDER or pursuant to this Section shall be maintained in an
escrow account with the LENDER, without interest, separate and apart from the
BORROWER's other funds. The LENDER shall not be liable for any failure to apply
to the payment of the obligations in respect to which such amounts were
deposited unless the BORROWER, while no EVENT OF DEFAULT exists hereunder, shall
have requested the LENDER in writing to make application of such deposits then
on hand to the payment of particular escrow items, which request shall be
accompanied by the bills therefor. The LENDER may, in its sole discretion, at
any time and from time to time, waive the requirements of this Section.
Notwithstanding any other provision of this Section, the
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BORROWER shall not be required to make any payment required under this Section
if such payment is required to be paid pursuant to the terms of any PERMITTED
ENCUMBRANCE.
(dd) The BORROWER shall keep any improvements constructed on
the REAL ESTATE and personalty thereon insured against loss by fire casualty,
and such other hazards and contingencies, including but not limited to
lightning, hail, windstorm, explosion, malicious mischief and vandalism, as are
covered by extended coverage policies in effect in the area where the REAL
ESTATE is located and such other risks as may be reasonably specified by the
LENDER from time to time, all for the benefit of the LENDER. Coverage for the
peril of sprinkler leakage must be included as a covered cause of loss for
buildings equipped with automatic sprinkler systems designed to discharge water,
or a chemical gas, or any other extinguishing agents. LENDER may require boiler
and machinery insurance to cover sudden and accidental breakdown of specific
types of equipment, including for example, boilers, heating and ventilating
systems, refrigeration equipment, air conditioning units, pumps, compressors,
motors, blowers, generators and transformers. All insurance shall be written on
policy forms and by insurance companies licensed and lawfully operating in the
jurisdiction in which the REAL ESTATE is located with a rating of "A-" or better
and Class IX or better according to A.M. Best Co. Insurance Guide and reasonably
satisfactory to the LENDER or pursuant to the terms of the VIRGINIA DEED OF
TRUST, and with respect to casualty insurance, shall be in an amount equal or
greater to the full replacement value of any improvements and personalty upon
the REAL ESTATE, as determined by an appraisal of such improvements and
personalty, acceptable to the LENDER and paid for by the BORROWER, but in any
event all insurance policies shall be in an amount sufficient to prevent
co-insurance liability, shall name the LENDER as a mortgagee and loss payee, as
its interest may appear, shall state that the insurance coverage shall not be
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affected by any act or neglect of the BORROWER or owner of the insured PROPERTY
and shall be endorsed such that the losses thereunder shall be payable to the
LENDER, as its interest may appear, and not to the BORROWER and the LENDER. The
policy or policies of insurance shall include a replacement cost or restoration
endorsement and a waiver of subrogation endorsement reasonably satisfactory to
the LENDER. Originals or certified true copies of the policy or policies of such
insurance, any endorsements thereto and all renewals thereof shall be manually
signed and delivered to and retained by the LENDER, and the BORROWER shall
provide the LENDER with receipts evidencing the payment of all premiums due on
such policies and the renewals thereof not less than thirty (30) days prior to
the renewal or expiration date thereof. All policies required hereby shall
provide and shall bear an endorsement that they shall not be canceled,
terminated, endorsed or amended without not less than thirty (30) days prior
written notice to the LENDER. The BORROWER shall give the LENDER prompt notice
of any loss covered by such insurance, and, the LENDER shall have the right to
adjust and compromise such loss, to collect, receive and receipt the proceeds of
insurance for such loss and to endorse the BORROWER's name upon any check in
payment thereof and, for such purposes the BORROWER hereby constitutes and
appoints the LENDER as its attorney in fact with the power of attorney granted
hereby deemed to be coupled with an interest and irrevocable. All monies
received as payment for a loss covered by an insurance policy shall be paid over
to the LENDER to be applied, at the option of the LENDER, either to the
prepayment of the LOAN or to the payment of other charges or expenses actually
incurred by the BORROWER in the restoration, reconstruction, repair, renovation
or replacement of the affected portion of the PROPERTY, provided that any
election by the LENDER to apply insurance proceeds to the cost of restoration,
reconstruction, renovation, repair or replacement shall be subject to
satisfaction of the following
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conditions: (i) such restoration, renovation, repair or rebuilding shall, in the
judgment of the LENDER, attain completion within the term of the LOAN; (ii) such
insurance proceeds, together with undisbursed LOAN proceeds and any amounts the
BORROWER deposits with the LENDER for such purpose are sufficient to fully
restore, renovate, repair or rebuild the damaged or destroyed PROPERTY; and
(iii) no event or circumstance has occurred and is existing which with the
giving of notice, the passing of time or both would constitute an EVENT OF
DEFAULT under this MORTGAGE or the other LOAN DOCUMENTS, otherwise, such
proceeds shall be applied in payment of the LOAN. The LENDER reserves the right
to require the escrow of insurance premiums during the term of the LOAN.
(ee) The BORROWER will maintain liability and indemnity
insurance with respect to the PROPERTY in an amount not less than $2,000,000 and
with such companies, and subject to the same terms and conditions specified in
Section (1)(dd) above (excepting that such insurance shall not have to list
LENDER as first mortgagee and loss payee or state that insurance coverage shall
not be affected by any act or neglect of the BORROWER or owner of the insured
property), and as the LENDER may reasonably direct and approve. Evidence of such
coverage in the form of a certified copy of the policy or an insurance
certificate must be supplied to LENDER.
(ff) The BORROWER shall also carry and maintain rental
interruption insurance on the PROPERTY in the same manner and under the same
conditions as provided in Section (1)(dd) covering debt service, real estate
taxes and insurance premiums for a period of at least six (6) months.
(gg) In the event that all or any portion of the REAL ESTATE
currently or at any time in the future is determined to be located in a
specially designated flood hazard area by the Secretary of Housing and Urban
Development or the Director of the Federal Emergency Management Agency, pursuant
to the provisions
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of the National Flood Insurance Act of 1968, or the Flood Disaster Protection
Act of 1973, as amended, the BORROWER shall obtain and maintain flood hazard
insurance in the full insurable value of the PROPERTY or any portion of the REAL
ESTATE located within such area, or the full amount of flood insurance
available, naming the LENDER as sole loss payee and complying with all other
conditions as provided in Section (1)(dd) above. The BORROWER shall be required
to provide flood hazard insurance as described, unless the BORROWER's insurance
broker certifies to the LENDER in writing that the REAL ESTATE is not in a flood
hazard area. The proceeds of any loss payable under a flood insurance policy
shall be applied, at the option of the LENDER, as set forth in (1)(dd) above
with respect to casualty insurance proceeds.
(hh) BORROWER, immediately upon obtaining knowledge of the
institution of any proceeding for a TAKING, will notify the LENDER of such
proceedings. The LENDER may participate in any such proceedings, and BORROWER
will, from time to time, deliver to the LENDER all instruments requested by them
to permit such participation. Any award or payment made as a result of any
TAKING shall be paid to the LENDER, to be applied by the LENDER in it's sole
discretion to restore or repair the PROPERTY or to repayment of the amounts due
under the NOTE and the other LOAN DOCUMENTS, in inverse order of maturity. The
application of any award or payment as a repayment of amounts due under the NOTE
and the other LOAN DOCUMENTS shall take effect only on the actual date of the
receipt of the payment or award by the LENDER. In the event any payment or award
is used to restore the PROPERTY, as aforesaid, the LENDER shall not be obligated
to see to the proper allocation thereof nor shall any amount so used be deemed a
payment of any indebtedness secured by this MORTGAGE. Payments or awards to be
used for restoration purposes, as aforesaid, shall be held by the LENDER and
disbursed under the same terms and conditions as provided for disbursement of
insurance proceeds
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in Section (1)(dd).
(ii) Notwithstanding anything to the contrary in this Section
(1), all rights of LENDER set forth herein shall be limited by the rights of any
beneficiary of any PERMITTED ENCUMBRANCE, if any.
(2) The LENDER may, at its option, declare the entire unmatured portion
of all indebtedness secured hereby, together with all interest accrued on the
entire secured debt, to be immediately due and payable, and the same shall
forewith become immediately due and payable (which acceleration of maturity may
be accomplished without notice to anyone), in any of the following events (each,
hereinafter referred to as an EVENT OF DEFAULT), the occurrence of any of which
shall constitute an EVENT OF DEFAULT:
(a) Any representation or warranty made by the BORROWER herein
which shall prove to have been incorrect in any material respect when made or
shall be breached.
(b) The failure of BORROWER to perform its obligations set
forth in Sections (1)(dd), (ee), (ff), or (gg) (insurance).
(c) Any attempted assignment by the BORROWER of the whole or
any part of the RENTS in contravention of Section (1)(s).
(d) Any transfer or event in violation of the provisions of
Sections (1)(u) or (v).
(e) The loss of any franchise agreement, license or permit
necessary for the operation, occupancy, or use of the PROPERTY, other than as a
result of casualty or condemnation, which loss continues for a period thirty
(30) days after receipt by BORROWER (or refusal of delivery) of written notice
given in accordance with the provisions of this MORTGAGE.
(f) The default by the BORROWER or by any guarantor of payment
or performance of the BORROWER under any obligation or indebtedness to the
LENDER, whether now existing or hereafter arising, which default is not cured
within any applicable cure or
22
<PAGE>
grace period.
(g) The occurrence of an Event of Default under the DEED OF
TRUST, from BORROWER to OTTO W. KONRAD and BRUCE H. MATSON, Trustees, for the
benefit of KEYBANK NATIONAL ASSOCIATION, dated as of October 1, 1997 (the
"Virginia Deed of Trust"), and recorded simultaneously herewith in the Clerk's
Office of the Circuit Court of the County of Sussex, Virginia.
(h) The occurrence of an EVENT OF DEFAULT under the Mortgage
and Security Agreement dated as of October 1, 1997 from the County of Saratoga
Industrial Development Agency and the Borrower to the Lender, recorded on or
about October 10, 1997 in the Clerk's Office of Saratoga County, New York.
(i) the occurrence of an EVENT OF DEFAULT under any Loan
Document.
(j) The failure of the BORROWER to perform or observe any of
its obligations or covenants under this MORTGAGE not previously specifically
referred to in this Section (2), which failure continues for a period of seven
(7) days after receipt by BORROWER (or refusal of delivery) of written notice
given in accordance with the provisions of this MORTGAGE in the event of a
monetary default or for a period of thirty (30) days after receipt by BORROWER
(or refusal of delivery) of written notice given in accordance with the
provisions of this MORTGAGE in the event of a non-monetary default. The failure
of the BORROWER to perform or observe any of its obligations or covenants
constituting an Event of Default under any LOAN DOCUMENT, not previously
specifically referred to in this Section (2), subject to any applicable cure
period.
(3) In the EVENT OF DEFAULT hereunder, the LENDER hereby shall be
entitled to the following remedies:
(a) The LENDER may enforce the lien of this MORTGAGE in
respect to all real and personal property encumbered hereby by foreclosure or
otherwise in proceedings that are prosecuted simultaneously or are prosecuted
separately in such order as the
23
<PAGE>
LENDER may select.
(b) The LENDER may require the BORROWER to assemble at
BORROWER's expense any or all of the personal property encumbered hereby and
make it available to LENDER at a place specified by LENDER which is reasonably
convenient to both parties; and LENDER may enforce all of its remedies in
respect to the encumbered personal property that may be available under the
UNIFORM COMMERCIAL CODE. In this latter event all expenses or retaking, holding,
preparing for sale, selling or the like, as well as all reasonable attorneys'
fees and lawful expenses incurred by said LENDER in enforcing such remedies
shall be payable to said LENDER by BORROWER and shall constitute a part of the
secured indebtedness.
(4) The BORROWER hereby waives any and all rights of appraisement,
sale, redemption and homestead under the laws of Arkansas, and especially under
the Act of May 8, 1899, and Acts amendatory thereto.
(5) All representations, warranties, covenants, duties, provisions
concerning insurance and condemnation and all Events of Default specified in the
VIRGINIA DEED OF TRUST, including such provisions contained in Articles V, VI,
VII, VIII and X of the VIRGINIA DEED OF TRUST, are incorporated herein by
reference and made applicable to real property conveyed hereunder. In the event
of a conflict between the provisions of the VIRGINIA DEED OF TRUST and the
provisions contained herein, the provisions of the VIRGINIA DEED OF TRUST shall
control unless applicable law otherwise dictates. In construing the provision of
the VIRGINIA DEED OF TRUST and this MORTGAGE, such provisions shall be read to
afford LENDER the maximum rights hereunder.
(6) This MORTGAGE shall be governed by the laws of the State of
Arkansas.
SIGNATURES APPEAR ON NEXT PAGE
24
<PAGE>
Executed on this 7th day of November, 1997.
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
--------------------------------
Its: Exec Vice President
-------------------------------
ATTEST:
/s/ Warren E. Beam
- ------------------------------
Assistant Secretary
- ---------------------, --------
ACKNOWLEDGMENT
STATE OF VA )
)ss.
COUNTY OF SUSSEX )
Before me, the undersigned Notary Public, in and for said County and
State on this day personally appeared Phillip S. Sumpter and Warren E. Beam,
known to me to be the persons whose names are subscribed to the foregoing
instrument and acknowledged that they were the Exec. Vice President and Asst.
Secretary, respectively, of Spurlock Adhesives, Inc. and as such officers were
authorized to execute the foregoing and had executed the foregoing and had
executed same for the uses and purposes set forth herein.
WITNESS my hand and seal on this 7th day of November, 1997
/s/
------------------------------
NOTARY PUBLIC
My Commission expires: 11/30/00
--------
25
<PAGE>
Schedule A
1. 1998 Real Estate Taxes, taxes and special assessments of subsequent years
which are due and payable but not delinquent until October 10, 1998.
2. Encroachment, overlaps, discrepancies or conflicts in boundary lines,
shortage in area, or other matters which would be disclosed by an
accurate survey of the land or by making inquiry of persons in possession
thereof.
3. Rights of way in favor of all County, State and Municipal roadways.
4. Loss arising from oil, gas or other minerals, or any other activity
concerning the sub-surface right or ownership, including but not limited
to the right of egress or ingress for said sub-surface purposes.
5. Any right of way in favor of Missouri Pacific Railroad.
6. Arkansas Mortgage With Power of Sale, dated July 11, 1996, by Spurlock
Adhesives, Inc., a Virginia corporation, in favor of National Canada
Finance Corporation, and filed July 15, 1996 and recorded in Mortgage
Book 209, page 945 of the records of Hot Spring County, Arkansas.
Exhibit 10.44
HAZARDOUS SUBSTANCES INDEMNITY AGREEMENT
THIS HAZARDOUS SUBSTANCES INDEMNITY AGREEMENT (the "Agreement") is made
as of the 1st day of October, 1997, by SPURLOCK ADHESIVES, INC., a Virginia
corporation with an office for the transaction of business at 5090 General
Mahone Highway, Waverly, Virginia (the "Company") and SPURLOCK INDUSTRIES, INC.,
a Virginia corporation with an office for the transaction of business at 5090
General Mahone Highway, Waverly, Virginia (the "Indemnitor") for the benefit of
KEYBANK NATIONAL ASSOCIATION, a national banking association with an office for
the transaction of business at 66 South Pearl Street, Albany, New York (the
"Bank").
RECITALS
WHEREAS, contemporaneously with the execution of this Agreement,
Company and Bank have entered into a Letter of Credit Reimbursement Agreement
dated as of October 1, 1997 (the "Reimbursement Agreement") pursuant to which
the Bank has agreed to issue a letter of credit (the "Letter of Credit") to Star
Bank, N.A., as Trustee (the "Trustee"); and
WHEREAS, contemporaneously with the execution of this Agreement, the
Company has executed and delivered to the Bank a $1,500,000 Promissory Note (the
"Term Note") to evidence a loan (the "Term Loan") made by the Bank to the
Company; and
WHEREAS, the Reimbursement Agreement and the Term Note are secured in
part by a Mortgage and Security Agreement (the "Mortgage") from the County of
Saratoga Industrial Development Agency (the "Issuer") and the Company dated as
of October 1, 1997 which encumbers the real property (the "Mortgaged Property")
described in Exhibit "A" attached hereto and made a part hereof; and
WHEREAS, the payment of the Company's obligations under the
Reimbursement Agreement and the Term Note are unconditionally guaranteed by the
Indemnitor through the execution of a guaranty (the "Guaranty"); and
WHEREAS, Bank has required, as a condition of issuing the Letter of
Credit and funding the Term Loan, the Company and Indemnitor indemnify and hold
Bank harmless against and from certain obligations for which Bank may incur
liability, whether as beneficiary of the Mortgage held by Bank, as mortgagee in
possession, or by foreclosure, by reason of the threat or presence of any
hazardous substance at or near the Mortgaged Property.
NOW, THEREFORE, in consideration of the premises, Ten Dollars ($10.00),
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Company and Indemnitor, intending to be legally bound,
hereby agree as follows:
<PAGE>
1. Recitals. The foregoing recitals are incorporated into this
Agreement by this reference.
2. Definitions. Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Mortgage.
3. Representations and Warranties.
(a) Company and Indemnitor represent and warrant that (i)
neither has any actual knowledge of any unlawful deposit, storage, disposal,
burial, discharge, spillage, uncontrolled loss, seepage or filtration of oil,
petroleum or chemical liquids or solids, liquid or gaseous products or any
hazardous wastes or hazardous substances (collectively, "Hazardous Substances"),
as those terms are used in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 or in any other federal, state or local
law governing Hazardous Substances, as such laws may be amended from time to
time (collectively, the "Hazardous Waste Laws"), at, upon, under or within the
Mortgaged Property, except in compliance with Hazardous Waste Laws, and (ii)
neither has caused or permitted to occur, and shall not permit to exist, any
condition which may cause an unlawful discharge of any Hazardous Substances at,
upon, under or within the Mortgaged Property, except in compliance with
Hazardous Waste Laws.
(b) Company and Indemnitor further represent and warrant that
(i) neither has been nor will be involved in operations at or near the Mortgaged
Property which operations could lead to (A) the imposition of liability on
Company or Indemnitor, or on any subsequent or former owner of the Mortgaged
Property or (B) the creation of a lien on the Mortgaged Property under the
Hazardous Waste Laws or under any similar laws or regulations; and (ii) neither
has permitted, and will not permit, any tenant or occupant of the Mortgaged
Property to engage in any activity that could impose liability under the
Hazardous Waste Laws on such tenant or occupant, on Company or Indemnitor or on
any other owner of any of the Mortgaged Property.
4. Covenants.
(a) Company and Indemnitor shall comply strictly and in all
respects with the requirements of the Hazardous Waste Laws and related
regulations and with all similar laws and regulations and shall notify Bank
immediately in the event of any discharge or discovery of any Hazardous
Substance at, upon, under or within the Mortgaged Property. Company and
Indemnitor shall promptly forward to Bank copies of all orders, notices,
permits, applications or other communications and reports in connection with any
discharge or the presence of any Hazardous Substance or any other matters
relating to the Hazardous Waste Laws or any similar laws or regulations, as they
may affect the Mortgaged Property.
2
<PAGE>
(b) Promptly upon the written request of Bank, after the
occurrence of any unlawful discharge or discovery under 3(a) hereof, Company and
Indemnitor shall provide Bank, at their expense, with an environmental site
assessment or environmental audit report prepared by an environmental
engineering firm reasonably acceptable to Bank, to assess with a reasonable
degree of certainty the presence or absence of any Hazardous Substances and the
potential costs in connection with abatement, cleanup or removal of any
Hazardous Substances found on, under, at or within the Mortgaged Property.
5. Indemnity.
(a) Company and Indemnitor, jointly and severally, shall at
all times indemnify and hold harmless Bank against and from any and all claims,
suits, actions, debts, damages, costs, losses, obligations, judgments, charges,
and expenses, of any nature whatsoever suffered or incurred by Bank, whether as
mortgagee, as mortgagee in possession, or as successor-in-interest to Company by
foreclosure deed or deed in lieu of foreclosure, under or on account of the
Hazardous Waste Laws or any similar laws or regulations, including the assertion
of any lien thereunder, with respect to:
(1) any discharge of Hazardous Substances, the threat
of a discharge of any Hazardous Substances, or the presence of
any Hazardous Substances affecting the Mortgaged Property
whether or not the same originates or emanates from the
Mortgaged Property including any loss of value of the Mortgaged
Property as a result of any of the foregoing;
(2) any costs of removal or remedial action incurred
by the United States Government or any costs incurred by any
other person or damages from injury to, destruction of, or loss
of natural resources, including reasonable costs of assessing
such injury, destruction or loss incurred pursuant to any
Hazardous Waste Laws;
(3) liability for personal injury or property damage
arising under any statutory or common law tort theory,
including, without limitation, damages assessed for the
maintenance of a public or private nuisance or for the carrying
on of an abnormally dangerous activity at or near the Mortgaged
Property; and/or
(4) any other environmental matter affecting the
Mortgaged Property within the jurisdiction of the Environmental
Protection Agency, any other federal agency, or any state or
local agency.
The obligations of Company and Indemnitor under this Agreement shall arise
whether or not the Environmental Protection Agency, any other federal agency or
any state or local agency has taken or threatened any action in connection with
the presence of any Hazardous Substances.
3
<PAGE>
(b) In the event of any discharge of Hazardous Substances,
the threat of a discharge of any Hazardous Substances, or the presence of any
Hazardous Substances affecting the Mortgaged Property, whether or not the same
originates or emanates from the Mortgaged Property or any contiguous real
estate, and/or if Company or Indemnitor shall fail to comply with any of the
requirements of the Hazardous Waste Laws or related regulations or any other
environmental law or regulation, Bank may at its election, but without the
obligation so to do, give such notices and/or cause such work to be performed at
the Mortgaged Property and/or take any and all other actions as Bank shall deem
necessary or advisable in order to abate the discharge of any Hazardous
Substance, remove the Hazardous Substance or cure the noncompliance of Company
or Indemnitor.
(c) Company and Indemnitor acknowledge that Bank has agreed
to issue the Letter of Credit in reliance upon the representations, warranties,
covenants and indemnities of the Company and Indemnitor in this Agreement. All
of the representations, warranties, covenants and indemnities of this Agreement
shall survive the repayment of all amounts due or to become due under the
Reimbursement Agreement and/or the release of the lien of the Mortgage from the
Mortgaged Property and shall survive the transfer of any or all right, title and
interest in and to the Mortgaged Property by Company to any party, whether or
not affiliated with Indemnitor.
6. Attorney's Fees. If Bank, or someone on Bank's behalf retains
the services of any attorney in connection with the subject of the indemnity
herein, Company and Indemnitor shall pay Bank's reasonable costs and attorney's
fees thereby incurred. Bank may employ an attorney of its own choice.
7. Interest. In the event that Bank incurs any obligations, costs
or expenses under this Agreement, Company and Indemnitor shall pay Bank
immediately on demand, and if such payment is not received within ten (10) days,
interest on such amount shall, after the expiration of the ten-day period,
accrue at the interest rate set forth in the Reimbursement Agreement until such
amount, plus interest, is paid in full.
8. No Waiver. The liabilities of Company and Indemnitor under this
Agreement shall in no way be limited or impaired by, and Company and Indemnitor
hereby consent to and agree to be bound by any amendment or modification of the
provisions of the Financing Documents or Bank Documents to or with Bank by
Company or Indemnitor or any person who succeeds Company as owner of the
Mortgaged Property. In addition, notwithstanding any terms of the Financing
Documents or the Bank Documents to the contrary, the liability of the Company
and Indemnitor under this Agreement shall in no way be limited or impaired by:
(i) any extensions of time for performance required by any of the Financing
Documents or the Bank Documents; (ii) any sale, assignment or foreclosure of the
Mortgage or any sale or transfer of all or part of the Mortgaged Property; (iii)
any exculpatory provision in any of the Financing Documents or Bank Documents
limiting Bank's recourse to property encumbered by the Mortgage or to any other
security, or limiting Bank's rights to a deficiency judgment against Company;
(iv) the accuracy or inaccuracy of the representations and warranties made by
4
<PAGE>
Company under any of the Financing Documents or Bank Documents; (v) the release
of Company or any other person from performance or observance of any of the
agreements, covenants, terms or conditions contained in the Financing Documents
or Bank Documents by operation of law, Bank's voluntary act, or otherwise; (vi)
the release or substitution, in whole or in part, of any security for the
Reimbursement Agreement; or (vii) Bank's failure to record the Mortgage or file
any UCC-1 financing statements (or Bank's improper recording or filing of any
thereof) or to otherwise perfect, protect, secure or insure any security
interest or lien given as security for the Reimbursement Agreement; and, in any
such case, whether with or without notice to Company or Indemnitor and with or
without consideration.
9. Waiver by Company and Indemnitor. Company and Indemnitor waive
any right or claim of right to cause a marshalling of Company's assets or to
cause Bank to proceed against any of the security for the Reimbursement
Agreement before proceeding under this Agreement against Company and Indemnitor
or to proceed against Company and Indemnitor in any particular order; Company
and Indemnitor agree that any payments required to be made hereunder shall
become due on demand; Company and Indemnitor expressly waive and relinquish all
rights and remedies (including any rights of subrogation) accorded by applicable
law to indemnitors or guarantors.
10. Releases. Any one or more of Company and Indemnitor or any other
party liable upon or in respect of this Agreement or the Reimbursement Agreement
may be released without affecting the liability of any party not so released.
11. Amendments. No provision of this Agreement may be changed,
waived, discharged or terminated orally, by telephone or by any other means
except by an instrument in writing signed by the party against whom enforcement
of the change, waiver, discharge or termination is sought.
12. Joint and Several Liability. In the event that this Agreement is
executed by more than one party, the liability of such parties is joint and
several. A separate action or actions may be brought and prosecuted against
Company and Indemnitor, whether or not an action is brought against any other
person or whether or not any other person is joined in such action or actions.
13. Consent to Jurisdiction. Company and Indemnitor consent to the
exercise of personal jurisdiction over Company and Indemnitor by any federal or
state court in the State of New York and consent to the laying of venue in any
jurisdiction or locality in the State of New York. Service shall be effected by
any means permitted by the court in which any action is filed.
14. Notices. All notices, demands, requests and other communications
required hereunder shall be in writing and shall be deemed to have been properly
given if personally delivered or sent by United States, certified or registered
mail, return receipt requested, postage prepaid, addressed to the party for whom
it is intended at its address hereinafter set forth:
5
<PAGE>
If to Company:
Spurlock Adhesives, Inc.
5090 General Mahone Highway
Waverly, Virginia 23890
Attn: Phillip S. Sumpter
If to Indemnitor:
Spurlock Industries, Inc.
5090 General Mahone Highway
Waverly, Virginia 23890
Attention: ____________________________
If to Bank:
KeyBank National Association
66 South Pearl Street
Albany, New York 12207
Attention: Corporate Banking Division
Notice shall be deemed given upon receipt. Any party may designate a change of
address by written notice to the others, given at least ten (10) days before
such change of address is to become effective.
15. Waivers. The parties waive trial by jury in any action brought
on, under or by virtue of this Agreement. Company and Indemnitor waive any right
to require Bank at any time to pursue any remedy in Bank's power whatsoever. The
failure of Bank to insist upon strict compliance with any of the terms hereof
shall not be considered to be a waiver of any such terms, nor shall it prevent
Bank from insisting upon strict compliance with this Agreement or any other
Financing Document or Bank Document at any time thereafter.
16. Severability. If any clause or provisions herein contained
operates or would prospectively operate to invalidate this Agreement in whole or
in part, then such clause or provision shall be held for naught as though not
contained herein, and the remainder of this Agreement shall remain operative and
in full force and effect.
17. Inconsistencies Among the Financing Documents and Bank
Documents. Nothing contained herein is intended to modify in any way the
obligations of Company or Indemnitor under the Reimbursement Agreement, the
Mortgage or any other Financing Document or Bank Document. Any inconsistencies
among the Financing Documents and Bank
6
<PAGE>
Documents shall be construed, interpreted and resolved so as to benefit Bank,
and Bank's election of which interpretation or construction is for Bank's
benefit shall govern.
18. Successors and Assigns. This Agreement shall be binding upon
Company's and Indemnitor's successors, assigns, heirs, personal representatives
and estate and shall inure to the benefit of Bank and its successors and assigns
but, to the extent the Reimbursement Agreement may be assigned to a third party,
the benefits of this Agreement shall continue to inure only to the benefit of
Bank.
19. Controlling Laws. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, Company and Indemnitor have executed this Agreement
as of the date first above written.
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
---------------------------------
Authorized Officer
SPURLOCK INDUSTRIES, INC.
By: /s/ Phillip S. Sumpter
---------------------------------
Authorized Officer
7
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On the 9th day of October, 1997, before me personally appeared Phillip
S. Sumpter, to me known, who being by me duly sworn, did depose and say that he
resides at 33296 Shingleton Road, Waverly, Virginia, that he is the Executive
Vice President of SPURLOCK ADHESIVES, INC., the corporation described in and
which executed the foregoing instrument, and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/ Kevin J. Kelley
-------------------------------------
Notary Public - State of New York
My Commission Expires:
Kevin J. Kelley
Notary Public, State of New York
Qualified in Albany County
Commission Expires 10/31/97
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On the 9th day of October, 1997, before me personally appeared Phillip
S. Sumpter, to me known, who being by me duly sworn, did depose and say that he
resides at 33296 Shingleton Road, Waverly, Virginia, that he is the Executive
Vice President of SPURLOCK INDUSTRIES, INC., the corporation described in and
which executed the foregoing instrument, and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/ Kevin J. Kelley
-------------------------------------
Notary Public - State of New York
My Commission Expires:
Kevin J. Kelley
Notary Public, State of New York
Qualified in Albany County
Commission Expires 10/31/97
01294\hazard.agr
8
Exhibit 10.45
CLOSING ITEM NO.: A-9
- --------------------------------------------------------------------------------
SPURLOCK INDUSTRIES, INC.
TO
COUNTY OF SARATOGA INDUSTRIAL
DEVELOPMENT AGENCY
========================================
GUARANTY
========================================
DATED AS OF
OCTOBER 1, 1997
- --------------------------------------------------------------------------------
<PAGE>
GUARANTY
THIS GUARANTY dated as of October 1, 1997, (this "Guaranty") from
SPURLOCK INDUSTRIES, INC. a corporation organized under the laws of the State of
Virginia (the "Guarantor") having an office for the transaction of business at
5090 General Mahone Highway, Waverly, Virginia 23890 to COUNTY OF SARATOGA
INDUSTRIAL DEVELOPMENT AGENCY, a New York public benefit corporation (the
"Issuer") having an address of Saratoga County Municipal Center, Ballston Spa,
New York 12020;
W I T N E S S E T H:
WHEREAS, Spurlock Adhesives, Inc., a wholly-owned subsidiary of the
Guarantor, (the "Company") has requested the Issuer to undertake a project (the
"Project") consisting of (A) (1) the acquisition of a certain parcel of land
comprising approximately 16.37 acres constituting Lot #3 located in the Moreau
Industrial Park in the Town of Moreau, Saratoga County, New York (the "Land"),
(2) the construction on the Land of two (2) buildings approximately 10,000
square feet each in size and one (1) approximately 800 square foot building for
use in the manufacturing of synthetic organic chemicals and related functions
(collectively the "Facility") and (3) the acquisition and installation therein
of certain machinery and equipment (the "Equipment" and together with the Land
and the Facility, the "Project Facility"), and (B) the financing of a portion of
the costs of the foregoing; and
WHEREAS, the Issuer proposes to finance a portion of the costs of the
Project Facility by the issuance of its Multi-Mode Variable Rate Industrial
Development Revenue Bonds (Spurlock Adhesives, Inc. Project), Series 1997 A in
the aggregate principal amount of $6,000,000 (the "Bonds"); and
WHEREAS, contemporaneously with the execution of this Guaranty, the
Issuer and the Company have entered into an installment sale agreement dated as
of October 1, 1997, (as amended from time to time, the "Installment Sale
Agreement") pursuant to which the Issuer has sold the Project Facility to the
Company (all terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Installment Sale Agreement); and
WHEREAS, the Guarantor will obtain benefits as a result of the issuance
and sale of the Bonds; and
WHEREAS, the Issuer is unwilling to issue and sell the Bonds unless,
among other conditions, the Guarantor shall have executed and delivered this
Guaranty to the Issuer; and
WHEREAS, the Guarantor has reviewed and approved the Installment Sale
Agreement;
NOW, THEREFORE, the Guarantor hereby covenants and agrees with the
Issuer as follows:
<PAGE>
ARTICLE I
REPRESENTATIONS AND WARRANTIES
OF GUARANTOR
SECTION 1.1. CAPACITY OF GUARANTOR. The Guarantor is a corporation duly
organized and existing under the laws of the State of Virginia, has power to
enter into this Guaranty and to carry out its obligations hereunder and has duly
authorized execution, delivery and performance of this Guaranty.
SECTION 1.2. NO VIOLATION OF RESTRICTIONS. Neither the execution and delivery of
this Guaranty, the consummation of the transactions contemplated thereby nor the
fulfillment of or compliance with the provisions thereof will (1) violate the
Guarantor's articles of incorporation or by-laws, (2) require consent under
(which has not been heretofore received) or result in a breach of or default
under any credit agreement, indenture, purchase agreement, mortgage, deed of
trust, commitment, guaranty or other agreement or instrument to which the
Guarantor is a party or by which the Guarantor or any of its Property (as
defined in the Installment Sale Agreement) may be bound or affected, or (3)
conflict with or violate in any material respect any existing law, rule,
regulation, judgment, order, writ, injunction or decree of any government,
governmental instrumentality or court (domestic or foreign), having jurisdiction
over the Guarantor or any of the Property of the Guarantor.
SECTION 1.3. GOVERNMENTAL CONSENT. No consent, approval or authorization of, or
filing, registration or qualification with, any Governmental Authority (as
defined in the Installment Sale Agreement) on the part of the Guarantor is
required as a condition to its execution, delivery or performance of this
Guaranty.
SECTION 1.4. PENDING LITIGATION. There are no proceedings pending or, to the
knowledge of the Guarantor, threatened against, or affecting, the Guarantor in
any court or before any Governmental Authority or arbitration board or tribunal
which involve the possibility of materially and adversely affecting the
Property, facilities, businesses, prospects, profits or conditions (financial or
otherwise) of the Guarantor or the ability of the Guarantor to execute, deliver
or perform this Guaranty. The Guarantor is not in default with respect to any
order of any court, Governmental Authority or arbitration board or tribunal.
SECTION 1.5. NO DEFAULTS. No event has occurred and no condition exists which,
upon the execution of this Guaranty, would constitute an Event of Default (as
defined in Article III hereof). The Guarantor is not in violation in any
material respect of any term of any agreement, charter, by-law or other
instrument to which the Guarantor is a party or by which it may be bound.
SECTION 1.6. TAXES. All tax returns required to be filed by the Guarantor in all
jurisdictions have in fact been filed or will be filed within the time allowed
by law, including all lawful extensions. All taxes, assessments, fees and other
governmental charges imposed upon the Guarantor or any Property, income or
franchises of the Guarantor which are due and payable have been paid, except for
certain taxes, assessments, fees and other governmental charges as the Guarantor
may be contesting in good faith, the nonpayment of which will not materially
adversely affect the Property, business, prospects, profits or condition
(financial or otherwise) of the Guarantor or the ability of the Guarantor to
execute, deliver or perform this Guaranty. The Guarantor does not know of any
proposed additional tax assessment against it.
2
<PAGE>
SECTION 1.7. COMPLIANCE WITH LAW. The Guarantor:
(A) is not in violation in any material respect of any laws,
ordinances or governmental rules and regulations to which it is subject; and
(B) has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of its Property or
to the conduct of its respective businesses which violation or failure to obtain
might materially adversely affect such Property or businesses.
ARTICLE II
COVENANTS AND AGREEMENTS
OF THE GUARANTORS
SECTION 2.1. GUARANTY OF PAYMENT AND PERFORMANCE. (A) (1) The Guarantor
irrevocably and unconditionally guarantees to the Issuer (i) full and prompt
payment of moneys sufficient to pay, or provide for the payment of, all amounts
due and owing the Issuer from the Company with respect to the Unassigned Rights
(as defined in the Installment Sale Agreement) and (ii) full and complete
performance of all of the Company's duties and obligations to the Issuer under
the Unassigned Rights. The Guarantor irrevocably and unconditionally agrees that
upon the occurrence of an Event of Default (as defined in the Installment Sale
Agreement) respecting such Unassigned Rights, the Guarantor will promptly pay
and/or perform the same upon demand by the Issuer.
(B) All payments by the Guarantor shall be paid in lawful money of
the United States of America.
(C) Each and every default in payment of any sums due and owing the
Issuer from the Company with respect to the Unassigned Rights and/or performance
of the duties and obligations thereunder shall give rise to a separate cause of
action hereunder, and separate suits may be brought hereunder by the Issuer as
each cause of action arises.
(D) The Guarantor shall pay to the Issuer all reasonable costs and
expenses (including attorneys fees) incurred by the Issuer in the protection of
any of the rights of the Issuer or in the pursuance of any of its remedies in
respect of this Guaranty.
SECTION 2.2. OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantor under
this Guaranty shall be absolute and unconditional and shall remain in full force
and effect, and, to the extent permitted by law, such obligations shall not be
affected, modified or impaired by any state of facts or the happening from time
to time of any event, including, without limitation, any of the following,
whether or not with notice to or the consent of the Guarantor:
(A) the invalidity, irregularity, illegality or unenforceability
of, or any defect in, (1) the Unassigned Rights, (2) the Bonds, (3) the other
Financing Documents or (4) any collateral security for any thereof;
3
<PAGE>
(B) any present or future law or order of any government or of any
agency thereof purporting to reduce, amend or otherwise affect the Unassigned
Rights or any other obligation of the Company or any other obligor or to vary
any terms of payment;
(C) any claim of immunity on behalf of the Company or any other
obligor or with respect to any Property of the Company or any other obligor;
(D) the happening of any event described in Section 8.4 or in
Article IX of the Installment Sale Agreement;
(E) the waiver, compromise, settlement, release or termination of
any or all of the obligations, covenants or agreements of (1) the Company under
the Unassigned Rights or any other Financing Documents and (2) the Guarantor
under any Financing Document;
(F) the failure to give notice to the Guarantor of the occurrence
of an Event of Default under any Financing Document;
(G) the transfer, assignment or mortgaging, or the purported or
attempted transfer, assignment or mortgaging, of all or any part of the interest
of the Issuer or the Company in the Project Facility, or any failure of or
defect in the title with respect to the Issuer's or the Company's interest in
the Project Facility, or the termination of the Installment Sale Agreement;
(H) the release, sale, exchange, surrender or other change in any
security for payment of the Unassigned Rights;
(I) the extension of the time for payment of any sum due with
respect to the Unassigned Rights or under this Guaranty or of the time for
performance of any other obligations, covenants or agreements under or arising
out of the Financing Documents;
(J) the modification or amendment (whether material or otherwise)
of any obligation, covenant or agreement set forth in the Unassigned Rights or
any Financing Document;
(K) the taking of, or the omission to take, any of the actions
referred to in the Financing Documents;
(L) any failure, omission or delay on the part of the Issuer or any
other person to enforce, assert or exercise any right, power or remedy conferred
on the Issuer or such other person in this Guaranty or the Financing Documents;
(M) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all of the assets, marshalling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization or other similar proceedings affecting the
Company, the Guarantor or the Issuer or any of the assets of either of them or
any allegation or any contest of the validity of the Financing Documents in any
such proceedings;
(N) any event or action that would, in the absence of this Section,
result in the release or discharge of the Guarantor from the performance or
observance of any obligation, covenant or agreement contained in this Guaranty;
4
<PAGE>
(O) the default or failure of the Guarantor to perform fully any of
its obligations set forth in this Guaranty; or
(P) any other circumstances which might otherwise constitute a
legal or equitable discharge or defense of a surety or a guarantor.
SECTION 2.3. WAIVER BY GUARANTOR. The Guarantor hereby waives with respect to
the Unassigned Rights and the indebtedness evidenced thereby the following:
diligence; presentment; filing of claims with a court in the event of bankruptcy
of the Company or any other person liable in respect of the Unassigned Rights,
any right to require a proceeding first against the Company or any other person;
protest; the release of the Guarantor from liabilities hereunder; notice of
dishonor or nonpayment of any such liabilities; and any other notice and all
demands whatsoever except demand for payment. The Guarantor hereby waives notice
from the Issuer of (A) the issuance of the Bonds, and (B) the acceptance of, or
notice and proof of reliance on, the benefits of this Guaranty.
SECTION 2.4. DISCHARGE OF GUARANTOR'S OBLIGATIONS AND TERMINATION OF THIS
GUARANTY. This Guaranty shall terminate and the obligations of the Guarantor
created hereunder shall be discharged on the earlier to occur of at such time as
all amounts due the Issuer under the Unassigned Rights have been paid and all
duties and obligations of the Company thereunder have been performed. On the
date of such discharge, the Guarantor shall be released from any and all
conditions, terms, covenants or restrictions created or placed upon them by this
Guaranty, and the Guarantor shall not have any further obligation or liability
hereunder.
SECTION 2.5. OTHER SECURITY. The Issuer may pursue its rights and remedies under
this Guaranty notwithstanding (A) any other guaranty of or security for the
Unassigned Rights, and (B) any action taken or omitted to be taken by the
Issuer, or any other person to enforce any of the rights or remedies under such
other guaranty or with respect to any other security.
SECTION 2.6. NO SET-OFF BY GUARANTOR. No set-off, counterclaim, reduction or
diminution of an obligation, or such defense of any kind or nature (other than
full performance by the Guarantor of the obligations hereunder), which the
Guarantor has or may have against the Issuer, or any other person shall be
available hereunder to the Guarantor.
SECTION 2.7. NOTICE AND SERVICE OF PROCESS; VENUE. The Guarantor consents and
submits to the jurisdiction of any local, state or federal court located within
the State of New York and within the Counties of Albany and/or Saratoga. The
Guarantor hereby waives personal service with respect to any action or
proceeding brought hereunder and agrees that notice of such in the manner set
forth in Section 5.4 hereof shall constitute sufficient service of notice of
such action or proceeding. The Guarantor further waives any right it may have to
object to the venue of such action or proceeding.
SECTION 2.8. GUARANTY OF PAYMENT. This Guaranty is a guaranty of payment and not
of collection, and the Guarantor waives any right to require that any action be
brought against any other person or to require that resort be had to any
security or to any balance of any fund or credit held by the Issuer or any other
person prior to the Issuer proceeding under this Guaranty. If at any time any
payment with respect to the Unassigned Rights or any other amount payable hereof
is rescinded or is required to be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of the Guarantor, the Issuer, the
Company or otherwise, the Guarantor's obligations hereunder with respect to such
payment shall be reinstated as though such payment had been due but not made at
such time.
5
<PAGE>
ARTICLE III
EVENTS OF DEFAULT
SECTION 3.1. NATURE OF EVENTS. An "Event of Default" shall exist if any of the
following occurs:
(A) PARTICULAR COVENANT DEFAULTS - the Guarantor fails to perform
or observe any covenant contained in Section 2.1 hereof;
(B) OTHER DEFAULTS - the Guarantor fails to comply with any other
provision of this Guaranty, and such failure continues for more than thirty (30)
days after notice thereof to the Guarantor;
(C) WARRANTIES OR REPRESENTATIONS - any warranty, representation or
other statement by or on behalf of the Guarantor contained in this Guaranty is
false or misleading in any material respect when made;
(D) INVOLUNTARY BANKRUPTCY PROCEEDINGS - a receiver, liquidator or
trustee of the Guarantor or of any of its Property is appointed by court order;
or the Guarantor is adjudicated bankrupt or insolvent or any of its Property is
sequestered by court order and such order remains in effect for more than sixty
(60) days; or a petition is filed against the Guarantor under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, and is
not dismissed within sixty (60) days after such filing;
(E) VOLUNTARY PETITIONS - the Guarantor files a petition in
voluntary bankruptcy or seeks relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing or any petition against it under such law; or
(F) ASSIGNMENTS FOR BENEFIT OF CREDITORS - the Guarantor makes an
assignment for the benefit of its creditors, or admits in writing its inability
to pay its debts generally as they become due, or consents to the appointment of
a receiver, trustee or liquidator of all or any part of its Property.
SECTION 3.2. DEFAULT REMEDIES. If an Event of Default exists, the Issuer may
proceed to enforce the provisions hereof and to exercise any other rights,
powers and remedies available to the Issuer. The Issuer in its discretion, shall
have the right to proceed first and directly against the Guarantor under this
Guaranty without proceeding against or exhausting any other remedies which it
may have and without resorting to any other security held by the Issuer.
SECTION 3.3. REMEDIES: WAIVER AND NOTICE. (A) No remedy herein conferred upon or
reserved to the Issuer is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Guaranty now or hereafter
existing at law or in equity or by statute;
6
<PAGE>
(B) No delay or omission to exercise any right or power accruing upon
the occurrence of any Event of Default hereunder shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right or power
may be exercised from time to time and as often as may be deemed expedient;
(C) In order to entitle the Issuer to exercise any remedy reserved to
it in this Guaranty, it shall not be necessary to give any notice, other than
such notice as may be expressly required in this Guaranty;
(D) In the event any provision contained in this Guaranty should be
breached by any party and thereafter duly waived by the other party so empowered
to act, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder; and
(E) No waiver, amendment, release or modification of this Guaranty
shall be established by conduct, custom or course of dealing.
ARTICLE IV
INTERPRETATION OF THIS GUARANTY
SECTION 4.1. ACCOUNTING PRINCIPLES. Where the character or amount of any asset
or liability or item of income or expense is required to be determined or
consolidated or other accounting computation is required to be made for the
purposes of this Guaranty, such determination, consolidation or computation
shall be made in accordance with generally accepted accounting principles at the
time in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Guaranty.
SECTION 4.2. DIRECTLY OR INDIRECTLY. Where any provision in this Guaranty refers
to action to be taken by any person, or which provision prohibits any person
from taking certain action, such provision shall be applicable whether such
action is to be taken or is not to be taken directly or indirectly by such
person.
SECTION 4.3. GOVERNING LAW. This Guaranty shall be governed by, and construed in
accordance with, the laws of the State.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. OBLIGATIONS ARISE ON SALE OF BONDS. The obligations of the
Guarantor hereunder shall arise absolutely and unconditionally when the Bonds
shall have been issued, sold and delivered by the Issuer.
7
<PAGE>
SECTION 5.2. SURVIVAL. All warranties, representations and covenants made by the
Guarantor herein shall be deemed to have been relied upon by the Issuer and
shall survive the delivery to the Issuer of this Guaranty regardless of any
investigation made by the Issuer.
SECTION 5.3. SUCCESSORS. This Guaranty shall inure to the benefit of and be
binding upon the successors of each of the parties. The provisions of this
Guaranty are intended to be for the benefit of the Issuer.
SECTION 5.4. NOTICES. (A) All communications under this Guaranty shall be in
writing and shall be deemed given when (1) delivered to the applicable address
stated in subsection (B) hereof by registered or certified mail, return receipt
requested, or by such other means as shall provide the sender with documentary
evidence of such delivery, or (2) delivery is refused by the Guarantor or the
Issuer, as the case may be, as evidenced by the affidavit of the Person who
attempted to effect such delivery.
(B) The addresses to which communications under this Guaranty shall be
delivered are as follows:
IF TO THE GUARANTOR:
Spurlock Industries, Inc.
5090 General Mahone Highway
Waverly, Virginia 23890
Attention: Phillip S. Sumpter, Executive Vice President
With a Copy to:
Williams Mullen Christian & Dobbins, P.C.
1021 East Cary Street
Richmond, Virginia 23219
Attention: David L. Dallas, Jr., Esq.
IF TO THE ISSUER:
County of Saratoga Industrial Development Agency
Saratoga County Municipal Center
40 McMaster Street
Ballston Spa, New York 12020
Attention: Administrator
With a Copy to:
Michael J. Toohey, Esq.
Snyder, Kiley, Toohey & Corbett
160 West Avenue
P.O. Box 4367
Saratoga Springs, New York 12866
8
<PAGE>
SECTION 5.5. ENTIRE UNDERSTANDING; COUNTERPARTS. This Guaranty constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and may be executed simultaneously in several counterparts, each of which shall
be deemed an original, but all of which, together, shall constitute one and the
same instrument.
SECTION 5.6. AMENDMENTS. No amendment, change, modification, alteration or
termination of this Guaranty shall be made except upon the written consent of
the Guarantor and the Issuer.
SECTION 5.7. PARTIAL INVALIDITY. The invalidity or unenforceability of any one
or more phrases, sentences, clauses or sections in this Guaranty shall not
affect the validity or enforceability of the remaining portions of this Guaranty
or any part thereof.
SECTION 5.8. SECTION HEADINGS NOT CONTROLLING. The headings of the several
sections of this Guaranty have been prepared for convenience of reference only
and shall not control, affect the meaning or be taken as an interpretation of
any provision of this Guaranty.
9
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and to be dated as of the day and year first above written.
SPURLOCK INDUSTRIES, INC.
By: /s/ Phillip S. Sumpter
--------------------------------
Name: Phillip S. Sumpter
------------------------------
Title: Executive Vice President
-----------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF SARATOGA )
On this 9th day of October, 1997, before me personally came Phillip S.
Sumpter, to me known, who being by me duly sworn, did depose and sat that he
resides in Waverly VA, that he is the Exec. V.P. of SPURLOCK INDUSTRIES, INC.,
the corporation described in and which executed the foregoing instrument, and
that he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Theresa C. Priest
------------------------------------
Notary Public
THERESA C. PRIEST
Notary Public, State of New York
Washington County #01PR4921971
Commission Expires Feb. 28, 1998
10
Exhibit 10.46
Nobel Insurance company
Suite 402
2296 Henderson Mill Road
Atlanta, Georgia 30345
PERFORMANCE BOND
BOND NUMBER 644927
------------
KNOW ALL MEN BY THESE PRESENTS, That we, D. B. Western, Inc. hereinafter called
Principal, and NOBEL INSURANCE COMPANY, a corporation organized and existing
under the laws of the State of Texas, as Surety, hereinafter called Surety, are
held and firmly bound unto Spurlock Adhesives, Inc. hereinafter called Obligee,
in the penal sum of Seven Million, Eight Hundred Seventy One Thousand, Seven
Hundred Fifty Eight Dollars ($7,871,758.00 --), for the payment whereof
Principal and Surety bind themselves, their heirs, executors, administrators,
successors and assigns, jointly and severally, firmly by these presents.
WHEREAS, Principal has by written agreement dated September 30, 1997, entered
into a contract with the Obligee for HCHO/UFC Turnkey Plant "B" in accordance
with the drawings and specifications prepared by D. B. Western, Inc. NOW,
THEREFORE, THE CONDITION OF THIS OBLIGATION is such, that if the Principal shall
promptly and faithfully perform the work called for under said Contract, then
this obligation shall be null and void; otherwise it shall remain in full force
and effect.
Whenever Principal shall be, and be declared by Obligee to be in default under
the Contract, the Obligee having performed Obligee's obligations hereunder, the
Surety may:
(1) Promptly remedy the default subject to the provisions of
paragraph (5) herein; or
(2) Complete the work under the contract in accordance with its
terms and conditions subject to the provisions of paragraph
(5) herein; or
(3) Give reasonable notice to Obligee to arrange for completion of
Principal's work under the contract subject to the provisions
of paragraph (5) herein; or
(4) Obtain a bid or bids for submission to the Obligee for
completing the work called for under the Contract and upon
determination by the Obligee and Surety of the lowest
responsible bondable bidder arrange for a contract between
such bidder with corporate Surety and Obligee, and then pay
the Obligee the bidder's price less the balance of the
contract amount; subject to the provisions of paragraph (5)
herein;
(5) The balance of the contract amount, as defined below, shall be
credited against the reasonable cost of completing performance
of the work under the Contract. If completed by the Obligee,
and the reasonable cost exceeds the balance of the contract
amount, the Surety shall pay to the obligee such excess, but
in no event shall the aggregate liability of the Surety exceed
the penal sum amount of this bond. If the Surety arranges
completion or
<PAGE>
NOBEL INSURANCE COMPANY
DUAL OBLIGEE RIDER
Attached to and forming a part of bond #(s) 644927 issued on behalf of
D. B. Western, Inc. hereinafter called Principal, for the benefit of Spurlock
Adhesives, Inc. and Key Bank, Albany, N.Y. and National Bank of Canada,
hereinafter called Obligees.
1. The Surety shall not be liable under this bond to the
Obligees, or either of them unless the said Obligees or either
of them make all payments to the principal or (to the Surety
in the event the Surety arranges for completion of the
construction upon default of the Principal) strictly in
accordance with the terms of any loans, financing or any
Agreement or obligations in place. Any default by either or
any Obligee will automatically relieve the Principal and the
Surety from performance of the contract.
2. Further, Obligees shall perform all the other obligations to
be performed by the Obligees under any financing, Loan
Agreement or other Agreement between Obligees, Obligees and
Principal or Obligee and Surety at the time and in the manner
herein set forth. Any default by either or both Obligees will
automatically relieve the principal and the Surety from
performance of the contract.
3. The aggregate limit under this Bond to all Obligees or Owner
shall not exceed the penalty of the Bond to which this rider
is attached. Further, NOBEL INSURANCE COMPANY shall not be
liable except for a single payment for each single breach or
single default.
4. NOBEL INSURANCE COMPANY, at its election, may request that any
payment due the Obligee or Principal be issued to NOBEL
INSURANCE COMPANY.
5. Further, NOBEL INSURANCE COMPANY may at its option, make any
payments under said Bond by check issued jointly to the Owner
and the Co-Obligee(s).
SIGNED AND SEALED THIS 9th day of October, 1997, in the presence of:
D.B. Western, Inc. Spurlock Adhesives, Inc.
- --------------------------------- ---------------------------------
Principal Obligee
By: /s/ (Seal) By: /s/ Irvine R. Spurlock (Seal)
------------------------- -----------------------
Title President
NOBEL INSURANCE COMPANY Key Bank
---------------------------------
Obligee
By: /s/ Arthur H. Jones (Seal) By: /s/ Richard C. Van Auken (Seal)
------------------------- ------------------------
Attorney-In-Fact
Arthur H. Jones National Bank of Canada
---------------------------------
Obligee
By: /s/ (Seal)
------------------------
Title VP
<PAGE>
NOBEL INSURANCE COMPANY
GENERAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that NOBEL INSURANCE COMPANY has made,
constituted and appointed, and by these presents does make, constitute and
appoint
J. Russell Tyldesley, Arthur H. Jones, Michael E. Schendel
or Catherine M. Mathews
its true and lawful attorney-in-fact, for it and in its name, place, and stead
to execute on behalf of the said Company, as surety, bonds, undertakings and
contracts of suretyship to be given to
ALL OBLIGEES
provided that no bond or undertaking or contract of suretyship executed under
this authority shall exceed in amount the sum of
********Eight Million Dollars ($8,000,000)********
This Power of Attorney is granted and is signed and sealed by facsimile
under and by the authority of the following Resolution adopted by the Board of
Directors of the Company on the 24th day of August, 1995.
"RESOLVED, that the Chairman of the Board, the Vice Chairman of the
Board, the President, an Executive Vice President or a Senior Vice President or
a Vice President of the Company, be, and that each or any of them is, authorized
to execute Powers of Attorney qualifying the attorney-in-fact named in the given
Power of Attorney to executive on behalf of the Company, bonds, undertakings and
all contracts of suretyship; and that an Assistant Vice President, a Secretary
or an Assistant Secretary be, and that each or any of them hereby, authorized to
attest the execution of any such Power of Attorney, and to attach thereto the
seal of the Company.
FURTHER RESOLVED, that the signatures of such officers and the seal of
the Company may be affixed to any such Power of Attorney or to any certificate
relating thereto by facsimile, and any such Power of Attorney or certificate
bearing such facsimile signatures or facsimile seal shall be valid and binding
upon the Company when so affixed and in the future with respect to any bond,
undertaking or contract of suretyship to which it is attached."
In Witness Whereof, NOBEL INSURANCE COMPANY has caused its official
seal to be hereunto affixed, and these presents to be signed by one of its Vice
Presidents and attested by one of its Assistant Vice Presidents this 1st day of
October, 1995.
<TABLE>
<CAPTION>
<S> <C> <C>
Attest: [CORPORATE NOBEL INSURANCE COMPANY
SEAL OF By
NOBEL INSURANCE
COMPANY]
/s/ William Osceola Gordon /s/ Emil B. Askew
William Osceola Gordon, Assistant Vice President Emil B. Askew, Vice President
</TABLE>
STATE OF GEORGIA
} SS:
COUNTY OF DEKALB
On this 1st day of October, 1995, before me personally came Emil B.
Askew, to me known, who being by me duly sworn did depose and say that he is a
Vice President of NOBEL INSURANCE COMPANY, the corporation described in and
which executed the above instrument; that he knows the seal of the said
corporation; that the seal affixed to the said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation and that he signed his name thereto by like order.
OFFICIAL SEAL
LENORA N. CAPE
NOTARY PUBLIC /s/ Lenora N. Cape
MY COMMISSION EXPIRES Lenora N. Cape
AUGUST 3, 1998 NOTARY PUBLIC
My Commission Expires August 3, 1998
CERTIFICATE
I, the undersigned, an Assistant Secretary of NOBEL INSURANCE COMPANY,
a Texas corporation, DO HEREBY CERTIFY that the foregoing and attached Power of
Attorney remains in full force and has not been revoked; and furthermore that
the Resolution of the Board of Directors, set forth in the said Power of
Attorney, is now in force.
Signed and sealed at the city of Atlanta in the State of Georgia. Dated the 9th
day of October, 1997.
<TABLE>
<CAPTION>
<S> <C>
[CORPORATE
SEAL OF
NOBEL INSURANCE /s/ Charles B. Cape
COMPANY] Charles B. Cape, Assistant Secretary
</TABLE>
Exhibit 10.47
PROMISSORY NOTE
(LIBOR RATE; SECURED)
$1,500,000.00 Saratoga, New York
Dated: As of October 10, 1997
FOR VALUE RECEIVED, SPURLOCK ADHESIVES, INC., a Virginia corporation
with an office for the transaction of business located at 5090 General Mahone
Highway, Waverly, Virginia (the "Borrower") promises to pay to the order of
KEYBANK NATIONAL ASSOCIATION, a national banking association, with its principal
office and place of business at 66 South Pearl Street, Albany, New York 12207
("KeyBank") the principal sum of One Million Five Hundred Thousand Dollars
($1,500,000.00) or so much thereof as may be advanced from time to time in
accordance with the terms of this Note, with interest on the unpaid principal
balance of such amount from the date of this Note or such advance, as the case
may be, at the Interest Rate (hereinafter defined).
This Note evidences a loan (the "Loan") made, or so much thereof as may
be made, by KeyBank to Borrower, in the principal amount hereof, and is secured
by (a) a mortgage from County of Saratoga Industrial Development Agency (the
"Issuer") and the Borrower to KeyBank dated as of October 1, 1997 (the
"Mortgage") which creates a first lien on certain real property located in the
Town of Moreau, Saratoga County, State of New York (the "Real Property"); (b) a
security agreement dated as of October 1, 1997 from Borrower to KeyBank (the
"Security Agreement") which, together with financing statements executed in
conjunction therewith (the "Financing Statements"), creates a first lien
security interest in certain personal property (the "Personal Property") more
particularly described in the Security Agreement; (c) the irrevocable,
unconditional guaranty of payment by Spurlock Industries, Inc. (the "Guarantor")
of the Loan set forth in a guaranty of payment dated as of October 1, 1997 from
the Guarantor to KeyBank (the "Guaranty"); and (d) such other security as may
now or hereafter be given to KeyBank by Borrower as collateral for the Loan (the
Mortgage, the Security Agreement, the Financing Statements, the Guaranty, this
Note and such other documents evidencing such other security which may hereafter
be given as further security for, or in connection with, the Loan, being
hereinafter collectively referred to as the "Term Loan Documents").
I.
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein shall
have the following definitions:
<PAGE>
"Default Interest Rate" shall mean the applicable Interest Rate plus
four (4%) percent per annum; provided, however, after maturity of the Loan
(whether by acceleration or otherwise), the principal of the Loan and the unpaid
interest and fees thereon shall bear interest at a rate per annum equal to the
greater of three percent (3%) in excess of the highest applicable interest rate
provided for herein, or sixteen percent (16%).
"Interest Rate" shall mean the rate of interest to be calculated
hereunder and paid by Borrower on any outstanding principal due under this Note
and shall be either the LIBOR Rate or the Variable Rate.
"Interest Rate Election Period" shall mean the time period during which
interest is to accrue on the principal balance hereof at the LIBOR Rate. An
Interest Rate Election Period shall be a term of one month (or, if this Note is
dated on other than the first day of a month, for the first Interest Rate
Election Period only, the time period between the date of this Note and the last
day of the month in which this Note is dated, inclusive). In no event shall any
Interest Rate Election Period extend beyond the Maturity Date of the Loan.
"LIBOR" shall mean the rate per annum calculated by KeyBank in good
faith, which KeyBank determines with reference to the rate per annum (rounded
upwards to the next higher whole multiple of 1/16% if such rate is not a
multiple) at which deposits in United States dollars for one month are offered
by prime banks in the London interbank eurodollar market on the first day of an
Interest Rate Election Period in an amount comparable to the outstanding
principal balance of the Loan.
"LIBOR Rate" shall mean a fixed rate equal to LIBOR plus Two and
Seventy-Five Hundredths (2.75%) percent.
"LIBOR Reserve Requirements" means, for any amount bearing interest at
the LIBOR Rate, the maximum reserves (whether basic, supplemental, marginal,
emergency, or otherwise) prescribed by the Board of Governors of the Federal
Reserve System (or any successor) with respect to liabilities or assets
consisting of or including "Eurocurrency liabilities" (as defined in Regulation
D of the Board of Governors of the Federal Reserve System) having a term equal
to the Interest Rate Election Period.
"Maturity Date" shall mean April 1, 2008.
"Prime Rate" shall mean that interest rate established by KeyBank
National Association as KeyBank's Prime Rate, whether or not such rate is
publicly announced. The Prime Rate may not be the lowest interest rate charged
by KeyBank for commercial or other extensions of credit.
"Variable Rate" shall mean a floating rate equal to the Prime Rate in
effect from time to time.
2
<PAGE>
II.
INTEREST
(a) COMPUTATION OF INTEREST. Interest on the outstanding principal
balance of this Note shall be computed on the basis of a 360-day year. Interest
shall accrue until the Loan is repaid.
(b) INTEREST RATE CHANGE PROCEDURES. The LIBOR Rate calculated
hereunder for an Interest Rate Election Period shall remain constant for the
Interest Rate Election Period. If the Variable Rate is in effect, each change in
the Prime Rate shall effect a corresponding change in the Variable Rate.
(c) IMPLEMENTATION OF DEFAULT INTEREST RATE. Upon the occurrence of
an Event of Default (hereinbelow defined), the computation of interest under
this Note shall immediately and without further action by KeyBank be based upon
the Default Interest Rate.
(d) UNAVAILABILITY OF LIBOR RATE. If KeyBank is unable to offer the
LIBOR Rate for any reason, KeyBank shall give the Borrower proper notice of its
inability to offer the LIBOR Rate and the Interest Rate for each monthly payment
of interest shall be the Variable Rate.
III.
LIBOR RESERVE REQUIREMENT
If because of the introduction of or any change in or because of any
judicial, administrative or other governmental interpretation of any law or
regulation, there shall be any increase in the cost to KeyBank of making,
funding, maintaining or allocating capital to the principal amount bearing
interest at the LIBOR Rate, including LIBOR Reserve Requirements, then Borrower
shall from time to time upon demand by KeyBank pay KeyBank additional moneys
sufficient to compensate KeyBank for such increased cost.
Any amount or amounts payable by Borrower to KeyBank pursuant to this
Article shall be paid by Borrower to KeyBank within ten (10) days of receipt by
Borrower from KeyBank of a statement setting forth the amount or amounts due and
the basis for the determination from time to time of such amount or amounts,
which statement shall be conclusive and binding upon Borrower absent manifest
error.
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<PAGE>
IV.
PAYMENT OF PRINCIPAL AND INTEREST
Borrower shall pay interest at the applicable Interest Rate on the
unpaid principal balance of this Note beginning on the first day of November,
1997 and continuing on the first day of each month thereafter until the Maturity
Date (or such earlier date in the event KeyBank accelerates Borrower's
obligations hereunder), at which time, any accrued and unpaid interest must be
paid. Principal repayment shall begin on May 1, 1998 when Borrower shall begin
making monthly principal payments in the amount of Twelve Thousand Five Hundred
Dollars ($12,500) and said monthly payments shall continue on the first day of
each month thereafter until the Maturity Date (or such earlier date in the event
KeyBank accelerates Borrower's obligations hereunder) when the balance of
principal remaining unpaid plus interest shall be fully due and payable.
V.
GENERAL CONDITIONS
(a) METHOD OF PAYMENT. All payments under this Note are payable at
66 South Pearl Street, Albany, New York 12207, or at such other place as KeyBank
shall notify Borrower in writing. KeyBank reserves the right to require any
payment on this Note, whether such payment is of a regular installment or
represents a prepayment, to be by wired federal funds or other immediately
available funds or to be paid at a place other than the above address.
(b) APPLICATION OF PAYMENTS RECEIVED. Except as may otherwise be
provided in this Note, all payments received by KeyBank on this Note shall be
applied by KeyBank to any unpaid Late Payment Charges (hereinbelow defined),
accrued and unpaid interest then due and owing and the reduction of principal of
this Note, in such order and in such amounts as KeyBank may determine from time
to time.
(c) LATE PAYMENT CHARGES. If Borrower fails to pay any amount of
principal and/or interest on this Note for ten (10) days after such payment
becomes due, whether by acceleration or otherwise, KeyBank may, at its option,
whether immediately or at the time of final payment of the amounts evidenced by
this Note, impose a late payment charge (the "Late Payment Charge") computed by
multiplying the amount of each past due payment by five (5%) percent. Until any
and all Late Payment Charges are paid in full, the amount thereof shall be added
to the indebtedness secured by any of the Term Loan Documents. The Late Payment
Charge is not a penalty and is deemed to be liquidated damages for the purpose
of compensating KeyBank for the difficulty in computing the actual amount of
damages incurred by KeyBank as a result of the late payment by Borrower.
4
<PAGE>
(d) PREPAYMENT. The principal balance may be prepaid in whole or in
part, in multiples of $100,000 at the end of any Interest Rate Election Period
without premium or penalty.
In the event KeyBank receives partial prepayments, or in the event that
KeyBank shall receive proceeds of condemnation or insurance proceeds for
application against the Loan, such prepayments and proceeds shall be applied to
installments of principal in the inverse order of maturity.
(e) ACCELERATION AND DEFAULT. If:
(1) Borrower fails to pay any sum due on this Note within ten
(10) days of the date the same is due; or
(2) Borrower shall fail to perform any other covenant,
obligation or agreement required to be performed by Borrower under this Note,
and such failure remains unremedied for thirty (30) calendar days after KeyBank
shall have given written notice thereof to Borrower, or, if such covenant,
condition or agreement is capable of cure but cannot be cured within such thirty
(30) day period, the failure of the Borrower to commence to cure within such
thirty (30) day period and thereafter diligently proceed with all action
required to complete said cure within ninety (90) days of such written notice
unless such time to cure is otherwise extended by KeyBank in writing; or
(3) Any warranty or representation made or given by Borrower
or any financial or other statement submitted by or on behalf of Borrower, or
the Guarantor in any instrument furnished in compliance with or in reference to
this Note or the Term Loan Documents should be false or misleading in any
material respect; or
(4) Borrower or the Guarantor shall generally not be paying
debts as they become due or file a petition or seek relief under or take
advantage of any insolvency law; make an assignment for the benefit of
creditors; commence a proceeding for the appointment of a receiver, trustee,
liquidator, custodian or conservator of Borrower or the Guarantor or of the
whole or substantially all of Borrower's or the Guarantor's property or of any
collateral pledged as security for this Note; or if Borrower or the Guarantor
shall file a petition or an answer to a petition under any chapter of the
Bankruptcy Reform Act of 1978, as amended (or any successor statute thereto), or
file a petition or seek relief under or take advantage of any other similar law
or statute of the United States of America, any state thereof, or any foreign
country or subdivision thereof; or
(5) A Court of competent jurisdiction shall enter an order,
judgment or decree appointing or authorizing a receiver, trustee, liquidator,
custodian or conservator of Borrower or the Guarantor or of the whole or
substantially all of Borrower's or the Guarantor's property, or any portion of
the collateral pledged as security for this Note, or enter an order for relief
against Borrower or the Guarantor in any case commenced under any chapter of the
Bankruptcy
5
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Reform Act of 1978, as amended (or any successor statute thereto), or grant
relief under any other similar law or statute of the United States of America,
any state thereof, or any foreign country or subdivision thereof and the same is
not stayed or discharged within sixty (60) days of entry; or
(6) Under the provisions of any law for the relief or aid of
debtors, a court of competent jurisdiction or a receiver, trustee, liquidator,
custodian or conservator shall assume custody or control or take possession from
Borrower or the Guarantor of all or substantially all of Borrower's or the
Guarantor's property or any portion of any collateral pledged as security for
this Note; or
(7) There is commenced against Borrower or the Guarantor any
proceeding for any of the foregoing relief or if a petition is filed against
Borrower or the Guarantor under any chapter of the Bankruptcy Reform Act of
1978, as amended (or any successor statute thereto), or under any other similar
law or statute of the United States of America, any state thereof, or any
foreign country or subdivision thereof, and such proceeding or petition remains
undismissed for a period of sixty (60) days or if Borrower or the Guarantor by
any act indicates consent to, approval of or acquiescence in any such proceeding
or petition; or
(8) KeyBank receives a notice to creditors with regard to a
bulk transfer by Borrower or the Guarantor pursuant to Article VI of the Uniform
Commercial Code or if the Borrower shall dissolve, terminate its existence,
fail, cease normal business operation or otherwise discontinue its existence; or
(9) An "Event of Default", as said term is defined in any of
the other Term Loan Documents or the Financing Documents (as defined in the
Mortgage), shall have occurred; or
(10) Borrower or the Guarantor fails to comply with the terms
of or an "event of default" occurs under any other loan transaction or credit
arrangement of any kind with KeyBank; or
(11) An "event of default" occurs under the loan and security
agreement dated as of July 1, 1996 between the Borrower and National Bank of
Canada (f/k/a National Canada Finance Corporation);
then, and in any such event (an "Event of Default"), KeyBank may, at its option,
declare the entire unpaid balance of this Note together with interest accrued
thereon and any other sums due hereunder or under the Term Loan Documents, to be
immediately due and payable and KeyBank may proceed to exercise any rights or
remedies that it may have under this Note or any other Term Loan Documents, or
such other rights and remedies which KeyBank may have at law, equity or
otherwise. In the event of such acceleration, Borrower may discharge its
obligations to KeyBank by paying:
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(i) the unpaid principal balance hereof as at the date
of such payment, plus
(ii) accrued interest computed in the manner set forth
above, plus
(iii) any Late Payment Charge computed in the manner set
forth above, plus
(iv) any other sum due and owing KeyBank under this
Note or any other Term Loan Document.
(f) COSTS AND EXPENSES ON DEFAULT. After the occurrence of an Event
of Default, in addition to principal, interest and any Late Payment Charges,
KeyBank shall be entitled to collect all costs of collection, including, but not
limited to, reasonable attorneys' fees, incurred in connection with the
protection or realization of collateral or in connection with any of KeyBank's
collection efforts, whether or not suit on this Note or any foreclosure
proceeding is filed, and all such costs and expenses shall be payable on demand
and until paid shall also be secured by the Term Loan Documents and by all other
collateral held by KeyBank as security for Borrower's obligations to KeyBank.
(g) NO WAIVER BY KEYBANK. No failure by the Guarantor of the Loan to
make any payments shall be deemed a waiver or release of Borrower's obligations
hereunder. No failure on the part of KeyBank or other holder hereof to exercise
any right or remedy hereunder, whether before or after the happening of a
default, shall constitute a waiver thereof, and no waiver of any past default
shall constitute waiver of any future default or of any other default. No
failure to accelerate the Loan evidenced hereby by reason of default hereunder,
or acceptance of a past due installment, or indulgence granted from time to time
shall be construed to be a waiver of the right to insist upon prompt payment
thereafter, or shall be deemed to be a novation of this Note or as a
reinstatement of the Loan evidenced hereby or as a waiver of such right of
acceleration or any other right, or be construed so as to preclude the exercise
of any right which KeyBank may have, whether by the laws of the state governing
this Note, by agreement or otherwise; and Borrower and each endorser or
Guarantor hereby expressly waive the benefit of any statute or rule of law or
equity which would produce a result contrary to or in conflict with the
foregoing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom such agreement is sought to be
enforced.
(h) FINANCIAL INFORMATION. Borrower will at all times keep proper
books of record and account in which full, true and correct entries shall be
made in accordance with generally accepted accounting principles and will timely
deliver to KeyBank the financial information required by the Reimbursement
Agreement (as defined in the Mortgage).
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<PAGE>
(i) WAIVER BY BORROWER. Borrower and each endorser or Guarantor of
this Note hereby waives presentment, protest, demand, diligence, notice of
dishonor and of nonpayment, and waives and renounces all rights to the benefits
of any statute of limitations and any moratorium, appraisement, exemption and
homestead now provided or which may hereafter be provided by any federal or
state statute, including but not limited to exemptions provided by or allowed
under the Bankruptcy Code of 1978, both as to itself personally and as to all of
its or their property, whether real or personal, against the enforcement and
collection of the obligations evidenced by this Note and any and all extensions,
renewals and modifications hereof.
(j) COMPLIANCE WITH USURY LAWS. It is the intention of the parties
to conform strictly to the usury laws, whether state or federal, that are
applicable to this Note. All agreements between Borrower and KeyBank, whether
now existing or hereafter arising and whether oral or written, are hereby
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity hereof or otherwise, shall the amount paid or agreed to
be paid to KeyBank or the holder hereof, or collected by KeyBank or such holder,
for the use, forbearance or detention of the money to be loaned hereunder or
otherwise, or for the payment or performance of any covenant or obligation
contained herein, or in any of the Term Loan Documents, exceed the maximum
amount permissible under applicable federal or state usury laws. If under any
circumstances whatsoever fulfillment of any provision hereof or of the Term Loan
Documents, at the time performance of such provision shall be due, shall involve
exceeding the limit of validity prescribed by law, then the obligation to be
fulfilled shall be reduced to the limit of such validity; and if under any
circumstances KeyBank or other holder hereof shall ever receive an amount deemed
interest by applicable law, which would exceed the highest lawful rate, such
amount that would be excessive interest under applicable usury laws shall be
applied to the reduction of the principal amount owing hereunder or to other
indebtedness secured by the Term Loan Documents and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
and such other indebtedness, the excess shall be deemed to have been a payment
made by mistake and shall be refunded to Borrower or to any other person making
such payment on Borrower's behalf. All sums paid or agreed to be paid to the
holder hereof for the use, forbearance or detention of the indebtedness of
Borrower evidenced hereby, outstanding from time to time shall, to the extent
permitted by applicable law, and to the extent necessary to preclude exceeding
the limit of validity prescribed by law, be amortized, pro-rated, allocated and
spread from the date of disbursement of the proceeds of this Note until payment
in full of the Loan evidenced hereby and thereby so that the actual rate of
interest on account of such indebtedness is uniform throughout the term hereof
and thereof. The terms and provisions of this paragraph shall control and
supersede every other provision of all agreements between Borrower, any endorser
or Guarantor and KeyBank.
(k) GOVERNING LAW; SUBMISSION TO JURISDICTION. This Note shall be
governed by and construed under the laws of the State of New York. Borrower and
each endorser or Guarantor hereby submits to personal jurisdiction in said state
for the enforcement of Borrower's obligations hereunder or under any other Term
Loan Document and waives any
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<PAGE>
and all personal rights under the law of any other state to object to
jurisdiction within such state for the purposes of litigation to enforce such
obligations of Borrower.
(l) WAIVER OF JURY TRIAL. KeyBank and the Borrower hereby waive
trial by jury in any litigation in any court with respect to, in connection
with, or arising out of this Note, any other Term Loan Document or the Loan, or
any instrument or document delivered in connection with the Loan, or the
validity, protection, interpretation, collection or enforcement thereof, or any
other claim or dispute howsoever arising between the Borrower and KeyBank.
(m) AUTHORITY OF KEYBANK. Borrower authorizes KeyBank to date this
Note as of the day when the Loan is made and to complete or correct this Note as
to any terms of the Loan not set forth herein at the time of delivery hereof.
(n) NOTICES. Any notices required or permitted to be given hereunder
shall be: (i) personally delivered or (ii) given by registered or certified
mail, postage prepaid, return receipt requested, or (iii) forwarded by overnight
courier service, in each instance addressed to the addresses set forth at the
head of this Note, or such other addresses as the parties may for themselves
designate in writing as provided herein for the purpose of receiving notices
hereunder. All notices shall be in writing and shall be deemed given, in the
case of notice by personal delivery, upon actual delivery, and in the case of
appropriate mail or courier service, upon deposit with the U.S. Postal Service
or delivery to the courier service.
(o) LIABILITY IF MORE THAN ONE BORROWER. If more than one person or
entity executes this Note as a Borrower, all of said persons or entities are
jointly and severally liable hereunder.
(p) ENTIRE AGREEMENT. This Note and the other Loan Documents
constitute the entire understanding between Borrower, the Guarantors, and
KeyBank and to the extent that any writings not signed by KeyBank or oral
statements or conversations at any time made or had shall be inconsistent with
the provisions of this Note and the other Term Loan Documents, the same shall be
null and void.
IN WITNESS WHEREOF, Borrower has executed this instrument the date
first above written.
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
--------------------------------
Phillip S. Sumpter
Executive Vice President
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STATE OF NEW YORK )
) ss.:
COUNTY OF SARATOGA )
On this ____ day of October, 1997, before me personally came Phillip S.
Sumpter, to me known, who being by me duly sworn, did depose and say that he
resides at 33296 Shingleton Road, Waverly, Virginia; that he is an Executive
Vice President of Spurlock Adhesives, Inc., the corporation described in, and
which executed the above instrument; and that he signed his name thereto by
order of the board of directors of said corporation.
/s/
---------------------------------
NOTARY PUBLIC
01294\prom.2
10
Exhibit 10.48
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT, dated April 8, 1998, is made by and among
Spurlock Industries, Inc., a Virginia corporation, Spurlock Adhesives, Inc., a
Virginia corporation (collectively, the "Corporations"), Spurlock Family Limited
Partnership, a Virginia limited partnership (the "Partnership"), H. Norman
Spurlock, Jr. ("Spurlock") and Harold N. Spurlock, Sr. ("Guarantor").
Recitals
WHEREAS, Spurlock has acknowledged that he is indebted to the
Corporations in the amount of THREE HUNDRED EIGHTY-FIVE THOUSAND and No/100
DOLLARS ($385,000.00) by reason of his use of the accounts set forth on Exhibit
1 attached hereto and incorporated herein; and
WHEREAS, the parties hereto desire to settle the claims, disputes and
differences among them with respect to matters related to Spurlock's known debts
to the Corporations; and
WHEREAS, in connection with such settlement Spurlock desires to repay
the Corporations for their losses and to be released from certain claims, and
the Corporations desire to accept such payment by and on behalf of Spurlock in
satisfaction of the known claims against Spurlock on the terms and conditions
more particularly set forth herein.
Agreement
NOW, THEREFORE, for and in consideration of the mutual promises
contained herein, the parties agree as follows:
1. Definitions.
1.1. Claims. The term "Claims" shall refer to those claims
of the Corporations against Spurlock which are set out on Exhibit 1, and no
others.
1.2 Debt. The term "Debt" shall refer to those obligations
of Spurlock to the Corporations arising out of the Claims set forth on Exhibit
1.
1.3 Note. The term "Note" shall refer to the Promissory
Note the form of which is attached hereto as Exhibit 2.
1.4 Settlement Documents. The term "Settlement Documents"
shall refer to the Note, the Pledge and Security Agreement by and between
Spurlock Adhesives, Inc. and the Partnership, the Unconditional Guaranty given
by Harold N. Spurlock, Sr., and the other documents set forth on Exhibit 6,
attached hereto.
2. Satisfaction of the Debt.
2.1. Settlement Amount. The parties acknowledge and agree
that the amount negotiated by the parties for repayment by Spurlock of the Debt
(including interest on the principal thereof at the Corporations' applicable
borrowing rate), and related accounting and legal
<PAGE>
fees, totals $385,000.00.
2.2 Cash Payment. Concurrently herewith, Spurlock has
delivered to the Corporation a cashier's or official bank check in the amount of
$10,000.00, payable to the order of Spurlock Adhesives, Inc.
2.3 Promissory Note. Concurrently with the execution of
this Agreement, the Partnership shall execute the Note in the principal amount
of $375,000.00 on the terms and conditions set forth in the form attached hereto
and incorporated herein as Exhibit 2.
2.4 Entry of Confessed Judgment Against Spurlock. On or
before April 13, 1998, Spurlock agrees to personally appear before the Clerk of
the Circuit Court of the County of Sussex, Virginia, and confess judgment in
favor of the Corporations in the amount of $375,000.00, and to take all other
action necessary pursuant to ss. 8.01-432 et seq. of the Code of Virginia to
permit such confessed judgment to be entered and docketed against him in the
Circuit Court of the County of Sussex, Virginia. Such judgment shall provide
that it arises out of claims against Spurlock for his actions which fall within
the dischargeability exceptions of 11 U.S.C. ss.523(a)(4), a fact which Spurlock
acknowledges, and that it is intended by the judgment debtor and the judgment
creditors to be nondischargeable under 11 U.S.C. ss.523(a)(4) (the "Confessed
Judgment"). The Corporations hereby covenant and agree that so long as the Note
and all other obligations of the Partnership under any of the Settlement
Documents are not in default or have not been cured as provided in the Note or,
as applicable, in the other Settlement Documents, then the Corporations shall
neither docket in any jurisdiction other than Sussex County, Virginia, nor seek
enforcement of the Confessed Judgment in any jurisdiction, including without
limitation any city, county, or any political subdivision of any state in the
United States, or in any foreign country. The Corporations further agree that
should the Corporations, or either of them, breach this provision, Spurlock
shall be entitled to injunctive relief against any such breach in the Circuit
Court of the City of Richmond, Virginia, which the parties hereby agree is
proper venue; and Spurlock and the Corporations hereby agree that the prevailing
party in such injunction proceeding shall be entitled to recover his or its
attorneys fees reasonably incurred in the prosecution or defense of such
proceeding from the losing party. Upon payment in full of the Note and
satisfaction of all obligations under the other Settlement Documents, the
Corporations shall cause the Confessed Judgment to be marked "satisfied" and
shall take no further actions to enforce the Confessed Judgment.
3. Additional Covenants of the Parties.
3.1 Security Interest. The parties further agree that the
Debt shall be secured by the pledge of 2,325,000 shares of common stock of
Spurlock Industries, Inc. (the "Securities") which Securities are currently
owned by the Partnership. To evidence such security interest, concurrently with
the execution of this Agreement, Spurlock Adhesives, Inc. and the Partnership
shall enter into a Pledge and Security Agreement on the terms and conditions set
forth in the form attached hereto and incorporated herein as Exhibit 3. The
Partnership hereby represents and warrants that it owns the Securities free and
clear of all liens and encumbrances.
3.2 Perfection of Security Interest. Currently with the
execution of this Agreement, the Partnership shall deliver to the Corporations
certificate numbers 3673 and 3674 which evidence the Securities, as well as such
stock powers as the Corporations deem necessary to perfect the Corporations'
security interest.
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3.3 Several Nature of Confessed Judgment and Note. The
parties acknowledge and agree that the Partnership's obligations under the Note
and the obligations which could become enforceable under the Confessed Judgment
are several obligations of the Partnership and Spurlock, but that in the event
of default under the Note, the Corporations shall be entitled to recover only a
maximum of $375,000.00 plus all accrued interest, late payments or other amounts
provided for under the terms of the Note and the other Settlement Documents, and
that any amounts collected or received by the Corporations from the Partnership
under the Note or from Spurlock under the Confessed Judgment shall operate as a
credit toward the total amounts due under the Note and the Settlement Documents
or the Confessed Judgment.
3.4 Redemption of Spurlock's Interest in Partnership. The
parties acknowledge that as part of the consideration by and between Spurlock
and the Partnership related to this Settlement Agreement, the Note and the
remaining Settlement Documents, Spurlock shall, pursuant to the terms of a
Partnership Redemption Agreement duly executed by Spurlock and the Partnership
on even date with the execution of this Settlement Agreement, redeem annually on
a prorata basis so much of his ownership interest in the Partnership as equates
to the Partnership's payments of interest and principal under the Note.
Additionally, Spurlock shall upon execution of this Settlement Agreement, have
resigned his positions as an officer and director of the general partner of the
Partnership and he shall have relinquished all of his stock ownership of the
same general partner. Further, Spurlock shall, upon execution of this Settlement
Agreement have conveyed to a trustee his entire interest in the Partnership
pursuant to an Irrevocable Assignment.
3.5 Noncompetition. Spurlock agrees that, for a period of
three (3) years from and after the date of this Agreement, he will not directly
or indirectly, either on behalf of himself or on behalf of any person or entity
(except the Corporations) with which he may be associated as an agent, employee,
consultant or otherwise, engage in or have any financial interest in a business
which is a competitor of the Corporations within the geographical area of the
United States, lying east of the Mississippi River. The parties acknowledge that
the scope of this noncompetition provision is reasonable in terms of length and
geographic scope because the customers of the Corporations are located
throughout this area. Spurlock hereby acknowledges that any breach or threatened
breach of this Section may result in significant and continuing injury to the
Corporations, the monetary value of which may be difficult to establish.
Therefore, Spurlock agrees that the Corporations shall be entitled to injunctive
relief by a court of appropriate jurisdiction in the event of any breach or
threatened breach of this Section.
3.6 Confidential Information. Spurlock agrees that he will
not disclose any Confidential Information regarding the Corporations.
"Confidential Information" shall include (i) any written or recorded information
belonging to the Corporations which is clearly identified or marked as being
confidential and (ii) information concerning the Corporations' business and/or
marketing plans, procedures, strategies or objectives; financial conditions,
costs, pricing, proprietary technology or other intellectual property; product
orders, sales, product development activities, existing and prospective
customers and any and all methods of operation. Spurlock shall maintain the
Corporations' Confidential Information confidential except: (a) Confidential
Information which is or becomes known publicly through no fault of the party
receiving or learning of the Confidential Information; (b) Confidential
Information learned by a party from a third party entitled to disclose it; (c)
Confidential Information already known to Spurlock before receipt from the
Corporations but only as shown by Spurlock's prior written records; (d)
Confidential Information disclosed with the prior written consent of the
Corporations; or (e) Confidential Information disclosed pursuant to any judicial
or governmental request, requirement or order, provided Spurlock takes
reasonable steps to give the Corporations sufficient prior notice
-3-
<PAGE>
in order to contest such request, requirement or order. Spurlock hereby
acknowledges that any breach or threatened breach of this Section may result in
significant and continuing injury to the Corporations, the monetary value of
which may be difficult to establish. Therefore, Spurlock agrees that the
Corporations shall be entitled to injunctive relief by a court of appropriate
jurisdiction in the event of any breach or threatened breach of this Section.
3.7 Indemnification. Except as provided in paragraph 2.4
herein, the parties agree that the Corporations shall not be required to
indemnify and hold harmless Spurlock for any legal expenses or other indemnity
related to the Claims, whether incurred before or after the execution of this
Agreement, and Spurlock hereby expressly waives and releases any claim thereto.
The parties further agree that neither this Settlement Agreement nor any
previous indemnification by the Corporations of any party to this Settlement
Agreement shall (a) obligate the Corporations to provide indemnification or (b)
otherwise affect any right or obligation of the Corporation to provide or deny
indemnification, with respect to matters unrelated to the Claims(as defined
below).
3.8 Financial Statements. Spurlock, the Partnership, and
the Guarantor shall deliver to the Corporations current financial statements,
certified by them to be true and correct, in such form as may be reasonably
requested by the Corporations, upon the execution of this Agreement or within a
reasonable time thereafter and upon each anniversary date of this Agreement
until all obligations evidenced by the Note have been satisfied in full.
3.9 Insolvency Certificates. Concurrently herewith, the
Partnership shall execute and deliver an Insolvency Certificate, in the form
attached hereto and incorporated herein as Exhibit 4.
3.10 Legal Opinion of the Partnership's and the Guarantor's
Counsel. Concurrently herewith, counsel for the Partnership and the Guarantor
shall furnish the Corporations with its legal opinion, in the form attached
hereto and incorporated herein collectively as Exhibit 5.
4. Guaranty. The obligations of the Corporations hereunder are
expressly conditioned on the execution of an unconditional guaranty by Harold N.
Spurlock, Sr. in the form attached hereto as Exhibit 3. Harold N. Spurlock, Sr.
joins in the execution of this Settlement Agreement in order to evidence his
obligations hereunder, including but not limited to his agreement to execute the
unconditional guaranty in the form attached hereto and incorporated herein as
Exhibit 3 concurrently with the execution of this Settlement Agreement.
5. Release of Spurlock and the Partnership by the Corporations. The
Corporations, for themselves, and their employees, agents and assigns, do hereby
forever release and discharge Spurlock and the Partnership and their respective
successors, assigns, individual partners, servants, agents, and employees, as
applicable, from all claims arising out of the matters specifically identified
in Exhibit 1 attached hereto (the "Claims"), and from all claims for legal and
auditing expenses incurred by the Corporations in their investigation and
settlement of the Claims. This release shall not extend to claims arising from
any matter other than those specifically identified in Exhibit 1 attached
hereto.
6. Other Documents. Concurrently herewith, the Partnership shall
cause to be delivered to the Corporation, the certificates and other documents
included on the Closing Memorandum attached hereto and incorporated herein as
Exhibit 6.
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<PAGE>
7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their heirs,
personal representatives or successors and assigns.
9. Effective Time. This Agreement shall become effective upon the
execution and delivery of all the Settlement Documents, the delivery of the cash
payment required under paragraph 2.2 above, and the entry and docketing of the
Confessed Judgment in the Circuit Court of Sussex County, Virginia.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SPURLOCK INDUSTRIES, INC.
By /s/ Phillip S. Sumpter
----------------------------------
Title: Chairman & CEO
------------------------------
SPURLOCK ADHESIVES, INC.
By /s/ Phillip S. Sumpter
----------------------------------
Title: Chairman & CEO
------------------------------
SPURLOCK FAMILY LIMITED PARTNERSHIP
By: Spurlock Family Corporation, Its General Partner
By: /s/ Harold N. Spurlock, Sr.
---------------------------------
Harold N. Spurlock, Sr., President
/s/ H. Norman Spurlock, Jr.
----------------------------------
H. NORMAN SPURLOCK, JR.
/s/ Harold N. Spurlock, Sr.
----------------------------------
HAROLD N. SPURLOCK, SR.
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<PAGE>
EXHIBIT 1
Credit card purchases from August 1, 1992 to January 31, 1998 on American
Express master account number:
3783-640753-61000
3783-640753-62008
3783-640753-63006
3783-640753-64004
Credit card purchases from January 1, 1997 to January 31, 1998 on the Key Bank
MasterCard master account number 5472-1841-1199-0024.
Checks and drafts payable to Spurlock and styled payees including H. Norman
Spurlock, Jr., H.N. Spurlock, Jr. and Norman Spurlock, from August 1, 1992 to
January 31, 1998, for the following accounts:
James River Bank (formerly known as
Bank of Waverly), Waverly, Virginia 0000403078
James River Bank (formerly known as
Bank of Waverly), Waverly, Virginia 0001105947
Horizon Bank, Malvern, Arkansas 0007014643
Horizon Bank, Malvern, Arkansas 0007014627
Smith Barney, Richmond, Virginia 170-14987-17
Claims arising from any matter other than those specifically identified above
are excluded.
<PAGE>
EXHIBIT 2
[EXECUTION ORIGINAL]
PROMISSORY NOTE
$375,000.00 Richmond, Virginia
April 8, 1998
For Value Received, the undersigned Spurlock Family Limited
Partnership, a Virginia limited partnership (the "Maker") unconditionally
promises to pay to the order of Spurlock Adhesives, Inc. (including any
subsequent holder hereof, the "Holder"), without offset or deduction, at 209
West Main Street, Waverly, Virginia 23890, except as provided herein or at such
other place as the Holder may designate, the principal sum of Three Hundred
Seventy-Five Thousand and No/100 Dollars ($375,000.00), together with interest
on the unpaid principal balance hereof from the date hereof until this Note is
paid in full. The unpaid principal balance hereof shall bear interest at a rate
of nine percent (9%) per annum.
Principal and interest hereunder shall be due and payable as follows:
(a) Interest shall be payable monthly, in advance, beginning on
April 8, 1998 and consecutively on the same calendar day of
each such month thereafter; and
(b) Principal shall be payable in a single payment on April 8,
2001.
provided that, if not sooner paid, all unpaid principal and accrued but unpaid
interest hereunder shall be due and payable on the third (3rd) anniversary of
the date of this Note. Interest shall be computed on the basis of a 365-day year
and shall be paid for the actual number of days elapsed.
All payments made on account of the indebtedness evidenced by this Note
shall be made without offset or deduction in lawful money of the United States
of America in immediately available funds and shall be applied first to the
payment of interest accrued on the unpaid principal balance from time to time
remaining unpaid, and the remainder of such payments shall be applied on account
of principal.
In the event any payment of principal or interest due under this Note
is made more than fifteen (15) days after the date when the same is due, then
the Lender shall be entitled to collect a "late charge" in an amount equal to
five percent (5%) of such payment.
The Maker may prepay this Note in whole or in part at any time and from
time to time, without penalty. Any partial prepayments shall be expressly
identified as a prepayment and shall be in an amount of not less than Two
Thousand Five Hundred and No/100 Dollars ($2,500.00).
The Maker hereby expressly agrees that, upon default in the payment of
principal at maturity or after acceleration as herein provided, the outstanding
principal balance shall continue to bear interest at the rate of nine percent
(9%) per annum.
IMPORTANT NOTICE: THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION
WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND
ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
<PAGE>
Until this Note has been satisfied in full, the Maker shall provide to
the Holder annual financial statements on or before each anniversary of this
Note in such a form as the Holder may reasonably prescribe, which financial
statements shall be certified to be true and correct by the general partner of
said partnership.
This Note has been made and is delivered pursuant to a certain
Settlement Agreement (the "Settlement Agreement") dated April 8, 1998 by and
among Spurlock Industries, Inc., Spurlock Adhesives, Inc., Spurlock Family
Limited Partnership, H. Norman Spurlock, Jr. and Harold N. Spurlock, Sr.
regarding (a) the settlement of certain claims by Spurlock Industries, Inc. and
Spurlock Adhesives, Inc. against H. Norman Spurlock, Jr. with respect to certain
actions of H. Norman Spurlock, Jr. while serving as an officer, director and
employee of Spurlock Industries, Inc. and Spurlock Adhesives, Inc., respectively
and (b) the redemption by the Maker of H. Norman Spurlock, Jr.'s partnership
interest in the Maker. Accordingly, the Maker hereof represents that the
obligation represented by this Note is for business purposes.
This Note is secured as provided in a certain Pledge and Security
Agreement (the "Pledge and Security Agreement"), dated April 8, 1998 by and
between Spurlock Adhesives, Inc. and the Spurlock Family Limited Partnership and
as further provided in a certain Unconditional Guaranty (the "Unconditional
Guaranty"), dated April 8, 1998 executed by Harold N. Spurlock, Sr.
("Guarantor") in favor of the Holder.
The entire principal amount hereof, together with all accrued interest,
shall immediately become due and payable (without demand for payment, notice of
nonpayment (except as provided below), presentment, notice of dishonor, protest,
notice of protest, or any other notice or demand, all of which the Maker hereby
waives) at the option of the Holder upon the occurrence of a Default hereunder
(failure to exercise this option shall not constitute a waiver of the right to
exercise the same in the event of any subsequent Default). A "Default" hereunder
shall be deemed to have occurred if any one or more of the following occurs:
(a) The Maker fails to pay when due any installment of principal or
interest on this Note and such failure shall continue for a
period of ten (10) days after notice of non-payment by the
Holder to the Maker;
(b) Spurlock Family Limited Partnership has breached any provision
of this Note, other than item (a) immediately above and such
breach shall continue for a period of ten (10) days after
notice of non-payment by the Holder to the Maker;
(c) Any of Spurlock Family Limited Partnership or the Guarantor, as
applicable, shall have breached a provision of the Settlement
Agreement or defaulted under the Pledge and Security Agreement
or the Unconditional Guaranty (collectively, this Note, the
Settlement Agreement, the Pledge and Security Agreement and the
Unconditional Guaranty are herein referred to as the
"Settlement Documents");
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<PAGE>
(d) Discovery that any representation, warranty or statement made
in any of the Settlement Documents or any certificate, report
or opinion delivered pursuant hereto or in connection herewith
was incorrect, incomplete or misleading in any material respect
on or as of the date made or deemed made;
(e) A change of greater than twenty-five percent (25%) in ownership
interest shall occur in the ownership or control of Spurlock
Family Limited Partnership or Spurlock Family Corporation
(except (i) as expressly contemplated in the Settlement
Documents, or (ii) a change resulting from the death of one or
more partners);
(f) Spurlock Family Limited Partnership dissolves, terminates,
merges, reorganizes, consolidates, changes its general partner
or sells or otherwise transfers a material portion of its
assets (except as expressly contemplated in the Settlement
Documents);
(g) Spurlock Family Corporation dissolves, terminates, merges,
reorganizes, consolidates, sells or otherwise transfers a
material portion of its assets (except as expressly
contemplated in the Settlement Documents);
(h) Spurlock Family Limited Partnership shall: (i) make a general
assignment for the benefit of creditors, (ii) file a petition,
pleading or motion under any bankruptcy or other law for the
relief or aid of debtors seeking reorganization, liquidation,
dissolution or other relief as a debtor or (iii) consent to or
acquiesce in the appointment of a receiver, custodian,
liquidator, trustee or other similar official, for the whole or
any substantial part of its assets, or for any part of any
collateral securing this Note; or
(i) A petition, pleading or motion shall be filed (i) against
Spurlock Family Limited Partnership under any bankruptcy or
other law for the relief of or aid of debtors seeking
reorganization, liquidation, dissolution or other debtor relief
for such person or (ii) seeking to appoint a receiver,
custodian, liquidator, trustee or other similar official for
Spurlock Family Limited Partnership, for the whole or any
substantial part of its assets, or for any part of any
collateral securing this Note, and such petition, pleading or
motion is not dismissed within thirty (30) days after the
filing thereof, or any order for relief or appointment entered
as a result of the filing of such petition, pleading or motion
is not stayed within seven (7) days after the entry thereof.
In the event that the Maker fails to pay in full any installment due
hereunder on or before its due date, in addition to the penalty, interest and
acceleration provisions herein set forth, the Maker agrees to pay all costs and
expenses incurred by the Holder in connection with the enforcement of this Note,
the collection of the indebtedness evidenced hereby, the collection of any
judgment rendered hereon, and/or the defense of any claim arising out of, or in
any way related to this Note, including, without limitation, reasonable
attorneys' fees.
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<PAGE>
The Maker, any co-maker, or endorser of, or grantor of collateral with
respect to, this Note and all others who may become liable for all or any part
of this obligation, agree hereby to be jointly and severally bound, and jointly
and severally waive and renounce any and all homestead and other exemption
rights and the benefit of all valuation and appraisement privileges as against
the debt or any renewal or extension thereof, and further waive demand, protest,
notice of non-payment (except as otherwise provided herein) and any and all lack
of diligence or delays in collection or enforcement hereof, and expressly
consent to any extension of time, release of any party liable for this
obligation, release of any of the collateral for this Note, acceptance of other
collateral for this Note, or any other indulgence or forbearance whatsoever. Any
such extension, release, modification, indulgence or forbearance under this Note
may be made without notice to such party and without in any way affecting the
personal liability of such party.
THE UNDERSIGNED, SPURLOCK FAMILY LIMITED PARTNERSHIP, HAS MADE,
CONSTITUTED AND APPOINTED, AND BY THESE PRESENTS DOES HEREBY IRREVOCABLY APPOINT
W. SCOTT STREET, III AND WILLIAM L. PITMAN, AS ITS TRUE AND LAWFUL
ATTORNEYS-IN-FACT, EITHER OF WHOM IS HEREBY AUTHORIZED FOR THE UNDERSIGNED AND
IN THE NAME OF THE UNDERSIGNED TO CONFESS JUDGMENT AGAINST THE UNDERSIGNED IN
FAVOR OF THE HOLDER OF THIS NOTE IN THE CLERK'S OFFICE OF THE CIRCUIT COURT OF
THE CITY OF RICHMOND, VIRGINIA OR IN ANY OTHER COURT OF PROPER JURISDICTION, FOR
THE UNPAID BALANCE OF THE INDEBTEDNESS EVIDENCED BY THIS NOTE, PLUS INTEREST,
COSTS, EXPENSES AND ATTORNEYS' FEES AS SPECIFIED HEREIN UPON THE OCCURRENCE OF A
DEFAULT UNDER THIS NOTE. THIS POWER OF ATTORNEY IS A POWER COUPLED WITH AN
INTEREST. THIS POWER OF ATTORNEY SHALL NOT TERMINATE IN THE EVENT OF THE
DISSOLUTION OF SPURLOCK FAMILY LIMITED PARTNERSHIP.
The undersigned stipulates that this Note shall be governed by and
construed under the laws of the Commonwealth of Virginia, without reference to
its conflicts of laws provisions.
No amendment, modification, termination, or waiver of any provision of
this Note, nor any consent to any departure by the Maker from any term of this
Note, shall in any event be effective unless it is in writing and signed by the
party against whom such action is sought to be enforced, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose given. In the event that any provision of this Note is determined to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity or enforceability of the remaining provisions of this Note.
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<PAGE>
All notices, requests and demands to or upon the respective parties
shall be in writing and shall be deemed to have been given or made when
delivered in person or received via certified mail, postage prepaid, return
receipt requested, addressed:
In the case of the Holder to: Spurlock Adhesives, Inc.
209 West Main Street
Waverly, Virginia 23890
Attention: Mr. Phillip S. Sumpter
with a copy to: William L. Pitman, Esquire
Williams, Mullen, Christian & Dobbins
1021 East Cary Street, 16th Floor
Richmond, Virginia 23219
In the case of the Maker to: Spurlock Family Limited Partnership
c/o Harold N. Spurlock, Sr.
1616 Blair Road
Petersburg, Virginia 23805
with a copy to: Hugh M. Fain, III, Esquire
Spotts, Smith, Fain & Buis
411 East Franklin Street, Suite 601
Richmond, Virginia 23219
or to such other addresses as may be specified by any party in a written notice
given to the other parties.
This Note shall apply to and bind the Maker, and its respective
successors and assigns.
[SIGNATURES ON NEXT PAGE]
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<PAGE>
WITNESS the following signature.
MAKER:
SPURLOCK FAMILY LIMITED PARTNERSHIP
By: Spurlock Family Corporation,
Its General Partner
By: _______________________________________
Harold N. Spurlock, Sr.,
Its President
EIN:
Address: 5090 General Mahone Highway
Waverly, Virginia 23890
COMMONWEALTH OF VIRGINIA,
CITY/COUNTY OF _________, to wit:
The foregoing instrument was acknowledged before me, a notary public in
and for the jurisdiction aforesaid, this ____ day of April, 1998, by
____________________, President of Spurlock Family Corporation, which is the
General Partner of Spurlock Family Limited Partnership, on behalf of the
partnership.
___________________________________
Notary Public
My commission expires: __________
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<PAGE>
EXHIBIT 3
[EXECUTION COPY]
UNCONDITIONAL GUARANTY
This UNCONDITIONAL GUARANTY (this "Guaranty") dated as of the 8th day
of April, 1998 (the "Guaranty") is given by HAROLD N. SPURLOCK, SR. (the
"Guarantor"), resident of Petersburg, Virginia, to Spurlock Adhesives, Inc., a
Virginia corporation (the "Corporation").
WHEREAS, the Corporation, Spurlock Industries, Inc., a Virginia
corporation ("Spurlock Industries"), Spurlock Family Limited Partnership (the
"Partnership"), H. Norman Spurlock, Jr. and the Guarantor have entered into a
certain Settlement Agreement dated April 8, 1998 (the "Settlement Agreement")
regarding the settlement of certain claims of the Corporation and Spurlock
Industries against H. Norman Spurlock , Jr.; and
WHEREAS, the Corporation is unwilling to enter into and perform the
Settlement Agreement unless it receives a guaranty from the Guarantor, who is a
limited partner of the Partnership and the parent of H. Norman Spurlock, Jr.,
with respect to the Liabilities, as hereinafter defined, of H. Norman Spurlock,
Jr. to the Corporation.
AGREEMENT:
NOW THEREFORE, for and in consideration of the premises, and other good
and valuable consideration, the receipt and adequacy of which the parties hereby
acknowledge, the parties covenant and agree as follows:
Section 1. Definitions and Interpretation.
(a) Unless the context indicates otherwise, words
used in this Guaranty in the singular number will be deemed to include words in
the plural number, and vice versa, and words in one gender will be deemed to
include words in the other genders.
(b) The section headings are for convenience only
and neither limit nor amplify the provisions of this Guaranty.
(c) The term "Note" as used shall refer to that
certain Promissory Note dated April 8, 1998 made by the Partnership payable to
the Corporation in the original face amount of $375,000.00.
(d) The term "Pledge and Security Agreement" shall
refer to that certain Pledge and Security Agreement dated April 8, 1998 by and
between the Partnership and the Corporation.
(e) The term "Debtor" shall refer to the
Partnership.
(f) The term "Bankruptcy Code" shall refer to Title
11 of the United States Code.
<PAGE>
Section 2. Guaranty. The Guarantor hereby unconditionally
guarantees to the Corporation, without offset or deduction, the full and prompt
payment of (a) the obligations evidenced by the Note, and all renewals,
extensions, modifications and substitutions therefor, and (b) the reimbursement
to the Corporation for any and all costs, expenses and reasonable attorney's
fees incurred in connection with either the collection of the Note or the
protection of the Corporation's security, rights or remedies with respect to the
Note or this Guaranty. The foregoing listed in (a) and (b) shall be herein
referred to as the "Liabilities."
Section 3. Guaranty Unconditional. The duties and obligations of
the Guarantor hereunder will be absolute, continuing and unconditional. Without
limiting the generality of the foregoing, this Guaranty will not be released,
discharged or otherwise affected by:
(a) any extension, renewal, compromise, settlement,
waiver or release of any of the Liabilities of any other maker, endorser or
guarantor (each of the foregoing sometimes herein referred to as a "Party")
under any instrument or document evidencing, guaranteeing or securing any of the
Liabilities including without limitation the Note, the Pledge and Security
Agreement, this Guaranty and the Settlement Agreement (collectively, the
"Settlement Documents");
(b) any amendment, modification or supplement to the
Note, the Pledge and Security Agreement, the Settlement Agreement or any other
Settlement Document;
(c) any failure to perfect a lien granted by any of
the Settlement Documents with respect to any of the Pledged Collateral (as
defined in the Pledge and Security Agreement), the release of any such lien or
the substitution or exchange of any security for any of the Liabilities;
(d) any change in the structure, existence or
ownership of the Debtor or the filing or entry of a final order in any
insolvency, bankruptcy, reorganization or other similar proceeding affecting the
Debtor or its assets or releasing any Party from any of its obligations under
any of the Settlement Documents;
(e) the existence of any claim, set-off or other
right that the Guarantor may have at any time against the Debtor, the
Corporation or any Party, whether arising from the execution of any of the
Settlement Documents or otherwise, provided that nothing contained herein will
prevent the assertion of such a claim in a separate suit;
(f) the unenforceability, for any reason, of any of
the duties or obligations of any Party under any of the Settlement Documents;
(g) the Corporation selling, exchanging, releasing,
surrendering, realizing upon or otherwise dealing with or in any manner and in
any order any collateral or security at any time held by or available to the
Corporation for any Liability, or for the obligation of the Guarantor, or for
the obligation of any person secondarily or otherwise liable for any of the
Liabilities;
(h) the failure of the Corporation: (i) to file or
enforce a claim against any other Party (or its estate in a bankruptcy or other
proceeding); (ii) to give notice of the creation or incurring by any Party of
any new or additional indebtedness or obligation with respect to a Liability or
under the Settlement Documents; (iii) to commence any action against any Party;
(iv) to disclose to the
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<PAGE>
Guarantor any facts that the Corporation may now or hereafter know with regard
to the Debtor; or (v) to proceed with due diligence to collect any amount due to
it under any of the Settlement Documents or to realize upon any collateral for a
Liability; or
(i) any other act, failure to act or delay of any
kind by the Debtor, any Party or the Corporation that might, but for the
provisions of this Section 3, constitute a legal or equitable discharge of the
Guarantor's obligations hereunder.
Section 4. Discharge; Reinstatement in Certain Circumstances. This
Guaranty will remain in full force and effect until the principal and interest
of the Note and all of the other Liabilities have been paid or performed in full
and until a period of one (1) year, beginning with the date of the last payment
made by or on behalf of the Debtor, has elapsed during which no petition in
bankruptcy has been filed by or against the Debtor or any other Party. If at any
time any payment or performance by the Debtor under any of the Settlement
Documents is rescinded or is required to be restored or returned because of
insolvency, bankruptcy, reorganization or otherwise, the Guarantor's obligations
hereunder with respect to such payment or performance will be reinstated as
though such payment had been due or performance required, but not paid or
performed at the time of such rescission or requirement. The Guarantor agrees
that payment or performance of any of the Liabilities or other acts that toll
any statute of limitations applicable to the Liabilities will also toll the
statute of limitations applicable to the Guarantor's liability hereunder.
Section 5. Subrogation. The Guarantor shall not exercise any right
of subrogation in and to the Liabilities or to all or any part of Corporation's
interest therein, until the Liabilities have been paid in full.
Section 6. Subordination. The Guarantor hereby subordinates all
indebtedness of the Debtor owing to the Guarantor, whether now existing or
hereafter arising, to the full and prompt payment and performance, as and when
due, of all of the Liabilities, together with all interest thereon and all
costs, expenses and reasonable attorneys' fees in connection therewith. Any
amount received by the Guarantor as payment on or with respect to the
subordinated indebtedness subsequent to any default in the payment or
performance of the Liabilities will be retained and held in trust by the
Guarantor solely for the benefit of the Corporation.
Section 7. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Debtor pursuant to the Settlement Documents
is stayed upon insolvency or bankruptcy, such amount and all other amounts
subject to acceleration under the terms of the Settlement Documents will,
nevertheless, be due and payable by the Guarantor on demand by the Corporation.
Section 8. Rights of Corporation Not Impaired. No lawful act or
omission of any kind or at any time by the Corporation in respect of any matter
whatsoever will in any way affect or impair the rights of the Corporation to
enforce any right, power or benefit of the Corporation under this Guaranty, and
no set-off, claim, diminution of any obligation, or defense of any kind or
nature that the Guarantor has or may have against the Corporation will be
available against the Corporation in any suit or action brought by the
Corporation to enforce any of its rights under this Guaranty. Nothing in this
Guaranty will be construed as a waiver by the Guarantor of any rights or claims
he may have against the Corporation under this Guaranty or otherwise, but any
recovery upon such rights and claims will be had from the Corporation
separately, it being the intent of this Guaranty that the Guarantor shall be
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<PAGE>
obligated, unconditionally and absolutely, to perform fully all of his
obligations hereunder for the benefit of the Corporation.
Section 9. Debtor's Affairs. The Guarantor represents to the
Corporation that the Guarantor has knowledge of the Debtor's financial condition
and affairs and agrees that the Guarantor will keep himself informed of the
Debtor's financial condition and affairs so long as this Guaranty is in force.
The Guarantor further agrees that the Corporation will have no obligation to
investigate the Debtor's financial condition or affairs for the benefit of the
Guarantor or to advise the Guarantor of any fact respecting, or any change in,
the Debtor's financial condition or affairs that might come to the knowledge of
the Corporation at any time, whether or not the Corporation knows or believes or
has reason to know or believe that any such fact or change is unknown to the
Guarantor or might (or does) materially increase the risk of the Guarantor
hereunder.
Section 10. Representations of Guarantor. The Guarantor hereby
represents and warrants the following to the Corporation:
(a) The Guarantor is fully capable and empowered
(being under no legal restriction, limitation or disability) to enter into,
execute and deliver this Guaranty and to perform his obligations hereunder.
(b) He has duly executed and delivered this Guaranty
for valuable legal consideration, and this Guaranty constitutes the valid and
binding obligation of the Guarantor enforceable in accordance with its terms,
except as such enforceability may be affected by bankruptcy and other insolvency
laws and general principles of equity.
(c) Other than a certain lawsuit in the United
States District Court for the District of Colorado, Civil Action No. 97-D-2214,
styled Lee Rasmussen, Minority Shareholder of Record, et al. v. Spurlock
Industries, Inc., et al., there are no pending or, to the best of the
Guarantor's knowledge, threatened actions, suits, proceedings or investigations
of a legal, equitable, regulatory, administrative or legislative nature that, if
adversely determined, might have a material adverse effect on his business,
assets, condition (financial or otherwise) or prospects or his ability to
perform the Guarantor's obligations under this Guaranty.
(d) To the best of his knowledge, after due inquiry,
no event that would constitute an Event of Default has occurred or is
continuing.
Section 11. Financial Statements. The Guarantor will furnish to the
Corporation, upon request by the Corporation, within 120 days after the end of
each calendar year, a statement of the Guarantor's financial condition, as of
the end of such calendar year, in such detail as the Corporation may reasonably
request.
Section 12. Corporation's Right of Set-Off. Upon the occurrence of
any Event of Default, the Corporation is hereby irrevocably authorized, at any
time and from time to time without notice to the Guarantor, any such notice
being expressly waived, to set-off, appropriate and apply any amount, including
any account, rebate, holdback or claim, whether or not matured, owing by the
Corporation to or for the account of the Guarantor, or any part thereof, against
the obligations of the Guarantor to the Corporation hereunder. The rights of the
Corporation under this Section 12 are in
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<PAGE>
addition to any other rights and remedies that the Corporation may have.
Section 13. Venue. The Guarantor agrees that any suit, action or
proceeding arising out of or relating to this Guaranty may be instituted in the
Circuit Court of the City of Richmond, Virginia, or in the United States
District Court for the Eastern District of Virginia, Richmond Division (to the
extent that such court has jurisdiction), at the option of the Corporation, and
the Guarantor hereby waives any objection that he may have to such venue and
irrevocably submits to the jurisdiction of either of such courts in any such
suit, action or proceeding. Nothing herein will affect the right of the
Corporation to proceed against the Guarantor in any other jurisdiction.
Section 14. Subsequent/Prior Guaranty. A subsequent guaranty by the
Guarantor will not be deemed to be in lieu of or to supersede or terminate this
Guaranty, but will be construed as an additional or supplemental guaranty unless
otherwise expressly provided therein; and in the event that the Guarantor has
given the Corporation a previous guaranty or guaranties, this Guaranty will be
construed to be an additional or supplemental guaranty, and not in lieu thereof
or to terminate such previous guaranty or guaranties, unless expressly so
provided herein or therein.
Section 15. Events of Default. Any one or more of the following
events shall constitute a default ("Event of Default") under this Guaranty:
(a) False Statement: If any certificate,
representation, warranty, statement or other writing made herein or heretofore,
now or hereafter furnished to the Corporation by or on behalf of the Guarantor
in connection with the Settlement Documents is discovered to have been
incorrect, incomplete or misleading in any material respect on or as of the date
made or deemed made;
(b) Termination of Liability: If the Guarantor seeks
to terminate the Guarantor's liability under this Guaranty; or
(c) Default by Debtor: Default by the Debtor under
the Note or the Pledge and Security Agreement or a breach by the Partnership of
the Settlement Agreement.
Section 16. Remedies. Whenever any Event of Default shall have
happened and be continuing, the Corporation or other holder of any of the
Liabilities (a) may declare the entire unpaid principal of and interest on the
Liabilities to be immediately due and payable, (b) may take whatever action
under the Settlement Documents, at law or in equity, as may appear necessary or
desirable to collect payments then due or thereafter to become due hereunder or
to enforce observance or performance of any covenant, condition or agreement of
the Guarantor under this Guaranty, or (c) may, immediately and without further
action by the Corporation, set-off against any obligation of the Guarantor to
the Corporation hereunder, all money owed by the Corporation in any capacity to
the Guarantor and to apply the same against the Liabilities.
Section 17. Successors and Assigns. This Guaranty will inure to the
benefit of and be binding on the parties and their respective heirs, personal
representatives, successors and assigns.
Section 18. Severability. If any provision of this Guaranty or the
application thereof in any circumstance is held to be unenforceable, the
remainder of this Guaranty will not be affected thereby and will remain
enforceable.
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<PAGE>
Section 19. Applicable Law. This Guaranty will be governed by, and
construed in accordance with, the laws of the Commonwealth of Virginia.
Section 20. Notices, Demands and Requests. All notices, demands,
requests and other communications required or permitted hereunder must be in
writing and will be deemed to have been given when delivered in person or
received by certified mail, postage prepaid, return receipt requested, (i) to
the Guarantor, at his address set forth below opposite his signature, and (ii)
to the Corporation, at its address set forth in the Note, or to such other
persons or addresses as the party entitled to notice has specified in writing to
the other parties from time to time.
Section 21. Waiver. The Guarantor hereby waives, to the extent
permitted by law, (i) the benefits of Sections 49-25 and 49-26 of the Code of
Virginia (1950), as amended, and any amendments thereto or any similar statutes
or rules of law, (ii) the benefit of any homestead or similar exemption, state
or federal, with respect to his obligations hereunder, (iii) notice of any of
the matters referred to in Section 3 of this Guaranty, (iv) notice of acceptance
of this Guaranty, (v) presentment and demand for payment of any of the
Liabilities, (vi) protest and notice of dishonor or nonpayment of any Liability,
and (vii) any demand (except as expressly specified herein), proof or notice of
nonpayment, or failure to pay or perform any of the Liabilities.
Section 22. Amendments. This Guaranty may only be amended,
supplemented or terminated in writing, signed by all of the parties.
Section 23. Entire Agreement. This Guaranty expresses the entire
understanding, and all agreements, between the parties with respect to the
subject matter hereof.
Section 24. Appointment of Secretary of the Commonwealth. If the
Corporation is unable to obtain prompt legal service upon the Guarantor at the
address shown for the Guarantor herein, the Guarantor hereby appoints the
Secretary of the Commonwealth of Virginia as his agent for the acceptance of
substituted service of process upon the Guarantor. It is understood and agreed
that the Guarantor hereby submits to the in personam jurisdiction of any duly
constituted Court of the Commonwealth of Virginia (upon compliance with the
procedural laws and rules of the Commonwealth of Virginia) wherein any action
may be brought by the holder of any Obligation.
Section 25. Notice. YOU ARE GUARANTEEING THE OBLIGATIONS DESCRIBED
IN THIS GUARANTY. IF FOR ANY REASON THE DEBTOR DOES NOT PAY OR PERFORM THE
DEBTOR'S OBLIGATIONS, YOU WILL HAVE TO PAY OR PERFORM THE DEBTOR'S OBLIGATIONS
AT YOUR EXPENSE. UPON DEFAULT, THE CORPORATION CAN COLLECT ALL OF THE
OBLIGATIONS FROM YOU WITHOUT FIRST ATTEMPTING TO COLLECT FROM THE DEBTOR. BY
SIGNING THIS GUARANTY, YOU AGREE THAT YOU HAVE RECEIVED COPIES OF AND HAVE HAD
AN OPPORTUNITY TO REVIEW ALL OF THE DOCUMENTS REFERRED TO IN THIS GUARANTY AND
THE DOCUMENTS DESCRIBED THEREIN WITH YOUR COUNSEL AND UNDERSTAND THE NATURE,
EXTENT, AND LEGAL AND PRACTICAL CONSEQUENCES OF YOUR LIABILITY UNDER THIS
GUARANTY.
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<PAGE>
WITNESS the following signature.
________________________________________
Harold N. Spurlock, Sr.
Address: 1616 Blair Road
Petersburg, Virginia 23805
COMMONWEALTH OF VIRGINIA )
) to-wit:
CITY/COUNTY OF RICHMOND )
The foregoing instrument was acknowledged before me this 10th day of
April, 1998, by Harold N. Spurlock, Sr.
My commission expires: __________
________________________________
Notary Public
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<PAGE>
EXHIBIT 4
SOLVENCY CERTIFICATE
This Certificate is delivered in connection with the Settlement
Agreement (the "Settlement Agreement"), dated April 8th, 1998, between Spurlock
Industries, Inc. (the "Company"), Spurlock Adhesives, Inc. ("Spurlock
Adhesives"), the Spurlock Family Limited Partnership (the "Partnership"), H.
Norman Spurlock, Jr. and Harold N. Spurlock, Sr. and related documents,
including but not limited to (i) a Promissory Note, dated April 8th, 1998,
payable to Spurlock Adhesives by the Partnership, (ii) a Pledge and Security
Agreement, dated April 8th, 1998, between the Partnership and Spurlock
Adhesives, and (iii) and Unconditional Guaranty, dated April 8th , 1998, by
Harold N. Spurlock, Sr. for the benefit of Spurlock Adhesives.
The undersigned are and, at all pertinent times mentioned herein, have
been officers of Spurlock Family Corporation (the "General Partner") which in
turn is and has been at all pertinent times mentioned herein the General Partner
of the Partnership. The General Partner has responsibility for the management of
the financial affairs of the Partnership and the undersigned officers of the
General Partner have acted on behalf of the Partnership in connection with the
negotiation and execution of all documents related to the Settlement Agreement
(collectively, including the Settlement Agreement, the "Settlement Documents")
to which the Partnership is a party, including the review of the affairs of the
Partnership and meeting and conferring with representatives of the Company and
Spurlock Adhesives and their counsel and in furnishing information to the
Company and Spurlock Adhesives to be used in the analyses prepared by them.
The undersigned officers of the General Partner have carefully reviewed
the contents of this Certificate. The statements made herein are based on the
undersigneds' personal knowledge of the Partnership, or upon reports or other
information available concerning the Partnership which, in the opinions of the
undersigned, are reliable. The statements made herein are made in good faith and
to the best of the knowledge and belief of the undersigned, and are accurate in
all material respects. Accordingly, the undersigned certify as follows:
1. The Partnership is not now, nor will the consummation of any of
the transactions related to the Settlement Documents (the "Settlement") render
it insolvent as defined in Chapter 11, Section 101(32) of the United States
Code.
2. After the consummation of the Settlement, by the incurrence of
its obligations under the Settlement Documents to which it is a party, the
Partnership will not incur debts beyond its ability to pay them as they mature.
3. Consummation of the Settlement will not leave the Partnership
with unreasonably small capital or with remaining assets that are unreasonably
small. The Partnership and the undersigned have agreed that "unreasonably small
capital" depends on the nature of the particular business or businesses
conducted or to be conducted. The undersigned has reached this conclusion based
on the needs and anticipated needs for capital of the businesses conducted
<PAGE>
or anticipated to be conducted by the Partnership in light of the Partnership's
available credit capacity.
4. The Partnership has not participated in the Settlement, executed
the Settlement Documents to which it is a party or made any transfer or incurred
any obligations thereunder, with actual intent to hinder, delay or defraud
either present or future creditors of the Partnership or any creditors of the
partners of the Partnership.
5. The Settlement Documents to which it is a party were executed
and delivered by the Partnership in good faith and, to the best of the knowledge
of the undersigned, the indebtedness of the Partnership incurred pursuant to the
Settlement Documents and the security interests granted to the Company under the
Settlement Documents were incurred in good faith and granted for fair and
reasonably equivalent value.
6. The Partnership does not intend to incur, or believe it will
incur, debts beyond its ability to pay them as they mature.
7. All items of indebtedness of the Partnership are current in
accordance with their respective terms and are not past due.
The undersigned understands that the Company is relying on the
foregoing statements in connection with the extension of credit to the
Partnership pursuant to the Settlement Documents. The undersigned are executing
this Certificate on behalf of the Partnership in their respective capacities as
officers of the General Partner.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
8th day of April, 1998.
SPURLOCK FAMILY LIMITED PARTNERSHIP
By: Its General Partner,
SPURLOCK FAMILY CORPORATION
By: /s/ Harold N. Spurlock, Sr.
-----------------------------------
Harold N. Spurlock, Sr., President
By: /s/ Irvine R. Spurlock
-----------------------------------
Irvine R. Spurlock, Vice President
<PAGE>
EXHIBIT 5
[LETTERHEAD OF SPOTTS, SMITH, FAIN & BUIS]
April 8, 1998
Spurlock Industries, Inc.
209 West Main Street
Waverly, Virginia 23890
Spurlock Adhesives, Inc.
5090 General Malone Highway
Waverly, Virginia 23890
Gentlemen:
We have acted as counsel for Spurlock Family Limited Partnership, a
Virginia limited partnership ("the Partnership"), its general partner, Spurlock
Family Corporation, a Virginia corporation (the "General Partner") and Harold N.
Spurlock, Sr. ("H. Spurlock") in connection with the settlement (the
"Settlement") entered into pursuant to that certain Settlement Agreement (the
"Settlement Agreement") dated April 8, 1998, by and among the Partnership, H.
Norman Spurlock, Jr. ("N. Spurlock"), H. Spurlock, Spurlock Industries, Inc.
(the "Company") and Spurlock Adhesives, Inc. ("Spurlock Adhesives"). In
connection therewith, we have been asked to deliver certain opinions to you.
We have examined (a) the Promissory Note executed by the Partnership as
maker, payable to Spurlock Adhesives (the "Note"); (b) the Pledge and Security
Agreement (the "Pledge and Security Agreement"), between the Partnership and
Spurlock Adhesives, granting a security interest to Spurlock Adhesives in
2,325,000 shares of the Company's common stock held by the Partnership (the
"Pledged Shares"); and (c) certain Stock Powers endorsed in blank by the
Partnership relating to the Pledged Shares (all such documents collectively
referred to as the "Settlement Documents"). We have also examined such other
corporate and partnership documents and records and made such investigation as
we have deemed necessary to enable us to render the opinions expressed herein.
With respect to the various factual matters material to our opinions,
we have relied, to the extent that we deem such reliance proper, upon
certificates from officers of the General Partner and upon certificates of
public officials. We have assumed the correctness of the factual matters
contained in such reliance sources and have not acquired any information giving
us knowledge, without any independent investigation for the purpose, that such
factual matters are incorrect.
<PAGE>
We have assumed (i) except with respect to the Partnership, the General
Partner and H. Spurlock, the genuineness of all signatures on and the due
authorization, execution, and delivery of the Settlement Documents and the
validity and binding effect thereof, (ii) the authenticity of all documents
submitted to us as originals, (iii) the conformity to the originals of all
documents submitted to us as copies, and (iv) the legal capacity of natural
persons.
Based on and subject to the foregoing, it is our opinion that:
1. The execution, delivery and performance by the Partnership of
the Settlement Documents to which it is a party and the consummation of the
transactions contemplated thereby have been duly authorized by all necessary
proceedings of the Partnership, and the Partnership has duly and validly
executed and delivered the Settlement Documents to which it is a party.
2. The Settlement Documents to which the Partnership is a party are
legal, valid and binding obligations of the Partnership and are enforceable
against the Partnership in accordance with their respective terms, except to the
extent that enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforceability is considered in an action at law or a suit in equity),
including the availability of equitable remedies, (iii) procedural requirements
of the law applicable to the exercise of creditors' rights generally, and (iv)
judicial discretion inherent in the forum addressing enforceability.
The opinions expressed above are subject to the following additional
assumptions and qualifications:
1. The opinions herein expressed are limited in all respects solely
to matters governed by the internal laws of the Commonwealth of Virginia and the
federal laws of the United States of America. We express no opinion as to the
substance or effect of the laws of any other jurisdiction.
2. Whenever we state our opinion to be "to our knowledge" or "known
to us," we mean that our attorneys who have given substantive legal attention to
representation of the Partnership, the General Partner and H. Spurlock in the
transaction have not made an investigation to acquire, and have not acquired,
actual knowledge of the existence or absence of the facts forming the basis for
such opinion but without such investigation do not have information which
contradicts the existence or absence of the facts forming the basis for such
opinion. Indeed, this Firm began its representation of the Partnership on March
17, 1998 and the nature of the representation is limited to the structuring and
closing of the Settlement and related Settlement Documents.
We assume no responsibility for any changes, material or otherwise,
which may hereinafter occur including modifications to the Settlement Documents,
nor do we assume any responsibility
<PAGE>
for or render any opinion on transactions, events, circumstances, omissions,
acts or documents which occur after the date hereof. We have no obligation to
communicate any such changes.
This opinion is issued solely for the benefit of you and your
successors and assigns and is not to be relied upon by any other person or
entity, and may not be copied, reproduced or disseminated to any person, other
than the named addressees for any reason.
Very truly yours,
/s/ SPOTTS, SMITH, FAIN & BUIS, P.C.
<PAGE>
EXHIBIT 6
CLOSING MEMORANDUM
FOR
H. NORMAN SPURLOCK, JR. SETTLEMENT
April 8, 1998
The following documents are to be delivered to Spurlock Industries,
Inc. (the "Company") and Spurlock Adhesives, Inc. ("Spurlock Adhesives") at or
prior to the closing (the "Closing"), of the transactions contemplated by that
certain Settlement Agreement, (the "Settlement Agreement") between the Company,
Spurlock Adhesives, Spurlock Family Limited Partnership (the "Partnership"), H.
Norman Spurlock, Jr. and Harold N. Spurlock, Sr., dated April 8, 1998, such
Closing to be held April 10, 1998, at the offices of Williams, Mullen, Christian
& Dobbins:
1. Settlement Agreement (executed April 8, 1998).
2. Promissory Note executed by the Partnership as maker, payable to Spurlock
Adhesives.
3. Pledge and Security Agreement (the "Pledge Agreement") between the
Partnership and Spurlock Adhesives, whereby the Partnership grants a
first priority security interest to Spurlock Adhesives in 2,325,000
shares of the Company's common stock held by the Partnership (the
"Pledged Shares").
4. Stock Powers (2) endorsed in blank by the Partnership for stock
certificates evidencing the Pledged Shares.
5. Certificates Nos. 3673 and 3674 evidencing all of the Pledged Shares.
6. Unconditional Guaranty, executed by Harold N. Spurlock, Sr. guaranteeing
payment of the Promissory Note.
7. Legal opinion of counsel for the Partnership.
8. Solvency Certificate, to be executed by the Partnership.
9. Financial statements as of the Closing, for H. Norman Spurlock, Jr.
10. Financial statements as of the Closing, for Harold N. Spurlock, Sr.
(post-closing).
11. Financial statements as of the Closing, for the Partnership.
12. Good Standing Certificate for Spurlock Family Corporation.
13. Certificate of Existence for the Partnership.
14. Resolutions, properly executed by all partners of the Partnership,
approving all transactions contemplated by the Settlement Agreement.
<PAGE>
15. General Partner's Certificate, executed by Spurlock Family Corporation.
16. Officer's Certificate of Spurlock Family Corporation.
17. Action in Writing of the shareholders and the Board of Directors of
Spurlock Family Corporation.
18. Check from H. Norman Spurlock, Jr., payable to Spurlock Adhesives in the
amount of $10,000.00, representing cash payment pursuant to the
Settlement Agreement.
19. Check from Harold N. Spurlock, Sr., payable to Spurlock Adhesives in the
amount of $2,812.50, representing the initial interest payment under the
Note.
20. Consent Judgment of H. Norman Spurlock, Jr., filed with the Clerk of the
Court of Sussex County, Virginia (filed stamped copy).
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Exhibit 10.49
[EXECUTION COPY]
UNCONDITIONAL GUARANTY
This UNCONDITIONAL GUARANTY (this "Guaranty") dated as of the 8th day
of April, 1998 (the "Guaranty") is given by HAROLD N. SPURLOCK, SR. (the
"Guarantor"), resident of Petersburg, Virginia, to Spurlock Adhesives, Inc., a
Virginia corporation (the "Corporation").
WHEREAS, the Corporation, Spurlock Industries, Inc., a Virginia
corporation ("Spurlock Industries"), Spurlock Family Limited Partnership (the
"Partnership"), H. Norman Spurlock, Jr. and the Guarantor have entered into a
certain Settlement Agreement dated April 8, 1998 (the "Settlement Agreement")
regarding the settlement of certain claims of the Corporation and Spurlock
Industries against H. Norman Spurlock , Jr.; and
WHEREAS, the Corporation is unwilling to enter into and perform the
Settlement Agreement unless it receives a guaranty from the Guarantor, who is a
limited partner of the Partnership and the parent of H. Norman Spurlock, Jr.,
with respect to the Liabilities, as hereinafter defined, of H. Norman Spurlock,
Jr. to the Corporation.
AGREEMENT:
NOW THEREFORE, for and in consideration of the premises, and other good
and valuable consideration, the receipt and adequacy of which the parties hereby
acknowledge, the parties covenant and agree as follows:
Section 1. Definitions and Interpretation.
(a) Unless the context indicates otherwise, words
used in this Guaranty in the singular number will be deemed to include words in
the plural number, and vice versa, and words in one gender will be deemed to
include words in the other genders.
(b) The section headings are for convenience only
and neither limit nor amplify the provisions of this Guaranty.
(c) The term "Note" as used shall refer to that
certain Promissory Note dated April 8, 1998 made by the Partnership payable to
the Corporation in the original face amount of $375,000.00.
(d) The term "Pledge and Security Agreement" shall
refer to that certain Pledge and Security Agreement dated April 8, 1998 by and
between the Partnership and the Corporation.
(e) The term "Debtor" shall refer to the
Partnership.
(f) The term "Bankruptcy Code" shall refer to Title
11 of the United States Code.
<PAGE>
Section 2. Guaranty. The Guarantor hereby unconditionally
guarantees to the Corporation, without offset or deduction, the full and prompt
payment of (a) the obligations evidenced by the Note, and all renewals,
extensions, modifications and substitutions therefor, and (b) the reimbursement
to the Corporation for any and all costs, expenses and reasonable attorney's
fees incurred in connection with either the collection of the Note or the
protection of the Corporation's security, rights or remedies with respect to the
Note or this Guaranty. The foregoing listed in (a) and (b) shall be herein
referred to as the "Liabilities."
Section 3. Guaranty Unconditional. The duties and obligations of
the Guarantor hereunder will be absolute, continuing and unconditional. Without
limiting the generality of the foregoing, this Guaranty will not be released,
discharged or otherwise affected by:
(a) any extension, renewal, compromise, settlement,
waiver or release of any of the Liabilities of any other maker, endorser or
guarantor (each of the foregoing sometimes herein referred to as a "Party")
under any instrument or document evidencing, guaranteeing or securing any of the
Liabilities including without limitation the Note, the Pledge and Security
Agreement, this Guaranty and the Settlement Agreement (collectively, the
"Settlement Documents");
(b) any amendment, modification or supplement to the
Note, the Pledge and Security Agreement, the Settlement Agreement or any other
Settlement Document;
(c) any failure to perfect a lien granted by any of
the Settlement Documents with respect to any of the Pledged Collateral (as
defined in the Pledge and Security Agreement), the release of any such lien or
the substitution or exchange of any security for any of the Liabilities;
(d) any change in the structure, existence or
ownership of the Debtor or the filing or entry of a final order in any
insolvency, bankruptcy, reorganization or other similar proceeding affecting the
Debtor or its assets or releasing any Party from any of its obligations under
any of the Settlement Documents;
(e) the existence of any claim, set-off or other
right that the Guarantor may have at any time against the Debtor, the
Corporation or any Party, whether arising from the execution of any of the
Settlement Documents or otherwise, provided that nothing contained herein will
prevent the assertion of such a claim in a separate suit;
(f) the unenforceability, for any reason, of any of
the duties or obligations of any Party under any of the Settlement Documents;
(g) the Corporation selling, exchanging, releasing,
surrendering, realizing upon or otherwise dealing with or in any manner and in
any order any collateral or security at any time held by or available to the
Corporation for any Liability, or for the obligation of the Guarantor, or for
the obligation of any person secondarily or otherwise liable for any of the
Liabilities;
(h) the failure of the Corporation: (i) to file or
enforce a claim against any other Party (or its estate in a bankruptcy or other
proceeding); (ii) to give notice of the creation or incurring by any Party of
any new or additional indebtedness or obligation with respect to a Liability or
under the Settlement Documents; (iii) to commence any action against any Party;
(iv) to disclose to the
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<PAGE>
Guarantor any facts that the Corporation may now or hereafter know with regard
to the Debtor; or (v) to proceed with due diligence to collect any amount due to
it under any of the Settlement Documents or to realize upon any collateral for a
Liability; or
(i) any other act, failure to act or delay of any
kind by the Debtor, any Party or the Corporation that might, but for the
provisions of this Section 3, constitute a legal or equitable discharge of the
Guarantor's obligations hereunder.
Section 4. Discharge; Reinstatement in Certain Circumstances. This
Guaranty will remain in full force and effect until the principal and interest
of the Note and all of the other Liabilities have been paid or performed in full
and until a period of one (1) year, beginning with the date of the last payment
made by or on behalf of the Debtor, has elapsed during which no petition in
bankruptcy has been filed by or against the Debtor or any other Party. If at any
time any payment or performance by the Debtor under any of the Settlement
Documents is rescinded or is required to be restored or returned because of
insolvency, bankruptcy, reorganization or otherwise, the Guarantor's obligations
hereunder with respect to such payment or performance will be reinstated as
though such payment had been due or performance required, but not paid or
performed at the time of such rescission or requirement. The Guarantor agrees
that payment or performance of any of the Liabilities or other acts that toll
any statute of limitations applicable to the Liabilities will also toll the
statute of limitations applicable to the Guarantor's liability hereunder.
Section 5. Subrogation. The Guarantor shall not exercise any right
of subrogation in and to the Liabilities or to all or any part of Corporation's
interest therein, until the Liabilities have been paid in full.
Section 6. Subordination. The Guarantor hereby subordinates all
indebtedness of the Debtor owing to the Guarantor, whether now existing or
hereafter arising, to the full and prompt payment and performance, as and when
due, of all of the Liabilities, together with all interest thereon and all
costs, expenses and reasonable attorneys' fees in connection therewith. Any
amount received by the Guarantor as payment on or with respect to the
subordinated indebtedness subsequent to any default in the payment or
performance of the Liabilities will be retained and held in trust by the
Guarantor solely for the benefit of the Corporation.
Section 7. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Debtor pursuant to the Settlement Documents
is stayed upon insolvency or bankruptcy, such amount and all other amounts
subject to acceleration under the terms of the Settlement Documents will,
nevertheless, be due and payable by the Guarantor on demand by the Corporation.
Section 8. Rights of Corporation Not Impaired. No lawful act or
omission of any kind or at any time by the Corporation in respect of any matter
whatsoever will in any way affect or impair the rights of the Corporation to
enforce any right, power or benefit of the Corporation under this Guaranty, and
no set-off, claim, diminution of any obligation, or defense of any kind or
nature that the Guarantor has or may have against the Corporation will be
available against the Corporation in any suit or action brought by the
Corporation to enforce any of its rights under this Guaranty. Nothing in this
Guaranty will be construed as a waiver by the Guarantor of any rights or claims
he may have against the Corporation under this Guaranty or otherwise, but any
recovery upon such rights and claims will be had from the Corporation
separately, it being the intent of this Guaranty that the Guarantor shall be
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<PAGE>
obligated, unconditionally and absolutely, to perform fully all of his
obligations hereunder for the benefit of the Corporation.
Section 9. Debtor's Affairs. The Guarantor represents to the
Corporation that the Guarantor has knowledge of the Debtor's financial condition
and affairs and agrees that the Guarantor will keep himself informed of the
Debtor's financial condition and affairs so long as this Guaranty is in force.
The Guarantor further agrees that the Corporation will have no obligation to
investigate the Debtor's financial condition or affairs for the benefit of the
Guarantor or to advise the Guarantor of any fact respecting, or any change in,
the Debtor's financial condition or affairs that might come to the knowledge of
the Corporation at any time, whether or not the Corporation knows or believes or
has reason to know or believe that any such fact or change is unknown to the
Guarantor or might (or does) materially increase the risk of the Guarantor
hereunder.
Section 10. Representations of Guarantor. The Guarantor hereby
represents and warrants the following to the Corporation:
(a) The Guarantor is fully capable and empowered
(being under no legal restriction, limitation or disability) to enter into,
execute and deliver this Guaranty and to perform his obligations hereunder.
(b) He has duly executed and delivered this Guaranty
for valuable legal consideration, and this Guaranty constitutes the valid and
binding obligation of the Guarantor enforceable in accordance with its terms,
except as such enforceability may be affected by bankruptcy and other insolvency
laws and general principles of equity.
(c) Other than a certain lawsuit in the United
States District Court for the District of Colorado, Civil Action No. 97-D-2214,
styled Lee Rasmussen, Minority Shareholder of Record, et al. v. Spurlock
Industries, Inc., et al., there are no pending or, to the best of the
Guarantor's knowledge, threatened actions, suits, proceedings or investigations
of a legal, equitable, regulatory, administrative or legislative nature that, if
adversely determined, might have a material adverse effect on his business,
assets, condition (financial or otherwise) or prospects or his ability to
perform the Guarantor's obligations under this Guaranty.
(d) To the best of his knowledge, after due inquiry,
no event that would constitute an Event of Default has occurred or is
continuing.
Section 11. Financial Statements. The Guarantor will furnish to the
Corporation, upon request by the Corporation, within 120 days after the end of
each calendar year, a statement of the Guarantor's financial condition, as of
the end of such calendar year, in such detail as the Corporation may reasonably
request.
Section 12. Corporation's Right of Set-Off. Upon the occurrence of
any Event of Default, the Corporation is hereby irrevocably authorized, at any
time and from time to time without notice to the Guarantor, any such notice
being expressly waived, to set-off, appropriate and apply any amount, including
any account, rebate, holdback or claim, whether or not matured, owing by the
Corporation to or for the account of the Guarantor, or any part thereof, against
the obligations of the Guarantor to the Corporation hereunder. The rights of the
Corporation under this Section 12 are in
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<PAGE>
addition to any other rights and remedies that the Corporation may have.
Section 13. Venue. The Guarantor agrees that any suit, action or
proceeding arising out of or relating to this Guaranty may be instituted in the
Circuit Court of the City of Richmond, Virginia, or in the United States
District Court for the Eastern District of Virginia, Richmond Division (to the
extent that such court has jurisdiction), at the option of the Corporation, and
the Guarantor hereby waives any objection that he may have to such venue and
irrevocably submits to the jurisdiction of either of such courts in any such
suit, action or proceeding. Nothing herein will affect the right of the
Corporation to proceed against the Guarantor in any other jurisdiction.
Section 14. Subsequent/Prior Guaranty. A subsequent guaranty by the
Guarantor will not be deemed to be in lieu of or to supersede or terminate this
Guaranty, but will be construed as an additional or supplemental guaranty unless
otherwise expressly provided therein; and in the event that the Guarantor has
given the Corporation a previous guaranty or guaranties, this Guaranty will be
construed to be an additional or supplemental guaranty, and not in lieu thereof
or to terminate such previous guaranty or guaranties, unless expressly so
provided herein or therein.
Section 15. Events of Default. Any one or more of the following
events shall constitute a default ("Event of Default") under this Guaranty:
(a) False Statement: If any certificate,
representation, warranty, statement or other writing made herein or heretofore,
now or hereafter furnished to the Corporation by or on behalf of the Guarantor
in connection with the Settlement Documents is discovered to have been
incorrect, incomplete or misleading in any material respect on or as of the date
made or deemed made;
(b) Termination of Liability: If the Guarantor seeks
to terminate the Guarantor's liability under this Guaranty; or
(c) Default by Debtor: Default by the Debtor under
the Note or the Pledge and Security Agreement or a breach by the Partnership of
the Settlement Agreement.
Section 16. Remedies. Whenever any Event of Default shall have
happened and be continuing, the Corporation or other holder of any of the
Liabilities (a) may declare the entire unpaid principal of and interest on the
Liabilities to be immediately due and payable, (b) may take whatever action
under the Settlement Documents, at law or in equity, as may appear necessary or
desirable to collect payments then due or thereafter to become due hereunder or
to enforce observance or performance of any covenant, condition or agreement of
the Guarantor under this Guaranty, or (c) may, immediately and without further
action by the Corporation, set-off against any obligation of the Guarantor to
the Corporation hereunder, all money owed by the Corporation in any capacity to
the Guarantor and to apply the same against the Liabilities.
Section 17. Successors and Assigns. This Guaranty will inure to the
benefit of and be binding on the parties and their respective heirs, personal
representatives, successors and assigns.
Section 18. Severability. If any provision of this Guaranty or the
application thereof in any circumstance is held to be unenforceable, the
remainder of this Guaranty will not be affected thereby and will remain
enforceable.
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<PAGE>
Section 19. Applicable Law. This Guaranty will be governed by, and
construed in accordance with, the laws of the Commonwealth of Virginia.
Section 20. Notices, Demands and Requests. All notices, demands,
requests and other communications required or permitted hereunder must be in
writing and will be deemed to have been given when delivered in person or
received by certified mail, postage prepaid, return receipt requested, (i) to
the Guarantor, at his address set forth below opposite his signature, and (ii)
to the Corporation, at its address set forth in the Note, or to such other
persons or addresses as the party entitled to notice has specified in writing to
the other parties from time to time.
Section 21. Waiver. The Guarantor hereby waives, to the extent
permitted by law, (i) the benefits of Sections 49-25 and 49-26 of the Code of
Virginia (1950), as amended, and any amendments thereto or any similar statutes
or rules of law, (ii) the benefit of any homestead or similar exemption, state
or federal, with respect to his obligations hereunder, (iii) notice of any of
the matters referred to in Section 3 of this Guaranty, (iv) notice of acceptance
of this Guaranty, (v) presentment and demand for payment of any of the
Liabilities, (vi) protest and notice of dishonor or nonpayment of any Liability,
and (vii) any demand (except as expressly specified herein), proof or notice of
nonpayment, or failure to pay or perform any of the Liabilities.
Section 22. Amendments. This Guaranty may only be amended,
supplemented or terminated in writing, signed by all of the parties.
Section 23. Entire Agreement. This Guaranty expresses the entire
understanding, and all agreements, between the parties with respect to the
subject matter hereof.
Section 24. Appointment of Secretary of the Commonwealth. If the
Corporation is unable to obtain prompt legal service upon the Guarantor at the
address shown for the Guarantor herein, the Guarantor hereby appoints the
Secretary of the Commonwealth of Virginia as his agent for the acceptance of
substituted service of process upon the Guarantor. It is understood and agreed
that the Guarantor hereby submits to the in personam jurisdiction of any duly
constituted Court of the Commonwealth of Virginia (upon compliance with the
procedural laws and rules of the Commonwealth of Virginia) wherein any action
may be brought by the holder of any Obligation.
Section 25. Notice. YOU ARE GUARANTEEING THE OBLIGATIONS DESCRIBED
IN THIS GUARANTY. IF FOR ANY REASON THE DEBTOR DOES NOT PAY OR PERFORM THE
DEBTOR'S OBLIGATIONS, YOU WILL HAVE TO PAY OR PERFORM THE DEBTOR'S OBLIGATIONS
AT YOUR EXPENSE. UPON DEFAULT, THE CORPORATION CAN COLLECT ALL OF THE
OBLIGATIONS FROM YOU WITHOUT FIRST ATTEMPTING TO COLLECT FROM THE DEBTOR. BY
SIGNING THIS GUARANTY, YOU AGREE THAT YOU HAVE RECEIVED COPIES OF AND HAVE HAD
AN OPPORTUNITY TO REVIEW ALL OF THE DOCUMENTS REFERRED TO IN THIS GUARANTY AND
THE DOCUMENTS DESCRIBED THEREIN WITH YOUR COUNSEL AND UNDERSTAND THE NATURE,
EXTENT, AND LEGAL AND PRACTICAL CONSEQUENCES OF YOUR LIABILITY UNDER THIS
GUARANTY.
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<PAGE>
WITNESS the following signature.
/s/ Harold N. Spurlock, Sr.
----------------------------------------
Harold N. Spurlock, Sr.
Address: 1616 Blair Road
Petersburg, Virginia 23805
COMMONWEALTH OF VIRGINIA )
) to-wit:
CITY/COUNTY OF RICHMOND )
The foregoing instrument was acknowledged before me this 10th day of
April, 1998, by Harold N. Spurlock, Sr.
My commission expires: 01/31/2000
----------
/s/
--------------------------------
Notary Public
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Exhibit 10.50
[EXECUTION ORIGINAL]
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made as of
April 8, 1998, by and between Spurlock Adhesives, Inc., a Virginia corporation
(the "Secured Party") and Spurlock Family Limited Partnership, a Virginia
limited partnership (the "Partnership" or "Pledgor").
RECITALS:
WHEREAS, Spurlock Industries, Inc. (the "Company"), the Secured Party,
the Partnership, H. Norman Spurlock, Jr. ("Spurlock") and Harold N. Spurlock,
Sr. (the "Guarantor") have entered into a Settlement Agreement dated April 8,
1998 (the "Settlement Agreement") regarding the settlement of certain claims of
the Company and the Secured Party against Spurlock; and
WHEREAS, pursuant to the Settlement Agreement and concurrently with the
execution of this Agreement, the Partnership shall execute and deliver a certain
Promissory Note dated April 8, 1998 (the "Note") payable to the Secured Party in
the original face amount of $375,000.00; and
WHEREAS, the Partnership owns 2,325,000 shares of common stock in the
Company, which shares are represented by certificate numbers 3673 and 3674 (the
"Securities"); and
WHEREAS, the Partnership wishes to pledge to the Secured Party, and
grant the Secured Party a security interest in, all of its right, title and
interest in and to the Securities to secure the obligations of the Partnership
under the Note and this Agreement.
AGREEMENT:
NOW THEREFORE, for and in consideration of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. "UCC." For the purposes of this Agreement, "UCC" means the
Uniform Commercial Code as adopted in the Commonwealth of Virginia, and all
amendments thereto, provided that if, by reason of mandatory provisions of law,
the validity or perfection of any security interest granted herein is governed
by the Uniform Commercial Code as in effect in a jurisdiction other than
Virginia, then, as to the validity or perfection of such security interest,
"UCC" shall mean the Uniform Commercial Code in effect in such other
jurisdiction.
SECTION 1.2. UCC Terms. Unless otherwise defined herein, or unless the
context otherwise requires, all terms used herein which are defined in the UCC
in effect as of the date hereof shall have the meanings therein stated.
<PAGE>
ARTICLE II
THE SECURITY INTERESTS
SECTION 2.1. The Security Interest. To secure the "Obligations" (as
such term is hereinafter defined), the Partnership hereby pledges, assigns and
grants a continuing security interest in and to the "Pledged Collateral" (as
such term is hereinafter defined) as herein provided, to the Secured Party.
SECTION 2.2. Obligations. The security interest and liens hereby
granted are to secure the full payment and performance when due, without offset,
whether by acceleration or otherwise, of each and all of the Obligations. The
term "Obligations" shall include, without limitation, all of the liabilities and
obligations of the Partnership under the Note, this Agreement and the Settlement
Agreement (the Note, this Agreement and the Settlement Agreement are
collectively referred to herein as the "Security Documents"), and all costs and
expenses incurred by the Secured Party in connection with the enforcement of the
Security Documents, the collection of any judgment rendered thereon, and/or the
defense of any claim arising out of, or in any way relating to, the Security
Documents, including, without limitation, reasonable attorneys' fees. The
foregoing and all other provisions of this Agreement notwithstanding, the
parties agree that, solely for the purposes of this Agreement, the various
obligations of the Pledgor hereunder to pay or reimburse the Secured Party for
certain legal and related expenses shall not include any legal or related
expenses incurred by the Secured Party or for which it may be liable with
respect to that certain lawsuit in the United States District Court for the
District of Colorado, Civil Action No. 97-D-2214, styled Lee Rasmussen, Minority
Shareholder of Record, et al. v. Spurlock Industries, Inc., et al. (the
"Derivative Action"); provided, however, that this provision shall not preclude
the Secured Party from exercising any right it has or may have to recover from
Pledgor any legal or related expenses relating to the Derivative Action which
right arises otherwise than pursuant to this Agreement.
SECTION 2.3. Pledged Collateral. The term "Pledged Collateral" shall
include, without limitation, the Securities and all dividends, distributions,
interest, instruments and other property from time to time received, receivable
or otherwise made upon or distributed in respect of or in exchange for any or
all of such Securities, and the proceeds of each and all of the foregoing.
SECTION 2.4. Delivery of Pledged Collateral. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of the Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Secured Party.
SECTION 2.5. Termination of Security Interests; Release of Pledged
Collateral.
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(a) Upon the full, final and irrevocable payment and
performance of all the Obligations, the security interests in the Pledged
Collateral shall terminate and all rights to the Pledged Collateral shall revert
to the Pledgor.
(b) Upon any such termination of the security interests or
any release of the Pledged Collateral, the Secured Party will, at the Pledgor's
expense, execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence the termination of the security interests or the
release of the Pledged Collateral. Any such documents shall be without recourse
to or warranty by the Secured Party.
SECTION 2.6. Security Interests Absolute. All rights of the Secured
Party and security interests hereunder, and all duties, and obligations of the
Pledgor hereunder, shall be absolute and unconditional and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver
or release in respect of any of the Obligations, or any document evidencing or
securing any of the Obligations, by operation of law or otherwise;
(ii) any modification or amendment or supplement to the
Note, the Settlement Agreement, the Guaranty of even date hereof from the
Guarantor to the Secured Party (the "Guaranty") or any other document evidencing
or securing any of the Obligations;
(iii) any release, non-perfection or invalidity of any
direct or indirect security for any of the Obligations;
(iv) any insolvency, bankruptcy, reorganization or other
similar proceeding affecting the Pledgor or its assets or any resulting
disallowance, release or discharge of all or any portion of the Obligations;
(v) the existence of any claim, set-off or other right
which the Pledgor may have at any time against the Secured Party or any other
entity or person, whether in connection herewith or any unrelated transactions;
provided, that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or
against the Pledgor for any reason of any of the Obligations, or any provision
of applicable law or regulation purporting to prohibit the payment by the
Pledgor of the Obligations; or
(vii) any failure by the Secured Party (a) to commence any
action against the Pledgor, or (b) to proceed with due diligence in the
collection, protection or realization upon any collateral securing the
Obligations, or (c) any other act or omission to act or delay of any kind by the
Pledgor, the Secured Party or any other corporation or person or any other
circumstance whatsoever which might, but for the provisions of this clause,
constitute a legal or equitable discharge of the Pledgor's obligations
hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Pledgor represents, warrants and agrees as follows:
SECTION 3.1. Contravention. The execution, delivery and performance by
the Pledgor of this Agreement requires no action by or in respect of, or filing
with, any governmental authority and does not contravene, or constitute (with or
without the giving of notice or lapse of time or both) a default under, any
provision of applicable law or of any agreement, judgment, injunction, order,
decree or other instrument binding upon or affecting the Pledgor.
SECTION 3.2. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Pledgor, enforceable against the Pledgor in accordance
with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors rights generally and
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<PAGE>
by equitable principles of general applicability (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 3.3. Title to Pledged Collateral. The Pledgor owns all of the
Pledged Collateral free and clear of any liens or encumbrances other than the
liens and security interests granted hereby.
SECTION 3.4. Pledged Collateral. The Pledgor is not and will not become
a party to or otherwise bound by any agreement, other than this Agreement, which
restricts in any manner the rights of any present or future holder of any of the
Pledged Collateral with respect thereto.
SECTION 3.5. Validity, Perfection and Priority of Security Interests.
Upon delivery of all certificates or instruments representing or evidencing the
Pledged Collateral to the Secured Party, the Secured Party will have a valid and
perfected security interest in the Pledged Collateral subject to no prior lien
or encumbrance. No registration, recordation or filing with any governmental
agency is required in connection with the execution or delivery of this
Agreement, or necessary for the validity or enforceability hereof or for the
perfection of the security interests of the Secured Party granted hereby. The
Pledgor has not performed any acts which might prevent the Secured Party from
enforcing any of the terms and conditions of this Agreement or which would limit
the Secured Party in any such enforcement.
SECTION 3.6. No Pledge of Partnership Interest. To the best knowledge
of the Pledgor, no partner of the Partnership has assigned, granted a security
interest in, or has otherwise encumbered or allowed to be encumbered, his or her
partnership interest in the Partnership.
ARTICLE IV
COVENANTS
The Pledgor agrees that so long as any of the Obligations remains
unpaid:
SECTION 4.1. Filing; Further Assurances. The Pledgor will, at Pledgor's
expense and in such manner and form as the Secured Party may reasonably require,
execute and deliver to the Secured Party any financing statement, specific
assignment or other paper and take any other action that may be reasonably
necessary or desirable, or that the Secured Party may reasonably request, in
order to create, preserve, perfect or validate the security interests granted
hereby or to enable the Secured Party to exercise and enforce its rights
hereunder with respect to any of the Pledged Collateral. To the extent permitted
by applicable law, the Pledgor hereby authorizes the Secured Party to execute
and file, in the name of the Pledgor or otherwise, UCC financing statements
which the Secured Party in its sole discretion may deem necessary or appropriate
to further perfect the security interests granted hereby.
SECTION 4.2. Liens on Pledged Collateral. The Pledgor will not sell or
otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral or create or suffer to exist any lien, security interest or
encumbrance (other than security interests in favor of the Secured Party) on any
Pledged Collateral. The Pledgor will pledge hereunder, immediately upon
Pledgor's acquisition (directly or indirectly) thereof, any and all additional
shares of stock or other securities received in substitution for or with respect
to any Pledged Collateral.
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<PAGE>
ARTICLE V
VOTING; DISTRIBUTIONS ON COLLATERAL
SECTION 5.1. Voting Rights.
(a) The Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this Agreement.
(b) The Secured Party shall execute and deliver, or cause
to be executed and delivered, to the Pledgor all such proxies, powers of
attorney, consents, ratifications and waivers and other instruments as the
Pledgor may reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other rights which the Pledgor is entitled to exercise
pursuant to paragraph (a) above.
SECTION 5.2. Dividends with Respect to the Pledged Collateral.
(a) During the term hereof, all cash dividends whether out
of earned or capital surplus or otherwise (other than stock dividends) on the
Pledged Collateral, or any part thereof, shall be paid to the Secured Party
(with any necessary endorsement) and such cash dividends shall be applied toward
the obligations of the Partnership under the Note, first to any late charges
outstanding, then to any interest payments outstanding and finally to the
principal balance of the Note. All stock or property representing stock or
liquidating dividends on distribution and liquidation upon or in respect of the
Pledged Collateral or any part thereof, or resulting from a stock dividend,
stock distribution, stock split or reclassification of the Pledged Collateral,
or any part thereof, received or exchanged for the Pledged Collateral, or any
part thereof, as a result of any merger, consolidation or otherwise, shall be
paid or transferred directly to (with any necessary endorsement) and deposited
with the Secured Party as part of the Pledged Collateral pursuant to this
Agreement immediately upon receipt thereof by the Partnership.
(b) All such dividends, distributions or payments of cash,
stock or property relating to the Pledged Collateral which are received by the
Pledgor shall be received in trust for the benefit of the Secured Party, and
shall be segregated from other funds of the Pledgor until paid over to the
Secured Party as Pledged Collateral.
ARTICLE VI
EVENTS OF DEFAULT
Any one of the following events will constitute an "Event of Default"
under this Agreement:
SECTION 6.1. The occurrence of a Default under the Note.
SECTION 6.2. A breach by the Secured Party or the Guarantor under the
Settlement Agreement.
SECTION 6.3. The failure by the Pledgor to observe or perform any of
the applicable agreements contained herein and to cure such failure within ten
(10) days of notice thereof from the Secured Party.
SECTION 6.4. Discovery that any representation or warranty made by the
Pledgor herein or any statement or representation made in any certificate,
report or opinion delivered pursuant hereto
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was incorrect, incomplete or misleading in any material respect on or as of the
date made or deemed made.
SECTION 6.5. If this Agreement shall at any time and for any reason
cease to create a valid and perfected first priority security interest in and to
the Pledged Collateral or such security interest shall cease to be in full force
and effect or shall be declared null and void, or the validity or enforceability
thereof shall be contested by the Pledgor or the Pledgor shall deny that it has
any further liability or obligation with respect thereto; provided, however, in
the event that an Event of Default arises under this Section 6.5 solely as a
result of the Derivative Action, then the Pledgor shall have a period of twenty
(20) days following notice thereof from the Secured Party to cure such Event of
Default by providing the Secured Party with substitute collateral, of a nature
reasonably satisfactory to the Secured Party and having a value equal to or
greater than any of the Pledged Collateral to which such Event of Default would
relate.
SECTION 6.6. If any Pledged Collateral is lost, abandoned, destroyed,
severally damaged and not replaced within 30 days of notice to Pledgor, or sold
or transferred except as permitted by prior agreement with the Secured Party.
ARTICLE VII
GENERAL AUTHORITY; REMEDIES
SECTION 7.1. General Authority. The Pledgor hereby irrevocably appoints
the Secured Party and any officer or agent thereof, with full power of
substitution, as the Pledgor's true and lawful attorney-in-fact, in the name of
the Pledgor, for the sole use and benefit of the Secured Party, but at the
Pledgor's expense, at and following the occurrence of an Event of Default, to
take any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to carry out the terms of this
Agreement. Without limiting the foregoing, the Pledgor hereby gives the Secured
Party the power and right on the Pledgor's behalf, at and following the
occurrence of an Event of Default, without notice to or further assent by the
Pledgor, to do the following:
(a) to receive, take, endorse, assign and deliver any and
all checks, notes, drafts, acceptances, documents and other negotiable and
non-negotiable instruments taken or received by the Pledgor as, or in connection
with, the Pledged Collateral;
(b) to demand, sue for, collect, receive and give
acquaintance for any and all monies due or to become due upon or in connection
with the Pledged Collateral;
(c) to commence, settle, compromise, compound, prosecute,
defend or adjust any claim, suit, action or proceeding with respect to, or in
connection with, the Pledged Collateral;
(d) to sell, transfer, assign or otherwise deal in or with
the Pledged Collateral or any part thereof, as fully and effectually as if the
Secured Party were the absolute owner thereof; and
(e) to do, at its option, but at the expense of the
Pledgor, at any time or from time to time, all acts and things which the Secured
Party deems necessary to protect or preserve the Pledged Collateral and to
realize upon the Pledged Collateral.
SECTION 7.2. UCC Rights. If an Event of Default shall have occurred,
the Secured Party may, in addition to all other rights and remedies granted to
it in this Agreement and in any other agreement securing, evidencing or relating
to the Obligations, exercise (i) all rights and remedies of a
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secured party under the UCC (whether or not in effect in the jurisdiction where
such rights are exercised) and (ii) all other rights available to the Secured
Party at law or equity.
SECTION 7.3. Application of Proceeds; Sale of Pledged Collateral.
(a) The Pledgor expressly agrees that if an Event of
Default shall occur and be continuing, the Secured Party, without demand of any
kind (except the notice specified below of the time and place of any public or
private sale) to or upon the Pledgor or any other person or entity (all of which
demands and/or notices are hereby waived by the Pledgor), may forthwith (i)
apply the cash, if any, then held by it as specified in Section 7.8 and (ii) if
there shall be no such cash or if such cash shall be insufficient to pay the
Obligations in full, to collect, receive, appropriate and realize upon the
Pledged Collateral and/or sell, assign, give an option or options to purchase or
otherwise dispose of and deliver the Pledged Collateral (or contract to do so)
or any part thereof in one or more lots or parcels (which need not be in round
lots) at public or private sale, at any office of the Secured Party or elsewhere
in such manner as is commercially reasonable, and as the Secured Party may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Secured Party shall have the right upon any such public sale,
and, if the Pledged Collateral is of a type customarily sold in a recognized
market or is of a type which is the subject of widely distributed standard price
quotations, upon any such private sale or sales, to purchase the whole or any
part of the Pledged Collateral so sold, and thereafter to hold the same,
absolutely and free from any right or claim of any kind. To the extent permitted
by applicable law, the Pledgor waives all claims, damages and demands against
the Secured Party arising out of the foreclosure, repossession, retention or
sale of the Pledged Collateral.
(b) The Secured Party shall give the Pledgor fifteen (15)
days written notice of its intention to make any such public or private sale or
sale at a broker's board or on a securities exchange. Such notice shall (i) in
the case of a public sale, state the time and place fixed for such sale, (ii) in
the case of sale at a broker's board or on a securities exchange, state the
board or exchange at which such sale is to be made and the day on which the
Pledged Collateral, or the portion thereof being sold, will first be offered for
sale and (iii) in the case of a private sale, state the day after which such
sale may be consummated. The Secured Party shall not be obligated to make any
such sale pursuant to any such notice. The Secured Party may adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In the case of any
sale of all or any part of the Pledged Collateral on credit or for future
delivery, the Pledged Collateral so sold may be retained by the Secured Party
until the selling price is paid by the purchaser thereof, but the Secured Party
shall not incur any liability in case of the failure of such purchaser to take
up and pay for the Pledged Collateral so sold and, in the case of such failure,
such Pledged Collateral may again be sold upon like notice.
SECTION 7.4. Rights of Purchasers. Upon any sale of the Pledged
Collateral (whether public or private) the Secured Party shall have the right to
deliver, assign and transfer to the purchaser thereof the Pledged Collateral so
sold. Each purchaser (including the Secured Party) at any such sale shall hold
the Pledged Collateral so sold absolutely, free from any claim or right of any
kind, including any equity or right of redemption of the Pledgor who, to the
extent permitted by law, hereby specifically waives all rights of redemption,
including, without limitation, any right to redeem the Pledged Collateral under
Section 8.9-506 of the UCC, stay or approval which the Pledgor has or may have
under any law now existing or hereafter adopted.
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SECTION 7.5. Securities Act, etc.
(a) The Pledgor understands that compliance with the
Federal Securities Laws might very strictly limit the course of conduct of the
Secured Party if the Secured Party were to attempt to dispose of all or any part
of the Pledged Collateral, and might also limit the extent to which or the
manner in which any subsequent transferee of any Pledged Collateral could
dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Secured Party in any attempt to dispose of all or part
of the Pledged Collateral under applicable Blue Sky or other state securities
laws or similar laws analogous in purpose or effect.
(b) Accordingly, the Pledgor expressly agrees that the
Secured Party is authorized, in connection with any sale of the Pledged
Collateral, if it deems it advisable so to do, (i) to restrict the prospective
bidders on or purchasers of any of the Pledged Collateral to a limited number of
sophisticated investors who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
sale of any of such Pledged Collateral, (ii) to cause to be placed on
certificates for any or all of the Pledged Collateral or on any other securities
pledged hereunder a legend to the effect that such security has not been
registered under the Federal Securities Laws and may not be disposed of in
violation of the provision of any applicable law, rule or regulation and (iii)
to impose such other limitations or conditions in connection with any such sale
as the Secured Party deems necessary or advisable in order to comply with any
law, rule or regulation.
(c) The Pledgor covenants and agrees that the Pledgor will
execute and deliver such documents and take such other action as the Secured
Party deems necessary or advisable in order to comply with all applicable laws,
rules or regulations. The Pledgor acknowledges and agrees that such limitations
may result in prices and other terms less favorable to the seller than if such
limitations were not imposed, and, notwithstanding such limitations, agrees that
any such sale shall be deemed to have been made in a commercially reasonable
manner, it being the agreement of the Pledgor and the Secured Party that the
provisions of this Section 7.5 will apply notwithstanding the existence of a
public or private market upon which the quotations or sales prices may exceed
the price at which the Secured Party sells. The Secured Party shall be under no
obligation to delay a sale of any Pledged Collateral for a period of time
necessary to permit the issuer of any securities contained therein to register
such securities under the Securities Act of 1933, as amended, or under
applicable state securities laws, even if the issuer would agree to it.
SECTION 7.6. Other Rights of the Secured Party.
(a) The Secured Party (i) shall have the right and power
to institute and maintain such suits and proceedings as it may deem appropriate
to protect and enforce the rights vested in it by this Agreement and (ii)
proceed by suit or suits at law or in equity to enforce such rights and to
foreclose upon the Pledged Collateral and to sell all, or from time to time, any
of the Pledged Collateral under the judgment or decree of a court of competent
jurisdiction.
(b) Upon the occurrence of an Event of Default, the
Secured Party shall, to the extent permitted by applicable law, without notice
to the Pledgor or any party claiming through the Pledgor, without regard to the
solvency or insolvency at such time of any person or entity then liable for the
payment of any of the Obligations, without regard to the then value of the
Pledged Collateral and without requiring any bond from any complainant in such
proceedings, be entitled as a matter of right to the appointment of a receiver
or receivers (who may be the Secured Party) of the Pledged Collateral or any
part thereof, and of the profits, revenues and other income thereof, pending
such proceedings, with such powers as the court making such appointment shall
confer, and to the entry of an order directing that the profits, revenues and
other income of the property constituting the whole or
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any part of the Pledged Collateral be segregated, sequestered and impounded for
the benefit of the Secured Party, and the Pledgor irrevocably consents to the
appointment of such receiver or receivers and to the entry of such order.
(c) In no event shall the Secured Party have any duty to
exercise any rights or take any steps to preserve the rights of the Secured
Party in the Pledged Collateral. Pledgor acknowledges that Secured Party shall
not have any duty or responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Pledged Collateral, whether or not the Secured Party has or is
deemed to have knowledge of such matters or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
SECTION 7.7. Waiver and Estoppel.
(a) The Pledgor agrees, to the extent the Pledgor may
lawfully do so, that the Pledgor will not at any time in any manner whatsoever
claim or take the benefit or advantage of, any appraisal, valuation, stay,
extension, moratorium, turnover or redemption law, or any law permitting the
Pledgor to direct the order in which the Pledged Collateral shall be sold, now
or at any time hereafter in force which may delay, prevent or otherwise affect
the performance or enforcement of this Agreement, and hereby waives all benefit
or advantage of all such laws.
(b) The Pledgor, to the extent the Pledgor may lawfully do
so, on behalf the Pledgor and all who claim through or under the Pledgor,
including without limitation any and all subsequent creditors, vendees,
assignees and lienors, waives and releases all rights to demand or to have any
marshaling of the Pledged Collateral upon any sale, whether made under any power
of sale granted herein or pursuant to judicial proceedings or under any
foreclosure or any enforcement of this Agreement, and consents and agrees that
all of the Pledged Collateral may at any such sale be offered and sold as an
entirety.
(c) The Pledgor waives, to the extent permitted by law,
presentment, demand, protest and any notice of any kind (except the notices
expressly required hereunder) in connection with this Agreement and any action
taken by the Secured Party with respect to the Pledged Collateral.
SECTION 7.8. Application of Monies. The proceeds of any sale of, or
other realization upon, all or any part of the Pledged Collateral shall be
applied by the Secured Party in the following order of priority, (the Pledgor
remaining liable for any deficiency remaining unpaid after such application):
(a) first, to payment of the expenses of such sale or
other realization, including reasonable compensation to the Secured Party's
agents and counsel, and all expenses, liabilities and advances incurred or made
by the Secured Party, its agents and counsel in connection therewith or in
connection with the care, safekeeping or otherwise of any or all of the Pledged
Collateral, and any other unreimbursed expenses for which the Secured Party is
to be reimbursed pursuant to Section 8.3;
(b) second, to payment of the Obligations in such order as
the Secured Party shall determine; and
(c) finally, any surplus then remaining shall be paid to
the Pledgor, or the Pledgor's successors or assigns, or to whomsoever may be
lawfully entitled to receive the same or as a court of competent jurisdiction
may direct.
-9-
<PAGE>
SECTION 7.9. Redemption of Pledged Collateral by the Company. The
Pledgor acknowledges and agrees that the Obligations, the Note, this Agreement,
the Guaranty and all related agreements, documents, instruments, and rights and
obligations of the Secured Party thereunder may, in the sole and absolute
discretion of the Secured Party and without notice to the Pledgor, be assigned
or otherwise transferred to the Company. Upon such assignment or transfer, the
Company shall possess all of the rights of the Secured Party hereunder,
notwithstanding that any purchase of the Pledged Collateral by the Company (in
the place of and to the extent that the Secured Party is permitted hereunder)
would result in the redemption and cancellation of any the Pledged Collateral
consisting of shares of the capital stock of the Company.
ARTCLE VIII
MISCELLANEOUS
SECTION 8.1. Notices. All notices, requests and other communications to
any party hereunder shall be in writing and shall be given to such party at the
address set forth on the signature page hereof or to such other address as such
party may hereafter specify for the purpose by notice to the other. Each such
notice, request or other communication shall be effective when delivered in
person or delivered certified mail, postage prepaid, return receipt requested.
Rejection or refusal to accept, or the inability to deliver because of a changed
address of which no notice was given shall not affect the validity of notice
given in accordance with this Section 8.1.
SECTION 8.2. Waivers, Non-Exclusive Remedies. No failure on the part of
the Secured Party to exercise, no delay in exercising, and no course of dealing
with respect to any right under this Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise by the Secured Party of any
right under this Agreement preclude any other or further exercise thereof or the
exercise of any other right. The rights of the Secured Party under this
Agreement are cumulative and are not exclusive of any other remedies provided by
law.
SECTION 8.3. Expenses; Documentary Taxes. The Pledgor shall forthwith
on demand pay all out-of-pocket expenses incurred by the Secured Party,
including the reasonable fees and disbursements of its counsel and agents, in
connection with the administration, sale or other disposition of the Pledged
Collateral and the preservation, protection or defense of the rights of the
Secured Party in and to the Pledged Collateral. The Pledgor shall forthwith pay
on demand the amount of any taxes which the Secured Party shall pay by reason of
the security interests (including any applicable transfer taxes).
SECTION 8.4. Successors and Assigns.
(a) This Agreement is for the benefit of the Secured Party
and its successors and assigns, and in the event of an assignment of all or any
of the Obligations, the rights hereunder, to the extent applicable to the
Obligations so assigned, may be transferred with such Obligations. Without
limiting the foregoing, the Secured Party shall have the right to assign all of
its rights and obligations hereunder to the Company.
(b) This Agreement shall be binding upon the Pledgor and
the Pledgor's heirs, personal representatives, successors and assigns, except
that the Pledgor may not assign or transfer any of its rights under this
Agreement without the prior written consent of the Secured Party.
SECTION 8.5. Amendments and Waivers. Any provision of this Agreement
may be amended or waived, if, but only if, such amendment or waiver is in
writing and is signed by the Pledgor and the Secured Party.
-10-
<PAGE>
SECTION 8.6. Delivery and Virginia Law. This Agreement has been
delivered in Virginia and shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to its conflicts of
laws provisions, except as otherwise required by mandatory provisions of law and
except to the extent that remedies provided by the laws of any jurisdiction
other than Virginia are governed by the laws of such jurisdiction.
SECTION 8.7. Limitation by Law; Severability.
(a) All rights, remedies and powers provided in this
Agreement may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable mandatory provisions of
law which may be controlling and be limited to the extent necessary so that they
will not render this Agreement invalid, unenforceable in whole or in part, or
not entitled to be recorded, registered or filed under the provisions of any
applicable law.
(b) If any provision hereof is invalid and unenforceable
in any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Secured Party in order to carry out
the intentions of the parties hereto as nearly as may be possible; and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 8.8. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when the Secured Party shall have received
counterparts hereof signed by itself and the Pledgor.
[SIGNATURES ON NEXT PAGE]
-11-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
SPURLOCK FAMILY LIMITED PARTNERSHIP
By: Spurlock Family Corporation, its general partner
By: /s/ Harold N. Spurlock, Sr.
------------------------------------------------
Harold N. Spurlock, Sr., President
SPURLOCK ADHESIVES, INC.
By: /s/ Phillip S. Sumpter
------------------------------------------------
Its Chairman, CEO
Exhibit 10.51
[EXECUTION ORIGINAL]
PROMISSORY NOTE
$375,000.00 Richmond, Virginia
April 8, 1998
For Value Received, the undersigned Spurlock Family Limited
Partnership, a Virginia limited partnership (the "Maker") unconditionally
promises to pay to the order of Spurlock Adhesives, Inc. (including any
subsequent holder hereof, the "Holder"), without offset or deduction, at 209
West Main Street, Waverly, Virginia 23890, except as provided herein or at such
other place as the Holder may designate, the principal sum of Three Hundred
Seventy-Five Thousand and No/100 Dollars ($375,000.00), together with interest
on the unpaid principal balance hereof from the date hereof until this Note is
paid in full. The unpaid principal balance hereof shall bear interest at a rate
of nine percent (9%) per annum.
Principal and interest hereunder shall be due and payable as follows:
(a) Interest shall be payable monthly, in advance, beginning on
April 8, 1998 and consecutively on the same calendar day of
each such month thereafter; and
(b) Principal shall be payable in a single payment on April 8,
2001.
provided that, if not sooner paid, all unpaid principal and accrued but unpaid
interest hereunder shall be due and payable on the third (3rd) anniversary of
the date of this Note. Interest shall be computed on the basis of a 365-day year
and shall be paid for the actual number of days elapsed.
All payments made on account of the indebtedness evidenced by this Note
shall be made without offset or deduction in lawful money of the United States
of America in immediately available funds and shall be applied first to the
payment of interest accrued on the unpaid principal balance from time to time
remaining unpaid, and the remainder of such payments shall be applied on account
of principal.
In the event any payment of principal or interest due under this Note
is made more than fifteen (15) days after the date when the same is due, then
the Lender shall be entitled to collect a "late charge" in an amount equal to
five percent (5%) of such payment.
The Maker may prepay this Note in whole or in part at any time and from
time to time, without penalty. Any partial prepayments shall be expressly
identified as a prepayment and shall be in an amount of not less than Two
Thousand Five Hundred and No/100 Dollars ($2,500.00).
The Maker hereby expressly agrees that, upon default in the payment of
principal at maturity or after acceleration as herein provided, the outstanding
principal balance shall continue to bear interest at the rate of nine percent
(9%) per annum.
IMPORTANT NOTICE: THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION
WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND
ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
<PAGE>
Until this Note has been satisfied in full, the Maker shall provide to
the Holder annual financial statements on or before each anniversary of this
Note in such a form as the Holder may reasonably prescribe, which financial
statements shall be certified to be true and correct by the general partner of
said partnership.
This Note has been made and is delivered pursuant to a certain
Settlement Agreement (the "Settlement Agreement") dated April 8, 1998 by and
among Spurlock Industries, Inc., Spurlock Adhesives, Inc., Spurlock Family
Limited Partnership, H. Norman Spurlock, Jr. and Harold N. Spurlock, Sr.
regarding (a) the settlement of certain claims by Spurlock Industries, Inc. and
Spurlock Adhesives, Inc. against H. Norman Spurlock, Jr. with respect to certain
actions of H. Norman Spurlock, Jr. while serving as an officer, director and
employee of Spurlock Industries, Inc. and Spurlock Adhesives, Inc., respectively
and (b) the redemption by the Maker of H. Norman Spurlock, Jr.'s partnership
interest in the Maker. Accordingly, the Maker hereof represents that the
obligation represented by this Note is for business purposes.
This Note is secured as provided in a certain Pledge and Security
Agreement (the "Pledge and Security Agreement"), dated April 8, 1998 by and
between Spurlock Adhesives, Inc. and the Spurlock Family Limited Partnership and
as further provided in a certain Unconditional Guaranty (the "Unconditional
Guaranty"), dated April 8, 1998 executed by Harold N. Spurlock, Sr.
("Guarantor") in favor of the Holder.
The entire principal amount hereof, together with all accrued interest,
shall immediately become due and payable (without demand for payment, notice of
nonpayment (except as provided below), presentment, notice of dishonor, protest,
notice of protest, or any other notice or demand, all of which the Maker hereby
waives) at the option of the Holder upon the occurrence of a Default hereunder
(failure to exercise this option shall not constitute a waiver of the right to
exercise the same in the event of any subsequent Default). A "Default" hereunder
shall be deemed to have occurred if any one or more of the following occurs:
(a) The Maker fails to pay when due any installment of principal or
interest on this Note and such failure shall continue for a
period of ten (10) days after notice of non-payment by the
Holder to the Maker;
(b) Spurlock Family Limited Partnership has breached any provision
of this Note, other than item (a) immediately above and such
breach shall continue for a period of ten (10) days after
notice of non-payment by the Holder to the Maker;
(c) Any of Spurlock Family Limited Partnership or the Guarantor, as
applicable, shall have breached a provision of the Settlement
Agreement or defaulted under the Pledge and Security Agreement
or the Unconditional Guaranty (collectively, this Note, the
Settlement Agreement, the Pledge and Security Agreement and the
Unconditional Guaranty are herein referred to as the
"Settlement Documents");
-2-
<PAGE>
(d) Discovery that any representation, warranty or statement made
in any of the Settlement Documents or any certificate, report
or opinion delivered pursuant hereto or in connection herewith
was incorrect, incomplete or misleading in any material respect
on or as of the date made or deemed made;
(e) A change of greater than twenty-five percent (25%) in ownership
interest shall occur in the ownership or control of Spurlock
Family Limited Partnership or Spurlock Family Corporation
(except (i) as expressly contemplated in the Settlement
Documents, or (ii) a change resulting from the death of one or
more partners);
(f) Spurlock Family Limited Partnership dissolves, terminates,
merges, reorganizes, consolidates, changes its general partner
or sells or otherwise transfers a material portion of its
assets (except as expressly contemplated in the Settlement
Documents);
(g) Spurlock Family Corporation dissolves, terminates, merges,
reorganizes, consolidates, sells or otherwise transfers a
material portion of its assets (except as expressly
contemplated in the Settlement Documents);
(h) Spurlock Family Limited Partnership shall: (i) make a general
assignment for the benefit of creditors, (ii) file a petition,
pleading or motion under any bankruptcy or other law for the
relief or aid of debtors seeking reorganization, liquidation,
dissolution or other relief as a debtor or (iii) consent to or
acquiesce in the appointment of a receiver, custodian,
liquidator, trustee or other similar official, for the whole or
any substantial part of its assets, or for any part of any
collateral securing this Note; or
(i) A petition, pleading or motion shall be filed (i) against
Spurlock Family Limited Partnership under any bankruptcy or
other law for the relief of or aid of debtors seeking
reorganization, liquidation, dissolution or other debtor relief
for such person or (ii) seeking to appoint a receiver,
custodian, liquidator, trustee or other similar official for
Spurlock Family Limited Partnership, for the whole or any
substantial part of its assets, or for any part of any
collateral securing this Note, and such petition, pleading or
motion is not dismissed within thirty (30) days after the
filing thereof, or any order for relief or appointment entered
as a result of the filing of such petition, pleading or motion
is not stayed within seven (7) days after the entry thereof.
In the event that the Maker fails to pay in full any installment due
hereunder on or before its due date, in addition to the penalty, interest and
acceleration provisions herein set forth, the Maker agrees to pay all costs and
expenses incurred by the Holder in connection with the enforcement of this Note,
the collection of the indebtedness evidenced hereby, the collection of any
judgment rendered hereon, and/or the defense of any claim arising out of, or in
any way related to this Note, including, without limitation, reasonable
attorneys' fees.
-3-
<PAGE>
The Maker, any co-maker, or endorser of, or grantor of collateral with
respect to, this Note and all others who may become liable for all or any part
of this obligation, agree hereby to be jointly and severally bound, and jointly
and severally waive and renounce any and all homestead and other exemption
rights and the benefit of all valuation and appraisement privileges as against
the debt or any renewal or extension thereof, and further waive demand, protest,
notice of non-payment (except as otherwise provided herein) and any and all lack
of diligence or delays in collection or enforcement hereof, and expressly
consent to any extension of time, release of any party liable for this
obligation, release of any of the collateral for this Note, acceptance of other
collateral for this Note, or any other indulgence or forbearance whatsoever. Any
such extension, release, modification, indulgence or forbearance under this Note
may be made without notice to such party and without in any way affecting the
personal liability of such party.
THE UNDERSIGNED, SPURLOCK FAMILY LIMITED PARTNERSHIP, HAS MADE,
CONSTITUTED AND APPOINTED, AND BY THESE PRESENTS DOES HEREBY IRREVOCABLY APPOINT
W. SCOTT STREET, III AND WILLIAM L. PITMAN, AS ITS TRUE AND LAWFUL
ATTORNEYS-IN-FACT, EITHER OF WHOM IS HEREBY AUTHORIZED FOR THE UNDERSIGNED AND
IN THE NAME OF THE UNDERSIGNED TO CONFESS JUDGMENT AGAINST THE UNDERSIGNED IN
FAVOR OF THE HOLDER OF THIS NOTE IN THE CLERK'S OFFICE OF THE CIRCUIT COURT OF
THE CITY OF RICHMOND, VIRGINIA OR IN ANY OTHER COURT OF PROPER JURISDICTION, FOR
THE UNPAID BALANCE OF THE INDEBTEDNESS EVIDENCED BY THIS NOTE, PLUS INTEREST,
COSTS, EXPENSES AND ATTORNEYS' FEES AS SPECIFIED HEREIN UPON THE OCCURRENCE OF A
DEFAULT UNDER THIS NOTE. THIS POWER OF ATTORNEY IS A POWER COUPLED WITH AN
INTEREST. THIS POWER OF ATTORNEY SHALL NOT TERMINATE IN THE EVENT OF THE
DISSOLUTION OF SPURLOCK FAMILY LIMITED PARTNERSHIP.
The undersigned stipulates that this Note shall be governed by and
construed under the laws of the Commonwealth of Virginia, without reference to
its conflicts of laws provisions.
No amendment, modification, termination, or waiver of any provision of
this Note, nor any consent to any departure by the Maker from any term of this
Note, shall in any event be effective unless it is in writing and signed by the
party against whom such action is sought to be enforced, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose given. In the event that any provision of this Note is determined to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity or enforceability of the remaining provisions of this Note.
-4-
<PAGE>
All notices, requests and demands to or upon the respective parties
shall be in writing and shall be deemed to have been given or made when
delivered in person or received via certified mail, postage prepaid, return
receipt requested, addressed:
In the case of the Holder to: Spurlock Adhesives, Inc.
209 West Main Street
Waverly, Virginia 23890
Attention: Mr. Phillip S. Sumpter
with a copy to: William L. Pitman, Esquire
Williams, Mullen, Christian & Dobbins
1021 East Cary Street, 16th Floor
Richmond, Virginia 23219
In the case of the Maker to: Spurlock Family Limited Partnership
c/o Harold N. Spurlock, Sr.
1616 Blair Road
Petersburg, Virginia 23805
with a copy to: Hugh M. Fain, III, Esquire
Spotts, Smith, Fain & Buis
411 East Franklin Street, Suite 601
Richmond, Virginia 23219
or to such other addresses as may be specified by any party in a written notice
given to the other parties.
This Note shall apply to and bind the Maker, and its respective
successors and assigns.
[SIGNATURES ON NEXT PAGE]
-5-
<PAGE>
WITNESS the following signature.
MAKER:
SPURLOCK FAMILY LIMITED PARTNERSHIP
By: Spurlock Family Corporation,
Its General Partner
By: /s/ Harold N. Spurlock, Sr.
---------------------------------------
Harold N. Spurlock, Sr.,
Its President
EIN:
Address: 5090 General Mahone Highway
Waverly, Virginia 23890
COMMONWEALTH OF VIRGINIA,
CITY/COUNTY OF RICHMOND, to wit:
The foregoing instrument was acknowledged before me, a notary public in
and for the jurisdiction aforesaid, this 10th day of April, 1998, by Harold N.
Spurlock, Sr., President of Spurlock Family Corporation, which is the General
Partner of Spurlock Family Limited Partnership, on behalf of the partnership.
/s/
-----------------------------------
Notary Public
My commission expires: 01/31/2000
----------
-6-
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
The Registrant has one wholly owned operating subsidiary, Spurlock
Adhesives, Inc.
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Spurlock Industries, Inc.
We consent to incorporation by reference in Registration Statement No. 333-09659
on Form S-8 of Spurlock Industries, Inc. of our report dated March 13, 1998 and
April 10, 1998 with respect to Note 2, relating to the consolidated statements
of financial condition of Spurlock Industries, Inc. as of December 31, 1997 and
the related consolidated statements of earnings, changes in stockholders' equity
and cash flows for the year then ended, which report is incorporated by
reference in the Annual Report on Form 10-K for the year ended December 31, 1997
of Spurlock Industries, Inc.
/s/ Cherry, Bekaert & Holland L.L.P.
Richmond, Virginia
April 15, 1998
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of Spurlock Industries, Inc. dated August 6, 1996 of our
report dated January 17, 1997 (except for Note 2, for which the date is March
13, 1998), relating to the financial statements of Spurlock Industries, Inc. as
of December 31, 1996.
/s/ Winter, Scheifley & Associates, P.C.
Winter, Scheifley & Associates, P.C.
Certified Public Accountants
April 17, 1998
Englewood, Colorado
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 362,685
<SECURITIES> 0
<RECEIVABLES> 1,222,277
<ALLOWANCES> 12,981
<INVENTORY> 530,183
<CURRENT-ASSETS> 6,535,734
<PP&E> 12,043,300
<DEPRECIATION> 4,890,414
<TOTAL-ASSETS> 19,401,431
<CURRENT-LIABILITIES> 5,365,116
<BONDS> 9,598,315
0
0
<COMMON> 0
<OTHER-SE> 4,268,043
<TOTAL-LIABILITY-AND-EQUITY> 19,401,431
<SALES> 24,725,077
<TOTAL-REVENUES> 24,725,077
<CGS> 19,597,991
<TOTAL-COSTS> 24,413,629
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,981
<INTEREST-EXPENSE> 627,799
<INCOME-PRETAX> (177,044)
<INCOME-TAX> (152,304)
<INCOME-CONTINUING> (24,740)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,740)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
